2021 (10) TMI 868 - AT - Income Tax

Reopening of assessment u/s 147 - Non disposing of objections put by assessee against reopening - HELD THAT - Since Assessing Officer failed to dispose off the preliminary objections of the assessee by way of a separate order, respectfully following the decision of the Hon'ble Bombay High Court in the case of Fomento Resorts Hotels Ltd. 2006 (11) TMI 645 - BOMBAY HIGH COURT we quash the re-assessment order passed u/s. 143(3) r.w.s. 147 of the Act for the A.Y. 2011-12. The preliminary ground raised by the assessee is allowed.

Summary

Issues Involved:
1. Natural Justice
2. Reassessment
3. Addition under Section 68
4. Addition under Section 69

Issue-wise Detailed Analysis:

1. Natural Justice:
The appellants contended that the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] erred by not granting a proper, sufficient, and adequate opportunity of being heard, thus violating the principles of natural justice. They argued that the appellate order was framed without proper application of mind to the facts and submissions on record.

2. Reassessment:
The appellants challenged the reassessment proceedings initiated under Section 147 read with Section 148 of the Income Tax Act, 1961. They argued that the necessary preconditions for initiating and completing the reassessment were not satisfied, making the reassessment framed as bad, illegal, and void.

The appellants' counsel submitted that the reassessment order was bad in law as the Assessing Officer did not dispose of the objections raised by the assessee for reopening the assessment. The counsel referred to several decisions, including the Hon'ble Supreme Court's decision in GKN Driveshafts (India) Ltd. v. ITO [259 ITR 19], which mandates that the Assessing Officer must pass a separate order disposing of the objections before proceeding with the reassessment.

The Tribunal observed that the Assessing Officer failed to dispose of the preliminary objections filed by the assessee, rendering the reassessment order invalid. The Tribunal quashed the reassessment order, citing the necessity for the Assessing Officer to pass a separate speaking order disposing of the preliminary objections.

3. Addition under Section 68:
The appellants contested the addition of ?5,30,14,596/- under Section 68 of the Act for alleged bogus/unexplained long-term capital gains. They argued that the Ld. CIT(A) based the addition on erroneous facts, surmises, suspicion, conjecture, and irrelevant considerations while ignoring relevant material submitted by the appellants.

4. Addition under Section 69:
The appellants also challenged the addition of ?27,83,266/- under Section 69 of the Act for alleged estimated unexplained expenses. They contended that the Ld. CIT(A) based the addition on surmises, suspicion, conjecture, and irrelevant considerations while ignoring relevant material submitted by the appellants.

Conclusion:
The Tribunal quashed the reassessment orders for the relevant assessment years as the Assessing Officer did not dispose of the preliminary objections raised by the assessees. This failure to follow the mandatory procedure laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO rendered the reassessment orders invalid. Consequently, the Tribunal did not delve into the merits of the additions under Sections 68 and 69, as the reassessment orders themselves were quashed. The appeals were allowed in favor of the assessees.