2021 (10) TMI 20 - AT - Income Tax

Assessment order quashed for 2011-12 due to assessing officer's error. Assessee's cross objection allowed.

ITO, Ward-1 (2) Mysore Versus P.H. Chandrashekar And Vice-Versa

The Tribunal quashed the assessment order for the year 2011-12, deeming it vitiated due to the assessing officer's failure to dispose of objections before ... Validity of reopening of assessment u/s 147 - eligibility of reasons to believe - non-compliance of procedure - non-disposing of objections filed by the assessee before completion of assessment - HELD THAT:- As decided in M/S. DEEPAK EXTRUSIONS PVT. LTD. [2017 (3) TMI 1257 - KARNATAKA HIGH COURT] with regard to the non following of procedure prescribed by Hon'ble Supreme Court in the case of GKN Drive Shafts India Ltd [2002 (11) TMI 7 - SUPREME COURT] AO did not dispose of the objections prior to proceeding with the assessment further and proceeded to pass the order for assessment. Under the circumstances, it can be said that the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been folio ed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained - also see SHRI. LAKSHMANA, S/O. LATE CHIKKATHIMMAIAH case [2021 (7) TMI 1141 - ITAT BANGALORE] - Decided in favour of assessee. Issues:Validity of assessment order challenged by the assessee regarding reopening of assessment for assessment year 2011-12.Detailed Analysis:Issue 1: Delayed Cross ObjectionThe assessee filed a cross objection challenging the validity of the assessment order, which was delayed by 489 days. The delay was condoned by the Tribunal after considering the reasons provided by the assessee's representative.Issue 2: Validity of Reopening of AssessmentThe assessing officer reopened the assessment for the year 2011-12 after a survey operation revealed undisclosed investments by the assessee in a hotel project. The assessee challenged the validity of the reopening before the Ld. CIT(A) on various grounds, including non-compliance with legal procedures. The Ld. CIT(A) upheld the assessing officer's actions, stating that the reopening was justified based on undisclosed income. However, the assessee contended that the assessing officer did not follow the procedure laid down by the Supreme Court, leading to a vitiated assessment order.Issue 3: Non-Compliance with Legal ProceduresThe assessee argued that the assessing officer did not follow the prescribed procedure by not disposing of objections raised by the assessee before completing the assessment. The Ld. A.R. cited relevant case laws and contended that this procedural irregularity rendered the assessment order void. The Ld. D.R. argued that such non-compliance would not invalidate the assessment order and could be rectified by remitting the matter to the authority.JudgmentThe Tribunal considered the arguments presented by both parties and referred to decisions by the jurisdictional High Court and a coordinate bench. Following the precedent set by the High Court, the Tribunal held that the failure to dispose of objections before completing the assessment violated the prescribed procedure. Consequently, the assessment order was deemed vitiated and was quashed. As a result, the cross objection filed by the assessee was allowed, and the appeal of the revenue was dismissed. The Tribunal pronounced the order on 24th September 2021.