Case Law Details

Case Name : Muller & Philpps (India) Ltd Vs ITO (ITAT Mumbai)
Appeal Number : I.T.A No. 5926/Mum/2009
Date of Judgement/Order : 28/10/2015
Related Assessment Year : 2001-02
Courts : All ITAT (7336) ITAT Mumbai (2110)

Brief of the Case

In the case of Muller & Philpps (India) Ltd vs. ITO, Hon’ble ITAT Mumbai held that the position of law is clear. It has been held by Hon’ble Supreme Court in the case of GKN Driveshaft 259 ITR 19, that it is mandatory on the part of the AO to provide the copy of the reasons to the assessee and to meet the objections filed by the assessee thereto, if any, before the AO can frame the reassessment order.

 Facts of the Case

In the present case, the assessee filed an appeal against the assessment order passed u/s 143(3) r.w.s. 147 of the Act alleging the re-opening as bad in law and challenging the reopening of the assessment and framing of impugned assessment order. The affidavit filed by the Revenue in support of his claims was opposed by the assessee on various grounds by filing a counter affidavit.

Contention of the assessee

With the help of copies of paper book filed by the assessee and the department, it was argued by Ld. Counsel that during the course of assessment proceedings the assessee requested to the AO, to provide the copy of reasons, but same was not provided to the assessee. It was further submitted that on the earlier occasions, Hon’ble Bench directed the Ld. DR to produce the assessment records, same was produced, and on the basis of perusal of assessment records, it was found by the Hon’ble Bench that there was no copy of ‘Reasons’, in the assessment records. It was argued by the Ld. Counsel that after long drawn exercise and exchange of affidavit, counter affidavit and other documents, now the final facts have emerged on the surface. Now, the admitted case of the department is that Reasons are not available in the assessment records and that no copy of Reasons was furnished to the assessee during the course of impugned reassessment proceedings. It was argued by the Ld. Counsel that in view of these facts and circumstances, position of law is now well settled on the basis of various judgments wherein it has been held that without recording the reasons prior to the issuance of notice u/s 148 and without providing a copy of the same to the assessee, the AO cannot make valid reopening of the assessment and cannot frame reassessment order. Reliance has been placed in this regard on the judgment of Hon’ble Bombay High Court in the case of CIT v. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom.), Tata International Ltd. Vs. DCIT [2012] 52 SOT 465 (Mum)., Synopsys International vs. DDIT ITA no.549/Bang/2011 dt.10.12.2012 Bang.)(Trib.), CIT vs. Rajindra Roshin & Turpentine Industries (2008) 305 ITR 161 (P&H) (162) and Rajoo Engg. vs Dy. CIT (2008) 218 CTR 53(Guj). It was thus argued that the reopening was without mandate of law and resultant reassessment order was null and void and should be held as such.

Contention of the Revenue

Ld. DR placed reliance on the affidavit filed by the department. It was submitted by the Ld. DR that admittedly no ‘Reasons’ were available in the assessment record, but copy of same was available in the computer. It was further submitted that during the course of assessment proceedings, the relevant issue was discussed with the counsel by the AO, which would be evident from this fact that the assessee had submitted reply on the merits of the issue involved, and therefore, it can be presumed that assessee was communicated the gist of the issues involved in the Reasons, on the basis of which reopening was done by the AO. It was further submitted that the ‘Reasons’ might have been misplaced and therefore, benefit of doubt should be given to the Revenue and reopening should be upheld even if copy of Reasons was not available in the file and certified copy of the same was not provided to the assessee by the AO.

Held by Tribunal

The Tribunal observed that the undisputed facts which emerged after aforesaid exhaustive exercise, on which there was unanimity on the part of both the sides, were that, one- no ‘Reasons’ were available in the assessment record, and two-there was nothing on record to show that certified copy of verbatim ‘Reasons’ was ever provided to the assessee, despite the request made by the assessee before AO, more than once. It has been submitted by the Ld. Counsel of the assessee that had the ‘Reasons’ been recorded by AO, these would have definitely been provided to the assessee. This vital argument of the Ld. Counsel could not be displaced by the Ld. DR and Even Tribunal itself was not in position to reject aforesaid argument of the Ld. Counsel. It was further noted that Hon’ble Bombay High Court in the case of CIT v. Videsh Sanchar Nigam Ltd held that in case reasons are not furnished by the AO to the assessee, before completion of reassessment proceedings, reassessment order cannot be upheld. Similar view has been taken by Hon’le Mumbai bench of ITAT in the case of Tata International Ltd. vs DCIT, and also in few other judgments as have been relied upon by Ld. Counsel before the tribunal. Further this view gets supported from a latest judgment of Hon’ble Bombay High Court in the case of CIT vs. Trend Electronic in ITA No.1867/2013 order dated 16th September 2015. In this case, Hon’ble Jurisdictional High Court, following its earlier decision in the case of Videsh Sanchar Nigam Ltd., held that law laid down by Hon’ble Supreme Court in the case of G.K.N. Driveshafts (India) Ltd, is clear and mandatory for implementation and it is to be strictly followed by the AO before framing the reassessment order. It was further held that rule with regard to furnishing of reasons by the AO is to be followed strictly, as the power given to the AO for reopening of a completed assessment under the Income Tax Act, is an exceptional power and whenever Revenue seeks to exercise such power, it must strictly comply with the pre-requisite conditions i.e. ‘Reasons’ must be recorded and these recorded ‘Reasons’ must be furnished to the assessee, when sought for, so as to enable the assessee to object to the same, during the course of assessment proceeding. Thus, in absence of ‘Reasons’ provided by the AO to the assessee, the reassessment order shall be bad in law. The recording of ‘Reasons’ and furnishing of the same has to be strictly complied with, as it is a jurisdictional issue. This requirement is very salutary as it ensures that reopening is not done in a casual manner. In addition to that, in case reopening has been done on some misunderstanding/misconceptions, then, the assessee is given opportunity to point out that reasons to believe, as recorded in the ‘Reasons’, do not warrant reopening, before the assessment proceedings are commenced. Since, No contrary judgment has been brought to the notice of Tribunal by Ld. DR. Thus, respectfully following the mandate of Hon’ble Supreme Court and Hon’ble Jurisdictional High Court in the aforesaid cases, the Tribunal hold that reopening of this case, in the given facts and circumstances of the case, is invalid and therefore, consequent reassessment order as framed by the AO is also illegal and the same is hereby quashed.

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