2017 (11) TMI 1146 - AT - Income Tax

Validity of reopening of assessment - objections against re-opening was not disposed of by way of speaking order - Held that - AO has not passed any speaking order, even in the Assessment Order there is no whisper about the objections raised by AO that assessment cannot be re-opened where the AO had invoked provision of Section 154 of the Act. Moreover, AO has discussed the reply of the Assessee raised during the course of re-assessment proceeding. We hereby set aside the assessment order, and direct the AO to dispose of the objection by way of separate speaking order and in case, if the objections are rejected he would make assessment afresh as per law

Issues Involved:

1. Legality of the reopening of the assessment under Section 147 of the Income Tax Act, 1961.
2. Validity of the notice issued for reopening the assessment.
3. Consistency in allowing deductions under Section 80IB in subsequent years.
4. Requirement of disposing of objections by a speaking order.
5. Charging of interest and awarding costs.

Detailed Analysis:

1. Legality of the Reopening of the Assessment under Section 147 of the Income Tax Act, 1961:

The assessee challenged the reopening of the assessment under Section 147, arguing that the initial assessment was completed under Section 143(3) and the deduction claimed was allowed. The reopening was based on a change of opinion following the Supreme Court's judgment in the case of Liberty India vs. CIT (317 ITR 218). The Tribunal noted that the issue of allowability of deduction under Section 80IB was decided against the assessee by the jurisdictional High Court for the assessment year 2008-09. Hence, the Tribunal upheld the reopening of the assessment, stating that the reopening was not based on a mere change of opinion but was justified in light of the Supreme Court's judgment.

2. Validity of the Notice Issued for Reopening the Assessment:

The assessee contended that the notice issued for reopening the assessment was not in the prescribed form and hence invalid. The Tribunal referred to the judgment of the Rajasthan High Court, which emphasized the need for notices to be in the prescribed proforma. However, the Tribunal found that the notice issued was valid and the reopening was justified as the reasons for reopening were duly supplied to the assessee.

3. Consistency in Allowing Deductions under Section 80IB in Subsequent Years:

The assessee argued that once a deduction is allowed in the initial year, it cannot be withdrawn in subsequent years. The Tribunal referred to the judgment of the jurisdictional High Court, which held that the deduction under Section 80IB cannot be allowed if it is found to be unsustainable in law, even if it was allowed in the initial year. The Tribunal emphasized that the law of consistency does not apply if the initial assessment order is legally unsustainable.

4. Requirement of Disposing of Objections by a Speaking Order:

The assessee contended that the Assessing Officer (AO) did not dispose of the objections raised against the reopening by a speaking order, as required by the Supreme Court in the case of G.K.N. Driveshafts (India) Ltd. vs. ITO (259 ITR 19). The Tribunal found merit in this contention and noted that the AO did not pass a speaking order addressing the objections. Following the judgments of the Bombay High Court, the Tribunal set aside the assessment order and directed the AO to dispose of the objections by a separate speaking order before proceeding with the assessment.

5. Charging of Interest and Awarding Costs:

The assessee argued that the charging of interest was illegal and against the law. The Tribunal did not specifically address this issue in detail but implied that the matter would be reconsidered once the AO disposes of the objections and reassesses the case as per law. The Tribunal also did not award costs to the appellant.

Conclusion:

The Tribunal partly allowed the appeal for statistical purposes, setting aside the assessment order and directing the AO to dispose of the objections by a separate speaking order. The AO was instructed to make a fresh assessment if the objections were rejected, following the due process of law. The Tribunal upheld the validity of the reopening of the assessment and the notice issued, emphasizing that the deduction under Section 80IB cannot be allowed if it is found to be unsustainable in law, even if it was allowed in the initial year.

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