Tolins Rubbers vs Assistant Commissioner of Income Tax

G. Sivarajan, J.—The petitioners in all these cases are sister concerns. The assessments of all these concerns for the asst. yrs. 1996-97 to 2001-02 under the IT Act, 1961 (for short ''the Act''), were completed. While accepting the returns processed u/s 143(1) of the Act, no proceedings were initiated as contemplated u/s 143(2) of the Act. However, in March, 2003, the petitioners have been served with notices'' u/s 148 of the IT Act for reopening the assessment for the years 1996-97 to 2001-02. The AO initially did not furnish the reasons recorded in the assessment records for reopening the assessments already completed though a request was made by the petitioners in that behalf. The petitioners initially sent a communication stating that the original returns filed must be taken as returns u/s 148 of the Act. The assessing authority was of the view that the petitioners have to file returns pursuant to Section 148 notices and subsequently the petitioners filed returns as required in the notices issued u/s 148 of the said Act. The petitioners, relying on the decision of the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and Others, , again requested the AO for furnishing the reasons for the issuance of notices u/s 148 of the said Act. Pursuant to the said request the AO, it is stated, has furnished the reasons for issuing the notice. The petitioners have extracted the said reasons in page Nos. 11 and 12 of WP(C) No. 31976 of 2003.

Sri V. Ramachandran, learned senior counsel appearing for the petitioners, submits that from the reasons furnished by the AO it is very clear that there is absolutely no material available with the officer to form an opinion that there is escapement of income from assessment and for issuing the notices. The senior counsel further submits that the attempt of the officer is only to have a roving enquiry to find out as to whether there is any escapement of income which is not permissible u/s 147 of the Act. The senior counsel submitted that the notices u/s 148 are issued without jurisdiction. Senior counsel also submitted that the petitioners are entitled to know the reasons for the reopening and to file objections. Senior counsel also pointed out that it is open to the petitioners to challenge the reasons recorded in the proceedings under Article 226 of the Constitution of India. Senior counsel, in support, relied on the decisions of the Supreme Court including the latest decision in GKN Driveshafts (India) Ltd. v. ITO and Ors. (supra). .

I have also heard Sri P.K.R. Menon, senior counsel (Government of India) taxes, appearing for the respondent. The senior counsel also, took me to the decision of the Supreme Court in GKN''s case (supra) and submitted that the Supreme Court in the said decision had stated the procedure to be adopted in such cases and that the parties have to adopt the said procedure.

The Supreme Court in GKN Driveshafts (India) Ltd. case (supra) observed in a similar situation as follows:

"We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice u/s 148 of the IT Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years."

In the light of the above decision, now that the assessing authority has furnished the reasons for reopening the assessment which are extracted in page Nos. 11 and 12 of the writ petitions, it is for the petitioners to file objections to the same. If the petitioners file objection to the jurisdiction of the AO for issuance of notices u/s 148 of the Act within three weeks from today, the AO will consider the said objection and pass a speaking order as held by the Supreme Court in the decision supra. The AO will do this before proceeding with the assessment pursuant to the returns filed by the petitioners and communicate the decision to the petitioners immediately thereafter.

These writ petitions are disposed of as above.