Case Law Details
Banwari Lal Pareek Vs ITO (ITAT Jaipur)
ITAT held that recording of reasons before initiation of reassessment proceedings and communication thereof to the assessee is sine qua non that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be. In the present case, admittedly such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, in our view, the reassessment proceedings initiated and consequential order passed by the AO and appeal order passed by the ld. CIT(A) are not justified and, therefore, we quash such reassessment order.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The assessee has filed an appeal against the order of the ld. CIT(A)-1, Jaipur dated 29-11-2019 for the assessment year 2010-11 wherein the assessee has raised the following grounds of appeal.
‘’1. That the ld. CIT(A) has grossly erred in law and facts in upholding services notice u/s 148 on the assessee within the due time.
2. That the ld. CIT(A) has grossly erred in law and facts in upholding validity of assessment order without providing reasons of reopening of the assessment by the AO in spite of the specific request made by the assessee during the course of assessment proceeding.
3. (a) That the ld. CIT(A) has grossly erred in law and facts in estimating the cost of construction of the house sold on the basis of assumption only at Rs.2,50,000/- as against the actual cost incurred of Rs.4,36,500/-.
(b) That the ld. CIT(A) Jaipur has grossly erred in law and facts in not accepting the cost of construction of the house Rs.4,19,040/- as valued by the approved Registered Valuer’s (Mahendra Singhal).”
2.1 At the outset of the hearing, the ld. AR straightway raked up grounds of appeal stating that this ground is purely legal in nature and goes to the root of the case. The ld. AR of the assessee submitted that the ld. CIT(A) has grossly erred in law and facts in upholding the validity of the assessment order without providing the reasons of reopening of the assessment by the AO in spite of the specific request made by the ld. AR of the assessee during the course of assessment proceedings. In this regard, the ld. AR of the assessee had drawn our attention towards the order of the ld. CIT(A) at page No. 2 wherein Ground No. 3 has been specifically taken by the assessee and he has categorically mentioned that the AO has erred in law as well as on facts in not providing reasons for issue of notice u/s 148 as demanded by the assessee during the assessment proceedings. The ld. AR of the assessee had further drawn our attention to Page No.6 of the impugned order of the ldl. CIT(A) wherein he has filed the written submission in support of Ground No. 3. Apart from this, the ld. AR has also drawn our attention towards reply dated 27-11-2017 filed by the assessee before the AO which is at Page 53 to 54 of the Paper book wherein the assessee had also requested the AO for providing the reasons for issuance of Notice u/s 148 of the Act. The ld. AR of the assessee further submitted that providing of reasons recorded is sine qua non for reopening the assessment. To this effect, the ld. AR has relied upon the decisions of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs ITO, 2003 (1) SCC 72, Hon’ble Bombay High Court in the case of CIT vs Videsh Sanchar Nigam Ltd. 2012 (340) ITR 66, Hon’ble Bombay High Court in the case of CIT vs Trend Electronics, 2015 (379) ITR 456, decision of Hon’ble Karnataka High Court in the case of Pr. CIT and Another vs V. Ramaiah (ITA No. 451 of 2017 dated 02-072018) and the decision of Hon’ble Supreme Court in the case of Pr. CIT vs V Ramaiah, reported in (2019) 262 Taxman 16 and submitted that since the AO has failed to furnish the reasons, therefore, the entire proceedings of reopening of assessment may be quashed.
2.2 On the other hand, the ld. DR relied on the orders of the lower authorities.
2.3 We have heard both the parties and perused the material available on record. It is an admitted fact that from the very beginning the assessee had been demanding the reasons recorded and in this regard the reply dated 27-11-2017 (PBP 53-54) of the assessee written to the ITO, wherein the assessee had specifically asked and demanded the AO to provide the reasons for issuance of Notice u/s 148 of the Act to the assessee. However, the AO did not provide the same. In appeal before the ld. CIT(A), the assessee had categorically raised the specific ground that the reasons recorded for reopening of the assessment was never supplied / provided to the assessee. However, the ld. CIT(A) had ignored the said ground of the assessee and also did not deal with the specific ground raised by the assessee. In our view, the AO was bound to furnish reasons recorded by him within a reasonable time as has been held by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs ITO (supra) wherein the Hon’ble Court held as under:-
‘’5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice u/s 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. .In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years.”
As per record, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment, therefore, in our considered view, the reassessment order in these circumstances of the case, cannot be upheld. For reaching this conclusion, we draw strength from the decision of Hon’ble Bombay High Court in the case of CIT vs Videsh Sanchar Nigam Ltd (2012) 340 ITR 66 wherein Hon’ble Bombay High Court had categorically held that since the reasons recorded for reopening of the assessment were not furnished to the assesse till the completion of the assessment then reassessment order cannot be upheld and thus dismissed the appeal filed by the Revenue. Even in the case of CIT vs Trend Electronics reported in (2015) 379 ITR 456, Hon’ble Bombay High Court has categorically held as under:-
‘’Income Tax Act 1961 Section 147 and 148 Reopening of assessment – validity of – Notice – Objections – Recording of reasons and furnishing of reasons to be strictly complied with – Failure on part of assessee to furnish reasons recorded to assessee when sought for – Reassessment not valid – Quashed – Appeal dismissed.”
Hon’ble Karnataka High Court in the case of Pr.CIT and Another vs V. Ramaiah (ITA No. 451 of 2017 dated 02-07-2018) has held as under:-
‘’8. The decision relied upon by the learned counsel for the Revenue is distinguishable on facts. The order which was to be passed by the assessing authority as preliminary objection of the assessee, once the assessee has raised the objection to such reassessment proceedings, the meeting of such objections in the main reassessment order, could be procedural aspect of the matter but the recording of the reasons before the initiation of the reassessment proceedings and communication thereof to the assessee is sine qua non as held by the Hon’ble Supreme Court and that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be.
9. In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order.
10. We do not find any substantial question of law arising in the matter. Therefore, the appeal of the Revenue stands dismissed. No costs.”
The SLP of the Revenue against the above order of Karnataka High Court (supra) has also been dismissed by the Hon’ble Supreme Court reported in (2019) 262 Taxman 16. Therefore considering the totality of the facts and circumstances of the case and keeping in view the legal proposition as discussed above, we hold that recording of reasons before initiation of reassessment proceedings and communication thereof to the assessee is sine qua non as held by the Hon’ble Supreme Court (supra) that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be. In the present case, admittedly such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, in our view, the reassessment proceedings initiated and consequential order passed by the AO and appeal order passed by the ld. CIT(A) are not justified and, therefore, we quash such reassessment order. Therefore, the ground raised by the assessee is allowed and consequential appeal of the assessee is also allowed with no order as to cost.
3.0 In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27 /07/2022
