2016 (7) TMI 1480 - AT - Income Tax

Reopening of assessment - non disposal of objections - Held that - In this case, it is not in dispute that the objections filed by the assessee were not disposed off by the Assessing Officer. Therefore, consequential assessment framed by the Assessing Officer cannot stand in the eye of law. Judgment of Gujarat High Court in General Motors India Pvt. Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT and the judgment of Apex Court in GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT has found that the Assessing Officer was first required to dispose off the objection of the assessee. Since the objections were not disposed of, the impugned assessment dated 31.12.2010 was void ab initio. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under Section 147 of the Income-tax Act, 1961.
2. Inclusion of one-time loan settlement in book profit under Section 115JB of the Act.
3. Non-disposal of objections by the Assessing Officer before completing the assessments.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:
The first issue pertains to the reopening of the assessment under Section 147 of the Income-tax Act, 1961. For the assessment year 2007-08, the reopening occurred after four years, and it was not alleged that the assessee furnished inaccurate particulars. The original assessment was completed, and the one-time loan settlement was previously deleted by the CIT(A) and confirmed by the Tribunal. For the assessment year 2008-09, the reopening was within four years. The Assessing Officer relied on the judgment of Delhi High Court in CIT v. Goyal M.G. Gases Ltd. (2010) to reopen the assessments. According to the assessee, the reopening was invalid as it was based on a change of opinion, which is not permissible as per the judgments of the Supreme Court and various High Courts including CIT v. Kelvinator of India Ltd. (2010) and CIT v. Baer Shoes (India) (P) Ltd. (2011).

2. Inclusion of One-time Loan Settlement in Book Profit under Section 115JB:
The second issue is whether the one-time loan settlement should be included in the book profit under Section 115JB of the Act. The assessee argued that since the one-time settlement was not taxable in the normal computation and was brought to the balance sheet as a capital reserve without routing through the Profit & Loss account, it should not be included in the book profit. The assessee cited the judgment of the Supreme Court in Apollo Tyres Ltd. v. CIT (2002) which held that the Assessing Officer cannot go beyond the book profit certified by the auditor. The Department contended that the book profit was not computed as per the Companies Act since the one-time settlement was not routed through the Profit & Loss account, thus justifying the recomputation of book profit by the Assessing Officer.

3. Non-disposal of Objections by the Assessing Officer:
The third issue involves the non-disposal of objections filed by the assessee against the reopening of assessments. The assessee filed objections on 04.07.2014 for the assessment year 2007-08 and on 19.03.2015 for the assessment year 2008-09, which were not disposed of by the Assessing Officer. The Tribunal referred to the judgments of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (2003) and the Gujarat High Court in General Motors India Pvt. Ltd. v. DCIT (2013), which mandate that the Assessing Officer must dispose of the objections by a separate order before proceeding with the assessment. Failure to do so renders the assessment invalid.

Conclusion:
The Tribunal concluded that the Assessing Officer's failure to dispose of the objections filed by the assessee before proceeding with the assessment rendered the assessment orders void ab initio. Consequently, the Tribunal set aside the orders of the authorities below and deleted the addition made by the Assessing Officer. Both appeals of the assessee were allowed.