2016 (10) TMI 348 - AT - Income Tax

Validity of reopening of assessment - procedures to be followed - Held that - It is settled proposition of law on the point that the Assessing Officer is bound to first decide the objections of the assessee against notice 148, communicate the same to the assessee and allow the assessee reasonable time to challenge the order of the Assessing Officer deciding the objections thereafter, the Assessing Officer may pass the reassessment/assessment. However this was not done by the Assessing Officer in the case of the assessee and decided the objection under Section 148 of the Act by a composite assessment order dt.31.12.2008 which is in gross violation of law in the case of GKN Driveshafts 2002 (11) TMI 7 - SUPREME Court - Decided in favour of assessee

Issues Involved:
1. Validity of the reassessment under Section 147/148 of the Income Tax Act.
2. Jurisdiction and compliance with mandatory requirements for reassessment.
3. Nature of the agreement and its tax implications.
4. Classification of income as "Business Income."
5. Consideration of statements and grounds of appeal.
6. Limitation period for assessment.
7. Charging of interest under Sections 234A, 234B, and 234C of the Act.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment:
The Tribunal examined the validity of the reassessment conducted under Section 147/148 of the Income Tax Act. The assessee argued that the reassessment was invalid as the Assessing Officer (AO) failed to dispose of the objections raised against the reassessment notice. The Tribunal noted that the AO completed the reassessment without first deciding the objections, which was contrary to the Supreme Court's ruling in GKN Driveshafts (India) Ltd. v. ITO. The Tribunal held that the AO's failure to separately and priorly address the objections rendered the reassessment order illegal and without jurisdiction.

2. Jurisdiction and Compliance with Mandatory Requirements:
The assessee contended that the reassessment was bad in law due to the lack of requisite jurisdiction, as the mandatory requirements to assume jurisdiction were not met. The Tribunal agreed, emphasizing that the AO must first decide the objections against the notice under Section 148 and communicate the decision to the assessee, allowing reasonable time to challenge it. The AO's composite assessment order without separately addressing the objections violated the legal procedure established by the Supreme Court and the Tribunal's specific directions.

3. Nature of the Agreement and Its Tax Implications:
The assessee argued that the agreement dated 18/03/2002 with WIPRO was merely an agreement to assign and not an assignment deed, hence not resulting in a transfer giving rise to accrual of income under "Capital Gains" or "Business." The Tribunal did not specifically address this issue in detail, as the reassessment was quashed on procedural grounds.

4. Classification of Income as "Business Income":
The assessee challenged the classification of ?3,32,58,944 as "Business Income," arguing that it did not engage in real estate business but intended to purchase land for setting up a Hotel and Software Park. The Tribunal did not delve into this issue due to the quashing of the reassessment on procedural grounds.

5. Consideration of Statements and Grounds of Appeal:
The assessee claimed that the authorities did not consider the statements of facts and grounds of appeal filed during the initial round of appeal proceedings. The Tribunal did not address this issue separately, as the reassessment was quashed on procedural grounds.

6. Limitation Period for Assessment:
The assessee argued that the assessment was barred by limitation and should be annulled. The Tribunal did not specifically address this issue, as the reassessment was quashed on procedural grounds.

7. Charging of Interest Under Sections 234A, 234B, and 234C:
The assessee contended that the interest charged under Sections 234A, 234B, and 234C was excessive and should be reduced. The Tribunal did not address this issue separately, as the reassessment was quashed on procedural grounds.

Conclusion:
The Tribunal quashed the reassessment order due to the AO's failure to separately and priorly address the objections against the notice under Section 148, as mandated by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO and the Tribunal's specific directions. The reassessment was deemed illegal and without jurisdiction. Other issues raised by the assessee were not specifically addressed due to the procedural quashing of the reassessment. The appeals were allowed, and the reassessment orders were set aside.

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