Reassessment Invalid If AO fails to Dispose Objections by Speaking Order: Supreme Court Refuses to Interfere With Karnataka HC Order [Read Order]

The Supreme Court of India refused to interfere with a Karnataka High Court judgment, which had set aside the reassessment proceedings because the Assessing Officer did not dispose the assessee’s objections by passing a speaking order.

The case came from the High Court judgment which dismissed the Revenue’s intra-court appeal and upheld the order of the learned Single Judge. By that order, the reassessment order and also the notice issued against Hewlett Packard Financial Services (India) Pvt. Ltd. were set aside.

The Revenue filed the writ appeal under Section 4 of the Karnataka High Court Act, challenging the Single Judge’s decision. Before the Division Bench, the revenue’s counsel argued that not passing an order on the assessee’s objections is only a curable irregularity and it is not a legal illegality. The counsel argued that the reassessment order should not have been fully quashed and the matter should have been remanded for fresh consideration.

The Revenue also argued that the assessee failed to file return of income in response to the notice under Section 148 and also did not file reply or objections in time. It was further argued that the Single Judge wrongly relied on the decisions in Deepak Extrusions (P) Ltd. v. DCIT and GKN Driveshafts (India) Ltd. v. ITO.

On the other side, the assessee’s senior counsel argued that passing an order on the preliminary objections is mandatory, as per the Supreme Court decision in GKN Driveshafts. They argued that once reasons for reopening are communicated and objections are filed, the Assessing Officer must dispose the objections by a speaking order before going ahead with the reassessment. The assessee also argued that the limitation period had expired on 31 March 2018 and because of this, remand cannot be granted.

Justice Krishna S. Dixit and Justice G. Basavaraja observed that when a notice under Section 148 is issued and the assessee seeks reasons and files objections, then the Assessing Officer is bound to dispose those objections by passing a speaking order before proceeding with the reassessment. The court referred to the Supreme Court judgment in GKN Driveshafts which lays down this procedure.

The court agreed with the Single Judge that if this mandatory procedure is not followed then the reassessment order cannot be sustained.

The High Court explained that reopening of assessment is serious and it has effect of reopening the assessment already done earlier. The court pointed out that even if there was limitation problem or practical difficulties for the Assessing Officer, it cannot be a reason to ignore the procedure in GKN Driveshafts.

The High Court also pointed out that in Deepak Extrusions case it had already held that if objections are not disposed of, the reassessment order will get vitiated. The court found no merit in the Revenue’s appeal and dismissed it.

After this, the Revenue approached the Supreme Court by filing a Special Leave Petition. By order dated 16 February 2026, a Bench of Justice Dipankar Datta and Justice Satish Chandra Sharma condoned the delay but refused to interfere with the High Court judgment and dismissed the Special Leave Petition.

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