Pr. Commissioner of Income Tax-2 v. Sagar Developers
2016-07-21
A.J.SHASTRI, AKIL ABDUL HAMID KURESHI
body2016
DigiLaw.ai
JUDGMENT : Akil Abdul Hamid Kureshi, J. 1. These tax appeals involve one single central issue. We may record facts from Tax Appeal No. 797 of 2015. It concerns the respondent-assessee's assessment for the assessment year 2002-03. For the said assessment year, the assessee had filed the return of income declaring total income of Rs. 41,030/-. After completion of the assessment, it appears that, a search was carried out under Section 132 of the Income Tax Act, 1961 ['the Act' for short] in group cases of Shri Ramesh Shah of Nadiad on 03.04.2008. Of various incriminating materials fond during such search, reference was made to the assessee in one of the books, which led to unaccounted business transactions of the searched person with the assessee. 2. On the basis of such materials, the Assessing Officer issued a notice for reopening of the assessment under Section 148 of the Act on 30.03.2009. The assessee raised objections to the notice of reopening under letter dated 11.11.2009. However, without disposing of such objections, the Assessing Officer continued with the assessment. He eventually passed an order of reassessment on 20.11.2009 and made a total addition of Rs. 75.85 lacs to the income of the assessee. He also directed initiation of penalty proceedings. The assessee challenged the order of assessment before the Appellate Commissioner, who, by his order dated 08.03.2011, partly allowed the appeal. He sustained addition only of Rs. 8.55 lacs out of the total addition of Rs. 75.85 lacs made by the Assessing Officer and deleted the rest. 3. This order was challenged by the Revenue before the Tribunal. Interestingly though the assessee had not challenged the order of the Commissioner (Appeals) and thus had indirectly accepted the validity of the re-opening of the assessment, Tribunal, referring to the judgment of this Court in case of General Motors India P. Ltd. v. DCIT reported in 354 ITR 244, held that the order of assessment passed by the Assessing Officer without disposing of the objections is liable to be set aside. Resultantly, the Tribunal passed the following order: "8. Therefore, respectfully following the above decision of the Hon'ble Jurisdictional High Court, we are of the considered view that the impugned order of re-assessment passed by the Assessing Officer without disposing off the objections raised by the assessee against the issuance of notice u/s. 148 by a separate order is liable to be quashed.
Therefore, respectfully following the above decision of the Hon'ble Jurisdictional High Court, we are of the considered view that the impugned order of re-assessment passed by the Assessing Officer without disposing off the objections raised by the assessee against the issuance of notice u/s. 148 by a separate order is liable to be quashed. We order accordingly. Thus, this ground of appeal of the Revenue is dismissed. 9. As we have quashed the reassessment order dated 20.11.2009, the grounds of appeal raised by the Revenue on the merits of the addition in this appeal has become infructuous and hence dismissed. 10. In the result, the appeal of the Revenue is dismissed." 4. In view of such facts, the grievance of the Revenue is that the Tribunal committed a serious error in setting aside the order of assessment only on the ground that the Assessing Officer had, before passing the order of reassessment, not decided the objections of the assessee. The Revenue also contended that in this particular case, in any case, it was not open for the Tribunal to do so since against the order passed by the Appellate Commissioner partially confirming additions made by the Assessing Officer in the order of reassessment, the assessee had preferred no appeal before the Tribunal. In other words, in the Revenue's appeal, the Tribunal could not have annulled the very order of assessment. 5. For the purpose of this group of appeals, we frame following common substantial question of law: "Whether the Income Tax Appellate Tribunal was correct in law in setting aside the order of reassessment which was passed by the Assessing Officer on the ground that before passing such order, the Assessing Officer had not disposed of the objections of the assessee raised pursuant to the decision of Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors reported in 259 ITR 90 without placing the matter back before the Assessing Officer for passing a fresh order, if so needed after disposing of the objections of the assessee." 6. Learned counsel Mr.
Learned counsel Mr. Parikh for the department submitted that the action of the Assessing Officer of passing final order of assessment without disposing of the objections of the assessee would not be fatal to the assessment proceedings and the Tribunal ought to have allowed the Assessing Officer to pass the fresh order after dealing with the objections of the assessee. In this context, counsel relied on the decision of Division Bench of Madras High Court in case of Areva T and D Ltd. v. Assistant Commissioner of Income Tax reported in 294 ITR 233, in which, somewhat similar situation came up for consideration. 7. On the other hand, learned counsel Mr. Soparkar for the assessees opposed the appeals contending that by virtue of the judgment of the Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (supra), once the assessee raises objections to the notice for reassessment, it is the duty of the Assessing Officer to dispose of the same before proceeding further with the assessment. This would ensure that frivolous cases of reassessment are filtered at the very threshold, if the assessee can point out to the Assessing Officer that the reasons for issuing notice for reopening are totally invalid. If the stand of the assessee at that stage is not accepted, he would also have an opportunity to challenge the very notice for reopening. When the Assessing Officer, therefore, proceeded to frame fresh assessment without disposing of the objections, he deprived the assessees of the valuable right flowing from the decision of Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (supra). 8. Counsel further submitted that the assessment proceedings have to be completed within a statutory time frame. If the Assessing Officer is now given an opportunity to rectify the error and proceed further with the assessments, gross injustice would be caused to the assessees who would be called upon to answer to the assessments of the several years back. 9.
8. Counsel further submitted that the assessment proceedings have to be completed within a statutory time frame. If the Assessing Officer is now given an opportunity to rectify the error and proceed further with the assessments, gross injustice would be caused to the assessees who would be called upon to answer to the assessments of the several years back. 9. Counsel relied on the decision of Division Bench of this Court in case of General Motors India P. Ltd. v. DCIT (supra) and of Delhi High Court in case of Ferrous Infrastructure (P.) Ltd. v. Deputy Commissioner of Income Tax reported in (2015) 63 Taxmann.com 201, in which, on similar grounds, the assessments have been quashed without opportunity to frame fresh assessment after dealing with the objections. 10. We may recall, in Tax Appeal No. 979 of 2015, the order of reassessment passed by the Assessing Officer was challenged by the assessee before the Commissioner (Appeals) who had granted substantial relief to the assessee and reduced the additions made by the Assessing Officer. The Commissioner (Appeals), however, had not annulled the assessment on the ground that the Assessing Officer had framed the assessment without disposing of the objections. This order of the Commissioner (Appeals) was challenged by the Revenue before the Tribunal. The assessee being satisfied with the order of Commissioner (Appeals) preferred no further appeal nor filed cross appeal after being served with the notice of the Revenue's appeal. In the appeal filed by the Revenue, the Tribunal upheld the assessee's contention that the very order of assessment was bad in law because it was passed without disposing of the objections. In our opinion, the Tribunal could not have given such a declaration in an appeal by the Revenue and not by the assessee. The validity of the assessment on the ground that it was passed without disposing of the objections was not at large before the Tribunal. In this appeal, therefore, the Tribunal clearly committed a fundamental error. 11. This aspect, however, does not arise in other tax appeals and, in any case, we have framed a common question which does not involve this element at all. We would, therefore, proceed to decide the question framed. 12.
In this appeal, therefore, the Tribunal clearly committed a fundamental error. 11. This aspect, however, does not arise in other tax appeals and, in any case, we have framed a common question which does not involve this element at all. We would, therefore, proceed to decide the question framed. 12. We may recall, Section 147 of the Act pertains to income escaping assessment and under which, if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, he may assess or reassess such income. Section 148 of the Act pertains to issuance of notice where income has escaped assessment. Sub section (1) of Section 148 requires that before making the assessment under Section 147, the Assessing Officer would serve on the assessee a notice requiring him to furnish within the specified time a return of his income. Sub section (2) of Section 148 provides that the Assessing Officer shall, before issuing any notice under said section, record his reason for doing so. Thus, before reassessment can be done, statutory requirements are of issuance of a notice and before issuance of notice, recording of reasons by the Assessing Officer for reopening of the assessment. These statutory provisions do not provide for supplying reasons recorded by the Assessing Officer to the assessee, permitting the assessee to raise his objections to the notice of reopening or require the Assessing Officer to consider such objections. This entire formula has been provided by the Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (supra) in following manner: "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order.
The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years." 13. Thus, based on the decision of Supreme Court in case of G.J. Drives now there would be a procedure for the Assessing Officer to furnish the reasons within a reasonable time, if so demanded by the assessee. On receipt of the reasons, the assessee would be entitled to file objections to the notice of reassessment which the Assessing Officer would be required to dispose of by a speaking order. 14. In this context, the question arise is, whether if the Assessing Officer defaults in disposing of the objections but proceeds to frame the assessment without so doing, should the reassessment be terminated permanently? In other words, the question is, should the assessment be placed back at a stage where such defect is detected or should the Assessing Officer for all times to come be prevented from carrying out his statutory duty and functions? 15. In case of Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax (supra), as noted, a very similar issue came up for consideration. The Division Bench of the Court, while agreeing that the Assessing Officer could not have framed the assessment without disposing of the objections, by a speaking order provided as under: "13. There is one more aspect of the matter. The order dated 3rd March, 2004 made by this Court in the earlier petition filed by the present petitioner namely Special Civil Application No. 2736 of 2004 directed the respondent to dispose of the objections filed by the petitioner by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. It is further laid down in the said order that it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner.
It is further laid down in the said order that it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner. This order was served on the respondent on 4th March 2004 and immediately on 5th March 2004, the petitioner was served with a copy of the impugned re-assessment order dated 9th February 2004. The petitioner thereupon preferred a rectification application under Section 35 of the Act requesting the respondent to withdraw the impugned re-assessment order dated 9th February 2004, but, as averred in the petition, till the date of filing of the petition, the respondent has neither called the petitioner for hearing on the application dated 10th March 2004 nor withdrawn the impugned re-assessment order. In the affidavit in reply, the aforesaid averments are dealt with only by reiterating that the objections have been disposed of in the reassessment order itself. The aforesaid conduct of the respondent alongwith the facts stated hereinbefore clearly points out that the stand of the respondent appears to be that once a notice for re-assessment has been made, the respondent is bound to frame an order of re-assessment regardless of the fact as to whether such an order can be supported or not, in law or on facts. 14. In the result, the impugned re-assessment order dated 9th February 2004 made under Section 17 read with Section 16(3) of the Act is hereby quashed and set aside. The respondent is directed to abide by the directions issued by this Court in its order dated 3rd March 2004 in Special Civil Application No. 2736 of 2004, more particularly, paragraph Nos. 4 and 5 which are reproduced hereunder for the sake of convenience:- 15. The above principle laid down in respect of the notice for re-assessment under the Income-tax Act would apply with full force to the notice for re-assessment under Section 17 of the WT Act as well. The petitioner-Company had already filed its return in response to the impugned notice and requested for furnishing reasons, which request has been acceded to only very recently and the petitioner has thereafter submitted its objections on 19.2.2004. The Assessing Officer is, therefore, now required to dispose of the objections by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. 16.
The Assessing Officer is, therefore, now required to dispose of the objections by passing a speaking order as per the aforesaid decision of the Hon'ble Supreme Court. 16. The Assessing Officer is accordingly required to decide the preliminary objections lodged by the petitioner to the notice for re-assessment and pass a speaking order. Until such speaking order is passed, obviously the Assessing Officer cannot undertake re-assessment. Hence, it is only after the Assessing Officer passes a speaking order deciding the petitioner's preliminary objections against the notice for reassessment that any cause of action would arise for the petitioner." 16. In case of General Motors India P. Ltd. v. DCIT (supra), this Court did strike down the order of assessment which was passed without disposing of the objections. It was provided as under: "23. From the aforesaid discussion, we are of the considered opinion that writ petition under Article 226 of the Constitution of India is maintainable where no order has been passed by the Assessing Officer deciding the objection filed by the assessee under Section 148 of the Act and assessment order has been passed or the order deciding an objection under Section 148 of the Act has not been communicated to the assessee and assessment order has been passed or the objection filed under Section 148 has been decided along with the assessment order. If the objection under Section 148 has been rejected without there being any tangible material available with the Assessing Officer to form an opinion that there is escapement of income from assessment and in absence of reasons having direct link with the formation of the belief, the writ Court under Article 226 can quash the notice issued under Section 148 of the Act. The writ petition filed by the petitioner is maintainable. The Assessing Officer is mandated to decide the objection to the notice under Section 148 and supply or communicate it to the assessee. The assessee gets an opportunity to challenge the order in a writ petition. Thereafter, the Assessing Officer may pass the reassessment order. We hold that it was not open to the Assessing Officer to decide the objection to notice under section 148 by a composite assessment order. The Assessing Officer was required to, first decide the objection of the assessee filed under section 148 and serve a copy of the order on assessee.
Thereafter, the Assessing Officer may pass the reassessment order. We hold that it was not open to the Assessing Officer to decide the objection to notice under section 148 by a composite assessment order. The Assessing Officer was required to, first decide the objection of the assessee filed under section 148 and serve a copy of the order on assessee. And after giving some reasonable time to the assessee for challenging his order, it was open to him to pass an assessment order. This was not done by the Assessing Officer, therefore, the order on the objection to the notice under section 148 and the assessment order passed under the Act deserves to be quashed." 17. Two things emerge from this judgment. Firstly, that the question whether after striking down the order of assessment on this ground further assessment should be permitted or not, was neither argued nor addressed by the Court. Second aspect is that, in case of General Motors India P. Ltd. v. DCIT (supra), the Court noticed the judgment of Division Bench of Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax reported in 270 ITR 469 in which, the Division Bench had, under somewhat similar circumstances, while setting aside the order of reassessment, required the Assessing Officer to dispose of the objections and only thereafter, proceed to pass the order of reassessment. 18. It can thus be seen that two Division Benches of the Court have taken somewhat different routes in similar backdrop. In case of General Motors India P. Ltd. v. DCIT (supra), the Court, without laying down the ratio, struck down the order of assessment without any further facility to the Assessing Officer to dispose of the objections and then to proceed to reassess the income of the assessee. In case of Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax (supra) again the Court had, without laying down the ratio, enabled the Assessing Officer to dispose of the objections and till then prevented him from passing fresh order of assessment. What should, therefore, be the correct legal position when the Court strikes down the order of assessment only on this ground has not been opined by either of the two Division Benches in the said cases. 19.
What should, therefore, be the correct legal position when the Court strikes down the order of assessment only on this ground has not been opined by either of the two Division Benches in the said cases. 19. Likewise, Delhi High Court in case of Ferrous Infrastructure (P.) Ltd. v. Deputy Commissioner of Income Tax also has merely allowed the petition on one of the grounds being the Assessing Officer had not disposed of the objections before proceeding with the assessment. The Court observed as under: "8.1 On going through the same, it is evident that the Assessing Officer has to pass a speaking order disposing of the objections "before proceeding with the assessment". In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the re-assessment order itself. On this ground also, the petitioner is liable to succeed." 20. On the other hand, Madras High Court in case of Areva T and D Ltd. v. Assistant Commissioner of Income Tax (supra) came to a specific conclusion that the action of the Assessing Officer in passing order of reassessment without disposing of the objections is not a nullity but a procedural defect. The Court held and observed as under: "23. From a reading of the above, it is clear that the Assessing Officer has to furnish reasons, within a reasonable time and on receipt of the same, the assessee can file objection to issue of notice and the Assessing Officer is bound to dispose of the same by a speaking order, before proceeding with the reassessment. In the present case, the objections have not been considered at all by the Assessing Officer before proceeding with the reassessment. Reassessment order was completed without considering the objections to the reopening of the assessment. It is nothing but a procedural defect and therefore it could not be held that the reassessment is a nullity in law. 24.
In the present case, the objections have not been considered at all by the Assessing Officer before proceeding with the reassessment. Reassessment order was completed without considering the objections to the reopening of the assessment. It is nothing but a procedural defect and therefore it could not be held that the reassessment is a nullity in law. 24. Since we are of the view that these are only irregularities committed by the Assessing Officer (i.e.) not considering the objections as well as not issuing notice under Section 143(2) of the Act, before completing the reassessment, we set aside the order of the Tribunal as well as the lower authorities with a direction to the Assessing Officer to consider the matter afresh, particularly the objections given by the assessee for reopening and issue notice under Section 143(2) of the Act, after giving opportunity to the assessee to raise all contentions relating to the reopening of the assessment as well as the merits of the case and permit the assessee to produce materials and evidence, if any, and pass orders in accordance with law, as expeditiously as possible. As the matter is remanded, it is not necessary to answer the above questions of law, as the same is likely to adversely affect the rights of either parties." 21. It is by now well settled principle of administrative law that whenever administrative action is found to be suffering from breach of principles of natural justice, the decision making process should be placed at a stage where the defect is detected rather than to permanently annul the action of the authority. In case of Union of India and ors v. Mohd. Ramzan Khan reported in AIR 1991 SC 471 three Judges Bench of the Supreme Court held that the inquiry report submitted by the Inquiry Officer against the delinquent government servant is an adverse material. If the Inquiry Officer record the findings of guilt and proposes the punishment against the delinquent, a copy of the Inquiry Officer's report must be made available to the delinquent before the same can be accepted by the disciplinary authority and punishment could be imposed. While doing so, the Supreme Court clarified that the decision would not preclude the disciplinary authority from revising the proceedings and continuing with in accordance with law from the state of supply of inquiry report in cases where dismissal, removal was the punishment. 22.
While doing so, the Supreme Court clarified that the decision would not preclude the disciplinary authority from revising the proceedings and continuing with in accordance with law from the state of supply of inquiry report in cases where dismissal, removal was the punishment. 22. The decision of Union of India and ors v. Mohammad Ramzan Khan(supra) came up for consideration before the Constitution Bench of the Supreme Court in case of Managing Director, ECIL, Hyderabad v. B. Karunakar reported in AIR 1994 SC 1074 . While reiterating that the delinquent would be entitled to copy of Inquiry Officer's report even when the punishment imposed is other than the major punishment of dismissal, removal or reduction in rank or when the rules are silent or even against it, the Court observed that, in case of non- furnishing of copy of report, it has to be seen whether the delinquent has been prejudiced thereby or not. Reinstatement with back-wages should not be mechanically ordered. It was provided that the Court or the Tribunal should furnish to the delinquent a copy and afford an opportunity to show if any prejudice is caused. 23. The decision in case of Union of India and ors v. Mohammad Ramzan Khan (supra) came up for consideration in case of State Bank of Patiala and ors v. S.K. Sharma reported in AIR 1996 SC 1669 , in which, while discussing the effect of non-supply of inquiry Officer's report before the Disciplinary Authority passed final order of punishment, it was held and observed as under: "32. We may summarise the principles emerging from the above discussion. [These are by no means intended to be exhaustive and are evolved keeping in view the context of disciplinary enquiries and orders of punishment imposed by an employer upon the employee]: (1) An order passed imposing a punishment on an employee consequent upon a disciplinary/departmental enquiry in violation of the rules/regulations/statutory provisions governing such enquiries should not be set aside automatically. The Court or the Tribunal should enquire whether (a) the provision violated is of a substantive nature or (b) whether it is procedural in character. (2) A substantive provision has normally to be complied with as explained hereinbefore and the theory of substantial compliance or the test of prejudice would not be applicable in such a case.
The Court or the Tribunal should enquire whether (a) the provision violated is of a substantive nature or (b) whether it is procedural in character. (2) A substantive provision has normally to be complied with as explained hereinbefore and the theory of substantial compliance or the test of prejudice would not be applicable in such a case. (3) In the case of violation of a procedural provision, the position is this: procedural provisions are generally meant for affording a reasonable and adequate opportunity to the delinquent officer/employee. They are, generally speaking, conceived in his interest. Violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. Except cases falling under 'no notice', 'no opportunity' and 'no hearing' categories, the complaint of violation of procedural provision should be examined from the point of view of prejudice, viz., whether such violation has prejudiced the delinquent officer/employee in defending himself properly and effectively. If it is found that he has been so prejudiced, appropriate orders have to be made to repair and remedy the prejudicate, including setting aside the enquiry and/or the order of punishment. If no prejudice is established to have resulted therefrom, it is obvious, no interference is called for. In this connection, it may be remembered that there may be certain procedural provisions which are of a fundamental character, whose violation is by itself proof of The Court may not insist on proof of prejudice in such cases. As explained in the body of the judgment, take a case where there is a provision g expressly providing that after the evidence of the employer/government is over, the employee shall be given an opportunity to lead defence in his evidence, and in a given case, the enquiry officer does not give that opportunity inspite of the delinquent officer/employee asking for it. The prejudice is self-evident. No proof of prejudice as such need be called for in such a case. To repeat, the test is one of prejudice, i.e., whether the person has received a fair hearing considering all things. Now, this very aspect can also be looked at from the point of view of directory and mandatory provisions, if one is so inclined. The principle stated under (4) hereinbelow is only another way of looking at the same aspect as is dealt with herein and not a different or distinct principle.
Now, this very aspect can also be looked at from the point of view of directory and mandatory provisions, if one is so inclined. The principle stated under (4) hereinbelow is only another way of looking at the same aspect as is dealt with herein and not a different or distinct principle. (4)(a) In the case of a procedural provision which is not of a mandatory characters the complaint of violation has to be examined from the standpoint of substantial compliance. Be that as it may the order passed in violation of such a provision can be set aside only where such violation has occasioned prejudice to the delinquent employee. (b) In the case of violation of a procedural provisional which is of a mandatory character, it has to be ascertained whether the provision is conceived in the interest of the person proceeded against or in public interest. If it is found to be the former, then it must be seen whether the delinquent officer has waived the said requirements either expressly or by his conduct. If he is found to have waived its then the order of punishment cannot be set aside on the ground of said violation. If, on the other hand, it is found that the delinquent officer/employee has not it or that the provision could no be waived by him, then the Court or Tribunal should make appropriate directions [include the setting aside of the order of punishment], keeping in mind the approach adopted by the Constitution Bench in B. Karunkar. The ultimate test is always the same viz., test of prejudice or the test of fair hearing, as it may be called. (5) Where the enquiry is not governed by any rules/regulations/statutory provisions and the only obligation is to observe the principles of natural justice - or, for that matter, wherever such principles are held to be implied by the very nature and impact of the order/action the Court or the Tribunal should make a distinction between a total violation of natural justice [rule of audi alteram] and violation of a facet of the said rule, as explained in the body of the judgment. In other words, a distinction must be made between no opportunity" and no adequate opportunity, i.e., between "no notice"/"no hearing" "no fair hearing".
In other words, a distinction must be made between no opportunity" and no adequate opportunity, i.e., between "no notice"/"no hearing" "no fair hearing". (a) In the case of former, the order passed would undoubtedly be invalid [one may call it "void" or a nullity if one chooses to]. In such cases, normally, liberty will be reserved for the Authority to take proceedings afresh according to law, i.e., in accordance with the said rule [audi alteram partem]. (b) But in the latter case, the effect of violation [of a facet of the rule of audi alteram] has to be examined from the standpoint of prejudice; in other word in other words, what the Court or Tribunal has to see is whether in the totality of the circumstances, the delinquent officer/employee did or did not have a fair hearing and the orders to be made shall depend upon the answer to the said query. [It is made clear that this principle [No. 5] does not apply in the case of rule against bias, the test in which behalf are laid down elsewhere.] (6) While applying the rule of audi alteram partem [the primary principle of natural justice] the Court/Tribunal/Authority must always bear in mind the ultimate and over-riding objective underlying the said rule, viz., to ensure a fair hearing and to ensure that there is no failure of justice. It is this objective which should guide them in applying the rule to varying situations that arise before them. (7) There may be situations where the interests of state or public interest may call for a curtailing of the rule of audi alteram partem. In such situations, the Court may have to balance public/State interest with the requirement of natural justice and arrive at an appropriate decision." 24. It can thus be seen that whenever an administrative action is found to be tainted with defect in the nature of breach of natural justice or the like, the Court would set aside the order, place back the proceedings at the stage where the defect is detected and leave the liberty to the competent authority to proceed further from such stage after having the defect rectified. In other words, the breach of principle of natural justice would ordinarily not result in terminating the proceedings permanently. 25.
In other words, the breach of principle of natural justice would ordinarily not result in terminating the proceedings permanently. 25. As noted, the requirement of supplying the reasons recorded by the Assessing Officer issuing notice for reopening and permitting the assessee to raise objections and to decide the same by a speaking order are not part of the statutory provisions contained in the Act. Such requirements have been created under a judgment of the Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (supra). It is true that when the Assessing Officer proceeds to pass the final order of assessment without disposing of the objections raised by the assessee, he effectively deprives the assessee of an opportunity to question the notice for reopening itself. However, the assessee is not left without the remedy when the Assessing Officer proceeds further with the assessment without disposing of the objections. Even before the final order of assessment is passed it would always be open for the assessee to make a grievance before the High Court and to prevent the Assessing Officer from finalizing the assessment without disposing of the objections. 26. The issue can be looked from slightly different angle. Validity of the notice for reopening would depend on the reasons recorded by the Assessing Officer for doing so. Similarly, the order of reassessment would stand failed on the merits of the order that the Assessing Officer has passed. Neither the action of the Assessing Officer of supplying reasons to the assessee nor his order disposing of the objections if raised by the assessee would per se have a direct relation to the legality of the notice of reopening or of the order of assessment. To declare the order of assessment illegal and to permanently prevent the Assessing Officer from passing any fresh order of assessment, merely on the ground that the Assessing Officer did not dispose of the objections before passing the order of assessment, in our opinion would be not the correct reading of the judgment of Supreme Court in case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors (supra). In such judgment, it is neither so provided nor we think the Supreme Court envisaged such an eventuality. 27. In the result, the question is answered in favour of the Revenue.
In such judgment, it is neither so provided nor we think the Supreme Court envisaged such an eventuality. 27. In the result, the question is answered in favour of the Revenue. The impugned respective judgments of the Tribunal would stand modified by providing that the respective orders of assessment though should stand set aside it would be open for the Assessing Officer to frame fresh assessment after first disposing of the objections of the assessees. Needless to clarify the provisions for time limit for framing the assessment as may be applicable would apply. 28. All tax appeals are disposed of.