Reassessment Order Quashed for Failing to Address Assessee's Objections: Matter Remanded for Fresh Consideration

Reassessment Order Quashed for Failing to Address Assessee’s Objections: Matter Remanded for Fresh Consideration

Summary in Key Points:

Reopening Notice: The Assessing Officer issued a notice under Section 148 of the Income-tax Act, 1961, to reassess the assessee’s income for the assessment year 2013-14, believing that income had escaped assessment.
Assessee’s Contention: The assessee objected to the reopening, clarifying that they had filed a return showing income and claiming a refund, not a NIL return as assumed by the Assessing Officer.
Previous Litigation: The assessee had previously challenged the reopening notice due to incomplete reasons. The court had ordered the Assessing Officer to address the assessee’s objections afresh.
Failure to Address Objections: Despite the court’s order, the Assessing Officer failed to address the assessee’s objections in the subsequent order.
Order Quashed and Remanded: The court quashed the order disposing of the objections and remanded the matter back to the Assessing Officer.

Decision:

The court directed the Assessing Officer to provide the assessee with a proper hearing and pass an appropriate order in accordance with the law, specifically addressing the assessee’s objections. This decision emphasizes the importance of adhering to court orders and ensuring that assessees are given a fair opportunity to present their case during reassessment proceedings. It underscores the need for due process and proper consideration of objections before finalizing any reassessment order.

HIGH COURT OF BOMBAY

Ugar Sugar Works Ltd.

Assistant Commissioner of Income-tax

G.S. Kulkarni and Advait M. Sethna, JJ.

WRIT PETITION (L) NO.23638 OF 2024

DECEMBER 13, 2024

Sham Walve, R.S. Padvekar, Tanzil Padvekar, Ms. Tejal Kharkar and Bhavik Chheda, Advs. for the Petitioner. Suresh Kumar, for the Respondent.

ORDER

1. We have heard Learned Counsel for the parties.

2. This petition under Article 226 of the Constitution of India is a second round of proceedings before this court. Earlier the petitioner had filed Writ Petition No.3631 of 2022 contending that the reasons provided for reopening post issuance of notice under Section 148 of the Income Tax Act 1961 (the Act) were incomplete as ex-facie seen from the reasons annexed to the approval under Section 151 of the Act. The proceedings of the said Writ petition were adjudicated by this court. By an order dated 23^rd January 2024 the Court disposed of the petition by quashing and setting aside the order dated 16^th February 2022 passed by the Assessing Officer disposing of the objection as raised by the petitioner to the notice under Section 148. What is significant, is the court recording the reasons that were made available to the petitioner vide communication dated 30^th April 2021 and the reasons annexed to the approval under Section 151 of the Act were incomplete. Hence the court was satisfied that the petitioner was not given an opportunity to effectively deal with the reasons on which opinion was formed for a belief that there was escapement of income for Assessment Year 2013-2014. Accordingly the said order dated 16^th February 2022 as asserted was quashed and set aside. The Court issued the following operative directions:-

“4 Therefore, we hereby quash and set aside the impugned order dated 16th February 2022 and remand the matter for denovo consideration.

5 In view of the above, the assessment order dated 25th March 2022 also is hereby quashed and set aside.

6 Petitioner shall file detailed objections to the notice dated 31st March 2021 issued under Section 148 of the Act. Should petitioner wish to receive any documents relied upon in the reasons to believe escapement of income, petitioner shall, within two weeks from the date this order being uploaded, apply to the Assessing Officer providing the list of documents/details required. The Assessing Officer shall make available those documents/details within two weeks of receiving the request and the link be made available to petitioner in the portal as well as by email. If any part of the document is required for further investigation and it does not pertain to petitioner, such portions could be redacted. After petitioner files the objections, the Assessing Officer shall pass a reasoned order to dispose the objections in accordance with law. The Assessing Officer shall deal with every point raised by petitioner. Before passing any order, personal hearing shall be granted notice whereof shall be communicated atleast five working days in advance. The proceeding will be concluded on or before 30th April 2024.

7 After passing an order disposing objections filed by petitioner, in case the objections are not accepted by the Assessing Officer, then the Assessing Officer should complete reassessment proceedings on or before 30th June 2024 as per the provisions of law.

8 Petition disposed.

9 We clarify that we have not made any observation on the merits of the matter.”

3. On the aforesaid backdrop the proceedings were remanded to the Assessing Officer. Subsequent thereto there was also correspondence entered between the Petitioner and the Respondent in regard to documents being furnished to the Petitioner by the Department. The Petitioner accordingly raised fresh objections vide letter dated 6^th April 2024, against the reasons as provided to it. The petitioner in paragraph 10 of the said letter raised a specific objection in regard to the reasons as set out in paragraph 7 “of the reasons” which was to the effect that the assessee has disclosed income of Rs.NIL, claiming carry forward and unabsorbed losses to the extent of Rs.98,32,365/-. Petitioner contended that reasons as furnished in such regard was totally untenable, in as much as the petitioner had not filed a NIL return and in fact it was a return where petitioner had shown its gross income as Rs.22,15,93,747/- and total income of Rs.22,15,23,750/- and had claimed a refund of Rs.1,30,58,530/-. It was stated that also the losses of current year to be set of were shown to be NIL. The petitioner therefore categorically submitted that the reasons as set out and as objected by the Petitioner were untenable.

4. In pursuance to the order dated 23^rd January 2024 passed by this court in the earlier Writ Petition (supra) these fresh objections raised by the Petitioner were disposed of by the impugned order dated 8^th June 2024. The grievance of the petitioner in the present proceeding is that in passing the fresh order disposing of objections, the contentions as urged by the petitioner have not been addressed, when the respondents were required to undertake in accordance with law, as directed by this Court and more particularly in respect of the objections which were raised in paragraph 7 and to which we have made reference hereinabove.

5. We have perused the impugned order. Although Mr. Walve has raised several contentions to point out very serious defects in the impugned order disposing of the petitioner’s objections, we do not intend to delve on all contention, suffice it to observe that we are more than satisfied that the fresh objections as raised by the Petitioner have not been dealt / disposed of despite a specific order to that effect passed by this court, much less in the manner according to law. In fact the impugned order in our opinion shows gross non application of mind to the detailed case which was put up by the petitioner before the Assessing Officer. It was a legal obligation of the respondents to dispose of the objections, in accordance with law and more particularly when there was a mandate of the orders passed by this court which was staring at the respondents, namely, the order dated 23^rd January 2024 passed on the earlier writ petition filed by the petitioner. We may also observe that as directed by this court in paragraph 7 of the said order, the order disposing of objections, would be the very foundation for passing an order re-assessing the petitioner’s income. If the foundation itself in terms of the impugned order dated 8^th June 2024 is of a nature which in our opinion is not in accordance with law and/or objectionable, we can imagine as to what can be the fate of the assessment order. However, without taking a serious view which this matter certainly deserved, we are of the opinion that the concerned officers would be better advised and a wiser sense prevails on these officers of the Assessment Unit so as to pass an appropriate order in accordance with law, by one more opportunity being granted to them. In the aforesaid circumstances, we dispose of this petition by the following order:-

ORDER

(i)

The impugned order dated 8^th June 2024 is quashed and set aside.

(ii)

The proceedings stand remanded to the Jurisdictional Assessing Officer to grant a hearing to the Petitioner and pass an appropriate order strictly in accordance with law and in the light of the observations made by the court not only in the order dated 23^rd January 2024 (supra) but also this order.

(iii)

Let this exercise be completed within a period of two months from today. Till the objections are disposed of, the direction of this court in paragraph 7 of the order dated 23^rd January 2024 shall operate, however, subject to modification that a re-assessment order be passed on/or before 31^st March 2025.

6. All contentions of the parties are expressly kept open.

7. Disposed of. No costs.