2022 (6) TMI 183 - AT - Income Tax

Reassessment Order Quashed for Jurisdictional Issues: Assessee's Objections Not Addressed

Kamlesh Kumar Agarwal (through Legal Heir Smt. Lakshmi Agarwal) Versus ITO, Ward 1 (3) Ghaziabad

Kamlesh Kumar Agarwal (through Legal Heir Smt. Lakshmi Agarwal) Versus ITO, Ward 1 (3) Ghaziabad - TMI Issues Involved:1. Jurisdiction of the Assessing Officer (AO) in reopening the assessment under Section 147 of the Income Tax Act, 1961.2. Validity of the reassessment order without complying with mandatory conditions and obtaining valid approval.3. Addition of Rs. 37,00,000/- on account of alleged bogus purchases.4. Adequate opportunity of being heard to the assessee.5. Failure to dispose of objections raised by the assessee against reopening of assessment.Issue-wise Analysis:1. Jurisdiction of the Assessing Officer (AO) in Reopening the Assessment:The assessee contended that the AO who issued the notice under Section 148 was not the jurisdictional AO. The assessee was assessed in Ghaziabad, but the notice was issued by the AO in New Delhi. The Tribunal observed that the jurisdictional AO for the assessee was indeed the ITO, Ghaziabad, as evidenced by the returns filed for the assessment years 2006-07 and 2008-09. The Tribunal cited the case of M.I. Builders Pvt. Ltd. vs. ITO, where it was held that reassessment proceedings initiated by a non-jurisdictional AO are invalid. Therefore, the reassessment proceedings initiated by the AO in New Delhi were held to be invalid.2. Validity of the Reassessment Order:The assessee argued that the reassessment order was passed without complying with the mandatory conditions of Sections 147 to 151 of the Income Tax Act, 1961. The Tribunal noted that the objections raised by the assessee against the reopening of the assessment were not disposed of by the AO before completing the reassessment. This was contrary to the procedure laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO, which mandates that objections must be disposed of by a speaking order. The Tribunal held that the failure to dispose of the objections rendered the reassessment order invalid.3. Addition of Rs. 37,00,000/- on Account of Alleged Bogus Purchases:The assessee challenged the addition of Rs. 37,00,000/- on account of bogus purchases, arguing that the AO recorded incorrect facts and disregarded the evidence submitted by the assessee. However, since the reassessment was held to be invalid on jurisdictional grounds, the Tribunal did not delve into the merits of this issue, rendering it academic.4. Adequate Opportunity of Being Heard:The assessee contended that the reassessment order was passed without giving adequate opportunity of being heard. The Tribunal noted that the objections raised by the assessee were not disposed of, which indicated a lack of adequate opportunity. This further supported the conclusion that the reassessment order was invalid.5. Failure to Dispose of Objections:The Tribunal emphasized that the AO did not comply with the mandatory requirement of disposing of the objections raised by the assessee against the reopening of the assessment. This non-compliance was a significant procedural lapse, making the reassessment order bad in law. The Tribunal referred to the case of PCIT Vs. Tupperware (India) Pvt. Ltd., where the Hon'ble Delhi High Court quashed the reassessment order for similar reasons.Conclusion:The Tribunal quashed the reassessment order on the grounds that the reassessment proceedings were initiated by a non-jurisdictional AO and that the AO failed to dispose of the objections raised by the assessee. As a result, the reassessment was held to be bad in law, and the appeal of the assessee was allowed. The other grounds raised by the assessee were not addressed as they became academic. The order was pronounced in the open court on 18/05/2022.