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2020 (9) TMI 191 - AT - Income TaxValidity of reopening of assessment - non recording of reasons before triggering reassessment proceedings - mandatory requirements of recording of reasons - HELD THAT - Date of issue of notice was 21/08/2013 whereas the reason were recorded on 27/08/2013 which was in violation of express provisions of Sec.148(2). The logic is simple. The recording of reasons would be an essential pre-requisite before triggering reassessment proceedings against the assessee. The case could be re-opened only in case Ld. AO had reasons to believe that certain income escaped assessment in the hands of the assessee. The formation of that belief is sine qua non before reopening the case of the assessee and therefore the same should precede the issue of notice u/s 148. Notice u/s 148 could not predate the reasons recorded by Ld. AO since the same would defeat the jurisdictional requirement of satisfaction on the part of Ld. AO before reopening the case of the assessee. This jurisdictional requirement is mandatory one and the same could not be overcome by mere fact that the assessee did not object to the same or participated in the assessment proceedings. See RAJOO ENGINEERS LTD. 2008 (7) TMI 1013 - GUJARAT HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings due to the timing of recording reasons and issuing notice under Section 148 of the Income-tax Act, 1961. 2. Compliance with mandatory provisions of Section 148(2) of the Income-tax Act, 1961. 3. Impact of procedural lapses on the jurisdiction and validity of reassessment orders. Issue-wise Detailed Analysis: 1. Validity of reassessment proceedings due to the timing of recording reasons and issuing notice under Section 148 of the Income-tax Act, 1961: The revenue contested the order of the Commissioner of Income-Tax (Appeals) [CIT(A)] which quashed the reassessment proceedings on legal grounds. The CIT(A) found that the notice under Section 148 was dated 21/08/2013, whereas the reasons for reopening were recorded on 27/08/2013. This sequence violated the mandatory requirement under Section 148(2) of the Income-tax Act, which stipulates that reasons must be recorded before issuing any notice. The Tribunal upheld this finding, emphasizing that the formation of belief that income escaped assessment must precede the issuance of the notice. This procedural lapse rendered the reassessment proceedings invalid. 2. Compliance with mandatory provisions of Section 148(2) of the Income-tax Act, 1961: Section 148(2) mandates that the Assessing Officer (AO) must record reasons for reopening an assessment before issuing a notice. The CIT(A) and the Tribunal found that this requirement was not met, as the notice was issued six days before the reasons were recorded. The Tribunal cited the Hon'ble Supreme Court's decisions in Y. Narayan Chetty V/s ITO and CIT V/s Kurban Hussaain Ibrahmiji Mithiborwala, which underscore the necessity of adhering to procedural requirements for reassessment. The Tribunal concluded that the reassessment proceedings were invalid due to non-compliance with Section 148(2). 3. Impact of procedural lapses on the jurisdiction and validity of reassessment orders: The Tribunal held that the procedural lapse of issuing the notice before recording reasons was a jurisdictional defect that could not be cured by subsequent participation in the assessment proceedings by the assessee. The Tribunal referenced its own decision in ACIT V/s Blue Star Ltd. and the Hon'ble Gujarat High Court's decision in Rajoo Engineers Ltd. V/s DCIT, both of which supported the view that reassessment proceedings initiated without complying with the mandatory provisions of Section 148(2) are invalid. Consequently, the reassessment order was quashed for lack of jurisdiction. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to quash the reassessment proceedings due to the AO's failure to comply with the mandatory requirement of recording reasons before issuing the notice under Section 148. The Tribunal emphasized that this procedural requirement is essential for the validity of reassessment proceedings and cannot be overlooked.
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