2022 (7) TMI 1516 - AT - Income Tax

Validity of the reassessment order - non providing the reasons of reopening of the assessment by the AO in spite of the specific request made - HELD THAT - As per record, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment, therefore, in our considered view, the reassessment order in these circumstances of the case, cannot be upheld. For reaching this conclusion, we draw strength from the decision of Videsh Sanchar Nigam Ltd 2011 (7) TMI 715 - BOMBAY HIGH COURT wherein as categorically held that since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment then reassessment order cannot be upheld and thus dismissed the appeal filed by the Revenue. Reassessment quashed - Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the following Issues:
1. Validity of notice u/s 148 and reasons for reopening assessment.
2. Estimation of construction cost of a house sold.

Issue 1: Validity of notice u/s 148 and reasons for reopening assessment:
The assessee challenged the validity of the notice u/s 148 and the absence of reasons for reopening the assessment. The assessee contended that the AO failed to provide reasons despite specific requests. The assessee cited legal precedents emphasizing the necessity of furnishing reasons for reopening assessments. The Tribunal noted that the AO did not provide reasons even after repeated requests by the assessee. Citing the decision in GKN Driveshafts (India) Ltd. vs ITO, the Tribunal emphasized that the AO must furnish reasons within a reasonable time. As the reasons were not provided to the assessee, the reassessment order was deemed invalid. Referring to various court decisions, including CIT vs Videsh Sanchar Nigam Ltd., the Tribunal held that failure to furnish reasons renders reassessment proceedings unjustified. Consequently, the reassessment order was quashed, and the appeal of the assessee was allowed.

Issue 2: Estimation of construction cost of a house sold:
The assessee disputed the estimation of the construction cost of a house sold, arguing that the actual cost incurred was higher than the amount considered by the authorities. The Tribunal observed that the assessee's contentions primarily focused on the validity of the notice u/s 148. However, the Tribunal did not delve into the specifics of the construction cost dispute due to the primary issue at hand. Ultimately, the Tribunal allowed the appeal of the assessee based on the invalidity of the reassessment proceedings.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of providing reasons for reopening assessments and quashing the reassessment order due to the failure to furnish reasons.