2019 (4) TMI 1472 - AT - Income Tax

Reassessment proceedings u/s 147 - not passing a speaking order rejecting the objections of the assessee - Jurisdictional power in direction to the learned assessing officer to initiate action u/s 269SS - HELD THAT - AO despite making repeated requests by the assessee for furnishing the reasons recorded for reopening of the case did not provide the reasons even before 13 months of the 1st request and when assessee files objection to such reasons within 60 days, he does not disposal of them by a speaking order but passes the assessment order u/s 143 (3) read with section 147 of the act. This itself shows that reassessment proceedings requires to be quashed as the neither rejection not acceptance of the objections of the assessee has prejudiced the interest of the assessee to challenge the same before the higher forum. Therefore not passing a speaking order rejecting the objections of the assessee but passing an order u/s 147 of the act making the additions based on reasons recorded has caused serious prejudiced to the interest of the assessee. The reopening of the assessment is quashed. Therefore, the learned CIT A was not correct in holding that the reopening has been done in accordance with the law by the assessing officer. Accordingly, ground number 1 of the appeal of the assessee is allowed.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Addition of ?11.25 crores on account of unexplained cash receipts.
3. Directions to take action for infringement of Section 269SS of the Income Tax Act, 1961.
4. Validity of protective assessment and substantive assessment.
5. Jurisdiction and powers of the Commissioner of Income Tax (Appeals).

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee challenged the reopening of the assessment on the grounds that the objections filed against the issuance of notice under Section 148 were not disposed of by the Assessing Officer (AO). The assessee argued that this violated the law laid down by the Supreme Court in the case of GKN Driveshafts (India) Ltd vs. Income Tax Officer, which mandates that the AO must dispose of objections by passing a speaking order before proceeding with the assessment. The Tribunal found that the AO failed to provide reasons for reopening within a reasonable time and did not dispose of the objections before passing the assessment order. This failure was deemed to have caused serious prejudice to the assessee, leading to the quashing of the reassessment proceedings.

2. Addition of ?11.25 Crores on Account of Unexplained Cash Receipts:
The AO made an addition of ?11.25 crores on a protective basis in the hands of the assessee company, based on documents seized during a search at the residence of Mr. Sanjeev Mahajan. These documents allegedly showed unaccounted cash payments made by Mr. Mahajan to Mr. Ram Meher Garg, director of the assessee company, for the purchase of a hotel building. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition on the grounds that there was no sale of property by the assessee and that the cash payments were not recorded in the books of the assessee. The Tribunal upheld this deletion, noting that the property in question remained with the assessee and that the addition could not be justified as there was no sale transaction.

3. Directions to Take Action for Infringement of Section 269SS:
The CIT(A) directed the AO to take action against the assessee for infringement of Section 269SS of the Income Tax Act, which prohibits taking or accepting loans or deposits in cash exceeding ?20,000. The assessee contended that no loan was taken from Mr. Mahajan, and thus, there was no question of violating Section 269SS. The Tribunal found that the CIT(A) exceeded his jurisdiction by issuing such a direction, as there was no material evidence supporting the conclusion that the assessee had accepted a loan in cash.

4. Validity of Protective Assessment and Substantive Assessment:
The AO made the addition on a protective basis in the hands of the assessee company while making a substantive addition in the hands of Mr. Ram Meher Garg. The assessee argued that the income had already been taxed in the hands of Mr. Garg and Mr. Mahajan, and thus, it could not be taxed again in the hands of the assessee. The Tribunal noted that the AO himself believed the income belonged to someone else and made the addition in the hands of the assessee merely to protect the revenue. This approach was found to be unjustified, leading to the quashing of the protective assessment.

5. Jurisdiction and Powers of the Commissioner of Income Tax (Appeals):
The assessee challenged the CIT(A)'s jurisdiction in directing the AO to take action under Section 269SS. The Tribunal held that the CIT(A) does not have the power to issue such directions, as per Section 251(1) of the Income Tax Act. The CIT(A)'s direction was found to be beyond his jurisdiction and was thus invalid.

Conclusion:
The Tribunal quashed the reopening of the assessment for the assessment years 2007-08, 2008-09, and 2009-10, as the AO failed to dispose of the objections against the reopening. Consequently, the appeals filed by the assessee were allowed, and the additions made by the AO were deleted. The directions issued by the CIT(A) for taking action under Section 269SS were also set aside. The appeals filed by the Revenue were dismissed.

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