IN HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 21.05.2015 W.P.(C)5229/2014 & CM No.10401/2014 FERROUS INFRASTRUCTURE PVT. LTD. & ANR. Petitioners versus DEPUTY COMMISSIONER OF INCOME TAX Respondent Advocates who appeared in this case: For Appellant : Mr S.Krishnan, Advocate For Respondent : Mr Rohit Madan, Advocate. CORAM:- HON BLE MR JUSTICE BADAR DURREZ AHMED HON BLE MR JUSTICE SANJEEV SACHDEVA JUDGMENT 21.05.2015 BADAR DURREZ AHMED, J (ORAL) 1. This writ petition is directed against notice dated 30.08.2012 issued by DCIT, Circle 11(1), New Delhi, under Section 148 of Income Tax Act, 1961. writ petition is also directed against order dated 30.03.2014 passed by Assessing Officer re-assessing income of assessee in respect of Assessment Year 2008-2009. 2. When this matter came up for hearing on first occasion, i.e., 19.08.2014, we had recorded that learned counsel for petitioners had raised two points in this petition. first point was that petitioners came to know, after re-assessment order, that purported reasons for initiating reassessment proceedings had been recorded after issuance of notice under Section 148. It was submitted that clear WP(C) No5229./2014 Page 1 of 7 position in law is that reasons have to be recorded prior to issuance of notice under Section 148. second point urged by learned counsel for petitioners was that objections furnished by petitioners to Section 148 notice had not been disposed of by separate speaking order prior to re-assessment order dated 30.03.2014. He submitted that this was in clear contradiction to Supreme Court decision in case of G.KN Driveshafts (India) Ltd. v. ITO : 259 ITR 19(SC). 3. counter-affidavit has been filed on behalf of Revenue and very surprising stand has been taken. In reply to paragraph No.1 of petition on merits, counter-affidavit reads as under:- 1. With respect to content of Paragraph no. 1 it is respectfully submitted that factual position in matter is that notice u/s.148 of Act dated 30.08.2012 was issued and duly served upon assessee company. notice u/s.148 was issued after recording reasons for issuance of notice u/s.l48 however, in lower portion of reasons recorded; date was inadvertently mentioned as 18/09/2012. Thus contentions and grounds of challenge made by Petitioner are denied as being frivolous and baseless. . (underlining added) In above statement impression is sought to be created that date mentioned as 18.09.2013 was incorrectly recorded. No reasons have been given or explanation offered as to how such circumstance could, at all, have arisen. We asked learned counsel for Revenue to produce relevant file and on examining same, we find that reasons for issuance of notice under Section 148 of said Act which WP(C) No5229./2014 Page 2 of 7 have been recorded bears date 19.09.2012. said date is printed. It is, first of all, inconceivable that when document is being typed on or before 30.08.2012 (the date on which notice under Section 148 was issued) that future date of 19.09.2012 would be typed. Secondly, what is even more shocking is fact that printed date 19.09.2012 has been corrected in hand to read 18.09.2012. In other words, if there was mistake in printing of date, same has been corrected to read 18.09.2012. Therefore, it cannot be said that date mentioned in reasons, i.e., 18.09.2012 was inadvertent mistake. date had been consciously corrected. That being position, factual situation is that reasons were recorded on 18.09.2012, they were also furnished to petitioners on 18.09.2012, but notice under Section 148 had already been issued on 30.08.2012. It is evident that notice was issued prior to recording of reasons. Section 148(2) of Income-Tax reads as under:- 148. (2) Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. It is absolutely clear from said provision that Assessing Officer is required to record his reasons before he issues notice under Section 148. 4. This aspect has been dealt with by Division Bench of this Court in Haryana Acrylic Manufacturing Co. v. Commissioner of Income-tax: 308 ITR 38(Delhi). 32. Secondly, let us assume for sake of argument that actual reasons were those as noted in said WP(C) No5229./2014 Page 3 of 7 form. Then why did Assessing Officer communicate different set of reasons to petitioner? Did he think that supplying of reasons and inviting of objections were mere charades? Did he think that it was mere pretence or formality which had to be gotten over with? At this point, it would be well to remember that Supreme Court in GKN Driveshafts (supra) had specifically directed that when notice under Section 148 of said Act is issued and noticee files return and seeks reasons for issuance of notice, Assessing Officer is bound to furnish reasons within reasonable time. On receipt of reasons, noticee is entitled to file objections to issuance of notice and Assessing Officer is bound to dispose of same by passing speaking order. These are specific directions given by Supreme Court in all cases where notices under Section 148 of said Act are issued. Surely, Assessing Officer could not have construed these specific directions to be mere empty formalities or dead letters? There is strong logic and purpose behind directions issued by Supreme Court and that is to prevent high-handedness on part of Assessing Officers and to temper any action contemplated under Section 147 of said Act by reason and substance. In fact, even Section 148(2) stipulates that Assessing Officer shall, before issuing any notice under said Section, record his reasons for doing so. Supreme Court has only carried forward this mandatory requirement by directing that reasons which are recorded be communicated to assessee within reasonable period of time so that at that stage itself assessee may point out any objections that he may have with regard to initiation of action under Section 147 of said Act. requirement of recording reasons, communicating same to assessee, enabling assessee to file objections and WP(C) No5229./2014 Page 4 of 7 requirement of passing speaking order are all designed to ensure that Assessing Officer does not reopen assessments which have been finalized on his mere whim or fancy and that he does so only on basis of lawful reasons. These steps are also designed to ensure complete transparency and adherence to principles of natural justice. Thus, deviation from these directions would entail nullifying of proceedings .. (underlining added) 5. Furthermore in decision of High Court of Karnanataka Commissioner of Income Tax, (Exemptions) v. Baldwin Boys High School: 364 ITR 637(Karnataka) - this very question of whether notice under Section 148 of said Act could be issued without recording reasons came up for consideration. Karnataka High Court observed as under:- 6. Section 148 of Act provides for issue of notice where income has escaped assessment. Sub- section (2) of section 148 of Act provides that Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. In view of this provision, no dispute was raised before us about procedure contemplated under this provision. From bare perusal of section 148 of Act, it is clear as crystal that Assessing Officer is obliged to record reasons before issuing notice under section 148 of Act . (underlining added) 6. decision sought to be relied upon by Mr Madan on behalf of Revenue in case of Adobe Systems Software Ireland Ltd. v. WP(C) No5229./2014 Page 5 of 7 Assistant Dirctor of Income Tax, 2014(7) AD 244, is not at all relevant for present discussion. That was case which dealt with furnishing of reasons to assessee. issue which had arisen was whether assessee was entitled to reasons without even filing return. That is not question before us. only question here is whether reasons could at all be recorded after issuance of notice under Section 148 of Act. And, secondly, that as reasons were recorded after issuance of Section 148 notice, whether proceedings were not vitiated. 7. We have seen from provisions of Section 148(2) as also decisions of this Court in Haryana Acrylic(supra), and that of Karnataka High Court in Baldwin Boys High School (supra), that reasons have to be recorded prior to issuance of notice under Section 148. If they are not so recorded, then notice under Section 148 and proceedings pursuant thereto are without authority of law. In present case, it is evident that reasons were recorded only on 18.09.2012, i.e., after notice under Section 148 had been issued on 30.08.2012. Clearly, statutory provisions, as explained by judicial decisions, indicate that notice under Section 148 would be invalid and consequently all proceedings pursuant thereto would also be vitiated. 8. We may also point out that second issue raised by learned counsel for petitioners also deserves some consideration. In GKN Driveshafts (supra), Supreme Court had directed as under:- However, we clarify that when notice under Section 148 of Income Tax Act is issued, proper course of action for noticee is to file return and if he so desires, to seek reasons for issuing WP(C) No5229./2014 Page 6 of 7 notices. assessing officer is bound to furnish reasons within reasonable time. On receipt of reasons, noticee is entitled to file objections to issuance of notice and assessing officer is bound to dispose of same by passing speaking order. In instant case, as reasons have been disclosed in these proceedings, assessing officer has to dispose of objections, if filed, by passing speaking order, before proceeding with assessment in respect of abovesaid five assessment years. (underlining added) 8. On going through same, it is evident that Assessing Officer has to pass speaking order disposing of objections before proceeding with assessment . In present case, separate speaking order has not been passed and objections have been dealt with, if at all, in re-assessment order itself. On this ground also, petitioner is liable to succeed. 9. For all reasons indicated above, petition is allowed. notice under Section 148 dated 30.08.2012 is quashed so also all proceedings pursuant to said notice under Section 148 including order dated 30.03.2014. 10. writ petition is allowed on above terms. BADAR DURREZ AHMED, J SANJEEV SACHDEVA, J MAY 21, 2015 sn WP(C) No5229./2014 Page 7 of 7 Ferrous Infrastructure Pvt. Ltd. & Anr. v. Deputy Commissioner of Income-tax