SOMATHEERAM MYURVEDIC BEACH RESORT (P) vs. THE ASSISTANT COMMISSIONR OF INCOME TAX

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WP(C)/3461/2010HC KeralaKLHC01045440201006 April 2010Bench: HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court observed that Ext.P4 assessment order did not reflect the sequence of events as narrated by the respondents, nor did it clearly indicate whether the Departmental Authorities had substantially complied with the mandate of the Apex Court in GKN Drive Shafts. The Court found that this could only be ascertained from the relevant file. Given that the petitioners have an effective alternate remedy by way of appeal, the Court directed the petitioners to pursue this remedy. The appeals, along with interlocutory applications for stay, were to be filed within two weeks and treated as validly filed on time. The appellate authority was directed to consider the stay applications and the appeals on merits expeditiously, within six weeks, taking note of the specific contentions and the law declared by the Apex Court. Until orders were passed on the stay applications, coercive proceedings were to be kept in abeyance.

What were the facts?

The petitioners, Somatheeram Ayurvedic Beach Resort (P) Ltd., are challenging assessment orders (Ext.P4) passed by the Assistant Commissioner of Income Tax under Section 143(3) read with Section 147 of the Income Tax Act. The primary contention is that these orders were finalized without adhering to the Supreme Court's mandate in GKN Drive Shafts V. Income Tax Officer. This mandate requires the Assessing Officer to furnish reasons for issuing a notice under Section 148, dispose of objections by a 'speaking order', and allow the assessee to file objections after receiving the reasons. The revenue, through its standing counsel, argued that the assessee was informed of the reasons during a detailed discussion after a notice under Section 143(2) was issued, and a detailed objection was filed, implying substantial compliance.

What were the issues?

1. Whether the Assessing Officer complied with the mandate of the Apex Court in GKN Drive Shafts V. Income Tax Officer, specifically regarding the furnishing of reasons for reopening the assessment under Section 147 and the disposal of objections by a speaking order? (Question of law and fact, turning on Section 147 and principles of natural justice). Assessee's Contention: The assessment orders were passed without regard to the Supreme Court's clear mandate in GKN Drive Shafts, which requires the Assessing Officer to furnish reasons for issuing a Section 148 notice, allow objections, and dispose of them by a speaking order. This procedure was not followed. Revenue's Contention: The assessee was informed of the reasons during a discussion after a Section 143(2) notice was issued, filed detailed objections, and the assessment was finalized. This constitutes substantial compliance with the Apex Court's directions, and therefore, no interference is warranted.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 143(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 6TH APRIL 2010 / 16TH CHAITHRA 1932 WP(C).No. 3461 of 2010(G) ------------------------- PETITIONER: ---------------- SOMATHEERAM AYURVEDIC BEACH RESORT (P) LTD. CHOWARA P.O., BALARAMAPURAM THIRUVANANTHAPURAM, REP.BY ITS CHAIRMAN MR.BABY MATHEW. BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENTS: --------------- 1. ASSISTANT COMMISSIONR OF INCOME TAX, CENTRAL CIRCLE-I, THIRUVANANTHAPURAM. 2. DEPUTY COMMISSIONR OF INCOME TAX, CENTRAL CIRCLE I, THIRUVANANTHAPURAM. ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06/04/2010, ALONG WITH WPC NO. 5064 OF 2010 WPC NO. 5077 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

P.R.RAMACHANDRA MENON, J ------------------------------------------ W.P(C) Nos.3461/2010, 5064/2010 & 5077/2010 ------------------------------------------- Dated this the 6th day of April, 2010. J U D G M E N T The petitioners in these cases are challenging Ext.P4 assessment orders passed by the first respondent under Section 143 (3), read with Section 147 of the Income Tax Act. The main ground of challenge is that the proceedings have been finalised by the said respondent without any regard to the clear mandate given by the Apex Court as per the decision in GKN Drive Shafts V. Income Tax Officer & others (259 ITR 19), whereby it has been held that, when a notice under Section 148 is issued, it is for the addressee to file a return and if he so desires, to seek reasons for issuing the notice; that the Assessing officer is bound to furnish reasons within a reasonable time; on receipt of which, the addressee is entitled to file objections and that the Assessing Officer is bound to dispose of the same by passing a 'speaking order'; which course is stated as not followed by the first respondent. 2. The learned standing counsel appearing for the Department submits that the averments and allegations raised in

W.P(C) Nos.3461/2010, 5064/2010 & 5077/2010 2 the Writ Petition are devoid of any merit or bonafides. The assessee, on receipt of notice under Section 148, requested to treat the return filed originally, as the return in response to the notice under Section 148 and sought for reasons for reopening the assessment. Subsequently, notice under Section 143(2) was issued; whereupon, the authorised representative of the petitioner/assessee turned up before the concerned authority and there was a detailed discussion during the course of which, the reasons were let known to the assessee, pursuant to which, a detailed objection was also filed. It was thereafter, that the assessment was finalised as per Ext.P4 and since there is substantial compliance with the direction given by the Apex Court, no interference is warranted in these Writ Petitions; submits the learned standing counsel. 3. On going through Ext.P4 assessment order, the factual position as to the sequence of events, as narrated from the part of the respondents in the statement filed in W.P(C) No.3461 of 2010 is not seen referred to. It is not discernible from Ext.P4, whether the course stated as pursued by the Departmental Authorities

W.P(C) Nos.3461/2010, 5064/2010 & 5077/2010 3 substantially complying with the mandate given by the Apex Court is satisfied or not; which can be ascertained only from the contents of the relevant file. This Court finds that the matter can be caused to be considered by the appellate authority; particularly when the petitioners are having an effective alternate remedy, by way of appeal. 4. In the above circumstances, the petitioners are permitted to pursue the alternate remedy by way of appeal, along with interlocutory applications for stay and if the petitioners file the proceedings as above within two weeks; the same shall be treated as valid appeals filed on time. The appellate authority shall consider the I.As if any, taking note of the specific contentions and appropriate orders shall be passed thereon, in accordance with law particularly law declared by the Apex Court in the decision cited supra, which shall be done after hearing the petitioners, as expeditiously as possible at any rate within 'six weeks' from the date of receipt of a copy of this judgment. It is made clear that, till appropriate orders are passed on the interlocutory applications for stay, all further coercive proceedings shall be kept in abeyance. It is

W.P(C) Nos.3461/2010, 5064/2010 & 5077/2010 4 open for the appellate authority to consider the appeals themselves on merits, within the time as specified above. The Writ Petitions are disposed of. Sd/- P.R.RAMACHANDRA MENON

JUDGE //True Copy// P.A to Judge ab

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