Adhere to the Law - Delhi High Court to Taxmen

By Vijay Kumar

IN GKN Driveshafts (India) Ltd Vs ITO - 2002-TIOL-634-SC-IT the Supreme Court had observed,

we clarify that when a notice under section 148 of the Income-tax 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 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. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer 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 a recent case - CIT v. Multiplex Trading & Industrial Co. Ltd - 2015-TIOL-2324-HC-DEL-IT, the Delhi High Court had observed,

Although the AO is required to provide reasons, receive objections and pass a speaking order thereon, only after the notice under Section 148 of the Act has been issued; these requirements are an integral part of the safeguards which have been inbuilt for ensuring that the assessments are reopened only for lawful reasons and in a transparent manner. If the said safeguards are flouted, it would invalidate the exercise of jurisdiction under Section 147 and 148 of the Act .

Last month, the High Court yet again came across such a case. Though the court did not impose heavy costs as it would have been inclined to, it directed the Revenue through the Principal Chief Commissioner of Income Tax (Pr CIT) to issue instructions to the AOs to strictly adhere to the law explained in various decisions of the Supreme Court and the High Court in regard to Sections 147/148 of the Act and make it mandatory for them to ensure that an order for reopening of an assessment clearly records the compliance with each of the legal requirements. Secondly, the AOs must be directed to strictly comply with the law explained by the Supreme Court in GKN Driveshafts (India) Ltd v. Income Tax Officer 2002-TIOL-634-SC-IT as regards the disposal of the objections raised by the Assessee to the reopening of the assessment.

It is easy to make the assessee follow the law:

It is not easy to make the Assessment Officer follow the law.