2018 (12) TMI 1516 - HC - Income Tax

Reopening of assessment - reasons not supplied to the assessee during the contemporary period - Held that - In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order. - decided against revenue

Summary

Issues Involved:
1. Non-communication of reasons for reassessment to the assessee.
2. Jurisdictional validity of the reassessment order.
3. Procedural requirements and compliance under sections 147/148 of the Income-tax Act, 1961.

Detailed Analysis:

1. Non-communication of reasons for reassessment to the assessee:
The Tribunal found that the reasons recorded by the assessing authority for reopening the assessment were never communicated to the assessee, despite repeated requests. The Tribunal noted instances where the assessee requested the reasons on December 21, 2011, and February 10, 2010, but the Assessing Officer failed to provide these. The Tribunal emphasized that the order sheet dated November 4, 2011, did not indicate that reasons for reopening the assessment were furnished to the authorized representative of the assessee. The Tribunal concluded that the failure to provide reasons, despite multiple requests, violated the mandatory requirement established by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO, which mandates that recorded reasons must be furnished to the assessee to enable them to file objections.

2. Jurisdictional validity of the reassessment order:
The Tribunal held that furnishing reasons for reopening the assessment is a jurisdictional issue, not a mere procedural formality. The Tribunal cited the Supreme Court's decision in GKN Driveshafts (India) Ltd., which stipulates that the recording and communication of reasons for reassessment are essential for the validity of the reassessment proceedings. The Tribunal also referenced similar views from the Bombay High Court in CIT v. Trend Electronics and the Delhi High Court in Principal CIT v. Samcor Glass Ltd. The Tribunal concluded that the reassessment order was invalid as the Assessing Officer did not comply with the mandatory condition of furnishing the reasons for reopening the assessment.

3. Procedural requirements and compliance under sections 147/148 of the Income-tax Act, 1961:
The Tribunal rejected the Revenue's argument that non-supply of reasons was a procedural lapse that could be rectified by remanding the case. The Tribunal emphasized that non-communication of reasons goes to the root of the matter and affects the jurisdiction of the Assessing Officer. The Tribunal noted that the reasons for reassessment were only provided to the Tribunal and not to the assessee during the reassessment process. This non-compliance with the procedural requirement of communicating reasons to the assessee rendered the reassessment order invalid. The Tribunal also distinguished the facts of the present case from the Madras High Court's decision in Home Finders Housing Ltd. v. ITO, where the procedural lapse was deemed not sufficient to quash the reassessment order.

Conclusion:
The Tribunal concluded that the failure to furnish reasons for reopening the assessment to the assessee, despite repeated requests, rendered the reassessment order invalid. The Tribunal quashed the reassessment order, emphasizing that the communication of reasons is a jurisdictional requirement that must be strictly complied with. The Tribunal dismissed the Revenue's appeal, finding no substantial question of law arising in the matter.