Karnataka Golf Association v. Deputy Director of Incometax (Exemptions) & Anr.

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The Tax Publishers2005 TaxPub(DT) 1361 (Karn-HC) : (2005) 006 (II) ITCL 0225 : (2005) 275 ITR 0297 : (2005) 195 CTR 0143 : (2005) 145 TAXMAN 0334 Karnataka Golf Association v. Dy. DIT (Exemptions) & Anr. () INCOME TAX --Reassessment----WRITMaintainability-- Held: When once the assessee had been informed of the reasons for reopening and was also enabled to file its objections and the concerned officer, on examination of the same had passed an order and had indicated that the matter requires further examination and action in accordance with the statutory provisions, the law should be allowed to run its course and same could not be interferred in a writ jurisdiction because statutory appeal and other remedies are available under the Act itself. Income Tax Act, 1961 s.147 Constitution of India, 1950 Article 226 Karnataka Golf Association v. Dy DIT (Exemptions) & Anr. In the Karnataka High Court D.V. Shylendra Kumar, J. Writ Petn. Nos. 44893 to 44898 of 2004 8 February 2005 Constitution of India, Arts. 226 & 227; Income Tax Act, 1961, section 148 In favour of: revenue; Assessment years 1996-97 to 2001-02 Counsel : KR. Prasad, for the Assessee E.R. Indra Kumar, for the Revenue ORDER D.V. Shylendra Kumar, J. This writ petition is in second round before this court in a petition under Articles. 226 and 227 of the Constitution of India by an assessee under the Income Tax Act, 1961, who is facing the prospect of reopening of assessments of earlier years pursuant to notice issued by the respondent-officers invoking the provisions of section 147/148 of the Income Tax Act, 1961. 2. The petitioner, M/s Karnataka Golf Association, had approached this court earlier questioning the legality of the notices issued under section 148, proposing reopening of the assessments for the years 1996-97 to 2001-02 as per notices dated 9-1-2003 by filing Writ Petn. Nos. 8446-8451 of 2003. 3. The principal ground of challenge was that the notices by themselves did not disclose as to under what circumstances the reopening was proposed; that the assessee was in the dark as to why proposition notice was issued at all; that the assessee was entitled to seek from the respondents the reasons for such reopening and notwithstanding the petitioner-assessee having sought for furnishing of such reasons for reopening, the respondents had not furnished the same and the notices as it is contended are without jurisdiction, and are liable to be quashed, etc. 4. This court in terms of order dated 23-7-2004, passed in the said writ petitions and following the decision of the Supreme Court rendered in the case of GM Driveshafts (India) Ltd. v. ITO & Ors. (2003) 259 ITR 19 (SC) directed the respondents-income-tax officials to furnish reasons that had been recorded by the respondents in their file for reopening of the assessments and to accord opportunity to the petitioner to file its objections on this aspect also. 5. In terms of the directions issued by this court, the respondents have, in fact, furnished such reasons in terms of Annex.-F series. The petitioner did file its objections to the reasons and the respondents have also passed an order on this in terms of communication dated 27-9-2004 (Copy at Annex.-I) purporting to deal with the objections raised by the petitioner. 6. This round of writ petition is for quashing of this order/communication dated 27-9-2004, as also the earlier notices preceding to this communication. 7. Sri. K.R. Prasad, learned senior counsel appearing for the petitioner, submits that the order now passed by the respondents which in effect enables the respondents to assume jurisdiction or the purposes of reopening the assessments is virtually one which has not dealt with the objections raised on behalf of the petitioner: that the concerned officer having not given proper and convincing reasons as to why the objections that had been put forth by the petitioner should be brushed aside; that the stand the respondents cannot assume jurisdiction, without indicating in the orders as to how the objections put forth by the petitioner are not tenable, this is an order which is required to be quashed along with the notices issued under section 148 for reopening the assessments. 8. Learned senior counsel submits that the respondents are required to follow the procedure of giving the reasons for reopening the assessments., that the assessee should be enabled to file its reply or objections to such reasons and then only can proceed further in accordance with the procedure and directions issued by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra). 9. It is also the submission of Sri Prasad, learned senior counsel, that the petitioner is enabled to question the legality of even the order dated 27-9-2004, passed by the respondents which is one dealing only with the objections with regard to the reasons given to the reopening particularly as this order itself is not an appealable order and unless the petitioner questions the legality, the respondents having assumed jurisdiction will proceed further in the matter exposing the petitioner to further assessment orders, appeals, liability for payment of tax, etc. Learned senior counsel submits that if the petitioner can legitimately avoid being exposed to such proceedings, it is definitely open to the petitioner to question the very order dated 27-9-2004 and in this regard has placed reliance on the Full Bench decision of the Gujarat High Court in Garden Finance Ltd. v. Asstt. CIT (2004) 268 ITR 48 (Guj)(FB). 10. Learned counsel for the petitioner also places reliance on the reported decision of the Gauhati High Court in the case of Smt. Jaswant Kaur Sehgal & Ors. v. CIT (2004) 271 ITR 475 (Gau) for the proposition that an order of the nature as under Annex.-L can also be called in question by filing a writ petition. Sri Prasad further submits that the decisions of the Gujarat High Court and Gauhati High Court are subsequent to the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), and purporting to follow the said decision and commends for an acceptance the view taken by these two High Courts to not only examine the legality of the order dated 27-9-2004, but also for issue of a writ by allowing these writ petitions. 11. Sri. E.R. Indrakumar, learned senior standing counsel appearing for the respondents, on the other hand, counters the submissions by pointing out that the petitioner had approached this court in the earlier round, that this court had issued directions to the respondents to furnish reasons; that in compliance of such directions, the reasons, in fact, were furnished; that the petitioner was also enabled to file his objections. those objections have been considered elaborately by the concerned officer and an order is passed which is also communicated to the petitioner; that it is now open to the respondents to proceed further in the matter; that no further hold up is warranted in the present circumstances; that the statutory authorities should be allowed to function in accordance with the statutory provisions and to ensure implementation of the statutory provisions. 12. The question is as to whether this court should examine the correctness or otherwise of the order/communication dated 27-9-2004 which is one in response to the objections raised by the petitioner to the reasons disclosed by the respondents for reopening the assessments. 13. I have perused the decision of the Supreme Court in GKN Driveshafts case (supra) and I have also been taken through the decisions of the Gujarat High Court and Gauhati High Court. 14. A careful reading of the decision of the Supreme Court indicates that whenever the Income Tax Department is proposing to reopen a concluded assessment, it is but necessary that the department should disclose the reasons for such reopening if the assessee requests for the same. At the same time, emphasis is laid that on the receipt of a notice of this nature, it is the duty of the assessee to file its return and respond to the notice. A proper reading of this decision indicates that the reasons to be disclosed by the department is for the purpose of enabling the assessee to file its reply and objections effectively in the context of proposition for reopening and in furnishing its stand or information. The decision of the Supreme Court does not indicate that the dealing with the objections raised by the assessee for reopening on the disclosure of reasons in itself could form an independent proceeding which should again be tested before the High Court or elsewhere. However, what is required is that while dealing with such objections, the order to be passed by the competent officer should be a reasoned order in the sense that it should disclose as to in what manner the objections have been dealt with by the concerned officer as in the event of the ensuing assessment order being made subject-matter of appeal or is taken up before the higher forum, the order should speak for itself. 15. I am afraid that no hard and fast rule can be laid down on the question of exercise of jurisdiction under Arts. 226 and 227 of the Constitution of India in such matters particularly for interference by the High Court in writ jurisdiction which is a discretionary jurisdiction. It is no doubt true that two of the High Courts have thought it fit to examine even the legality or correctness of the order passed by the officers of the Income Tax Department white dealing with the objections filed by the assessee to the reasons for reopening the assessments. But, that does not mean that it is the law laid down or it can be generalised in all circumstances. 16. I am of the view that when once the assessee has been informed of the reasons for reopening and is also enabled to file its objections and the concerned officer on examination of the same has passed an order and has indicated that the matter requires further examination and action in accordance with the statutory provisions, the law should be allowed to run its course. It is not as though an order to be passed by the assessing officer on reopening becomes final by itself. The statutory provisions of appeal and other remedies can take care of the interest of an assessee if the assessment order has gone wrong in any way. The tenor and purpose of the procedure indicated by the Supreme Court in the case of GW Driveshafts case (supra), to my mind appears to be to ensure a fair and reasonable opportunity to be provided to an assessee to enable the assessee to come out with its explanation and also to point out any such anomalies or inconsistencies which might have been noticed in the reasons assigned for reopening. That perhaps was necessitated because of the manner in which the very proposition notice issued under section 148 is couched. The proposition notice does not disclose anything except for saying that the officer is of the opinion that certain income has escaped assessment and is required to be brought to tax. Nothing else is indicated in this notice. Perhaps a little more transparency on the part of the revenue and a little more information could have avoided all unnecessary litigation. Unfortunately, it is not our strong point to learn from our mistakes. It is high time that the form of the notice under section 148 issued is made more transparent particularly taking cue from the decision of the Supreme Court in GKN Driveshafts case (supra) and considerable litigation is avoided on this aspect which has been a fertile ground for litigation as it is evident from the law reports. 17. One another contention which is according to Sri Prasad, learned senior counsel of considerable weight and importance is that the respondents -officers have taken more than 18 months from the date of issue of notices for giving reasons for reopening and that in itself should be taken as a justifiable ground to quash the notices as if the reasons had been noted in the files before the' issue of such notices, it should not have taken more than a couple of weeks for the department to furnish the same and that is a suspicious circumstance as to' whether the reasons had been recorded or not at all. 18. Though the argument appears to be attractive, I am not inclined unable to consider the same in the present case as the assessee had approached this court in the earlier round of litigation by filing a writ petition and this court had an occasion to direct the respondents to furnish reasons within a stipulated time and the respondents have complied. That having happened, there is no further scope to go back to this aspect yet again in this writ petition. 19. In the circumstances, I am of the view that there is no need for this court to interfere again in such a matter, in the exercise of writ jurisdiction. It is made clear that the respondents can proceed in accordance with law from the stage at which the proceedings had been held up. The petitioner may be accorded a proper opportunity if the petitioner so seeks and proceed further. 20. It is also clarified that as this court has not examined the merits of the order which is challenged in this writ petition and I am of the opinion that it is not necessary to examine at this stage in the writ jurisdiction, it is open to the petitioner to question the correctness or point out any of its defects before any forum where it can be so questioned or challenged as and when the occasion arises to the petitioner, if the petitioner should suffer an adverse order which can be made subject-matter of further proceedings. In all other aspects, this writ petition is dismissed. OPEN SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 1361 (Karn-HC) : (2005) 006 (II) ITCL 0225 : (2005) 275 ITR 0297 : (2005) 195 CTR 0143 : (2005) 145 TAXMAN 0334

Karnataka Golf Association v. Dy. DIT (Exemptions) & Anr. ()

INCOME TAX

--Reassessment----WRITMaintainability-- Held: When once the assessee had been informed of the reasons for reopening and was also enabled to file its objections and the concerned officer, on examination of the same had passed an order and had indicated that the matter requires further examination and action in accordance with the statutory provisions, the law should be allowed to run its course and same could not be interferred in a writ jurisdiction because statutory appeal and other remedies are available under the Act itself.

Income Tax Act, 1961 s.147

Constitution of India, 1950 Article 226

Karnataka Golf Association v. Dy DIT (Exemptions) & Anr.

In the Karnataka High Court D.V. Shylendra Kumar, J.

Writ Petn. Nos. 44893 to 44898 of 2004 8 February 2005

Constitution of India, Arts. 226 & 227; Income Tax Act, 1961, section 148

In favour of: revenue; Assessment years 1996-97 to 2001-02

Counsel : KR. Prasad, for the Assessee E.R. Indra Kumar, for the Revenue

ORDER

D.V. Shylendra Kumar, J.

This writ petition is in second round before this court in a petition under Articles. 226 and 227 of the Constitution of India by an assessee under the Income Tax Act, 1961, who is facing the prospect of reopening of assessments of earlier years pursuant to notice issued by the respondent-officers invoking the provisions of section 147/148 of the Income Tax Act, 1961.

2. The petitioner, M/s Karnataka Golf Association, had approached this court earlier questioning the legality of the notices issued under section 148, proposing reopening of the assessments for the years 1996-97 to 2001-02 as per notices dated 9-1-2003 by filing Writ Petn. Nos. 8446-8451 of 2003.

3. The principal ground of challenge was that the notices by themselves did not disclose as to under what circumstances the reopening was proposed; that the assessee was in the dark as to why proposition notice was issued at all; that the assessee was entitled to seek from the respondents the reasons for such reopening and notwithstanding the petitioner-assessee having sought for furnishing of such reasons for reopening, the respondents had not furnished the same and the notices as it is contended are without jurisdiction, and are liable to be quashed, etc.

4. This court in terms of order dated 23-7-2004, passed in the said writ petitions and following the decision of the Supreme Court rendered in the case of GM Driveshafts (India) Ltd. v. ITO & Ors. (2003) 259 ITR 19 (SC) directed the respondents-income-tax officials to furnish reasons that had been recorded by the respondents in their file for reopening of the assessments and to accord opportunity to the petitioner to file its objections on this aspect also.

5. In terms of the directions issued by this court, the respondents have, in fact, furnished such reasons in terms of Annex.-F series. The petitioner did file its objections to the reasons and the respondents have also passed an order on this in terms of communication dated 27-9-2004 (Copy at Annex.-I) purporting to deal with the objections raised by the petitioner.

6. This round of writ petition is for quashing of this order/communication dated 27-9-2004, as also the earlier notices preceding to this communication.

7. Sri. K.R. Prasad, learned senior counsel appearing for the petitioner, submits that the order now passed by the respondents which in effect enables the respondents to assume jurisdiction or the purposes of reopening the assessments is virtually one which has not dealt with the objections raised on behalf of the petitioner: that the concerned officer having not given proper and convincing reasons as to why the objections that had been put forth by the petitioner should be brushed aside; that the stand the respondents cannot assume jurisdiction, without indicating in the orders as to how the objections put forth by the petitioner are not tenable, this is an order which is required to be quashed along with the notices issued under section 148 for reopening the assessments.

8. Learned senior counsel submits that the respondents are required to follow the procedure of giving the reasons for reopening the assessments., that the assessee should be enabled to file its reply or objections to such reasons and then only can proceed further in accordance with the procedure and directions issued by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra).

9. It is also the submission of Sri Prasad, learned senior counsel, that the petitioner is enabled to question the legality of even the order dated 27-9-2004, passed by the respondents which is one dealing only with the objections with regard to the reasons given to the reopening particularly as this order itself is not an appealable order and unless the petitioner questions the legality, the respondents having assumed jurisdiction will proceed further in the matter exposing the petitioner to further assessment orders, appeals, liability for payment of tax, etc. Learned senior counsel submits that if the petitioner can legitimately avoid being exposed to such proceedings, it is definitely open to the petitioner to question the very order dated 27-9-2004 and in this regard has placed reliance on the Full Bench decision of the Gujarat High Court in Garden Finance Ltd. v. Asstt. CIT (2004) 268 ITR 48 (Guj)(FB).

10. Learned counsel for the petitioner also places reliance on the reported decision of the Gauhati High Court in the case of Smt. Jaswant Kaur Sehgal & Ors. v. CIT (2004) 271 ITR 475 (Gau) for the proposition that an order of the nature as under Annex.-L can also be called in question by filing a writ petition. Sri Prasad further submits that the decisions of the Gujarat High Court and Gauhati High Court are subsequent to the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), and purporting to follow the said decision and commends for an acceptance the view taken by these two High Courts to not only examine the legality of the order dated 27-9-2004, but also for issue of a writ by allowing these writ petitions.

11. Sri. E.R. Indrakumar, learned senior standing counsel appearing for the respondents, on the other hand, counters the submissions by pointing out that the petitioner had approached this court in the earlier round, that this court had issued directions to the respondents to furnish reasons; that in compliance of such directions, the reasons, in fact, were furnished; that the petitioner was also enabled to file his objections. those objections have been considered elaborately by the concerned officer and an order is passed which is also communicated to the petitioner; that it is now open to the respondents to proceed further in the matter; that no further hold up is warranted in the present circumstances; that the statutory authorities should be allowed to function in accordance with the statutory provisions and to ensure implementation of the statutory provisions.

12. The question is as to whether this court should examine the correctness or otherwise of the order/communication dated 27-9-2004 which is one in response to the objections raised by the petitioner to the reasons disclosed by the respondents for reopening the assessments.

13. I have perused the decision of the Supreme Court in GKN Driveshafts case (supra) and I have also been taken through the decisions of the Gujarat High Court and Gauhati High Court.

14. A careful reading of the decision of the Supreme Court indicates that whenever the Income Tax Department is proposing to reopen a concluded assessment, it is but necessary that the department should disclose the reasons for such reopening if the assessee requests for the same. At the same time, emphasis is laid that on the receipt of a notice of this nature, it is the duty of the assessee to file its return and respond to the notice. A proper reading of this decision indicates that the reasons to be disclosed by the department is for the purpose of enabling the assessee to file its reply and objections effectively in the context of proposition for reopening and in furnishing its stand or information. The decision of the Supreme Court does not indicate that the dealing with the objections raised by the assessee for reopening on the disclosure of reasons in itself could form an independent proceeding which should again be tested before the High Court or elsewhere. However, what is required is that while dealing with such objections, the order to be passed by the competent officer should be a reasoned order in the sense that it should disclose as to in what manner the objections have been dealt with by the concerned officer as in the event of the ensuing assessment order being made subject-matter of appeal or is taken up before the higher forum, the order should speak for itself.

15. I am afraid that no hard and fast rule can be laid down on the question of exercise of jurisdiction under Arts. 226 and 227 of the Constitution of India in such matters particularly for interference by the High Court in writ jurisdiction which is a discretionary jurisdiction. It is no doubt true that two of the High Courts have thought it fit to examine even the legality or correctness of the order passed by the officers of the Income Tax Department white dealing with the objections filed by the assessee to the reasons for reopening the assessments.

But, that does not mean that it is the law laid down or it can be generalised in all circumstances.

16. I am of the view that when once the assessee has been informed of the reasons for reopening and is also enabled to file its objections and the concerned officer on examination of the same has passed an order and has indicated that the matter requires further examination and action in accordance with the statutory provisions, the law should be allowed to run its course. It is not as though an order to be passed by the assessing officer on reopening becomes final by itself. The statutory provisions of appeal and other remedies can take care of the interest of an assessee if the assessment order has gone wrong in any way. The tenor and purpose of the procedure indicated by the Supreme Court in the case of GW Driveshafts case (supra), to my mind appears to be to ensure a fair and reasonable opportunity to be provided to an assessee to enable the assessee to come out with its explanation and also to point out any such anomalies or inconsistencies which might have been noticed in the reasons assigned for reopening. That perhaps was necessitated because of the manner in which the very proposition notice issued under section 148 is couched. The proposition notice does not disclose anything except for saying that the officer is of the opinion that certain income has escaped assessment and is required to be brought to tax. Nothing else is indicated in this notice. Perhaps a little more transparency on the part of the revenue and a little more information could have avoided all unnecessary litigation. Unfortunately, it is not our strong point to learn from our mistakes. It is high time that the form of the notice under section 148 issued is made more transparent particularly taking cue from the decision of the Supreme Court in GKN Driveshafts case (supra) and considerable litigation is avoided on this aspect which has been a fertile ground for litigation as it is evident from the law reports.

17. One another contention which is according to Sri Prasad, learned senior counsel of considerable weight and importance is that the respondents -officers have taken more than 18 months from the date of issue of notices for giving reasons for reopening and that in itself should be taken as a justifiable ground to quash the notices as if the reasons had been noted in the files before the' issue of such notices, it should not have taken more than a couple of weeks for the department to furnish the same and that is a suspicious circumstance as to' whether the reasons had been recorded or not at all.

18. Though the argument appears to be attractive, I am not inclined unable to consider the same in the present case as the assessee had approached this court in the earlier round of litigation by filing a writ petition and this court had an occasion to direct the respondents to furnish reasons within a stipulated time and the respondents have complied. That having happened, there is no further scope to go back to this aspect yet again in this writ petition.

19. In the circumstances, I am of the view that there is no need for this court to interfere again in such a matter, in the exercise of writ jurisdiction. It is made clear that the respondents can proceed in accordance with law from the stage at which the proceedings had been held up. The petitioner may be accorded a proper opportunity if the petitioner so seeks and proceed further.

20. It is also clarified that as this court has not examined the merits of the order which is challenged in this writ petition and I am of the opinion that it is not necessary to examine at this stage in the writ jurisdiction, it is open to the petitioner to question the correctness or point out any of its defects before any forum where it can be so questioned or challenged as and when the occasion arises to the petitioner, if the petitioner should suffer an adverse order which can be made subject-matter of further proceedings. In all other aspects, this writ petition is dismissed.

OPEN