GKN Driveshafts (India) Ltd. v. Income Tax Officer and Others
"When a reassessment notice under Section 148 is issued, the assessee should file a return and may seek the reasons for reopening; the Assessing Officer must furnish them within a reasonable time and dispose of the assessee's objections by a speaking order before proceeding with the reassessment."
Issues Before the Court
- (i)
Whether a writ petition challenging notices for reassessment under Section 148 of the Income Tax Act, 1961 was premature, when the assessee could raise its objections before the Assessing Officer?
- (ii)
What procedure should follow a notice under Section 148, so that the assessee can contest the reopening of the assessment?
Law & Rules Applicable
- (i)
Income Tax Act, 1961, Sections 147 and 148 (income escaping assessment and notice for reassessment), as they stood before the Finance Act, 2021, and Section 143(2) (notice for scrutiny assessment).
- (ii)
The requirement of natural justice that an authority deciding objections must give reasons.
Application to Facts & Circumstances
The Delhi High Court dismissed the appellant's writ petition against notices under Sections 148 and 143(2) as premature, holding that it could raise all its objections in reply to the notices. The notices concerned seven assessment years; by the time the appeals were heard, assessments for two years had been completed, and five years remained in issue.
The Supreme Court saw no reason to interfere with the High Court's order, but clarified the procedure: "when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer 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 assessing officer is bound to dispose of the same by passing a speaking order."
As the reasons had been disclosed in the proceedings before it, the Court directed the Assessing Officer to dispose of the objections, if filed, by a speaking order before proceeding with the assessments for the five years, and directed the appellate authority to decide the appeals against the completed assessments expeditiously.
Conclusion & Ruling
- (i)
The appeals were dismissed, subject to the clarification and directions on procedure.
- (ii)
On receiving a notice under Section 148, the assessee should file a return and may seek the reasons for reopening; the Assessing Officer must furnish them within a reasonable time and decide the assessee's objections by a speaking order before proceeding with the reassessment.
- (iii)
The procedure governed reassessments under the old Sections 147 to 151. For notices issued on or after 1 April 2021, the Finance Act, 2021 introduced a statutory pre-notice procedure in Section 148A, considered in Union of India v. Ashish Agarwal.
Authorities Cited
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- Union of India v. Ashish Agarwal, (2023) 1 SCC 617Case brief →Full text of Union of India v. Ashish Agarwal on Indian Kanoon