2018 (8) TMI 1991 - AT - Income Tax

Validity of reopening of assessment u/s 147 - AO of not providing inspection of documents held/relied upon for reopening AND also failed to address the objections raised by the assessee - HELD THAT - Assessee has filed objections to the initiation of reassessment proceedings u/s 148 which were not disposed of by the AO before framing the assessment u/s143(3) read with section 147 - disposal of objections is of paramount importance and goes to the root of the assessment. The non disposal of objections by the AO is a serious defect which is incurable and the assessment will have go in that event. In the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT has held that the AO has to dispose of the objections if filed by the assessee by way of speaking order before proceeding with the assessment. However, in the present case there has been no disposal of objections filed by the assessee. The case of the assessee is further fortified by the decision in the case of Bayer Material Science Pvt. Ltd. vs. DCIT 2016 (3) TMI 179 - BOMBAY HIGH COURT as held that passing a draft assessment order without having disposal of objections filed by the assessee to the reasons recorded in support of the notice the draft assessment order was not sustainable being without jurisdiction. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdictional validity of reopening assessment under section 147/148.
2. Non-disposal of objections by the Assessing Officer before framing the assessment under section 143(3) read with section 147.

Analysis:

Issue 1: Jurisdictional validity of reopening assessment under section 147/148:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) relevant to assessment year 2009-10. The case was reopened based on information received alleging the assessee's involvement in a hawala racket. The assessee objected to the reopening, citing lack of permission from the CIT and failure to provide inspection of relevant documents. The AO issued notices under section 148, and the assessee raised objections against the reassessment proceedings. The CIT(A) dismissed the objections, leading to the appeal. The Tribunal held that the non-disposal of objections is a serious defect, following the decision in GKN Driveshafts (India) Ltd. vs. ITO & Others, emphasizing the importance of disposing of objections before proceeding with the assessment. Citing precedents including Bayer Material Science Pvt. Ltd. vs. DCIT, the Tribunal concluded that the assessment was without jurisdiction and quashed the proceedings under section 147.

Issue 2: Non-disposal of objections by the Assessing Officer:
The Tribunal noted that the AO failed to dispose of the objections filed by the assessee against the initiation of reassessment proceedings under section 148 before framing the assessment under section 143(3) read with section 147. Emphasizing the significance of disposing of objections, the Tribunal referenced the GKN Driveshafts case, stating that the non-disposal of objections is a serious defect rendering the assessment unsustainable. Citing various decisions, including those by the Hon’ble Bombay High Court, the Tribunal concluded that the assessment was without jurisdiction due to the failure to address the objections raised by the assessee. Consequently, the Tribunal quashed the proceedings under section 147 and the consequent order.

In light of the legal issue addressed, the Tribunal partially allowed the appeal, and since the legal issue was resolved, the grounds raised on merits were not adjudicated.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, relevant legal precedents cited, and the ultimate decision rendered by the Appellate Tribunal.