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Bombay High Court Quashes Reassessment Notices Over Procedural Errors
The tax department wanted to take another look at a company’s tax assessment.
The company objected to reopening the assessment.
Before deciding that objection, the department sent a notice to start scrutiny.
The department said it could send that notice as long as it waited to make a final decision.
The Bombay High Court disagreed.
It said the scrutiny notice itself begins the assessment process.
So the department had to decide the company’s objection first.
The court also said the department did not wait the required four weeks after rejecting the objection.
It cancelled the notices and the related reassessment proceedings.
The Bombay High Court quashed reassessment notices issued to H.P. Diamonds India Pvt. Ltd. for assessment year 2012-13.
The dispute concerned a March 2019 notice seeking to reopen the company’s assessment over share premium transactions.
The Assessing Officer issued a scrutiny notice before providing the reasons for reopening and before deciding the company’s objections.
The Revenue argued that it could issue an initial scrutiny notice before deciding objections, provided it did not pass a final assessment order.
The court held that objections must be decided before assessment proceedings begin and also noted the department did not observe a four-week waiting period after rejecting them.
- Who
- The Bombay High Court, the Income Tax Department and H.P. Diamonds India Pvt. Ltd.
- What
- The court quashed reassessment notices and proceedings, ruling that the company’s objections to reopening had to be decided before assessment proceedings began.
- Where
- Mumbai, at the Bombay High Court.
- When
- The judgment was reported on October 3, 2026; the notices and related steps occurred in 2019.
- Why
- The department issued a scrutiny notice before deciding the company’s objections to reopening its completed assessment, and did not observe the stated four-week period after rejecting them.
Company’s position
Revenue’s position
When scrutiny can begin
Company’s position
H.P. Diamonds argued that the Assessing Officer had to decide its objections to reopening in a speaking order before proceeding with reassessment.
Revenue’s position
The Revenue argued that the department only had to decide the objections before issuing a final assessment order, and could issue an initial scrutiny notice earlier.
Key facts
- Company
- H.P. Diamonds India Pvt. Ltd.
- Assessment year
- 2012-13
- Reopening notice
- Issued under Section 148 in March 2019
- Scrutiny notice
- Issued under Section 143(2) on September 2, 2019
- Reasons provided
- September 3, 2019
- Objections rejected
- October 31, 2019
- Court outcome
- Reassessment notices and consequential proceedings were quashed
Quotes
Bombay High Court bench
The bench of Justices B.P. Colabawalla and Firdosh Pooniwalla hearing the reassessment case.
“If one were to issue a Section 143(2) Notice and proceed with the assessment without first disposing of the objections, it would really amount to putting the cart before the horse.”
freepressjournal.in
Sources
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