Case digest: Objections to be adjudicated prior to the proceedings


Supreme Court of India:

GKN Driveshafts (India) Ltd. v. Income-tax Officer; [2002] 125 Taxman 963 (SC) 
@para 3 “On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.” 

High Court of Delhi:

Scan Holding Ltd. v. ACIT; [2018] 90 taxmann.com 396 (Delhi) 
@para 15 “In the facts of the present matter, we feel that the Assessing Officer has merely observed and recorded that the objections raised by the assessee were untenable and wrong, without elucidating and dealing with the contentions and issues raised in the objection letter dated 10th June, 2015. The Assessing Officer has not applied his mind to the assertions and contentions raised by the petitioner and the core issue to be examined and considered.” 

Matter remanded back for fresh adjudication. 

SAK Industries (P.) Ltd. v. Deputy Commissioner of Income-tax; [2012] 19 taxmann.com 237 (Delhi)
@para 8 “The order is non-speaking and does not deal with the contentions raised by the petitioner. It is a cryptic order, which does not meet the basic requirements of the principles of natural justice. It has to be struck down and set aside.”

Delhi Tourism & Transport Development Corpn. Ltd. v. ACIT; [2004] 141 Taxman 361 (Delhi)
@para 2 “In view of this (GKN Driveshafts), we direct the respondent to follow the procedure laid down by the Supreme Court and decide the objections by a speaking order before passing an order.”

Ferrous Infrastructure (P.) Ltd. v. Deputy Commissioner of Income-tax; [2015] 63 taxmann.com 201 (Delhi)
@para 8.1 “On going through the same, it is evident that the Assessing Officer has to pass a speaking order disposing of the objections "before proceeding with the assessment". In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the reassessment order itself.” 

Keshav Shares & Stocks Ltd v. ITO; [2008] 174 Taxman 63 (Delhi)
@para 8 “The proper course for the Assessing Officer, in view of the Supreme Court decision, would have been to have responded to the letter dated 17-9-2007. Unfortunately, the Assessing Officer did not do so. Nor was there any separate speaking order passed in respect of the objections taken by the assessee in its letter dated 17-9-2007. As a result, it is apparent that the directives of the Supreme Court in GKN Driveshafts (India) Ltd.'s case have not been followed by the Assessing Officer. The assessment order has been made without first passing a speaking order on the objections raised by the petitioner.” 


High Court of Bombay


KSS Petron Private Limited v. ACIT; ITA No. 224/2014 
@para 8 “We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on re­opening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.”

IOT Infrastructure & Energy Services Ltd. v. ACIT; [2010] 233 CTR 175 (Bombay)
@para 3 “In our view, there is absolutely no reason or justification for the AO not to deal with the objections filed by the assessee to the reopening of the assessment particularly in view of the binding principle of law laid down by the Supreme Court in that regard. In. the circumstances, during the course of the hearing, we have suggested to the learned counsel that it would be appropriate for this Court to set aside the order of reassessment dt. 23rd Dec, 2009 and the noting by the AO dt. 21st Dec, 2009 disposing of the objections and to remit the proceedings back to the AO.” 

Rabo India Finance Ltd. v. DCIT; [2012] 27 taxmann.com 163 (Bombay)

@para 3 “The principle laid down by the Supreme Court was binding upon the Assessing Officer. Instead of complying with the decision, the Assessing Officer has acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the assessee.”

V. M. Salgaoncar Sales International v. ACIT; [2015] 59 taxmann.com 291 (Bombay)
@para 9 “On such a fundamental lapse on the part of the Assessing Officer in disposing of the objections was pointed out to us, we expected the State-Revenue would withdraw the order and crave liberty to pass a fresh order dealing with the objections of the petitioner. However, to our dismay, the Revenue is still attempting to justify its order disposing of the petitioner's objections even though it is clear as daylight that the objection was chalk and the order disposing of the objections, was dealing with an imaginary ground of cheese.” 

“However, on further consideration, we felt that it would send a wrong signal and the Officers of the Revenue, who would continue to pass orders without application of mind, on imaginary objections with impunity. Therefore, we decided to set aside the order dated 20/02/2015 of the Assessing Officer disposing of the objections to the impugned notice.”


Shashank Vyankatesh Manohar v. Union of India; 2014 (1) MhLj 838

[on FEMA Dispute; taking a tax analogy]
@para 18 quoting GKN Driveshafts “On receipt of the reasons recorded for re-opening the assessment, the party is entitled to place its objections to the reasons recorded for re-opening before the Assessing Officer. The Assessing Officer is then required to consider those objections and pass an order thereon before proceeding to re-assess the assessee's income in respect of a completed assessment. Thus, the Supreme Court has provided for giving of reasons recorded while reopening the assessment to the party and then dealing with the objections of the party.

“…This opinion cannot be arbitrary, but must be supported by reasons, howsoever, minimal those reasons may be, to evidence application of mind to the objections raised by the noticee.” 


High Court of Calcutta


Sahara India Commercial Corpn. Ltd. v. DCIT; [2006] 284 ITR 295 (CAL.)
@para 7 “In view of the objections submitted by the petitioner-company raising the question of jurisdiction, and in the face of the apex court decision in GKN Driveshafts ( India) Ltd. v. ITO reported in [2003] 259 ITR 19 on receipt of the objections from the petitioner-company, he was under the obligation to make a speaking order. He could have very well said that on the facts of the case the objections were not entertainable. He did not say so. He rather said that he had considered the objections. Thereafter, he did not say anything about the merits of the objections raised by the petitioner-company.” 

@para 9 “The petitioner-company was entitled to get the speaking order. Such a valuable right of the petitioner-company could not be taken away by the Assessing Officer at the stroke of a pen. He clearly acted contrary to the binding decision of the apex court. It is not the case that he had no knowledge of the decision. Hence I am unable to countenance the manner in which he proceeded with the matter.”


High Court of Karnataka


Deepak Extrusions (P.) Ltd. v. DCIT; [2017] 80 taxmann.com 77 (Karnataka)
@para 12 “It is also undisputed position that the Assessing Officer did not dispose of the objections prior to proceeding with the assessment further and proceeded to pass the order for assessment. Under the circumstances, it can be said that the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained.”

High Court of Madras


Venkatesan Raghuram Prasad v. ITO; [2018] 94 taxmann.com 249 (Madras)
@para 7 “When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action, to be followed is

(a) file the return,
(b) If he so desires, to seek reasons for issuing the notices.
(c) The Assessing Officer is bound to furnish reasons within a reasonable time.
(d) On receipt of reasons, the assessee is entitled to file objections to the issuance of notice, and
(e) The Assessing Officer is bound to dispose of the same by passing a speaking order.
(f) The assessee if desires can file a writ challenging the order or can proceed with the assessment. However, the assessee has still a right to challenge the reopening of assessment after the assessment order is passed, before Appellate Authority.” 

Karti P. Chidambaram v. ACIT; [2018] Taxman 416 (Madras) 
@para 17 “The second issue is whether the respondent has complied with the directives in the case of GKN Driveshafts (India) Limited. The Hon'ble Supreme Court pointed out that if the assessee desires and seeks for reasons for reopening, the Assessing Officer is bound to furnish reasons within a reasonable time and on receipt of the reasons, the assessee is entitled to file objections for issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order….The next step that the respondent should have undertaken is to pass a speaking order on the objections. Unfortunately, the respondent did not do so, but sent a communication to the petitioner dated 30.08.2016 terming it as a rebuttal for objections for reopening the assessment.”

@para 18 “…On 29.12.2016, the petitioner through its authorized representative appeared before the respondent and submitted a written request to keep the notice under Section 143(3) of the Act in abeyance till a speaking order is passed on the petitioner's further representation dated 29.09.2016. However, on 30.12.2016 without any opportunity to the petitioner, the impugned assessment order has been passed. Thus the facts clearly demonstrate that the respondent has not followed the directives in the case of GKN Driveshafts (India) Limited. The rebuttal dated 30.08.2016 cannot taken as an order required to be passed on the objections given by the petitioner for reopening the assessment and the manner in which the impugned assessment order has been passed is wholly illegal and the entire proceedings are flawed. The respondent while issuing the rebuttal dated 30.08.2016 did not attach any finality to the proceedings but gave an opportunity to the petitioner to make further submission. On account of this, the petitioner had no opportunity to challenge the rebuttal dated 30.08.2016. This is one more ground to state that the proceedings are in violation of principles of natural justice. Accordingly this issue is answered in favour of the petitioner and against the revenue.”

Jayanthi Natarajan v. ACIT; W.P No. 1905/2017, High Court of Madras 
@para 14: “…The purpose for passing a separate speaking order on the objections is with a view to afford an opportunity to the assessee to question such an order, if he is aggrieved. The respondent by passing the impugned order has taken away such valuable right from the petitioner inasmuch as the impugned proceedings is an order of assessment under Section 143(3) of the Act. Therefore, if an order of assessment has to be challenged, necessarily an appeal has to be preferred and only in rarest of rare case, Courts would entertain challenge to assessment orders in writ proceedings. Thus, the procedure adopted by the respondent is completely flawed, which goes to the root of the matter, thereby, vitiates the entire proceedings.”

Home Finders Housing Ltd. v. ITO; [2018] 93 taxmann.com 371 (Madras) 
@ para 17 “The forming of opinion to proceed further by disposal of the objections need not be a detailed consideration of all the facts and law applicable. It must show application of mind to the objections raised by the noticee. In case the objections are such that it would require a detailed examination of facts and application of legal provisions, taking into account the assessment order sought to be reopened, the string of violations, suppression of material particulars and transactions which would require considerable time and would be in the nature of a detailed adjudicatory process, the Assessing Officer can dispose of the objections, by giving his tentative reasons for overruling the objections.”

@para 26 “We therefore make the position clear that non-compliance of the procedure indicated in the GKN Driveshafts (India) Ltd.'s case (supra) would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority.” 

Note: Assessee’s SLP has been dismissed by the Hon’ble Supreme Court of India in Home Finders Housing Ltd. v. ITO; [2018] 94 taxmann.com 84 (SC)


Home Finders Housing Ltd. v. ITO; [2017] 82 taxmann.com 17 (Madras) 
@para 12 “The same view was taken by another two Division Bench of the Bombay High Court in the cases reported in IOT Infrastructure & Energy services Ltd. (supra), Rabo India Finance Ltd.. (supra) Thus, it is evident from the above decisions of the Bombay High Court that after setting aside the order of assessment, the matter was remitted back to the Assessing Officer to pass a speaking order on the objections raised by the respective petitioners therein.” 


Martech Peripherals (P.) Ltd. v. DCIT; [2017] 81 taxmann.com 73 (Madras)
@para 14 “Having heard the learned counsel for the parties and perused the records, according to me, in so far as the first submission of the petitioner is concerned, it has been conceded by the counsel for the respondents/Revenue that objections filed by the petitioner/assessee to the notice issued by respondent No. 2, for reopening of the assessment, have not been disposed of.”

@para 14.3 “Thus, having regard to the observations made by the Supreme Court, it is clear that the impugned assessment order cannot be sustained, as the objections have not been disposed of.” 


High Court of Gujarat 


PCIT v. Sagar Developers; [2016] 72 taxmann.com 321 (Gujarat) 
@para 26 “The issue can be looked from slightly different angle. Validity of the notice for reopening would depend on the reasons recorded by the Assessing Officer for doing so. Similarly, the order of reassessment would stand failed on the merits of the order that the Assessing Officer has passed. Neither the action of the Assessing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgement of Supreme Court in case of GKN Driveshafts (India) Ltd. (supra). In such judgement, it is neither so provided nor we think the Supreme Court envisaged such an eventuality.”

Mgm Exports v. Deputy Commissioner of Income-tax; [2010] 323 ITR 331 (Gujarat)
para@ 6 “After considering the explanation tendered, the court has come to the conclusion that the position in law was well settled and the Assessing Officer is accordingly required to decide the preliminary objections and pass a speaking order disposing of the objections raised by the petitioner. That until such a speaking order is passed, the Assessing Officer cannot undertake reassessment.”

Simaben Vinodrai Ravani v. ITO; [2017] 79 taxmann.com 6 (Gujarat)
@para 7 “The matter is remitted to the file of the Assessing Officer at the stage of submitting the objections by the petitioner against the reopening of the assessment for AY 2010-11. The Assessing Officer now to deal with and dispose of the objections raised by the petitioner on 14.12.2016 and pass a speaking order, before proceeding with the reassessment”

Arvind Mills Ltd. v. Assistant Commissioner of Wealth-tax; [2004] 141 TAXMAN 210 (GUJ.)
@para 9 “On receipt of reasons, the assessee is entitled to file preliminary objections to issuance of notice and the Assessing Officer is under a mandate to dispose of such preliminary objections by passing a speaking order, before proceeding with the assessment in respect of the assessment year for which such notice has been issued.”

Technomaint Contactors Ltd. v. Union of India; [2014] 43 taxmann.com 409 (Gujarat) [on service tax] 
@para 7 “All that we are suggesting is that when the show cause notice was issued by the department to which the petitioners have raised their objections, recoveries without adjudication of such disputed taxes was simply not permissible in law.” 

Torrent Power SEC Ltd. v. Assistant Commissioner of Income-tax; [2014] 45 taxmann.com 443 (Gujarat)
@para 21 “Be that as it may, we are of the firm opinion that vital stage of considering the objections and disposing of the same in wake of not only the averments made in the objections raised but also based on surrounding circumstances of facts and law was given a go by completely. The respondent was needed to pass a speaking order, which not only is obligatory but that would have saved enormous time and resources as the appellate authority decided the very issue under reopening in favour of the assessee.”


High Court of Madhya Pradesh 

SICA Educational Trust (Regd.) v. Union of India; [2008] 167 Taxman 19 (Madhya Pradesh)
para@ 11 “The objection/petition filed by the petitioner-trust has been appended as Annexure P-15. A perusal of the order (Annexure P-16) disclose that the said objections were not at all adverted to by the Assessing Officer. No speaking order has been passed rejecting the said objections, as required under the law laid down by the Apex Court.” 

“…The Assistant Commissioner, Income-tax, respondent No. 3, is directed to consider the objections filed by the petitioner-trust and pass a separate speaking order on the said objections. It is further directed that in the event if the objections are rejected, the assessment order will not be passed for a period of 4 weeks thereafter.”

High Court of Jharkhand

Vijeta Construction Ltd. v. ACIT; [2008] 174 Taxman 432 (Jharkhand)
@para 6 “In the light of the decision of the Supreme Court, this Court without going into the merit of the case direct the petitioner to file objection, if they so desire, within two weeks from today and if such objection is filed the Assessing Officer shall dispose of the objection by passing a reasoned order before proceeding with the assessment in respect of the assessment year in question.” 

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