Court allows fresh objections in Income Tax Act reassessment case, grants stay on assessment proceedings

The court set aside the order disposing of objections to a notice issued under Section 148 of the Income-Tax Act, 1961 for reopening assessment for the Assessment Year 2010-2011. The petitioner was granted an opportunity to file fresh objections based on new material provided by the Revenue, with the Assessing Officer directed to pass a fresh order within four weeks. A stay was granted on the assessment proceedings due to the expiration of the time frame for completing the assessment, with a further stay on the impugned notice for ten weeks from the judgment date. All contentions were left open for future consideration.

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Issues:
Challenge to notice under Section 148 of the Income-Tax Act, 1961 for reopening assessment for the Assessment Year 2010-2011 based on lack of disclosure of information source and relevant documents in the reasons provided.

Analysis:
The petition challenged a notice dated 31.3.2017 issued under Section 148 of the Income-Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2010-2011. The petitioner contended that the reasons for the notice did not disclose the source of information or provide relevant portions of information received, as required by guidelines set by the Delhi High Court in a previous case. The Revenue later sought to rely upon a report received from the Assistant Director of Income-Tax (Investigation), which was annexed to the affidavit-in-reply. However, the petitioner had not been given an opportunity to present objections in light of this communication, forming the basis of the reasons provided.

During the hearing, the learned counsel for the Revenue referred to a CBDT Circular dated 10.1.2018, which outlined the manner in which reopening notices should be issued. The Circular emphasized the need for reasons to mention details of the relied-upon documents. Since the facts were not disputed, the court set aside the order disposing of the objections and granted the petitioner an opportunity to file fresh objections considering the material now available. The petitioner agreed to file fresh objections within two weeks, and the Assessing Officer was directed to pass a fresh order within four weeks after receiving the objections. The Assessing Officer was also instructed not to act upon the impugned notice for four weeks after communicating the order on objections, if adverse to the petitioner.

Considering the time frame for completing the assessment for the Assessment Year 2010-2011 had expired, a stay had been granted on the assessment proceedings. To allow for the necessary procedures, a stay of the impugned notice was granted for a period of ten weeks from the date of the judgment. The petition was disposed of with all contentions of the parties expressly kept open for future consideration.

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