Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: VAT RATES :: cpt :: TDS :: ACCOUNTING STANDARDS :: form 3cd :: empanelment :: Central Excise rule to resale the machines to a new company :: due date for vat payment
« News Headlines »
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout
 Income-tax (27th Amendment) Rules, 2016 - 92/2016
 Announcement - Clarifications in Respect of MEF 2016-17
 Non-taxing GST apps to make filing income tax return less painful

Reopening cases without reason
December, 23rd 2006
To avoid reassessments on flimsy grounds, the Supreme Court's view on the need for a speaking order should be widely circulated among the officers of the Department.

Principles of natural justice form the basis for all actions of the income-tax officer (ITO). The statute swears by the motto audi alteram partem (hear both sides). When the assessing officer (AO) deviates from this principle, the very jurisdictional base can be questioned by way of a writ petition in the High Court. In innumerable cases, reassessment notices are issued without specifying the reason for reopening the assessment. Reasons are given along with the assessment order.

Seeking reasons

The Supreme Court considered this matter in GKN Driveshafts India Ltd vs ITO (259 ITR) and observed that when a notice for reassessment is issued, the proper course of action for the taxpayer is to file a return and, if he so desires, seek reasons for issue of the notice.

The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the taxpayer is entitled to file objections to the issuance of notice and the AO is bound to dispose of the same by passing a speaking order. If this procedure is not followed, the taxpayer can challenge the assessment order. Courts often allow such writ petitions with a direction to the AO to pass a speaking order.

Ms Kamalesh Sharma was served with a notice for reassessment. She sought reasons for such reopening. She filed objections and also requested for a speaking order on the objections. This was on the basis of the Supreme Court ruling in the GKN case.

In the Kamalesh Sharma case, notwithstanding the clear language of the Supreme Court, the AO did not pass any speaking order but straightaway passed an assessment order and simultaneously rejected the contentions raised by the lady. She, therefore, approached the Delhi High Court with a writ petition. The court was unhappy with the AO for not complying with the directions of the Supreme Court.

It observed: "We cannot appreciate how, in spite of the clear language used by the Supreme Court as well as this court, the assessing officer did not comply with the requirement of law. Learned counsel for the respondent submits that the objections touched upon the merits of the controversy and the failure of the AO to deal with the objections before passing the assessment order was only a technical error. We are mentioning this only to reject this argument in view of the clear language of the Supreme Court. The assessing officer cannot try to hide behind niceties, which are not even legal."

The Delhi High Court set aside the assessment order and directed the AO to deal with the objections within eight weeks. The AO was directed to pass a speaking order. It concluded: "For not following the law laid down by the SC and stressed by this court, we impose costs upon the respondent of a sum of Rs 3,500 to be paid to the petitioner (287 ITR 337)."

Key issues emerge

Certain important issues arise for consideration with regard to the court's observations on the reassessment notices. While the Supreme Court spells out the need for a speaking order, the statute does not. What happens if the speaking order rejects the objections?

Can there be an appeal against the detailed order given by the AO rejecting the objections of the taxpayer? Such an appeal may not lie because under the Code of Civil Procedure (CPC), appeals may not be entertained against interlocutory orders.

Does the Supreme Court ruling alter this position established by the CPC? If, however, no appeal lies, the only remedy may be by way of a writ petition again. It is upon the issue of a valid notice that the AO can assume jurisdiction of the case. The Supreme Court has conferred a valuable right on the taxpayer who can now insist upon a speaking order even before completion of the assessment.

It is possible that the taxpayer may be spared the ordeal of a huge demand being raised by a regular reassessment order if the AO accepts the objections and drops the proceedings. The procedure laid down by the Supreme Court and insisted upon by the Delhi High Court may benefit the Revenue also to pass a well-considered assessment order which will stand scrutiny at the level of the first appeal.

It is necessary that the Supreme Court's view on the need for a speaking order with regard to objections to jurisdiction under Sections 147 and 148 of the Income-Tax Act, 1961 is widely circulated among the officers of the Department so that reassessments on flimsy grounds may be avoided and the taxpayer spared of unnecessary harassment.

T. C. A. Ramanujam
(The author is a former Chief Commissioner of Income-Tax.)

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Mission

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions