AI Drafter 
TaxTMI 
TaxTMI 
2025 (8) TMI 758
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....pital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm association or body, of the previous year in which the said transfer took place". The CIT(A) NFAC has relied upon various decisions of the Apex court and High courts. Whether the Decision of the Ld.CIT(A) is acceptable for the reason that, the facts and circumstances of the case is distinguishable from those cited in the case laws relied upon by the assessee and the Ld CIT(A). ii). Whether the decision of the Ld CIT(A) is correct in the light of the judgment of the Hon'ble Apex court in the case of McDowell & Co. Ltd. v. CTO [1985] 22 Taxman 11 (SC) held that tax planning may be legitimate, provided it is within the frame work of law. Colourable devices cannot be a part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay taxes honestly, without resorting to subterfuges. Here, the assessee being one of the partners of t....
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....ssment order. The addition in the hands of the assessee has been made as income from business, being in the nature of a compensation received by the assessee HUF, as discussed elaborately in the assessment order. But, Ld CIT(A) has, made elaborate discussion on section 45(4), which is not relevant in the context of the assessee's case, there by diluting the efforts made by the AO to bring to books the unaccounted/undisclosed income earned by the assessee under the guise of family arrangement, which it is not. The AO has not taken recourse to sec 45(4) in the assessment order while bringing to tax the amount of Rs. 29,13,00,000/-. Here, the order of Ld CIT(A) is against facts and law. viii). The Ld CIT(A) failed to appreciate the fact that, in this case, the assessee HUF has been compensated with Rs. 29.13 crores for forgoing its share of (business) profits to the extent of 99.9% in the business of the firm, as per the re-constitution/ revaluation of the said firm, but still continuing as a partner with 0.01% share. The benefit/perquisite as envisaged in section 28 of the Act includes any money received under an agreement wherein the party performing the activity is com....
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....roper reasons and on approvals from specified authority as stated by the revenue. In response to this notice assessee filed returns of income for the both the A.Ys., with the same income as disclosed vide their original income tax returns. 3.2 The assessment was completed u/s. 147 r.w.s.144 r.w.s.144B by the NFAC on a total income of Rs. 29,23,74,060/- for AY-2015-16 as against the returned of income of Rs. 10,74,060/-, And Rs. 238,59,15,430/- for AY-2016-17 as against the returned of income of Rs. 15430/-. While completing the assessments, it was held by the AO that, "Consequent on the reconstitution, the assessee HUF was to receive Rs. 2,37,41,97,625/- from M/s.Texmo Industries by way of goodwill. From M/s.Texmo Precision Castings, the assessee HUF was to receive as sum of Rs. 37.54 Crores. As a part of reconstitution, the profit-sharing ratio was revised and the assessee HUF share was revised to 0.01% in both the firms. The assessee HUF ceased to exist in the year 2015. Section 28(iv) of the Income tax Act lays down that "the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be charg....
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....eventual independent control and/or management would vest with Shivan, b. interest of the family members (held directly/indirectly) in the partnership firm Texmo Precision Castings should be adjusted for eventual independent control and/or management would vest with Arjunan. - Post the restructuring envisaged in the Memorandum of Family Arrangement, the percentage of share in TPC and TI for the family members were as under: SL. No Name of the Partnership firm Damayanthi Ramachandran (HUF) Share of Arjunanindi RR Trust for Arjunan (Sole beneficiary Arjunan) RR Trust for Shivan (Shivan and Mrs. Damayanthi Ramachandran are the beneficiaries) 1 Texmo Precision Castings (TPC) 0.01% 0.01% 99.97% 0.01% 2 Texmo Industries (TI) 0.01% -- 0.01% 99.98% - Partnership deeds of Texmo Industries and Texmo Precision Castings were amended on 06.05.2013 to give effect to the change in shareholding envisaged in the Memorandum of Family Arrangement dated 05.05.2013. - Change in Profit Sharing Ratio/Rights: Sl. No. Name of the Partner Texmo Industries (11) (Old New Share Holding) Texmo. Precision Castin....
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.... receivable from M/s Texmo Industries and M/s Texmo Precision Castings as on 31.03.2016 Rs. 207.13 Crores & Rs. 31.46 Crores totalling to Rs. 238.59 Crores was considered to be the income escaped - It is submitted that the benefit that is the goodwill generated in the business is an intangible asset that is recorded in the Balance sheet of the assessee. The same is converted into cash and credited into the current account of the assessee. The value of the goodwill that is converted into cash and credited into the current account of the assessee is taxable u/s. 28(iv) of the Act. 5.1 The ld.DR further tried to distinguish between the claim of Family Arrangement and the Business Arrangement. He submitted that the arrangement entered into by the partners (beneficiaries) of the firms, namely the HUF and others, is on business matter and not on family dispute or property matter as claimed by the assessee. Hence, this agreement shall not be termed as a family arrangement, rather it shall be named as a "Business Arrangement". 5.2 As per the ld.DR the definitions of Family Arrangement & Business Arrangement are as given below: Family Arrangement: A family arrangement i....
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....n profit sharing ratio of the partners of the firm implies that the same has been carried out in order to apportion the benefits derived out of business profit to each partner post reconstitution. (v) vide the reconstitution deed (named as family agreement) the assessee HUF in the capacity of a partner in the firm's business and its profits, even after extinguishing its shares continued to be partner with 0.01% share in the profits. (vi) The assessee HUF as well as other partners of the firm received credits in their books in the current accounts as compensation against relinquishment of share in the profits of the firm. (vii) since the revaluation has been carried out in the assets of the business firm and since no revaluation happened in the assets of HUF, the agreement entered into by the firms and its partners can only be termed as a business arrangement and not a family arrangement. No family property has been revalued nor assets distributed to its members. (viii) The compensation received by the assessee HUF is absorbed by the provisions of Section 28(iv) of the Act and not under any other provisions of the act. (ix) On careful....
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.... Industries as on 31.03.2014. 5.8 He further submitted that the Firm where the assessee is a partner is revalued, and the "Good Will" is brought into the books of accounts of the assessee. The ld.DR stated that the transaction and the income that is received by the assessee by converting the intangible assets of goodwill in the books of the Firms and receiving the benefit is squarely taxable u/s. 28(iv) of the Act. The Section 28(iv) in the Act is extracted for reference: "(iv) [ the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession:]" The term used in the section is "the value of benefit". The phrase used as "whether convertible into money or not" is clarificatory to emphasis and include all benefits arising from performance of business or profession. As submitted by the assessee, the section does not give immunity to any of the benefits as exemption from considering the same out of the ambit of section 28(iv) of the Act. 5.9 In the case of the assessee, the "benefit" is the assessee's share of goodwill credited (convertible into money) into its current account, and the value is Rs.....
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....e family arrangement of the paper book. [Sl. 5(a), Page- 563 to 580]. Further, the ld.AR submitted that the ld.CIT(A) in his order dated 29.11.2024 vide DIN No: ITBA/NFAC/S/250/2024-25/1070758503(1) has examined the applicability of Section 28(iv) in the assessee's case (Para 9.4, pg 62) and held that the provisions of section 28(iv) have no applicability in the present case. 6.1 He also submitted that the ld. CIT(A) has referred to the ruling of the Mumbai Bench of the ITAT in the case of Dy. CIT v. Manish M. Chheda [2009] 29 SOT 138 (Mum.), wherein the Hon'ble Mumbai ITAT has held that: "since no benefit or perquisite arose to partners in course of business carried on, section 28(iv) could not be applied to bring sum in question to tax in hands of partners of firm. Even otherwise, increase in capital of a partner as a result of revaluation of assets of firm did not have nexus with business of firm and, therefore, could not be brought within ambit of section 28(iv)." 6.2 The ld. CIT(A) has stated that one of the conditions necessary for the applicability of section 28(iv) is that the benefit or perquisite sought to be taxed must be arising in the course of business ....
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....siness or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs. 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act." 6.5 In the present case, the ld.AR drew our attention to para 5(viii) and facts of the case stated in para (xi) of the appeal by the Revenue for the AY 2015-16 wherein the AO has held that the assessee had withdrawn its share of extra income received on account of revaluation of the business of the partnership firms. Relevant extract of the appeal is captured as under: viii) The Ld. CIT(A) failed to appreciate the fact that, in this ....
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.... the current account of partners and not the capital account. 6.6 Therefore, the AO has contended that the assessee has withdrawn monies from the partnership firms. In such a case, without prejudice to the argument that no money has been withdrawn by the assessee, even if considered as withdrawn, the provisions of section 28(iv) would not come into play given that no non-monetary perquisites were received by the assessee. 6.7 The ld.AR submitted that the revaluation of business and subsequent withdrawal by the partners cannot be regarded as income u/s. 28(iv) of the Act. This has been discussed in various judicial precedents and the same are summarized as under: 6.8 In the case of Chetnaben B. Seth 203 ITR 24(Guj), Hon'ble Gujarat High Court has held that amount received by an assessee partner of a firm towards valuation of goodwill and assets of a firm at the time of retirement from the firm does not attract provisions of section 28 (iv) of the Act, since, the same cannot be said to be a perquisite arising from the business and that even otherwise it would not partake the character of income. 6.9 Further, in the case of DCIT Vs Manish M. Chheda (ITAT Mumbai) ITA No. 27....
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....ents made to the employees by the assessee because they cannot be brought within the purview of the words "any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite" more so because of the following words "whether convertible into money or not". In fact the Tribunal also accepted this position in the impugned order. Therefore, as this aspect of the matter has been decided in favour of Respondent by both the Appellate Authorities and the Revenue was not in appeal before the High Court, it was also not open to the Revenue to raise the issue at this stage." 6.11 Hence, the ld.AR argued that in the present case of the assessee, no benefits in kind were received by the assessee for the year under consideration warranting any additions u/s. 28(iv) of the Act. 6.12 Therefore, in view of the above, the ld.AR pleaded that the provisions of section 28(iv) of the Act are not applicable in the case of the assessee, and hence prayed that the appeal filed by the revenue authorities ought to be dismissed. 7.0 We have heard the rival contentions perused the material available on record and gone through the orders of the lower au....
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....he assessee had paid a sum of Rs. 23.05 Crores, received from M/s.Texmo Industries to M/s.Ramchandran Trust for Arjunan and had received a sum of Rs. 6.08 Crores from M/s.Texmo Precision Castings. The AO has held that assessee had made withdrawal as per the terms and conditions in the amended partnership deed and there was actual withdrawal of cash by the assessee from the goodwill credited to its current account. However, assessee disputes this fact. It says there was no actual withdrawal. The AO has made out a case that assessee failed to declare the income on account of extra profits received due to credit of goodwill in its current account (goodwill determined while revaluation of M/s.Texmo Industries). 7.4 The assessee made detailed submissions before the AO, arguing that amount credited to its current account, due to revaluation of M/s.Texmo Industries and M/s.Texmo Precision Castings, is not taxable. The AO did not accept assessee's contention and made addition of Rs. 29,13,00,000/- to the total income of the assessee by passing an order u/s. 147 of the Act dated 18.09.2021 by determining the total income at Rs. 29,23,74,060/-. 7.5 The assessee before the ld.CIT(A), NF....
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....aring ratio in the said firms as on 01.04.2013 was as under: SL. No Name of the Partnership firm Damayanthi Ramachandran (HUF) RR Trust for Arjunan (Sole beneficiary Arjunan) RR Trust for Shisan (Shivan and Mrs. Damayanthi Ramachandran are sole beneficiaries) 1 Texmo Precision Castings (TPC) 30% 35% 35% 2 Texmo Industries (11) 50% 50% 25% 25% - On 05.05.2013, R Ramachandran (HUF) / Damayanthi Ramachandran (HUF), Arjunan Ramachandran, Shivan Ramachandran, Damayanti Ramachandran, R.Ramachandran Trust for Arjunan and Ramachandran Trust for Shivan entered into a Memorandum of Family Arrangement. - As stated in clause E-I and ii of the said Memorandum, the family members had agreed that a. interest of the family members (held directly/indirectly) in the partnership firm Texmo Industries should be adjusted for eventual independent control and/or management would vest with Shivan b. interest of the family members (held directly/indirectly) in the partnership firm Texmo Precision Castings should be adjusted for eventual independent control and/or management would vest with Arjunan. - Post the restruct....
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....rent account balance after credit of goodwill a on 31.03.2014 (Rs. in Crores) Damayanthi Ramachandran (HUF) 128.23 237.49 318.43 RR Trust for Arjunan 91.75 329.20 408.21 RR Trust for Shivan 90.39 178.06 346.48 7.7 The goodwill generated in the business is an intangible asset that is recorded in the Balance sheet of the assessee. The same is converted into cash and credited into the current account of the assessee. The value of the goodwill that is converted into cash and credited into the current account of the assessee is taxable u/s. 28(iv) of the Act. 7.8 The revenue tried to distinguish between the claim of Family Arrangement and the Business Arrangement. The claim of the revenue that the arrangement entered into by the partners (beneficiaries) of the firms, namely the HUF and others, is on business matter and not on family dispute or property matter as claimed by the assessee is not acceptable in the eyes of law. We find that the reconstitution of partnership deed has been made by altering the share of profit among the partners based on the family arrangement, wherein all the partners are of one family. Hence, we find that, this agreem....
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.... present case cannot be found faulted with. 7.12 As concerned to the applicability of clause (iv) of section 28 the Act to the captioned A.Y. 2014-15, the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to tax under the head Profit and gains of business or profession. The said provision deal with the taxation of benefits and perquisites in kind i.e., non-monetary benefits arising from business or profession. Our above view is based on the decision of the Hon'ble Supreme Court in the case of Mahindra and Mahindra vs. Commissioner (404 ITR 1 - SC) wherein it is held as under: "On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the ....
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....resent facts and circumstances of the case, we are of the considered view that the AO has erred in treating the amount withdrawn from the partner as a result of the reconstitution as income chargeable to tax u/s. 28(iv) of the Act. Hence, there is no reason to interfere in the order of the ld.CIT(A) and thus dismiss the grounds of appeal raised by the revenue. CO No.19 & 20/Chny/2025 - A.Y. 2015-16 & 2016-17: 8. The assessee has raised the following grounds in its Cross objection: 1. Non opportunity of being heard granted The Hon'ble Commissioner of Income-tax (Appeals) ('Ld. CIT(A)') has erred in law and facts, in concluding that the opportunity of being heard was granted to the respondent without appreciating that no video conferencing took place on the schedule date and time. 2. Reassessment proceedings are not as per the procedure mandated by the Apex Court * The order passed by the Ld. CIT(A) of validating the re-assessment proceedings under section 147 on is not in conformity with the law, facts and circumstances of the case. * The Ld. CIT(A) has erred in concluding that reopening of assessment under section 148 o....
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....s under [Page No. 34 of the CIT(A) order] Date Event Relevant page of the Paper Book 22.05.2019 A survey was undertaken on the premises of Texmo Industries ('TI'). - 05.11.2019 Notice issued u/s. 148 of the Income-tax Act, 1961 ('the Act'). 601-601 03.12.2019 Return of income filed by the assessee and reasons for reopening of the assessment sought for by the assessee in accordance with the decision of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Limited v. ITO [2003] 259 ITR 19 [SC] vide the letter dated 04 December 2019. 603-617 29.09.2020 Notice issued u/s. 143(2) read with section 147 of the Act calling for information and also extracting therein the reasons purported to have been recorded for reopening of assessment. 528-531 15.10.2020 Submission filed against the above letter cum Notice. It was clarified therein that the reasons as recorded for re-opening were not furnished to the assessee and without prejudice detailed objections were filed to the so-called reasons mentioned in the aforesaid Notice u/s. 143(2). It was also prayed that in accordance with the decision of the Hon'ble Apex Court in the case of GK....
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....ant case, as the reasons had been disclosed in the proceedings, the Assessing Officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment." (emphasis supplied by us) As can be seen from the above table: i. Reasons as recorded for reopening the assessment have never been provided / served upon the assessee; ii. Without prejudice to the aforesaid, even if for a moment, one were proceed on the basis that the reasons as provided in the Notice u/s. 143(2) dated 29.09.2020 were the reasons validly recorded for reopening the assessment, the same were not disposed of prior to commencement of the assessment proceedings. 10.1 Objections were filed by the assessee vide letter dated 15.10.2020. Thereafter, Notice dated 19.07.2021 has been issued u/s. 142(1) of the Act, thereby commencing the assessment proceedings. The said Notice was replied to by the assessee vide its letter dated 26.07.2021. 10.2 Thereafter, the AO has issued a SCN dated 10.09.2021 and a draft re-assessment order dated 13.09.2021 by rejecting the objection for reopening of the assessment raised by the assessee in the said SCN/draft order a....
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....ections in the body of the reassessment order which action of the AO is gross-defiance to the order of the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd. and against the Hon'ble Bombay High Court in the case of Asian Paints Ltd. Bharat Jayanthi Lal Patel (supra), wherein their Lordships have given clear directions that the AO must dispose off the objections raised by the assessee against re-opening and facilitate at least four (4) weeks time before re-assessment order is framed, so that assessee may prefer filing of Writ Petition before the Hon'ble jurisdictional High Court against the re-opening of assessment. In the light of the above discussion, we are of the view that the assessee succeeds on the legal issue that the AO failed to comply with the binding directions of the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd., before framing the reassessment order. The AO rejecting objections of the assessee against re-opening by merely doing so while passing the re-assessment order, wouldn't come to the rescue of the Revenue because such an action of AO is noted to be in gross defiance to the binding order of the Hon'ble Supreme Co....
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....held by the Hon'ble Bombay High Court in the case of Asian Paints Limited v. DCIT & anr. (2008) 296 ITR 90 (Bom) and also in the case of Bharat Jayantilal Patel v. UOI reported in [2015] 378 ITR 596 (Bom.), which fact we find from perusal of Page No.86 of the Paper Book. Thus, according to the Ld. Sr. Counsel, it can be noted that the decision of the Hon'ble Madras High Court in the case of Home Finders Housing Ltd. (order dated 25.04.2018), is distinguishable on the facts and not applicable to the present case." Further, it was held that, "the order in the case of Home Finders Housing Ltd., (supra) was a decision rendered earlier to the decision held by the Hon'ble Division Bench in CIT v. Janak Shanthilal Mehta (supra) and in such an event i.e. when there are two conflicting views between the order of Hon'ble High Court of co-equal strength (of the same Court) then, later pronouncement of the Hon'ble Court is binding on us." 10.7 In light of the above arguments the ld.AR prayed to quash the reassessment order passed by the AO as void ab initio. 11.0 Per contra the ld.DR submitted that a survey under Section 133A of the Income Tax Act was conducted by the Income Tax....
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....by recording reasons therein and after obtaining approvals from the specified authorities as mandated by law. (ii) On being requested by the assessee, the reasons recorded for each year have been communicated to the assessee, in the due course of the assessment proceedings. (iii) The objections raised by the assessee on the reasons for re-opening of the case have been disposed of by the AO by justifying the reasons to the satisfaction of the assessee, as mandated by the Hon'ble Apex Court verdict and thus, in obedience to law the AO has discharged his duty well before finalization of the assessment proceedings. The assessee HUF has themselves submitted before the ld.CIT(A) that, the AO has disposed of the objections raised. (iv) It is pertinent to mention here that the Hon'ble Jurisdictional Madras High Court has dealt with this specific issue, while dealing with the case of M/s.Home Finders Housing Ltd. in Writ Petition No.1019 of 2017 and W.M.P.Nos.1001 and 6076 of 2017, while examining into the adherence of the AO to legal obligations and the Court directions while disposing of such objections raised by the assessee during the course of assessm....
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....challenging the said Hon'ble High Court order. 11.2 In this connection, the ld.DR elaborately submitted that the Jurisdictional High Court of Madras has the opportunity in the case of M/s.Home Finders Housing ltd. vs. Income Tax Officer in W.A. No. 463 of 2017 to examine the intention of the Hon'ble Supreme Court behind giving the directions in the case of M/s.GKN Driveshaft case in the reopening of the assessment proceedings u/s. 148 of the Act. The Hon'ble High Court in the elaborate discussion has ruled that the directions as issued by the Hon'ble Supreme Court is the procedural safeguard provided to the assessee to avoid unnecessary harassment by directing the AO to pass speaking order taking into account the objections for the reopening of the assessment. The Hon'ble Supreme Court also ruled that the disposal of the objections is in the value of a procedural requirement to appraise the assessee of the actual grounds which made the AO to arrive at prima facie satisfaction that there was escapement of assessment warranting reopening of the assessment proceedings. The relevant paragraphs of the order of the Hon'ble High Court is reproduced as follows: "16. It i....
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....ant by placing reliance on an order passed by the learned Single Judge in Mrs. Jayanthi Natarajan (cited supra) submitted that the order being one made without complying with the mandatory procedure, is non est in law and it cannot be given life by complying with the procedure later. In short, it is the contention that non-compliance of a prescribed procedure would nullify the order and the irregularity cannot be cured later. 21. The learned counsel for the Revenue contended that the order dated 14 September 2017 in W.P.No. 1905 of 2017 is bad in law. It was passed ignoring the order passed by a Coordinate Bench which is challenged in this appeal. 22. Since the learned counsel for the appellant placed heavy reliance on the view expressed in Mrs.Jayanthi Natarajan, we have perused the said order. We are in respectful disagreement with the views expressed by the learned Single Judge in W.P.No. 1905 of 2017. 23. The learned Single Judge by placing reliance on the decision of the Supreme Court in Sona Builders, quashed the assessment order without remitting the matter to the Assessing Officer for compliance of the procedure regarding disposal of objection. In....
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....tice u/s. 148 of the Act dated 05.11.2019. We note that the assessee filed a return of income in response to the said notice and requested for providing the reasons for reopening the assessment. Later the AO issued the notice u/s. 143(2) of the Act dated 29.09.2020 wherein the AO has sought clarification from the assessee stating as under: "Issues as per reasons recorded for reopening" "There was survey on 22.5.2019 in the case of M/s.Texmo industries and M/s.Texmo precision castings in which assessee is partner. As per the amendment made in the partnership deed assessee's share of profit was revised by 0.01% in both the firms as per the supplementary deeds the assessee has withdrawn Rs. 207.13 crores from M/s.Texmo industries to settle the dues of the assessee to M/s.Ramachandran Trust for Arjunan. The assessee had also withdrawn Rs. 31.96 crores from M/s.Texmo precision castings on account of revaluation of business. These incomes have escaped the assessment." 12.1 Subsequently, the assessee filed a reply on 15.10.2020 objecting to the reasons for reopening of assessment u/s. 148 of the Act believing to be the reasons for reopening has been recorded. However, the A....
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....;ble Supreme Court in the case of GKN Driveshafts (India) Limited v. ITO [2003] 259 ITR 19 [SC] wherein it has been clearly laid down as under: "However, it was clarified that when a notice under section 148 is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons had been disclosed in the proceedings, the Assessing Officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment." (emphasis supplied by us) 12.7 The decision of the coordinate bench of Tribunal in the case of IDFC First Bank Ltd. v. PCIT/ACIT ITA No. 1170 & 1171/CHNY/2024 (AY 2016-17) wherein in similar set of facts, the Tribunal has quashed the re-assessment proceedings conducted contrary to the procedure / law laid down by the Hon'ble Apex Court in the case of GKN Driveshafts Ltd. (supra). Relev....
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....oss defiance to the binding order of the Hon'ble Supreme Court; and the AO couldn't have over reached the order of the Hon'ble Supreme Court by disposing off the objections while framing the re-assessment order, which defeats the purpose of such an exercise as discussed supra. Therefore, we hold that the omission on the part of the AO to comply with the directions of the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd., strikes at the root of the jurisdiction of the AO to re-open the assessment and consequent passing of reassessment order dated 31.03.2022 is held to be non-est in the in the eyes of law and all other grounds are academic and not adjudicated. Therefore, on the legal issue as discussed, we quash the re-assessment order dated 31.03.2022 passed u/s. 147/143(3) of the Act for AY 2016-17." 12.8 The judgement in the case of CIT v. Fomento Resorts and Hotels Ltd., (Bom.); ITA No. 71 of 2006, dated 27.11.2006, where the Tribunal held that though the reopening of the assessment is within three years from the end of the relevant assessment year, since the reasons recorded for reopening the assessment were not furnished to the assessee till the completio....
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....cer can clothe himself with the jurisdiction to assess or reassess u/s. 147(a) of the Act only if he records the reasons which can stand the test of relevance in accordance with the judicial pronouncements and after obtaining necessary sanction. This has been further fortified in the case of Kavee Enterprises (P.) Ltd. v. Commissioner of Income-tax [2008] 170 Taxman 264 (Jharkhand)/[2008] 301 ITR 156 (Jharkhand), wherein the Hon'ble High Court held as under: 7. From bare reading of the aforementioned two provisions it is manifestly clear that the jurisdiction of the Assessing Authority to assess or reassess under section 147(a) of the Act is subject to the condition that he has "reason to believe" that the assessee failed to disclose all material facts necessary for assessment for the relevant assessment year. It is also incumbent upon the Assessing Officer to comply with the mandatory requirements of section 148 which casts an obligation on him to issue notice before making any assessment or reassessment and before issuance of notice he must record his reasons. 8. The question referred in this case is no longer res integra. In the case of GKN Driveshafts (India) ....
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....ated above notices are issued by him but if, in any case, it is found that the reasons recorded by him are not germane to the exercise of jurisdiction under section 147(a) of the Act, then the very assumption of jurisdiction will be ab initio void rendering the entire process of assessment as a nullity. There can be hardly any doubt in holding that the recording of the reasons is a pre-requisite to the assumption of jurisdiction by the Income-tax Officer for initiating the proceedings under section 147(a). The reasons so recorded acquire much significance when the action is taken under clause (a) of section 147 because it is only the recorded reasons which can indicate as to why the Income-tax Officer was made to believe that income has escaped assessment for the relevant assessment year. Further, the language employed in section 151 clearly leads to the conclusion that the Board or the Commissioner of Income-tax, while according, sanction for issuance of notice under section 148 and for coming to an objective conclusion authorizing the Income-tax Officer to take action under section 147(a), are required to confine themselves only to the reasons recorded by the Income-tax Officer. ....
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....f the Act. Section 148(2) of the Act, in a very specific term, provides that while issuing notice under section 148(1) of the Act, the Assessing Officer must assign reasons. Admittedly the same has not been done by the Assessing Authority in the instant case. 12. Having regard to the facts of the case and the law discussed hereinabove, I am of the definite view that the mandate of sections 147 and 148 of the Act have not been complied with and, therefore, the entire proceeding and the consequential orders become void, ab initio. Consequently the action of the Assessing Officer is declared as illegal, arbitrary and unjustified. 13. In the result, the questions referred are answered accordingly." 12.11 In view of the facts and circumstances of the case, we have observed that the AO has neither provided any reasons for reopening of the assessment to the assessee except vaguely mentioned it in his notice issued u/s. 143(2) of the Act dated 29.09.2020 nor disposed of the objections raised by assessee in his reply filed on 15.10.2020. We find that the AO has made a passing remarks by stating the objections disposed of in his draft assessment order, no speaking order ....