2025 (11) TMI 53 - HC - Income Tax

Section 148A(3) order and Section 148 notice set aside; matter remanded to Assessing Officer for fresh hearing

Michael And Susan Dell Foundation Versus Assistant/ Deputy Commissioner of Income Tax Circle International Taxation 2 (2) (1) New & Anr.

The HC set aside the order passed under section 148A(3) and the notice issued under section 148 and remanded the matter to the Assessing Officer for fresh ... Validity of reopening of assessment u/s 147 - notice u/s 148A (b) was issued by the respondents/Revenue wherein it was alleged that the petitioner had for the Financial Year 2017-18 made foreign remittances - petitioner filed its reply explaining its source of income and the respondents had vide order accepted the return filed through the assessment order and it is on the same amount that the notice has now been issued by the respondents to the petitioner - also respondents had overlooked the stand of the petitioner while issuing the notice u/s 148A(1) and order/notice u/s 148A(3) and 148 - HELD THAT:- Revenue would not contest the stand of the petitioner that the petitioner’s contention was not considered by the respondents/Revenue. If that be so, we set aside order passed u/s 148A(3) and notice u/s 148 of the Act and remand the matter back to the Assessing officer with a direction that the AO shall pass a fresh/ reasoned order after hearing the petitioner through its representative on the date and time to be informed to the petitioner. ISSUES PRESENTED AND CONSIDERED 1. Whether the order under Section 148A(3) and reassessment notice under Section 148 can be sustained where the Assessing Officer did not consider the taxpayer's written submissions and explanations in response to the show-cause notice under Section 148A(1). 2. Whether, on a finding that the taxpayer's submissions were not dealt with, the appropriate remedy is to quash the impugned order/notice and remit the matter to the Assessing Officer for fresh adjudication with opportunity of hearing and requirement of a reasoned order. 3. Whether the remand should be subject to a time-limit for completion of further proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of the order under Section 148A(3) and reassessment notice under Section 148 where Assessing Officer failed to consider taxpayer's submissions. Legal framework: Section 148A(1) requires issue of a notice and affords the taxpayer an opportunity to furnish a response; Section 148A(3) requires the Assessing Officer to consider the taxpayer's representation and to record reasons for reopening, with any subsequent issuance of notice under Section 148 being founded on that consideration. Precedent Treatment: No earlier judicial precedent was invoked or applied by the Court in the judgment; the decision rests on statutory obligation and the record before the Court. Interpretation and reasoning: The Court examined the record and accepted the uncontradicted position (not contested by Revenue) that the taxpayer's contentions, including explanation of the source of funds and prior assessment acceptance on the same amount, were not dealt with in the order dated 29.06.2025 under Section 148A(3). Where the statutory process under Section 148A is intended to ensure that taxpayer representations are considered before reopening, a failure to address those representations vitiates the decision to proceed with reassessment. The Court therefore concluded that an order that does not reflect consideration of the taxpayer's submissions does not satisfy the statutory mandate under Section 148A and cannot sustain the consequential notice under Section 148. Ratio vs. Obiter: Ratio - The legal proposition that an order under Section 148A(3) and any consequent Section 148 notice must reflect consideration of the taxpayer's response and reasons for reopening, and that absence of such consideration renders the reopening invalid. Conclusions: The Court set aside the order under Section 148A(3) and the reassessment notice under Section 148 for failure to consider the taxpayer's submissions; the impugned proceedings were held to be vitiated by this omission. Issue 2 - Appropriate remedy where Assessing Officer failed to consider submissions: quash and remand for fresh reasoned order and hearing. Legal framework: Principles of natural justice and statutory mandate under Section 148A require opportunity of hearing and mandate reasoned decisions; courts may quash administrative action that fails to comply and remit for fresh consideration consistent with statutory requirements. Precedent Treatment: No case law was relied upon in the decision; the Court applied statutory and procedural principles directly to the facts. Interpretation and reasoning: Given the conceded omission by Revenue, the Court held that a supervisory remedial course - setting aside the impugned order/notice and remitting the matter - best effectuates statutory compliance and preserves the taxpayer's right to be heard. The Court directed the Assessing Officer to pass a fresh, reasoned order after hearing the taxpayer's representative, thereby ensuring both adherence to Section 148A(3) and fulfilment of audi alteram partem obligations. Ratio vs. Obiter: Ratio - Where an Assessing Officer fails to deal with taxpayer's representations in the Section 148A process, the appropriate remedy is to set aside the impugned order/notice and remit for a fresh, reasoned decision after hearing the taxpayer. Conclusions: The Court remanded the matter to the Assessing Officer with directions to hear the taxpayer and pass a fresh reasoned order; the impugned order and notice were set aside. Issue 3 - Imposition of a time-limit for completion of the remanded proceedings. Legal framework: Courts routinely impose reasonable time-limits when remitting matters to administrative authorities to ensure expeditious disposal and prevent prejudice caused by unwarranted delay; such directions are within the supervisory jurisdiction. Precedent Treatment: No precedents were cited; the direction was made as a matter of supervisory control in the exercise of judicial review powers. Interpretation and reasoning: To balance the need for correct procedure with the interest in finality and expedition, the Court fixed a definite outer time limit for completion of the entire process (hearing and passing of a fresh reasoned order). This ensures that the Assessing Officer acts within a reasonable period and that the taxpayer's rights are not indefinitely postponed. Ratio vs. Obiter: Ratio - When remitting for fresh consideration due to deficiency in the original decision under Section 148A, courts may and should impose a reasonable time-limit for completion of the further proceedings to secure prompt adjudication. Conclusions: The Court directed that the entire process, including hearing and passing of a fresh reasoned order, be completed within six weeks from the date of the Court's order. Ancillary findings and administrative outcome Interpretation and reasoning: The respondents did not contest the petitioner's central factual-legal contention that its earlier explanations were not considered; that concession informed the Court's remedial outcome. No substantive adjudication was made on the merits of the reassessment (i.e., correctness of taxability of the remitted amount), since the record required fresh consideration. Ratio vs. Obiter: Obiter - The Court's observation that the taxpayer's prior assessment acceptance dealt with the same amount and that the Assessing Officer 'overlooked' the taxpayer's stand explains the basis for remand but does not constitute a final adjudication on merits. Conclusions: The petition was disposed of by setting aside the Section 148A(3) order and Section 148 notice and remanding the matter for fresh, reasoned consideration within the prescribed six-week period; ancillary interim relief applications were addressed as indicated in the order.