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| DATE: | January 1, 2013 (Date of publication) |
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| Click here to download the judgement (synopsis_147_late_furnishing_reasons.pdf) |
S. 147: Non-supply of recorded reasons before passing reassessment order renders the reopening void. Subsequent supply does not validate reassessment order
The AO issued a notice u/s 147 to reopen the assessment. Though the assessee filed a ROI and requested for a copy of the recorded reasons, the same were not furnished to it. The AO passed a reassessment order and thereafter supplied the assessee with a copy of the recorded reasons. In appeal before the Tribunal, the assessee claimed that as the recorded reasons had not been furnished to it before passing the reassessment order, the reassessment order was void. HELD by the Tribunal allowing the appeal:
In GKN Driveshafts 259 ITR 19 (SC) it was held that the AO is bound to furnish the reasons recorded for reopening the assessment within a reasonable time so that the assessee can file its objections thereto. Even as per the rules of natural justice, the assessee is entitled to know the basis on which the AO has formed an opinion that income has escaped assessment. There is no justifiable reason for the AO to deprive the assessee of the recorded reasons. If the reasons are not furnished to the assessee during the assessment proceedings, then the subsequent furnishing of the reasons after completion of assessment proceedings serves no purpose and amounts to the assessee being denied its right to raise objections to the validity of the reopening proceedings. A reassessment order passed without furnishing the recorded reasons is not sustainable in law. The furnishing of reasons after completion of assessment does not make good the defect/invalidity with which the initiation of proceedings u/s 147/148 is tainted (K V Venkataswamy Reddy (Bang) (attached), Tata International Ltd (ITAT Bom) & Videsh Sanchar Nigam Ltd 340 ITR 66 (Bom) (SLP dismissed) followed)
IT IS A PITY HOW AOs ARE UNAWARE OF THEIR OWN PROCEDURES AND THUS HARASS THE ASSESSED. THIS IS TO BE DISCOURAGED STRICTLY. AND HAND OVER ORDERS FOR DOMESTIC INQUIRY ON OFFICERS CONCERNED AND DULY HAND OVER PUNISHMENTS LIKE DEMOTIONS THAT WILL HELP THE REVENUE ADMINISTRATION SENSIBLE , I BELIEVE;
True big maze of judgements on various sections of income tax Act, that does not preclude ld.AO from doing very high home work in applications of sections, as he is handling taxpayers who are many a time misled by their consultants that way PWC v CIT the SC exonerated the PwC in respect of satyam computers issue;
genuine errors of tax payers are always acceptable but the Revenue is not as Revenue is to specialize what to apply and what not that way natural justice surface, after all you cannot take for granted the tax payer;
Even finance Acts are subject to judicial review as constitution expects governments have to act fairly on citizens, as even criminals too enjoy basic tenets of constitution protection;
when so, how revenue assume itself bigger than life size!
Acting fairly is the function of any administrative authority, well defined in Ridge v Baldwin(1963) 1QB 539 at 578. Lord Diplock put it…’Where an Act of Parliament confers upon administrative body (may be like Revenue her) which involve in making decisions which affect to their Detriment, the rights of other persons or curtail their liberty to do as they please, there is a presumption that Parliament intended that the administrative body should act fairly towards those persons who will be affected by their decisions. (Development dates from 1966..an Immigration officer at London Airport refused to admit a boy from Pakistan on the ground that he appeared to be well over the age 16, under which he would have been allowed to enter with his father. Lord Parker CJ held that even if an Immigration officer is not acting in a judicious or Quasi judicious capacity,he must nevertheless act fairly. (Re H K (an infant)(1967) 2 QB 617. similarly R v Birmingham city justice ex.p Chris Foreign Foods (A Wholesalers) Ltd (1970) 1 WLR 1428;
Ridge v Baldwin sorted out the confusion caused by the artificial use of ‘Judicial’ to describe functions which were in reality administrative , it did eliminate the misnomer from the law.
A means of doing so,,however, appeared in the later line of cases which laid down that the powers of a purely administrative character must be exercised ‘fairly’, meaning in accordance with natural justice – which after all is only Fair Play in action (a much quoted remark of Harmann LJ in Ridge v Baldwin ;
Natural justice is but fairness writ large and judicialy’ Lord Morris in Furnel v Whangarei High scools board (1973)AC 660 at 679;
By this simple verbal shortcut the misuse of the term judicial can be avoided altogether.At last we reach the result directly instead of by a devious path: administrative powers which affect rights must be exercised in accordance with the Natural Justice…(On the development see (1975) 25 U Tor LJ 280(DJ Mullen)(1978) 28 U. Tor LJ 215 (M. Loughlin)(1979) 96 SAf LJ 607 (LG Baxter)….
Word’ judicial’ is largely misused by Revenue and so a lot of problems as revenue fails in natural justice is well known!