2018 (2) TMI 162 - AT - Income Tax

Assessee wins appeal as Tribunal deems reassessment without jurisdiction. Importance of legal procedures stressed.

The Tribunal allowed all 109 appeals filed by the assessee, finding that the reassessment proceedings were without jurisdiction due to the AO's failure to ... Reopening of assessment - proceeding against dissolved entity - copy of reasons recorded were not provided to the assessee - Held that:- In the present case despite specifically request by the assessee to the AO / CIT(A) for providing the reasons recorded for assumption of jurisdiction, AO or the CIT (A) have failed to comply the mandatory requirement of law by providing the reasons recorded before issuance of notice u/s 148 to the assessee, hence objection raised by the assessee vide letter dt.09.12.2008 remained unanswered. Further the reasons brought on record by the Standing Counsel for the Revenue, reproduced herein above are bereft of any reasoning and are not pertain to the years under consideration. From a perusal of the two reasoning’s reproduced herein above, it is not discernible as to for which BOI the reasons were recorded, for which year it were recorded, what were the PAN nos of BOI and what were ground s for reopening. Further the reasons reproduced hereinabove are only the reasons forming part of the note sheet, whereas for the requirement of law, the reasons should be recorded separately and thereafter proceedings should be initiated by the AO.As the copy of reasons are required to be provided to the assessee and note sheet of the proceedings cannot acquire the status of reasons recorded Therefore the reassessment proceedings initiated by the Revenue against the BOI are without any jurisdiction - Decided in favour of assessee. Issues Involved:1. Validity of Reopening of Assessments.2. Jurisdiction of Assessing Officer (AO) to Issue Notices under Section 148.3. Status of Assessee as Body of Individuals (BOI) or Association of Persons (AOP).4. Validity of Protective Assessments.5. Compliance with Legal Procedures and Requirements.Detailed Analysis:1. Validity of Reopening of Assessments:The Tribunal examined whether the reopening of assessments under Section 147/148 was valid. The assessee argued that the reopening was invalid as the reasons for reopening were not provided, which is mandatory as per the Supreme Court's ruling in GKN Driveshafts (India) Ltd. vs. CIT. The Tribunal noted that despite requests, the AO did not furnish the reasons for reopening, nor did he pass a speaking order addressing the objections raised by the assessee. Consequently, the Tribunal held that the reassessment proceedings were without jurisdiction and allowed the appeals of the assessee.2. Jurisdiction of Assessing Officer (AO) to Issue Notices under Section 148:The Tribunal scrutinized whether the AO had the jurisdiction to issue notices under Section 148. The assessee contended that the AO did not have valid reasons to believe that income had escaped assessment, and the reasons recorded were vague and non-specific. The Tribunal found that the reasons recorded by the AO did not specify the BOI, the assessment year, or the grounds for reopening. Therefore, the Tribunal concluded that the AO lacked jurisdiction to issue the notices, rendering the reassessment proceedings invalid.3. Status of Assessee as Body of Individuals (BOI) or Association of Persons (AOP):The Tribunal addressed the issue of whether the assessee should be assessed as a BOI or an AOP. The AO had issued notices treating the assessee as an AOP, while the assessee argued that they were a BOI until their dissolution on 12.09.1993. The Tribunal noted that the AO did not provide evidence to support the existence of an AOP or the reasons for treating the assessee as an AOP. The Tribunal held that the reassessment proceedings treating the assessee as an AOP were without jurisdiction and allowed the appeals of the assessee.4. Validity of Protective Assessments:The Tribunal considered the validity of protective assessments made by the AO. The assessee argued that protective assessments could not be made based on suspicion of income escaping assessment. The Tribunal agreed with the assessee, stating that the AO's action of making protective assessments indicated doubt and suspicion rather than a bona fide belief that income had escaped assessment. Consequently, the Tribunal quashed the protective assessments made by the AO.5. Compliance with Legal Procedures and Requirements:The Tribunal emphasized the importance of compliance with legal procedures and requirements, particularly the need to provide reasons for reopening assessments and to pass a speaking order addressing objections raised by the assessee. The Tribunal found that the AO failed to comply with these mandatory requirements, rendering the reassessment proceedings invalid. The Tribunal allowed the appeals of the assessee on these grounds.Summary of Tribunal's Decision:The Tribunal allowed all 109 appeals filed by the assessee, concluding that the reassessment proceedings initiated by the AO were without jurisdiction due to the failure to provide reasons for reopening assessments and the lack of evidence supporting the existence of an AOP. The Tribunal quashed the protective assessments and emphasized the need for compliance with legal procedures and requirements.