Sahkari Khand Udyog Mandal Ltd vs. ACIT (Gujarat High Court)

S. 147: Strict guidelines laid down to streamline procedure for reopening of assessments

(i) In large number of cases pertaining to reopening of assessments, we have noticed that different stages of the assessees demanding reasons recorded by the AO, supplying of such reasons, the assessees raising objections and the AO disposing of such objections, consume considerable time. In many cases, the last stage of disposing of the objections raised by the assessee is reached only a few weeks, and in some cases even days, before the assessment would be time-barred. This situation is quite unsatisfactory, both from the point of the assessee as well as the department. In the last minute rush, the AO frames assessment in a most hurried manner. In the process, important and valid grounds raised by the assessee are often times lost sight of. Additions are thus made which could have been avoided forcing the assessee to prefer appeal which could have been avoided, further creating needless strain on the system. On the other hand, some times additions were made without full and proper scrutiny. The additions which should have otherwise stood the test of appellate scrutiny fail the test.

(ii) It can thus be seen that there are four important stages once the AO issues notice for reopening of the assessment. Such stages are: (i) the assessee if he so wishes, may demand the reasons recorded by the AO after filing return in response to notice u/s 148 of the Act, (ii) the AO supplying such reasons to the assessee, (iii) the assessee raising objections to the notice for reopening and (iv) the AO disposing of the objections raised by the assessee. With a view to streamlining this procedure, and to ensure, as far as possible, the AO is not faced with the unenviable task of completing the assessment proceedings in a few days left before the same became time barred, we would like to give certain directions of general implication which, we would expect, are followed by all concerned. While doing so, we are conscious that these stages are provided by the Supreme Court in GKN Driveshafts (India) Ltd 259 ITR 19 and we would be giving directions only to the extent the said judgment already does not provide for. We have noticed that considerably long time is consumed sometimes by the assessee demanding the reasons recorded by the Assessing Officer and sometimes the AO complying with such a request of the assessee. It is an accepted proposition that the reasons recorded by the AO are not confidential and the assessee whose assessment is being reopened has a right to know such reasons. We therefore thought that these two stages can be substantially eliminated by giving suitable directions. The further stage is of the assessee raising objections which often times is done after much delay and the last stage comes where the AO deals with such objections. This is yet another problem area where unduly long time is consumed by the AO. Under the circumstances, following directions are issued:

(1) Once the AO serves to an assessee a notice of reopening of assessment u/s 148 of the Income-tax Act, 1961, and within the time permitted in such notice, the assessee files his return of income in response to such notice, the AO shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons.

(2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons.

(3) If objections are received by the AO from the assessee within the time permitted hereinabove, the AO would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee.

(4) This is being done in order to ensure that sufficient time is available with the AO to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the AO to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in GKN Driveshafts (India) Ltd would not apply. It only means that the time frame provided hereinabove would not apply in such cases.

(5) In the communication supplying the reasons recorded by the AO, he shall intimate to the assessee that he is expected to raise the objections within 60 days of receipt of the reasons and shall reproduce the directions contained in sub-para 1 to 4 hereinabove giving reference to this judgment of the High Court.

(6) The Chief Commissioner of Income Tax and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all AOs for scrupulously carrying out the directions contained in this judgment.