2025 (8) TMI 1195 - HC - Income Tax

Notice under Section 148 invalid where authority ignored prior direction to consider representation and give reasoned order

M/s. J.M. Global Equities Versus The Deputy Commissioner, Income Tax, Circle 10 (1) Kolkata.

M/s. J.M. Global Equities Versus The Deputy Commissioner, Income Tax, Circle 10 (1) Kolkata. - TMI 1. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment order passed under Section 147 read with Section 143(3) of the Income Tax Act is legally sustainable where the Assessing Officer failed to comply with a court direction to consider and communicate a reasoned disposal of objections to a notice under Section 148 within a stipulated time, and the notice would stand set aside upon failure to so communicate. 2. Whether a notice under Section 148, and any assessment and consequential proceedings premised on that notice, lose jurisdictional validity if a judicial direction mandating reasoned consideration of objections is not complied with by the Revenue authorities within the prescribed time. 3. The nature and extent of the statutory duty of the Assessing Officer to furnish reasons for reopening, and to dispose of objections by passing a speaking order prior to proceeding with reassessment (scope and application of the obligation articulated in precedent). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of assessment passed despite non-compliance with court direction to consider objections to Section 148 notice Legal framework: The statutory scheme requires reasons to be recorded for issuance of a notice under Section 148 and contemplates furnishing reasons to the assessee and disposal of objections by the Assessing Officer before proceeding with reassessment under Section 147/143(3). Precedent Treatment: The Court applied the established principle that where reasons for issuing a Section 148 notice are supplied, the noticee is entitled to file objections and the assessing officer must dispose of those objections by a speaking order before proceeding with assessment (as elucidated in established authority). Interpretation and reasoning: The Court held that a coordinate bench ordered the Revenue to consider the assessee's representation dated March 2, 2016 and communicate a reasoned response within four weeks, failing which the Section 148 notice would stand set aside. The assessing authority passed the assessment order before communicating any reasoned disposal of the objection and did not bring the assessment's existence to the attention of the Court when the representation was being considered. The Assessing Officer's own observation that the assessment 'shall be governed by the direction of the Hon'ble Court' further underscored that compliance with the court direction was expected. Non-compliance with the explicit judicial direction rendered the underlying notice defective and vitiated the jurisdiction to pass the reassessment. Ratio vs. Obiter: Ratio - The mandatory character of disposing of objections in accordance with the court's direction before proceeding with reassessment; failure to comply renders the notice and assessment void. Obiter - remarks about the Assessing Officer's conduct being 'deprecated' and general admonitions to departmental counsel are illustrative but ancillary. Conclusion: The assessment order passed under Section 147/143(3) is without jurisdiction and unsustainable because it was predicated on a Section 148 notice the validity of which was extinguished by non-compliance with the court's direction. Issue 2 - Effect of non-compliance with court direction on the Section 148 notice and consequential proceedings Legal framework: A notice under Section 148 is a prerequisite for reassessment under Section 147; judicially mandated procedures relating to disposal of objections affect the continuing validity of such notice. Precedent Treatment: The Court relied on the settled proposition that the assessing officer must furnish reasons within a reasonable time and dispose of objections by a speaking order before proceeding, affirming that procedural non-compliance can invalidate subsequent assessment measures. Interpretation and reasoning: Because the court's direction expressly provided that failure to communicate a reasoned order within four weeks would result in the notice standing set aside, the Court treated the direction as determinative of the notice's legal existence. The subsequent passing and later communication of the assessment order did not cure the fundamental defect that the prerequisites ordered by the Court were not observed. Consequently, all consequential proceedings flowing from the void notice (including assessment, recovery, and any bank attachment) lack enforceability. Ratio vs. Obiter: Ratio - A notice under Section 148 ceases to have legal effect where a court orders disposal of objections within a specified time and the Revenue fails to comply; assessments and consequential measures premised on such a notice must be quashed. Obiter - observations on timing pressures (limitation) asserted by the Revenue are noted but do not justify non-compliance. Conclusion: The Section 148 notice, the assessment dated March 30, 2016, and all consequential proceedings (including attachments) are quashed and set aside for want of jurisdiction stemming from failure to comply with the court's direction. Issue 3 - Duty of Revenue to assist the Court and exercise diligence in litigation related to reassessment proceedings Legal framework: Administrative and procedural duties require departmental officers and counsel to place complete and accurate instructions before the Court and to act promptly and diligently when judicial directions are given. Precedent Treatment: The Court reaffirmed the principle that lack of adequate instructions or failure by departmental counsel to inform the Court of relevant developments can lead to adverse consequences for the Revenue and prejudice its interests. Interpretation and reasoning: The Court criticised the revenue authorities for failing to disclose the existence of the assessment order during hearing of the earlier writ, and for not complying with the direction to furnish a reasoned order. The Court emphasised that any laxity by revenue officers in providing particulars or instructions to counsel may result in adverse orders harming the Department. Ratio vs. Obiter: Predominantly obiter guidance directed at administrative conduct and future compliance; it serves as a judicial admonition rather than the basis for the disposal of the specific controversy. Conclusion: The Court directed that revenue authorities must be vigilant and diligent in furnishing adequate particulars and instructions to departmental counsel and in complying with court directions; failure to do so may prejudice the Department and invite judicial remedy.