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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Shell Gas BV – Appellant
Versus
Assistant Commissioner Of Income Tax International Taxation 1 Ahmedabad – Respondent
R/Special Civil Application No. 7906 of 2024
Decided on : 25-06-2024
Taxation - Income Tax Act - Sections 148A(b), 148A(d), 148 - The court emphasized the necessity of providing reasons in quasi-judicial orders, ruling that failure to do so invalidates the order and any subsequent notices.
Fact of the Case:
The petitioner challenged notices and orders under the Income Tax Act regarding alleged income escapement due to non-charging of interest on a loan to its subsidiary, asserting that prior notices had not led to any action.
Finding of the Court:
The court found that the Assessing Officer failed to provide reasons addressing the petitioner's detailed objections, rendering the order under Section 148A(d) invalid and the subsequent notice under Section 148 also quashed.
Issues: Whether the Assessing Officer's order under Section 148A(d) was valid given the lack of reasons addressing the petitioner's objections.
Ratio Decidendi: The court held that quasi-judicial authorities must provide reasons for their decisions to ensure fairness and prevent arbitrariness, and failure to do so invalidates the order.
Result: The impugned order and notice were quashed, allowing the Assessing Officer to issue a fresh order after considering the petitioner's response.
ORDER :
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned senior advocate Mr.S.N. Soparkar with learned advocate Mr.B.S. Soparkar for the petitioner and learned senior standing counsel Mr.Varun Patel for the respondent appearing on advance copy.
2. Rule, returnable forthwith. Learned advocate Mr.Varun Patel waives service of notice of Rule on behalf of the respondent.
2.1 Having regard to the controversy in narrow compass, with the consent of the learned advocates appearing for both the sides, the matter is taken up for final hearing.
3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice under Section 148A(b) dated 27th March, 2024, order under Section 148A(d) and the notice under Section 148 dated 19th April, 2024 of the Income Tax Act, 1961 (for short ‘the Act’) for the A.Y. 2017-18.
4. The brief facts of the case are as under.
4.1 The Petitioner had not filed return of income for the A.Y. 2017-18 assuming that it has no taxable income in India.
4.2 During the Financial Year 2016-17, the Petitioner has advanced Interest Free ECB loan of Rs.165,97,94,188/- to its subsidiary, an Indian Company, namely M/s.Hazira Port Pvt. Ltd. The case of the said company was taken up for scrutiny and order under Section 92CA(3) of the Act came to be passed on 31st January, 2021 in which the Transfer Pricing Officer made downward revision of income of Hazira Port Pvt. Ltd of Rs.08,69,73,215/- for the interest that was not paid by it to the petitioner on the interest free loan given by the petitioner. A draft assessment order was passed on 22nd July, 2021 proposing the addition in the income of Hazira Port Pvt. Ltd. which was challenged before the Dispute Resolution Panel (DRP).
4.3 The DRP vide order dated 28th April, 2022 partly allowed the contentions of Hazira Port Pvt. Ltd. and directed the Assessing Officer to frame final assessment order. In fact, the Assessing officer had on 15th September, 2021, under mistaken belief that Hazira Port Pvt. Ltd. has not challenged the draft order of 22nd July, 2021 before the DRP, passed the final assessment order.
4.4 Subsequent to the directions issued by the DRP, the Assessing Officer once again passed the final assessment order on 31st May, 2022 following the directions of the DRP. The Hazira Port Pvt. Ltd. assailed both the orders before the Commissioner of Income Tax (appeal) and before the Income Tax Appellate Tribunal respectively.
4.5 In the meanwhile, a notice under Section 148 of the Act was served upon the petitioner on 31st March, 2021 and the reasons for reopening were supplied vide notice on 11th May, 2021. The said notice was issued alleging escapement of income on the issue of the non-charging of interest to M/s.Hazira Port Pvt. Ltd. The Petitioner, therefore, filed a detailed response to the said notice on 13th September, 2021. It appears that no further proceedings are carried out and no order under Section 143(3) read with Section 147 of the Act is passed.
4.6 Surprisingly, again the notice under Section 148A(b) of the Act on the very same issue was issued to the petitioner on 06th February, 2023. The petitioner filed its detailed response to the said notice on 15th February, 2023. This time also no further proceedings are carried out and no order under Section 148A(d) of the Act is received by the petitioner.
4.7 It is the case of the petitioner that the petitioner received the impugned show-cause notice under Section 148A(b) on 27th March, 2024 which was responded by the petitioner on 15th April, 2024 conveying the past correspondence on the above issues as well as filing detailed objections on merits as well.
4.8 Subsequently, the respondent passed the impugned order under Section 148A(d) on 19th April, 2024 alleging escapement of income to the tune of Rs.08,69,73,215/- and the consequential impugned notice under Section 148 of the even date is also issued requesting the petitioner to file return of income.
5. Learned senior advoca
Quasi-judicial authorities must provide reasons for their decisions to ensure fairness and prevent arbitrary actions.
The necessity of recording reasons in administrative decisions is essential for transparency and fairness, and failure to do so constitutes a denial of justice.
A mere recital of vague reasons would not be sufficient nor a matter like the present one where the aggrieved party has a right to know the reasons for the decision being taken either for or against ....
It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons ....
The necessity for clear and specific reasons in reopening assessments under the Income Tax Act is paramount; vague reasons do not justify such actions.
Administrative authorities must provide clear reasons for decisions affecting rights to ensure fairness and prevent arbitrariness.
Quasi-judicial authorities must provide reasons for their decisions, especially when condoning delays, to ensure fairness and prevent arbitrary actions.
The failure to provide valid notice and opportunity to be heard constitutes a violation of natural justice, necessitating quashing of ex parte orders under the GST Act.
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