Court Directs Reassessment Review: Jurisdictional Challenge in Tax Case

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Case Name:

Bhola Ram Steel Private Limited Vs. Principal Commissioner of Income Tax (High Court of Patna)

Civil Writ Jurisdiction Case No.24983 of 2019

Date: 6th January 2021

Key Takeaways:

• The court emphasized the importance of jurisdiction in reassessment cases.
• The decision underscores the role of tax authorities in resolving factual disputes.
• The court referenced a previous case, “Satyendra Kumar Construction Pvt. Ltd. Vs. Commissioner of Income Tax-II & Ors.,” to guide its decision.

Issue

Was the reassessment notice issued to the petitioner arbitrary and without jurisdiction?

Facts

• The petitioner received a notice under Section 148 (of Income Tax Act, 1961), for reassessment for the year 2012-13.
• The petitioner argued that the notice was issued without any failure on their part to disclose necessary facts and was based on a mere change of opinion.
• The petitioner sought to quash the notice and subsequent orders as illegal and without jurisdiction.

Arguments

• Petitioner: Argued that the reassessment notice was arbitrary, illegal, and issued without jurisdiction. They claimed there was no failure in disclosing material facts and that the notice was based on a mere change of opinion.
• Respondent (Revenue): Cited a previous judgment where the court directed the petitioner to present their case before the tax authority, suggesting a similar approach should be taken here.

Key Legal Precedents

• Satyendra Kumar Construction Pvt. Ltd. Vs. Commissioner of Income Tax-II & Ors.: This case was referenced to support the decision that the tax authority should resolve the matter, as it involved similar circumstances.

Judgement

The court decided not to express an opinion at the notice stage and directed the petitioner to present their case before the appropriate tax authority. The authority was instructed to consider the objections and resolve the matter within a specified timeframe, ensuring the petitioner had the opportunity for a personal hearing.

FAQs

Q1: What does this decision mean for the petitioner?

A1: The petitioner must present their case to the tax authority, which will decide on the jurisdictional issue and the reassessment notice.

Q2: Why did the court not quash the notice directly?

A2: The court preferred to leave the matter to the tax authority, as it involved disputed facts that the authority is better equipped to handle.

Q3: What is the significance of the “Satyendra Kumar Construction Pvt. Ltd.” case?

A3: It set a precedent for handling similar jurisdictional challenges in tax reassessment cases, guiding the court’s decision in this case.

Petitioner has prayed for the following relief(s):-

“i) For issuance of a writ of certiorari or any other appropriate writ quashing the Notice u/s 148 (of Income Tax Act, 1961) (‘the Act”) dated 30.03.2019 (Annexure-’1’), for assessment year 2012-13 issued by the Assistant Commissioner of Income Tax, Circle-2, Patna (the Respondent No. 3 herein and also referred to as the “Assessing Officer” hereinafter) initiating proceedings for reassessment against the Petitioner as being wholly arbitrary, illegal, without jurisdiction as the same has been initiated in absence of any finding attributing failure on part of the petitioner in disclosing fully and truly all material facts necessary for assessment and on mere change of opinion.

ii) For issuance of an appropriate writ quashing the preliminary order dated 13.11.2019 (Annexure-’2’) passed in pursuance of the said Notice by Respondent No. 4 whereby the petitioner’s objection on the issue of assumption of his jurisdiction has been rejected on the ground of being wholly arbitrary, illegal and without jurisdiction.

iii) For issuance of an appropriate writ quashing the notice u/s 142(1) (of Income Tax Act, 1961) dated 23.10.2019 (Annexure-’3’) by which the petitioner has been directed to furnish certain details along with connected documents as the same is erroneous and without any basis.

(iv) For issuance of any other writ, order or direction which your Lordships may deem fit and proper in the facts and circumstances of the case.”

2. Mrs. Archana Sinha, learned counsel for the Revenue, invites our attention to the judgment dated 18.06.2019 passed by a Coordinate Bench of this Court in CWJC No. 17412 of 2017, titled as Satyendra Kumar Construction Pvt. Ltd. Vs. Commissioner of Income Tax-II & Ors.. She points out that in

somewhat similar circumstances, the Court has directed the writ-petitioner to appear before the authority, highlighting all the issues raised in the present petition, leaving for the authorities to decide the matter, per law.

3. The Judgment dated 18.06.2019, in toto, is extracted as under:-

“Mr. D.V. Pathy, learned counsel for the

petitioner while questioning the proceedings

initiated under Section 148 (of Income Tax Act, 1961),

1961 by service of notice dated 31.03.2017

impugned at Annexure 10 series submits that the

issue which is raised in the writ petition is covered

by the judgments of this Court and Supreme Court

and which does not permit the Statutory Authority

to reopen the matter repeatedly. According to Mr.

D.V. Pathy, it is for the third time that the

assessment has been reopened in the present case.

Having heard learned counsel for the

parties and considering that it is at the very stage of

issuance of notice that the petitioner has rushed to

this Court on the grounds noted above, we are

certainly not persuaded to express ourselves at the

notice stage rather would leave the matter open for

discussion before the Statutory Authority who shall

apply his mind to the objections raised by the

petitioner on the reopening of the proceeding in the

backdrop of the legal position settled and take the

matter to its logical end within three months from

the date of receipt/production of a copy of this

order.

With this observation, this writ petition is

disposed of.”

4. On the other hand, Shri A.K. Rastogi, learned counsel

for the petitioner refers to and relies upon several decisions

rendered by Hon’ble the Apex Court as also different

constitutional Courts of the land.

5. Having gone through the record, and more

specifically the notice dated 5th of September, 2019, we are of the

considered view that interest of justice would be best met if the

issue, more so, in view of certain disputed questions of fact, is left

to be best decided by the authority in terms of the view already

taken by a Coordinate Bench of this Court in Satyendra Kumar

Construction Pvt. Ltd. (supra).

6. As such, we dispose of the present petition in the

following terms:

(a) petitioner shall appear before the appropriate

authority on 21st of January, 2021, when a date shall be fixed for

further hearing of the matter;

(b) parties shall place the entire material before the

appropriate authority on the next date of hearing;

(c) since the matter pertains to the Assessment Year

2012-13 and the petitioner has been assessed twice i.e. in the year

2016 and 2018, we direct that the proceedings be positively

concluded within a period of two months;

(d) however, we clarify that preliminary objection on the

jurisdictional issue, more so in view of first proviso to sub-section

(1) of Section 147 (of Income Tax Act, 1961) shall be decided

first;

(e) needless to add, opportunity of hearing in person

shall be afforded to all concerned;

(f) liberty reserved to the petitioner to take recourse to

such remedies as are otherwise available in accordance with law

including filing a fresh petition before this Court on the same and

subsequent cause of action.

7. The petition stands disposed of in the aforesaid terms.

8. Interlocutory Application(s), if any, shall also stand

disposed of.

spal/-

(Sanjay Karol, CJ)

(Anjani Kumar Sharan,J)