Reassessment order passed without disposing objections bad in law. ITAT follows jurisdictional HC

Reassessment order passed without disposing objections bad in law. Dismissal of SLP by Supreme Court without assigning reasons not a declaration of law  

ABCAUS Case Law Citation:
ABCAUS 2922 (2019) (05) ITAT

Important Case Laws Cited/relied upon by the parties
National Thermal Power Co., Ltd., Vs. CIT 229 ITR 383 (SC)

Pruthvi Brokers and Shareholders 349 ITR 336
KSS Petron Private Limited Vs. ACIT
M/s. Bayer Material Science Pvt. Ltd.
GKN Driveshafts (India) Ltd. Vs. ITO [2003] 259 ITR 19 (SC)
CIT Vs. Trend Electronics (2015) 379 ITR 456 (Bom)
CIT Vs. Videsh Sanchar Nigam Ltd (2012) 340 ITR 66 (Bom)
Kunhayammed and others Vs. State of Kerala (2000) 245 ITR 360

The assessee was an individual who filed its return of income electronically. The case was re-opened by issuing notice u/s 148 of the Income Tax Act, 1961 (the Act). Thereafter the case was taken up for scrutiny and assessment was framed u/s 143(3) r.w.s. 148 of the Act.

Aggrieved by the order of AO, assessee carried the matter before CIT(A), who dismissed the appeal of assessee.

Aggrieved by the order of CIT(A), assessee was in appeal before the Tribunal.

The assessee raised additions ground claiming that the reassessment order passed u/s 147 of the Act was bad in law since, objections raised to the reassessment proceedings were not disposed-off.

The assessee’s submission was that the additional grounds being legal grounds and since it went to the root of the issue involved in the appeal, the same be admitted and the same was admitted by the Tribunal.

The assessee contended that when the AO had not followed the law laid down by the Hon’ble Apex Court in the case of GKN Driveshafts, the order passed by the AO lacked jurisdiction and therefore be set aside.

The Department relied upon a favourable judgment passed by the Hon’ble High Court wherein it was held that the non compliance of the procedure laid down in the GKN Driveshafts case would not make the order void or non est. The Hon’ble High Court had opined that such violation was a procedural irregularity which could be cured by remitting the matter.

The Department also pointed out that against the above decision of the Hon’ble High Court, the assessee had approached the Hon’ble Supreme Court by filing a Special leave Petition (SLP) which had been dismissed.    

The assessee submitted that the Hon’ble Supreme Court had merely dismissed the SLP without assigning any reasons for dismissal. Relying on the decision of Hon’ble Apex Court, he submitted that when the SLP is dismissed without assigning any reasons, then the order is not a declaration of law by Supreme Court under Article 141 of the Constitution.  

The Tribunal observed that it was undisputed fact that on receipt of the reasons for re-opening of the assessment u/s 148 of the Act the assessee had raised objection to the re-opening of the assessment proceedings initiated by the AO. The AO did not dispose of the objections separately and proceeded and passed the re-assessment order.

Before the Tribunal, the Revenue could not place any material on record to demonstrate that the reasons recorded for reopening the assessment was furnished to the assessee. Therefore, the Tribunal opined that clearly, despite the request by the assessee, the Assessing Officer had completed the assessment without furnishing the reasons recorded for reopening of assessment.

The Tribunal further opined that the furnishing the reasons recorded for reopening of the assessment was mandatory condition as held by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. wherein the Hon’ble Supreme Court had laid down the principle that recorded reasons must be furnished to the assessee when the assessee sought for the reasons.

The Tribunal also observed that Hon’ble Bombay High Court after considering the decision of Hon’ble Apex Court in the case of GKN Driveshafts had held that the reassessment order to be non sustainable when the objections to the re-assessment were not disposed off by the AO. Similar view was also taken by the Hon’ble High Court in another case.

The Tribunal further found that Hon’ble High Court had  that recorded reasons as laid down by the Apex Court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the AO. It had further held that the recording of reasons and furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in the absence of reasons being furnished when sought for would make an order passed on reassessment bad in law.

In view of that the Revenue could not placed any contrary binding decision in its support, the Tribunal, held the reassessment order passed by the AO to be bad in law and set it aside.

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