2025 (7) TMI 1477 - AT - Income Tax

Reassessment proceedings u/s 147 - non disposing of the objections raised by the assessee against the reasons recorded to issue a notice u/s 148 - Unexplained cash deposits HELD THAT - Reassessment proceedings were initiated u/s 147 of the Act because as per information received by the AO from ADIT Investigation Kolkata to the effect that several entities were found to be depositing cash in bank accounts and thereafter amounts were being rotated through banking channel among various entities. And as per the information the assessee had received funds through the entity Sajendra Mookim which found to be a shell entity in investigation. Whether the objections filed by the assessee were disposed off or not before finalisation of assessment ? - On going through the order of assessment although there is a mention of supply of reasons recorded for reopening to the assessee but there is no mention in the entire order regarding filing of objections by the assessee. And it is important to mention here that although assessee had filed reply to the notice u/s 142(1) on 15.10.2018 but even in that reply there is no mention of filing objections against reassessment proceedings. Therefore in our view in order to decide this ground consultation of assessment record is necessary so that clear factual picture can emerge. There is no dispute to the legal proposition as set down by Hon ble Supreme Court in the case of GKN Driveshaft 2002 (11) TMI 7 - SUPREME COURT Interest of justice would be met only if the matter is the restored back to the file of Ld. CIT for deciding this legal ground after consulting and verifying the assessment records needless to mention after providing opportunity of hearing to the assessee. Thus present appeal of the assessee is restored to the file of Ld. CIT(A) for adjudicating the additional grounds on merits by providing opportunity of hearing to the parties. Appeal filed by the assessee stands partly allowed.

Summary

ISSUES:

Whether the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961 are valid in the absence of disposal of objections raised by the assessee against the reasons recorded for reopening.Whether the Assessing Officer complied with the procedural requirements laid down by the Hon'ble Supreme Court in GKN Driveshaft (India) Ltd. vs. ITO before issuing notice under section 148 of the Act.Whether additional grounds challenging jurisdiction and validity of reassessment proceedings can be admitted at the appellate stage.Whether the matter should be remanded for fresh adjudication after verification of assessment records and opportunity of hearing.

RULINGS / HOLDINGS:

The reassessment proceedings initiated under section 147 of the Act are "bad in law and without jurisdiction" because the Assessing Officer failed to pass any order disposing off the objections raised by the assessee against the reasons recorded to issue the notice under section 148, thereby not complying with the procedure prescribed by the Hon'ble Supreme Court in GKN Driveshaft (India) Ltd. (supra).The notice dated 28.03.2018 issued under section 148 and the subsequent assessment order passed under section 143(3) read with section 147 of the Act are without jurisdiction and liable to be quashed unless the procedural defects are cured.The additional grounds challenging the jurisdiction of the Assessing Officer to initiate reassessment proceedings are "purely legal in question and goes to the roots of the case" and hence are admitted to be heard on merits.The appeal is restored to the file of the Commissioner of Income Tax (Appeals) for adjudication of the additional grounds after consulting and verifying the assessment records and providing opportunity of hearing to the parties; the appellate authority is at liberty to call for any document, remand report, or pass any order as deemed fit according to law.The restoration of the matter to the appellate authority does not constitute any expression on the merits of the dispute, which shall be decided independently in accordance with law.

RATIONALE:

The court applied the procedural framework established by the Hon'ble Supreme Court in GKN Driveshaft (India) Ltd. vs. ITO, which mandates that before issuing a notice under section 148, the Assessing Officer must consider and dispose of objections raised by the assessee against the reasons recorded for reopening assessment.Reliance was placed on authoritative precedents including Jute Corporation of India Ltd. vs. Commissioner of Income-tax, National Thermal Power Co. Ltd. vs. Commissioner of Income Tax, and Ahmedabad Electricity Co Ltd vs. Commissioner of Income-tax, which support admission of additional legal grounds that go to the root of jurisdictional validity.The court recognized the importance of procedural compliance to uphold jurisdictional validity in reassessment proceedings and emphasized the need for a clear factual record before adjudication.The decision reflects a doctrinal adherence to procedural fairness and due process in tax reassessment, ensuring that reopening of assessments is not arbitrary but follows prescribed judicial safeguards.