2014 (12) TMI 384 - AT - Income Tax

Validity of notice for reopening of assessment u/s 148 time for normal scrutiny u/s 143(3) was available and the A.O. - Held that - as per Section 147 the AO is justified in issuing the notice u/s 148 and justified in making the assessment u/s144 - the Commissioner of Income tax has held that when the Assessing Officer can assess the income u/s. 143(2), it is not necessary to issue the notice u/s. 148 of the Act. But in the instant case, the Assessing Officer has not completed the assessment and pendency of the assessment order - The AO has issued the notice u/s 147 and made the assessment thus, AO is justified in reopening the assessment as well as making the assessment u/s. 147 r.w.s. 144 - CIT (A) is not justified in action the order of the CIT(A) is set aside Decided in favour of revenue. Opportunity of being heard provided or not Non-speaking order passed by CIT(A) - Amount paid to tenants to be deducted from sale consideration or not - Held that - CIT(A) has allowed the claim of the assessee without passing any speaking order - the CIT(A) should pass the order with giving the reasons the same has also been provided under the Instruction issued by the CBDT in Instruction No. 1592 dated 7.1.85 F. No.262/38/84ITJ - the requirement of giving reasons for an order derives its authority from the principle that justice should not only be done but it also should seem to have been done - the duty to act judicially excludes the possibility of arbitrary exercise of the power - If reasons are required to be given for an order the same would be an effective restraint or potent weapon to check the abuse of power - It excludes from consideration extraneous or irrelevant matters thus, the matter of compensation of ₹ 28,00,000/- is remitted back to CIT(A) to decided afresh order Decided in favour of revenue.

Summary

Issues Involved:
1. Legality of notice issuance under Section 148 when time for normal scrutiny under Section 143(3) was available.
2. Adequacy of opportunity provided to the assessee for being heard before concluding the assessment.
3. Deduction of Rs. 28 lakhs paid to tenants from the sale consideration.

Detailed Analysis:

Issue 1: Legality of Notice Issuance Under Section 148
The department contended that the CIT(A) erred by observing that the Assessing Officer (AO) was incorrect in issuing notice under Section 148 when time for normal scrutiny under Section 143(3) was still available. The CIT(A) noted that the AO initiated reassessment proceedings despite the regular assessment not being barred by limitation. The AO had issued a notice under Section 148 on 22.10.2008, even though the time limit for issuing a notice under Section 143(2) was until 31.10.2008. The CIT(A) found no office copy of any notice under Section 143(2) on record, proving that no such notice was issued. The tribunal concluded that the AO was justified in reopening the assessment and making the assessment under Section 147 read with Section 144, reversing the CIT(A)'s finding.

Issue 2: Adequacy of Opportunity Provided to the Assessee
The department argued that the CIT(A) was incorrect in stating that the AO did not provide adequate opportunity for the assessee to be heard. The CIT(A) observed that the AO's conduct violated the principles of natural justice, as the AO gave multiple dates for hearings in one notice and finalized the assessment before the final date. The CIT(A) concluded that the AO's actions demonstrated an intention not to grant adequate opportunity. The tribunal noted that the AO had issued several notices and provided multiple opportunities for the assessee to respond. Despite this, the assessee did not comply, leading to the assessment being completed under Section 147 read with Section 144. Therefore, the tribunal found the AO's actions justified and reversed the CIT(A)'s decision.

Issue 3: Deduction of Rs. 28 Lakhs Paid to Tenants
The department challenged the CIT(A)'s decision to allow the assessee's claim of Rs. 28 lakhs paid to tenants to be deducted from the sale consideration. The CIT(A) allowed this deduction based on the assessee's submission that the payment was made to tenants for clear title to the property. The tribunal found that the CIT(A) allowed the claim without passing a speaking order, which is required for quasi-judicial functions. The tribunal referenced the Supreme Court's decision in Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India, emphasizing the necessity of recording reasons in support of orders. Consequently, the tribunal restored the matter to the CIT(A) to pass a fresh order, ensuring it is a speaking order.

Conclusion:
The tribunal allowed the department's appeal on the first and second grounds, reversing the CIT(A)'s findings. On the third ground, the tribunal allowed the appeal for statistical purposes and remanded the matter back to the CIT(A) for a fresh decision, directing the CIT(A) to provide a detailed, reasoned order. The tribunal emphasized the importance of adhering to the principles of natural justice and the necessity of issuing speaking orders in quasi-judicial proceedings.