Gagan Trading Company Limited v. the Income-Tax Officer, 5(1)(2), Mumbai and 2 Ors.

Bombay HC9 Jul 2014WP/935/2014

Case brief

AI extract

What is this about?

The High Court held that while it is constrained from entertaining the writ petition on merits due to the availability of an efficacious alternative remedy via appeal to CIT(A), it observed the Assessing Officer's unjustified procedural delays and restrained recovery proceedings pending the appeal's disposal.

What did the court decide?

No coercive proceedings for recovery of tax consequent to the Assessment order will be taken by the Revenue till the disposal of the petitioner's appeal before the CIT (A).

Gagan Trading Company Limited Vs the Income-Tax Officer, 5(1)(2)… — Income Tax | Bombay HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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WRIT PETITION NO.935 OF 2014

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Gagan Trading Company Limited.

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..Petitioner.

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vs.

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Income Tax Officer 5(1)(2) and anr.

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..Respondents.

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Mr. Hiro Rai along with Mr. Subhash Shetty i/by Jitendra Singh for the Petitioners.

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Mr. Abhay Ahuja for the Respondents.

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CORAM : M. S. SANKLECHA AND G.S. KULKARNI, JJ. DATE : O9 JULY 2014

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PC:

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This petition under Article 226 of the Constitution of India challenges:

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(a) the notice dated 12 March 2013 issued under Section 148 of the Income Tax Act, 1961 (“the Act”) seeking to reopen assessment for Assessment Year 2007-08;

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(b) order dated 21 Feb. 2014 of the Assessing Officer disposing the objections raised by the petitioners to the grounds relied for issuing impugned notice dated 12 March 2013; and

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(c) the Assessment order dated 29 March 2014 passed by the Assessing Officer.

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Mr. Rai, learned Counsel appearing for the petitioners points out that the petitioners have preferred an appeal on 25

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April 2014 against the order of the Assessing Officer dated 29 March 2014 to the Commissioner of Income Tax (Appeals)(CIT-A). However, he submits that the facts in this case are so gross, that this court should entertain this petition. In particular, he points out to the following sequence of events:-

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(a) On receipt of the impugned notice dated 12 March 2013 under Section 148 of the Act, the petitioner on 20 March 2013 sought reasons for issuing of the impugned notice;

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(b) On 8 January 2014 the reasons were furnished by the Assessing officer to the petitioner i.e. 10 months after the petitioners had asked for reasons for issuing of the impugned notice;

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(c) On 21 January 2014 the petitioners filed its objections to the grounds communicated on 8 January 2014 by the Assessing Officer;

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(d) On 21 February 2014 the Assessing officer disposed of the objections by rejecting the same and served the same upon the petitioner on 28 February 2014;

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(e) On the same day i.e. on 28 Feb. 2014, the Assessing Officer issued a notice under Section 143(2) of the Act calling for particulars for the purpose of completing the assessment;

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(f) On 7 March 2013, the petitioner pointed out that they were contemplating filing of writ petition challenging the

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impugned notice 12 March 2013 and referred the Assessing Officer to the decision of this Court in the matter of Asian Points vs. DCIT 296 ITR 90. In the circumstances, the petitioner requested the Assessing Officer to keep the reassessment proceedings in abeyance. However, without prejudice to the above, the petitioners did supply information called for in the notice under Section 143(2) of the Act;

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(g) In spite of the above, on 11 March 2014, the Assessing Officer sought further information to complete the assessment;

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(h) On 20 March 2014 the petitioner requested the Assessing Officer not to proceed with the assessment for the Assessment Year 2007- 08 as they are in the process of filing a writ petition in this Court;

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(i) On 24 March 2014 this petition was filed. The Assessing Officer was informed of the same on 25 March 2014;

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(j) On 29 March 2014 the Assessing officer passed an Assessment order for Assessment year 2007-08; and

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(k) On 25 April 2014 the petitioner filed an appeal to the CIT(A) against the assessment order dated 29 March 2014.

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On the basis of the above facts, it is submitted that there was gross delay on the part of the Assessing officer in giving

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reasons seeking to reopen the assessment and also in disposing of the objections to the reasons filed by the petitioner. It was only on account of the delay on the part of the Assessing officer in furnishing the reasons a situation arose which forced the Assessing Officer to complete the reassessment proceedings before 31 March 2014 otherwise the reassessment proceedings would have become time barred. It is submitted that this attitude on the part of the Revenue would leave assessees like the petitioner with no fair opportunity to challenge the reassessment notices in Court in case even when the same are completely without jurisdiction. In the above view of the matter, it is submitted that this Court should entertain the petition.

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As against the above, Mr. Ahuja learned Counsel appearing for the revenue submitted that the Assessing Officer had no option but to pass an assessment order before 31 March 2014, as otherwise the reassessment proceeding for Assessment Year 2007-08 would become time barred. It also submitted that in the communication the petitioner had addressed to the Assessing Officer asking the Assessing Officer to keep the assessment proceedings in abeyance, no offer was made by the petitioner that in case the assessment proceedings are not concluded before 31 March 2014 the petitioner would waive its rights to challenge the reassessment proceedings as time barred . In any case, it is submitted that as an appeal has now been filed with the CIT(A)

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and the same is an efficacious remedy, this petition should not be entertained. This is particularly so as the appeal has been filed on all issues including the issue of jurisdiction for issuing notice under Section 148 of the Act.

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We have considered the submissions. We are not inclined to entertain the petition on merits as the petitioner has already invoked an efficacious alternative of filing an appeal to CIT(A) raising all the issues including the issue of jurisdiction to reopen the assessment for Assessment year 2007-08.We see no reason to conclude that the petitioner would not get justice at the hands of CIT(A).

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However, we are constrained to make a few observations with regard to the conduct of the Assessing Officer in these proceedings which leaves much to be desired. The impugned notice for reopening of assessment was served upon the petitioner on 12 March 2013 and the petitioner on 20 March 2013 asked for the reasons which are already recorded as a condition precedent to issuing the impugned notice. The reasons were available with the Assessing officer on 12 March 2013 itself. Thus, giving of these reasons should not have taken any time, yet the Assessing Officer chose to furnish the reasons to the assessee only on 8 January 2014 i.e. almost 10 months after the petitioner asked for reasons. This delay in handing over/furnishing of the reasons is

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inexplicable as the Assessing Officer always knew that the reassessment has to be completed by 31 March 2014 and therefore the urgency in completing the proceedings regarding jurisdiction. Thereafter, when the petitioner filed its objection to the reasons on 21 January 2014, the Assessing officer disposed of the objections by order only on 21 Feb. 2014 and served it upon the petitioner only on 28 February 2014. Thus on the date he served the order upon the petitioner the Assessing officer was aware that he could not complete the reassessment proceedings before 31 March 2014 in view of the decision of this Court in Asian Paints (supra) which requires an Assessing Officer to wait for a period of four weeks before he commences reassessment proceeding.

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In the above view, the conduct of the Assessing Officer in delaying the proceeding as pointed out above and thereafter pleading helplessness by stating that unless he passes the reassessment order before 31 March 2014 the same would become time barred is a little strange. This conduct on the part of the Assessing officer is not appreciated. The entire procedure of giving of reasons and dealing with objections before reassessment proceedings can commence as laid down by the Supreme Court in GKN Drive Shafts (I) Ltd. v/s. I.T.O. 259 ITR 19 was only to ensure that the reassessment proceedings are not taken by the Assessing Officer without satisfaction of the preconditions of Sections 147 and 148 of the Act as a safeguard against

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harassment. One more result of this self inflicted delay on the part of the Assessing officer in dealing with the jurisdictional issues, was the tearing hurry in which he is to complete the process of reassessment and pass an order. This hurry in passing Assessment order could lead to injustice not only to the assessee but also to the Revenue as it is likely the proper consideration would not be given to the issues involved. We trust that the Revenue would ensure that in the process of giving of reasons and in deciding the objections of the petitioner, all the Assessing Officers would act with reasonable expedition.

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However, as the petitioner has already invoked an efficacious alternative remedy by filing an appeal before CIT (A), we see no reason to entertain this petition. We are certain that the CIT (A) would consider the petitioner's case on merits and apply the law as applicable to the facts of the present case. All contentions left open to be urged before CIT(A).

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However, in the peculiar facts of the present case, no coercive proceedings for recovery of the tax consequent to the Assessment order dated 29 March 2014 will be taken by the Revenue till the disposal of the petitioner's appeal before the CIT (A).

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With the above observations, we dispose of this

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petition. No order as to costs.

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(G. S. KULKARNI, J.) (M.S. SANKLECHA, J.)

Gagan Trading Company Limited v. the Income-Tax Officer, 5(1)(2), Mumbai and 2 Ors.

Case brief

What is this about?

What did the court decide?

Gagan Trading Company Limited v. the Income-Tax Officer, 5(1)(2), Mumbai and 2 Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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