[Opinion] Legal Development Post GKN Pronouncement – A Review

Dr. Sanjay Bansal & Dr. Puja Jaiswal – [2026] 184 taxmann.com 371 (Article)

1. Introduction

The landmark judgement of the Hon’ble Supreme Court of GKN Driveshafts (India) Ltd. v. ITO remains a significant judgement in the context of the provisions of reassessment under the Income tax Act, 1961 and the Income Tax Act, 2025. The said judgement is a classic example of judicial adventurism as it established mandatory procedural safeguards under tax reassessment regime, despite the procedural aspects majorly codified into the Income Tax Act, 1961 vide sections-148 and 148A w.e.f. 2021 onwards. The substitution of new sections for sections 148 and 148A under the Finance Act of 2024 of the Income Tax Act, 1961 dealing with–“Issue of notice where income has escaped assessment”, can be classified as an attempted exercise of statutory recognition of the judgement rendered in GKN Driveshafts (supra), albeit the principles laid down therein, sets down to ensure fairness, transparency in reopening cases which are widely applied by High Courts and the Income Tax authorities, therefore, an examination and analysis of subsequent legal developments becomes necessary for better understanding of the power of reopening the assessment.

2. GKN Driveshafts (India) Ltd. Case – Judicial Adventurism

The Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd., has set out the procedure to be adopted by the Income Tax Officer in the matter of reassessment proceedings. It was an appeal arising from the decision of High Court of Delhi in GKN Driveshafts (India) Ltd. v. ITO, wherein a petition challenging the notices issued to assessee by Income Tax Officer under Section 148 of the Income Tax Act, 1961 had been filed. The High Court of Delhi held that the petitioner was not justified in invoking the extraordinary jurisdiction of the Court at the stage of notice issued, and therefore the petition being premature was dismissed. In an appeal against the said decision, the Hon’ble Supreme Court while upholding the decision of the Hon’ble High Court of Delhi and dismissing the Civil Appeal pronounced:

“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. 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. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.”

Before making the above observations, the Supreme Court took note of the following factors:

(i) That the High Court had taken the view that the appellants could have taken all objections in their replies to the notices and that therefore, at that stage, the writ petition was premature;

(ii) That the counsel appearing for the appellant had brought to the notice of the Court that the impugned notices related to seven assessment years and that during the pendency of the appeals before the Supreme Court, the assessment for two years i.e. 1995-96 and 1996-97 was completed against which the appeals were filed before the appellate authority, however, the notices relating to the other five assessment years, viz. 1992-93, 1993-94, 1994-95, 1997-98 and 1998-99 were the subject-matter of the appeals before the Supreme Court.

Plain reading of the decision of the Supreme Court in GKN Driveshafts (India) Ltd.’s case (supra) would therefore, show that it had refused to interfere in the order of the High Court of Delhi dismissing the writ petition on the ground that the same was premature as the petitioners had approached the High Court immediately on receipt of the notice without availing an opportunity of filing the reply and the objections to the notice. Simultaneously, it was observed that

“proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices when a notice receives a notice under section 148 of the said Act.”

The Supreme Court has further observed that the noticee is entitled to insist for adjudication of the objections to the issuance of notice and to invite a speaking order from the adjudicating authority in relation to such objections, where upon, the Assessing Officer would be enjoined to dispose of such objections by a speaking order. In other words, the Supreme Court has held that when the authorities issue notices under section 148 of the Income Tax Act, 1961 the proper course of action for the assessee is first to file a reply and raise all his objections and invite a speaking order on such objections.

Before 01.04.2021, there was no provision under the Income Tax Act, 1961 for filing Objections and Order to be passed thereupon by the Assessing Officer on the receipt of notice under Section 147/148 of the said Act by an assessee. Be that as it may, the Supreme Court in the case of GKN DriveshaftIndia Ltd. (supra) has laid down nothing but guidelines in the form of procedure which is but a machinery of law – the channel and means whereby law is administered and justice reached; and does not whittle down or modify any substantive right. Procedural laws are devised and enacted for the purpose of advancing justice. Rules of procedure are intended to be handmaid to the administration of justice. The main purpose and object of enacting procedural laws is to see that justice is done to the parties. Laws of procedure are grounded on the principle of natural justice. The laying down of the procedure by the Supreme Court governing the entertainment of Objections and disposal of the same by an Order much less a speaking one by the Assessing Officer is in tune with the concept of adherence of the principles of natural and speedy justice i.e., a part of rule of law and Article 14 of the Constitution of India; and is nothing short of ‘the law’ under Article 141 of the Constitution of India.

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