Case Law Details
Rajesh Poddar Vs ITO (Bombay High Court)
Facts of the Case:
1. The Assessing Officer (AO) issued a notice under Section 148 of the Income Tax Act, 1961 on 30th March 2021, to reopen the assessment for the assessment year 2014-15, stating that income chargeable to tax had escaped assessment.
2. The petitioner requested a copy of the reasons recorded for reopening but was informed that he should first file a return of income tax before the reasons would be provided.
3. The petitioner claimed that he could not file the return due to testing positive for Covid-19 and being advised rest for one and a half months. He also mentioned operational glitches on the tax portal that hindered him from uploading the return until 16th August 2021.
4. The petitioner requested the reasons for reopening again in response to a notice under Section 142(1) of the Act dated 20th December 2021 but didn’t receive them.
5. Subsequently, the AO issued a notice cum draft assessment order on 17th March 2022, requiring the petitioner to file objections by 20th March 2022. Due to holidays and non-working days, the petitioner requested an adjournment until 23rd March 2022, which was not accepted. The assessment order was passed on 21st March 2022.
Petitioner’s Arguments: The petitioner’s counsel argued that the AO failed to furnish the reasons recorded for reopening the assessment despite repeated requests. This was in violation of the requirement set forth in the GKN Driveshafts (India) Ltd. V/s. Income-tax Officer & Ors judgment. The short time given to file objections to the draft assessment order was also unreasonable.
Revenue’s Stand: The revenue contended that the petitioner deliberately delayed filing the return after receiving the notice under Section 148 of the Act. Since the return was eventually filed, and the petitioner participated in the reassessment proceedings, the petitioner couldn’t challenge the order on the ground of reasons not being furnished.
High Court’s Decision: The High Court considered the GKN Driveshafts (India) Ltd. judgment, which states that after issuing a notice under Section 148, the AO must furnish the reasons for reopening within a reasonable time. The petitioner’s consistent requests for the reasons were not met, which is essential to allow the assessee to present facts and arguments to possibly avoid the reassessment.
The Court found the failure to provide reasons for reopening as a fatal flaw in the assessment order. The reliance on the Amaya Infrastructure (P.) Ltd. case by the revenue was deemed inapt, as the factual circumstances were different.
Regarding the short period given to file objections to the draft assessment order, the Court agreed that it was insufficient.
Outcome: The High Court set aside the order of assessment, notice of demand, and the notice under Section 148 of the Act. The matter was remanded to the concerned officer under the Faceless Assessment Scheme, with directions to provide the petitioner with the reasons recorded for reopening. The proceedings were to be completed preferably within three months from the date of the judgment.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. A notice under Section 148 of the Income Tax Act, 1961 (“the Act”) dated 30th March, 2021 came to be issued by the Assessing Officer (A.O.) seeking to reopen the assessment for the assessment year 2014-15 on account of his reasons to believe that income chargeable to tax for the said assessment year had escaped assessment within the meaning of Section 147 of the Act.
2. The Petitioner vide communication dated 16th April, 2021, in reference to the aforementioned notice under Section 148 of the Act sought a copy of the reasons recorded. However, vide communication dated 19th April, 2021, the Petitioner was informed that a return of income tax ought to be filed first whereafter only the reasons for reopening would be furnished.
The Petitioner claims that the return of income could not be filed by him as he had tested Covid positive on 22nd April, 2021 and was advised rest for a period of one and half months. The Petitioner states that a notice under Section 142(1) of the Act was issued on 17th June, 2021 which was replied expressing the inability of the Petitioner to upload the return of income as the access for filing the return had not been enabled. It was also urged during the course of argument by the learned Counsel for the Petitioner that the portal during the relevant time had developed some operational glitches by the service providers, on account of which the Petitioner was unable to upload the return, which was finally uploaded on 16th August, 2021, when the option to file the return had been enabled.
3. Learned Counsel for the Petitioner urged that in response to the notice under Section 142(1) of the Act dated 20th December, 2021, the Petitioner had yet again requested the Respondents to provide a copy of the reasons recorded which however were not furnished yet again.
4. It was next urged that a notice cum draft assessment order dated 17th March, 2022 was issued requiring the Petitioner to file objections to the proposed variation by 20th March, 2022. The Petitioner claims that 18th March, 2022 was a holiday on account of the festival of Holi, whereas 19th and 20th March, 2022 were Saturday and Sunday respectively. All of these three days being non-working days, therefore forced the Petitioner to make a request for an adjournment till 23rd March, 2022 which request too was not accepted and finally an order of assessment under Section 147 r/w Section 144B of the Act came to be passed on 21st March, 2022.
Although a number of issues have been raised in the petition, yet the grounds which were pressed during the course of argument by learned Counsel for the Petitioner were limited to the failure on the part of the Respondents to furnish the reasons recorded for reopening and secondly the unreasonably short period of time provided to the Petitioner for filing his objections to the draft assessment order dated 17th March, 2022.
5. The stand of the revenue on the other hand is that the petitioner had deliberately delayed the filing of the return pursuant to the issuance of the notice under Section 148 of the Act. It was stated that finally the return of income having been filed, and the Petitioner having participated during the reassessment proceedings was estopped from challenging the order of assessment impugned on the ground that reasons had not been furnished. Reliance in this regard was placed upon a judgment of this Court in the case of Amaya Infrastructure (P.) Ltd. V/s. Income-tax Officer, Ward 12(1) (1)1.
6. We have heard learned Counsel for the Parties.
7. As per the ratio of the judgment of the Apex Court in GKN Driveshafts (India) Ltd. V/s. Income-tax Officer &! Ors2, after the issuance of notice under Section 148 of the Act, the noticee is required to file a return if he so desires and to seek reasons for issuing the notice under Section 148 of the Act. The A.O. is then bound to furnish the reasons within a reasonable period of time to which the noticee is entitled to file objections. The A.O. has then been bound to dispose of the objections by passing his speaking order. The Judgment in GKN Driveshafts (India) Ltd. was squarely applicable in the facts and circumstances of the case.
8. It can be seen from the facts narrated hereinabove that after receipt of notice under Section 148 of the Act, by the Petitioner, there was some delay in filing the return. However, the Petitioner had consistently requested the A.O. to furnish the reasons for reopening, which admittedly were never provided to the Petitioner. There have been a plethora of judgments reiterating the importance of furnishing the reasons for reopening to the assessee so that the assessees in appropriate cases bring to the notice of the A.O. facts which could persuade the A.O. to drop the reassessment proceedings on the ground that the reopening was not warranted based upon issues of facts or of law of which the A.O. was either ignorant of or had entertained misconceptions regarding the same.
The requirement to pass a speaking order as per the judgment of the Apex Court in the case of GKN Driveshafts (India) Ltd. was further prescribed to ensure that the reassessment proceedings were not initiated casually and even if erroneously initiated, were dropped at the threshold. In the present case therefore failure on the part of the A.O. to furnish reasons recorded for purposes of reopening the assessment does make the order of assessment unsustainable in law.
9. Reliance placed by Mr. Kumar, learned Counsel for the revenue on the judgment of this Court in the case of Amaya Infrastructure (P.) Ltd. is inapt. This was a case where this Court had dismissed the petition on the ground that the Petitioner had chosen to submit itself to the jurisdiction of the A.O. during the reassessment proceedings. However, what is important to note here is the fact that in the said case, reasons had not only been furnished to the Petitioner but the Petitioner had also filed its objections to the reopening which objections were considered and an order passed by the A.O.. The facts in that case therefore were quite different from the one which confront us in the present case.
Even otherwise we are of the opinion that the time granted by the A.O. to the Petitioner to file its response to the draft assessment order was quite insufficient in the facts and circumstances as have been discussed hereinabove.
Be that as it may, we allow the present petition. The order of assessment and notice of demand both dated 21st March, 2022 as also the notice under Section 148 of the Act dated 30th March, 2021, are set aside. The matter is remanded to the concerned officer under the Faceless Assessment Scheme who shall proceed in the matter after providing to the Petitioner the reasons recorded for reopening. The proceedings be completed preferably within a period of three months from today.
10. The writ petition is disposed of accordingly.
