2026 (3) TMI 487 - AT - Income Tax

Reassessment initiated during pending scrutiny breaches jurisdiction; reassessment quashed where objections to reopening were not decided.

Reopening and reassessment under section 147/148 issued while the original scrutiny assessment under section 143(3) remained pending, and where the ... Reassessment u/s 147/148 initiated during pendency of scrutiny assessment u/s 143(3) - Parallel assessment proceedings - HELD THAT: - The Tribunal examined the assessment order and contemporaneous records and found that although the cause title referred to section 143(3), the assessment order itself records issuance of notice u/s 147/148 and the additions flowed from reasons recorded for reopening. Reliance was placed on the principle that two parallel assessment streams cannot co-exist and that reassessment u/s 147/148 cannot be resorted to while regular scrutiny proceedings u/s 143(3) remain pending. The Tribunal considered precedents including the decision in KLM Royal Dutch Airlines [2007 (1) TMI 138 - DELHI HIGH COURT] and the Apex Court in Trustees of H. E. H. the Nizam's Supplemental Family Trust [2000 (2) TMI 4 - SUPREME COURT] to conclude that pending scrutiny assessment must be concluded before initiating reassessment, and that the AO's initiation of reassessment during the pendency of scrutiny assessment was therefore without jurisdiction. [Paras 8, 9, 11] Reassessment proceedings under section 147/148 initiated during pendency of scrutiny assessment under section 143(3) were without jurisdiction and invalid Objections to reopening must be decided before completion of reassessment - Whether the assessment could stand when objections against reopening were not decided by the Assessing Officer - HELD THAT: - The Tribunal noted that the assessee filed objections to the reopening and that the AO, in the remand report, admitted that there is no record to establish disposal of those objections. The Tribunal applied the mandate of the Apex Court in GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] that objections to reopening must be disposed of before completing reassessment. The absence of any record showing that the objections were considered established that the reassessment was completed without complying with the requirement to decide objections, rendering the assessment procedurally defective. [Paras 7, 11] Assessment completed without deciding the assessee's objections to reopening was in violation of law and vitiates the reassessment Final Conclusion: The assessment for AY 2010-11 was quashed because reassessment under section 147/148 was initiated during the pendency of scrutiny assessment under section 143(3) and because the AO failed to decide the assessee's objections to reopening; consequent merits of additions were left open and the appeal is allowed. Issues: Whether reassessment proceedings under section 147/148 of the Income-tax Act, 1961 initiated and completed during the pendency of regular scrutiny assessment under section 143(3) (and without deciding the assessee's objections to reopening) are valid.Analysis: The Tribunal examined the assessment order and record and found that notice under section 148 was issued during pendency of proceedings under section 143(3). The reasons recorded for reopening formed the basis of the final assessment order and the assessing officer admitted in the remand report that objections filed by the assessee against reopening were not disposed of. The Tribunal reviewed binding authority holding that two concurrent assessment proceedings cannot lawfully be pursued and that reassessment under section 147/148 cannot be initiated while the original scrutiny assessment remains pending. The Tribunal considered the departmental plea of 'merging streams' and noted that the existence of a notice under section 148 together with the AO's admission that objections were not decided establishes that reassessment was in fact proceeded with; this gave rise to a jurisdictional defect. The Tribunal also applied the principle that assessment completed without deciding statutory objections to reopening violates the requirement in GKN Driveshafts (India) Ltd. and renders the reassessment invalid. Having found both initiation of reassessment during pending scrutiny assessment and failure to decide objections, the Tribunal held the reassessment order to be without jurisdiction and procedurally flawed.Conclusion: The reassessment proceedings and the assessment order dated 28.03.2013 under section 147/148 read with section 143(3) are quashed; decision is in favour of the assessee.