2025 (2) TMI 244 - HC - Income Tax

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 ... Reopening of assessment - notice issued beyond a period of 4 years - Applicability of TOLA provisions​​​​​​​ - reasons record that deduction u/s 54F must be restricted to the cost of acquisition of petitioner’s share in the property and also no rental income has been offered for tax u/s 23 - whether this Court should exercise its extraordinary jurisdiction to examine the validity of reassessment proceedings in the present case? - HELD THAT:- The issue of whether, on account of TOLA provisions, proviso to Section 147 of the Act would be applicable or not was not raised by the petitioner in its objections. This issue has been raised for the first time before this Court. In our view, if the objection has not been raised before the assessing officer, it would not be fair to raise such an objection in Writ Petition for the first time to challenge the validity of the reassessment proceedings. Petitioner has filed undated letters to show that the issue of Section 54F was examined during the assessment proceedings and, therefore, there is a change of opinion. In the annexure to the queries raised, there is no query concerning Section 54F or taxation of rental income. Whether these undated letters were filed or not during the assessment proceedings in the absence of any document acknowledging the same by the revenue, it would not be proper for us to enter the arena of investigating this issue as to whether these documents were filed or not. This would involve an investigation into the facts that this Court, under Article 226 of the Constitution of India, cannot examine. However, the petitioner is free to demonstrate the same in appeal. Issue of rental income under the house property is concerned, no query is raised, and even in the undated letters, there is no reply on this issue. Therefore, we cannot accept the petitioner's contention that this issue was examined during the assessment proceedings. Learned counsel for the petitioner was fair in stating that, certainly, this was not examined. Petitioner also submitted that the impugned proceedings were initiated at the behest of the audit party and, therefore, the proceedings are bad in law. In our view, it is a settled position that if the audit objection is on facts, then the revenue would have no jurisdiction to reopen the case on audit. However, if the issue raised is a question of law, then certainly, reopening can be done. The issue in the present case, whether it is a question of fact or a question of law, will have to be examined in the light of the submissions made during the course of the assessment proceedings, which would again involve the determination of questions of fact, which this Court cannot go into in writ proceedings. In any view, the reasons recorded do not mention the reopening being done based on audit objections. Therefore, we have our own doubts about whether the petitioner can raise this issue. Also, we cannot comprehend how internal audit objection documents were shared with the petitioner. On perusal of the letter filed on 17 August 2018, in response to the audit party’s query, we find various documents annexed to this letter. Prima facie, we do not find a reference to these documents in undated letters, which the petitioner claims to have filed in assessment proceedings. Petitioner has participated in the reassessment proceedings despite the officer not disposing of the objection observed in the assessment order. The petitioner, vide letter dated 28 March 2022, has made his detailed submissions on the merits of the case without raising any objection on the insufficiency of time between the order rejecting objection and the time given for reply. On 17 January 2022, the petitioner has filed detailed submissions on the merits again without objecting the respondents not having passed any order disposing of the objections. Therefore, in our view, the petitioner cannot now raise this contention before the Writ Court. However, the petitioner is free to raise this issue before the Appellate Authority. We refrain from exercising our jurisdiction under Article 226 of the Constitution of India. However, if the petitioner files an appeal against the assessment order dated 29 March 2022 within four weeks from the date of uploading of the present order, then, the Appellate Authority will adjudicate the appeal Ad-interim relief extended for four weeks from the date of uploading the present order to enable the petitioner to make an appropriate application before the appropriate Authority for seeking a stay of the demand. ISSUES PRESENTED and CONSIDEREDThe 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 ANALYSIS1. Reassessment Proceedings and the First Proviso to Section 147The 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 OpinionThe 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 InfluenceThe 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 HearingThe 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 RemedyThe 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 HOLDINGSThe 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.