2016 (2) TMI 1398 - AT - Income Tax

AO must address assessee's objections under Section 148 before reassessment; failure leads to invalid reassessment

Sh. Tarlochan Singh Versus Income Tax Officer, Hoshiarpur.

The ITAT Amritsar held that the AO must first address the assessee's objections to the notice issued under section 148 before proceeding with the ... Reopening of assessment - Mandation to address objection raised by an assessee against a notice issued u/s 148 - HELD THAT:- As evident from the observations of their Lordships in “General Motors India Pvt. Ltd.” [2012 (8) TMI 714 - GUJARAT HIGH COURT] the obligation to decide the objection raised by an assessee against a notice issued u/s 148 of the Act, first, i.e., prior to ad separate from the assessment order, is not a mere technicality, as is tried to be made out by the Department. It is a binding mandate and in the present case too, this mandate has not been followed. AO ought to have first separately decided the objections raised by the assessee against the notice u/s 148 of the Act - Appeal of assessee allowed. ISSUES: Whether the Assessing Officer (AO) validly exercised jurisdiction in reopening a completed assessment without separately disposing of objections raised against the reopening notice issued under section 148 of the Income Tax Act.Whether the AO was required to decide objections to the reopening notice prior to passing the assessment order, and if failure to do so affects the validity of the assessment.Whether the confirmation of addition of income relating to ownership of trucks was justified when the assessee had already declared income as a percentage of gross receipts from those trucks. RULINGS / HOLDINGS: It was held that the AO did not comply with the binding mandate to first decide the objections raised by the assessee against the notice issued under section 148 separately and prior to passing the assessment order; the AO's disposal of objections within the assessment order is not permissible.The court held that the obligation to decide objections to the reopening notice prior to the assessment order is 'not a mere technicality' but a mandatory requirement, and failure to comply renders both the order on objections and the assessment order liable to be quashed.The court did not expressly rule on the addition relating to the trucks in the provided text; the appeal was allowed solely on the ground of non-compliance with procedure regarding objections to the reopening notice. RATIONALE: The court relied on the precedent set by the Gujarat High Court in 'General Motors India Pvt. Ltd.' which held that a writ petition under Article 226 is maintainable where the AO fails to decide objections filed under section 148 before passing the assessment order, emphasizing the necessity for the AO to communicate the decision on objections to the assessee and allow reasonable time for legal challenge prior to assessment.The AO's rejection of objections within the consolidated assessment order was found contrary to the legal framework requiring separate disposal of objections to the reopening notice, as per statutory interpretation of section 148 and judicial pronouncements.No contrary authority was cited by the Department, and the court followed the binding precedent, marking a doctrinal emphasis on procedural safeguards in reopening assessments under the Income Tax Act.