Court invalidates Income Tax notice and assessment order citing jurisdictional errors and lack of speaking order

The Court quashed the notice issued under Section 148 of the Income Tax Act, 1961, due to incorrect facts and lack of a speaking order addressing objections. Consequently, the assessment order was deemed invalid as it was based on the flawed notice. The Court found the Writ Petition maintainable despite the availability of an alternate remedy, citing jurisdictional errors and incorrect factual basis for reopening the assessment.

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Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the assessment order dated 29/9/2021.
3. Maintainability of the Writ Petition given the availability of an alternate remedy.

Summary:

1. Legality of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 24/3/2020 issued by the Income Tax Officer (ITO) under Section 148 of the Income Tax Act, 1961, on the grounds that it was based on incorrect facts. The notice stated that the petitioner had earned a profit of Rs. 9,90,314/- from the sale of shares, which was not offered for taxation. However, the petitioner contended that this amount was actually a loss incurred in commodity trading for the Assessment Year 2012-13, not 2013-14, as mentioned in the notice. The Court found that the notice was based on incorrect facts and that the objections raised by the petitioner were not addressed in a speaking order, as required by the Supreme Court's decision in GKN Driveshafts (India) Ltd. [(2003) 1 SCC 72]. Consequently, the notice under Section 148 was quashed.

2. Validity of the Assessment Order Dated 29/9/2021:
The assessment order dated 29/9/2021, which assessed the petitioner's income at Rs. 1,55,30,950/-, was also challenged. The Court noted that the assessment was based on the flawed notice under Section 148 and thus could not stand. The objections raised by the petitioner were not properly considered, and the ITO did not provide any reasons for rejecting the objections. The Court held that the assessment order was invalid due to the procedural lapses and incorrect factual basis for reopening the assessment.

3. Maintainability of the Writ Petition Given the Availability of an Alternate Remedy:
The respondents argued that the Writ Petition should not be entertained as the petitioner had an alternate remedy of filing a statutory appeal. However, the Court held that the availability of an alternate remedy does not bar the maintainability of a Writ Petition, especially when the challenge is to the jurisdictional validity of the notice under Section 148. The Court cited various decisions, including M/s Godrej Sara Lee Ltd. and M/s Magadh Sugar & Energy Ltd., to support the view that a Writ Petition can be entertained in cases involving jurisdictional errors or when the proceedings are based on incorrect facts.

Conclusion:
The Court quashed the notice dated 24/3/2020 issued under Section 148 of the Income Tax Act, 1961, and set aside all consequential actions, including the assessment order dated 29/9/2021. The Writ Petition was found to be maintainable despite the availability of an alternate remedy, given the jurisdictional errors and incorrect factual basis for reopening the assessment.

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