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2022 (9) TMI 78 - AT - Income TaxReopening of assessment u/s 147 - failure to provide the copy of recording of reason to believe to the assessee - HELD THAT - AO in view of the judgment of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT was required to provide the copy of reasons to the assessee before completion of assessment which he did not do and supplied only in the month of January, 2019 whereas the assessment was completed on 19/12/2018. As regards the second argument of D. R. that the assessee applied for providing copy of reasons only in the month of January by depositing fee in January, 2019, we find that there is no fee prescribed under the Act for obtaining copy of reasons as is borne out from the provisions of section 147 148 - Providing of reasons recorded has not been mentioned in any of the sections connected with the reopening of the cases and it is only the judgment of Hon'ble Supreme Court which requires that before completion of assessment proceedings, the AO is required to provide copy of reasons to the assessee. The judgment of Hon'ble Supreme Court is binding on the Department as well as on assessee. AO was required to provide copy of reasons recorded before completion of assessment which he did not do. Reiterating the importance of providing copy of reasons to the assessee, in the case of Mithlesh Kumar Tripathi 2005 (11) TMI 28 - ALLAHABAD HIGH COURT has held that if the reasons are supplied along with the notice u/s 148(2) of the Act, it shall obviate unnecessary harassment to the assessee as well to Revenue by avoiding unnecessary litigation. This is undisputed fact that the assessee, vide letter dated 07/12/2018, enclosed the acknowledgement of ITR in compliance to notice u/s 148 and also required the Assessing Officer to communicate to the assessee the copy of reasons recorded in terms of law laid down by Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. and which the AO supplied only after completion of assessment therefore, the assessment order is bad in law and is void ab initio. Various courts, including Hon'ble Supreme Court, in a number of cases have held that copy of reasons recorded has to be provided to assessee before completion of assessment order. We find that CIT(A) has rightly accepted the contention of the assessee and after relying on number of case laws, decided the issue in favour of the assessee.
Issues Involved:
1. Appreciation of comments in the remand report. 2. Non-filing of Income Tax Return (ITR) within the due period. 3. Supply of reasons recorded by the Assessing Officer to the assessee. Issue-wise Detailed Analysis: 1. Appreciation of Comments in the Remand Report: The Revenue contended that the learned Commissioner of Income Tax (Appeals) [CIT(A)] failed to appreciate the comments made in the remand report. The CIT(A) quashed the assessment order on the grounds that the reasons for reopening the assessment were not supplied to the assessee, which was a procedural requirement as per the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. vs. Income Tax Officer [2003] 259 ITR 19 (SC). The CIT(A) relied on multiple case laws to support this decision, emphasizing that the reasons must be provided before the completion of assessment proceedings. 2. Non-filing of Income Tax Return (ITR) within the Due Period: The Revenue argued that the assessee did not file the ITR within the prescribed period as mentioned in the notice issued under section 148 of the Income Tax Act, 1961. The return was filed only on 07/12/2018, while the assessment was getting time-barred on 31/12/2018. The CIT(A) noted that despite the delay, the Assessing Officer (AO) issued notices under sections 142(1) and 143(2) and considered the return filed by the assessee. Therefore, the return could not be termed as non est (invalid). The Tribunal agreed with the CIT(A), stating that the AO's actions indicated acceptance of the return, thus invalidating the Revenue's argument. 3. Supply of Reasons Recorded by the Assessing Officer to the Assessee: The core issue was whether the AO was required to provide the reasons for reopening the assessment to the assessee before completing the assessment. The CIT(A) annulled the assessment, citing the failure to provide reasons as mandated by the Supreme Court in GKN Driveshafts (India) Ltd. The Tribunal upheld this decision, noting that the AO provided the reasons only in January 2019, after the assessment was completed on 19/12/2018. The Tribunal emphasized that providing reasons is a jurisdictional requirement, and failure to do so renders the assessment void ab initio. The Tribunal also dismissed the Revenue's reliance on the Madras High Court's judgment in Home Finders Housing Ltd., distinguishing it on the facts that the case involved non-disposal of objections rather than non-supply of reasons. Conclusion: The Tribunal dismissed the Revenue's appeal and the assessee's cross-objections. It upheld the CIT(A)'s decision to annul the assessment due to the AO's failure to provide the reasons for reopening the assessment before completing the assessment proceedings, in line with judicial precedents. The Tribunal found no infirmity in the CIT(A)'s order and affirmed that the procedural requirement of supplying reasons is crucial for a valid assessment.
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