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How can lack of jurisdiction for reassessment notice be questioned?

QUESTION: Where the taxpayer feels that his return is correct, it is open to the assessee to take shelter under jurisdiction so as to avoid the long-drawn process of convincing the assessing officer both on facts and on question of law, especially since the law is also uncertain in many respects. How should the assessee proceed in such cases?

ANSWER: Taxpayer has the right to be satisfied that the notice for back assessments accords with the requirements of law. Where an assessment has already been made, it cannot be subject matter of a reassessment notice unless there are recorded reasons and on the basis of such recorded reasons, there is satisfaction of a higher authority as specified under Sec. 151 on the basis of such recorded reasons that the notice is justified. Recording of such reasons is, therefore, obligatory in all cases where a regular assessment had been made. The assessing officer is obliged to disclose the reasons before filing of the return, if he is asked, after the assessee responds to the notice by filing a return. In fact, the assessee is entitled to a copy of the recorded reasons and not merely to the gist of the same.

The Supreme Court in GKN Driveshafts (India) Ltd. v ITO (2003) 259 ITR 19 (SC) has laid down the steps to be followed in such cases. The courts will not entertain any writ petition questioning the validity of the notice merely on receipt of such notice. It will expect the assessee to apply and get the copy of the recorded reasons to which he is entitled and, thereafter, lodge his objections as regards jurisdiction to the assessing officer himself, if he feels that the reasons recorded do not justify such notice. On receipt of such objections, the assessing officer is obliged to consider the objections and pass a speaking order with his reasons for not accepting the objections, if he is unable to accept them. It is only at this stage that the assessee may file a writ against such an order, if he is not satisfied with it, if he so chooses. At the same time, his right to question jurisdiction is not lost, if he does not file a writ, since he can always take up the matter of jurisdiction along with the merits in case there is a reassessment in pursuance of such notice after consideration of the assessee's objection on merits as well.

In rare cases, courts have interfered even on notice, where the notice is mala fide, as for example, where it is against a decision binding on the assessing officer or is otherwise without any ostensible basis whatsoever. Where the writs are entertained, the court will not enter into adequacy of the reasons or merits, if notice is prima facie warranted as long as there is nexus as between information and probable liability. There is a large volume of case law as to what constitutes information and what cannot be accepted.

An assessee is best protected on facts rather than on jurisdiction, though he may seek to rely upon lack of jurisdiction where it is possible to do so by following the procedure for this purpose.

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