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Friday, 14 April 2017 11:56

Assessing Officer is bound to dispose of objections to issuance of Notice u/s 148 by passing a speaking order - Madras High Court

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Reopening Notice u/s 148 - Madras High Court Reopening Notice u/s 148 - Madras High Court Taxpundit.org

Whether remitting the matter back for passing a speaking order on the objections raised against the reopening of the assessment, would amount to extension of period of limitation? - Held No

 

1. If the Assessing Officer has passed the order of assessment within the prescribed period of limitation and thereafter, if such order is put to challenge before the Court of law and consequently, is set aside on some reason, which in the opinion of the Court is a curable defect, it is always open for the Court to remit the matter back to the Assessing Officer for passing a fresh order of assessment after curing those defects. In such cases, it does not mean that the Court has extended the period of limitation. Needles to say that once the Court has set aside the order and remitted the matter back to the Assessing Authority, the parties are reverted back to their original position as existed before passing the order of assessment and therefore, a fresh order to be passed in pursuant to such remand, is deemed to have been passed within the prescribed period of limitation, even though the time prescribed so under statute got expired by that time.

2. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee 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. 

Berger Paints vs. Acit1. Writ petition filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari to call for the records of the respondent contained in its Assessment Order dated 30.12.2016 in PAN: AAACH1651B, passed under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13 and to quash the same as arbitrary , unjust and illegal

2. The petitioner is aggrieved against the order of assessment dated 30.12.2016 passed under Section 143(3) of Income Tax Act, 1961, for the assessment year 2012-13

3. The petitioner is a real estate Company involved in the development of properties. They filed their return for the assessment year 2012-13 on 30.09.2012, admitting a nil total income. The petitioner's case was selected for scrutiny and notice dated 03.12.2014 was issued under Section 143(2) of the Income Tax Act, 1961. On 29.12.2014, the petitioner, through their authorised representative, submitted certain documents pertaining to the issue

4. After detailed scrutiny of the documents and hearing the petitioner's representative on various dates, the respondent passed an order of assessment on 23.03.2015, by accepting the petitioner's return

5. While so, the respondent issued a notice dated 16.10.2015 under Section 148 of the said Act seeking to reopen the assessment under Section 147 of the said Act, simply by stating that the respondent has reasons to believe that the petitioner's income escaped assessment

6. By letter dated 20.11.2015, the petitioner requested for furnishing the informations pertaining to the reasons for reopening the assessment and the copies of documents relied upon by the respondent

7. The petitioner also requested to treat the return filed on 30.09.2012 as response to the notice under Section 148 of the said Act.

8. After four months, the respondent through letter dated 05.02.2016 furnished the purported reasons recorded for reopening of the assessment

9. In response to the aforementioned letter, the petitioner gave a reply on 26.03.2016 objecting to the reopening of the assessment

10. It is specifically stated by the petitioner that a joint venture development agreement dated 12.03.2012 was very much available with the respondent at the time of original scrutiny itself and that the assessment had been completed under Section 143(3) of the said Act after scrutinising the said document as well

11. There was no tangible material or basis available to the respondent so as to reopen the assessment under Section 147 of the said Act

12. Inspite of the specific objection raised by the petitioner to the reopening of the assessment, the respondent failed to pass a speaking order disposing those objections

13. On the other hand, the respondent passed the impugned order of assessment on 30.12.2016 assessing the petitioner's income at Rs.1,63,58,148/-

15. Hence, this writ petition

16. The respondent filed a counter affidavit wherein it is stated as follows:

During the financial year 2011-12 relevant to the assessment year 2012-13, project expenses were claimed to the extent of Rs.56,14,265/- without submitting the details of the same. The previous officer had accepted only the difference in the opening and closing stock to the extent of Rs.7,43,883/- and not the above project expenses. The assessment was reopened under Section 147 by issuing notice under Section 148 after obtaining necessary approval as contemplated under Section 151 of the said Act. The objections raised by the petitioner for reopening the assessment was considered while passing the impugned order of assessment

17. A rejoinder affidavit was filed by the petitioner wherein it is contended as follows:

The objections of the petitioner to the reopening of the assessment was submitted on 26.03.2016 and however, the assessment order was passed only on 30.12.2016 just one day prior to the last date for passing such assessment, as required under Section 153(2) of the said Act. Therefore, this Court at any event cannot extend the time period by giving an opportunity to the respondent to further reassess the income of the petitioner. The period of limitation statutorily prescribed cannot be extended by an order of the Court

Arguments by Assessee

(a) Once the respondent has chosen to reopen the assessment under Section 147 by issuing a notice under section 148, he is duty bound to pass a speaking order on the objections raised by the petitioner which is admittedly received by the respondent, well before passing the impugned order of assessment. Without passing a speaking order on the objections raised against reopening of the assessment, the respondent cannot pass the final order of assessment. In support of the above contention, the decision of the Apex Court reported in 2003(1) SCC 72 (GKN Driveshafts (India) Ltd. vs. Income Tax Officer and Ors) is relied on.

(b) The Joint Venture Agreement dated 12.03.2012 was very much available with the respondent even at the time of the original scrutiny of the returns and therefore, the respondent is not having jurisdiction to reopen the assessment in the absence of any tangible material which has come to his knowledge later. In this aspect, the decision of the Apex Court reported in 2010(2) SCC 723 (Commissioner of Income tax, Delhi vs. Kelvinator of India Limited) is relied on.

(c) When, admittedly, the respondent has not passed any speaking order on the objections raised by the petitioner and when the impugned order of assessment itself was passed just one day prior to the expiry of the prescribed period, this Court cannot even remit the matter, by extending the period of limitation, to the respondent to redo the assessment beyond the period prescribed under Section 153(2) of the said Act. In support of the above contentions, the decision of the Apex Court reported in 2001(10) SCC 280 (Sone Builders vs. Union of India and others)and the Division Bench decision of the Bombay High Court reported in (2016)382 ITR 333 (Bayer Material Science (P.) Ltd. vs. Deputy Commissioner of Income Tax-10(3)) are relied on.

Arguments by Revenue

Learned standing Counsel appearing for the respondent submitted that though a speaking order is not passed by the respondent on the objections raised by the petitioner against the reopening of the assessment, all those objections were considered while passing the impugned order of assessment. Even though the learned Standing Counsel submitted so, he is however fair enough to state further that in view of the Division Bench decisions made by the Bombay High Court reported in (2006)287 ITR 1(Bombay) (Allana Cold Storage Ltd. vs. Income-tax Officer) , (2012)27 Taxmann.com 163(Bombay) (Rabo India Finance Ltd. vs. Deputy Commissioner of Income-tax) and (2010) 233 CTR 175(Bombay) (IOT Infrastructure & Energy services Ltd. vs. Assistant Commissioner of Income-tax), the matter may be remitted back to the Assessing Officer to first pass a speaking order on the objections raised by the petitioner and thereafter, to pass a final order of assessment afresh.

Also Read : Capital Gains - Assessee is Entitled to Claim Exemption u/s 54F on One or More Flats - Reopening u/s 147 is Unsustainable - Madras High Court

Adjudication

In this case, the first contention raised by the petitioner is that the respondent has not passed a speaking order on the objections filed against the reopening of assessment. Insofar as the said contention is concerned, the respondent's side has not raised any serious objections and on the other hand, they admit to such position. However, they want the matter to be remitted back for passing such a speaking order. However, the petitioner is opposing to such course of action by contending that it would amount to extension of the period of limitation prescribed for passing the order of assessment. Therefore, this Court has to now consider as to whether remitting the matter back to the respondent for passing a speaking order on the objections raised against the reopening of the assessment and thereafter, to pass a fresh order of assessment, would amount to extension of period of limitation.

In my considered view, the question of extension of period of limitation, as contended by the petitioner, does not arise at all in this case. Admittedly, the order of assessment impugned in this writ petition was already passed within the prescribed period of limitation. If the Assessing Officer has passed the order of assessment within the prescribed period of limitation and thereafter, if such order is put to challenge before the Court of law and consequently, is set aside on some reason, which in the opinion of the Court is a curable defect, it is always open for the Court to remit the matter back to the Assessing Officer for passing a fresh order of assessment after curing those defects.

In such cases, it does not mean that the Court has extended the period of limitation. Needles to say that once the Court has set aside the order and remitted the matter back to the Assessing Authority, the parties are reverted back to their original position as existed before passing the order of assessment and therefore, a fresh order to be passed in pursuant to such remand, is deemed to have been passed within the prescribed period of limitation, even though the time prescribed so under statute got expired by that time.  An order passed within the period of limitation can always be questioned before the Court of law by raising very many grounds touching upon the merits of the matter. Upon considering those grounds, if the Court comes to a conclusion to set aside the impugned order and remit the matter back to the authority for passing a fresh order, depending upon the facts and circumstances of each case, it can do so.

Supreme Court on Section 35D - Berger Paints Case Law

In view of such remand, as the parties are reverted back to their original position as existed prior to the impugned order, it cannot be said that the court is extending the period of limitation. If such construction or interpretation is accepted, no fresh order of assessment can ever be made in respect of cases remitted by the Court where the limitation for passing the orders prescribed under the statute has already expired. Needless to say that prescription of statutory period of limitation is for the concerned authority to perform a particular act within such time limit. If he has acted within such prescribed time and passed an order, the statutory obligation vested on such authority, insofar as the period of limitation is concerned, is deemed to have been discharged. His order, so passed within time, may be right or wrong. Still it is an order passed within time. The person aggrieved against such an order is entitled to challenge the same before the appropriate forum, in a manner known to law. If any such challenge is made, such Forum has to look into the other aspects of the matter and the objections raised by the person so aggrieved, in order to come to a conclusion on the question whether to sustain the order or to set aside the same. If for some reasons such Forum chooses to set aside, it is open to such Forum to remit the matter back to the Original Authority for redoing the exercise once again. At that point of time, certainly, the question of considering the limitation does not arise, as such forum is not granting time to pass the original order itself beyond the period of limitation and on the other hand, it is an order empowering the original authority to redo their exercise. Certainly, there is a vast difference between the stage and circumstances of the exercise of power “to do” and “redo”. When the power “to do” is certainly to be exercised within the statutory period of limitation, the power to “redo” such exercise does not fall under the purview of limitation once again. Hence, I reject the contention of the petitioner on this aspect.

Considering all these aspects, I am of the view that the matter has to go back to the respondent for passing a speaking order on the objections and thereafter, to pass the final order of assessment. Accordingly, the writ petition is allowed and the impugned order of assessment is set aside and the matter is remitted back to the respondent to pass a speaking order on the objections raised by the petitioner, after giving an opportunity of hearing to them. Such exercise shall be done by the respondent within a period of four weeks from the date of receipt of a copy of this order. Thereafter, it is open to the respondent to pass the final order on merits and in accordance with law within a period of four weeks.

Cases Referred to

1. 2003(1) SCC 72 (GKN Driveshafts (India) Ltd. vs. Income Tax Officer and Ors)

2. 2010(2) SCC 723 (Commissioner of Income tax, Delhi vs. Kelvinator of India Limited)

3. (2016)382 ITR 333 (Bayer Material Science (P.) Ltd. vs. Deputy Commissioner of Income Tax-10(3))

4. (2006)287 ITR 1(Bombay) (Allana Cold Storage Ltd. vs. Income-tax Officer)

5. (2012)27 Taxmann.com 163(Bombay) (Rabo India Finance Ltd. vs. Deputy Commissioner of Income-tax)

6. (2010) 233 CTR 175(Bombay) (IOT Infrastructure & Energy services Ltd. vs. Assistant Commissioner of Income-tax)

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