2015 (11) TMI 1769 - AT - Income Tax

Reopening of assessment - capital gains arising out of the joint development agreement as assessee entered with Vaswani Estates Developers P. Ltd. - non-furnishing of reasons to assessee for reopning of assessment - Held that - AO had not complied with the law laid down by the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd (2002 (11) TMI 7 - SUPREME COURT). AO had not given copy of the reasons for which notice u/s.148 of the Act was issued. In our opinion awareness of the assessee as to the reason why notice u/s.148 of the Act was issued may not be sufficient to satisfy the requirement in this regard. No doubt Ld. DR has relied on a judgment of Hon ble Madras High Court in the case of CIT v. C. Palaniappan 2011 (3) TMI 589 - MADRAS HIGH COURT where it was held that non-furnishing of reasons was only a supervening illegality and would not render the proceedings void by itself. However, we find that Hon ble Delhi High Court in the case of Samcor Glass Ltd 2015 (12) TMI 773 - DELHI HIGH COURT and Trend Electronics 2015 (9) TMI 1119 - BOMBAY HIGH COURT had held that jurisdictional issues should be strictly complied with by the authorities concerned and no question of knowledge being attributed on the basis of implication can arise. Once a jurisdictional High Court decision is there on a particular legal issue, this Tribunal being an inferior forum to jurisdictional High Court, is bound to follow the said judgment. Accordingly we are constrained to quash the assessment done on the assessee for the impugned assessment year. Appeal of the assessee having been allowed on legal ground itself, other grounds relating to the merits of the issue are not dealt with. Assessee s appeal is allowed.

Summary

Issues:
1. Jurisdiction under section 148 of the Income-tax Act, 1961.

Analysis:
In this appeal, the primary issue revolves around the assumption of jurisdiction under section 148 of the Income-tax Act, 1961. The appellant raised concerns regarding the lack of reasons supplied by the Assessing Officer (AO) for issuing the notice under section 148. The appellant contended that despite requesting the reasons, they were not provided, rendering the assessment void-ab-initio. The appellant cited the judgment of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd v. ITO [(2003) 259 ITR 19] to support their argument. The appellant further argued that the absence of reasons undermined the validity of the assessment, as highlighted in various High Court judgments. On the contrary, the Departmental Representative (DR) asserted that the appellant was aware of the core reason for the notice under section 148, as evidenced by their computation of capital gains related to a joint development agreement. However, the tribunal noted that the AO failed to comply with the legal requirement of providing reasons, as mandated by the GKN Driveshafts case. The tribunal emphasized the significance of strictly adhering to jurisdictional issues, as emphasized in relevant High Court judgments. Ultimately, the tribunal relied on the legal precedent set by the jurisdictional High Court and quashed the assessment for the impugned assessment year based on the jurisdictional issue alone.

Therefore, the tribunal allowed the appellant's appeal on legal grounds, following the binding legal precedent established by the jurisdictional High Court. The assessment was deemed void due to the failure to furnish reasons for reopening the assessment, as required by law. The tribunal dismissed the stay petition filed by the appellant as it became infructuous following the appeal's allowance.

This detailed analysis highlights the crucial legal issue of jurisdiction under section 148 of the Income-tax Act, emphasizing the importance of providing reasons for reopening assessments to ensure procedural fairness and compliance with legal standards.