Invalid reopening u/s 147 quashed by ITAT for Rs. 18,00,000 addition

The ITAT allowed the appeal, quashing the reassessment order due to the invalidity of the reopening u/s 147, addition u/s 2(22)(e) of Rs. 18,00,000, and the AO's failure to dispose of objections. The ITAT found the AO acted without jurisdiction by not following prescribed procedures, as mandated by legal precedent, leading to the reassessment order being deemed unsustainable.

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Issues:
The issues involved in this case are the validity of reopening u/s 147, addition u/s 2(22)(e) of Rs. 18,00,000, and non-disposal of objections by the AO.

Validity of Reopening u/s 147:
The appeal was directed against the order upholding the reopening u/s 147 and the validity of notice u/s 148 of the Income Tax Act, 1961. The AO had initiated proceedings u/s 147 and issued notice u/s 148. The assessee contended that the notice was beyond jurisdiction and void-ab-initio. The ITAT quashed the reassessment order as the AO failed to dispose of objections filed by the assessee, which was against the mandate of the decision of the Hon'ble Gujarat High Court. The ITAT held that the AO acted without jurisdiction by not following the norms laid down by the Supreme Court in terms of disposing of objections before passing the reassessment order.

Addition u/s 2(22)(e) of Rs. 18,00,000:
The AO made an addition u/s 2(22)(e) of Rs. 18,00,000 in the hands of the assessee based on a loan raised by a company in which the assessee was a substantial shareholder. The ITAT, following a precedent, quashed the reassessment order as the AO did not dispose of the objections raised by the assessee before passing the order, which was against the mandate of the decision of the Hon'ble Supreme Court. The ITAT held that the reassessment under section 147 cannot be sustained due to the failure of the AO to follow the required procedures.

Non-Disposal of Objections by the AO:
The ITAT highlighted that the AO failed to dispose of the objections filed by the assessee against the notice u/s 147 of the Act before passing the assessment order. Citing the decision of the Hon'ble Supreme Court, the ITAT emphasized that the AO is bound to disclose the reasons for reassessment and dispose of objections before proceeding with the reassessment. The ITAT quashed the reassessment order due to the AO's failure to follow the prescribed procedures, as mandated by legal precedent.

Conclusion:
The ITAT allowed the assessee's appeal, quashing the reassessment order on the grounds of the invalidity of the reopening u/s 147, the addition u/s 2(22)(e) of Rs. 18,00,000, and the non-disposal of objections by the AO. The ITAT held that the jurisdiction assumed was not legal, following the legal precedents set by the Hon'ble Supreme Court and the decision in the case of the assessee's brother.

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