Case Note & Summary
The petitioner, Ajay Oxycholoride Floorings, a partnership firm, challenged two notices dated 20th February 1990 and 3rd June 1991 issued by the Assistant Commissioner of Income Tax, Circle 24(2), Bombay, under Section 147 of the Income Tax Act, 1961, seeking to reopen completed assessments. The petitioner requested the Assessing Officer to disclose the reasons recorded prior to issuance of the notices, but no reasons were supplied despite a letter dated 8th June 1991. Consequently, the petitioner filed a writ petition under Article 226 of the Constitution of India before the Bombay High Court. The court issued rule on 15th July 1991 with interim relief. The respondents filed a counter affidavit on 4th February 1998 and disclosed the reasons recorded. The court considered whether the failure to supply reasons at the time of issuance of notices or upon request invalidates the reopening proceedings. The court held that the Assessing Officer is bound to record reasons before issuing notice for reopening and must supply those reasons to the assessee upon request; non-compliance violates principles of natural justice. The court quashed the notices and allowed the petition.
Headnote
A) Income Tax - Reassessment - Section 147, Income Tax Act, 1961 - Reasons to be recorded and supplied - The Assessing Officer must record reasons before issuing notice for reopening assessment and supply those reasons to the assessee upon request; failure to do so vitiates the reopening proceedings. (Paras 1-4)
B) Constitutional Law - Writ Jurisdiction - Article 226, Constitution of India - Challenge to reopening notices - Assessee invoked writ jurisdiction after department failed to supply reasons despite request; court held that non-supply of reasons violates principles of natural justice and renders notices invalid. (Paras 2-4)
Issue of Consideration
Whether the notices issued under Section 147 of the Income Tax Act, 1961 for reopening completed assessments are valid when the Assessing Officer failed to disclose the reasons recorded for reopening to the assessee despite request.
Final Decision
The court allowed the writ petition and quashed the notices dated 20th February 1990 and 3rd June 1991 issued under Section 147 of the Income Tax Act, 1961.
Law Points
- Reopening of assessment
- reasons to be recorded
- supply of reasons
- natural justice
- Section 147 Income Tax Act
- 1961
Case Details
2005 LawText (BOM) (08) 277
Writ Petition No.2262 of 1991
Firoze B. Andhyarjuna, senior counsel with P.J. Pardiwalla and Ms. Rajni Dirkar i/b. Little & Co. for petitioner; Dr. P. Daniel i/b. Pankaj Kapoor for respondents
Ajay Oxycholoride Floorings, a Partnership firm
Mr. Iyer, Assistant Commissioner of Income-tax, Circle 24(2); A. Balasubramian, Commissioner of Income-tax, Bombay City XII; Union of India
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Nature of Litigation
Writ petition challenging notices for reopening completed assessments under Section 147 of the Income Tax Act, 1961.
Remedy Sought
Quashing of notices dated 20th February 1990 and 3rd June 1991 and restraining the respondents from proceeding with reassessment.
Filing Reason
The Assessing Officer failed to supply the reasons recorded for reopening the assessment despite the petitioner's request, violating principles of natural justice.
Issues
Whether the notices for reopening assessment under Section 147 of the Income Tax Act, 1961 are valid when the Assessing Officer did not disclose the reasons recorded to the assessee despite request.
Submissions/Arguments
Petitioner argued that the Assessing Officer failed to supply reasons recorded for reopening, which is mandatory and violates natural justice.
Respondents filed counter affidavit and disclosed reasons, but the court considered the initial failure to supply reasons as fatal.
Ratio Decidendi
The Assessing Officer must record reasons before issuing notice for reopening assessment under Section 147 of the Income Tax Act, 1961 and must supply those reasons to the assessee upon request; failure to do so violates principles of natural justice and renders the reopening proceedings invalid.
Judgment Excerpts
This petition is directed against the two notices dated 20th February, 1990 (Exhibit-E & E-1) and notice dated 3rd June, 1991 (Exhibit-G) whereby the power to reopen the completed assessment has been invoked.
No reasons were disclosed or supplied by the Assistant Commissioner of Income Tax in spite of request letter dated 8th June, 1991.
Procedural History
The petitioner received notices for reopening assessment on 20th February 1990 and 3rd June 1991. Petitioner requested reasons on 8th June 1991, but no reasons were supplied. Petitioner filed writ petition on 15th July 1991, and court issued rule with interim relief. Respondents filed counter affidavit on 4th February 1998 disclosing reasons. Final hearing and judgment on 16th August 2005.
Acts & Sections
- Income Tax Act, 1961: 147
- Constitution of India: 226
