2017 (5) TMI 416 - AT - Income Tax

Tribunal quashes assessment order lacking jurisdiction, procedural compliance under Income Tax Act.

M/s. Shiva Rubber Industries Versus Income Tax Officer, Ward-2 (2), Gurgaon

The Tribunal allowed the appeal, quashing the assessment/reassessment order due to lack of jurisdiction in reopening the assessment and non-compliance ... Reopening of assessment - permission from competent authority - Held that:- From the provisions of Section 151(2), it is evident that if the case is reopened by any Assessing Officer who is below the rank of Joint Commissioner within four years no approval from the higher authority is required. The officer below the rank of the Joint Commissioner are Income Tax Officer, ACIT, DCIT to reopen the assessment within four year u/s.151(2) mandatorily did not have any approval from their superior authority. The reliance was placed on the decision in the case of S. Sewa Singh Gill vs. CIT (1962 (3) TMI 110 - PUNJAB HIGH COURT) where it has been held that competency of ITO cannot be doubted and challenged as the assessment drafted by the ITO is final assessment and the CIT(A) making the approval regarding assessment is not valid. In the circumstances and the facts of the present case, the AO has acted at the behest of the superior authority and accordingly assumption of jurisdiction was bad. Accordingly, it will be a case of failure to exercise the discretion all together and such direction is held to be illegal and unwarranted, therefore, order so passed by the AO is directed to be quashed. Issues Involved:1. Jurisdiction of the Assessing Officer in reopening the assessment under Section 147 of the Income Tax Act, 1961.2. Compliance with mandatory conditions under Sections 142(1), 148, and 143(2) of the Income Tax Act, 1961.3. Validity of the reassessment proceedings and the subsequent assessment order.Detailed Analysis:1. Jurisdiction of the Assessing Officer in Reopening the Assessment under Section 147:The primary issue was whether the Assessing Officer (AO) had the legal jurisdiction to reopen the assessment under Section 147 of the Income Tax Act, 1961. The appellant argued that the AO had erred in law and on facts by reopening the assessment without proper jurisdiction and without serving mandatory notices. The Tribunal examined the provisions of Section 151 of the Income Tax Act, which requires the satisfaction of the Joint Commissioner or higher authorities for reopening cases beyond four years from the end of the relevant assessment year. The Tribunal found that the AO acted at the behest of superior authorities, violating the requirement of independent satisfaction. This was supported by precedents such as CIT vs. SPL’s Siddhartha Ltd. (2012) and S. Sewa Singh Gill vs. CIT (1962), which emphasize that the satisfaction of one authority cannot be substituted by another.2. Compliance with Mandatory Conditions under Sections 142(1), 148, and 143(2):The appellant contended that the AO failed to comply with the mandatory conditions of Sections 142(1), 148, and 143(2) of the Income Tax Act. The Tribunal noted that the AO issued notice under Section 148 after obtaining approval from the Additional CIT and served it on the assessee. However, the AO did not address the objections raised by the assessee regarding the reasons for reopening the assessment. The Tribunal highlighted that the AO must dispose of the objections with a speaking order before proceeding with the reassessment, as mandated by the Supreme Court in G.K.N. Driveshafts (India) Ltd. This procedural lapse rendered the reassessment invalid.3. Validity of the Reassessment Proceedings and the Subsequent Assessment Order:The Tribunal scrutinized whether the reassessment proceedings and the subsequent assessment order were valid. It was found that the AO completed the reassessment hastily without properly addressing the objections raised by the assessee. The Tribunal referred to the ITAT’s earlier order, which had remanded the matter back to the AO to consider the objections. The AO’s failure to comply with this directive and the procedural requirements led the Tribunal to conclude that the reassessment was invalid. The Tribunal relied on cases like M/s. S. Power Pvt. Ltd. vs. ITO and PCIT vs. Tupper Ware India Pvt. Ltd., which emphasize the necessity of addressing objections before finalizing reassessment.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the assessment/reassessment order on the grounds of lack of jurisdiction and non-compliance with mandatory procedural requirements. The legal grounds were upheld, making the grounds on merit academic and not requiring further adjudication. The order was pronounced on April 25, 2017.