AO must dispose of assessee's objections before proceeding with reopened assessment under reassessment provisions

Gujarat HC quashed assessment orders passed by AO for failure to dispose of petitioner's objections against reassessment reopening. Court held that following GKN DRIVESHAFTS precedent, AO is mandatorily required to dispose of objections filed by assessee before proceeding with reopened assessment. Without examining merits regarding section 24(a) deduction disallowance, HC remanded matters back to AO to first dispose of reopening objections filed across three assessment years under consideration.

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Issues Involved:
1. Validity of notice issued under section 148 of the Income Tax Act, 1961.
2. Failure of the Assessing Officer to dispose of objections raised by the petitioner.
3. Legality of the assessment order passed under section 147 read with section 144B of the Act.

Detailed Analysis:

1. Validity of Notice Issued under Section 148:
The petitioner, a Charitable Trust, challenged the notice issued under section 148 of the Income Tax Act, 1961, for three assessment years (2013-14, 2015-16, and 2016-17). The notice was issued on the grounds of alleged escapement of income due to a wrong claim of deduction under section 24(a) of the Act. The petitioner argued that the reasons recorded for reopening the assessment were factually incorrect and invalid ab initio, as no such deduction was claimed. The petitioner contended that the assumption of jurisdiction was fundamentally flawed and illegal.

2. Failure to Dispose of Objections:
The petitioner raised objections to the reopening of the assessment on 10.06.2020, which were reiterated on 05.03.2021. The Assessing Officer failed to dispose of these objections by a speaking order, as mandated by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. vs. Income Tax Officers and ors. The petitioner argued that the failure to pass a speaking order deprived them of the opportunity to challenge the issuance of the notice at that stage. The Court noted that it is mandatory for the Assessing Officer to dispose of the objections before proceeding with the assessment, as per the Supreme Court's directive.

3. Legality of the Assessment Order:
The petitioner also challenged the assessment order dated 24.09.2021 passed under section 147 read with section 144B of the Act for all three assessment years. The petitioner contended that the assessment order was passed without addressing the objections raised, which is contrary to the established legal procedure. The Court observed that the Assessing Officer did not pass any order disposing of the objections raised by the petitioner, which is a violation of the procedural requirements laid down by the Supreme Court.

Conclusion:
The Court quashed and set aside the impugned assessment orders passed by the Assessing Officer. The matters were remanded back to the Assessing Officer to dispose of the objections raised by the petitioner regarding the reopening of the assessment. The Assessing Officer was directed to complete this exercise within 12 weeks from the date of receipt of the Court's order and to pass a speaking order after giving the petitioner an opportunity of hearing. The Court clarified that it did not go into the merits of the matter and that the Assessing Officer should pass an appropriate order in accordance with the law. The rule was made absolute to the aforesaid extent, with no order as to costs.

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