2014 (11) TMI 46 - AT - Income Tax

Tribunal quashes reassessment order over procedural errors, appellant succeeds on legal grounds

The Tribunal quashed the reassessment order due to improper disposal of objections in a composite order and non-compliance with sections 147 and 151. The ... Non-speaking order - Notice for reopening of assessment u/s 148 - Mandatory provisions of sections 147 and 151 are complied with before initiating the proceedings of re-assessment or not - Assessment reopened after four years - Default or failure on the part of the assessee to disclose fully and truly material facts as envisaged in the first proviso to section 147 or not – Held that:- CIT(A) did not advert to all the grounds raised before him - It was specifically urged before him that the provisions of sections 147 and 151 of the Act were not complied with – there was no whisper in the order qua this submission - It was also submitted that proceedings were initiated after lapse of four years and same is barred by time - The assessee had also pointed out that the objection against reopening were disposed by composite assessment order, but not by way of separate order - Such act is not permissible as decided in GENERAL MOTORS INDIA PVT. LTD Versus DEPUTY COMMISSIONER OF INCOME-TAX [2012 (8) TMI 714 - GUJARAT HIGH COURT] - none of the submissions is considered and decided in the order - Non-consideration of same is not justified and smacks arbitrariness – thus, the objections dismissed by the AO in a composite order is not proper, therefore the assessment so framed vide order dated 18/01/2013 deserves to be quashed on this ground alone - CIT(A) has not decided the specific ground in respect of assessment being time barred, non-compliance of the mandatory provisions of sections 147 & 151 of the Act – thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Issues Involved:1. Reopening of assessment u/s 147 beyond four years.2. Absence of a separate speaking order dealing with objections.3. Reopening of an already quashed order.4. Validity of proceedings initiated beyond four years.5. Requirement of 'reason to believe' and proper sanction for reassessment.6. Disallowance of additional depreciation claimed u/s 32(1)(iia).7. Adoption of income based on a quashed order.8. Adoption of income increased by disallowance of exemption u/s 10B.9. Charging of interest u/s 234A/234B/234C & 234D.10. Initiation of penalty proceedings u/s 271(1)(c).Detailed Analysis:1. Reopening of Assessment u/s 147 Beyond Four Years:The appellant argued that the reopening of the assessment u/s 147 was beyond the permissible period of four years and lacked any failure on their part to disclose fully and truly all material facts. The Tribunal noted that the assessment was reopened after the initial assessment u/s 143(1) was quashed. The Tribunal emphasized that for reopening under section 143(1), it is not necessary to establish that the escapement of income was due to the assessee's default.2. Absence of a Separate Speaking Order Dealing with Objections:The appellant contended that the Assessing Officer (AO) erred by not issuing a separate speaking order to dispose of objections against reopening, which goes against the precedent set by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors. The Tribunal found that the AO indeed disposed of the objections in a composite order of assessment, which was not permissible as per the Hon'ble Gujarat High Court's ruling in General Motors India (P) Ltd. vs. Dy.CIT.3. Reopening of an Already Quashed Order:The appellant argued that the reassessment was based on an order that had already been quashed by the Hon'ble ITAT, leaving no basis for reasons to believe escapement of income. The Tribunal agreed with the appellant, noting that the CIT(A) failed to appreciate that the original assessment order was quashed, thus invalidating the basis for reopening.4. Validity of Proceedings Initiated Beyond Four Years:The appellant claimed that the proceedings initiated beyond four years were time-barred. The Tribunal observed that since the only surviving order was u/s 143(1), the condition of reopening beyond four years without default on the part of the assessee did not apply. However, the Tribunal found that the CIT(A) did not properly address the issue of time-barred proceedings.5. Requirement of 'Reason to Believe' and Proper Sanction for Reassessment:The appellant argued that the reassessment lacked the necessary 'reason to believe' and proper sanction. The Tribunal noted that the CIT(A) did not consider this submission adequately. The Tribunal emphasized that non-compliance with sections 147 and 151 and the failure to address objections separately rendered the reassessment invalid.6. Disallowance of Additional Depreciation Claimed u/s 32(1)(iia):The appellant challenged the disallowance of additional depreciation on a captive power plant. The Tribunal did not adjudicate this issue as the appellant succeeded on legal grounds regarding the invalidity of the reassessment.7. Adoption of Income Based on a Quashed Order:The appellant contended that the AO erroneously adopted the income as per the quashed order. The Tribunal agreed, noting that the CIT(A) failed to appreciate that the original order was quashed, thus invalidating the basis for adopting the income.8. Adoption of Income Increased by Disallowance of Exemption u/s 10B:The appellant argued that the CIT(A) unjustifiably adopted the income increased by disallowance of exemption u/s 10B. The Tribunal did not adjudicate this issue as the reassessment was quashed on legal grounds.9. Charging of Interest u/s 234A/234B/234C & 234D:The appellant challenged the charging of interest under these sections. The Tribunal did not address this issue separately due to the quashing of the reassessment.10. Initiation of Penalty Proceedings u/s 271(1)(c):The appellant contested the initiation of penalty proceedings. The Tribunal did not adjudicate this issue as the reassessment was quashed.Conclusion:The Tribunal quashed the reassessment order on the grounds of improper disposal of objections in a composite order and non-compliance with sections 147 and 151. Consequently, the Tribunal did not adjudicate the merit-based grounds due to the appellant's success on legal grounds.