2019 (11) TMI 393 - AT - Income Tax

Tribunal Invalidates Reassessment Order Due to Lack of Reasons, Emphasizes Procedural Fairness

The tribunal set aside the reassessment order in a case where the Assessing Officer failed to furnish reasons for reopening the assessment to the ... Reopening of assessment u/s 148 - recording of reasons and furnishing of the same to assessee - HELD THAT:- Assessee had sought the reasons from the AO and were never furnished to the assessee, he has pointed to the letter written by the assessee to the AO which is placed in paper book. Before me, Revenue has not placed any material on record to demonstrate that the reasons recorded for reopening the assessment was furnished to the assessee. In the present case it is thus clear that despite the request by the assessee, the Assessing Officer has completed the assessment without furnishing the reasons recorded for reopening of assessment. Furnishing the reasons recorded for reopening of the assessment is mandatory condition as held in the case of GKN Driveshafts (India) Ltd. Vs. ITO [2002 (11) TMI 7 - SUPREME COURT] wherein laid down the principle that recorded reasons must be furnished to the assessee when the assessee seeks the reasons. Hon’ble Bombay High Court in the case of CIT Vs. Trend Electronics [2015 (9) TMI 1119 - BOMBAY HIGH COURT] after considering the decision of CIT Vs. Videsh Sanchar Nigam Ltd. [2011 (7) TMI 715 - BOMBAY HIGH COURT] has held that recorded reasons as laid down by the Apex Court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the AO. It has further held that the recording of reasons and furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in the absence of reasons being furnished when sought for would make an order passed on reassessment bad in law. Revenue has not placed any contrary binding decision in its support. Issues:Reopening of assessment without furnishing reasons to the assessee.Analysis:The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2003-04. The Assessing Officer had noted discrepancies in the capital gains declared by the assessee and initiated reassessment proceedings under section 147 of the Income Tax Act. The assessee contended that despite repeated requests, the reasons for reopening the assessment were not furnished by the Assessing Officer, which is a mandatory requirement as per legal precedents. The assessee relied on the decision in GKN Driveshafts (India) Ltd. Vs. ITO, where it was held that furnishing the recorded reasons for reopening of assessment is compulsory. The Revenue failed to provide evidence that the reasons were shared with the assessee. The tribunal, considering the legal principles established by the Hon'ble Supreme Court and the Bombay High Court, held that failure to furnish the reasons for reopening the assessment renders the reassessment order bad in law. Consequently, the reassessment order was set aside, and the appeal of the assessee was allowed.This judgment highlights the importance of adhering to procedural requirements, such as providing reasons for reopening assessments, as mandated by the law. Failure to comply with such requirements can lead to the reassessment order being deemed invalid, as demonstrated in this case. The tribunal's decision was based on established legal principles and precedents set by higher courts, emphasizing the significance of procedural fairness and transparency in tax assessments. The judgment serves as a reminder to tax authorities to ensure strict compliance with statutory procedures to maintain the integrity and legality of assessment processes.