ROUGH DRAFT

LAW OF TAXATION – I

Reassessment Proceedings
A discourse on recording of reasons and communication of the same

Submitted to: Mr. Bhanu Pratap Singh

Submitted by: Abhishek Kumar Singh, Roll no. 171, VII semester, section B

Law of Taxation – I – ROUGH DRAFT

TABLE OF CASES

Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161
TAXMAN 316 (SC). ............................................................................................................. 8

Commissioner of Income-tax v. Rajindra Rosin & Turpentine Industries [2008] 305 ITR 161
(PUNJ. & HAR.). ................................................................................................................... 5

GKN Driveshafts (India) Ltd. v. Income-tax Officer [2002] 125 TAXMAN 963 (SC)..... 5, 7, 8

GVK Gautami Power Ltd. v. Assistant Commissioner of Income-tax, [2012] 20 taxmann.com

710 (AP). ............................................................................................................................ 7, 8

Haryana Acrylic Manufacturing Co. v. CIT [2009] 308 ITR 38 (Delhi). ............................ 7, 8

Haryana Acrylic Manufacturing Co. v. Commissioner of Income-tax [2008] 175 TAXMAN

262 (DELHI). ..................................................................................................................... 5, 7

K.M. Bansal v. CIT [1992] 195 ITR 247 (All.).......................................................................... 6

Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287. ................................................................. 5

Mithlesh Kumar Tripathi v. Commissioner of Income-tax [2005] 149 TAXMAN 692 (ALL.).
................................................................................................................................................ 6

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 1. PRELIMINARIES

OBJECTIVE OF THE STUDY

To learn about the nature of the ‘compensation’ amount involved in this case; to learn whether
such income is taxable under the Income Tax Act or not by analysing the case decided by the
Authority of Advance Rulings (AAR).

RESEARCH METHODOLOGY

The methodology used in the course of this research is purely doctrinal and non – empirical.
Primary sources such as statutes and case laws have been used. Secondary sources such as
books, journal articles, newspaper articles and speeches have also been referred to. The author
has taken a mono-disciplinary approach. There has been the use of analytical, descriptive,
applied, qualitative, conceptual methodology.

STATEMENT OF PROBLEM

Recording of reasons is a condition precedent to invoke jurisdiction under section 147/148 of

the Income Tax Act, 1961. When a notice under section 148 of the Act is issued, the proper
course of action for the noticee is to file return and if he so desires, to seek reasons for issuing
notices and the Assessing Officer is bound to furnish reasons within a reasonable time. On
receipt of reasons, the noticee is entitled to file objections to issuance of notice and the
Assessing Officer is bound to dispose of the same by passing a speaking order.

It has been observed that the requirement of recording the reasons, communicating the same to
the assessee, enabling the assessee to file objections and the requirement of passing a speaking
order are all designed to ensure complete transparency and adherence to the principles of
natural justice.

Thus the problem is whether issuance of notice for reassessment, recording of reasons before
issuance of notice and communicating the same to the to the assessee within a reasonable time
(and particularly keeping in mind the limitation period), as a whole, shall be considered as a
mandatory obligation communication of reasons recorded within reasonable time are directory
provisions?

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RESEARCH QUESTIONS TO BE ADDRESSED

 whether legislature under section 148(2) of the Act, which in unequivocal terms
require ‘reasons’ to be recorded, intended such ‘reasons’ not to be
communicated/disclosed along with ‘Notice?’
 Whether non-disclosure of reasons, while giving notice, fulfils the ‘contention’ and
the ‘object’ of the framers?

LITERATURE SURVEY

The author referred to volume 2 of the commentary “Income Tax Law” by Chaturvedi &
Pithisaria to read about the literature available on section 56 of the Act. The author also referred
to volume 4 of the same book to read about the literature on section 195 of the Act. The author
also referred to volume 6 of Sampath Iyengar’s commentary on “Law of Income Tax” to read
about literature on section 195 and volume 3 of the same commentary to read about section 56.

CONTRIBUTION OF AUTHOR

The author has done some original research by researching cases concerning recording of
reasons before issuance of notice for reassessment. The author felt that this was necessary
because there have been situations where notices for reassessment are issued haste when the
limitation period for reassessment are about to expire and assesses are not given opportunity to
seek reasons, in consonance with principles of natural justice, before filing their revised returns.

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 2. INTRODUCTION

The primary contentions which the assessee may raise in his favour are that the date on which
reasons are supplied by the department for reassessment proceedings are beyond limitation
period of law as prescribed in the Income Tax Act, 1961. The assessee may contend that notice
for reassessment should not be devoid of the reasons and in case where notice is issued within
time period but reasons are supplied beyond limitation period, the whole reassessment
proceedings would be held to be barred by the limitation period.

However, the revenue will argue that by the plain reading of the provisions pertaining to
limitation period of issuing notice the only requirement provided is that reasons should be
recorded by the AO before issuing the notice. The provisions of the act nowhere provide that
reasons should also be supplied along with the notice and so if notice was sent well within the
limitation period hence the reassessment proceedings are valid.

The project will thus argue from both the assessee’s and the revenue’s side and hence try to
draw a fair conclusion.

3. ASSESSEE’S ARGUMENTS
4. REVENUE’S ARGUMENTS
5. CONCLUSION

6. BIBLIOGRAPHY

 Income Tax Act, 1969.

 http://manupatra.com/roundup/334/Articles/Interpretation%20of%20Section%20147
%20of%20the%20Income.pdf
 http://law.incometaxindia.gov.in/Directtaxlaws/act2005/section148.htm
 http://taxguru.in/income-tax/notice-for-assessment-or-reassessment-us-148-of-the-
income-tax-act-1961.html
 Chaturvedi and Pithisaria, Income Tax Law (New Delhi, India: Lexis Nexis
Butterworths Wadhwa, 2012) – volume 5 and 8.
 Sampath Iyengar, Law of Income Tax (New Delhi India: Bharat Law House Pvt. Ltd.,
2013) – volume 1 and 7.
 http://www.itatonline.org/articles_new/index.php/guide-to-the-law-on-reopening-of-
assessments-us-147-of-the-income-tax-act/