Case Law Details
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.
With these observations and directives, the Supreme Court dismissed the civil appeals, effectively setting a significant judicial precedent on the procedural requirements for reassessment under Section 148 of the Income Tax Act. This judgment has since been widely cited by various courts and tribunals to ensure fair and transparent reassessment proceedings.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Heard learned counsel for the parties. Leave is granted.
By the order under challenge, a Division Bench of the High Court at Delhi dismissed the writ petition filed by the appellant challenging the validity of notices issued under Sections 148 and 143(2) of the Income Tax Act, 1961. The High Court took the view that the appellant could have taken all the objections in its reply to the notices and that, at that stage, the writ petition was premature. Accordingly, the writ petition was dismissed on 31st January, 2001. Aggrieved by that order, the appellant is in appeal before us.
Mr. M.L. Verma, learned senior counsel appearing for the appellant, submits that the impunged notices relate to seven assessment years; that during the pendency of these appeals, in respect of two assessment years, viz., 1995-96 and 1996-97, assessment has been completed against which appeals have been filed. Notices relating to the other five assessment years, viz., 1992-93, 1993-94, 1994-95, 1997-98 and 1998-99, are now the subject-matter of these appeals.
We see no justifiable reason 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 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 above said five assessment years.
Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the appellate authority to dispose of the same, expeditiously.
With the above observations, the civil appeals are dismissed. No costs.
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