2018 (2) TMI 1900 - AT - Income Tax

Reopening of assessment u/s 147 - non disposing objections of the assessee against issuance of notice for re-opening assessment - addition of Short Term Capital Gain - share of assessee and the other co-owner in the impugned plot was 1/3rd each - HELD THAT - AO is duty bound to decide the objections of the assessee against initiation of reassessment proceedings by passing a separate speaking order. Thereafter, AO shall give four weeks time to the assessee from the date of service of the said order before proceeding with the finalization of assessment. In the case of KSS Petron Private Ltd. Vs. ACIT 2016 (10) TMI 1112 - BOMBAY HIGH COURT has set aside reassessment proceedings were the Assessing Officer has not followed the proper procedure as mandated for disposing of the objections of the assessee on reopening. It is apparent from record that the AO committed error in not following the proper procedure for deciding the objections of assessee against re-opening of assessment. AO is a quasi judicial authority and is therefore, duty bound to follow the law laid down by the Hon ble Supreme Court of India, the Hon ble High Courts and the Appellate Authorities. The assessment orders have been passed by the Assessing Officer in both the cases without following the principles as set out by the Hon ble Apex Court and Hon ble Jurisdictional High Court. - Appeals of Revenue are dismissed.

Issues Involved:
1. Validity of reassessment orders under Section 147 of the Income Tax Act.
2. Non-disposal of objections raised by the assessees regarding the reopening of assessments.
3. Adherence to procedures laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors.
4. Compliance with the principles of natural justice.

Detailed Analysis:

1. Validity of Reassessment Orders under Section 147:
The primary issue was whether the reassessment orders passed by the Assessing Officer (AO) under Section 147 were valid. The AO had issued notices under Section 148 to both assessees for the assessment year 2008-09, leading to the reassessment proceedings. The AO observed that the assessees had not declared Short Term Capital Gains from a development agreement with M/s. Vascon Dwellings Pvt. Ltd., which resulted in additional income. The reassessment orders were challenged by the assessees on the grounds that the AO did not dispose of their objections through a speaking order, as required by law.

2. Non-disposal of Objections Raised by the Assessees:
The assessees contended that the AO failed to dispose of their objections regarding the reopening of assessments by passing a speaking order. This contention was based on the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors., which mandates that the AO must furnish reasons for reopening an assessment and dispose of any objections by passing a speaking order. The Commissioner of Income Tax (Appeals) upheld the assessees' contention, quashing the reassessment orders for non-compliance with this requirement.

3. Adherence to Procedures Laid Down by the Supreme Court:
The Tribunal noted that the AO did not adhere to the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. The AO's ordersheet entry dated 24-02-2014, which purportedly disposed of the objections, was found to be insufficient and non-speaking. The Tribunal emphasized that a valid order disposing of objections must provide clear reasons and allow the assessee time to challenge the order before proceeding with the final assessment.

4. Compliance with Principles of Natural Justice:
The Tribunal further observed that the AO violated the principles of natural justice by not providing the assessees sufficient opportunity to challenge the order disposing of their objections. The AO passed the assessment order immediately on the next day after the alleged disposal of objections, without affording the assessees the four-week period mandated by the Bombay High Court in Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax. This accelerated finalization of the assessment was deemed a violation of the assessees' rights.

Conclusion:
The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) in quashing the reassessment orders due to the AO's failure to follow the proper procedure for disposing of objections. The appeals by the Department were dismissed, and the cross objections filed by the assessees were rendered infructuous. The Tribunal reiterated the importance of adhering to judicial procedures and principles of natural justice in reassessment proceedings.

Order pronounced on Friday, the 23rd day of February, 2018.

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