2019 (1) TMI 1472 - HC - Income Tax

Reopening of assessment - Held that - The assessee in the present case twice made a request to the assessing authority, but despite the specific requests, the assessing authority did not comply with the said request and supplied the reasons to the assessee. That casts a doubt even on the fact of the recording of the reasons in the contemporary period by the assessing authority. The fact that such reasons are supplied before the learned Tribunal only for the first time was enough for the learned Tribunal to hold that the assessing authority lacked the jurisdiction in invoking the reassessment proceedings and therefore, the impugned reassessment order deserves to be quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment under Section 143 read with Section 147 of the Income Tax Act, 1961 due to lack of reasons provided for reopening.
2. Whether the assessment passed under Section 143 read with Section 147 of the Income Tax Act, 1961 is invalid.

Analysis:
Issue 1:
The High Court of Bombay heard an appeal by the Revenue against the judgment of the Income Tax Appellate Tribunal (the Tribunal) regarding the validity of an assessment under Section 143 read with Section 147 of the Income Tax Act, 1961. The Tribunal held that the reassessment carried out by the Assessing Officer was invalid due to the failure to provide reasons recorded to the assessee. The Tribunal emphasized that a questionnaire served upon the assessee cannot replace the supply of reasons, which is essential for reassessment. The Court noted that the failure to provide reasons before the completion of the assessment renders the reassessment order invalid. This view was consistent with previous decisions, including CIT Vs. Videsh Sanchar Nigam Ltd. The Tribunal's decision was supported by the Karnataka High Court in the case of Pr. CIT Vs. Ramaiah, which reiterated that participation in reassessment proceedings does not suffice to inform the assessee of the reasons for reopening, highlighting the importance of providing reasons beforehand for the assessee to raise objections.

Issue 2:
The High Court upheld the Tribunal's decision, citing precedents and emphasizing the necessity of providing reasons for reopening assessments. The Court dismissed the Income Tax Appeal, finding no merit in the appeal and affirming the invalidity of the assessment due to the failure to provide reasons for reopening. The judgment underscored the importance of procedural regularity and the requirement for the assessing authority to supply reasons to the assessee before completing the assessment process. The decision highlighted that the failure to provide reasons in a timely manner casts doubt on the jurisdiction of the assessing authority to initiate reassessment proceedings, ultimately leading to the quashing of the reassessment order.