Bombay HC Pulls Up AO for Ignoring Taxpayer’s Objections in Tax Reassessment Case

Moneylife Digital Team 30 April 2025

Economy & Nation

In a sharp rebuke to the income tax (I-T) department, the Bombay High Court (HC) has set aside a reassessment-related order passed against Modern Realty Pvt Ltd, observing that the assessing officer (AO) had failed to properly consider the taxpayer’s objections, rendering the process legally untenable.

In an order earlier this week, the bench of justice MS Sonak and justice Jitendra Jain says, "In this case, the AO has been extremely casual in dealing with Modern Realty’s objections. As noted earlier, the objections have not been dealt with at all. This amounts to frustrating the salutary process... Modern Realty has filed only one set of objections, and without dealing with those objections, to say that objections followed by cross objections are an endless process, which should end at a certain point in time, was not justified."

"We think that such casualness in the matter of the disposal of Modern Realty’s objections to reopening the assessment must end. In several cases, the AOs do not seriously deal with the assessee‘s objections, forcing us to set aside such orders and remand the matters to the AOs. By shirking their duty of deciding on Modern Realty’s objections, the AO cannot frustrate the scheme provided in GKN Driveshafts India Ltd. The impugned order is an instance where the AO has virtually declined to exercise the jurisdiction vested in him and to discharge the duty expected of him," the bench says in the order.

The Court, while allowing the writ petition filed by Modern Realty, noted that the AO had merely acknowledged receiving objections to a notice under Section 148 of the Income Tax Act (for reopening the 2015–16 assessment), but did not apply his mind to any of them.

Modern Realty had raised detailed objections on 14 February 2022 after receiving the reasons for reassessment on 7 July 2021. However, the order dated 25 March 2022 neither addressed these objections substantively nor applied the cited precedents meaningfully.

The HC held that such an approach undermines the safeguards established by the Supreme Court in GKN Driveshafts (India) Ltd v CIT (259 ITR 19), which mandates the AO to fairly consider and dispose of a taxpayer’s objections before proceeding with reassessment.

The bench directed the jurisdictional AO to freshly consider the objections and pass a reasoned order within four weeks. If any order is adverse to Modern Realty, the AO must wait another four weeks before initiating reassessment proceedings, it added.

Furthermore, the High Court awarded costs of Rs5,000 to Modern Realty, highlighting that judicial review cannot substitute the mandatory reasoning that the AO is bound to provide.

"The casualness with which the objections were handled must end," the Court noted, underlining that failure to address objections frustrates the statutory process and burdens the court with avoidable litigation.

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