2018 (4) TMI 1527 - AT - Income Tax

Initiation of re-assessment proceeding U/s 147 - reasons not furnished to the assessee - Held that- When a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the assessee s case under consideration, the reasons were not furnished to the assessee therefore, the reassessment order cannot be upheld - decided in favour of assessee.

Summary

Issues involved:
1. Validity of reassessment under section 147/148 of the Income Tax Act.
2. Requirement of furnishing reasons recorded u/s 147/148 to the assessee.
3. Compliance with principles of natural justice in reopening u/s 147/148 of the Act.

Detailed analysis:
1. The appeal pertains to the Assessment Year 2008-09 challenging the order passed by the Ld. Commissioner of Income Tax (Appeals) and the subsequent assessment order by the Assessing Officer u/s 143(3)/147 of the Income Tax Act, 1961. The appellant raised grievances regarding the initiation of re-assessment proceedings u/s 147, withdrawal of unabsorbed depreciation allowance, and the necessity of furnishing reasons for reopening the assessment.

2. The appellant contended that the Assessing Officer failed to provide reasons for reopening the assessment during the reassessment proceedings u/s 147/148. The appellant argued that without knowing the reasons, it becomes challenging to defend the case, emphasizing the principle of natural justice. The Ld. CIT(A) rejected the appellant's objection, stating that the Assessing Officer acted diligently in discovering the escapement of income.

3. The Tribunal noted that the reasons recorded u/s 147/148 were not furnished to the assessee, which is essential for the assessee to defend the case adequately. Citing the judgment of the Hon'ble Supreme Court, the Tribunal emphasized the mandatory requirement of recording and communicating reasons for passing an order under section 147 of the Act. The Tribunal also referred to a similar case where the reassessment order was deemed bad in law due to the failure to provide reasons to the assessee.

4. Relying on the precedent set by a Coordinate Bench, the Tribunal held that failure to furnish reasons for reopening the assessment to the assessee renders the reassessment order invalid. Consequently, the Tribunal allowed the appeal of the assessee based on the technical grounds of not providing the reasons recorded u/s 147 to the assessee, thereby not delving into other grounds raised by the appellant on merits.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of complying with procedural requirements and principles of natural justice in reassessment proceedings under section 147/148 of the Income Tax Act.