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M/s Trends Electronics Versus Income Tax Officer, Ward 24 (1) (2) , Mumbai

2015 (6) TMI 641 - ITAT MUMBAI

Reopening of assessment - non-furnishing of reasons recorded by the AO - Held that:- No copy of the reasons recorded were furnished to the assessee, which is necessary before the assessment is completed. We hold that in view of the decision of the Tribunal in the case of Telco Dadajee Dhackjee Limited (2012 (8) TMI 495 - ITAT MUMBAI ) and the case of Videsh Sanchar Nigam Ltd., (2011 (7) TMI 715 - Bombay High Court ), the reassessment order passed by the AO u/s.143(3) r.w.s 147 of the Act dated 3 .....

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Mumbai pertaining to A.Y. 2007-08. 2. The assessee has raised the following grounds of appeal:- 1 . On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming addition of ₹ 4757658/- on account of alleged non genuine purchases from MIS Sonotron Trading Co. P Ltd. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in relying upon the statement of partner .....

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Tax (Appeals) confirming order made under section 143 (3) rws 147 of the Act is illegal, bad-in-law, ultra virus and without allowing reasonable opportunity of the hearing, and without appreciating the facts, submission and evidences in their proper perspective and without passing said order within reasonable time after the last date of hearing is liable to be annulled. 5. The learned assessing officer erred in charging interest under section 234A, 2348, 234 C and 2340 of the Act. 3. Since the a .....

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or reopening. He has further pointed out that by this letter the assessee requested the reasons for reopening for both the assessment years i.e. 2007-08 and 2008-09. The A.O. has completed the reassessment u/s 143(3) r.w.s. 147 without furnishing the reasons for reopening to the assessee. The ld. Counsel has invited our attention to the order of the tribunal dated 25-5-2013 in assessee s own case for A.Y. 2008-09 in ITA No. 902 of 2013 and submitted that the reassessment has been quashed by the .....

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sessee has made a request vide its letter dated 28-4-2010 for furnishing the reasons recorded by the A.O. for reopening of the assessment prior to filing of the return of income. The ld. D.R. further submitted that the assessee in the said letter has also requested for 15 days time to file the return of income in response to the notice u/s 148 of the Act. The ld. D.R. has pointed out that the A.O. has considered the request of the assessee and vide letter dated 29- 4-2010 asked the assessee to f .....

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n of income which is a mandatory condition and therefore the assessee cannot take a plea for quashing of the assessment for non-furnishing the reasons recorded for reopening of the assessment. 6. We have considered the rival submissions as well as material placed on record. At the outset, we note that an identical issue has been considered and decided by the co-ordinate Bench of this Tribunal in assessee s own case for A.Y. 2008-09 vide order dated 25-3-2013 in para 7 to 17 are as under:- 8. The .....

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AO recorded the reasons u/s.148(2) r.w.s 147 of the Act before issuing notice to the assessee u/s.148 of the Act. We observe from page 33 of PB that assessee vide its letter dated 28.4.2010 asked the AO to furnish the reasons recorded for reopening of assessment. The AO vide its letter dated 29.4.2010, copy placed at page 34 of PB asked the assessee to file return of income and in respect of reasons stated as under: As regards to your request for providing reasons for reopening of assessments, t .....

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etter dated 7.5.2010, it has to be considered as return filed by the assessee in response to issue of notice u/s.148 of the Act. However, the AO did not furnish copy of reasons recorded to the assessee. 10. The Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. v. Income-tax Officer,259 ITR 19(SC) has held as under: When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek r .....

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of assessment having been not disclosed by the department despite specific request by the assessee, reopening was invalid 12. The Hon ble Jurisdictional High Court (Panaji Bench) in the case of Fomento Resorts and Hotels Ltd (supra) vide its order dated 27.11.2006 has held that giving reasons in support of an order is part of complying with the principles of natural justice. Since the reasons were not given before making the assessment order, the Hon ble High Court confirmed the order of ITAT a .....

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s (India) Ltd (supra) and various other decisions of Hon ble High Courts and ITAT has held vide paras 16 & 17 as under: 16. Thus in view of the above discussion and in view of the binding precedents, respectfully applying these propositions to the facts of the case and as the Assessing Officer has not furnished the reasons to the assessee before concluding the assessment proceedings, much less within the reasonable period of time as mandated by the Hon ble Supreme Court we have no other alte .....

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the order of the Tribunal and dismissed the appeal of the department on the ground that reasons recorded for reopening of assessment were not furnished to the assessee till the completion of assessment, the reassessment order cannot be upheld. 14. Similar issue again came up for consideration before the Tribunal in the case of Telco Dadajee Dhackjee Limited (supra) and on account of difference of opinion between the Members of Division Bench, one of the questions referred to the Third Member wa .....

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void. We consider it prudent to reproduce paras 2 to 6 of the said order of the Third Member which are as under: 2. The facts have been narrated in considerable detail in the orders of the ld Members and I do not propose to repeat them except where it is absolutely essential. In my opinion, Question No.(ii) is more fundamental to the dispute before me and requires to be resolved first. There is no dispute that the copy of the reasons recorded for issuing notice under section 148 were not provid .....

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e despite the assessee s request, the assessment itself cannot be quashed or held ab initio void. He invited my attention to the following orders / judgments where this point arose but despite the same the reassessments orders were merely set aside for being redone after supplying the reasons to the assessee: (1) Datamatics Ltd. vs. ACIT (2008) 110 ITD 24 (Mum) (2) Smt Kamlesh Sharma vs. ITO (2006) 287 ITR 337 (Del) (3) Areva T&D India Ltd. vs. ACIT (2007) 294 ITR 233 (Mad) (4) CIT vs. Jai P .....

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e and the rules of natural justice are violated, the assessment must be quashed, My attention was also drawn to the order of the Tribunal in the aforesaid case in ETA No: 1 & 5/PN/2001 dated 04.04.2006. It was also submitted that the judgment of the Hon ble Bombay High Court (Panaji Bench) has been confirmed by the Supreme Court by dismissing the Special Leave Petition filed by the CIT by order dated 16.07.2007. The copy of the order of the Supreme Court has also been filed. The judgment of .....

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48 of the Income Tax Act is not fatal to the validity of the reopening. 4. I have carefully considered the above submissions. It is true that in the case of GKN Driveshafts (India) Ltd (supra) the Supreme Court has not held that that non-furnishing of the reasons for reopening the assessment affects the validity of the notice under section 148 and what has been held therein is that in such a case the reassessment order should be set aside and the proceedings should be restored to the Assessing O .....

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ashed. In this order the Tribunal has referred to the judgment of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) and also to the judgment of the Hon ble Bombay High Court in the case of Devji Ravji Patel vs. Balasubramaniam and Others (1994) 210 1TR 925 (Bom). Section 11 of the Expenditure Tax Act provides for chargeable expenditure escaping assessment. It does not expressly provide for recording of reasons before issuing the notice of reassessment. Section 148(2) of the I .....

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that the notice issued under section 11 of the Expenditure Tax Act without recording reasons is invalid. Section 148(2) of the Income Tax Act only makes it explicit what was already implicit in the section. The judgment of the Hon ble Bombay High Court has become final, the Supreme Court having dismissed the Special Leave Petition filed by the Department against the same. In addition to the above, a Division Bench of the Tribunal in Mumbai has held in its order dated 30.10.2009 in ITA No: 7626/ .....

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l in the case of ITO vs. Smt Gurinder Kaur (supra) cited by the learned Senior DR before me and has pointed out that the order of the Delhi Bench of the Tribunal is not in consonance with the view taken by the Delhi High Court in the case of New Bank of India Ltd. vs. ITO (1982) 136 ITR 679 (Del). There is thus an order of a Division Bench of the Tribunal in Mumbai which supports the assessee s contention that if the reasons for reopening the assessment are not furnished to the assessee, that is .....

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ee but the assessee s objections were not properly considered by the Assessing Officer. The Hon ble High Court, therefore, set aside the reassessment proceedings and directed the Assessing Officer to dispose off the objections of the assessee by following the due procedure of law in conformity with the judgment of the Supreme Court in the case of GKN Driveshafts (India Ltd (supra). In the case of Allana Cold Storage ltd (supra) also, as paragraph 3 of the judgment would show, the reasons for reo .....

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. The facts being different, the cited judgments are not. applicable. 6. In the light of the binding judgment of the Panaji Bench of the Hon ble Bombay High Court (supra) and the order of the Tribunal in the case of Videsh Sanchar Nigam Ltd. (supra) and respectfully following the same, I hold that since the Assessing Officer did not furnish the reasons recorded for reopening the assessment to the assessee despite specific request, the reassessment order is liable to be quashed as null and void. .....

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