Objection to be filed by the assessee in case notice u/s 148 is issued to the assessee . Below is the complete procedure laid down by the
Hon’ble SC In the case of GKN Driveshafts (India) Limited v. ITO (2003) 259 ITR19(sc),
The Hon’ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under section-148 of the Act.
An Assessee may raise objection on the reasons formed by the Assessing Officer. The Assessing Office is to take note of these objections and has to dispose of the same before commencing reassessment by passing a “speaking order”.
Where the Assessing Officer passed an order of reassessment without hearing objections of Assessee, it was held that the Assessing Officer had acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the Assessee and such order was liable to be set aside.-
[Rabo India Finance Ltd. v. DCIT(2012) 346 ITR 528:27 taxman.com 163 (Bom)]
In the case of
GKN Driveshafts (India) Limited v. ITO (2003) 259 ITR19(sc),
the Hon’ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under section-148 of the Act.
In GKN Driveshafts (India) Limited v. ITO, (2003) 259 ITR19 (SC),
the Supreme Court held that the court saw no justifiable reason to interfere with the order under challenge. However, the Court clarified that –when a notice under section-148 of the 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 following points may be noted with respect to supply of copy of reasons:
(i) The Assessing Officer is bound to furnish reasons within a reasonable time;
(ii) On receipt of reason, the noticee is entitled to file objections to issuance of notice; and
(iii) The Assessing Officer is bound to dispose of the same by passing a speaking order.
It was further held by the Apex Court that the Assessing Officer has to dispose of the objection, if filed, by passing a speaking order before proceeding with the assessment. It clearly implies that after the objections to the notice under section-148 have been filed by the Assessee. The Assessing Officer is required to dispose of the same by passing a speaking order, before proceeding with the reassessment.-
[GKN Driveshafts (India) Limited v. ITO, (2003) 259 ITR19: 179 CTR 11 (SC)]
In a subsequent decision in the case of
Garden Finance Ltd. v. ACIT reported in (2004) 268 ITR 48 (Guj.) (FB),
the effect of Supreme Court’s 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 objection to issuance of the re-assessment 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 filling a writ petition so that he does not have to wait till completion of the reassessment proceedings which would have entailed the liability to pay tax and interest on re-assessment 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 rigour of availing of the alternative remedy before the Assessing Officer for objecting to the reassessment notice under section-148 has been considerably softened by the Apex Court in G.K.N case (2003) 259 ITR 19 in the year 2003. In my view, therefore, the G.K.N therefore, the G.K.N case (2003) 259 ITR 19 (SC) does not run counter to the Calcutta Discount co. Ltd. case (1961) 41 ITR 191 (SC) but it merely provides for challenge to the re-assessment notice in two stages, that is,-
(i) raising preliminary objections before the Assessing Officer and in case of failure before the Assessing Officer,
(ii) challenging the speaking order of the Assessing Officer under section-148 of the Act”
Assessee is entitled to be supplied with the reasons in the event he challenges the notice for reassessment; assessee is not stopped from challenging the impugned notice after having submitted to the jurisdiction of the officer by filing returns. It was held in this case that the reasons recorded under section-148(2) of the Act, must be communicated to the assessee along with the notice under section-148, in view of the principles of natural justice.-[Mithlesh Kumar Tripathi v. CIT(2006) 280 ITR 16 (All.)]
Reasons for notice must be given and objections of assessee must be considered
The principle grievances of the petitioners is based on the judgment of the Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO reported in (2003) 259 ITR 19. The law laid down by the apex court in this judgment is that when a notice under section-148 of the Income Tax Act is issued, the noticee is expected to file the return and if he so desires he may seek reasons for issuing the notice. The apex court has laid down that on the assessee seeking such reason, “the Assessing Officer is bound to furnish the reasons within a reasonable time”. Thereafter, the apex court has added that on receipt of reasons, the noticee is entitled to file objections and the Assessing Officer is bound to dispose of the same by passing a speaking order.
The law as laid down by the apex court is binding on this court as well as on the authorities functioning under the statute. This being the position, we fail to understand as to why the first respondent did not decide the objections separately which he is duty bound to decide. The whole idea in laying down the law in the above referred judgment of the apex court is to give an opportunity to the assessee to know as to what is the decision on his objections, which decision has also to be arrived at after giving an opportunity to the assessee. In the present case, the assessee has been denied this opportunity. Not only that but in the first three writ petitioned what we find is that a common order has been passed on the objections as well as for the reassessment. In the fourth matter, the assessment order does not disclose any decision on the objections at all and undoubtedly no such decision has been given separately on the objections.
Having noted this scenario, in our view the proper course will be to interfere with the assessment orders passes in all four matters by the concerned officer. We are aware that when an alternative remedy is resorted to, the writ jurisdiction is not to be exercised, but that is a rule of self- limitation. The orders challenged in the present matter are clearly against the law laid down by the apex court and, therefore, the exercise of writ jurisdiction is called for. That being so, we allow all these petitions and quash and set aside the orders of assessment passed in all these four petitions. Inasmuch as the assessment orders are set aside, the appeals filed by the petitioners no longer require to be prosecuted. The same will stand disposed of.
Now that the impugned orders are set aside, the first respondent, after hearing the petitioners, will pass separate speaking orders on the objections which the petitioners have filed. We further add that in the event the objections are rejected, the assessment order will not be passed for a period of four weeks thereafter.
All contentions of both the parties are kept open. We further clarify that this order does not mean any reflection on the impugned orders on the merits-
[Allana Cold Storage and Ors. V. ITO and Ors. (2006) 287 ITR 1: 206 CTR 401 (Bom.)]
(Followed the order passed by Supreme Court in the case of GKN Driveshafts (India) Limited v. ITO (2003) 259 ITR 19: 179 CTR 11 (SC)- Matter set aside to pass fresh order.
All four petitions in the above cases were filed by companies which were sister concerns.
By consent of counsel for both the parties, the petitions were heard and decided at the admission stage itself.
Assessing Officer is required to dispose of the objections against the notice under section 148 by passing a speaking order, before proceeding with the reassessment
It was held that when a notice under section 148 of the Act is issued, the proper course of action for the assessee is to file the return and if he so desires, to seek reason for the issuance of the notice under section 148. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to the issuance of notice under section 148 and the Assessing Officer is bound to dispose of the same by passing a speaking order.
If the assessee does not ask for reasons and file objections before the Assessing Officer, he is not entitled to challenge the reopening proceedings
Law does not provide or mandate that the Assessing Officer shall suo motu supply the copy of those ‘reasons to believe’ to the assessee. It is for assessee and if assessee chooses to ask for reasons then he/she can file objections thereto. Only when such objections are filed, it becomes the duty of the Assessing Officer to dispose of all those objections first by passing a speaking order and if the objections are rejected then it gives a cause to the assessee to challenge such order by filling an appropriate writ.-
[Anil Kumar Chaudhary v. ITO(2015) (ITAT Delhi)]
IT was held in this case that the Assessing Officer is bound to disclose the reason for reassessment within a reasonable time and on receipt of the reasons, the assessee is entitled to raise objections and if any such objections are filed, the objections must be disposed of by a speaking order before proceeding to reassess in terms of the notice given earlier. It was further held that the Assessing Officer failed to dispose of the objections and instead of that, straightaway passed the order of reassessment. Therefore, the order of reassessment was not valid.-
[Vishwanath Engineers v. ACIT (2013) 352 ITR 549 (Guj.)]
Reassessment framed without disposing of preliminary objections raised by assessee cannot be sustained
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 be sustained. Accordingly, the reassessment order is hereby quashed and set aside and the respondent authority is directed to dispose of the preliminary objections by passing a speaking order and only thereafter proceed with the reassessment proceeding in accordance with law. In the peculiar facts and circumstances of the case the respondent authority is directed to dispose of the preliminary objections raised by the petitioner within a period of four weeks by passing a speaking order in accordance with law. Thereafter the respondent authority shall undertake reassessment proceedings, if necessary, and shall complete the same within a period of four weeks thereafter, i.e., the date of disposal of the preliminary objections.-
[MGM export v DCIT (2010) 323 ITR 331: (2009) 23 DTR 356 (Guj.)]
Where Assessing Officer started reassessment proceedings, Assessing Officer was required to decide preliminary objections and pass a speaking order disposing of objections raised by petitioner and until such a speaking order was passed, Assessing Officer could not undertake reassessment.-
[Arvind Mills Ltd. v. Asstt. CWT (2004) 270 ITR 467 :191 CTR 233 (Guj.)]
Where the assessing Officer passed an order of reassessment without hearing objections of assessee, it was held that the Assessing Officer had acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the assessee and such order was liable to be aside.-
[Rabo india Finance Ltd. v DCIT (2012)(Bom.)]
Assessing Officer has to apply his mind to objections raised by assessee to reopening and has to deal with same in order.-
Where Assessing Officer passed assessment order under section 147 without first passing a speaking order on objections raised by assessee to issuance of notice under section 148, in view of decision of Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19: (2002) , assessment was liable to be set aside.-
[Keshav Shares& Stock Ltd. v. ITO(2008) (Del.)]
Reassessment order passed without considering the objections lodged by the assessee is not sustainable
Reassessment framed by the assessing officer without disposing primary objection raised by the assessee to the issue of reassessment notice issued by him was liable to be quashed. But Assessing Officer was directed to consider the objections filed by the assessee and pass fresh orders after hearing the assessee.
The notice for reopening the assessment was issued on 16.03.2009 and the reasons in support of the notice were dated 18.06.2009. On 18.12.2009, the assessee lodged its objections to the reopening of the assessment, stating that a copy of the letter dated 18.06.2009 had been handed over only on 16.12.2009. The order of assessment was passed on 23.12.2009.
In the writ petition filed by the assessee, the High Court held that there was absolutely no reason or justification for the Assessing Officer not to deal with the objections filed by the assessee to the reopening of the assessment, particularly in view of the binding principle of law laid down by the Supreme Court in that regard. The Order of reassessment was therefore set aside. The High Court directed the Assessing Officer to pass a fresh order on the objections raised by the assessee to the proposed reassessment in accordance with the law.-
[IOT Infrastructure & Energy Services Ltd v. ACIT (2010) 329 ITR 547: 233 CTR 175 (Bom.)]
Assessing Officer completed the assessment without providing the reasons recorded in spite of request – Held Assessment order set aside for fresh order. –
[Bhabesh Chandra Panja v. ITO (2010) 41 SOT 390 (TM) (KOL)]
If assessee does not ask for section 147 reason & object to reopening, ITAT cannot remand to Assessing Officer and give assessee another opportunity.-
Assessing Officer must supply reasons even without request from assessee.-
[Sahakari Khand Udyog Mandal Ltd. 370 ITR 107 (Guj.)]
Objection of re-assessment
Disposal of the Objections has to be by a Speaking Order
In the case of Mukesh Modi, it was held that Rejection of objection without speaking order the Notice and reassessment not valid.-
[Mukesh Modi v. DCIT (2014) 366 ITR 418 (Raj.)]
Reason for reassessment was not furnished to the assessee before completion of assessment, held reassessment not valid
The Tribunal following the judgment of
Bombay High Court in CIT v. Fomento Resorts and Hotels Ltd ITA no. 71 of 2006 dated 27.11.2006,
has held that though the reopening of assessment was within three years from the end of relevant assessment year, since the reasons recorded for reopening of the assessment were not furnished to the assessee till date the completion of assessment, the reassessment order cannot be upheld, moreover, Special Leave Petition filed by revenue against the decision of this court in the case of CIT v. Fomento Resorts and Hotels Ltd, has been dismissed by Apex Court, vide order dated July 16, 2007. The court dismissed the appeal of the revenue.-
[CIT v. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom)]
Assessing Officer had failed to apply his mind to the relevant material while framing the assessment order, he could not take advantage of his own wrong and reopen the assessment under section 147
In the order rejecting the objections filed by the assessee to the notice under section 148, the Assessing Officer had observed “verification of the assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and therefore, it cannot be said that there is change of opinion”. Thus, according to the Assessing Officer, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. It was held that since the Assessing Officer had failed to apply his mind to the relevant material while framing the assessment order, he could not take advantage of his own wrong and reopen the assessment under section 147 of the Act.-
[Asian Paints Ltd. v. DCIT(2009) 308 ITR 195 (Bom.)]
Reassessment order passed prior to 4 weeks as above is liable to be quashed.-
[Aroni Commercial Ltd. v. DCIT (2014) 88 CCH 62 (Bom.)]; [Raman & Weil P Ltd. v. DCIT (2015) 117 DTR 57 (Bom.)]
The Assessing Officer shall wait for a minimum 4 weeks from the date of disposal of the objection before completing the assessment.-[Asian Paints Ltd. v. DCIT (2008) ITR 90 (Bom.)]