Facts of the Case

  • The petitioner’s assessment for AY 2011–12 was reopened by the Assessing Officer (AO).
  • Reasons for reopening were provided to the petitioner.
  • The petitioner filed objections against such reopening.
  • However, before deciding those objections, the AO proceeded to pass the final reassessment order.
  • The petitioner challenged this action before the Delhi High Court.

Issues Involved

  1. Whether the AO can finalize reassessment without adjudicating objections filed by the assessee?
  2. Whether non-compliance with the procedure laid down in GKN Driveshafts case renders reassessment invalid?

Petitioner’s Arguments

  • The AO violated the mandatory procedure established by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO.
  • Objections filed against reopening must be disposed of by a separate speaking order before proceeding further.
  • Passing a reassessment order without deciding objections is illegal and arbitrary.
  • Reliance was placed on precedents including:
    • Smt. Kamlesh Sharma v. B.L. Meena (2006)

Respondent’s Arguments

  • The Revenue contended that reasons for reopening had already been supplied.
  • It was argued that the procedure is not absolute in nature.
  • The department sought time to justify its actions.

Court’s Findings / Order

  • The Court reaffirmed that the procedure under GKN Driveshafts is mandatory and sacrosanct.
  • It held that:
    • The AO must first consider and dispose of objections by a reasoned order.
    • Only thereafter can reassessment proceedings continue.
  • The Court observed that failure to follow this procedure violates principles of natural justice.
  • The reassessment order dated 29 December 2018 was set aside.
  • Directions issued:
    • AO to reconsider objections and pass a reasoned order within 4 weeks.
    • Thereafter proceed in accordance with law.
  • Liberty granted to the petitioner to pursue further remedies if objections are rejected.

Important Clarifications by the Court

  • Disposal of objections is a quasi-judicial function, not a mechanical formality.
  • Each objection must be addressed with proper reasoning.
  • No addition or improvement to recorded “reasons to believe” is permissible later.
  • Reassessment without following due process is liable to be quashed.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Principles laid down in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC)

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:3676-DB/TWS29072019CW5932019.pdf

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