2023 (1) TMI 833 - AT - Income Tax

Reopening of assessment u/s 147 - non supply of reasons by the AO - As argued Tangible material for reopening of the case and the reasons for reopening of assessment was not supplied - case was reopened on the basis of the information relating to purchase of DDA flat at Dwarka in auction conducted by the learned Receiver appointed by the Hon ble High Court during the financial year 2010-11 - HELD THAT - We find merit into the contention of the assessee that AO was required to supply reasons of reopening of assessment. The assessee has a legal right to file objections against the re-opening of assessment. Non supply of reasons deprived the assessee from this valuable legal right to raise objection against the reasons for reopening of assessment. The issue relates to the assessment year 2011-12 and it would be too late to restore the matter for supply of reasons to the assessee. Assessing Officer ought to have supplied the reasons. Reopening of assessment is not justified in the facts and circumstances of the present case. Since the action of AO is contrary to ratio laid down in the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT wherein it was clarified that when a notice under section 148 of the Income Tax Act is issued, the proper course for the noticee is to file return and if so desires, to seek reason for issuing notices. AO is bound to furnish reasons within a reasonable time. On receipt of reasons the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose the same by passing a speaking order. Undisputedly, in the present case the reasons were not furnished to the assessee. Therefore, he could not file any objection. Under these facts, hereby set aside the impugned order. The grounds raised by the assessee are allowed.

Summary

Issues:
Reopening of assessment u/s 147 of the Income-tax Act, 1961 without tangible material or reasons supplied to the assessee.

Analysis:
1. The appeal was against the order of the Commissioner of Income-tax (Appeals) regarding the assessment year 2011-12. The assessee raised grounds challenging the reassessment under section 147 of the Income-tax Act, 1961. The Assessing Officer had reopened the assessment and made additions to the income, leading to the appeal.

2. The facts revealed that the Assessing Officer had reopened the assessment and framed an order assessing income after making additions. The assessee then appealed to the CIT(A), who dismissed the appeal, prompting the current appeal before the Tribunal.

3. The assessee contended that the reopening of the assessment was invalid as the reasons for reopening were not supplied despite requests. The basis of the reopening was disputed, and the lack of reasons hindered the assessee's ability to object effectively. The documents submitted by the assessee were reviewed.

4. On the contrary, the Department argued that the reopening was based on information received about a property transaction, necessitating a review of capital gains and deductions. The Assessing Officer believed there was an escapement of taxable income, justifying the reassessment.

5. The assessee clarified that the computation of capital gain was noted in the income tax return, indicating no intention to conceal or provide inaccurate details of income.

6. After considering the contentions and available material, it was found that the case was reopened based on information related to the purchase of a property. The assessee claimed the investment was funded by selling two properties.

7. The Tribunal acknowledged the assessee's argument that there was no tangible material for reopening the case, and the failure to supply reasons deprived the assessee of the opportunity to object effectively. Citing legal precedent, it was determined that the Assessing Officer should have provided reasons for the reopening. Consequently, the reopening of the assessment was deemed unjustified, and the impugned order was set aside, allowing the grounds raised by the assessee.

8. Ultimately, the appeal of the assessee was allowed, and the order was pronounced in open court on 18th January 2023.