2023 (1) TMI 1261 - HC - Income Tax

Court affirms writ petition approval, stresses mandatory objection consideration under Income Tax Act.

The Court dismissed the appeal, affirming the Single Judge's decision to allow the writ petition. It emphasized the mandatory nature of considering ... Mandatory procedure for disposal of objections before passing assessment on reopening - obligation to furnish reasons for reopening - reopening of assessment under Section 148/147 of the Income Tax Act - curable defect doctrine under Section 292B of the Income Tax Act - precedent in G.K.N. Driveshafts on mandatory compliance - remand for reconsideration of assessmentMandatory procedure for disposal of objections before passing assessment on reopening - obligation to furnish reasons for reopening - reopening of assessment under Section 148/147 of the Income Tax Act - Whether the Assessing Officer complied with the mandatory procedure of furnishing reasons for reopening and disposing the assessee's objections before passing the final assessment order. - HELD THAT: - The Court examined the chronology of events and the A.O.'s recordal of proceedings. Although reasons for reopening were stated to have been issued on 28.09.2018, the assessee had sought reasons as early as 10.04.2018 and again on 12.12.2018; the A.O. subsequently proceeded with hearings on 18.12.2018 and 20.12.2018 and completed the assessment hurriedly by 28.12.2018 to meet the statutory time limit. The Division Bench applied the settled principle, as followed by this Court in Deepak Extrusions and tracing the rule in G.K.N. Driveshafts, that the procedure of making reasons known and disposing the objections before proceeding to finalise the reopened assessment is mandatory. The court found that, by no stretch, the A.O.'s order could be treated as a speaking order reflecting bona fide disposal of objections; the material shows that the proceedings were rushed and the mandatory procedure was not complied with. [Paras 8, 9, 10]The mandatory procedure of furnishing reasons and properly considering and disposing the assessee's objections prior to finalising the reopened assessment was not followed; the writ petition was rightly allowed on this ground.Curable defect doctrine under Section 292B of the Income Tax Act - remand for reconsideration of assessment - precedent in G.K.N. Driveshafts on mandatory compliance - Whether the procedural defect in not furnishing reasons and disposing objections prior to passing the assessment was a curable defect warranting remand to the Assessing Officer under the curative doctrine invoked by the Revenue. - HELD THAT: - Revenue relied on the proposition that the defect was curable under Section 292B and placed reliance on judgments which remanded matters to the A.O. The Court contrasted those authorities with this Court's treatment in Deepak Extrusions and the Supreme Court's pronouncements in G.K.N. Driveshafts, concluding that where the mandatory procedure is not complied with and the record establishes a hurried completion without proper disposal of objections, the defect cannot be treated as a mere curable irregularity. The Division Bench found no patent error in the Single Judge's application of this mandatory-rule jurisprudence and observed that the facts here mirrored those in Deepak Extrusions, rendering remand unnecessary in favour of upholding the writ court's order. [Paras 10, 11]The contention that the defect was curable and that the matter should be remanded was rejected; the appellate challenge fails and the writ court's order stands.Final Conclusion: The intra-court appeal is dismissed. The Division Bench upheld the Single Judge's finding that the Assessing Officer did not comply with the mandatory procedure of making reasons known and disposing the assessee's objections before finalising the reopened assessment; the defect was not treated as curable and the writ petition was correctly allowed. Issues: Appeal against order allowing assessee's writ petition challenging final assessment order passed without following mandatory procedure for disposal of objections under Section 292(B) of the Income Tax Act, 1961.Analysis:1. Background and Facts: The Revenue filed an intra Court appeal against the order allowing the assessee's writ petition challenging the final assessment order passed by the Assessing Officer (AO) without following the mandatory procedure. The AO issued a notice under Section 148 of the Income Tax Act on 23.03.2018, and the assessee sought reasons on 10.04.2018. The final assessment order was passed on 28.12.2018 without addressing the objections raised by the assessee. 2. Appellant's Submission: The Revenue argued that the defect in not furnishing reasons earlier was curable under Section 292(B) of the Act. They relied on a case where a similar matter was remanded to the AO. The Revenue contended that the objections were discussed with the assessee before passing the final order, and thus, the appeal should be allowed. 3. Respondent's Argument: The respondent argued that the mandatory procedure for disposal of objections before proceeding with the assessment was not followed, citing a relevant case law. They emphasized that the AO did not adequately consider the objections raised by the assessee, and therefore, the appeal should be dismissed. 4. Court's Analysis: The Court examined the sequence of events and found that the AO did not address the objections raised by the assessee in a timely manner. The AO hurriedly completed the proceedings between 18.12.2018 and 28.12.2018 to meet the deadline. The Court noted that the procedure for disposal of objections was mandatory, as established in previous judgments. 5. Decision: The Court dismissed the appeal, stating that there was no error in the Single Judge's decision to allow the writ petition. The Court emphasized that the provision requiring the AO to consider objections before passing the final order is mandatory. As a result, the appeal was rejected without costs.This detailed analysis highlights the key arguments presented by both parties, the Court's examination of the facts and legal precedents, and the final decision reached by the Court in dismissing the appeal.