Fair consideration of later evidence requires reassessment objections to be reconsidered without finally deciding the validity of reopening

Fairness in objection proceedings requires subsequent material relevant to the source of funds for share purchases to be considered before objections to reassessment are finally determined. The discussion concerns a non-resident assessee who attributed the acquisition funding to loans from HSBC Geneva and personal funds, while later furnishing detailed documents and annexures in response to statutory assessment notices. Although the initial rejection of objections was not prima facie unsupported on the material then available, the later evidence warranted fresh consideration. The substantive validity of the recorded belief for reopening, and other objections, remained open and were not finally adjudicated.

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Issues: Whether the order rejecting objections to reopening of assessment was liable to be set aside for fresh consideration in light of subsequent material furnished by the assessee regarding the source of funds for purchase of shares.

Analysis: The challenge arose from a notice under Section 148 of the Income-tax Act, 1961 for A.Y. 2014-15 and the subsequent order rejecting objections to reopening. The objections asserted that the assessee, being a non-resident, had funded the acquisition of shares through loans from HSBC Geneva and own funds, and that the belief of escapement was unsustainable. The rejection order had treated those objections as unsupported and left verification to reassessment proceedings. However, detailed material and annexures were later furnished by the assessee in response to notices under Section 143(2) and Section 142(1). In these peculiar facts, although the earlier reasoning in the objection-disposal order was not prima facie faulted on the material then available, fairness required that the subsequently furnished material be considered before objections to reopening were finally dealt with. The merits of the reopening, including the validity of the recorded belief and other objections, were not finally adjudicated and were expressly kept open.

Conclusion: The order disposing of objections was set aside, and the Assessing Officer was directed to pass a fresh order on the objections after considering the assessee's letter dated 8 March 2022 and its annexures; the substantive challenge to reopening was left open for fresh consideration. This issue is in favour of the assessee.

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