The Bombay High Court has held that an Assessing Officer cannot begin scrutiny proceedings under Section 143(2) of the Income-tax Act, 1961, in a reassessment case before deciding the assessee’s objections against reopening the assessment.
The ruling was delivered in H.P. Diamonds India Pvt. Ltd. v. Deputy Commissioner of Income Tax, concerning reassessment proceedings for Assessment Year 2012–13.
The assessee had challenged the reopening of its assessment and raised objections before the Assessing Officer. However, before those objections were decided, the Assessing Officer issued a notice under Section 143(2), followed by a notice under Section 142(1).
The High Court relied on the Supreme Court’s landmark ruling in GKN Driveshafts (India) Ltd. v. ITO, (2003) 259 ITR 19 (SC), which requires an Assessing Officer to consider and dispose of objections to reopening through a speaking order before proceeding with the reassessment.
The Court observed that a Section 143(2) notice marks the commencement of scrutiny and, therefore, cannot be issued while the assessee’s objections to reopening remain undecided. Accordingly, the High Court set aside the Section 143(2) notice and the consequential Section 142(1) notice.
The judgment reinforces an important procedural safeguard in reassessment proceedings: the Assessing Officer must first address the assessee’s challenge to the reopening before proceeding to examine the substantive tax issues.