2015 (10) TMI 793 - AT - Income Tax

Validity of reopening of assessment under section 147 - A.R. submitted that that the Assessee s objection to reassessment proceedings were not passed by a separate order but were disposed by the A.O in the assessment order dated 22.03.2006 passed u/s. 143(3) r.w.s. 147 - Held that - As decided in case of General Motors India Pvt. Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT A.O is mandated to decide the objection to the notice u/s. 148 and supply or communicate it to the Assessee. The Assessee gets an opportunity to challenge the order in a writ petition. Thereafter the A.O may pass the re-assessment order. We hold that it was not open to the A.O to decide the objection to notice u/s/ 148 by a composite assessment order. Assessing Officer was required to first decide the objection of the Assessee filed u/s. 148 and serve a copy of the order of the Assessee and after giving reasonable time to the Assessee for challenging his order it was open to him to pass an assessment order. This was not done by the A.O therefore the order on the objection to the notice u/s. 148 of the assessment order passed under the Act deserved to be quashed. Revenue has not brought any contrary binding decision of Hon ble Apex Court or Hon ble jurisdictional High Court in support of its contention that the order disposing of the objections of the Assessee to reassessment proceedings along with the assessment order is in order and therefore valid as per law. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment under section 147 of the Act.
2. Disallowances of expenses incurred on the consumption of Pit construction and land expenses.

Issue 1: Validity of reopening of assessment under section 147 of the Act:

The appeals were filed against the order of CIT(A)-VI for A.Y. 2000-01 & 2001-02. The Assessee challenged the validity of the reassessment proceedings under section 147 of the Act. The Assessee contended that the Assessing Officer (A.O) did not pass a separate order disposing of the objections raised by the Assessee against the reasons recorded for the initiation of reassessment proceedings. The Assessee argued that the A.O should have first decided the objection of the Assessee before passing the assessment order. The Assessee relied on the decision of the Hon'ble Gujarat High Court in a specific case to support their argument. The A.O rejected the objections of the Assessee in the assessment order itself. The Tribunal held that the A.O was required to decide the objection of the Assessee separately before passing the assessment order. Since the A.O did not comply with this requirement, the assessment order was quashed, and the appeal of the Assessee was allowed.

Issue 2: Disallowances of expenses incurred on the consumption of Pit construction and land expenses:

The Assessee's appeals also challenged the disallowances of expenses incurred on the consumption of Pit construction and land expenses. The Assessee claimed that the disallowances were made without appreciating that the expenses were accounted for under the mercantile system of accounting. The Assessee argued that each year should be considered independently, and the A.O wrongly applied a revised rate per M.T. of solid waste without proper justification. The Tribunal did not delve into the merits of these grounds as the reassessment order itself was quashed due to procedural irregularities. The Tribunal allowed the Assessee's appeal for both A.Y. 2000-01 and 2001-02 based on the procedural flaw in the reassessment proceedings.

In conclusion, the Tribunal found in favor of the Assessee on both issues. The reassessment proceedings were deemed invalid due to the A.O's failure to pass a separate order addressing the objections raised by the Assessee. Consequently, the assessment order was quashed, and the appeals of the Assessee were allowed for both assessment years.