Brief of the Case
In the case of CIT v Trend Electronics, Hon’ble High Bombay Court held that before issuance of reopening notice for assessment, the Revenue have to furnish the reasons for it. Otherwise, the notice will be considered as bad in Law.
Facts of the Case
The Assessing Officer initiated reassessment proceedings by issuing notice under Section 148 of the Act seeking to reopen the assessment. The assessee by a letter tried to get the copy of recorded reasons for reopening of assessment. In the reply to the assessee’s letter, the ld. AO directed the assessee to file it’s return of income and also informed the assessee that the reasons would be furnished after the return of income is filed. The assessee thereafter by letter informed the Assessing Officer that return of income under Section 139 of the Act be treated as the return of income consequent to notice under Section 148 of the Act. The Assessing Officer thereafter completed the reassessment proceedings under Section 143(3) r/w 147 of the Act without having given a copy of the reasons recorded for issue of reopening notice dated 26 March 2010 to the assesse.
The ld. CIT(A) also confirmed the orders passed by the AO.
Judgment of the Hon’ble Tribunal
The Hon’ble tribunal relied on GNK Driveshafts (India) Ltd. Vs. ITO 259 ITR 19, wherein it has been specifically provided that the Assessing Officer is bound to furnish reasons for issuance of reopening notice when sought for by the assessee. Also, reliance was placed upon CIT Vs. Videsh Sanchar Nigam Ltd., 340 ITR 66, wherein this Court has held that failure to furnish the recorded reasons for issue of reopening notices to the assessee before completion of the assessment proceedings would make the reassessment order passed in pursuance of such a notice bad in law. In the above circumstances, the appeal of the assessee was allowed by the Tribunal.
Judgment of the Hon’ble High Court
The Hon’ble High Court held that it is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever revenue seeks to exercise such power, they must state reasons to indicate that the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment.
These recorded reasons as laid down by the Apex Court must be furnished to the assessee when sought for so as to enable the assessee to object to the same before the Assessing Officer.
By relying on the Judgments of the Hon’ble Apex Court which were cited by the Hon’ble Tribunal, it was held that there is no substantial question of Law involved in this appeal. Accordingly, the appeals of the Revenue were dismissed.