2015 (8) TMI 1598 - HC - Income Tax

Validity of proceedings u/s 147 - reason to believe - legal requirement for the AO to conduct any further independent enquiry - as per AO there was concrete information from the investigation wing which was available to AO when he passed the order for reopening the assessment u/s 147 - HELD THAT - The Court finds that the ITAT has in the impugned order invalidated the reopening order on two grounds. One is that the AO did not make any enquiry before arriving at an independent satisfaction for initiating the reassessment proceedings. Secondly the AO did not consider the objections filed by the Assessee. He granted no hearing to the Assessee which was a mandatory requirement as explained by the Supreme Court in GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT Non consideration of objections - As it is not in dispute that the AO in fact did not consider the objections filed by the Assessee. It is also not in dispute that he was guided only by the report of the investigation wing and that there was no other material available before him. It is possible for the Assessee to contend that had the objections of the Assessee been considered by the AO as he was mandatorily required to do in terms of the decision in GKN Driveshaft (India) Ltd. (supra) the AO might not have decided to pursue the matter under Section 147 of the Act. In the circumstances the view of the ITAT cannot be held to suffer from any legal infirmity. No substantial question of law arises.

Summary

The Delhi High Court, in an appeal under Section 260A of the Income Tax Act, 1961, upheld the ITAT's order invalidating the reopening of assessment under Section 147 for AY 2002-03. The Court affirmed two key grounds for invalidation: (1) the Assessing Officer (AO) failed to conduct any independent enquiry before forming satisfaction to reopen the assessment, relying solely on the investigation wing's report; and (2) the AO did not consider the objections filed by the Assessee nor granted a hearing, violating the mandatory requirement established by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC). The Court held that the ITAT's view was legally sound and found no substantial question of law, thereby dismissing the Revenue's appeal.