Writ petition dismissed for reassessment beyond four years, objections not raised before assessing officer cannot be raised first time in writ proceedings

The Bombay HC dismissed a writ petition challenging reassessment proceedings initiated beyond four years. The petitioner argued TOLA provisions applied and raised issues regarding Section 54F deduction restrictions and untaxed rental income. The HC held that objections not raised before the assessing officer cannot be raised for the first time in writ proceedings. The court found the petitioner participated in reassessment without timely objections and failed to demonstrate issues were examined during original assessment. The HC declined to exercise extraordinary jurisdiction under Article 226, directing the petitioner to file appeal within four weeks with interim relief granted for that period.

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

• Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act were barred by the first proviso due to the alleged absence of failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.
• Whether the reassessment proceedings amounted to a change of opinion, which is impermissible under the Act.
• Whether the reassessment proceedings were initiated at the behest of the audit party's objections, thus lacking the assessing officer's independent "reasons to believe."
• Whether the petitioner was provided with sufficient opportunity of hearing before the reassessment order was passed.
• Whether the petitioner had an alternate and efficacious remedy by way of an appeal under the Income Tax Act, precluding the need for the Court to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India.

ISSUE-WISE DETAILED ANALYSIS

1. Reassessment Proceedings and the First Proviso to Section 147

The petitioner contended that the reassessment notice was issued beyond the statutory period of four years and was barred by the first proviso to Section 147, as there was no failure to disclose material facts. The respondent argued that the period was extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2022 (TOLA), thus the notice was not barred.

The Court noted that the issue of TOLA's applicability was not raised in the petitioner's objections to the assessing officer and should not be introduced for the first time in writ proceedings. The Court refrained from delving into this issue, suggesting it be raised in an appeal.

2. Change of Opinion

The petitioner argued that the issues concerning Section 54F and rental income were examined during the original assessment, thus reassessment constituted a change of opinion. The Court found no evidence of queries raised during the initial assessment regarding these issues. The undated letters submitted by the petitioner lacked acknowledgment by the revenue, and the Court declined to investigate these facts, suggesting they be examined in an appeal.

3. Audit Party's Influence

The petitioner claimed reassessment was initiated based on audit objections, thus invalid. The Court held that reopening based on audit objections is permissible if it involves questions of law, not facts. The reasons recorded did not explicitly mention audit objections, and the Court expressed doubts about the petitioner's ability to raise this issue, particularly since internal audit documents were shared with the petitioner.

4. Opportunity of Hearing

The petitioner alleged insufficient time between the rejection of objections and the reassessment order. The Court noted the petitioner participated in reassessment proceedings without raising this objection, thus precluding it from being raised in writ proceedings. This issue was left open for appeal.

5. Alternate and Efficacious Remedy

The Court emphasized the availability of an appeal under Chapter XX of the Income Tax Act as an alternate remedy. The absence of a pre-deposit requirement for appeals further negated the need for writ jurisdiction. The Court cited its recent judgment in Oberoi Constructions Limited v. Union of India & Ors. to support this stance.

SIGNIFICANT HOLDINGS

The Court held that it would not exercise its extraordinary jurisdiction under Article 226 due to the availability of an alternate remedy. The Court extended ad-interim relief for four weeks to allow the petitioner to seek a stay of the demand from the appropriate authority. The petitioner was granted liberty to raise all objections before the appellate authority, with the Court's observations not influencing the merits of the appeal.

The petition was disposed of with no costs, and parties were directed to act on an authenticated copy of the order.

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