MGM Exports vs Dy. Commissioner of Income Tax

D.A. Mehta, J.—On 16-2-2009 notice for final disposal had been issued and accordingly the petition is taken up for final hearing and disposal today. Rule. Learned Counsel for the respondent is directed to waive service.

The facts in brief are that for assessment year 2001-02 against the returned income of Rs. 28,79,998, the petitioner was assessed on a total income of Rs. 93,20,410 u/s 143(3) of the Income Tax Act, 1961 (the Act) on 15-3-2004. The matter was carried in appeal before Commissioner (Appeals) and thereafter before the Income Tax Appellate Tribunal (the Tribunal). The Tribunal, by order dated 27-2-2006, remanded the matter back to the assessing officer to decide the issues afresh after considering the amendments as per Taxation Laws (Amendment) Act, 2005. Accordingly, fresh assessment was framed on 28-9-2006 u/s 143(3) read with Section 254 of the Act on a total income of Rs. 28,80,000.

On 3-3-2008 the respondent authority issued notice u/s 148 of the Act proposing to reopen the completed assessment. Vide communication dated 8-3-2008 the petitioner requested the respondent to treat the original return of income as return of income filed in response to notice u/s 148 of the Act and also asked for a copy of the reasons recorded by the respondent. On 21-10-2008 the respondent supplied the copy of the reasons recorded for reopening. In light of the view that the court is inclined to adopt, it is not necessary to reproduce either the reasons recorded or the respective stand of the parties on merits of the controversy. Suffice it to state that upon receipt of the reasons recorded the petitioner preferred objections, both on jurisdiction and on merits, vide communication dated 11-12-2008. The respondent passed the impugned reassessment order dated 16-12-2008. It is the notice dated 3-3-2008 issued u/s 148 of the Act and the reassessment order dated 16-12-2008 which are under challenge in the present proceedings.

On behalf of the petitioner attention was invited to the following two decisions of this High Court in the case of Arvind Mills Ltd. Vs. Assistant Commissioner of Wealth Tax, and Arvind Mills Ltd. Vs. Assistant Commissioner of Wealth Tax, to contend that the respondent was under an obligation to first dispose of the preliminary objections raised by the petitioner and could not have framed the reassessment order. It was also submitted that as held by this Court until such speaking order is passed the respondent obviously cannot undertake reassessment. Learned advocate, therefore, submitted that the petition is required to be allowed on this limited ground.

Mr. M.R. Bhatt, learned senior standing counsel appearing on behalf of the respondent authority, was not in a position to distinguish the aforesaid judgments of this High Court. It was submitted that the respondent authority had dealt with the objections in the reassessment order itself and hence, the same should be treated as sufficient compliance with the directions and the procedure laid down by the apex court in case of GKN Driveshqfts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC).

In the case of Arvind Mills Ltd. v. Asstt. CWT (supra), this Court took note of identical contentions raised on behalf of revenue and it is further recorded that the court had called upon Mr. T.U. Bhatt, learned Counsel for the revenue, to explain in what circumstances the impugned order came to be made without first disposing of the preliminary objections raised by the petitioner by passing a speaking order as required by the order of the apex court in GKN Driveshqfts (India) Ltd. s case (supra) as well as directions given by this Court in earlier judgment in case of Arvind Mills Ltd. v. Asstt. CWT (No. 1) (supra). After considering the explanation tendered, the court has come to the conclusion that the position in law was well-settled and the assessing officer is accordingly required to decide the preliminary objections and pass a speaking order disposing of the objections raised by the petitioner. That until such a speaking order is passed, the assessing officer cannot undertake reassessment.

Applying the aforesaid settled legal position to the facts of the case it is apparent that the action of the respondent authority in framing the reassessment order, without first disposing of the preliminary objections raised by the petitioner, cannot be sustained. Accordingly, the reassessment order dated 16-12-2008 is hereby quashed and set aside and the respondent authority shall dispose of the preliminary objections by passing a speaking order and only thereafter proceed with the reassessment proceedings in accordance with law. Considering the fact that the normal period of limitation, for framing reassessment pursuant to notice dated 3-3-2008 issued u/s 148 of the Act, has already expired on 31-12-2008, in the peculiar facts and circumstances of the case it would serve the ends of justice if the respondent authority is directed to abide by the following schedule:

(i) The respondent authority shall dispose of the preliminary objections raised by the petitioner within a period of four weeks from today by passing a speaking order in accordance with law;

(ii) Thereafter the respondent authority shall undertake reassessment proceedings, if necessary, and shall complete the same within a period of four weeks thereafter, i.e., the date of disposal of the preliminary objections;

(iii) No extension of time shall be sought for by either side in the fact situation of the present case;

(iv) The aforesaid schedule shall not preclude the rights of the petitioner to challenge the order disposing of the preliminary objections, if the said order is required to be so challenged.

The petition is allowed accordingly in the aforesaid terms rule made absolute. There shall be no order as to costs.