AO should deal with each objection and give proper reasons for the conclusion for section 148 Reassessment: Bombay HC

The Bombay HC in a case u/s 148 has held that considering the assessee’s objections to the re-opening of assessment is not a mechanical ritual but a quasi judicial function.

The citation of the case is as under:

Tata Capital Financial Services Limited  V/s. Assistant Commissioner of Income Tax Circle 1(3)(1) and Ors. ( WRIT PETITION NO. 546 OF 2022 )

Facts:

 1. It is petitioner’s case that RBI had, by Notification No.DNBS 193/DG(VL) – 2007 dated 22nd February, 2007, issued directions relating to prudential norms to NBFC in exercise of its powers conferred under Reserve Bank of India Act, 1934 (RBI Act). Clause 3(2) of the said directions require that income including interest/discount or any other charges of NPA (Non-Performing Assets) shall be recognised only when it is actually realised. So the said income was offered to tax on a receipt basis and not accrual basis for AY 13-14.

 2. The petitioner received a notice dated 30th March, 2021 under Section 148 of the Act stating that there are reasons to believe that  petitioner’s income chargeable to tax for A.Y. 2013-14 has escaped assessment within the meaning of Section 147 of the Act.

 3. By a letter dated 18th May, 2021 petitioner filed its objections to the said notice. Thereafter, by a letter dated 6th August, 2021 from respondent petitioner received reasons for re-opening. In the objections to the re-opening, petitioner raised various points including the fact that interest and other charges on NPA ought to be taxed on actual realisation basis

 4. In the order passed on 17th December, 2021, rejecting the objections the Assessing Officer has not dealt with all these points.

The Hon Bombay HC held as under:

 1. The concerned officer shall keep in mind that the exercise of considering the assessee’s objections to the re-opening of assessment is not a mechanical ritual but a quasi judicial function.

2. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion.

 3. He shall also grant a personal hearing to the petitioner and the notice of personal hearing shall be communicated atleast seven working days in advance.

 4. If the said officer is relying on any judgment or order of any Court or Tribunal, a list thereof shall be provided to petitioner alongwith notice of personal hearing so that petitioner will be able to deal with or distinguish these judgments/orders in the personal hearing.

 5. A copy of this order be placed before the members of the Central Board of Direct Taxes who shall issue guidelines to all its officers based on the directions given above with clear instructions that they shall be strictly followed.

 6. Therefore, the order dated 17th December, 2021 impugned in this petition is quashed and set aside. The matter is remanded for denovo consideration.