2025 (1) TMI 164 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - non-disposal of the objection before finalization of the assessment order - HELD THAT - Since in the instant case, the AO has passed the assessment order without disposing-of the objections filed by the assessee for reopening of the assessment, the impugned assessment will not be valid as per the decision rendered in the case of KSS Petron Private Ltd. 2016 (10) TMI 1112 - BOMBAY HIGH COURT Assessee appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Appellate Tribunal ITAT Mumbai addresses the following core legal questions:

Whether the reopening of the assessment for the Assessment Year 2009-10 was valid.
Whether the assessment order passed by the Assessing Officer (AO) without disposing of the objections raised by the assessee to the reopening of the assessment is valid.
Whether the procedural requirements as laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. were adhered to by the AO.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Reopening of Assessment

Relevant Legal Framework and Precedents: The reopening of assessments is governed by Section 148 of the Income Tax Act, 1961. The Supreme Court's decision in GKN Driveshafts (India) Ltd. v. ITO establishes that the AO must provide reasons for reopening the assessment and dispose of any objections raised by the assessee before finalizing the assessment.
Court's Interpretation and Reasoning: The Tribunal emphasized that the AO must adhere to the procedural safeguards outlined in the GKN Driveshafts case. The failure to dispose of objections before passing the assessment order constitutes a violation of these procedural requirements.
Key Evidence and Findings: The AO issued a notice for reopening on 19-03-2013, and the reasons for reopening were provided to the assessee on 20-01-2014. The assessee filed objections on 11-02-2014, but the AO passed the assessment order on 21-03-2014, before disposing of these objections.
Application of Law to Facts: The Tribunal applied the principles from the GKN Driveshafts case and found that the AO's actions were procedurally flawed, rendering the assessment order invalid.
Treatment of Competing Arguments: The Tribunal considered the Revenue's position but found it untenable in light of established legal precedents requiring the disposal of objections before finalizing an assessment.
Conclusions: The Tribunal concluded that the assessment order was invalid due to the AO's failure to dispose of the objections before passing the order.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The impugned assessment will not be valid as per the decision rendered by the Hon'ble Bombay High Court in the above-referred case."
Core Principles Established: The Tribunal reinforced the principle that procedural compliance with the Supreme Court's guidelines in GKN Driveshafts is mandatory for the validity of a reopened assessment.
Final Determinations on Each Issue: The Tribunal quashed the assessment order due to procedural non-compliance, specifically the AO's failure to dispose of the assessee's objections before finalizing the assessment. Other grounds for challenging the reopening were not adjudicated due to the quashing of the assessment order.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the necessity of procedural adherence in the reopening of assessments, thus upholding the principles set forth in the GKN Driveshafts case.

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