2021 (7) TMI 1141 - AT - Income Tax

Tribunal nullifies assessment due to failure to address objections promptly. Upholds appellant's contentions.

The Tribunal allowed the appeal, annulling the assessment due to the AO's failure to dispose of objections as required by law. The Tribunal upheld the ... Validity of assessment u/s 147 - assessee argued AO has not disposed off the objections with regard to validity of reopening of assessment under section 148 - HELD THAT:- The admitted position is the AO has not disposed off the objections by a speaking order. Under the circumstances, it is clear that the mandatory procedure of disposal of objection by the AO before proceeding with the assessment has not been followed and therefore the order of assessment cannot be sustained and has to be quashed. See M/S. DEEPAK EXTRUSIONS PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 (4) , BANGALORE [2017 (3) TMI 1257 - KARNATAKA HIGH COURT] - Decided in favour of assessee. Issues:Validity of order of reassessment under section 148 of the Income Tax Act, 1961 due to non-disposal of objections by the Assessing Officer.Detailed Analysis:Issue 1: Validity of Order of ReassessmentThe appellant, an individual, owned agricultural land beyond 8 kms from the municipal limits of Bruhat Bengaluru Mahanagara Palike. The land was sold, and the appellant claimed no capital gain tax as it was agricultural land. However, the Assessing Officer (AO) issued a notice under section 148 based on information from the Income Tax Department. The appellant contended that no notice was served, but he filed the return after being instructed by department personnel. The AO passed an order assessing capital gains, invoking section 50C due to a variance in property value. The appellant challenged the reassessment, citing non-disposal of objections regarding the validity of reopening proceedings under section 147 by the AO, as per the Supreme Court's decision in GKN Driveshafts (India) Ltd. vs. ITO. The CIT(A) acknowledged the non-compliance but upheld the order, citing time constraints. The CIT(A) relied on Gujarat and Madras High Court decisions, dismissing the appellant's grounds. The appellant appealed to the Tribunal.Issue 2: Compliance with Supreme Court RulingThe CIT(A) contended that due to time constraints, the AO couldn't pass a separate order on objections, as mandated by the Supreme Court. The CIT(A) cited approvals obtained and the appellant's delayed response to the notice. The CIT(A) referenced cases to support that non-disposal of objections doesn't render the assessment void. The Tribunal considered the appellant's arguments, noting the Karnataka High Court's stance that failure to dispose of objections renders the assessment unsustainable. The Tribunal highlighted that non-jurisdictional High Court decisions cited by the CIT(A) were not binding. Relying on the Karnataka High Court decision, the Tribunal annulled the assessment, as the AO didn't follow the mandatory procedure of disposing objections before assessment.ConclusionThe Tribunal allowed the appeal, annulling the assessment due to the AO's failure to dispose of objections as required by law. The Tribunal upheld the appellant's contentions based on the Karnataka High Court's decision, emphasizing the importance of complying with procedural requirements before proceeding with assessments.This detailed analysis highlights the key aspects of the judgment regarding the validity of the reassessment order under section 148 of the Income Tax Act, 1961, focusing on the non-disposal of objections by the Assessing Officer as per the Supreme Court's ruling.