2015 (8) TMI 20 - HC - Income Tax

High Court emphasizes detailed reasoning in setting aside perfunctory orders on tax objections

Sun Tan Trading Co. Pvt. Ltd. Versus The Deputy Commissioner of Income Tax, 1 (3) (1), Mumbai And Others

The High Court set aside the perfunctory orders disposing of objections to reopening notices under Section 148 of the Income Tax Act for Assessment Years ... Reopening of the assessment - disallow an expenditure claimed for the Assessment Year 2005-06 to 2010-11 under Section 37 as advertisements, sales promotions expenses, etc. on the ground that it was incurred for the exporter of the liquor and appropriately forms part of the consideration payable for the imported goods by the petitioner - Held that:- We notice that the petitioner had sought a copy of the sanction granted to the Assessing Officer in terms of Section 151 of the Act to issue the impugned reopening notices. The orders disposing of the objections records that as it is administrative sanction and the Assessing Officer is not obliged to provide a copy of the same to assessee. The affidavit-in-reply to the above petition filed by the revenue also does not contain a copy of this sanction, although it does mention that the necessary sanction has been obtained. Mr. Chhotaray, the learned Counsel for the revenue submits that revenue cannot be compelled to give a copy of the sanction to the assessee. We find this attitude of the revenue rather strange. The law requires the sanction to be obtained while issuing notice under Section 151 of the Act as in the absence of appropriate sanction, the proceedings itself are without jurisdiction. We would have expected the revenue to have made a copy of sanction available to the assessee, when sought, of its own. This is the minimum fair play expected of the State. The assessee is not an enemy. The attitude of the revenue seems to be that the assessee has to be taxed and to achieve that object, fair play could be jettisoned. The revenue is certainly expected to ensure that every paisa due to the State is collected but the same has to be only in accordance with law and in compliance with rules of fair play. In the above circumstances, we set aside the three orders dated 15 January 2015 and restore the issue to the Assessing Officer to enable disposal of the petitioner's objections in accordance with the law. So as to avoid the reassessment proceedings becoming time barred, we make clear that the period of 15 weeks from today would stand excluded for the purpose of computing period of limitation under Section 153 of the Act. Issues:Challenge to reopening notices under Section 148 of the Income Tax Act for Assessment Years 2007-08, 2008-09, and 2009-10. Lack of detailed reasons in the order disposing of objections. Request for a copy of the sanction granted to the Assessing Officer under Section 151 of the Act.Analysis:Reopening Notices:The three petitions in question challenged the reopening notices issued under Section 148 of the Income Tax Act for the Assessment Years 2007-08, 2008-09, and 2009-10. The reasons for reopening the assessments were based on an order by the Customs and Central Excise Settlement Commission, which led to the payment of differential duty of customs. The revenue sought to disallow certain claimed expenditures as they were considered part of the consideration payable for imported goods. The petitioners objected to these reasons, arguing that there was no basis to believe that income had escaped assessment. The Assessing Officer disposed of the objections with identically worded orders, failing to address the specific contentions raised by the petitioners.Order Disposing of Objections:The High Court noted that the orders disposing of the objections were perfunctory and did not adequately address the objections raised by the petitioners. A quasi-judicial authority's order should be a speaking order, providing reasons for accepting or rejecting objections. The court emphasized that the order should demonstrate consideration of the objections to establish the validity of the reopening notice. Consequently, the court set aside the orders and directed the Assessing Officer to reconsider the objections in accordance with the law.Request for Sanction Copy:The petitioners had requested a copy of the sanction granted to the Assessing Officer under Section 151 of the Act for issuing the reopening notices. The orders disposing of objections stated that as it was an administrative sanction, the Assessing Officer was not obligated to provide a copy to the assessee. However, the court found this stance problematic, emphasizing the importance of fair play and compliance with legal procedures. The court directed the Assessing Officer to provide a copy of the sanction to the petitioner before addressing the objections, highlighting the necessity of transparency and adherence to due process.In conclusion, the High Court set aside the orders disposing of objections, emphasizing the need for detailed and reasoned decisions by the Assessing Officer. Additionally, the court underscored the importance of providing transparency and fair play in tax proceedings, directing the revenue authorities to provide necessary documents when requested by the assessee.