2018 (12) TMI 1461 - AT - Income Tax

Invalid reassessment proceedings due to failure to communicate reasons for reopening assessment. Emphasis on natural justice principles.

The Tribunal held that the reassessment proceedings under Section 147 read with Section 143(3) of the Income Tax Act, 1961 were invalid due to the ... Validity of reopening of assessment - non-communication of reasons to the assessee for reopening of assessment - Held that:- In the absence of signature of the AO, the order sheet entry dated 22.02.2016 is unauthenticated and cannot be given much weightage. Reasons required to be communicated to the assessee properly. See SABH INFRASTRUCTURE LTD. VERSUS ASSTT. COMMISSIONER OF INCOME TAX [2017 (9) TMI 1589 - DELHI HIGH COURT] The department could not place any evidence or any other decision of the Higher Court or Tribunal to controvert the submissions made by the AR and the decisions relied upon by the AR. The department could not place any evidence to establish that the reasons were communicated to the assessee and no other decision was brought before us to controvert the submissions of the AR. Therefore, we hold that the AO has not communicated the reasons for reopening of assessment and the case laws relied up on by the Ld.AR are squarely applicable to assessee’s case. Accordingly, we hold that the assessments made u/s 147 r.w.s. 143(3) are invalid - Decided in favour of assessee Issues Involved:1. Non-communication of reasons recorded for reopening the assessment under Section 147 of the Income Tax Act, 1961.2. Validity of the reassessment proceedings under Section 147 read with Section 143(3) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Non-communication of reasons recorded for reopening the assessment under Section 147 of the Income Tax Act, 1961:The primary issue in these appeals was the non-communication of reasons for reopening the assessment to the assessee. The assessee argued that the Assessing Officer (AO) did not supply the copy of the reasons recorded for issuing the notice under Section 148, making the reassessment proceedings invalid. The assessee cited the Supreme Court's decision in GKN Driveshafts (India) Ltd., which mandates that the AO must supply the reasons recorded for reopening the assessment upon request.The AO claimed that the reasons were communicated to the assessee's Authorized Representative (AR) during the course of assessment proceedings, as noted in the order sheet entry dated 22.02.2016. However, this order sheet was unsigned by the recording officer, and the AR denied receiving the reasons, as evidenced by a letter dated 06.10.2016.The Tribunal emphasized that communication of reasons is a legal requirement and not merely a formality. The reasons must be clearly communicated to the assessee, allowing them to file objections. Failure to do so violates the principles of natural justice and renders the assessment invalid. The Tribunal cited several judicial precedents, including decisions from the Delhi and Bombay High Courts, supporting the necessity of supplying reasons to the assessee.2. Validity of the reassessment proceedings under Section 147 read with Section 143(3) of the Income Tax Act, 1961:Given the non-communication of reasons, the Tribunal held that the reassessment proceedings under Section 147 read with Section 143(3) were invalid. The Tribunal relied on its earlier decision in the case of Sri Sarvaraya Sugars Ltd., where it was held that non-communication of reasons recorded for reopening the assessment renders the assessment invalid.The Tribunal reiterated that the AO must supply the reasons recorded for reopening the assessment to the assessee, allowing them the opportunity to file objections. In this case, the AO's failure to supply the reasons deprived the assessee of this opportunity, violating the principles of natural justice.The Tribunal concluded that the assessments made under Section 147 read with Section 143(3) were invalid due to the non-communication of reasons. Consequently, the orders of the Commissioner of Income Tax (Appeals) were set aside, and the reassessment orders were quashed.Conclusion:The Tribunal allowed the appeals of the assessee, holding that the reassessment proceedings were invalid due to the non-communication of reasons recorded for reopening the assessment. The Tribunal emphasized the importance of adhering to legal requirements and principles of natural justice in reassessment proceedings. The decision underscores the necessity for the AO to supply the reasons recorded for reopening the assessment to the assessee, ensuring transparency and fairness in the reassessment process.