Madras HC quashes Re-Assessment against Cognizant since reasons were not communicated to Assessee within ‘Reasonable Time’ [Read Order]

A two-judge bench of the Madras High Court has held that the re-opening of assessment under section 148 of the Income Tax Act, 1961 against Cognizant without providing the reasons for the same within a ‘reasonable time’ shall invalidate the proceedings.

The assessee challenged an order for re-opening of assessment before the division bench comprising Justice T S Sivagnanamand Justice Santhi Kumar SukumaraKurupstating that they sought for the reasons for reopening two times. However, finally, the same was furnished with a delay of four months and the final order was passed without considering their objections.

The assessee within 30 days by their letter dated 27.04.2018 had sought for reasons for initiating the reopening proceedings. The Assessing Officer did not furnish the reasons nor responded to the said letter, but proceeded to issue the notice under Section 143(2) dated 21.08.2018. Therefore, the assessee submitted another letter dated 27.08.2018, requesting for furnishing the reasons for reopening. It is only thereafter, the reasons for reopening were furnished vide letter dated 30.08.2018.

The bench, while allowing the writ petition, observed that it is not clear as to why there was such a delay in furnishing the reasons. It may be true that no time limit has been prescribed for furnishing the reasons.

The referred the decision of the Supreme Court, in the case of GKN Driveshafts (India) Limited v. Income-Tax Officer wherein it was held that the reasons shall be furnished within a reasonable time by the Assessing Officer, upon receiving the request for the same from the assessee.

“There is an enormous delay in furnishing the reasons for reopening and we are of the opinion that the reasons were not furnished to the assessee within a reasonable time. However, since we are fully convinced that the reopening proceedings is a clear case of change of opinion, we do not wish to render any finding on the legal issue as to what would be the reasonable time within which the assessee should be informed about the reasons for reopening, upon the request received from the assessee in that regard, and we leave the said legal issue open for consideration in an appropriate proceedings at the appropriate time,” the Court said.

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