TMI Blog2017 (11) TMI 1915X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme Court, in that view of the matter, the issues which are raised in the matter, the Tribunal ought not to have remitted back for reassessment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act. - D.B. Income Tax Appeal No. 292 / 2016 - - - Dated:- 7-11-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas, JJ. For Appellant(s) : Mr. Sanjay Jhanwar with Ms Archana For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay Judgment 1. By way of this appeal, the appellant has assailed the judgment and order of the tribunal whereby tribunal has allowed the appeal of the assessee only for statistical purposes. 2. This court while admitting the appeal on 14.2.2017 framed the following substantial questions of law:- (I) Whether under the facts and circumstances of the case the ld. Tribunal was justified in not declaring the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law. 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters. 9 In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provision reads that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended by Sri Shekhar, learned counsel for the department that in view of the expression So far as may be in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh s case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression so far as may be has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression as far as practicable has stated without anything mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iveshafts (supra), the Supreme Court had directed as under:- 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. (underlining added) 8.1. On going through the same, it is evident that the Assessing Officer has to pass a speaking order disposing of the objections before proceeding with the assessment . In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the reassessment order itself. On this ground also, the petitioner is liable to succeed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are, therefore, of the opinion that the Tribunal has rightly cancelled the order of the Assessing Officer. The questions referred to us are, therefore, answered in favour of the assessee and against the revenue. 9. In Sona Builders vs. UOI Ors., (2001) 1 SCC 280, it has been held as under :- 3. We are quite unable to agree with the view taken by the High Court. The notice was addressed on May 21, 1993, from Delhi to the appellant in Jaipur fixing the hearing on May 31, 1993. It was patent that it would take two or three days for that notice to be received in Jaipur even though despatched by speed post. In effect, therefore, the notice gave five days to the addressees to respond, and we are told that two of those days were Saturday and Sunday. Under section 269UD the Appropriate Authority had two months to act commencing from the end of the month in which the Form No. 37-I was filed. The form was filed on March 9 so that the Appropriate Authority had about two months and twenty days to take action. He did not take action until only one week from the last available date, and then he gave the appellant, in reality, only three days to respond. This was, plainly, most inad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible that construction which favours the assessee must be adopted. This is a well accepted rule of construction recognised by this Court in several of its decisions. Hence all that we have to see is, what is the true effect of the language employed in Section 271(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty. 13. In Keshrimal Jivji Shah Anr. vs. Bank of Maharashtra ORs., [2005] 273 ITR 451, it has been held as under :- 30. Mr. Naphade's reliance upon the decision of the Lahore High Court, subsequently followed, according to him, is misplaced. Considering the view of the Supreme Court in matters of this nature, it will not be possible for us to accept the pleas raised by Shri Naphade. The Court cannot allow a party to get away with violation of its prohibitory orders and uphold the transactions contrary to and in violation of its directions on the spacious plea that only way in which the Court can regulate such acts is to visit the guilty party with penalties. It is time that Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 19th Feb., 2004. The AO 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. 5. The AO is accordingly required to decide the preliminary objections lodged by the petitioner to the notice for reassessment and pass a speaking order. Until such speaking order is passed, obviously the AO cannot undertake reassessment. Hence, it is only after the AO passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner. 2. In, Arvind Mills Ltd. vs. Assistant Commissioner of Wealth Tax (GUJHC) (2004) 270 ITR 0469, it has been held as under :- 9. The position in law is thus well settled. After a notice for reassessment has been issued, an assessee is required to file the return and seek reasons for issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh after considering the amendments as per Taxation Laws (Amendment) Act, 2005. Accordingly, fresh assessment was framed on 28th Sept., 2006 under s. 143(3) r/w s. 254 of the Act on a total income of ₹ 28,80,000. 4. On behalf of the petitioner attention was invited to the following two decisions of this High Court in the case of Arvind Mills Ltd. vs. Asstt. CWT (2004) 191 CTR (Guj) 233 : (2004) 270 ITR 467 (Guj) and Arvind Mills Ltd. vs. Asstt. CWT (2004) 191 CTR (Guj) 235 : (2004) 270 ITR 469 (Guj) to contend that the respondent was under an obligation to first dispose of the preliminary objections raised by the petitioner and could not have framed the reassessment order. It was also submitted that as held by this Court until such speaking order is passed the respondent obviously cannot undertake reassessment. Learned advocate, therefore, submitted that the petition is required to be allowed on this limited ground. 7. Applying the aforesaid settled legal position to the facts of the case it is apparent that the action of the respondent authority in framing the reassessment order, without first disposing of the preliminary objections raised by the petitioner, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, the question is, should the assessment be placed back at a stage where such defect is detected or should the Assessing Officer for all times to come be prevented from carrying out his statutory duty and functions? 15. In case of Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax (supra), as noted, a very similar issue came up for consideration. The Division Bench of the Court, while agreeing that the Assessing Officer could not have framed the assessment without disposing of the objections, by a speaking order provided as under: 13. There is one more aspect of the matter. The order dated 3rd March, 2004 made by this Court in the earlier petition filed by the present petitioner namely Special Civil Application No. 2736 of 2004 directed the respondent to dispose of the objections filed by the petitioner by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. It is further laid down in the said order that it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner. This order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot undertake reassessment. Hence, it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner. 16. In case of General Motors India P. Ltd. v. DCIT (supra), this Court did strike down the order of assessment which was passed without disposing of the objections. It was provided as under: 23. From the aforesaid discussion, we are of the considered opinion that writ petition under Article 226 of the Constitution of India is maintainable where no order has been passed by the Assessing Officer deciding the objection filed by the assessee under Section 148 of the Act and assessment order has been passed or the order deciding an objection under Section 148 of the Act has not been communicated to the assessee and assessment order has been passed or the objection filed under Section 148 has been decided along with the assessment order. If the objection under Section 148 has been rejected without there being any tangible material available with the Assessing Officer to form an opinion that there is escapement of income from assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l then prevented him from passing fresh order of assessment. What should, therefore, be the correct legal position when the Court strikes down the order of assessment only on this ground has not been opined by either of the two Division Benches in the said cases. 24. It can thus be seen that whenever an administrative action is found to be tainted with defect in the nature of breach of natural justice or the like, the Court would set aside the order, place back the proceedings at the stage where the defect is detected and leave the liberty to the competent authority to proceed further from such stage after having the defect rectified. In other words, the breach of principle of natural justice would ordinarily not result in terminating the proceedings permanently. 25. As noted, the requirement of supplying the reasons recorded by the Assessing Officer issuing notice for reopening and permitting the assessee to raise objections and to decide the same by a speaking order are not part of the statutory provisions contained in the Act. Such requirements have been created under a judgment of the Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (2004) 268 ITR 48 (Guj.) (FB), the effect of Supreme Court decision in the case of G.K.N. Driveshaft (India) Ltd. (Supra) came up for consideration and by a majority opinion it has been thus laid down by this Court as under: What the Supreme Court has now done in the G.K.N. Case : (2003) 259 ITR 19 is not to whittle down the principle laid down by the Constitution Bench of the Apex Court in Calcutta Discount Co. Ltd. case : (1961) 41 ITR 191 but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the reassessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the re-assessment proceedings which would have entailed the liability to pay tax and interest on reassessment and also to go through the gamut of appeal, the second appeal before Income-tax Appellate Tribunal and then reference/tax appeal to the High Court. Viewed in this light, it appears to me that the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions by the petitioner against the reopening of the assessment for A.Y. 2009-10. The Assessing Officer now to deal with and dispose of the objections raised by the petitioner on 24.11.2016 and pass a speaking order, before proceeding with the reassessment in respect of the assessment year for which such notice has been issued and communicate the outcome of the same and thereafter after giving some reasonable time to the petitioner to challenge the decision dispose of the objections (in case the Assessing Officer over-rules the objections raised by the petitioner by a speaking order). He may proceed further with the reassessment proceedings in respect of AY for which such notice has been issued. The Assessing Officer to give reasonable time to the petitioner which shall not be less than two months from the date of disposing of the objections (in case the Assessing Officer over-rules the objections raised by the petitioner by a speaking order). However, it is made clear that we have not expressed anything on merits and the impugned assessment order has been set aside solely on the aforesaid ground and for the reasons stated above. Rule made absolute to the aforesaid extent. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court and stressed by this Court, we impose costs upon the respondent of a sum of ₹ 3,500 to be paid to the petitioner. The costs be paid within a period of four weeks from today. 11. The decision cited by the learned counsel for the Revenue in the case of Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) does not, in any way, enable us to detract from the position indicated above and especially the directions given by the Supreme Court in GKN Driveshafts (India) Ltd. (supra). The decision in Rajesh Jhaveri (supra) was not concerned with the procedure to be adopted by the AO for passing a speaking order before proceeding with the assessment. In fact, the decision in GKN Driveshafts (India) Ltd. (supra) has not even been noticed in Rajesh Jhaveri s case (supra) apparently, because the issue of procedure did not at all arise in Rajesh Jhaveri s case (supra). Consequently, the latter decision would have no application to the facts and circumstances of the present case. 12. In view of the foregoing discussion, we set aside the assessment order dt. 28th Dec., 2007 and direct the AO to pass a speaking order on the objection as taken in the letter dt. 17th S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready expired. Needless to say that prescription of statutory period of limitation is for the concerned authority to perform a particular act within such time limit. If he has acted within such prescribed time and passed an order, the statutory obligation vested on such authority, insofar as the period of limitation is concerned, is deemed to have been discharged. His order, so passed within time, may be right or wrong. Still it is an order passed within time. The person aggrieved against such an order is entitled to challenge the same before the appropriate forum, in a manner known to law. If any such challenge is made, such Forum has to look into the other aspects of the matter and the objections raised by the person so aggrieved, in order to come to a conclusion on the question whether to sustain the order or to set aside the same. If for some reasons such Forum chooses to set aside, it is open to such Forum to remit the matter back to the Original Authority for redoing the exercise once again. At that point of time, certainly, the question of considering the limitation does not arise, as such forum is not granting time to pass the original order itself beyond the period of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict Oilseeds Growers Co-op. Union Ltd. vs. Assistant Commisioner of Income Tax, (GUJHC) [2015] 59 taxmann.com 328 12. Agarwal Metals Alloys vs. Assistant Commissioner of Income Tax, (BOM)[2012] 346 ITR 64.. 6. He contended that in all the cases relied upon the Department, the matter was remitted back and if the contention raised by the assessee is accepted, in no case of Section 153, the matter could be remanded. 7. We have heard the counsel for the parties. 8. Before proceeding with the matter, it is not out of place to mention that the law declared by the Supreme Court in GKN Driveshafts (supra) clearly held that the preliminary objection is to be decided as the first, it cannot be decided subsequently. The argument which has been canvassed by the assessee is required to be considered very seriously more particularly in view of the observations made by the Supreme Court in the case of KSS Petron Private Ltd (supra) which is followed in Hotel Blue Moon (supra), the law declared by the Supreme Court is taken in true spirit whether it will open a second inning in his own. Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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