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High Court of Bombay rules that reassessment cannot be initiated without addressing the primary objections of the assessee
High Court of Bombay rules that reassessment cannot be initiated without addressing the primary objections of…
The High Court of Bombay, in the case of V. M. Salgaoncar Sales International v. Assistant Commissioner of Income-tax, Circle-2, Goa, held that the Assessing Officer cannot initiate reassessment without addressing the primary objections of the assessee. The case involved the reassessment of an assessee-firm engaged in the business of iron ore. The Assessing Officer sought to reopen the assessment based on the view that mining activities were illegal and the income accrued to the assessee could not be considered legitimate business income. The assessee objected to this, stating that it was not engaged in mining activities but was only involved in buying iron ore, processing it, and exporting the processed iron ore. However, the Assessing Officer proceeded with reassessment without addressing this objection. The High Court ruled that the Assessing Officer’s failure to address the primary objection of the assessee before initiating reassessment was not sustainable and remanded the matter for reconsideration.
Case Name:
V. M. Salgaoncar Sales International v. Assistant Commissioner of Income-tax, Circle-2, Goa (High Court of Bombay)
Key Takeaways:
1. The Assessing Officer cannot initiate reassessment without addressing the primary objections of the assessee.
2. Reopening of assessment should only be done by the revenue if it strictly satisfies the jurisdictional requirements of the Income Tax Act.
3. The reasons recorded in support of the notice for reopening an assessment must be furnished to the assessee, who then has the opportunity to object to the reasons, and the Assessing Officer must dispose of the objections by a speaking order.
4. The Assessing Officer must have an honest and objective second look at the reasons for reopening the assessment in the context of the objections of the assessee.
5. The entire procedure laid down by the Supreme Court to ensure that unwarranted reopening of assessments does not take place should be followed by the revenue.
Case Synopsis:
In the case of V. M. Salgaoncar Sales International v. Assistant Commissioner of Income-tax, Circle-2, Goa, the High Court of Bombay addressed the issue of reassessment of the assessee-firm engaged in the business of iron ore. The Assessing Officer sought to reopen the assessment for the assessment year 2008-09 based on the view that income arising out of mining business was illegal and could not be considered as legitimate business income but as ‘Income from other sources’. The assessee objected to this notice, contending that it was not engaged in mining activities but was only involved in the business of buying iron ore, processing it, and exporting the processed iron ore.
The Court held that the Assessing Officer’s order did not appear to be sustainable and may require reconsideration. The Court emphasized that the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO requires that whenever a notice to reopen an assessment under section 148 is issued to an assessee, the reasons recorded in support of the notice must be furnished to the assessee, who would then have an opportunity to object to the reasons and the Assessing Officer, on consideration of the objections, would dispose of the objections by a speaking order.
The Court found that the Assessing Officer did not deal with the objection raised by the petitioner in a proper manner and disposed of an imaginary objection, not taken by the petitioner, by a reasoned order. The Court expressed its dismay at the Revenue’s attempt to justify its order disposing of the petitioner’s objections, even though it was clear that the objection was not properly addressed. The Court set aside the order disposing of the objections and restored the petitioner’s objection to the impugned notice before the respondent-Revenue.
The Court directed the respondent-Revenue to assign the issue of objections raised by the petitioner to an officer other than the Assessing Officer who authored the previous order, and to dispose of the objections expeditiously. The Revenue was also instructed not to take any proceedings for a period of four weeks from the date the objections are disposed of.
In conclusion, the High Court of Bombay found that the Assessing Officer’s order did not properly address the objections raised by the petitioner and directed the Revenue to reconsider the objections and dispose of them in accordance with the procedure laid down by the Supreme Court. The Court emphasized the importance of an honest and objective second look at the reasons for reopening the assessment in the context of the objections raised by the assessee.
FAQ
Q1: Can the Assessing Officer initiate reassessment without addressing the objections of the assessee?
A1: No, the Assessing Officer cannot initiate reassessment without addressing the primary objections of the assessee.
Q2: What should the Assessing Officer do before commencing reassessment proceedings?
A2: The Assessing Officer should have an honest and objective second look at the reasons for reopening the assessment in the context of the objections of the assessee.
Q3: What is the procedure for reopening an assessment?
A3: The reasons recorded in support of the notice for reopening an assessment must be furnished to the assessee, who then has the opportunity to object to the reasons, and the Assessing Officer must dispose of the objections by a speaking order.
