AO bound to furnish reopening reasons recorded us 147 within a reasonable time for initiation of reassessment proceedings u/s 147/148

AO bound to furnish reopening reasons recorded us 147 within a reasonable time for initiation of reassessment proceedings u/s 147/148 This was held by ITAT in a recent Judgment

ABCAUS Case Law Citation:
6611 2016 (06) ITAT

Brief Facts of the Case:
The assessee filed his return of income which was processed u/s 143(1) of the Income Tax Act, 1961 creating a demand . However, the order was subsequently revised u/s 154 and the demand was reduced to NIL. Thereafter, a notice was issued to the assessee u/s 148 on the basis of information received from the Director Investigation (DIT-Inv) in respect of the fact that the gifts received by the assessee were not gifts but simply accommodation entries given by the persons who have allegedly given the gifts. The notice u/s. 148 of the Act was issued after due approval from the Addl. CIT.

The notice remained uncomplied with and consequently the AO completed the assessment u/s 148/144 by making addition of accommodation entries. Against the order,  the assessee appealed before the CIT(A), who dismissed the appeal of the assesseee. Aggrieved by the order of CIT(A), the assessee filed the present appeal with ITAT.

Contentions of the Assessee:
The assessee contended that he vide its letter dated 9.4.2008 before the AO had submitted that the original return of income might be treated as return of income for the purpose of section 148. Also, he had also requested for the supply of the reasons recorded for issuing of Notice u/s 148. However, such reasons were not supplied to him till the completion of assessment. Ultimately, the AO framed the assessment u/s 148/144 without giving the copy of the reasons recorded. The assessee pleaded that this point was also specifically raised before the CIT(A) who categorically admitted that the reasons for re-opening were not supplied to him. The assessee contended  that non-supply of copy of reasons recorded was contrary to the provisions of law as laid down by the Hon’ble Apex Court in the case of GNK Driveshafts (India) ltd. vs. ITO reported in 259 ITR 19 (SC). Thus, the assessee requested that by following the decision of the Hon’ble Apex Court, as aforesaid, the assessment be quashed being bad in law. In support of his contention he relied upon the various other case laws as under:

  • CIT vs. Trend Electronics 2015-TIOL-2393-HC-Mum
  • CIT vs. Videsh Sanchar Nigam Ltd. 340 ITR 66 (Bom.)
  • Telco Dadajee Dhackjee Ltd. VS. DCIT 2(3) 2012 TIOL-532-ITAT-MUM-TM
  • M/s Synopsys International vs. DDIT (Int. Taxation) ITA No. 549/Bang/11
  • G. Munuswamy vs. ACIT in ITA No. 242/Mds/2013
  • Sh. Sunil Kumar vs. DCIT 2015-TIOL- 1929-ITAT-Ranchi
  • S. Prasad Raju Vs. DCIT 96 TTJ 832.

Important Excerpts from ITAT Judgment:

…… we find that the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. vs. ITO 259 ITR 19 (2003) has held that “it is clear that the completion of assessment/reassessment without furnishing the reasons recorded by the AO for initiation of proceedings under section 147/148 of the Act is not sustainable in law as it is incumbent on the AO to supply them within reasonable time. We note that on the anvil of this judgment, on the request of the Assessee, the AO is bound to furnish the reasons recorded for initiation of proceedings under section 147 of the Act within a reasonable period of time so that the assessee could file its objections thereto and the AO was to dispose of the same by passing a speaking order thereon, which the AO has not done. We also note that even as per the rules of natural justice, the assessee is entitled to know the reasons on the basis of which the AO has formed an opinion that income assessable to tax has escaped assessment. The furnishing of reasons to the assessee is to enable/facilitate it to present its defence and objections to the initiation of proceedings under section 147/148 of the Act. Therefore, we are of the considered opinion that there was no justifiable reasons for the AO to deprive the assessee of the recorded reasons by him for initiating proceedings under section 147/148 of the Act. Therefore, in our considered opinion, the reopening in question is not sustainable in the eyes of law. Accordingly, we allow the assessee’s appeal on legality aspect without proceeding to adjudicate on merits by quashing the assessment order.

AO bound to furnish reopening reasons recorded us 147

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