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2017 (12) TMI 54 - AT - Income TaxValidity of reassessment made u/s 147 - non communicating the reasons recorded for reopening - Held that - AO cannot proceed to make the reassessment without communicating the reasons and the assessment order framed u/s 147 without communicating the reasons required to be quashed. Accordingly, the assessment order made u/s 143(3) r.w.s. 147 is hereby quashed. See CIT Vs. Videsh Sanchar Nigam Ltd. 2011 (7) TMI 715 - Bombay High Court - Decided in favour of assessee.
Issues:
1. Validity of reassessment made u/s 147 r.w.s.143(3) of I.T.Act without communicating the reasons recorded for reopening the assessment. 2. Additions made by the AO on merits. Issue 1: Validity of reassessment: The appeal was filed against the order of the Commissioner of Income-Tax (Appeals) for the assessment year 2010-11. The appellant challenged the reassessment made under section 147 without the communication of reasons for reopening the assessment. The appellant filed a return of income in 2010, a survey was conducted, and the reassessment was completed with a higher total income. The appellant requested the reasons for reopening but the AO did not communicate them. The appellant argued that as per the Supreme Court's judgment in M/s GKN Drive Shafts (India) Ltd. Vs. ITO, it is mandatory to communicate reasons. The appellant also cited the High Court's decision in Berger Paints India Ltd. Vs. ACIT, emphasizing the importance of communicating reasons for jurisdiction under section 147. The appellant contended that without the reasons being communicated, the assessment made under section 147 was invalid and should be quashed. Issue 1 Analysis: During the appeal hearing, the appellant's representative highlighted that the AO failed to communicate the reasons for issuing the notice under section 148 despite the appellant's request. Citing legal precedents, the appellant argued that non-communication of reasons rendered the assessment invalid. The Departmental Representative (DR) supported the lower authorities' orders upholding the reassessment. However, upon review, it was found that the reasons were not communicated to the appellant. Referring to the Supreme Court and High Court judgments, the Tribunal concluded that the AO cannot proceed with the assessment under section 147 without communicating the reasons. Drawing parallels with similar cases, the Tribunal held that the assessment order made under section 147 without communicating the reasons needed to be quashed. Consequently, the assessment order was invalidated, and the appellant's appeal on this ground was allowed. Issue 2: Additions made on merits: The revised grounds of appeal also raised issues regarding additions made by the AO on merits. However, since the reassessment order under section 147 was quashed, the Tribunal deemed it unnecessary to adjudicate these grounds on merits. Consequently, the appeal was allowed based on the quashing of the assessment order under section 147. Issue 2 Analysis: The Tribunal noted that the grounds related to additions made on merits were moot following the decision to quash the reassessment order under section 147. As a result, the Tribunal did not delve into the merits of these grounds and allowed the appeal based on the invalidation of the assessment order. In conclusion, the Tribunal allowed the appeal, quashing the assessment order made under section 147 due to the failure to communicate reasons for reopening the assessment. The Tribunal also decided not to address the merits of the additions made by the AO, as the primary issue of reassessment validity took precedence in the appeal.
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