By TIOL News Service:

KOLKATA, AUG 29, 2016: THE issue is - Whether the filing of petition before High Court against a reopening notice, can be faulted on the ground that despite the receipt of the reasons for the notice, the assessee had rushed to the High Court prematurely. NO is the answer.

Facts of the case:

The assessee had preferred the present petition challenging the notice issued by the AO for reopening of the assessment u/s 148 on the ground that no reasons for such reopening was supplied to it. The counsel for assessee submitted that the AO had invoked Section 148 for looking into the four aspects of the return, namely technical knowhow fees, non-inclusion of excise duty, payment made to club and guest house expenses. The AO had considered the four heads individually along with other heads in his order u/s 143(3) and therefore, it was not a case of withholding any information by the assessee before the AO. There may or may not be a mistake on the part of the AO in quantifying the tax incident in respect of all or any of the four heads. Such a mistake did not vest the AO with the jurisdiction to invoke Section 148.

After hearing the parties, the High Court had held:

1. Tne of the points involved in the impugned notice u/s 148 is the treatment of technical knowhow fees. It is found from the record that the assessee had disclosed all materials facts relating to technical knowhow fees before the AO in the present A.Y as also for the A.Ys of 1993-1994. Therefore, the invocation of the provisions of Section 148 in respect of such head is not called for by the AO. So far as excise duty, payment made to club and guest house expenses are concerned, the same were disclosed by the assessee in its balance-sheet for the relevant year, as also the return filed with the AO. The AO had considered all the four heads in his order of assessment u/s 143(3). Although an appeal was carried against the order of assessment, the same related to heads other than those involved in the notice u/s 148. In case of G.K.N.Driveshafts (India) Ltd., it was held that the AO was bound to furnish the reasons within reasonable time for invoking Section 148. On receipt of such notice, the Assessee is entitled to file objection to the issuance of such notice and that, the AO is bound to dispose of the same by passing a reasoned order.

2. In the present case, the writ petition was filed on receipt of notice u/s 148. The AO has disclosed the reasons in the affidavit-inopposition. Therefore, the filing of the petition cannot be faulted on the ground that, despite the receipt of the reasons for the notice, the assessee had rushed to the High Court prematurely. The writ petition is pending for a period of 16 years and no useful purpose would be subserved by adopting the procedure as contemplated in G.K.N.Driveshafts (India) Ltd case. In the facts of the case, it is found that the assessee is not guilty of not disclosing fully and truly all material facts necessary for the relevant A.Y. Therefore, invocation of provision of Section 148 by the AO is unwarranted for the relevant assessment year.

(See 2016-TIOL-1884-HC-KOL-IT )