TMI Blog2016 (8) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgement of Supreme Court in case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and ors (2002 (11) TMI 7 - SUPREME Court ). In such judgement, it is neither so provided nor we think the Supreme Court envisaged such an eventuality. - Decided in favour of the Revenue. - TAX APPEAL NO. 797 of 2015 With TAX APPEAL NO. 127 of 2016 With TAX APPEAL NO. 392 of 2015 With TAX APPEAL NO. 395 of 2015 With TAX APPEAL NO. 396 of 2015 With TAX APPEAL NO. 212 of 2016 - - - Dated:- 21-7-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE APPELLANT : MR KM PARIKH, ADVOCATE FOR THE OPPONENT : MR S N SOPARKAR WITH MR B S SOPARKAR WITH MR JAIMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer without disposing off the objections raised by the assessee against the issuance of notice u/s. 148 by a separate order is liable to be quashed. We order accordingly. Thus, this ground of appeal of the Revenue is dismissed. 9. As we have quashed the reassessment order dated 20.11.2009, the grounds of appeal raised by the Revenue on the merits of the addition in this appeal has become infructuous and hence dismissed. 10. In the result, the appeal of the Revenue is dismissed. 4. In view of such facts, the grievance of the Revenue is that the Tribunal committed a serious error in setting aside the order of assessment only on the ground that the Assessing Officer had, before passing the order of reassessment, not decided the objections of the assessee. The Revenue also contended that in this particular case, in any case, it was not open for the Tribunal to do so since against the order passed by the Appellate Commissioner partially confirming additions made by the Assessing Officer in the order of reassessment, the assessee had preferred no appeal before the Tribunal. In other words, in the Revenue's appeal, the Tribunal could not have annulled the very or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the assessment proceedings have to be completed within a statutory time frame. If the Assessing Officer is now given an opportunity to rectify the error and proceed further with the assessments, gross injustice would be caused to the assessees who would be called upon to answer to the assessments of the several years back. 9. Counsel relied on the decision of Division Bench of this Court in case of General Motors India P. Ltd. vs. DCIT (supra) and of Delhi High Court in case of Ferrous Infrastructure (P.) Ltd. vs. Deputy Commissioner of Income Tax reported in (2015) 63 Taxmann.com 201, in which, on similar grounds, the assessments have been quashed without opportunity to frame fresh assessment after dealing with the objections. 10.We may recall, in Tax Appeal No. 979 of 2015, the order of reassessment passed by the Assessing Officer was challenged by the assessee before the Commissioner (Appeals) who had granted substantial relief to the assessee and reduced the additions made by the Assessing Officer. The Commissioner (Appeals), however, had not annulled the assessment on the ground that the Assessing Officer had framed the assessment without disposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years. 13. Thus, based on the decision of Supreme Court in case of G.J.Drives now there would be a procedure for the Assessing Officer to furnish the reasons within a reasonable time, if so demanded by the assessee. On receipt of the reasons, the assessee would be entitled to file objections to the notice of reassessment which the Assessing Officer would be required to dispose of by a speaking order. 14. In this context, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f re-assessment regardless of the fact as to whether such an order can be supported or not, in law or on facts. 14. In the result, the impugned re-assessment order dated 9th February 2004 made under Section 17 read with Section 16(3) of the Act is hereby quashed and set aside. The respondent is directed to abide by the directions issued by this Court in its order dated 3rd March 2004 in Special Civil Application No.2736 of 2004, more particularly, paragraph Nos.4 and 5 which are reproduced hereunder for the sake of convenience :- 15. The above principle laid down in respect of the notice for re-assessment under the Income-tax Act would apply with full force to the notice for re-assessment under Section 17 of the WT Act as well. The petitioner-Company had already filed its return in response to the impugned notice and requested for furnishing reasons, which request has been acceded to only very recently and the petitioner has thereafter submitted its objections on 19.2.2004. The Assessing Officer is, therefore, now required to dispose of the objections by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. 16. The Assessing Officer is ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der on the objection to the notice under section 148 and the assessment order passed under the Act deserves to be quashed. 17.Two things emerge from this judgement. Firstly, that the question whether after striking down the order of assessment on this ground further assessment should be permitted or not, was neither argued nor addressed by the Court. Second aspect is that, in case of General Motors India P. Ltd. vs. DCIT (supra), the Court noticed the judgement of Division Bench of Arvind Mills Ltd vs. Assistant Commissioner of Wealth Tax reported in 270 ITR 469 in which, the Division Bench had, under somewhat similar circumstances, while setting aside the order of reassessment, required the Assessing Officer to dispose of the objections and only thereafter, proceed to pass the order of reassessment. 18. It can thus be seen that two Division Benches of the Court have taken somewhat different routes in similar backdrop. In case of General Motors India P. Ltd. vs. DCIT (supra), the Court, without laying down the ratio, struck down the order of assessment without any further facility to the Assessing Officer to dispose of the objections and then to proceed to reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, before completing the reassessment, we set aside the order of the Tribunal as well as the lower authorities with a direction to the Assessing Officer to consider the matter afresh, particularly the objections given by the assessee for reopening and issue notice under Section 143(2) of the Act, after giving opportunity to the assessee to raise all contentions relating to the reopening of the assessment as well as the merits of the case and permit the assessee to produce materials and evidence, if any, and pass orders in accordance with law, as expeditiously as possible. As the matter is remanded, it is not necessary to answer the above questions of law, as the same is likely to adversely affect the rights of either parties. 21. It is by now well settled principle of administrative law that whenever administrative action is found to be suffering from breach of principles of natural justice, the decision making process should be placed at a stage where the defect is detected rather than to permanently annul the action of the authority. In case of Union of India and ors vs. Mohd. Ramzan Khan reported in AIR 1991 SC 471 three Judges Bench of the Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such enquiries should not be set aside automatically. The Court or the Tribunal should enquire whether (a) the provision violated is of a substantive nature or (b) whether it is procedural in character. (2) A substantive provision has normally to be complied with as explained hereinbefore and the theory of substantial compliance or the test of prejudice would not be applicable in such a case. (3) In the case of violation of a procedural provision, the position is this: procedural provisions are generally meant for affording a reasonable and adequate opportunity to the delinquent officer/employee. They are, generally speaking, conceived in his interest. Violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. Except cases falling under no notice , no opportunity and no hearing categories, the complaint of violation of procedural provision should be examined from the point of view of prejudice, viz., whether such violation has prejudiced the delinquent officer/employee in defending himself properly and effectively. If it is found that he has been so prejudiced, appropriate orders have to be made to repair and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the approach adopted by the Constitution Bench in B.Karunkar. The ultimate test is always the same viz., test of prejudice or the test of fair hearing, as it may be called. (5) Where the enquiry is not governed by any rules/regulations/statutory provisions and the only obligation is to observe the principles of natural justice - or, for that matter, wherever such principles are held to be implied by the very nature and impact of the order/action the Court or the Tribunal should make a distinction between a total violation of natural justice [rule of audi alteram] and violation of a facet of the said rule, as explained in the body of the judgment. In other words, a distinction must be made between no opportunity and no adequate opportunity, i.e., between no notice / no hearing no fair hearing . (a) In the case of former, the order passed would undoubtedly be invalid [one may call it void or a nullity if one chooses to]. In such cases, normally, liberty will be reserved for the Authority to take proceedings afresh according to law, i.e., in accordance with the said rule [audi alteram partem ]. (b) But in the latter case, the effect of violation [of a facet of the rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t left without the remedy when the Assessing Officer proceeds further with the assessment without disposing of the objections. Even before the final order of assessment is passed it would always be open for the assessee to make a grievance before the High Court and to prevent the Assessing Officer from finalizing the assessment without disposing of the objections. 26. The issue can be looked from slightly different angle. Validity of the notice for reopening would depend on the reasons recorded by the Assessing Officer for doing so. Similarly, the order of reassessment would stand failed on the merits of the order that the Assessing Officer has passed. Neither the action of the Assessing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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