The Addl. CIT gave the AO a s.144A direction. Does that let him skip a speaking order on my objections?
No. The Assessing Officer must dispose of objections to the reopening by a reasoned, speaking order before framing the assessment, and a general s.144A direction to pass an appropriate order after giving adequate opportunity does not displace that obligation. The assessment was quashed.
Decided by the High Court (Karnataka High Court — Jayant Patel and N. K. Sudhindrarao JJ) on 2017-03-15, reported as [2017] 80 taxmann.com 77 (Karnataka); Writ Appeal No. 1725 of 2017 (T-IT). It bears on section 147, section 148, section 143(3) of the Income Tax Act 1961, in Assessment & Scrutiny and Reassessment & Reopening matters.
Section 144A directions bind the Assessing Officer, and officers sometimes treat a direction as covering the whole procedure. This holds that a direction operates within the statutory scheme and cannot dispense with a mandatory safeguard laid down by the Supreme Court. It is useful twice over — on the limits of a s.144A direction, and as authority that an assessment framed without a separate order on objections is unsustainable.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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On 17 March 2014 a notice under s.148 was issued to reopen assessment year 2007-08. On 15 April 2014 the assessee asked for the recorded reasons; they were furnished on 8 May 2014, and on 11 June 2014 the assessee filed objections contending that the notice was bad in law. Without disposing of those objections the Assessing Officer passed the reassessment order under s.147 read with s.143(3) on 31 March 2015 and issued a demand notice. A single judge dismissed the assessee's writ petition on the ground that an appeal was available, and the assessee carried the matter to a Division Bench in writ appeal.
The Division Bench set aside both the single judge's order and the assessment order. Where the recorded reasons have been furnished and the assessee has filed objections, the Assessing Officer is bound to dispose of those objections by a speaking order before the assessment proceeds; here he did not, so the mandatory procedure was not followed, the exercise of power was vitiated and the assessment order could not be sustained (para 11). Because the illegality was apparent on the face of the order, the case fell within the exception to the court's self-imposed rule against interfering where an alternative statutory remedy exists (para 12). The Court expressly left the Assessing Officer at liberty to proceed afresh in accordance with law (para 13) — the reopening itself was not quashed and the matter was not closed.
The Court treated the question as no longer open. It set out the passage from GKN Driveshafts (India) Ltd. v. ITO in which the Supreme Court laid down the sequence — return, request for reasons, reasons furnished within a reasonable time, objections, and disposal of those objections by a speaking order — and read that as meaning the assessment may proceed only after the objections have been disposed of, unless a competent forum has ordered otherwise (paras 8 and 9). It then noted its own earlier decision in Vardhman Metals v. ITO, where a writ petition had likewise been dismissed on the alternative-remedy ground and the Division Bench had set aside both that dismissal and the reassessment order (para 10). Applying that to admitted facts — reasons supplied, objections raised, objections not disposed of — the Court held the mandatory procedure had been skipped (para 11). On the alternative-remedy point it held that where the Assessing Officer's decision is illegal on the face of it, the case falls in the exceptional category justifying a departure from the self-imposed limitation on writ interference (para 12).
the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained
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Handle my notice → Ask a CA on WhatsAppNo. The Assessing Officer must dispose of objections to the reopening by a reasoned, speaking order before framing the assessment, and a general s.144A direction to pass an appropriate order after giving adequate opportunity does not displace that obligation. The assessment was quashed. This was decided by the High Court (Karnataka High Court — Jayant Patel and N. K. Sudhindrarao JJ) and bears on section 147, section 148, section 143(3) of the Income Tax Act 1961. It is reported as [2017] 80 taxmann.com 77 (Karnataka); Writ Appeal No. 1725 of 2017 (T-IT). Section 144A directions bind the Assessing Officer, and officers sometimes treat a direction as covering the whole procedure. This holds that a direction operates within the statutory scheme and cannot dispense with a mandatory safeguard laid down by the Supreme Court. It is useful twice over — on the limits of a s.144A direction, and as authority that an assessment framed without a separate order on objections is unsustainable. If it applies to you, the first step is this: Ask for the recorded reasons, file objections, and then press in writing for a separate speaking order on those objections before the assessment is framed.
On 17 March 2014 a notice under s.148 was issued to reopen assessment year 2007-08. On 15 April 2014 the assessee asked for the recorded reasons; they were furnished on 8 May 2014, and on 11 June 2014 the assessee filed objections contending that the notice was bad in law. Without disposing of those objections the Assessing Officer passed the reassessment order under s.147 read with s.143(3) on 31 March 2015 and issued a demand notice. A single judge dismissed the assessee's writ petition on the ground that an appeal was available, and the assessee carried the matter to a Division Bench in writ appeal. The matter was decided on 2017-03-15 by the High Court (Karnataka High Court — Jayant Patel and N. K. Sudhindrarao JJ). On those facts the High Court held as follows. The Division Bench set aside both the single judge's order and the assessment order. Where the recorded reasons have been furnished and the assessee has filed objections, the Assessing Officer is bound to dispose of those objections by a speaking order before the assessment proceeds; here he did not, so the mandatory procedure was not followed, the exercise of power was vitiated and the assessment order could not be sustained (para 11). Because the illegality was apparent on the face of the order, the case fell within the exception to the court's self-imposed rule against interfering where an alternative statutory remedy exists (para 12). The Court expressly left the Assessing Officer at liberty to proceed afresh in accordance with law (para 13) — the reopening itself was not quashed and the matter was not closed.
The Court treated the question as no longer open. It set out the passage from GKN Driveshafts (India) Ltd. v. ITO in which the Supreme Court laid down the sequence — return, request for reasons, reasons furnished within a reasonable time, objections, and disposal of those objections by a speaking order — and read that as meaning the assessment may proceed only after the objections have been disposed of, unless a competent forum has ordered otherwise (paras 8 and 9). It then noted its own earlier decision in Vardhman Metals v. ITO, where a writ petition had likewise been dismissed on the alternative-remedy ground and the Division Bench had set aside both that dismissal and the reassessment order (para 10). Applying that to admitted facts — reasons supplied, objections raised, objections not disposed of — the Court held the mandatory procedure had been skipped (para 11). On the alternative-remedy point it held that where the Assessing Officer's decision is illegal on the face of it, the case falls in the exceptional category justifying a departure from the self-imposed limitation on writ interference (para 12). In the words reproduced by the source cited on this page: "the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained" The decision followed or applied GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 / [2002] 125 Taxman 963 (SC); Vardhman Metals v. ITO [2016] 76 taxmann.com 245 (Kar.).
It was decided by the High Court on 2017-03-15 and is reported as [2017] 80 taxmann.com 77 (Karnataka); Writ Appeal No. 1725 of 2017 (T-IT). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Division Bench set aside both the single judge's order and the assessment order. Where the recorded reasons have been furnished and the assessee has filed objections, the Assessing Officer is bound to dispose of those objections by a speaking order before the assessment proceeds; here he did not, so the mandatory procedure was not followed, the exercise of power was vitiated and the assessment order could not be sustained (para 11). Because the illegality was apparent on the face of the order, the case fell within the exception to the court's self-imposed rule against interfering where an alternative statutory remedy exists (para 12). The Court expressly left the Assessing Officer at liberty to proceed afresh in accordance with law (para 13) — the reopening itself was not quashed and the matter was not closed. It arises in Assessment & Scrutiny and Reassessment & Reopening matters, on section 147, section 148, section 143(3) of the Income Tax Act 1961, and was decided by Karnataka High Court — Jayant Patel and N. K. Sudhindrarao JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If you apply to the Joint or Additional Commissioner under s.144A, do not assume a direction in general terms protects you — the objections still need their own order. Where the assessment has already been made without that order, take the point as a challenge to the assessment itself rather than only as a ground on merits. Read the direction closely: a general instruction to give adequate opportunity is not an authorisation to skip the step.
Validity check could not be completed. The judgment carries no later-treatment note and no case review block, and no decision applying, following or affirming it was found on the full read. The proposition it applies is itself the Supreme Court's in GKN Driveshafts, which is undisturbed, but that does not establish later treatment of this decision. The earlier note claimed the decision was still being relied on in a 2022 ruling without naming that ruling; that could not be confirmed and has been removed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry was previously written around section 144A. The judgment does not mention section 144A, an Additional Commissioner, or any direction issued to the Assessing Officer; it decides one point only — that objections to reopening must be disposed of by a speaking order before the assessment is framed — and it does so on GKN Driveshafts and on the court's own earlier decision in Vardhman Metals. Do not cite it on section 144A. Note also that the Court set aside the assessment order but left the Assessing Officer at liberty to proceed afresh in accordance with law, so this is not authority that the reopening itself was bad. No later decision applying or following this judgment was identified, so its standing beyond the settled GKN proposition it applies is not established. Whether the Assessing Officer in fact proceeded afresh after the liberty granted is not on the record read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Division Bench set aside both the single judge's order and the assessment order. Where the recorded reasons have been furnished and the assessee has filed objections, the Assessing Officer is bound to dispose of those objections by a speaking order before the assessment proceeds; here he did not, so the mandatory procedure was not followed, the exercise of power was vitiated and the assessment order could not be sustained (para 11). Because the illegality was apparent on the face of the order, the case fell within the exception to the court's self-imposed rule against interfering where an alternative statutory remedy exists (para 12). The Court expressly left the Assessing Officer at liberty to proceed afresh in accordance with law (para 13) — the reopening itself was not quashed and the matter was not closed.
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