2018 (2) TMI 2086 - AT - Income Tax

Assessing Officer's Failure to Address Objections Leads to Cancellation of Assessment

The Tribunal canceled the assessment due to the Assessing Officer's failure to address objections challenging the validity of reopening under section ... Validity of reassessment where objections to reopening are not disposed of - Requirement to pass a speaking order on objections to reasons recorded for reopening - Reassessment under section 143(3)/147 following notice under section 148Validity of reassessment where objections to reopening are not disposed of - Requirement to pass a speaking order on objections to reasons recorded for reopening - Assessment completed under section 143(3)/147 without disposing of the assessee's objections to the reasons recorded for reopening is invalid - HELD THAT: - The Tribunal examined whether the Assessing Officer disposed of the specific objections filed by the assessee after receipt of the reasons recorded for reopening. Relying on the principle affirmed by the Hon'ble Supreme Court in G.K.N. Driveshaft (India) Limited and on the earlier Division Bench decision of this Tribunal in Hardware Trading Corporation , the Tribunal held that once reasons are communicated the assessee is entitled to file objections and the Assessing Officer is obliged to consider and dispose of those objections by a speaking order before proceeding with reassessment. In the present case the Assessing Officer did not pass any order disposing of the objections raised by the assessee; hence the reassessment order passed under section 143(3)/147 was held to be bad in law and liable to be cancelled. [Paras 5]Assessment under section 143(3)/147 cancelled for failure to dispose of objections to reopening; appeal allowed on this ground.Addition under section 2(22)(e) rendered infructuous by cancellation of reassessment - Addition made under section 2(22)(e) was not adjudicated because the reassessment was cancelled and the challenge to that addition became infructuous - HELD THAT: - Having quashed the reassessment for failure to dispose of objections to the reopening, the Tribunal recorded that the substantive challenge to the addition made under section 2(22)(e) in Grounds No. 8 and 9 fell away. The Tribunal expressly declined to decide those grounds as they had become infructuous consequent to cancellation of the reassessment order. [Paras 6]Substantive additions under section 2(22)(e) left undecided as infructuous; no adjudication on merits.Final Conclusion: The reassessment order under section 143(3)/147 is cancelled for failure to dispose of the assessee's objections to the reasons recorded for reopening; consequential challenges to additions were not decided as they became infructuous and the appeal is allowed. Issues: Validity of assessment made under section 143(3)/147, Addition made under section 2(22)(e)Validity of assessment made under section 143(3)/147:The appeal was against the order of the ld. Commissioner of Income Tax (Appeals) challenging the validity of the assessment made by the Assessing Officer under section 143(3)/147. The Assessing Officer had reopened the assessment and issued a notice under section 148. The assessee requested to treat the original return as a response to the notice. The assessment was completed, adding deemed dividend under section 2(22)(e) of the Act. The appeal was dismissed by the ld. CIT(Appeals), leading to the appeal before the Tribunal. The assessee raised preliminary issues regarding the validity of the assessment.The Tribunal found that the objections raised by the assessee challenging the validity of reopening were not considered or disposed of by the Assessing Officer before completing the reassessment. Citing a previous Tribunal decision and a Supreme Court case, it held that passing an assessment order without addressing objections challenging the validity of reopening was bad in law. Following the Supreme Court decision, the Tribunal canceled the assessment due to the Assessing Officer's failure to address the objections raised by the assessee.Addition made under section 2(22)(e):Due to the decision on the preliminary issue, the Tribunal found the issues raised by the assessee challenging the addition made by the Assessing Officer in the assessment to be infructuous. The Tribunal did not find it necessary to decide on these issues due to the cancellation of the assessment. Consequently, the appeal of the assessee was allowed based on the decision on the preliminary issue, and the Tribunal pronounced the order in favor of the assessee on February 23, 2018.