Toja Tyres and Treads Pvt. Ltd. vs Deputy Commissioner of Income Tax and Another

C.N. Ramachandran Nair, J.—The petitioner which is a private limited company, is challenging exhibit P6 revisional order of the Commissioner of Income Tax issued u/s 264 of the Income Tax Act, 1961, refusing to interfere with exhibit P3 issued by the Assessing Officer overruling the petitioner''s objections against reopening of assessments u/s 147 of the Act.

The Income Tax assessments of the petitioner for the assessment years 1996-97 to 2001-02 completed u/s 143(1) of the Act based on returns filed were reopened by the Assessing Officer by issuing notice u/s 148 of the Act based on information collected from the Central Excise and Sales Tax Departments pursuant to search conducted by those Departments in a group of companies controlled by the petitioner. Even though brief details justifying the proposal for assessments u/s 147 were furnished by the Assessing Officer, the petitioner challenged the reopening by filing W. P. No. 31984 of 2003 Tolins Rubbers Vs. Assistant Commissioner of Income Tax, which led to exhibit P5 judgment wherein this court gave freedom to the petitioner to file objections to the grounds for reopening of the assessments and directed the Assessing Officer to pass a speaking order on the petitioner''s objections. Pursuant to exhibit P5 judgment, the Assessing Officer issued exhibit P3 order wherein he overruled the petitioner''s objections filed against reopening of assessments and proceeded to complete the assessments u/s 147 read with section 143(3) of the Act. The petitioner challenged exhibit P3 in a revision before the Commissioner of Income Tax who rejected it vide exhibit P6 order, which is under challenge in this writ petition.

I have heard Sri V. Ramachandran, senior counsel appearing for the petitioner, and Sri P. K. R. Menon, senior counsel appearing for the Income Tax Department.

The petitioner has relied on the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 and contended that exhibit P6 order of the Commissioner of Income Tax upholding the reopening of the assessments vide exhibit P3 order is untenable. However, it is conceded that the petitioner has filed statutory appeals against the revised assessments completed u/s 147 pursuant to reopening of assessments under exhibit P3 and confirmed vide exhibit P6 order. It is also submitted that the validity of reopening of the original assessments is also a ground raised in the appeals filed before the Commissioner of Income Tax (Appeals) against the revised assessments. The petitioner, probably, filed this writ petition on the apprehension that in view of exhibit P6 order of the Commissioner of Income Tax upholding the reopening of assessments, that issue may not be open for decision by the Commissioner of Income Tax (Appeals), in the course of disposal of appeals filed against the revised assessments. In this connection, it has to be noted that the Supreme Court has in the very decision cited by the petitioner, above referred to, directed the assessee to pursue the statutory appeal which obviously includes challenge against the validity of the reopening also. Therefore, this apprehension of the petitioner based on which this writ petition is filed is out of place.

Reopening of assessment u/s 147 has to be based on relevant materials. An assessee is entitled to know the basis of reopening and is free to file objections against the reopening and the tenability of such objections has to be adjudicated by the Assessing Officer. This is settled by the decision of the Supreme Court above referred to. In fact, if the assessee files a return pursuant to a notice u/s 148 and along with it raises objections against reopening of assessments, such objections can be adjudicated in the revised assessment order itself. The remedy against reassessment so completed is to file a statutory appeal covering all aspects against assessment including the reopening. However, if the assessee does not choose to file a return u/s 148 of the Act, but requests for adjudication on the objection on reopening, even then the statute does not contemplate separate contests against the order upholding the reopening in revision before the Commissioner of Income Tax and appeal against the revised assessment before the appellate authority. Therefore, it would not be proper for the Commissioner of Income Tax to decide the revision filed against the reopening on the merits, unless the assessee waives his right of appeal and files revision u/s 264 of the Act against the consequent reassessment itself. In other words, even if an order upholding the reopening is issued independently, it forms the basis and part of the reassessment u/s 147 and it is open to the assessee to challenge the said order in appeal filed against reassessment.

In the above view of the matter, the petitioner is entitled to contest the validity of reopening of the assessments in the appeals filed before the Commissioner of Income Tax (Appeals) against the reassessments. The Commissioner of Income Tax (Appeals) is free to go into the validity of reopening of the assessments de hors the findings by the Commissioner of Income Tax in exhibit P6 revisional order u/s 264 of the Act.

In the circumstances, I decline to go into the merits of the contentions raised against exhibit P6. WPC is disposed of leaving freedom to the petitioner to pursue the remedy in appeals filed before the statutory authority.