2009 (3) TMI 64 - HC - Income Tax

Court sets aside reassessment order due to failure to address preliminary objections, directs strict adherence to schedule

M/S MGM EXPORTS Versus DEPUTY COMMISSIONER OF INCOME TAX

The High Court quashed and set aside the reassessment order dated 16.12.2008 due to the respondent's failure to address preliminary objections before ... Reassessment order – notice u/s 148 - it is apparent that the action of the respondent authority in framing the reassessment order, without first disposing of the preliminary objections raised by the petitioner, cannot be sustained - Accordingly, the reassessment order is hereby quashed and set aside and the respondent authority is directed to first dispose of preliminary objections by passing a speaking order and only thereafter proceed with the reassessment proceedings in accordance with law Issues:1. Reopening of completed assessment under Section 148 of the Income-tax Act, 1961.2. Compliance with legal procedures in reassessment proceedings.3. Quashing and setting aside of reassessment order.4. Directions for disposing of preliminary objections and completing reassessment proceedings within a specified timeline.Analysis:Issue 1: Reopening of completed assessment under Section 148 of the Income-tax Act, 1961.The judgment revolves around the reopening of a completed assessment for Assessment Year 2001-2002 under Section 148 of the Income-tax Act, 1961. The respondent authority issued a notice proposing to reopen the assessment, leading to objections raised by the petitioner on jurisdiction and merits. The reassessment order dated 16.12.2008, based on the notice issued under Section 148, was challenged in the present proceedings.Issue 2: Compliance with legal procedures in reassessment proceedings.The petitioner contended that the respondent authority was obligated to first address the preliminary objections raised before proceeding with reassessment. Citing previous judgments, the petitioner argued that the respondent should have disposed of objections before framing the reassessment order. The respondent, however, claimed to have addressed the objections in the reassessment order itself, asserting compliance with legal directions and procedures laid down by the Supreme Court.Issue 3: Quashing and setting aside of reassessment order.The High Court, considering the settled legal position, found that the respondent's action in framing the reassessment order without addressing the preliminary objections was unsustainable. Consequently, the reassessment order dated 16.12.2008 was quashed and set aside. The Court directed the respondent to dispose of the preliminary objections by passing a speaking order before proceeding with reassessment proceedings in accordance with the law.Issue 4: Directions for disposing of preliminary objections and completing reassessment proceedings within a specified timeline.In light of the expired period of limitation for reassessment, the Court provided a detailed schedule for the respondent authority to follow. This schedule included disposing of preliminary objections within four weeks and completing reassessment proceedings within an additional four weeks thereafter. The Court emphasized that no extension of time would be allowed, and the petitioner retained the right to challenge the order disposing of preliminary objections if necessary.In conclusion, the petition was allowed as per the specified terms, with the rule made absolute and no order as to costs.This detailed analysis of the judgment addresses the issues of reopening completed assessments, procedural compliance in reassessment proceedings, quashing of the reassessment order, and the specific directions provided by the High Court for the timely completion of the reassessment process.