2025 (3) TMI 1120 - AT - Income Tax

Reopening of assessment u/s 147 - reasons have not been supplied - addition on account of unexplained money u/s. 69A and unexplained jewellery - HELD THAT - We find that at no point of time the reasons recorded by the AO were ever supplied to the assessee despite specific request as per the letter dated 24/12/2015 incorporated supra. As noted above assessee has challenged this issue specifically before the CIT (A) and detailed submissions were made however nowhere CIT (A) has even addressed this point. At least at the appellate stage CIT (A) could have asked the AO to provide the reasons recorded and he himself could have taken note of the objections. Even before us no material has been brought on record that these reasons which have been given before us was ever made available to the assessee. Accordingly we hold that no reasons were supplied to the assessee despite specific request. Once that is so then it is a clear violation of the law enunciated by the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT . Thus if the reasons have not been supplied then the entire re-assessment notice u/s. 148 and consequently the entire re-assessment order u/s. 148 is bad in law - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The case primarily revolves around two core legal questions:

1. The validity of the re-assessment proceedings initiated by the Assessing Officer (AO) under Section 147 of the Income Tax Act, 1961, particularly focusing on the failure to provide the reasons for reopening the assessment to the assessee.

2. The addition of Rs. 34,69,337/- to the assessee's income, categorized as unexplained money under Section 69A and unexplained jewelry.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Re-assessment Proceedings

Relevant Legal Framework and Precedents:

The legal framework for reopening assessments is governed by Section 147 of the Income Tax Act, which requires the AO to have "reason to believe" that income has escaped assessment. The Supreme Court in GKN Driveshafts (India) Ltd. vs. DCIT emphasized that the reasons for reopening must be provided to the assessee upon request, allowing the assessee to raise objections.

Court's Interpretation and Reasoning:

The Tribunal noted that the AO failed to provide the reasons for reopening the assessment despite the assessee's specific request. This omission was a violation of the principles established in GKN Driveshafts and other jurisdictional High Court rulings, which mandate the supply of reasons as a jurisdictional prerequisite.

Key Evidence and Findings:

The Tribunal observed that the reasons for reopening were not supplied to the assessee at any point, neither during the assessment proceedings nor at the appellate stage. The Tribunal also noted that the CIT(A) did not address this issue despite the assessee's detailed submissions.

Application of Law to Facts:

Applying the principles from GKN Driveshafts and subsequent High Court decisions, the Tribunal concluded that the failure to furnish reasons rendered the reassessment proceedings void.

Treatment of Competing Arguments:

The Department's representative suggested that the reasons could be provided now and the matter remanded to the AO. However, the Tribunal rejected this, emphasizing that the procedural requirement to provide reasons is a jurisdictional matter that must be adhered to before proceeding with reassessment.

Conclusions:

The Tribunal held that the reassessment proceedings were invalid due to the AO's failure to provide the reasons for reopening the assessment, as required by law.

2. Addition of Unexplained Money and Jewelry

This issue was not extensively analyzed by the Tribunal, as the decision on the first issue rendered the reassessment proceedings void. Consequently, the addition of Rs. 34,69,337/- was also quashed as part of the invalidated reassessment order.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal reiterated the importance of the procedural requirement, quoting the Supreme Court: "The completion of assessment/re-assessment without furnishing the reasons recorded by the AO for initiation of proceedings under section 147/148 of the Act is not sustainable in law as it is incumbent on the AO to supply them within reasonable time."

Core Principles Established:

The Tribunal reinforced the necessity of providing reasons for reopening assessments as a jurisdictional requirement, ensuring that reassessment notices are not issued lightly and that the assessee has an opportunity to object.

Final Determinations on Each Issue:

The Tribunal quashed the reassessment proceedings, declaring them void due to the procedural lapse of not providing the reasons for reopening to the assessee. Consequently, the addition of unexplained money and jewelry was also annulled.