D.b. Income Tax Appeal v. Deputy Commissioner Of Income Tax Circle, Circle-2, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 292 / 2016 M/s K.C. Mercantile (Presently Known As Genus InnovationLimited), Registered Office At B-9, Ganpati Enclave Ajmer Road,Jaipur Through Its Director Ramachandran Viswanathan S/o ShriMuthurama Ramachandran, Residing At C-89, Jagraj Marg, 402,Mangalam Apartment, Bapu Nagar, Jaipur- 302015 ----Appellant Versus Deputy Commissioner of Income Tax Circle, Circle-2, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar with Ms Archana For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 07/11/2017 1. By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has allowedthe appeal of the assessee only for statistical purposes. 2.This court while admitting the appeal on 14.2.2017 framedthe following substantial questions of law:- (I) Whether under the facts and circumstances ofthe case the ld. Tribunal was justified in notdeclaring the reassessment proceedings and theconsequential assessment order passed thereto asnullity? (II) Whether under the facts and circumstances ofthe case the ld. Tribunal has not committed gravelegal error in setting aside the entire quantumproceedings? 2.1Subsequently vide order dt. 8.8.2017, relying on decision ofSupreme Court, this court added the following substantial questionof law:- Whether under the facts and circumstances of thecase the ld. Tribunal was justified in not declaring thereassessment proceedings and the consequentialassessment order passed thereto as nullity ? 3.The facts of the case are that the appellant is a limitedcompany incorporated under the Companies Act, 1956 andengaged in the business of manufacturing of electronics energymeters besides doing work on job basis. The return of incomedeclaring total income of Rs.2,79,230/- was filed by the assesseewhich was processed u/s 143(1) of the IT Act, 1961. Thereafterthe re-assessment proceedings were initiated u/s 148 and theassessment stood completed u/s 143(3)/148 at total income ofRs.49,79,230/- by making addition of Rs.47,00,000/- on accountof share application money as unexplained cash credit u/s 68 ofthe Act. The ld. CIT(A) dismissed the appeal of the assessee. 4.Counsel for the appellant has contended that the presentappeal is arising out of the judgment and order of the tribunalwhereby tribunal has upheld the contention of the appellant andremitted back the matter for reassessment which will give asecond inning to the Assessing Officer who has to doreassessment within a period of 9 months and he will getextended time of limitation which is not the object of the IncomeTax Act. When the Court has already fixed the period, it is to beconstrued in a very strict sense and has to be applied. 4.1. In support of his contention, he has relied upon the following decisions: 1. KSS Petron Private Ltd. vs. The ACIT, ITA No. 224/2014, 03.10.2016 holding as under: 7. On further Appeal, the Tribunal passed theimpugned order. By the impugned order itheld that the Assessing Officer was notjustified in finalizing the Assessment,without having first disposed of theobjections of the appellant. This impugnedorder holds the Assessing Officer is obligedto do in terms of the Apex Court's decision inGKN Driveshafts (India) Ltd., v/s. ITO259ITR19. In the aforesaid circumstances,the order of the CIT(A) and the AssessingOfficer were quashed and set aside. However,after having set aside the orders, it restoredthe Assessment to the Assessing Officer topass fresh order after disposing of theobjections to reopening notice dated 28[th]March, 2008, in accordance with law. 03.10.2016 holding as under: 7. On further Appeal, the Tribunal passed theimpugned order. By the impugned order itheld that the Assessing Officer was notjustified in finalizing the Assessment,without having first disposed of theobjections of the appellant. This impugnedorder holds the Assessing Officer is obligedto do in terms of the Apex Court's decision inGKN Driveshafts (India) Ltd., v/s. ITO259ITR19. In the aforesaid circumstances,the order of the CIT(A) and the AssessingOfficer were quashed and set aside. However,after having set aside the orders, it restoredthe Assessment to the Assessing Officer topass fresh order after disposing of theobjections to reopening notice dated 28[th]March, 2008, in accordance with law. 8. We note that once the impugned orderfinds the Assessment Order is withoutjurisdiction as the law laid down by the ApexCourt in GKN Driveshafts (supra) has notbeen followed, then there is no reason torestore the issue to the Assessing Officer topass a further/fresh order. If this ispermitted, it would give a licence to theAssessing Officer to pass orders on reopeningnotice,withoutjurisdiction(withoutcompliance of the law in accordance with theprocedure), yet the only consequence, wouldbe that in appeal, it would be restored to theAssessing Officer for fresh adjudication afterfollowing the due procedure. This would leadto unnecessary harassment of the Assesseeby reviving stale/ old matters. 9 In fact, toensure that reopening notices are disposedof, expeditiously the parliament itself hasprovided in Section 153(2) of the Act aperiod of limitation within which theAssessing Officer must pass an order on thenotice of reopening i.e. within one year fromthe end of the financial year in which thenotice was issued. In fact, Section 153 (2A)of the Act as in force at the relevant timeitself provides that an order of freshAssessment, consequent to the order of Tribunal under Section 254 of the Act, wouldhave to be passed within one year from theend of the financial year in which the orderunder Section 254 of the Act, was passed bythe Tribunal and received by theCommissioner of Income Tax. 2. In Pr. Commissioner of Income Tax-2 vs. SagarDevelopers (GUJHC)[2016] 72 taxmann.com 321, it hasbeen held as under :- 27. In the result, the question is answered infavour of the Revenue. The impugnedrespective judgments of the Tribunal wouldstand modified by providing that therespective orders of assessment thoughshould stand set aside it would be open forthe Assessing Officer to frame freshassessment after first disposing of theobjections of the assessees. Needless toclarify the provisions for time limit forframing the assessment as may be applicablewould apply. 3. In GKN Driveshafts (India) Ltd. vs. Income Tax Officerand Ors. (SC)[2003] 259 ITR 19 (SC) it has been held asunder :- 5. We see no justifiable reason to interferewith the order under challenge. However, weclarify that when a notice under Section 148of the Income Tax Act is issued, the propercourse of action for the notice is to file returnand if he so desires, to seek reasons forissuing notices. The assessing officer isbound to furnish reasons within a reasonabletime. On receipt of reasons, the notice isentitled to file objections to issuance ofnotice and the assessing officer is bound todispose of the same by passing a speakingorder. In the instant case, as the reasonshave been disclosed in these proceedings,the assessing officer has to dispose of theobjections, if filed, by passing a speakingorder, before proceeding with the assessmentin respect of the abovesaid five assessmentyears. 4. In Assistant Commissioner of Income Tax vs. Hotel BlueMoon , [2010] 321 ITR 362 SC, it has been held as under :- 4. In Assistant Commissioner of Income Tax vs. Hotel BlueMoon , [2010] 321 ITR 362 SC, it has been held as under :- 15. We may now revert back to Section 158BC(b) which is the material provision whichrequires our consideration. Section 158BC(b) provides for enquiry and assessment.The said provision reads “that the assessingofficer shall proceed to determine theundisclosed income of the Block period in themanner laid down in Section 158 BB and theprovisions of Section 142, sub-section (2)and (3) of Section 143, Section 144 andSection 145 shall, so far as may be, apply.”An analysis of this sub section indicates that,after the return is filed, this clause enablesthe assessing officer to complete theassessment by following the procedure likeissue of notice under Sections 143(2)/142and complete the assessment under Section143(3). This Section does not provide foraccepting the return as provided underSection 143(i)(a). The assessing officer hasto complete the assessment under Section143(3) only. In case of default in not filingthe return or not complying with the noticeunder Sections 143(2)/142, the assessingofficer is authorized to complete theassessment ex-parte under Section 144.Clause (b) of Section 158 BC by referring toSection 143(2) and (3) would appear toimply that the provisions of Section 143(1)are excluded. But Section 143(2) itselfbecomes necessary only where it becomesnecessary to check the return, so that whereblock return conforms to the undisclosedincome inferred by the authorities, there isno reason, why the authorities should issuenotice under Section 143(2). However, if anassessment is to be completed under Section143(3) read with Section 158-BC, noticeunder Section 143(2) should be issued withinone year from the date of filing of blockreturn. Omission on the part of the assessingauthority to issue notice under Section143(2) cannot be a procedural irregularityand the same is not curable and, therefore,the requirement of notice under Section143(2) cannot be dispensed with. The otherimportant feature that requires to be noticedis that the Section 158 BC(b) specifically refers to some of the provisions of the Actwhich requires to be followed by theassessing officer while completing the blockassessments under Chapter XIV-B of the Act.This legislation is by incorporation. ThisSection even speaks of subsections which areto be followed by the assessing officer. Hadthe intention of the legislature was toexclude the provisions of Chapter XIV of theAct, the legislature would have or could haveindicated that also. A reading of the provisionwould clearly indicate, in our opinion, if theassessing officer, if for any reason,repudiates the return filed by the assessee inresponse to notice under Section 158 BC(a),the assessing officer must necessarily issuenotice under Section 143(2) of the Act withinthe time prescribed in the proviso to Section143(2) of the Act. Where the legislatureintended to exclude certain provisions fromthe ambit of Section 158 BC(b) it has doneso specifically. Thus, when Section 158 BC(b)specifically refers to applicability of theproviso thereto cannot be exclude. We mayalso notice here itself that the clarificationgiven by CBDT in its circular No.717 dated14th August, 1995, has a binding effect onthe department, but not on the Court. Thiscircular clarifies the requirement of law inrespect of service of notice under sub-section(2) of Section 143 of the Act. Accordingly, weconclude even for the purpose of ChapterXIV-B of the Act, for the determination ofundisclosed income for a block period underthe provisions of Section 158 BC, theprovisions of Section 142 and sub-sections(2) and (3) of Section 143 are applicable andno assessment could be made withoutissuing notice under Section 143(2) of theAct. However, it is contended by Sri Shekhar,learned counsel for the department that inview of the expression “So far as may be” inSection 153 BC(b), the issue of notice is notmandatory but optional and are to be appliedto the extent practicable. In support of thatcontention, the learned counsel has relied onthe observation made by this Court in Dr.Pratap Singh’s case [1985] 155 ITR 166(SC).In this case, the Court has observed thatSection 37(2) provides that “the provisions ofthe Code relating to searches, shall so far asmay be, apply to searches directed underSection 37(2). Reading the two sectionstogether it merely means that the methodology prescribed for carrying out thesearch provided in Section 165 has to begenerally followed. The expression “so far asmay be” has always been construed to meanthat those provisions may be generallyfollowed to the extent possible. The learnedcounsel for the respondent has brought toour notice the observations made by thisCourt in the case of Maganlal Vs. JaiswalIndustries, Neemach and Ors., [(1989) 4 SCC344], wherein this Court while dealing withthe scope and import of the expression “asfar as practicable” has stated “withoutanything more the expression `as far aspossible’ will mean that the manner providedin the code for attachment or sale ofproperty in execution of a decree shall beapplicable in its entirety except suchprovision therein which may not bepracticable to be applied.” 5. In General Motors India (P) Ltd. vs. DeputyCommissioner of Income Tax (GUJHC) [2013] 354 ITR 244,it has been held as under :- 5. In General Motors India (P) Ltd. vs. DeputyCommissioner of Income Tax (GUJHC) [2013] 354 ITR 244,it has been held as under :- 23. From the aforesaid discussion, we are ofthe considered opinion that writ petitionunder Art. 226 of the Constitution of India ismaintainable where no order has beenpassed by the AO deciding the objection filedby the assessee under s. 148 of the Act andassessment order has been passed or theorder deciding an objection under s. 148 ofthe Act has not been communicated to theassessee and assessment order has beenpassed or the objection filed under s. 148has been decided along with the assessmentorder. If the objection under s. 148 has beenrejected without there being any tangiblematerial available with the AO to form anopinion that there is escapement of Incomefrom assessment and in absence of reasonshaving direct link with the formation of thebelief, the writ Court under Art. 226 canquash the notice issued under s. 148 of theAct. The writ petition filed by the petitioner ismaintainable. The AO is mandated to decidethe objection to the notice under s. 148 andsupply or communicate it to the assessee.The assessee gets an opportunity tochallenge the order in a writ petition. Thereafter, the AO may pass thereassessment order. We hold that it was notopen to the AO to decide the objection tonotice under s. 148 by a compositeassessment order. The AO was required to,first decide the objection of the assessee filedunder s. 148 and serve a copy of the orderon assessee. And after giving somereasonable time to the assessee forchallenging his order, it was open to him topass an assessment order. This was not doneby the AO, therefore, the order on theobjection to the notice under s. 148 and theassessment order passed under the Actdeserve to be quashed. 6. In Ferrous Infrastructure Pvt. Ltd. and Ors. vs. DeputyCommissioner of Income Tax (DELHC) [2015] 63taxmann.com 201, it has been held as under :- 8. We may also point out that the secondissue raised by the learned counsel for thepetitioners also deserves some consideration.In GKN Driveshafts (supra), the SupremeCourt had directed as under:- "However, we clarify that when a noticeunder Section 148 of the Income Tax Act isissued, the proper course of action for thenoticee is to file return and if he so desires,to seek reasons for issuing notices. Theassessing officer is bound to furnish reasonswithin a reasonable time. On receipt ofreasons, the noticee is entitled to fileobjections to issuance of notice and theassessing officer is bound to dispose of thesame by passing a speaking order. In theinstant case, as the reasons have beendisclosed in these proceedings, the assessingofficer has to dispose of the objections, iffiled, by passing a speaking order, beforeproceeding with the assessment in respect ofthe abovesaid five assessment years."(underlining added) 8.1. On going through the same, it is evidentthat the Assessing Officer has to pass aspeaking order disposing of the objections"before proceeding with the assessment". In the present case, a separate speaking orderhas not been passed and the objections havebeen dealt with, if at all, in the re-assessment order itself. On this ground also,the petitioner is liable to succeed. 9. For all the reasons indicated above, thepetition is allowed. The notice under Section148 dated 30.08.2012 is quashed so also allproceedings pursuant to the said noticeunder Section 148 including the order dated30.03.2014. 7. In Travellers CHoice vs. Income Tax Officers,[2010] 326ITR 153 (Karnataka), it has been held as under :- 8.1. On going through the same, it is evidentthat the Assessing Officer has to pass aspeaking order disposing of the objections"before proceeding with the assessment". In the present case, a separate speaking orderhas not been passed and the objections havebeen dealt with, if at all, in the re-assessment order itself. On this ground also,the petitioner is liable to succeed. 9. For all the reasons indicated above, thepetition is allowed. The notice under Section148 dated 30.08.2012 is quashed so also allproceedings pursuant to the said noticeunder Section 148 including the order dated30.03.2014. 7. In Travellers CHoice vs. Income Tax Officers,[2010] 326ITR 153 (Karnataka), it has been held as under :- 8. In view of the order passed in I.T.A. No.102 of 2002 and other connected mattersbetween CIT Vs. Dr. N. Thippa Setty [2010]322 ITR 525 (Karn), dated April 9, 2008, weare of the view that the order passed by theauthorities have to be quashed on theground that there is no compliance with theprovisions of the section 147 of the Act, forthese assessment years. Accordingly, weanswer the questions of law framed.Accordingly, the appeal is allowed. 8. In Commissioner of Income Tax vs. Amit K. Jain (GUJHC)[2016] 388 ITR 113, it has been held as under :- 6. We have heard learned counsel for theparties. We are aware of the decision of theApex Court which has been referred by theBombay High Court. Nonetheless, whileblock assessment is to be made, theAssessing Officer is having knowledge aboutthe statutory provision and while issuingnotice he should have mentioned in it abouthis source of power and should havereferred to time which is required to begiven for the purpose of filing of returnunder section 158BC of the Act. The wordsmentioned in the notice are 'within fifteendays' whereas the provision mandates thetime of "not less than fifteen days". In viewof the decisions of the Supreme Courtreferred more particularly New IndiaIndustries Ltd. (supra), we are of the opinion, fifteen days means, clear fifteendays which is the requirement under law. Inthat view of the matter, we are of the viewthat the notice which was issued by theauthority asking the assessee to file thereturn within fifteen days is not inaccordance with the provisions of theIncome-tax Act and therefore it is invalid. Inour view, the authority who is issuing thenotice must be aware of the Act and mustconstrue the provision strictly. The words'not less than fifteen days' have to beinterpreted correctly. In that view of thematter, since the Assessing Officer asked theassessee to file the return within fifteendays of the service of the notice, the noticeissued by the Assessing Officer is invalid. Weare, therefore, of the opinion that theTribunal has rightly cancelled the order ofthe Assessing Officer. The questions referredto us are, therefore, answered in favour ofthe assessee and against the revenue. 9. In Sona Builders vs. UOI & Ors., (2001) 1 SCC 280, ithas been held as under :- 9. In Sona Builders vs. UOI & Ors., (2001) 1 SCC 280, ithas been held as under :- 3. We are quite unable to agree with theview taken by the High Court. The noticewas addressed on May 21, 1993, from Delhito the appellant in Jaipur fixing the hearingon May 31, 1993. It was patent that it wouldtake two or three days for that notice to bereceived in Jaipur even though despatchedby speed post. In effect, therefore, thenotice gave five days to the addressees torespond, and we are told that two of thosedays were Saturday and Sunday. Undersection 269UD the Appropriate Authority hadtwo months to act commencing from theend of the month in which the Form No. 37-Iwas filed. The form was filed on March 9 sothat the Appropriate Authority had abouttwo months and twenty days to take action.He did not take action until only one weekfrom the last available date, and then hegave the appellant, in reality, only threedays to respond. This was, plainly, mostinadequate. 4. Further, the notice alleged that theapparent consideration of the transaction between the appellant and the transferorwas low based on the sale instancementioned thereon. To be able adequately torespond to that allegation, it was necessaryfor the appellant to ascertain what themerits and demerits were of that propertywhich had been auctioned, and to knowwhat were the terms and conditions of theauction. No copy of any document relatingto the sale instance was furnished by theAppropriate Authority to the appellant alongwith the notice, or at any time whatsoever. 5. There is no doubt in our minds that onboth counts there has been a gross breachof the principles of natural justice becauseadequate opportunity to meet the casemade out in the notice was not given to theappellant. 6. Having regard to the statutory limit withinwhich the Appropriate Authority has to actand his failure to act in conformity with theprinciples of natural justice, we do not thinkwe can remand the matter to theAppropriate Authority. We must set his orderaside. 10. In Jayanthi Natarajan vs. Assistant Commissioner ofIncome Tax, Non Corporate Circle 1(1) (MADHC), it hasbeen held as under :- 17. The law declared by the Hon'bleSupreme Court is of binding character and isa source of law and to itself, which will bindall authorities. GKN Driveshafts (India) Ltd.,(supra), lays down a law and failure tocomply would render the assessment orderas without jurisdiction (Nand Kishore v.State of Punjab reported in (1995) 6 SCC614 and Nair Services Society v. State ofKerala reported in (2007) 4 SCC 1). 11. Shri A.S. chinnaswamy Raju, vs. ACIT, 12. The Commissioner of Income Tax, West Bengal 1,Calcutta vs. Vegetables Products Ltd. (SC) 6. There is no doubt that the acceptance ofone or the other interpretation sought to beplaced on Section 271(1)(a)(i) by the partieswould lead to some inconvenient result, butthe duty of the court is to read the section,understand its language and give effect tothe same. If the language is plain, the factthat the consequence of giving effect to itmay lead to some absurd result is not afactor to be taken into account ininterpreting a provision. It is for thelegislature to step in and remove theabsurdity. On the other hand, if tworeasonable constructions of a taxingprovision are possible that constructionwhich favours the assessee must beadopted. This is a well accepted rule ofconstruction recognised by this Court inseveral of its decisions. Hence all that wehave to see is, what is the true effect of thelanguage employed in Section 271(1)(a)(i).If we find that language to be ambiguous orcapable of more meanings than one, thenwe have to adopt that interpretation whichfavours the assessee, more particularly sobecause the provision relates to impositionof penalty. 13. In Keshrimal Jivji Shah & Anr. vs. Bank of Maharashtra& ORs., [2005] 273 ITR 451, it has been held as under :- 30. Mr. Naphade's reliance upon the decisionof the Lahore High Court, subsequentlyfollowed, according to him, is misplaced.Considering the view of the Supreme Courtin matters of this nature, it will not bepossible for us to accept the pleas raised byShri Naphade. The Court cannot allow aparty to get away with violation of itsprohibitory orders and uphold thetransactions contrary to and in violation ofits directions on the spacious plea that onlyway in which the Court can regulate suchacts is to visit the guilty party withpenalties. It is time that Courts reach thetransaction itself and put an end topurported rights created thereby. Failingwhich, it will become possible for parties toretain fruits or benefits of such acts by suffering penalties. It is well settled that noperson can take advantage of his ownwrong. In the instant case, respondent No. 2in violation of the order of this Court,transferred the property by creating sub-lease in favour of petitioner. The approachsuggested by Shri Naphade, if accepted, willallow respondent No. 2 to retain the benefitsunder the sub-lease. It will also allow thepetitioners to get away easily when theCourts below have found that they have notacted bona fide. 14. In Umesh Kumar Misra son of Sri Ram Raj Misra vs.Union of India (UOI) through Secretary, Ministry of HomeAffairs, (ALLHC)(2006) ILR 3AII1211, it has been held asunder :- 7. It is also a settled principle that no personcan claim any right arising out of his wrongdoing i.e. a person having done wrong,cannot take advantage of his own wrong. 5.Mr. Singhi, counsel for the respondent has relied on Section153(3) of the Income Tax Act and contended that basic argumentof assessee is contrary to spirit of Section 153(3), if such anargument is accepted, it is contrary to law declared by theSupreme Court itself on which the assessee has based hisargument in GKN Driveshafts (supra) where the Supreme Courtitself has remanded back the matter for reassessment. He hasrelied upon the following decisions: 1. In, Arvind Mills Ltd. vs. Assistant Commissioner ofWealth Tax (GUJHC) (2004) 270 ITR 0467, it has been heldas under :- 3. It is, however, not necessary to go into themerits of the controversy raised in this petition for the simple reason that in GKNDriveshafts India Ltd. v. ITO: (2003) 259 ITR19 the apex Court has now clarified thatwhen a notice under Section 148 of the ITAct is issued, the proper course of action forthe noticee is to file return and if he sodesires, to seek reasons for issuing notices.The AO is bound to furnish reasons within areasonable time. On receipt of reasons, thenoticee is entitled to file objections toissuance of notice and the AO is bound todispose of the same by passing a speakingorder. 4. The above principle laid down in respect ofthe notice for reassessment under the IT Actwould apply with full force to the notice forreassessment under Section 17 of the WT Actas well. The petitioner-company had alreadyfiled its return in response to the impugnednotice and requested for furnishing reasons,which request has been acceded to only veryrecently and the petitioner has thereaftersubmitted its objections on 19th Feb., 2004.The AO is, therefore, now required to disposeof the objections by passing a speaking orderas per the aforesaid decision of the Hon'bleSupreme Court. 5. The AO is accordingly required to decidethe preliminary objections lodged by thepetitioner to the notice for reassessment andpass a speaking order. Until such speakingorder is passed, obviously the AO cannotundertake reassessment. Hence, it is onlyafter the AO passes a speaking orderdecidingthepetitioner'spreliminaryobjectionsagainstthenoticeforreassessment that any cause of action wouldarise for the petitioner. 5. The AO is accordingly required to decidethe preliminary objections lodged by thepetitioner to the notice for reassessment andpass a speaking order. Until such speakingorder is passed, obviously the AO cannotundertake reassessment. Hence, it is onlyafter the AO passes a speaking orderdecidingthepetitioner'spreliminaryobjectionsagainstthenoticeforreassessment that any cause of action wouldarise for the petitioner. 2. In, Arvind Mills Ltd. vs. Assistant Commissioner ofWealth Tax (GUJHC) (2004) 270 ITR 0469, it has been heldas under :- 9. The position in law is thus well settled.After a notice for reassessment has beenissued, an assessee is required to file thereturn and seek reasons for issuance of suchnotice. The AO is then bound to supply thereasons within a reasonable time. On receiptof reasons, the assessee is entitled to file preliminary objections to issuance of noticeand the AO is under a mandate to dispose ofsuch preliminary objections by passing aspeaking order, before proceeding with theassessment in respect of the assessmentyear for which such notice has been issued. 14. In the result, the impugnedreassessment order dt. 9th Feb., 2004, madeunder Section 17 r/w Section 16(3) of theAct is hereby quashed and set aside. Therespondent is directed to abide by thedirections issued by this Court in its order dt.3rd March, 2004, in Special Civil ApplicationNo. 2736 of 2004 (supra), more particularly,para Nos. 4 and 5 which are reproducedhereunder for the sake of convenience. "4. The above principle laid down in respectof the notice for reassessment under the ITAct would apply with full force to the noticefor reassessment under Section 17 of the WTAct as well. The petitioner company hadalready filed its return in response to theimpugned notice and requested for furnishingreasons, which request has been acceded toonly very recently and the petitioner hasthereafter submitted its objections on 19thFeb., 2004. The AO is, therefore, nowrequired to dispose of the objections bypassing a speaking order as per the aforesaiddecision of the Hon'ble Supreme Court. 5. The AO is accordingly required to decidethe preliminary objections lodged by thepetitioner to the notice for reassessment andpass a speaking order. Until such speakingorder is passed, obviously the AO cannotundertake reassessment. Hence, it is onlyafter the AO passes a speaking orderdeciding the notice for reassessment that anycause of action would arise for thepetitioner." 3. In MGM Exports vs. Deputy Commissioner of Income Tax, (GUJHC) (2010) 323 ITR 0331, it has been held as under :- 2. The facts in brief are that : for asst. yr.2001-02 against the returned income of Rs.28,79,998, the petitioner was assessed on a total income of Rs. 93,20,410 under s.143(3) of the IT Act, 1961 (the Act) on 15thMarch, 2004. The matter was carried inappeal before CIT(A) and thereafter beforethe Income-tax Appellate Tribunal (theTribunal). The Tribunal, by order dt. 27thFeb., 2006, remanded the matter back to theAO to decide the issues afresh afterconsidering the amendments as per TaxationLaws (Amendment) Act, 2005. Accordingly,fresh assessment was framed on 28th Sept.,2006 under s. 143(3) r/w s. 254 of the Acton a total income of Rs. 28,80,000. (GUJHC) (2010) 323 ITR 0331, it has been held as under :- 2. The facts in brief are that : for asst. yr.2001-02 against the returned income of Rs.28,79,998, the petitioner was assessed on a total income of Rs. 93,20,410 under s.143(3) of the IT Act, 1961 (the Act) on 15thMarch, 2004. The matter was carried inappeal before CIT(A) and thereafter beforethe Income-tax Appellate Tribunal (theTribunal). The Tribunal, by order dt. 27thFeb., 2006, remanded the matter back to theAO to decide the issues afresh afterconsidering the amendments as per TaxationLaws (Amendment) Act, 2005. Accordingly,fresh assessment was framed on 28th Sept.,2006 under s. 143(3) r/w s. 254 of the Acton a total income of Rs. 28,80,000. 4. On behalf of the petitioner attention wasinvited to the following two decisions of thisHigh Court in the case of Arvind Mills Ltd. vs.Asstt. CWT (2004) 191 CTR (Guj) 233 :(2004) 270 ITR 467 (Guj) and Arvind MillsLtd. vs. Asstt. CWT (2004) 191 CTR (Guj)235 : (2004) 270 ITR 469 (Guj) to contendthat the respondent was under an obligationto first dispose of the preliminary objectionsraised by the petitioner and could not haveframed the reassessment order. It was alsosubmitted that as held by this Court untilsuch speaking order is passed therespondent obviously cannot undertakereassessment. Learned advocate, therefore,submitted that the petition is required to beallowed on this limited ground. 7. Applying the aforesaid settled legalposition to the facts of the case it is apparentthat the action of the respondent authority inframing the reassessment order, without firstdisposing of the preliminary objections raisedby the petitioner, cannot be sustained.Accordingly, the reassessment order dt. 16thDec., 2008 is hereby quashed and set asideand the respondent authority shall dispose ofthe preliminary objections by passing aspeaking order and only thereafter proceedwith the reassessment proceedings inaccordance with law. Considering the factthat the normal period of limitation, forframing reassessment pursuant to notice dt.3rd March, 2008 issued under s. 148 of theAct, has already expired on 31st Dec., 2008,in the peculiar facts and circumstances of thecase it would serve the ends of justice if therespondent authority is directed to abide bythe following schedule : (i) The respondent authority shall dispose of the preliminary objections raised by thepetitioner within a period of four weeks fromtoday by passing a speaking order inaccordance with law; (ii) Thereafter the respondent authority shallundertake reassessment proceedings, ifnecessary, and shall complete the samewithin a period of four weeks thereafter, i.e.,the date of disposal of the preliminaryobjections; (iii) No extension of time shall be sought forby either side in the fact situation of thepresent case; (iv) The aforesaid schedule shall not precludethe rights of the petitioner to challenge theorder disposing of the preliminary objections,if the said order is required to be sochallenged. 4. In, Pr. Commissioner of Income Tax-2 vs. SagarDevelopers (GUJHC) [2016] 72 taxmann.com 321, it hasbeen held as under :- 5. For the purpose of this group of appeals,we frame following common substantialquestion of law: "Whether the Income Tax Appellate Tribunalwas correct in law in setting aside the orderof reassessment which was passed by theAssessing Officer on the ground that beforepassing such order, the Assessing Officer hadnot disposed of the objections of theassessee raised pursuant to the decision ofSupreme Court in case of GKN Driveshafts(India) Ltd. v. Income Tax Officer and orsreported in 259 ITR 90 without placing thematter back before the Assessing Officer forpassing a fresh order, if so needed afterdisposing of the objections of the assessee." 5. For the purpose of this group of appeals,we frame following common substantialquestion of law: "Whether the Income Tax Appellate Tribunalwas correct in law in setting aside the orderof reassessment which was passed by theAssessing Officer on the ground that beforepassing such order, the Assessing Officer hadnot disposed of the objections of theassessee raised pursuant to the decision ofSupreme Court in case of GKN Driveshafts(India) Ltd. v. Income Tax Officer and orsreported in 259 ITR 90 without placing thematter back before the Assessing Officer forpassing a fresh order, if so needed afterdisposing of the objections of the assessee." 14. In this context, the question arise is,whether if the Assessing Officer defaults indisposing of the objections but proceeds toframe the assessment without so doing,should the reassessment be terminatedpermanently? In other words, the questionis, should the assessment be placed back ata stage where such defect is detected orshould the Assessing Officer for all times to come be prevented from carrying out hisstatutory duty and functions?15. In case of Arvind Mills Ltd. v. AssistantCommissioner of Wealth Tax (supra), asnoted, a very similar issue came up forconsideration. The Division Bench of theCourt, while agreeing that the AssessingOfficer could not have framed theassessment without disposing of theobjections, by a speaking order provided asunder: "13. There is one more aspect of the matter.The order dated 3rd March, 2004 made bythis Court in the earlier petition filed by thepresent petitioner namely Special CivilApplication No. 2736 of 2004 directed therespondent to dispose of the objections filedby the petitioner by passing a speaking orderas per the aforesaid decision of the Hon'bleSupreme Court. It is further laid down in thesaid order that it is only after the AssessingOfficer passes a speaking order deciding thepetitioner's preliminary objections againstthe notice for reassessment that any cause ofaction would arise for the petitioner. Thisorder was served on the respondent on 4thMarch 2004 and immediately on 5th March2004, the petitioner was served with a copyof the impugned re-assessment order dated9th February 2004. The petitioner thereuponpreferred a rectification application underSection 35 of the Act requesting therespondent to withdraw the impugned re-assessment order dated 9th February 2004,but, as averred in the petition, till the date offiling of the petition, the respondent hasneither called the petitioner for hearing onthe application dated 10th March 2004 norwithdrawn the impugned re-assessmentorder. In the affidavit in reply, the aforesaidaverments are dealt with only by reiteratingthat the objections have been disposed of inthe reassessment order itself. The aforesaidconduct of the respondent alongwith thefacts stated hereinbefore clearly points outthat the stand of the respondent appears tobe that once a notice for re-assessment hasbeen made, the respondent is bound toframe an order of re-assessment regardlessof the fact as to whether such an order canbe supported or not, in law or on facts. 14. In the result, the impugned re- assessment order dated 9th February 2004made under Section 17 read with Section16(3) of the Act is hereby quashed and setaside. The respondent is directed to abide bythe directions issued by this Court in its orderdated 3rd March 2004 in Special CivilApplication No. 2736 of 2004, moreparticularly, paragraph Nos. 4 and 5 whichare reproduced hereunder for the sake ofconvenience:-- 14. In the result, the impugned re- assessment order dated 9th February 2004made under Section 17 read with Section16(3) of the Act is hereby quashed and setaside. The respondent is directed to abide bythe directions issued by this Court in its orderdated 3rd March 2004 in Special CivilApplication No. 2736 of 2004, moreparticularly, paragraph Nos. 4 and 5 whichare reproduced hereunder for the sake ofconvenience:-- 15. The above principle laid down in respectof the notice for re-assessment under theIncome-tax Act would apply with full force tothe notice for re-assessment under Section17 of the WT Act as well. The petitioner-Company had already filed its return inresponse to the impugned notice andrequested for furnishing reasons, whichrequest has been acceded to only veryrecently and the petitioner has thereaftersubmitted its objections on 19.2.2004. TheAssessing Officer is, therefore, now requiredto dispose of the objections by passing aspeaking order as per the aforesaid decisionoftheHon'bleSupremeCourt. 16. The Assessing Officer is accordinglyrequired to decide the preliminary objectionslodged by the petitioner to the notice for re-assessment and pass a speaking order. Untilsuch speaking order is passed, obviously theAssessing Officer cannot undertake re-assessment. Hence, it is only after theAssessing Officer passes a speaking orderdecidingthepetitioner'spreliminaryobjectionsagainstthenoticeforreassessment that any cause of action wouldarise for the petitioner."16. In case of General Motors India P. Ltd. v.DCIT (supra), this Court did strike down theorder of assessment which was passedwithout disposing of the objections. It wasprovidedasunder: "23. From the aforesaid discussion, we are ofthe considered opinion that writ petitionunder Article 226 of the Constitution of Indiais maintainable where no order has beenpassed by the Assessing Officer deciding theobjection filed by the assessee under Section148 of the Act and assessment order hasbeen passed or the order deciding an objection under Section 148 of the Act hasnot been communicated to the assessee andassessment order has been passed or theobjection filed under Section 148 has beendecided along with the assessment order. Ifthe objection under Section 148 has beenrejected without there being any tangiblematerial available with the Assessing Officerto form an opinion that there is escapementof income from assessment and in absenceof reasons having direct link with theformation of the belief, the writ Court underArticle 226 can quash the notice issued underSection 148 of the Act. The writ petition filedby the petitioner is maintainable. TheAssessing Officer is mandated to decide theobjection to the notice under Section 148and supply or communicate it to theassessee. The assessee gets an opportunityto challenge the order in a writ petition.Thereafter, the Assessing Officer may passthe reassessment order. We hold that it wasnot open to the Assessing Officer to decidethe objection to notice under section 148 bya composite assessment order. The AssessingOfficer was required to, first decide theobjection of the assessee filed under section148 and serve a copy of the order onassessee. And after giving some reasonabletime to the assessee for challenging hisorder, it was open to him to pass anassessment order. This was not done by theAssessing Officer, therefore, the order on theobjection to the notice under section 148 andthe assessment order passed under the Actdeserves to be quashed." 17. Two things emerge from this judgment.Firstly, that the question whether afterstriking down the order of assessment onthis ground further assessment should bepermitted or not, was neither argued noraddressed by the Court. Second aspect isthat, in case of General Motors India P. Ltd.v. DCIT (supra), the Court noticed thejudgment of Division Bench of Arvind MillsLtd. v. Assistant Commissioner of Wealth Taxreported in : 270 ITR 469 in which, theDivision Bench had, under somewhat similarcircumstances, while setting aside the orderof reassessment, required the AssessingOfficer to dispose of the objections and onlythereafter, proceed to pass the order ofreassessment. 18. It can thus be seen that two DivisionBenches of the Court have taken somewhatdifferent routes in similar backdrop. In caseof General Motors India P. Ltd. v. DCIT(supra), the Court, without laying down theratio, struck down the order of assessmentwithout any further facility to the AssessingOfficer to dispose of the objections and thento proceed to reassess the income of theassessee. In case of Arvind Mills Ltd. v.Assistant Commissioner of Wealth Tax(supra) again the Court had, without layingdown the ratio, enabled the Assessing Officerto dispose of the objections and till thenprevented him from passing fresh order ofassessment. What should, therefore, be thecorrect legal position when the Court strikesdown the order of assessment only on thisground has not been opined by either of thetwo Division Benches in the said cases. 24. It can thus be seen that whenever anadministrative action is found to be taintedwith defect in the nature of breach of naturaljustice or the like, the Court would set asidethe order, place back the proceedings at thestage where the defect is detected and leavethe liberty to the competent authority toproceed further from such stage after havingthe defect rectified. In other words, thebreach of principle of natural justice wouldordinarily not result in terminating theproceedings permanently. 25. As noted, the requirement of supplyingthe reasons recorded by the AssessingOfficer issuing notice for reopening andpermitting the assessee to raise objectionsand to decide the same by a speaking orderare not par