GKN Driveshafts (India) Ltd Vs ITO And Ors (Supreme Court of India)
Supreme Court of India has clarified the mandatory procedure to be followed by income tax authorities when initiating reassessment proceedings under Section 148 of the Income Tax Act, 1961. The ruling came in an appeal filed by GKN Driveshafts (India) Ltd. against a Delhi High Court order that had dismissed their challenge to Section 148 notices as premature.
The High Court had earlier taken the view that the assessee could raise all objections in response to the notices, thus dismissing the writ petition on January 31, 2001, without interfering at the notice stage. The Supreme Court, while granting leave and hearing the appeal, found no justifiable reason to overturn the High Court’s decision to not intervene at that preliminary stage.
However, the Apex Court utilized the opportunity to lay down a clear sequence of actions for both the Assessing Officer (AO) and the assessee upon issuance of a Section 148 notice. This procedural clarification aimed to streamline the reassessment process and ensure adherence to principles of natural justice.
For the five assessment years (1992-93, 1993-94, 1994-95, 1997-98, and 1998-99) where assessments were pending, the Supreme Court mandated the following steps:
1. Filing of Return: The noticee (assessee) must first file their return of income in response to the Section 148 notice.
2. Request for Reasons: If the assessee wishes, they should then seek the reasons for the issuance of the notice from the Assessing Officer.
3. Furnishing Reasons: The Assessing Officer is legally bound to furnish these reasons to the assessee within a reasonable timeframe.
4. Filing Objections: Upon receiving the reasons, the assessee is entitled to file objections to the issuance of the Section 148 notice.
5. Speaking Order on Objections: Crucially, the Assessing Officer is then bound to dispose of these objections by passing a ‘speaking order’ (a reasoned order). This speaking order must be issued before proceeding further with the actual assessment in respect of the concerned assessment years.
For the two assessment years (1995-96 and 1996-97) where assessments had already been completed and were under appeal before the Commissioner (Appeals), the Supreme Court directed the appellate authority to dispose of these appeals expeditiously.
