Re-assessment order passed in violation of Supreme Court guidelines is bad in law- ITAT

Re-assessment order passed in violation of guidelines laid down by the Supreme court in the case of GKN Driveshaft Ltd. is bad in law- ITAT

ABCAUS Case Law Citation:
ABCAUS 2676 (2018) (12) ITAT

Important Case Laws Cited/relied upon:
GKN Driveshaft (India) Ltd. Vs ITO, 259 ITR 19
PCIT vs Tupperware India P. Ltd. (2016) 236 Taxman 0494
Thakur Bhai Magan Bhai Patel vs ITO (2017) 393 ITR 0612

In the instant appeal, the assessee had challenged the order passed by the Commissioner of Income Tax (Appeals) confirming the action of the AO in confirming re-assessment order without disposing off

During the assessment year under consideration, the assessee company received share application money from the two applicant companies.

The initial assessment was completed u/s 143(3) of the Income-tax Act, 1961 (“the Act”). However, later on, on receipt of information to the effect that the assessee had received accommodation entries the Assessing Officer (AO) initiated re-assessment proceedings by issuance of notice u/s 148 of the Act and added the same to the income of the assessee.

The CIT(A) dismissed the appeal and confirmed the addition.

Before the Tribunal, the assessee contended that the assessment was liable to be quashed because the AO had not passed an order dealing with the objections filed by the assessee for initiation of proceedings u/s 147 of the Act and thereby violating the law laid down by the Hon’ble Supreme Court rendering the assessment order illegal. The assessee also relied upon the jurisdictional High Court. It was further submitted that the CIT(A) also has not adverted to this fact.

Assessee further contended that the learned AO did not provide any material which was in his possession in support of recording the reasons u/s 148(2) of the Act for reopening of the assessment proceedings and thereby rendering the assessment order illegal and void.

On the merits, it was contended that the CIT(A) erred in confirming the addition made by the AO to the returned income on the account of alleged accommodation entry of the same amount ignoring the position of law and facts.

On the other hand, it was the argument of the Revenue that there was no proof that the assessee had filed the objection letter with the AO. It was further submitted that it had been held that the reopening of assessment u/s 147 is valid despite the AO not passing speaking order against objections field by the assessee and the SLP filed against this decision of the High Court was dismissed by the Hon’ble Supreme Court.

It was further contended that the assessment order clearly reads that the assessee entered appearance and cooperated in the assessment proceedings by filing requisite details/information required by the learned AO, as such, it was not open for the assessee to contend that it had raised any objections to the reopening of the proceedings and for non disposal of such objections, the assessment order is bad in law.

The Tribunal observed that if really the assessee did not deliver the objection letter before the AO raising objections to the reopening of the proceedings, and when such fact was raised before the CIT(A) specifically giving date of the letter and the contents thereof, should there be anything wrong with the statement, learned AO should have contended before the CIT(A) that the alleged objection letter was not at all filed and it was for the first time assessee was raising such objections before the first appellate authority and such statement was baseless.

The Tribunal noted that in respect of this contention raised by the assessee the, CIT(A) did not deal with this aspect at all. It was, therefore, futile for the revenue to contend that there was no evidence to show that the objection was never filed before the AO and the order of assessment did not reflect the filing of such letter.

The Tribunal opined that it was clear that the assessee contended before the AO that reopening proceedings were unnecessary, illegal and were near reversion of the assessment framed, but the AO did not advert to such objections by a separate order or during the course of assessment order.

The Tribunal opined the Hon’ble jurisdictional High Court had held that after having correctly understood the decision of the Supreme Court as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment.

The Tribunal opined that the Hon’ble Gujarat High Court had adverted to the aspect of the guidelines laid down by the Hon’ble apex court but had not laid down the law as argued by the Revenue to the effect that despite the AO not passing speaking order against the objections filed by the assessee, the reopening of assessment u/s 147 is valid.

The Tribunal opined that the assessment order passed in violation of the guidelines laid down by the Hon’ble Apex court was bad in law in view of the judgment of the Hon’ble jurisdictional High Court.

The assessment order was accordingly quashed.

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