2022 (3) TMI 780 - AT - Income Tax

Validity of reopening of assessment u/s 147 - As argued AO has failed to supply the copy of the reasons recorded u/s 148(2) to the assessee during assessment proceedings - HELD THAT - The case of the assessee finds support from the decision of the GKN Driveshafsts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT wherein as held that when a notice u/s 148 of the Act is issued and the assessee has filed its return of income and sought the reasons for issuance of notice u/s 148 of the Act, the AO is bound to furnish the copy of reasons within the reasonable time and assessee on receipt of the reasons is entitled to file objections to issuance of notice. The Hon ble Apex Court held that the AO is bound to dispose of the objections filed by the assessee by passing a speaking order. AO has not provided the reasons despite the assessee having filed return of income and having requested the AO to provide reasons which has deprived the assessee from filing the objections to the re-opening of assessment and against issuance of notice u/s 148 of the Act. The case of the assessee is also covered by the decision of CIT Vs Videsh Sanchar Nigam Ltd. 2011 (7) TMI 715 - BOMBAY HIGH COURT as held that the reasons recorded for re-opening the assessment were not furnished to the assessee till the completion of assessment, the reassessment order cannot be upheld. Similar ratio has been laid down in the case of CIT Vs National Organic Chemical Industries Ltd. by the Hon ble Bombay High Court by following the decision of Co-ordinate Bench in the case of CIT vs. Videsh Sanchar Nigam Ltd. (supra). Thus we set aside the order of ld CIT(A) and hold that the assessment framed u/s 143(3) is not valid and is accordingly quashed. The legal grounds raised by the assessee are allowed.

Summary

Issues:
- Non-supply of reasons recorded u/s 148(2) of the Income Tax Act during assessment proceedings.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The assessee challenged the order on legal and merit grounds. The legal issue raised was the failure to supply the copy of reasons recorded u/s 148(2) of the Act during assessment proceedings, rendering the assessment invalid.

2. The AO reopened the assessment based on information received regarding bogus donations made by the assessee. Despite the assessee's request, the reasons recorded for reopening were not provided. The assessment was framed without supplying the reasons, leading to challenges by the assessee before the Ld. CIT(A) on the jurisdictional issue.

3. The Ld. A.R. argued that the assessment order was invalid as reasons were not supplied, depriving the assessee of the opportunity to file objections. The Ld. D.R. opposed, stating the issue was not raised before the Ld. CIT(A). The Ld. A.R. reiterated the non-supply of reasons and the void nature of the assessment order.

4. The Tribunal noted that the reasons were never supplied to the assessee, hindering the filing of objections against the reopening of assessment. Citing legal precedents, including GKN Driveshafts (India) Ltd. and CIT Vs. Videsh Sanchar Nigam Ltd., the Tribunal held that assessments framed without providing reasons are invalid. The order of the Ld. CIT(A) was set aside, and the assessment under section 143(3) was quashed.

5. As the appeal was allowed on the legal issue, other grounds on merits were left open for future consideration if needed. The appeal of the assessee was allowed, and the assessment was deemed invalid due to the failure to supply reasons during assessment proceedings.