Assessing Officer should dispose of the objections before making order of re-assessment
The Gujarat High Court in the case of Palco Metals Ltd. vs. Deputy Commissioner of Income Tax, 2016 (1) TMI 235 has held that the Assessing Officer should dispose of the objections first before making final order of assessment. It was held that non-disposing of the objections would deprive the assessee of an opportunity to controvert the validity of the notice and if the reopening of assessment is made it would cause prejudice to the assessee.
In view of the judgment of the Hon’ble Apex Court in case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer and others as has been reported in 2002 (11) TMI 7, Supreme Court , upon issuance of notice for reopening, the assessee is entitled to raise objections after knowing the reasons which are supplied to him.
The Division Bench of the Gujarat High Court in the case of Sahkari Khand Udhyog Mandal Ltd. vs. Assistant Commissioner of Income Tax as has been reported in 2014 (6) TMI 149, has also provided a time limit within which, the Assessing Officer should dispose of the objection, if any, raised by the assessee.
It was held that if the Assessing Officer fails to dispose of the objections, the assessee would be deprived of an opportunity which he is lawfully entitled to.
In other words, the Assessing Officer is under a mandate to dispose of the objections raised by assessee against the reasons shown for reopening.
Judicial precedents on similar issues:
• If Assessing Officer agrees with the objections field by the assessee, his jurisdiction on reassessment comes to an end. This was held in the case of Shri Ratan Singh, 306 ITR 343 by the Rajasthan High Court as well as in that of Atlas Cycle Industries, 180 ITR 319 by the Punjab and Haryana High Court .
• Copy of reasons recorded should be supplied by the Assessing Officer. If the Assessing Officer fails to do so till completion of assessment, the order of reassessment will be invalid. This was held in the case of CIT vs. VSNL 340 ITR 66 by the Bombay High Court.
• Disposal of objections should be done by a speaking order. This was held in the case of GKN Driveshafts (India) Ltd. 259 ITR 19 by the Hon’ble Apex Court.
• The Assessing Officer should wait for a period of four weeks to start assessment after disposing of the objections. This was held in the case of Asian Paints Ltd. vs. DCIT 296 ITR 1 by the Bombay High Court.
• Disposal of objections should be connected with recorded reasons. This was held in the case of Pranshukhlal Bros. vs. ITO, WP no. 2124 of 2014, by the Bombay High Court.
• Reassessment order passed without supplying reasons recorded though the same was sought for by the assessee is invalid. This was held in the case of CIT vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 by the Bombay High Court.
• Reasonable time for supplying reasons is the time period within which the income tax department can issue a notice under section 148 of the Income Tax Act. This was held in the case of Acrylic Manufacturing Co. vs. CIT 308 ITR 38 by the Punjab and Haryana High Court.