Clipped from: https://taxguru.in/income-tax/interim-relief-granted-reassessment-issued-reply.html
IVL Dhunseri Petrochem Industries Private Limited Vs Union of India & Ors. (Calcutta High Court)
The Calcutta High Court examined a writ petition challenging a notice issued under section 148 of the Income-tax Act, 1961, initiating reassessment proceedings for Assessment Year 2021-22. The petitioner contended that the notice was issued without any information suggesting escapement of income, which is a mandatory jurisdictional requirement. After receiving the reassessment notice, the petitioner sought disclosure of the information forming the basis of the notice and also raised objections to its issuance. According to the petitioner, neither the requested information was supplied nor were the objections addressed by the Assessing Officer.
The petitioner further pointed out that prior to issuing the reassessment notice, the Revenue had issued a notice under section 133(6) seeking specific details regarding interest from deposits and interest reflected in the income tax return. The petitioner submitted a detailed reply to this notice along with supporting documents. However, the replies were allegedly not considered at all before the reassessment notice was issued. It was argued that such non-consideration amounted to non-application of mind, rendering the reassessment proceedings without foundation.
Reliance was placed on various judicial precedents to argue that objections to reassessment notices must be disposed of before proceeding further, and that the principles laid down by the Supreme Court in GKN Driveshafts (India) Ltd. apply even in cases where section 148A procedures are not mandatorily applicable. The petitioner asserted that failure to deal with objections violates settled legal principles governing reassessment.
The Revenue sought time to file an affidavit-in-opposition. Upon a prima facie examination of the materials on record, the High Court observed that there was nothing to indicate that the replies furnished by the petitioner to the section 133(6) notice were considered prior to issuance of the section 148 notice. The Court noted that detailed explanations had been provided by the petitioner, yet the record did not disclose why those explanations were disregarded or found unsatisfactory.
The Court formed a prima facie view that issuing a reassessment notice without considering the assessee’s replies could amount to lack of application of mind and may not withstand judicial scrutiny. It further observed that the principles laid down by the Supreme Court regarding disposal of objections to reassessment notices should apply even in cases where section 148A is not required to be mandatorily followed. Since the objections raised by the petitioner had not been dealt with, the Court held that the petitioner had established a strong prima facie and arguable case.
In view of these findings, the Calcutta High Court granted interim relief by restraining the Revenue authorities from proceeding further pursuant to the impugned section 148 notice dated June 3, 2025, for AY 2021-22 until the end of March 2026 or until further orders, whichever was earlier. The Revenue was directed to file its affidavit-in-opposition within six weeks, with liberty to the petitioner to file a reply thereafter. The matter was directed to be listed for further consideration after completion of pleadings.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Affidavit of service filed on behalf of the petitioner be kept with the record.
2. This writ petition mounts challenge to a notice issued under Section 148 of the Income Tax Act, 1961 (in short ‘the said Act of 1961’) whereby proceedings for reassessment of the petitioner’s income for the assessment year 2021-22 have been initiated.
3. Mr. Jhunjhunwala, learned Advocate appearing for the petitioner submits that the impugned notice has been issued without there being any information suggesting escapement of income from assessment which is a mandatory requirement under Section 148 of the said Act of 1961. Mr. Jhunjhunwala submits that by issuing such notice, the Assessing Officer has committed a jurisdictional error. It is further submitted that upon receipt of the said notice, the petitioner wrote to the Assessing Officer asking for the information which formed the basis of issuance of the said notice and thereby also objected to the issuance of the notice impugned. It is submitted that neither any information as sought for has been provided to the petitioner nor has the petitioner’s objection been dealt with.
4. Mr. Jhunjhunwala has taken this Court through a notice dated April 03, 2024 issued under Section 133 (6) of the said Act of 1961 and submitted that by the said notice certain information/clarifications were sought for from the petitioner. It is submitted that the petitioner issued a threadbare reply to the said notice (Annexure P-4 at pages 156 to 161 of the writ petition) along with all relevant documents in support of the petitioner’s contention. It is submitted that despite the petitioner having responded to the said notice under Section 133(6) of the said Act of 1961 in details, the same do not appear to have been considered at all by the Assessing Officer prior to issuance of the impugned notice under Section 148 of the said Act of 1961. He submits that such non-application of mind to the explanation submitted by the petitioner in response to the notice under Section 133(6) of the said Act of 1961 prior to issuance of the impugned notice under Section 148 of the said Act of 1961 would render the reopening notice without foundation. In support of his contention he relies on the following judgments :-
i) Benaifer Vispi Patel Vs. Income Tax Officer & Anr. reported at [2024] 475 ITR 704 (Bom).
ii) Vishal Garg Vs. Assistant Commissioner of Income Tax reported at [2024] 167 com 483 (Punjab & Haryana).
5. He further relies on a judgment of the Hon’ble Allahabad High Court in the case of Arjun Sahu Vs. Assistant Commissioner of Income Tax reported at [2025] 179 taxmann.com 581 in support of the propositions that principles laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. Income-Tax Officer & Ors. reported at (2003) 259 ITR 19 must be applied even in cases where Section 148A of the said Act of 1961 is not applicable and that it is obligatory on the part of the Income Tax Authorities to dispose of any objection raised by an assessee to a notice under Section 148 of the said Act of 1961 before proceeding further.
6. Another judgment passed by the Hon’ble Delhi High Court in the case of Monish Jagapati Raju –Vs- Assessment Unit of Income Tax Department reported at [2025] 171 taxmann.com 874 (Delhi) has been cited to indicate that in the said case the Revenue Authorities dealt with the assessee’s objection to the notice under Section 148 of the said Act of 1961 although the same had been issued under the new regime.
7. Mr. Dutt, learned senior Standing Counsel appearing for the respondent Revenue Authorities assisted by Mr. Sharma seeks time to file affidavit-in-opposition to the writ petition.
8. Heard learned Advocates appearing for the respective parties and considered the materials-on-record.
9. On a prima facie consideration of the material-on-record it appears that the replies furnished by the petitioner to the notice dated April 03, 2024 issued by the Revenue Authorities under Section 133(6) of the said Act of 1961 have not at all been considered by the Revenue Authorities. It is evident that by the notice under Section 133(6) of the said Act of 1961, the petitioner had been queried on two counts i.e. (i) information regarding interest from deposit and (ii) information regarding interest on income tax return.
10. The petitioner had given detailed replies to the queries raised. There is nothing on record to suggest that the petitioner’s answers have at all been considered by the Revenue Authorities prior to the issuance of the notice under Section 148 of the said Act of 1961. There is nothing to indicate as to why should the said answers not weigh with the Revenue authorities.
11. Since the notice impugned has, in the prima facie view of the Court, been issued without considering the petitioner’s reply to the notice issued under Section 133(6) of the said Act of 1961, this Court is of the prima facie view that the same may not withstand scrutiny of the Court in case it turns out that the said notice was issued without applying mind to the petitioner’s replies. This Court is also of the prima facie view that the principles established by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) should be applied to those cases where the procedure of Section 148A of the said Act of 1961 is not required to be mandatorily resorted to. In the case at hand, the objection filed by the petitioner to the notice under Section 148A of the said Act of 1961 has not been dealt with/disposed of as yet. Such failure, in the prima facie opinion of this Court contravenes the principle laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra).
12. Having regard to the aforesaid, since the petitioner has made out a strong prima facie and arguable case, there shall be an interim order restraining the respondent Revenue Authorities from proceeding further in terms of the impugned notice dated June 03, 2025 issued under Section 148 of the said Act of 1961 for the assessment order 2021-22 till the end of March, 2026 or until further orders, whichever is earlier.
13. As prayed for by Mr. Dutt, learned senior Standing Counsel appearing for the respondent Revenue Authorities, let affidavit-in-opposition to the writ petition be filed within six weeks from date. Affidavit-in-reply thereto, if any, be filed within two weeks thereafter.
14. List this matter for further consideration immediately after expiry of the time fixed for exchange of affidavits.
aniltikotekar4sme.com 