IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 3RD DAY OF SEPTEMBER, 2019 PRESENT: HON BLE MR.ABHAY S. OKA, CHIEF JUSTICE AND HON BLE MR.JUSTICE MOHAMMAD NAWAZ WRIT APPEAL NO.828 OF 2019 (T-IT) BETWEEN: M/S. SWADESH TRADING CO., PARTNERSHIP FIRM, D.NO.2-43, BADRIYA COMPOUND, KAMBALABETTU, VITTAL MUDNOOR, BANTWAL-574 211. DAKSHINA KANNADA, KARNATAKA, REPRESENTED BY ITS ERSTWHILE PARTNER: SMT. KADEEJA MOHAMMED ANDHUNI, W/O. ANDHUNI MOHAMMED, AGED ABOUT 57 YEARS. ... APPELLANT (BY SMT. VANI H., ADVOCATE) AND: 1. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I, ALBUQUERQUE HOUSE, PANDESHWAR, MANGALORE-575 001. -2- 2. ADDITIONAL COMMISSIONER OF INCOME TAX, CENTRAL RANGE, ALBUQUERQUE HOUSE, GROUND FLOOR, PANDESHWAR, MANGALORE-575 001. ... RESPONDENTS (BY SRI. E.I.SANMATHI, ADVOCATE) --- THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE ORDER DATED 07.02.2019 PASSED BY LEARNED SINGLE JUDGE IN WRIT PETITION NO.1374/2019 (T-IT). THIS APPEAL COMING ON FOR ORDERS THIS DAY, CHIEF JUSTICE DELIVERED FOLLOWING: JUDGMENT parties were put to notice that appeal will be decided finally. 2. With view to appreciate submissions canvassed across bar, reference to few factual details is necessary. appellant has filed return of income tax for Assessment Year 2011-12. On 27th March 2018, notice under Section 148 of Income Tax Act, 1961 (for short -3- said Act of 1961 ) was issued to appellant proposing re- assessment of alleged escaped income. After receiving copy of reasons recorded in notice issued under Section 148 of said Act of 1961, on 15th October 2018, appellant filed objections. appellant also made application dated 22nd October 2018 to jurisdictional Deputy Commissioner of Income Tax seeking direction under Section 144A of said Act of 1961. On 22nd October 2018, notice was served to appellant by Deputy Commissioner of Income Tax, Central Circle-1, Mangaluru, to file objections within period of one week. appellant filed objections on 29th October, 2018. 3. On 26th December 2018, first respondent proceeded to conclude assessment under sub-section (3) of Section 143 read with Section 147 of said Act of 1961. We may note here that Additional Commissioner of Income Tax, Central Range, Mangaluru passed order on 28th November 2018 directing Assessment Officer to pass appropriate order after giving adequate opportunity of hearing to assessee. -4- 4. learned counsel appearing for appellant relied upon decision of Division Bench of this Court dated 15th March 2017 in W.A.No.1725/2017 (T-IT) in case of M/S. DEEPAK EXTRUSIONS PVT. LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX. Her submission is that purpose of seeking direction under Section 144A of said Act of 1961 was to ensure that objections raised by appellant are promptly decided. Her further submission is that without considering objections, assessment under sub- section (3) of Section 143 read with section 147 of said Act of 1961 could not have been completed in law. 5. learned counsel appearing for respondents submitted that appellant himself applied for direction under Section 144A of said Act of 1961 and that is how Additional Commissioner has passed order on said application which is binding on Assessing Officer and that is why Assessing Officer proceeded to complete assessment in accordance with law under sub- section (3) of Section 143 read with section 147 of said Act -5- of 1961. He relied upon decision of Apex Court in case of GKN DRIVESHAFTS (INDIA) LTD. vs. INCOME TAX OFFICER & ORS. in Civil Appeal Nos.7731-7737/2002 dated 25th November 2002. His submission is that as Assessing Officer is bound by order passed under Section 144A of said Act of 1961, no interference can be made. 6. We have considered submissions. It is necessary to note law laid down by Apex Court in case of GKN DRIVESHAFTS (INDIA) LTD (supra) and in particular, what is held in paragraph 5 which reads thus: 5. We see no justifiable reason to interfere with order under challenge. 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 notices. assessing officer is bound to furnish reasons within reasonable time. On receipt of reasons, notice 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 -6- filed, by passing speaking order, before proceeding with assessment in respect of abovesaid five assessment years. (underline supplied) 7. same decision of Apex Court was noted by Division Bench of this Court in case of M/S. DEEPAK EXTRUSIONS PVT. LTD (supra). Division Bench referred to another decision of learned Single Judge in which decision of Apex Court in GKN DRIVESHAFTS (INDIA) LTD. (supra) was followed. Ultimately, in paragraphs 11 and 12, Division Bench held thus: 11. If facts of present case are examined in light of aforesaid legal position, it is admitted position that reasons for re- opening of assessment by issuing of notice under Section 148 of Act were supplied to appellant assessee. It is also admitted position that appellant assessee after receipt of such reasons raised objections. It is also undisputed position that Assessing Officer did not dispose of objections prior to proceeding with assessment further and proceeded to pass order for assessment. Under circumstances, it can be said that mandatory procedure of disposal of objection by Assessing officer before proceeding with assessment has not been followed and exercise -7- of power can be said as not only vitiated, but order of assessment cannot be sustained. 12. If decision of Assessing Officer is illegal on face of it, in our view, it would fall in exceptional category of making departure from normal principles of self impose limitation of not to interfere in matter where there is existence of alternative statutory remedy. (underline supplied) 8. Now, coming to facts of case in hand, notice under Section 148 of said Act of 1961 was served upon appellant for reopening of assessment. After receiving copy of reasons, appellant admittedly raised objections. It is not in dispute that Assessing Officer did not dispose of objections prior to completing assessment under sub-section (3) of Section 143 read with Section 147 of said Act of 1961. Therefore, law laid down by Apex Court as well as Division Bench of this Court would squarely apply. Therefore, only conclusion is that order of assessment is bad in law as same is made without deciding objections of appellant. -8- 9. Now, only question is about effect of direction issued under Section 144A of said Act of 1961. After having perused said direction, we find that Additional Commissioner did not direct Assessing Officer to complete assessment without deciding objections filed by appellant. When direction is issued under Section 144A of said Act of 1961 to Assessing Officer to pass appropriate order, he has to pass appropriate order in accordance with law. While issuing direction under Section 144A of said Act of 1961, Additional Commissioner could not have bypassed well settled law and directed Assessing Officer to act contrary to law. 10. We may note at this stage that learned counsel appearing for appellant stated that appellant is now not pressing application made under Section 144A of said Act of 1961. 11. Therefore, in our considered view, order dated 28th November 2018 passed under Section 144A of said -9- Act of 1961 does not affect applicability of principles laid down in aforesaid decision of Apex Court. 12. Accordingly, we pass following order: (i) assessment order dated 26th December 2018 for Assessment Year 2011-12 passed by first respondent is hereby quashed and set aside; (ii) We direct first respondent to decide objections raised by appellant by passing reasoned order before undertaking assessment in accordance with Section 143 read with Section 147 of said Act of 1961; (iii) order dated 28th November 2018 issued under Section 144A of said Act of 1961 is hereby set aside and application made by appellant under Section 144A of said Act stands disposed of as not pressed. In view of above direction, impugned order passed by learned Single Judge stands modified to that extent; (iv) We direct appellant to remain present before Assessing Officer on 13th - 10 - September 2019 so that Assessing Officer can hear appellant on objections and decide same as directed; (v) appeal is partly allowed on above terms. pending interlocutory application does not survive for consideration and is accordingly disposed of. Sd/- CHIEF JUSTICE Sd/- JUDGE Ksm Swadesh Trading Co. v. Deputy Commissioner of Income-tax, Central Circle-I, Mangalore / Additional Commissioner of Income-tax, Central Range, Mangalore