2016 (10) TMI 837 - AT - Income Tax

Reopening of assessment - reasons the believe - Held that - AO is bound to furnish the reasons recorded for initiation of proceedings under section 147 of the Act within a reasonable period of time so that the assessee could file its objections thereto and the AO was to dispose of the same by passing a speaking order thereon, which the AO has not done. As also noted that even as per the rules of natural justice, the assessee is entitled to know the reasons on the basis of which the AO has formed an opinion that income assessable to tax has escaped assessment. The furnishing of reasons to the assessee is to enable/facilitate it to present its defence and objections to the initiation of proceedings under section 147/148 of the Act. Therefore, there was no justifiable reasons for the AO to deprive the assessee of the recorded reasons by him for initiating proceedings under section 147/148 of the Act. Therefore, the reopening in question is not sustainable in the eyes of law, hence, the same is quashed. - Decided in favour of assessee

Summary

Issues:
1. Jurisdiction under section 148 of the Income Tax Act, 1961.
2. Applicability of section 292BB for Assessment Year 2005-06.

Analysis:

Issue 1: Jurisdiction under section 148 of the Income Tax Act, 1961:
The Assessee challenged the assumption of jurisdiction under section 148 by the Assessing Officer (AO) due to non-supply of reasons for reopening the assessment. The Assessee's counsel argued that the AO initiated proceedings without providing reasons, rendering the assessment order void ab initio. The Assessee cited the case of GNK Driveshafts (India) Ltd. vs. ITO, emphasizing the necessity of supplying reasons for reopening. The CIT(A) also acknowledged the non-supply of reasons. The Tribunal, after examining the reply submitted by the Assessee and relevant case law, concluded that the AO's failure to furnish reasons for initiating proceedings under section 147/148 rendered the reopening unsustainable in law. As per the judgment, the Assessee's appeal was allowed on the legality aspect, and the orders of the authorities below were quashed.

Issue 2: Applicability of section 292BB for Assessment Year 2005-06:
The Assessee contended that the CIT(A) wrongly applied section 292BB for the A.Y. 2005-06, arguing that as per the ITAT, Delhi Special Bench Judgment in the case of Kuber Tobacco Products, section 292BB is not retrospective but applicable only from A.Y. 2008-09. The Tribunal concurred with this argument, noting that the provisions of section 292BB were not retrospective for the relevant assessment year. Consequently, the Tribunal allowed the Assessee's appeal on this ground without delving into the merits, thereby quashing the orders of the lower authorities.

In conclusion, the Tribunal's judgment focused on the procedural irregularities in the jurisdictional aspect and the incorrect application of statutory provisions, leading to the allowance of the Assessee's appeal on legal grounds.