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2019 (9) TMI 1284 - HC - Income TaxReopening of assessment - ultra vires to Section 11 of Expenditure Tax Act, 1987 - non disposal of the objections to the reasons in the assessment order - whether it was necessary for the Assessing Officer to have first disposed of the Appellant s objections by passing a speaking order and only upon communication of the same to the Appellants, proceeded to reopen the assessment ? - HELD THAT - Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee s objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd 2002 (11) TMI 7 - SUPREME COURT , Bayer Material Science (P) Ltd. 2016 (3) TMI 179 - BOMBAY HIGH COURT and KSS Petron Private Ltd. 2016 (10) TMI 1112 - BOMBAY HIGH COURT we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue.
Issues Involved:
1. Compliance with the mandatory preconditions for reopening of assessment under the principles laid down by the Supreme Court in GKN Driveshafts vs. ITO. 2. Computation of chargeable expenditure with reference to the unit of residential accommodation in the hotel versus the number of persons occupying the unit. Issue-wise Detailed Analysis: Issue 1: Compliance with the mandatory preconditions for reopening of assessment under the principles laid down by the Supreme Court in GKN Driveshafts vs. ITO The primary issue revolves around whether the Income-Tax Appellate Tribunal (ITAT) erred in law by not holding that the reassessment order was invalid due to non-compliance with the preconditions laid down by the Supreme Court in GKN Driveshafts vs. ITO. The appellant contended that the Assessing Officer (AO) did not furnish the reasons for reopening the assessment for the year 1997-98 and failed to dispose of the objections by passing a speaking order before proceeding with the reassessment. The court noted that the AO had indeed stated the reason for reopening on the reverse of the notice dated 13th March 2003. However, the AO failed to dispose of the objections raised by the appellant before making the reassessment order on 26th March 2004. The court highlighted that the Supreme Court in GKN Driveshafts (India) Ltd. mandated that once reasons are furnished, the assessee is entitled to raise objections, and the AO must dispose of these objections by passing a speaking order before proceeding with the reassessment. The court referred to similar cases, including Bayer Material Science (P) Ltd. and KSS Petron Private Ltd., where it was held that the AO must dispose of objections by passing a speaking order before proceeding with the reassessment. The court concluded that the AO's failure to do so in the present case constituted non-compliance with the jurisdictional parameters, rendering the assumption of jurisdiction for reopening the assessment ultra vires Section 11 of the Expenditure Tax Act. Issue 2: Computation of chargeable expenditure with reference to the unit of residential accommodation in the hotel versus the number of persons occupying the unit The second issue concerned whether the ITAT was justified in holding that chargeable expenditure should be computed with reference to the unit of residential accommodation in the hotel, rather than the number of persons occupying the unit. However, the court found it unnecessary to address this issue since the first substantial question of law was resolved in favor of the appellant. The court noted that any decision on the second issue would be redundant and unnecessary. Conclusion: The court allowed the appeal, setting aside the impugned orders made by the AO, the Commissioner (Appeals), and the ITAT on the grounds of non-compliance with jurisdictional parameters. The court did not address the second substantial question of law, clarifying that it was not decided in this appeal. The appeal was allowed without any order as to costs.
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