Case Law Details
Home Finders Housing Ltd. Vs ITO (Supreme Court of India)
The matter arose from reassessment proceedings initiated against the assessee, a real estate promoter, for Assessment Year 2012-13. The assessee had filed a nil return of income, and an assessment order was passed on 23 March 2015. Subsequently, the Assessing Officer formed the view that income chargeable to tax had escaped assessment and issued a notice dated 16 October 2015 under Sections 147 and 148 of the Income-tax Act. On the assessee’s request, the Assessing Officer furnished the reasons for reopening. The assessee filed objections to the reopening, but the Assessing Officer proceeded with the reassessment and passed an assessment order on 30 December 2016 without first disposing of those objections by a separate speaking order.
The assessee challenged the reassessment order before the writ court, contending that the Assessing Officer had violated the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer, which requires the Assessing Officer to dispose of objections to a notice under Section 148 by a speaking order before proceeding with reassessment. The learned Single Judge accepted that the prescribed procedure had not been followed, set aside the reassessment order, and remitted the matter to the Assessing Officer to consider the objections and proceed afresh, while rejecting the assessee’s objection relating to limitation.
In the intra-court appeal before the Madras High Court, the assessee argued that violation of the mandatory procedure prescribed in GKN Driveshafts (India) Ltd. rendered the reassessment order void and incapable of being cured by remand. It was also contended that, since the reassessment order had been passed just before the limitation period expired, a fresh assessment could not thereafter be made. Reliance was placed on Sona Builders v. Union of India and the decision in Mrs. Jayanthi Natarajan v. Assistant Commissioner of Income Tax. The Revenue contended that failure to dispose of the objections constituted only a procedural irregularity, that the Assessing Officer still had time to complete the reassessment after remand, and that the contrary view expressed in Mrs. Jayanthi Natarajan was per incuriam.
The High Court observed that although there was no statutory requirement to pass an order on the objections, the Supreme Court in GKN Driveshafts (India) Ltd. had prescribed such a procedure as a safeguard before proceeding with reassessment. It held that the disposal of objections is a procedural requirement intended to inform the assessee of the grounds on which the Assessing Officer proposes to proceed. The Court stated that if, after considering the objections, the Assessing Officer decided to continue with reassessment, the objections should first be disposed of by a speaking order before passing the reassessment order.
On the principal issue, the High Court held that non-compliance with the procedure prescribed in GKN Driveshafts (India) Ltd. did not render the reassessment order void or non est. According to the Court, such non-compliance amounted to a procedural irregularity that could be cured by remitting the matter to the Assessing Officer. The Court disagreed with the contrary view taken in Mrs. Jayanthi Natarajan and observed that Sona Builders had been decided on its own facts and did not establish that every procedural irregularity would invalidate the entire proceedings. Regarding limitation, the High Court declined to express any opinion, holding that the issue depended on facts and should be decided by the Assessing Officer if it subsequently arose. The Court confirmed the learned Single Judge’s direction remitting the matter to the Assessing Officer for passing a fresh order after disposing of the assessee’s objections, while setting aside the Single Judge’s observations on limitation. The intra-court appeal was accordingly allowed in part.
The Revenue thereafter challenged the High Court’s judgment before the Supreme Court by filing a Special Leave Petition. The Supreme Court passed a brief order dismissing the Special Leave Petition and disposed of the pending application. As a result, the High Court’s order directing the Assessing Officer to pass a fresh order after first disposing of the assessee’s objections remained undisturbed.
Read Also Order of Madras HC in this case: Madras HC Directs AO to Pass Fresh Order After Disposing Reopening Objections
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
The Special Leave Petition is dismissed.
Pending application stands disposed of.
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