2017 (8) TMI 1305 - AT - Income Tax

Reopening of assessment - CIT(A) held that the reopening was bad in law and hence the re-assessment proceedings were not valid but did not adjudicate the issue upon merits by treating them to be infructuous - non speaking order - Held that - When the reopening as well as merits of the case were before the learned CIT(A), it was incumbent upon him to pass an order and adjudicate by speaking order on both aspects. In the cross objection assessee is rightly aggrieved that despite filing the appeal and raising the necessary grounds the learned CIT(A) has not adjudicated upon the merits of the case. There are catena of decisions of higher Courts when it has been held that it is incumbent upon lower authorities to decide upon the jurisdictional as well as merits of the case raised before them so that there is a finality in proceeding at lower level and the higher forum can properly appreciate and decide upon the issue. Hence in our considered opinion the interest of justice requires that the adjudication of merits be remitted to the file of the learned CIT(A). Learned CIT(A) is directed to complete the appeal order by considering the merits of the case and passing an order on the merits of the case. Needless to add, assessee should be granted adequate opportunity of being heard. We make it clear that we have not considered the issue of reopening in any manner whatsoever. Revenue is free to take up the issue as required after the order by the learned CIT(A) is completed in terms of our remitting as above.

Summary

Issues involved:
1. Validity of reopening assessment and merits of addition of disallowed commission amount.
2. Delay in filing cross objection by the assessee.
3. Failure of the CIT(A) to adjudicate on the merits of the case.

Issue 1: Validity of reopening assessment and merits of addition of disallowed commission amount:
The appeal by the Revenue and cross objection by the assessee pertains to the order of the learned CIT(A) dated 18.03.2015 concerning the assessment year 2006-2007. The Revenue raised grounds questioning the CIT(A)'s decision, alleging failure on the part of the assessee to disclose all material facts necessary for assessment. The Revenue contended that the assessee's actions amounted to non-compliance and delaying tactics, leading to an ex-parte order. Additionally, the Revenue argued that the reopening for the assessment year in question did not constitute a "change of opinion" and highlighted discrepancies in the disclosure of related party payments. On the other hand, the cross objection by the assessee challenged the disallowance of expenses under specific sections of the Income Tax Act and raised concerns regarding the CIT(A)'s failure to address the grounds of appeal. The assessment was conducted under reassessment proceedings, resulting in the disallowance of a substantial commission amount. The CIT(A) held the reopening to be invalid in law, rendering the reassessment proceedings invalid. However, the CIT(A) did not delve into the merits of the case, deeming them inconsequential. The Tribunal noted a delay in filing the cross objection, which was condoned after considering the reasons provided by the assessee. The Tribunal emphasized the importance of adjudicating on both the jurisdictional and merit aspects of a case, directing the CIT(A) to complete the appeal order by addressing the merits and granting the assessee a fair hearing opportunity. The Tribunal refrained from considering the reopening issue, leaving it open for the Revenue to pursue after the completion of the CIT(A)'s order on the merits.

Issue 2: Delay in filing cross objection by the assessee:
The Tribunal acknowledged a delay of 51 days in the filing of the cross objection by the assessee. Despite the delay, the assessee submitted an affidavit explaining the reasons for the delay. After hearing both counsels, the Tribunal decided to condone the delay due to reasonable cause. The Tribunal's decision to accept the late filing was based on the provided justifications and the principle of ensuring a fair opportunity for all parties to present their case.

Issue 3: Failure of the CIT(A) to adjudicate on the merits of the case:
The cross objection raised by the assessee highlighted the CIT(A)'s failure to adjudicate on the merits of the case, despite the issues being brought before the authority. The Tribunal emphasized the necessity for lower authorities to address both jurisdictional and merit-related matters raised before them to ensure a conclusive decision-making process. Citing precedents from higher courts, the Tribunal stressed the importance of finality in proceedings at lower levels to facilitate a comprehensive review by higher forums. Consequently, the Tribunal directed the CIT(A) to complete the appeal order by considering the merits of the case and issuing a detailed decision. The Tribunal underscored the significance of providing the assessee with a fair opportunity to present their arguments, thereby ensuring a just and thorough adjudication process.

This detailed analysis provides a comprehensive overview of the judgment, addressing all the issues involved and highlighting the key legal arguments and decisions made by the Tribunal.