Reopening objections and ITR-7 disclosure limits: reassessment failed on natural justice, and deemed application was not reportable in Schedule-I.

Non-disposal of objections to reopening before completion of reassessment violated natural justice and rendered the reassessment unsustainable. The assessee's objections to the reopening were on record, but the Assessing Officer did not consider or dispose of them before completing the assessment; the reassessment was therefore vitiated in the assessee's favour. Schedule-I of ITR-7 was held to cover only amounts accumulated or set apart under section 11(2), not deemed application under Explanation (1)(2) to section 11(1). The addition made for non-disclosure of deemed application was accordingly unsustainable and was deleted in the assessee's favour.

---

---

Issues: (i) Whether the reassessment order was vitiated for non-disposal of the assessee's objections to the reopening under sections 147 and 148; (ii) Whether amounts treated as deemed application under Explanation (1)(2) to section 11(1) were required to be disclosed in Schedule-I of ITR-7, and whether the addition made for non-disclosure was sustainable.

Issue (i): Whether the reassessment order was vitiated for non-disposal of the assessee's objections to the reopening under sections 147 and 148.

Analysis: The assessee had raised objections to the reopening at the assessment stage, and those objections were found to have been uploaded along with the appeal papers. The Assessing Officer did not consider or dispose of the objections before completing the assessment. Such failure deprived the assessee of a fair consideration of its challenge to reopening and offended the principles of natural justice.

Conclusion: The reassessment order was vitiated on this ground and the issue was decided in favour of the assessee.

Issue (ii): Whether amounts treated as deemed application under Explanation (1)(2) to section 11(1) were required to be disclosed in Schedule-I of ITR-7, and whether the addition made for non-disclosure was sustainable.

Analysis: On the scheme of ITR-7 and the relevant instruction for Schedule-I, disclosure was required for amounts accumulated or set apart under section 11(2). The provision did not extend to deemed application under Explanation (1)(2) to section 11(1). The addition was therefore based on an erroneous reading of the return form requirements.

Conclusion: The deemed application amount was not required to be shown in Schedule-I, and the addition made on that basis was unsustainable. The issue was decided in favour of the assessee.

Final Conclusion: The assessment addition was deleted and the appeal was allowed in full.

Ratio Decidendi: Schedule-I of ITR-7 is confined to disclosure of amounts accumulated or set apart under section 11(2), and non-disposal of objections to reopening before completion of assessment renders the reassessment unsustainable as contrary to natural justice.

---