2021 (1) TMI 670 - AT - Income Tax

Reopening of assessment u/s 147 - non furnishing of the reasons recorded by the AO to assessee - HELD THAT - As gone through the letter dated 29.11.2016 wherein the objections of the assessee have been removed by the AO but the supply of reasons has not been mentioned there to. We have gone through the order sheets in assessment folder and could not find any noting pertaining to furnishing of reasons recorded to the assessee. As verified the records of the revenue and find that the letters filed by the assessee requesting for supply of reasons have been a part of the record. The revenue till the date of hearing could not furnish the evidence of supplying the reasons recorded to the assessee. The issue of vitiation of reassessment proceedings on account of the failure of the AO to furnish reasons for reopening the assessment u/s. 148 of the Act to the assessee has been dealt in Sh. M.R. Seetharama (Ind.) 2015 (12) TMI 110 - ITAT BANGALORE and ITO Vs. Rishi Godani 2018 (4) TMI 929 - ITAT AGRA Hon'ble jurisdictional High Court in the case of Pr. CIT Vs. Jagat Talkies Distributors 2017 (9) TMI 192 - DELHI HIGH COURT held that the assessment proceedings cannot be held to be valid in the absence of furnishing of reasons recorded by the AO to the assessee. Hon'ble Supreme Court in the case of M/s. GKN Driveshafts Pvt. Ltd. 2002 (11) TMI 7 - SUPREME COURT held that after filing of the return in response to the notice issued u/s. 148, the assessee has every right to seek the reasons recorded for the assessment and Assessing Officer is bound to furnish the reasons within the reasonable time. In the instant case, since the fact of furnishing of the reasons recorded by the AO has not been established and keeping in view, the fact that the revenue could not provide any evidence to prove that the reasons recorded indeed have been supplied to the assessee, we hereby hold that the reassessment proceedings are vitiated. - Decided in favour of assessee.

Issues:
1. Validity of assessment order assessing income against returned income.
2. Legality of reassessment order passed under sections 147/143(3) of the Act.
3. Non-issuance of notice u/s. 143(2) after furnishing return.
4. Legality of proceedings u/s. 147 initiated without proper reasons.
5. Violation of natural justice and inadequate opportunity.
6. Correct provision of the Act for initiating proceedings.
7. Treatment of share application money as escaped income.
8. Additional grounds of appeal challenging the initiation of proceedings u/s. 147.
9. Admission of additional grounds opposed by the ld. DR.
10. Compliance with the judgment of the Hon'ble Apex Court regarding additional grounds.
11. Non-supply of reasons recorded for reassessment proceedings.
12. Previous judicial decisions on the issue of non-supply of reasons.
13. Consequences of failure to provide reasons for reassessment proceedings.
14. Application of the judgment in GKN Driveshafts case to the present case.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A)-XXV, New Delhi, where the assessee challenged the assessment of income at a higher amount than the returned income. The grounds raised included the failure to consider evidence judicially and the legality of the reassessment order.

2. The reassessment order passed under sections 147/143(3) of the Act was challenged on various grounds, including the legality of the notice issued, non-issuance of notice u/s. 143(2), and the initiation of proceedings without proper reasons. The violation of natural justice and inadequate opportunity was also raised.

3. The issue of non-supply of reasons for reassessment proceedings was extensively discussed. The assessee contended that the assessment was nullity based on the GKN Driveshafts case, where the Hon'ble Supreme Court held that the Assessing Officer must furnish reasons within a reasonable time.

4. The Tribunal examined the assessment records and found discrepancies regarding the supply of reasons to the assessee. Despite the absence of evidence proving the supply of reasons, the revenue failed to establish the same. Citing previous judicial decisions, including the GKN Driveshafts case, the Tribunal held that the reassessment proceedings were vitiated due to the failure to provide reasons.

5. The Tribunal admitted the additional grounds raised by the assessee, emphasizing the broad powers of the Appellate Tribunal to consider questions of law arising from the facts on record. The decision was in line with the judgment of the Hon'ble Apex Court and allowed for a reexamination of the new grounds raised by the assessee.

6. Ultimately, the appeal of the assessee was allowed, highlighting the importance of providing reasons for reassessment proceedings to ensure procedural fairness and compliance with legal requirements. The judgment emphasized the significance of following established legal principles and ensuring due process in tax assessments.

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