2017 (8) TMI 1314 - AT - Income Tax

Validity of reopening of assessment - non disposing of the assessee s objections against the notice u/s. 148 - Held that - CIT(A) by respectfully following the judgment of the Hon ble Supreme Court i.e. in the case of GKN Driveshafts India Ltd. 2002 (11) TMI 7 - SUPREME Court has rightly observed that AO has not passed the speaking order in disposing of the assessee s objections against the notice u/s. 148 of the I.T. Act, before proceeding with the assessment, hence, correctly held that the subsequent assessment order is bad in law and deserving of being quashed. - Decided in favour of assessee.

Issues:
1. Validity of reassessment under section 147 of the Income Tax Act, 1961.
2. Disposal of objections through a speaking order by the Assessing Officer.
3. Acceptance of Fair Market Value of Property.
4. Application of section 2(14)(iii)(b) of the Income Tax Act, 1961.
5. Treatment of long term capital gain and disputed property.

Analysis:

1. Validity of Reassessment under Section 147:
The appeal challenged the assessment framed by the Assessing Officer (AO) under sections 143(3)/147 of the Income Tax Act, 1961. The appellant contended that the reassessment was illegal and lacked jurisdiction as the conditions for a valid assumption of jurisdiction were not fulfilled. The AO was criticized for not applying his mind before invoking section 50C of the Act. Additionally, it was argued that no valid approval was obtained as required under section 151(2) of the Act.

2. Disposal of Objections Through a Speaking Order:
The appellant raised objections to the reopening of the assessment, emphasizing the necessity of a speaking order by the AO. The failure to pass a speaking order on the objections was deemed a legal flaw. Citing relevant judgments, including the GKN Driveshafts case, the appellant argued that this irregularity could not be considered trivial and needed to be rectified by the AO.

3. Acceptance of Fair Market Value of Property:
The appellant contested the acceptance of the Fair Market Value of the property as on 01.04.1981, arguing that the valuation adopted by a government-approved valuer should have been considered. The rejection of documentary evidence without rationale was highlighted as a flaw in the decision-making process.

4. Application of Section 2(14)(iii)(b) of the Income Tax Act:
The appellant argued that the land in question did not fall under the purview of section 2(14)(iii)(b) of the Act, emphasizing that the location of the land in Baghpat did not automatically make it a capital asset. The failure to acknowledge submissions and case laws, as well as the lack of a reasonable opportunity for the appellant, were raised as concerns.

5. Treatment of Long Term Capital Gain and Disputed Property:
The appellant disputed the computation of long term capital gain, claiming the property to be disputed and hence rejecting the litigation expenses. The reassessment proceedings were challenged as illegal and without jurisdiction, with a plea for the deletion of the additional amount. The need for a fair opportunity to present the case was stressed.

In the final judgment, the Tribunal allowed the appeal, quashing the assessment order due to the non-disposal of objections by the AO. The decision was supported by legal precedents emphasizing the importance of passing a speaking order in such cases. The Tribunal's ruling was based on the established legal principles and the specific circumstances of the case, ensuring justice and adherence to procedural requirements.

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