2018 (2) TMI 1900 - AT - Income Tax

Tribunal Upholds Commissioner's Decision on Reassessment Orders, Emphasizes Procedural Adherence

The Income Tax Officer, Ward – 2 (1), Nashik Versus Smt. Nirmala Vijay Sanklecha And Vice-Versa

The Income Tax Officer, Ward – 2 (1), Nashik Versus Smt. Nirmala Vijay Sanklecha And Vice-Versa - TMI Issues Involved:1. Validity of reassessment orders under Section 147 of the Income Tax Act.2. Non-disposal of objections raised by the assessees regarding the reopening of assessments.3. Adherence to procedures laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors.4. Compliance with the principles of natural justice.Detailed Analysis:1. Validity of Reassessment Orders under Section 147:The primary issue was whether the reassessment orders passed by the Assessing Officer (AO) under Section 147 were valid. The AO had issued notices under Section 148 to both assessees for the assessment year 2008-09, leading to the reassessment proceedings. The AO observed that the assessees had not declared Short Term Capital Gains from a development agreement with M/s. Vascon Dwellings Pvt. Ltd., which resulted in additional income. The reassessment orders were challenged by the assessees on the grounds that the AO did not dispose of their objections through a speaking order, as required by law.2. Non-disposal of Objections Raised by the Assessees:The assessees contended that the AO failed to dispose of their objections regarding the reopening of assessments by passing a speaking order. This contention was based on the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors., which mandates that the AO must furnish reasons for reopening an assessment and dispose of any objections by passing a speaking order. The Commissioner of Income Tax (Appeals) upheld the assessees' contention, quashing the reassessment orders for non-compliance with this requirement.3. Adherence to Procedures Laid Down by the Supreme Court:The Tribunal noted that the AO did not adhere to the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. The AO's ordersheet entry dated 24-02-2014, which purportedly disposed of the objections, was found to be insufficient and non-speaking. The Tribunal emphasized that a valid order disposing of objections must provide clear reasons and allow the assessee time to challenge the order before proceeding with the final assessment.4. Compliance with Principles of Natural Justice:The Tribunal further observed that the AO violated the principles of natural justice by not providing the assessees sufficient opportunity to challenge the order disposing of their objections. The AO passed the assessment order immediately on the next day after the alleged disposal of objections, without affording the assessees the four-week period mandated by the Bombay High Court in Asian Paints Ltd. Vs. Deputy Commissioner of Income Tax. This accelerated finalization of the assessment was deemed a violation of the assessees' rights.Conclusion:The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) in quashing the reassessment orders due to the AO's failure to follow the proper procedure for disposing of objections. The appeals by the Department were dismissed, and the cross objections filed by the assessees were rendered infructuous. The Tribunal reiterated the importance of adhering to judicial procedures and principles of natural justice in reassessment proceedings.Order pronounced on Friday, the 23rd day of February, 2018.