2018 (4) TMI 877 - AT - Income Tax

Reopening of assessment - non disposal of the assessee s objections to the reasons recorded - Held that - AO having not disposed of the assessee s objections to the reasons recorded, by passing a separate speaking order before proceeding with the assessment, the assessee has been illegally debarred from exercising a legally enforceable right, which would have become available to him. Thus the assessment order is null and void and it is quashed as such. - Decided in favour of assessee.

Summary

Issues:
1. Validity of ex-parte order passed by Ld. CIT(A)
2. Legality of initiation of proceedings u/s 147 and issuance of notice u/s 148
3. Disallowance of deduction made u/s 54 of the I. T. Act
4. Addition of amount under the head Long Term Capital Gain
5. Compliance with legal procedures in assessment proceedings

Analysis:
1. The appellant challenged the ex-parte order passed by Ld. CIT(A) for A. Y. 2005-06, alleging it to be wrong, arbitrary, and against natural justice principles. The grounds raised included lack of independent application of mind by the Assessing Officer, premature initiation of proceedings u/s 147, and invalid notice issuance under section 282. The ITAT found the first ground not pressed and rejected it accordingly.

2. The appellant objected to the initiation of proceedings u/s 147 and issuance of notice u/s 148, arguing that the AO did not decide these objections separately as required by law. The ITAT observed that the AO disposed of the objections in the assessment order itself, contrary to legal precedents like 'GKN Driveshafts' and 'General Motors India P. Ltd.'. The failure to pass a separate speaking order on objections rendered the assessment null and void, leading to its quashing.

3. The appellant contested the disallowance of a deduction made u/s 54 of the I. T. Act. The ITAT did not delve into this issue as the assessment order was deemed null and void due to procedural irregularities.

4. The appellant challenged the addition of a substantial amount under the head Long Term Capital Gain, citing legal and factual errors by the Assessing Officer. However, this issue was not addressed by the ITAT due to the primary focus on procedural lapses in the assessment process.

5. In conclusion, the ITAT found that the AO's failure to dispose of the objections separately before proceeding with the assessment rendered the entire assessment order null and void. Citing legal precedents and principles, the ITAT quashed the assessment order, ruling in favor of the appellant. The appeal was allowed, and the order was pronounced in open court on 16/04/2018.