Brief Background of the case
In the present case, Assessing officer issued notice u/s 148 for making re-assessment of the assessee. In response, the assessee filed a four page letter addressing to the A.O. wherein a request has been made in the concluding part of the letter to supply the reasons for re-opening the cases u/s 148 of the Income Tax Act. The assessee submittedthat an affidavit regarding non-receipt of reasons for reopening ofassessment under Section 148 was filed.The fact of asking the reasons by the assesseeand no communication of the reasons for issuing notice u/s 148 by the A.O.was also stated by the commissioner in his order.Ld. Counsel of the assessee submitted that in view of the failure of the A.O. in supplying the reasons recorded while reopening the assessments in this case by issue of notice u/s 148, the entire reassessment proceedings were bad in law and liable to be quashed.However, the CIT(A) decided the issue againstthe assessee on the plea that it was not correct to say that theassessee remained ignorant about the reasons for the issue of noticeunder Section 148 of the Act. Being aggrieved with the assessment order, assessee filed the appeal before ITAT.
Contention of the Assessee
The Ld. Counsel of the assessee relied on a series of decisions. He submitted that the decisionof Hon’ble Delhi High Court in Haryana Acrylic Manufacturing Companyclinches the issue in favour of the assessee, wherein it was heldthat the requirement of recording the reasons and communicating thesame to the assessee, enabling the assessee to file objections and therequirement of passing a speaking order are all designed to ensurethat the Assessing Officer does not reopen assessments which havebeen finalized on his mere whim or fancy and that he does so only onthe basis of lawful reasons. Thus, a deviation from these directionswould entail the nullifying of the proceedings.
Contention of the Revenue
The learned DR opposed the submissions of the ld. Counsel of the assessee.He submitted that the finding ofthe CIT(A) as recorded in paragraph 6.4 of his appellate order was thatit was not correct to say that the assessee remained ignorant aboutthe reasons for the issue of notice under Section 148 of the Act.TheCIT(A) has recorded certain facts, i.e., that the assessee has not filedany return for A.Y. 1998-99 although its total income was in excess ofmaximum amount not chargeable to income tax and that, as perprovisions of Section 139(1), it was required to furnish the return ofincome in the prescribed form etc. and that, under the provisions ofSection 147 read with Explanation 2(a) thereto, where no return ofincome is furnished, although the total income exceeds the maximumamount not chargeable to income tax, the case is deemed to be onewhere income chargeable to tax has escaped assessment and theAssessing Officer is required to assess such income under Section 147of the Act.The learned DR further submitted that theassessee has cooperated with the Assessing Officer in the assessmentproceedings and, therefore, it should not be open to the assessee nowto plead that it was not supplied the copy of the reasons recorded forreopening of the assessment.
Held by Tribunal
The Tribunal noted that the facts of non-supplying the reason by AO are not in dispute. CIT(A) has also giving the findings to this effect in his order. The onlyissue which requires adjudication is that whether the non-communicationof the reasons recorded for issuing notice underSection 148 of the Act, in-spite of a specific request made by theassessee for providing reasons for issuing the notice under Section148 renders the whole reassessment proceedings vitiated and void inlaw.
Reliance was placed on decision of Hon’ble Supreme Court in GKN Driveshafts (India) Ltd wherein it was held thatwhen a notice under Section 148 of the Act is issued, the proper courseof action for the assessee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish the reasons within a reasonable time. On receipt of reasons, the assesseeis entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. Further in case of Sahkari Khand Udyog Mandal Ltd Hon’ble Gujrat High court concluded that the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return of income by the assessee without waiting for the assessee to demand such reasons. It is an admitted fact, in the present case that the Department has failed to supply the assessee the copy of reasons recorded by the Assessing Officer for issuance of notice under Section 148 of the Act. Following the decision of Hon’ble Jurisdictional High Court in Haryana Acrylic Manufacturing Company, the issue was decided in favour of the assessee. The whole reassessment proceedings and the resultant order of assessment passed under Section 143(3)/148 of the Act becomes vitiated entailing in nullifying proceedings and, accordingly, the orders of assessment under Section 143(3)/148 quashed.