Madras HC Quashes Reopening Assessment order u/s 148 based on grossly erroneous factual foundation is untenable-in-law [Read Order]
The petitioner argued that the reassessment notices were based on a fundamental factual error and also raised issues regarding the timeliness and authority of the reassessment approvals
Madras High Court – Madras HC – Assessment order – Section 148 Income tax act – grossly erroneous factual foundation – taxscan
Madras High Court – Madras HC – Assessment order – Section 148 Income tax act – grossly erroneous factual foundation – taxscan
In a recent ruling, the Madras High Court quashed the reopening of the assessment order under Section 148, stating that it was based on a grossly erroneous factual foundation, rendering it untenable in law.
The case involved the petitioner, Fives India Engineering & Projects who had engaged in transactions with Fives France under an Assistance Service Agreement. The petitioner had sought clarification from the Authority for Advance Ruling ( AAR ) on several questions, including whether payments to Fives France required withholding tax. The AAR, however, declined to address the questions.
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Following this, the petitioner’s tax returns for the relevant assessment years were accepted without further action. However, the Income Tax authorities later issued notices claiming income had escaped assessment. The notices were contested successfully in court, based on a new legal framework for reassessment established by the Supreme Court.
Further complicating matters, the notices were issued on the basis of transactions that were not within the scope of the AAR's review. The petitioner argued that the reassessment notices were based on a fundamental factual error and also raised issues regarding the timeliness and authority of the reassessment approvals.
The single bench of Justice Senthil Kumar Ramamoorthy found that the reassessment proceedings were initiated on a false premise and that the approval for reassessment was not obtained from the appropriate authority. Citing proceedings from various high courts and the Supreme Court, the Madras HC concluded that both the order and the notices under Section 148A (d) were invalid.
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As a result, the court quashed the impugned order and notices, rendering the subsequent assessment orders void. The ruling underscores the necessity for accurate factual bases and proper procedural adherence in reassessment proceedings.
To Read the full text of the Order CLICK HERE
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