2025 (6) TMI 1075 - AT - Income Tax

Validity of reopening of assessment - as argued AO recording reasons and ld AO issuing notice u/s 148 of the Act should be the same person - HELD THAT - DR on the contrary vide his written submission quoted various case laws but we find that the objection raised by the assessee is very very preliminary in nature and that had not been addressed by the ld NFAC. This goes to the root of the mater. Hence we deem it fit and appropriate in the interest of justice and fairplay to restore this entire appeal to the file of the ld NFAC for de novo adjudication in accordance with law. The assessee is at liberty to raise additional grounds if any and additional evidences if any in support of its contentions. Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the assumption of jurisdiction under Section 147 of the Income-tax Act, 1961 (the Act) for reopening the assessment is valid, given the circumstances of the case;
• Whether the reasons for reopening the assessment recorded by one officer and the notice under Section 148 issued by a different officer affects the validity of the reopening;
• Whether the appellate authority below (National Faceless Appeal Centre - NFAC) properly adjudicated the preliminary objection regarding the validity of the jurisdiction assumed under Section 147;
• Whether, on merits, the additions made by the Assessing Officer (AO) in the reassessment order were justified (although this was not addressed in detail by the Tribunal in this judgment); and
• Whether the appeal requires remand for de novo consideration in light of the above procedural and jurisdictional issues.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of Assumption of Jurisdiction under Section 147 of the Act

Relevant Legal Framework and Precedents:

Section 147 of the Income-tax Act empowers the AO to reopen an assessment if he has reason to believe that income chargeable to tax has escaped assessment. The procedure requires recording of reasons for reopening, approval by a competent authority under Section 151, and issuance of notice under Section 148. Jurisdictional validity depends on adherence to these procedural safeguards. The Gujarat High Court decision in Hynoop Food & Oil Industries Ltd. v. ACIT (307 ITR 115) was cited, which held that the officer recording reasons and the officer issuing the notice under Section 148 should be the same person, or at least the procedural requirements must be strictly complied with to validate reopening.

Court's Interpretation and Reasoning:

The Tribunal noted that in the present case, the reasons for reopening were recorded by Shri Nand Kishore Joshi on 15.03.2018, approval under Section 151 was granted on 19.03.2019, but the notice under Section 148 was issued on 28.03.2019 by a different officer, Shri Pankaj Kumar Pruthi. The assessee challenged this procedural irregularity, arguing that the reopening was invalid as the officer recording reasons and the officer issuing notice were different.

The Tribunal observed that the NFAC had only addressed the validity of the assumption of jurisdiction in general terms and failed to consider the specific preliminary objection raised by the assessee regarding the identity of the officers involved. This procedural objection was considered fundamental, going to the root of the jurisdictional validity of the reopening.

Key Evidence and Findings:

The documentary evidence included the reasons recorded by one officer, approval by the competent authority, and the notice issued by another officer. The Tribunal found that the NFAC did not address these facts in its order.

Application of Law to Facts:

Applying the principle from the cited precedent and the statutory scheme, the Tribunal found the procedural lapse significant enough to vitiate the reopening. The failure of the NFAC to consider this objection rendered its order incomplete and unjust.

Treatment of Competing Arguments:

The Revenue relied on various case laws supporting reopening but did not specifically counter the procedural objection regarding the officer identity. The Tribunal found the assessee's preliminary objection compelling and not adequately addressed by the NFAC.

Conclusions:

The Tribunal concluded that the objection to the validity of the reopening under Section 147 was a substantial legal question that had not been properly adjudicated. In the interest of justice and fairplay, the appeal was restored to the NFAC for de novo consideration of all issues, including the preliminary objection.

Merits of the Additions Made in Reassessment

The Tribunal refrained from examining the merits of the additions made by the AO in the reassessment order, as the jurisdictional issue was not yet resolved. The other grounds raised by the assessee on law and merits were left open for consideration by the NFAC upon remand.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The objection raised by the assessee is very very preliminary in nature and that had not been addressed by the ld NFAC. This goes to the root of the mater. Hence, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this entire appeal to the file of the ld NFAC for de novo adjudication in accordance with law."

Core principles established include:

• The procedural validity of reopening under Section 147 is fundamental and must be strictly complied with;
• The officer recording reasons and the officer issuing notice under Section 148 should be the same or the procedure must be consistent with statutory requirements to uphold reopening;
• Failure to address substantial preliminary objections by the appellate authority warrants remand for fresh adjudication;
• Appellate authorities must pass speaking orders dealing with all contentions raised by the parties;
• Where jurisdictional validity is in question, merits of the additions should not be adjudicated until jurisdiction is established.

Final determinations:

• The appeal was allowed for statistical purposes by setting aside the NFAC order;
• The matter was remanded to the NFAC for fresh hearing and disposal after considering all contentions and evidence;
• The other grounds raised by the assessee were left open pending fresh adjudication.