Non furnishing of reasons recorded for reopening of assessment despite assessee asking the same, the reassessment order bad in law.
In a recent judgment, ITAT Delhi held that where reasons recorded were not furnished for reopening of assessment even when assessee sought for the same, the reassessment order would be bad in law.
ABCAUS Case Law Citation:
4658 (2025) (07) abcaus.in ITAT
Important Case Laws relied upon by Parties:
GKN Drive Shaft India Ltd reported in 259 ITR 19 (SC)
In the instant case, the assessee had challenged the order passed by the CIT(A) in in dismissing the ground of appeal that the AO had not served the notice under section 148 of the Income Tax Act on the assessee in accordance with law and the assessment made consequent thereto is liable to be quashed.
The AO based on the information available with AST System that assessee had made cash deposits in his Bank account and had made commodity transaction through multi commodity exchange and in view of the fact that no return of income has been filed by him for relevant Assessment Year (AY 2010-11), proceeded to reopen the case of the assessee vide issuance of notice u/s 148 of the Act.
The assessee claimed that he was an agriculturist and has been doing agriculture activities with his father in the agricultural land measuring about 10 acres in the village which is canal as well as tube-well irrigated. In addition to the above, it was submitted that he was doing the business of sale and purchase of scrap of wheat, sarso, bajra, jawar and purchase and sale of buffalos and rearing of buffalo in the village. The assessee had filed his return of income u/s 44AF of the Act showing income from sale and purchase of crops, scrap and buffalos.
The assessee with the help of profit shown explained the source of cash deposit in Bank and also furnished the cash flow statement.
The AO however disbelieved the contentions of the assessee and made an addition on account of cash deposits as his unexplained income.
The assessee preferred an appeal before the CIT(A), wherein, ground was raised challenging the validity of assumption of jurisdiction u/s 147 of the Act. It was specifically pointed out that no notice u/s 148 per se of the Act was served on the assessee. Further, on repeated issuance of notice u/s 142(1) of the Act calling for return of income during the course of assessment proceedings, the assessee had indeed furnished the return of income and sought for reasons recorded for reopening the assessment. The assessee had filed a reply in response to notice u/s 148 of wherein he had stated that the original return be treated as return in response to notice u/s 148 of the Act. The assessee sought for reasons recorded for reopening in this letter. No reasons for reopening assessment was ever supplied to the assessee.
The Tribunal observed that the CIT(A) merely applied the provisions of Section 292BB of the Act regarding the objection of the assessee on non-furnishing of reasons recorded for reopening the assessment. Further, with regard to non supply of reasons for reopening the assessment by the AO, the CIT(A) observed that assessee had never sought for the reasons before the AO and accordingly dismissed the plea of the assessee.
However, the Tribunal noted that a letter written by the Authorized Representative of the assessee to the AO was submitted by the assessee wherein the assessee had duly filed a reply to the notice filed a reply to the notice u/s 148 of the Act and had indeed sought for reasons recorded. Admittedly, the reasons were not provided to the assessee.
The Tribunal observed that the question whether the non-furnishing of reasons recorded for reopening of the assessment would become fatal to the reassessment proceedings per se was subject matter of consideration by the Hon‟ble Bombay High Court wherein, it was held that where reasons were not furnished for reopening of assessment even when assessee sought for the same, the reassessment order could be bad in law.
Following the same, the Tribunal quashed the reassessment proceedings being in violation of decision of the Hon’ble Supreme Court.
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