By TIOL News Service

CHANDIGARH, APRIL 05, 2018: THE issue before the Bench is - Whether since assessee has option of filing writ to challenge the order of the CIT on the SCN for reopening, another writ challenging issuance of SCN in answerable. Verdict is NO.

Facts of the case

The Assessee-company filed return for the relevant AY and assessment was completed u/s 143(3) at an income of about Rs 599 crores against returned income of about Rs.562 crores. However, the CIT on perusal of the records observed that the assessing order was erroneous and prejudicial to the interest of the revenue. According to the CIT, the Assessee had claimed an amount of royalty as revenue expenditure. The CIT was of the view that the same should had been treated as capital expenditure. Accordingly, the CIT issued notice for reassessment u/s 263. The order refers to the judgment of the Supreme Court in the case of Honda Siel Cars India Ltd. vs. Commissioner of Income-Tax and a judgment of the Allahabad High Court.

The High Court held that,

++ there is no reason to accept the contention that the Principal Commissioner has made up his mind and will not take a view in favour of the assessee even if he is required to do so. The language of the show cause notice was relied upon in support of this apprehension. Indeed, some of the observations would indicate the same. However, that is only a manner in which it has been put. The Court have no doubt that if the assessee's contention is otherwise found to be correct the Principal Commissioner will drop the proceedings. In fact, in that event, he would be bound to do so. The contention that it was wrongly observed that it was admitted by the assessee during the course of assessment proceedings that the facts of the assessee's case and the facts of the said judgment are identical can also be raised in the proceedings relating to the show cause notice. To leave no room for grievance, it is clarified that if a jurisdictional issue does in fact arise the assessee can always challenge even the order on the show cause notice by filing a separate writ petition. Even the contention that the issue ought to be decided as per the legal position existing on 04.01.2016 is kept open.

(See 2018-TIOL-609-HC-P&H-IT)