TaxTMI 
TaxTMI 
2026 (7) TMI 1581
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....return was processed under section 143(1) of the Act. Subsequently, the Assessing Officer received information from the office of the Director of Income-tax (Investigation)-I, Mumbai, vide letter dated 19.03.2013, stating that the assessee had issued 1,90,575 shares of the face value of Rs. 10/- each at a premium of Rs. 390/- per share to 34 investors for an aggregate consideration of Rs. 7,62,30,000/-. The information further stated that field enquiries conducted by the Investigation Wing revealed that most of the investor-companies were not available at the addresses furnished and that the parties located during the enquiry had not furnished proper particulars concerning the introduction of capital at such a substantial premium. 3. On the basis of the aforesaid information, the Assessing Officer recorded reasons to believe that the amount of Rs. 7,62,30,000/- represented the assessee's own money routed through bogus entities and that income to the said extent had escaped assessment. Accordingly, notice under section 148 of the Act was issued on 28.03.2013. By letter dated 09.05.2013, the assessee requested the Assessing Officer to treat the original return filed under section ....
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....on forms, complete supporting records or any due diligence or independent valuation report justifying the premium of Rs. 390/- per share. He also noticed discrepancies between the particulars of the subsequent transfer of shares furnished by the assessee and those disclosed by the investor-companies. 6. The Assessing Officer held that the assessee had failed to establish the identity and creditworthiness of the investor-companies, the genuineness of the transactions and the source of the investments. He consequently treated the share application money of Rs. 7,62,30,000/- as the assessee's unexplained income under section 68 of the Act. After setting off the returned loss of Rs. 1,28,655/-, the total income was assessed at Rs. 7,61,01,340/-. The assessment was accordingly completed under section 143(3) read with section 147 of the Act by order dated 10.03.2014. The Assessing Officer also directed charging of interest under sections 234A, 234B and 234C, as applicable, and initiation of penalty proceedings under section 271(1)(c) read with section 274 of the Act. 7. Aggrieved, the assessee preferred an appeal before the CIT(A) on 02.04.2014. Before the CIT(A), the assessee chal....
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....equently on 28.03.2013. The CIT(A), therefore, proceeded on the basis that the notice under section 142(1) had been issued on 24.02.2014. 10. On examination of the assessment order, the CIT(A) found that the Assessing Officer had proceeded with the reassessment after receiving the assessee's objections dated 21.02.2014, without first disposing of the objections by a speaking order. The CIT(A) further recorded that there was no reference anywhere in the assessment order to the disposal of the objections raised by the assessee. 11. Relying upon the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. Income-tax Officer, reported in 259 ITR 19, the CIT(A) held that the Assessing Officer was required to furnish the reasons recorded for reopening, permit the assessee to file its objections and dispose of the objections by a separate speaking order before proceeding with the reassessment. The CIT(A) observed that failure to comply with the prescribed procedure was not a mere procedural lapse but a jurisdictional error affecting the validity of the reassessment. The CIT(A) also referred to the decisions of the Hon'ble Bombay High Court in Asian Paints Ltd. v. Dep....
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....eof. He submitted that the assessee had raised specific objections to the reopening by letter dated 21.02.2014; however, without disposing of those objections by a speaking order, the Assessing Officer proceeded to issue notice under section 142(1) of the Act on 24.02.2014 and continued with the reassessment proceedings. He, therefore, submitted that the CIT(A) was justified in quashing the reassessment order as being bad in law. 15. Per contra, the learned Departmental Representative submitted that the assessee had raised its objections to the reopening at the fag end of the reassessment proceedings. He, therefore, contended that the Assessing Officer could not be faulted for proceeding to complete the reassessment without separately disposing of those objections. Accordingly, he supported the grounds raised by the Revenue and prayed that the impugned order of the CIT(A) be set aside. 16. We have heard the rival submissions and perused the material placed on record. The limited controversy arising in the present appeal is whether the CIT(A) was justified in quashing the reassessment order on the ground that the Assessing Officer proceeded with the reassessment without dispos....
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....ther, on perusal of assessment order, it is seen that nowhere in the assessment order, the AO has mentioned about the disposal of the objection raised by the appellant. Thus, from the assessment order, it is established that the appellant had filed its objection against the reasons recorded for issue of notice u/s 148 of the Act vide its letter dated 21.02.2014. However, the AO had not disposed the said objection by passing a "speaking order" before proceeding with the reassessment. 6.4 It is pertinent to mention here that an assessment order passed under Section 147 is legally invalid if the Assessing Officer doesn't dispose off the assessee's objections to the reasons for reassessment. Based on the landmark decision of Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer (259 ITR 19), the AO must first dispose of any objections by a separate "speaking order" before proceeding with the reassessment. The Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. Income-tax Officer 259 ITR 19 (SC)/[2003] established a binding procedure for reassessment proceedings. This procedure mandates that the AO must furnish re....
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....rder by which the objections dated 21.02.2014 were disposed of. 19. The submission of the learned Departmental Representative that the objections were raised at the fag end of the reassessment proceedings does not advance the case of the Revenue. Once objections to the reopening were filed before completion of the reassessment, the Assessing Officer was required to dispose of them by a speaking order before proceeding further. The procedure prescribed by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. Income-tax Officer (2003) 259 ITR 19 (SC) does not provide an exception merely because, according to the Revenue, the objections were filed at a belated stage. 20. It is also pertinent that the objections were filed on 21.02.2014, whereas the reassessment order was passed on 10.03.2014. Thus, the objections were admittedly available with the Assessing Officer before completion of the reassessment. Indeed, the subsequent notice under section 142(1) was issued on 24.02.2014. Nothing prevented the Assessing Officer from disposing of the objections by a speaking order before taking the reassessment proceedings further. 21. The first limb of the Revenue's grounds proc....