TMI Blog2020 (10) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... record of the AO, the reassessment order passed by the AO is set aside being invalid. - Appeal of the assessee is allowed. - ITA No. 354/JP/2019 - - - Dated:- 6-10-2020 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Vijay Goyal (CA) For the Revenue : Ms Chanchal Meena (Addl. CIT) ORDER PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the order dated 8th January, 2019 of ld. CIT (A), Ajmer for the assessment year 2009-10. The assessee has raised the following grounds :- 1. On the facts and in the circumstances of the case and in law the assessment order passed by AO u/s 143(3) r.w.s. 147 of Income Tax Act dated 29/11/2016 is bad in law and perverse, void ab initio and deserves to be annulled as the same is based on presumptions, assumptions conjectures, and surmises having no material against the assessee or irrelevant material and/or on the material/findings which do not having any bearing in the case of the assessee and also relying on the material without providing the opportunity to assessee of confrontation. 2. On the facts and in the circumstances of the case and in law the ld. CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.11.2016 without disposing off the objections raised by the assessee vide letter dated 19th July, 2016. The ld. A/R of the assessee has submitted that this additional ground is purely legal in nature and goes to the root of the matter. Further, the facts necessary to adjudicate this ground are already on record and, therefore, no new facts or material are required to be verified for adjudication of this ground. In support of his contention, he has relied upon the decision of Hon ble Supreme Court in case of NTPC vs. CIT, 229 ITR 383 (SC) and submitted that the Hon ble Supreme Court has held that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having bearing on the tax liability of the assessee. The ld. A/R has also relied upon the Hon ble Jurisdictional High Court in case of Zakir Hussain vs. CIT, 202 CTR (Raj.) 40 and submitted that the Hon ble High Court has held that the Tribunal has wide powers to permit raising of additional ground at any stage of proceedings in deciding the appeal. 4. On the other hand, the ld. D/R has submitted that the assessee cannot be allowed to raise such a new plea at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of GKN Drive Shaft India Ltd. (supra). Hence the assessment order so passed is illegal and without jurisdiction and liable to be quashed. The further reliance is placed in following-decisions: - (i) Pushpak Bullion Pvt. Ltd. Vs. DCIT 371 ITR 81 (Guj) (ii) General Motors India P. Ltd. Vs. DCIT (2013) 354 ITR 244 (Guj) (iii) G N Mohan Raju Vs. ITO (2015) 167 TTJ (Bang) 236. (iv) Hon'ble Bombay High Court in the case of Allana Cold Storage Ltd. Vs. ITO and others (2006) 287 ITR 1 has quashed the assessment where the Assessing Officer did not follow the procedure of considering the objections. (v) A Division Bench of this Court in Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax (No.2), (2004) 270 ITR 469 after considering the decision of this Court in Garden Finance Ltd. v. ACIT, (2004) 268 ITR 48 (Guj.) held in the majority opinion as under :- ..........What the Supreme Court has now done in the GKN s case (2003) 259 ITR 19 is not to whittle down the principle laid down by the Constitution Bench of the Apex Court in Calcutta Discount Co. Ltd. s case (1961) 41 ITR 191 but to require the assessee first to lodge preliminary ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed off the objections raised by the assessee against the notice issued under section 148 of the IT Act. The assessee has also relied upon various decisions as part of the submissions before the ld. CIT (A) reproduced above. Thus the issue raised in the additional ground no. 2 is arising from the impugned order of the ld. CIT (A) though the ld. CIT (A) has not disposed off this objection of the assessee in specific terms. The relevant part of the order of the ld. CIT (A) rejecting the ground raised against the validity of the reassessment order in para 4.3 is as under :- 4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the AO had specific information in his possession that the appellant had shifted in ascertained losses in order to reduce his income by misuse of facility of Client Code Modification through his broker. Hence, I am of the considered opinion that the AO had sufficient material with him to form the belief that income pertaining to A.Y. 2009-10 had escaped assessment. Therefore, the reopening of assessment u/s 147 and issue of notice u/s 148 for the A.Y. 2009-10 in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsued the alleged objections filed against the notice under section 148 of the Act. The ld. D/R has further contended that though the assessee challenged the validity of reopening, however, no specific ground was raised before the ld. CIT (A) against the non disposal of the objections by the AO before passing the reassessment order. Once the assessee has participated in the proceedings and allowed the AO to pass the reassessment order, then the assessee cannot be allowed to raise this objection. Further the ld. D/R has submitted that it is only a curable defect and the objections can be disposed off by the AO. In support of her contention, the ld. D/R has relied upon the decision of Hon ble Supreme Court in case of Home Finders Housing Ltd. vs. ITO 94 Taxmann.com 84 (SC). 8. We have considered the rival submissions as well as the relevant material on record. The revenue has not disputed that the assessee has raised the objections vide letter dated 19th July, 2016 against the notice issued under section 148 of the IT Act. The relevant part of the objections raised by the assessee are as under :- Respected Sir, In connection to above cited subject and on behalf of our abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of which was either adjusted out of profit of the assessee or made through. a/c payee cheque. Thus the entire reassessment proceedings. is, solely hased on some report which is not coupled with any documentary evidence, therefore the reopening of assessment proceedings is bad-in-law, invalid, void-ab-inition and deserve to be drop. Thus the assessee has raised the objections against the reopening of the assessment on the ground that there is no tangible material to conclude or to form the opinion that due to Client Code Modification Facility used by the broker the income of the assessee assessable to tax has escaped assessment. These objections raised by the assessee no doubt are required to be disposed off by the AO by a separate and speaking order before passing the reassessment order. The assessee has relied upon various decisions including the decision of Hon ble Gujarat High Court in case of Pushpak Bullion Pvt. Ltd. vs. DCIT, 379 ITR 81 (Guj.) wherein the Hon ble High Court while considering the issue of validity of reassessment order passed by the AO without disposing off the objections has observed in para 7 to 9 as under :- 7. Having heard the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd . ( supra ) would not apply. It only means that the time frame provided hereinabove would not apply in such cases. 5. In the communication supplying the reasons recorded by the Assessing Officer, he shall intimate to the assessee that he is expected to raise the objections within 60 days of receipt of the reasons and shall reproduce the directions contained in sub-para 1 to 4 hereinabove giving reference to this judgment of the High Court. 6. The Chief Commissioner of Income Tax and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all the Assessing Officers for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be followed. It is true that on receipt of notice under Section 148 of the Act, the assessee is required to file return within time prescribed in such notice and/or within reasonable time and simultaneously asked for the reasons recorded for reopening and AO is bound to dispose of such objections within time provided by the Division Bench in the case of Sahakari Khand Udyog Mandal Ltd. ( supra ), however in any case before the order of assessment under Section 143(3) r/w Section 147 of the Act. However, at this stage also, the AO must give reasonable time to the assessee to challenge the order disposing of the objection by way of petition under Article 226 of the Constitution of India. 8.2 In the case of GKN Driveshafts (India) Ltd. ( supra ), the Hon'ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under Section 148 of the Act in the following words:- . . However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the notice is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer and in case of failure before the Assessing Officer, ( ii ) challenging the speaking order of the Assessing Officer under section 148 of the Act (p.87). 8.4 Thereafter, in the case of Arvind Mills Ltd. ( supra ), the Division Bench of this Court had an opportunity to consider the aforesaid two decisions and after considering both the aforesaid decisions, in para 9 the Division Bench has observed and held as under: 9. The position in law is thus well settled. After a notice for re- assessment has been issued an assessee is required to file the return and seek reasons for issuance of such notice. The Assessing Officer is then bound to supply the reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file preliminary objections to issuance of notice and the Assessing Officer is under a mandate to dispose of such preliminary objections by passing a speaking order, before proceeding with the assessment in respect of the assessment year for which such notice has been issued. 8.5 Thus, considering the aforesaid decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. ( supra )and the decision of the Ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. In view of the above and for the reasons stated above, as the AO has not dealt with and disposed of the objections raised by the assessee against reopening of the assessment on merits meaning thereby has disposed of the objections without considering the objections on merits solely on the ground that assessee has not filed return of income within period not less than 30 days from the date of receipt of notice under Section 1 48 of the Act, impugned orders disposing of the objections are hereby quashed and set aside and the matters are remanded to the AO to consider, decide and dispose of the objections on its own merits and in accordance with law and in light of the observations made herein above. The aforesaid exercise shall be completed by the AO within a period of two months from the date of receipt of writ of the present order. However, it is made clear that this Court has not expressed anything on merits with respect to legality and validity of the notice under Section 148 of the Act or even with respect to objections raised against the reopening of the assessment for respective assessment years. Rule is made absolute to the aforesaid extent in each of the petitions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners no longer require to be prosecuted. The same will stand disposed of. Thus the requirement of disposing off the objections against the notice issued under section 148 by a separate and speaking order is a mandatory requirement in view of the judgment of the Hon ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (supra), the failure of the AO to dispose off the objections renders the reassessment order not sustainable in law. In the case in hand there is complete failure on the part of the AO to dispose off the objections against notice u/s 148 of the Act and not merely a procedural irregularity of separate and speaking order. Accordingly, in the facts and circumstances of the case and specifically involving the issue of addition of ₹ 2,71,317/-, we find that in this case the AO does not deserve a second inning. Accordingly, without remitting the matter to the record of the AO, the reassessment order passed by the AO is set aside being invalid. 9. Since we have set aside the reassessment order on legal issue, therefore, we do not propose to go to the other grounds raised by the assessee. 10. In the result, appeal of the assessee is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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