The Madras High Court recently quashed an income tax assessment against former Union Minster and Rajya Sabha MP Jayanthi Natarajan.
In the instant case, the Income Tax Department re-opened the assessment against the petitioner. Rebutting the proceedings, the petitioner pointed out that the proviso to Section 147 of the Act is clear in that, when more than four years have lapsed from the end of the relevant assessment year, where a scrutiny assessment has already been made under Section 143(3) of the Income Tax Act, it is necessary for the Income Tax Department to show that the assessee had failed to truly and fully disclose all material facts in order to invoke jurisdiction under Section 147 of the Income Tax Act.
However, the department overruled the above objections merely pointing out the incorrectness of a sale proceedings completed by the petitioner during the relevant assessment year. According to the department, petitioner had omitted to offer true and correct long term capital gains on transfer of asset through the Joint Development Agreement (JDA). As per which, the petitioner was to receive 40% constructed space in lieu of transfer of 60% UDS of land that belonged to the petitioner.
Quashing the assessment proceedings, Justice T Sivagnanam noted that the department failed to pass a speaking order.
The bench accepted the contentions of the petitioner that she had absolutely no idea as to what was the transaction, which is being referred to by the respondent, as she had not been furnished the reasons on which, the income tax assessment had been reopened. Along with letter dated 01.09.2016, the respondent furnished the reasons for reopening.
The bench pointed out that on receipt of the reasons, the noticee is entitled to file objections to issuance of notice for reopening and if he files such objections, the Assessing Officer is bound to dispose of the same by passing a speaking order. “Thus, the procedure, which was required to be followed by the respondent is to dispose of the petitioner’s objections by passing a speaking order.”
“Admittedly, in the instant case, this has not been done by the respondent, but the respondent seeks to sustain the impugned assessment order stating that in the first few paragraphs of the order, he has dealt with objections and disposed of accordingly. Unfortunately, the manner in which the respondent has decided the issue is wholly unsustainable in law. 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.”
Read the full text of the Order below.
