2015 (6) TMI 1165 - HC - Income Tax

Court orders detailed reasons for assessment reopening objection rejection, stresses transparency & fairness

The court found the communication rejecting objections to the reopening of the assessment year 2009-10 under Section 147 of the Income Tax Act inadequate ... Reopening of assessment - reasons to believe - Held that:- Petitioner is correct in his submission that the communication dated 06.01.2015, Annexure-K, is bereft of reasons and is not a speaking order. “The giving of reasons in support of the conclusions by judicial and quasi judicial authorities when exercising initial jurisdiction is essential for various reasons. First it is calculated to prevent unconscious, unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimize the chances of unconscious infiltration of actual bias or unfairness in conclusion.” This is the observation of the Apex Court in Woolcombers of India Ltd., vs. Woolcombers workers Union and another [1973 (8) TMI 158 - SUPREME COURT]. The communication, Annexure-K, simply states that the objections are rejected, since the licence fee/logo is a “expenditure towards good will”. This, in my considered opinion, is a ‘conclusion’ and not a ‘reason’. In the circumstances, there is a need to interfere with the communication, Annexure-K. - Decided in favour of assessee Issues:1. Validity of reopening the case under Section 147 of the Income Tax Act for the assessment year 2009-10.2. Adequacy of reasons provided for rejecting objections to the reopening of the case.Analysis:1. The judgment pertains to a case where the petitioner received a notice for reopening the assessment year 2009-10 under Section 147 of the Income Tax Act. The petitioner filed objections to the reopening, which were subsequently rejected by the Deputy Commissioner of Income Tax. The court noted that the communication rejecting the objections lacked reasons and was not a speaking order. Citing the importance of providing reasons to prevent unfairness or arbitrariness, the court emphasized the necessity for authorities to give detailed reasons for their conclusions. The court referred to a previous Supreme Court ruling to support this stance.2. The communication rejecting the objections merely stated that the expenditure towards the license fee/logo was considered as an expenditure towards goodwill. The court observed that this statement was a conclusion rather than a reason. Consequently, the court found it necessary to intervene and quash the communication rejecting the objections. The court directed the authorities to reconsider the petitioner's objections and issue a speaking order with detailed reasons after providing an opportunity for a hearing to the petitioner within a specified timeline. The petitioner was instructed to appear before the authority on a designated date without further notice.This judgment highlights the importance of providing detailed reasons for decisions made by judicial and quasi-judicial authorities, especially in cases involving the reopening of assessments under the Income Tax Act. It underscores the need for transparency and fairness in administrative proceedings to prevent any potential bias or unfairness.