2024 (12) TMI 1428 - AT - Income Tax

Validity of reopening of assessment - non disposal of assessee s objections filed against reopening of assessment - HELD THAT - In a letter forwarded by AO it does not deal with the objections filed by the assessee against reopening of assessment. Hence, contentions of the Revenue that the objections were disposed of by the AO on 05.09.2018 are misplaced. No infirmities in the finding of First Appellate Authority. The objections of the assessee against reopening of assessment were not disposed off by the AO, hence, the assessment is vitiated. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues presented and considered in this judgment are:

Whether the assessment proceedings under Sections 147 and 148 of the Income Tax Act, 1961, were valid given the alleged non-disposal of the assessee's objections by the Assessing Officer (AO) as mandated by the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO.
Whether the failure to dispose of the objections by a separate speaking order constitutes a mere procedural irregularity or renders the reassessment proceedings void ab initio.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assessment Proceedings under Sections 147 and 148

Relevant Legal Framework and Precedents: The legal framework involves Sections 147 and 148 of the Income Tax Act, 1961, which pertain to the reopening of assessments. The Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO established that objections to the reopening must be disposed of by a speaking order before proceeding with the assessment.
Court's Interpretation and Reasoning: The court emphasized the importance of following the procedure laid down by the Supreme Court, which is binding and not merely procedural. The failure to pass a speaking order on the objections affects the jurisdiction of the AO to proceed with the assessment.
Key Evidence and Findings: The letter dated 05.09.2018 from the AO was found not to address the objections filed by the assessee substantively. It merely reiterated the initiation of proceedings based on cash deposits without addressing the objections.
Application of Law to Facts: The court applied the precedent set by the Supreme Court and various High Courts, concluding that the AO's failure to dispose of the objections by a speaking order invalidated the assessment proceedings.
Treatment of Competing Arguments: The Revenue argued that the failure was a procedural irregularity, citing the case of Home Finders Housing Ltd. The court, however, found that the dismissal of the SLP in that case did not constitute a binding precedent and emphasized the binding nature of the Supreme Court's directions in GKN Driveshafts.
Conclusions: The court concluded that the assessment order was void due to the AO's failure to comply with the procedural requirements set by the Supreme Court.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The assessing officer is bound to dispose of the same by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." (GKN Driveshafts)
Core Principles Established: The requirement for the AO to pass a speaking order on objections is not a mere procedural formality but a jurisdictional requirement. Failure to do so renders the reassessment proceedings invalid.
Final Determinations on Each Issue: The appeal by the Revenue was dismissed, upholding the CIT(A)'s decision to quash the assessment order. The cross objections by the assessee were dismissed as infructuous.

The judgment reinforces the procedural safeguards in reassessment proceedings, emphasizing adherence to the Supreme Court's directives to ensure fairness and legality in the assessment process.

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