Reassessment under Section 147 quashed for failure to provide reasons to believe despite assessee's request

The ITAT Raipur quashed a reassessment u/s 147 after the AO failed to provide the assessee with a copy of "reasons to believe" despite specific request. The tribunal held this failure violated the assessee's statutory right to object to the reopening basis, invalidating the AO's jurisdictional assumption. Citing precedents including GKN Driveshafts (SC), Agarwal Metals (Bombay HC), and Jagat Talkies Distributors (Delhi HC), the tribunal ruled the assessment was passed in violation of governing legal principles and struck it down for want of valid jurisdiction. The assessee's appeal was allowed.

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Issues Involved:
1. Validity of the jurisdiction assumed by the Assessing Officer (A.O) under Section 147 of the Income-tax Act, 1961.
2. Legality of the assessment order passed without providing the reasons for reopening the assessment to the assessee.
3. Jurisdictional issue concerning the notices issued under Sections 148 and 143(2).
4. Addition of Rs. 29,34,000 as deemed income under Section 56(2)(vii)(b)(ii).
5. Applicability of Section 56(2) to the land held as stock in trade.

Detailed Analysis:

1. Validity of the Jurisdiction Assumed by the A.O under Section 147:
The primary issue revolves around the sustainability of the assessment framed by the A.O without making available a copy of the "reasons to believe" to the assessee. The assessee had specifically requested the A.O for a certified copy of the reasons based on which the proceedings under Section 147 were initiated. The A.O's failure to provide these reasons before the culmination of the assessment proceedings was deemed a significant procedural lapse. The Tribunal held that this failure deprived the assessee of the statutory right to object to the reopening of the assessment, thus invalidating the jurisdiction assumed by the A.O.

2. Legality of the Assessment Order Passed Without Providing Reasons:
The Tribunal emphasized that the failure to provide the "reasons to believe" goes to the root of the validity of the jurisdiction assumed by the A.O. Citing the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. ITO, it was reiterated that the assessee has a statutory right to obtain these reasons and file objections, which the A.O is required to dispose of through a speaking order. The Tribunal found that the A.O's failure to communicate these reasons rendered the assessment void.

3. Jurisdictional Issue Concerning Notices Issued under Sections 148 and 143(2):
The assessee contended that the notices issued under Sections 148 and 143(2) were without jurisdiction as the jurisdiction over the assessee had already been transferred to another ward. However, this issue was not elaborated upon in the judgment, as the primary focus remained on the procedural lapse concerning the non-provision of reasons for reopening the assessment.

4. Addition of Rs. 29,34,000 as Deemed Income under Section 56(2)(vii)(b)(ii):
The CIT(Appeals) had confirmed the addition of Rs. 29,34,000 as deemed income under Section 56(2)(vii)(b)(ii), ignoring the assessee's claim that the land in question was agricultural land. The Tribunal did not delve into the merits of this addition due to the quashing of the assessment on procedural grounds.

5. Applicability of Section 56(2) to Land Held as Stock in Trade:
The assessee argued that the provisions of Section 56(2) were not applicable as the land was held as stock in trade. This issue, like the previous one, was left open by the Tribunal due to the quashing of the assessment on procedural grounds.

Conclusion:
The Tribunal quashed the assessment framed by the A.O under Section 147 due to the failure to provide the "reasons to believe" to the assessee, which is a procedural requirement. This failure invalidated the jurisdiction assumed by the A.O, rendering the assessment void. Consequently, the Tribunal did not address the merits of the additions made in the assessment. The appeal was allowed, and the assessment was quashed based on the procedural lapse.

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