Case Note & Summary
The petitioner, Wavy Construction LLP, challenged an order dated 14 October 2021 rejecting its objections against reopening of assessment under Section 147 of the Income Tax Act, 1961, and the consequent assessment order dated 30 September 2022 passed under Sections 143(3) read with 147, 260 and 144B of the Act for Assessment Year 2012-13. The petitioner had initially filed its return on 29 September 2012. After a long gap, on 29 March 2019, a notice under Section 148 was issued alleging that income of Rs. 4,13,05,930/- had escaped assessment in relation to a property sale transaction. The petitioner filed objections on 6 May 2019, which were rejected on 25 November 2019. The petitioner then filed Writ Petition No. 3368 of 2019, which was disposed of on 21 September 2021 by a Division Bench that quashed the earlier assessment order dated 19 May 2021 and remanded the matter to the Assessing Officer to reconsider the objections after granting a personal hearing. Pursuant to this, the petitioner filed further objections on 30 September 2021. However, on 14 October 2021, the Assessing Officer rejected the objections without granting a personal hearing. Subsequently, the assessment was transferred to the National Faceless Assessment Centre (NFAC), and a show cause notice was issued on 20 September 2022. The petitioner claimed it was unaware of certain notices posted on the portal. The final assessment order dated 30 September 2022 was passed making additions. The petitioner argued that the Assessing Officer failed to comply with the High Court's direction to grant a personal hearing and that the approval under Section 151 was not communicated. The respondents contended that the petitioner was given sufficient opportunities. The court analyzed the procedural history and found that the Assessing Officer did not grant a personal hearing as directed, and the Section 151 approval was not communicated. The court held that the order rejecting objections and the reassessment order were vitiated due to violation of natural justice and non-communication of mandatory approval. The court quashed both the order dated 14 October 2021 and the assessment order dated 30 September 2022, and remanded the matter back to the Assessing Officer for fresh consideration after granting a personal hearing and communicating the Section 151 approval.
Headnote
A) Income Tax - Reopening of Assessment - Section 147, 148, 151, 143(3) read with 147, 260, 144B of Income Tax Act, 1961 - Validity of Reassessment Order - The petitioner challenged the reassessment order and the order rejecting objections against reopening. The court held that the Assessing Officer failed to provide a proper opportunity of hearing as directed by the earlier order of the High Court, and the approval under Section 151 was not communicated to the assessee, which is a mandatory requirement. Consequently, the reassessment order was quashed and set aside. (Paras 1-46) B) Income Tax - Natural Justice - Opportunity of Hearing - Section 147, 148 of Income Tax Act, 1961 - The court held that the Assessing Officer did not grant a personal hearing to the petitioner despite the High Court's direction in the earlier writ petition. The order rejecting objections was passed without giving the petitioner a chance to be heard, violating principles of natural justice. (Paras 20-30) C) Income Tax - Approval under Section 151 - Communication to Assessee - Section 151 of Income Tax Act, 1961 - The court held that the approval granted under Section 151 for reopening of assessment must be communicated to the assessee. Failure to do so renders the reopening invalid. The court relied on the principle that such approval is a condition precedent for valid issuance of notice under Section 148. (Paras 31-35)
Issue of Consideration
Whether the reassessment order dated 30 September 2022 and the order rejecting objections dated 14 October 2021 are valid when the petitioner was not granted a proper opportunity of hearing and the approval under Section 151 was not communicated.
Final Decision
The court allowed the writ petition. The order dated 14 October 2021 rejecting the petitioner's objections and the assessment order dated 30 September 2022 were quashed and set aside. The matter was remanded to the Assessing Officer for fresh consideration of the objections after granting a personal hearing to the petitioner and after communicating the approval under Section 151. The respondents were directed to pass a fresh order within a period of eight weeks from the date of the judgment.
Law Points
- Reopening of assessment under Section 147 of the Income Tax Act
- 1961 requires valid reasons to believe
- objections against reopening must be disposed of by a speaking order after granting personal hearing
- approval under Section 151 must be communicated to the assessee
- failure to provide opportunity of hearing vitiates the reassessment order
- principles of natural justice apply to faceless assessment proceedings.
