TMI Blog2017 (8) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ACCOUNTANT MEMBER:- The above appeals filed by respective assessees are directed against the separate orders dated 22.02.2012 of the CIT(A)-XXV, New Delhi relating to A.Y. 2001-02. Since identical grounds have been taken by both the assessees in their respective appeals, therefore, these were heard together and are being disposed of by this common order. ITA No. 1708/DEL/2012 [A.Y 2001-02] 2. Facts of the case, in brief are that the assessee is a HUF and filed its return of income on 17.10.2001 declaring total income of ₹ 41,214/-. In this case, the A.O had received information from Addl. DIT[INV], Ghaziabad vide letter F. No. Add. DIT[INV]/GZB/AES/SM/Bogus Gifts/79/2007-08/1286 dated 26.03.2008 that the assessee has received ₹ 5 lakhs through cheque No. 328638 dated 17.05.2000 from Shri Sanjay Mohan Aggarwal in the garb of gift. Accordingly, after recording reasons and obtaining prior approval of Addl. CIT, Range-29, New Delhi the A.O issued notice u/s 148 of the I.T. Act, 1961 to the assessee on 31.03.2008. The assessee, in response to the same, filed a letter stating that original return filed on 17.10.2001 may be treated as return filed in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the A.O was not satisfied with the explanation given by the assessee. Relying on various decisions including the decision of the Hon'ble Supreme Court in the case of Sumati Dayal reported in 214 ITR 801 he held that the gift received by the assessee is not genuine since the assessee was not able to prove the genuineness of such gift as bonafide. Therefore, the provisions of section 68 are clearly attracted. Since the assessee failed to prove the creditworthiness of the donor, the A.O, invoking the provisions of section 68 of the Act made addition of ₹ 5 lakhs to the total income of the assessee as income from undisclosed sources. 6. Before the ld. CIT(A), the assessee challenged the addition of ₹ 5 lakhs made by the A.O u/s 68 of the Act. The validity of notice issued u/s 148 of the Act was also challenged on the ground that the A.O has not disposed off the objections raised by the assessee against the issue of notice u/s 148 of the Act. 7. However, the ld. CIT(A) was also not satisfied with the arguments advanced by the assessee and upheld the action of the A.O in making the addition of ₹ 5 lakhs u/s 68 of the Act. He also rejected the ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be quashed and accordingly, subsequent proceedings pursuant to such notice u/s 148 including the assessment order has to be quashed. 10. In his second plank of argument, the ld. AR submitted that the A.O has issued notice u/s 148 of the Act on the basis of information received from Addl. [Inv], Ghaziabad vide letter dated 26.03.2008 that the assessee has received gift of ₹ 5 lakhs from Shri Sanjay Mohan Aggarwal. However, he has not come to any independent conclusion that he has reason to believe that the income of the assessee has escaped assessment. Referring to the decision of the Hon'ble Delhi High Court in the case of Principal CIT Vs. G G Pharma vide ITA No. 545/2015 order dated 08.10.2015, he submitted that the Hon'ble High Court in the said decision has held that before issue of notice u/s 148 of the Act, the A.O must apply his mind to the materials and conclude that he has reason to believe that income of the assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the burden of proof is on the assessee. The assessee has to prove the identity and capacity of the donor and genuineness of the transaction. In the instant case, the assessee has failed to discharge the onus cast on him. Referring to the following decisions, he submitted that the addition made by the A.O and sustained by the ld. CIT(A) is justified under the facts and circumstances of the case: i. Kale Khan Mohammad Hanif Vs. CIT [1963] 50 ITR 1 [SC] ii CIT Vs. Mohanakala [2007] 291 ITR 278 [SC] iii. Indus Valley Promoters Ltd Vs. CIT [2008] 305 ITR 202 [Del] iv. Bhartesh Jain Vs. DCIT [Del] 483 CTR Vol 201 dated 7.4.2006 v. CIT Vs. Biju Patnaik 160 ITR 674 15. So far as the arguments of the ld. AR that the A.O has not disposed of the objections raised on reopening of the assessment is concerned, the ld. AR referring to the decision of the Hon'ble High Court in the case of Smt. Kamlesh Sharma Vs. B.L. Meena, ITO Ors reported at 287 ITR 337 [Del] submitted that he has no objection if the matter is restored to the file of the A.O with the direction to give an opportunity to the A.O to dispose of the objections filed by the assessee by passing a speaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed off the objections raised by the appellant apropos the reasons recorded for issuance of notice u/s 148. 19. However, we find the ld. CIT(A) has not discussed this issue at all. Under these circumstances, we have to adjudicate first as to whether the reassessment proceedings are valid or not in the absence of disposal of objections raised by the assessee to such reopening of the assessment. We find the Hon'ble Delhi High Court in the case of Ferrous Infrastructure Pvt. Ltd Anr [supra] has held that the A.O has to dispose of the objections if filed by passing a speaking order before proceeding with the assessment. If the A.O does not pass speaking order disposing of the objections raised by the assessee, notice u/s 148 of the Act has to be quashed. Relevant observations of the Hon'ble High Court read as under: We may also point out that the second issue raised by the learned counsel for the petitioners also deserves some consideration. In GKN Driveshafts (supra), the Supreme Court had directed as under:- However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforementioned decision was mandatory, the AO had in fact not disposed of the objections by a speaking order. Nevertheless, the CIT (A) held that the said defect does not make the assessment order illegal and hence it cannot be quashed. It is a technical mistake which is curable. 6. The Court is of the considered view that after having correctly understood the decision of the Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment. 21. Since in the instant case it is an admitted fact that the A.O has not disposed of the objections raised by the assessee to such reopening of the assessment u/s 148 of the Act by passing a speaking order, therefore, such reassessment order is liable to be quashed. So far as the argument of the ld. DR that the matter should be restored to the file of the A.O with the direction to dispose of the objections raised by passing a speaking order, in the light of the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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