Roomy Exports Vs ACIT (ITAT Mumbai)
Reasons Supplied After Nearly a Year, Objections Left Unanswered: ITAT Sets Aside Reassessment of Roomy Exports
How the Reassessment Began
Roomy Exports filed its original return on 28 September 2007, declaring income of ₹23,74,231. The return was processed under section 143(1).
Years later, information from the Investigation Wing concerning the Rajendra S. Jain Group led the Assessing Officer to suspect accommodation entries. The recorded reasons referred to bogus unsecured loans and sales, while the addition ultimately made in the reassessment concerned purchases. On 27 March 2014, the officer issued a notice under section 148, alleging escapement of income of ₹58,84,676.
The assessment was completed on 23 March 2015 under sections 143(3) read with 147. Treating purchases of ₹58,84,676 as unexplained, the officer assessed total income at ₹82,58,910. The Commissioner (Appeals) upheld the assessment, prompting the assessee to approach the Tribunal.
The Tribunal, however, dealt first with the manner in which the reopening had been carried out.
The Request for Recorded Reasons
After receiving the reopening notice, the assessee informed the Assessing Officer that its original return should be treated as the return filed in response to section 148. It also requested a certified copy of the reasons recorded for reopening.
According to the chronology placed before the Tribunal, that request was made in April 2014. The officer continued the assessment proceedings and issued notices seeking information, but did not supply the reasons. Following a change in the officer’s jurisdiction, the assessee requested them again on 18 December 2014.
The reasons were eventually furnished on 3 March 2015, almost a year after the reopening notice and only 20 days before the reassessment order. The assessee filed objections to the reopening on 11 March 2015. The officer proceeded to complete the assessment on 23 March 2015 without disposing of those objections through a speaking order.
That sequence, rather than the strength of the alleged accommodation-entry information, became decisive.
What the Tribunal Held
The Tribunal applied the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO. Under that procedure, an assessee who receives a reopening notice may file a return and seek the recorded reasons. The Assessing Officer must furnish the reasons within a reasonable time. The assessee may then object to the reopening, and the officer must decide those objections by a speaking order.
Roomy Exports had asked for the reasons and later filed objections once it received them. Yet the reasons were supplied only near the end of the assessment proceedings, and the objections were never separately decided. The Tribunal found a clear breach of the GKN Driveshafts procedure.
The Bench explained why the timing mattered. Supplying reasons close to the deadline for completing the assessment defeats the purpose of giving an assessee an opportunity to examine the basis for reopening and challenge it effectively. The later failure to decide the objections compounded that defect.
The assessee had also relied on decisions including Haryana Acrylic Manufacturing Co., Videsh Sanchar Nigam Ltd., Asian Paints Ltd. and Allana Cold Storage Ltd. in support of its procedural challenge. Having considered the sequence of events, the Tribunal held that the reassessment order deserved to be set aside.
Result of the Appeal
The Tribunal allowed the grounds challenging the delayed supply of reasons and the failure to decide the objections. It treated the assessee’s other grounds as academic and dismissed them as infructuous. The appeal was therefore described as partly allowed.
The practical result is that the reassessment order, including the ₹58,84,676 addition, was set aside. The Tribunal did not examine whether the purchases were genuine or whether the Investigation Wing material could otherwise support an addition. Its decision rested on the procedural defects in the reopening.
Author’s Comments
This order shows why the recorded reasons and the decision on objections are substantive steps in a reassessment. An assessee cannot meaningfully challenge a reopening without knowing its stated basis in time to respond. Equally, an assessment order is not a substitute for a speaking order on objections where the governing procedure requires one.
The dates make the failure especially clear here. The assessee requested reasons well before the assessment was completed, repeated the request, and filed objections promptly after receiving them. The officer nevertheless issued the final order without deciding those objections.
For practitioners, the case highlights the value of preserving the full correspondence: the response to the section 148 notice, requests for reasons, proof of when those reasons were furnished, and the objections filed thereafter. In Roomy Exports, that chronology determined the outcome. The addition fell with the reassessment order; its merits were left undecided.
Cases Discussed
- GKN Driveshafts (India) Ltd. vs. Income-tax Officer, [2002] 125 Taxman 963 (Supreme Court), 25-11-2002 — Followed by the Tribunal; the Assessing Officer is required to furnish the recorded reasons within a reasonable period and dispose of the assessee’s objections by a speaking order.
- Haryana Acrylic Manufacturing Co. vs. Commissioner of Income-tax, [2008] 175 Taxman 262 (Delhi)/[2009] 308 ITR 38 (Delhi), 03-11-2008 — Relied upon by the assessee in support of the contention that reopening reasons must be furnished within a reasonable time.
- Commissioner of Income-tax vs. Videsh Sanchar Nigam Ltd., [2012] 21 taxmann.com 53 (Bombay)/[2012] 340 ITR 66 (Bombay), 20-07-2011 — Relied upon for the proposition concerning failure to provide reopening reasons in time.
- Asian Paints Ltd. vs. Deputy Commissioner of Income-tax, [2008] 296 ITR 90 (Bombay), 29-01-2007 — Relied upon in support of the mandatory procedure governing disposal of objections to reopening.
- Allana Cold Storage Ltd. vs. ITO, [2006] 287 ITR 1 (Bombay) — Relied upon for the proposition that objections to reopening must be disposed of by a speaking order.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’], dated 12.02.2026, pertaining to Assessment Year (AY) 2007-08.
2. Briefly, the facts of the case are that the assessee had originally filed its return of income on 28.09.2007, declaring total income of Rs. 23,74,231/- which was processed u/s. 143(1) of the Act. Subsequently, the notice u/s. 148 was issued on 27.03.2014 for the reason that the assessee has taken certain accommodation entries in the nature of bogus unsecured loans and bogus sales as per information received from DDIT, Investigation wing pursuant to search carried out in case of Rajendra S. Jain Group, and basis that the Assessing Officer recorded reasons that income chargeable to tax has escaped assessment to the extent of Rs. 58,84,676/-. In compliance to the notice issued u/s. 148 of the Act, the assessee filed its return of income, and thereafter notices were issued under section 143(2) and 142(1) of the Act, and assessment proceedings were completed under section 143(3) read with 147 of the Act, vide order dated 23.03.2015, wherein the Assessing Officer brought to tax purchases amounting to Rs. 58,84,676/- as unexplained, and assessed total income was determined at Rs. 82,58,910/-.
3. Subsequently, the assessee carried the matter in appeal before the ld. CIT(A), who has sustained the findings of the Assessing Officer. Against the said order, the assessee is in appeal before us.
4. Though the assessee has taken various grounds of appeal, we firstly take up ground nos. 10 and 11, wherein the assessee has challenged the non-furnishing of the reasons by the Assessing officer within a reasonable time period as well as non-disposal of the objections, so taken by the assessee, by the Assessing Officer by way of a speaking order, in defiance of the decision of the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. Income-tax Officer [2002] 125 Taxman 963 (SC) [25-11-2002].
5. In this regard, during the course of hearing, the ld. AR taken us through the factual matrix of the case and it was submitted that notice under section 148 was issued on 27.03.2014, and in response, the assessee vide its letter dated 14.04.2014 submitted that it has already filed its return of income originally on 28.09.2007, and a copy of the acknowledgment of the said return was submitted. It was further submitted that the said return may be taken as due compliance to the notice under section 148 of the Act, and it was requested to the Assessing Officer to provide certified copy of the reasons recorded prior to the issuance of notice under section 148 of the Act. It was submitted that the Assessing Officer, without providing the reasons, gone ahead and issued notice under section 142(1) on 24.07.2014, seeking necessary information/documentation from the assessee. Thereafter, another notice under section 143(2) dated 27.03.2014 was issued by the Assessing Officer, and in compliance, the assessee sought adjournment vide its letter dated 14.08.2014, wherein it was submitted that, without prejudice to the validity and legality of the notice and the entire reassessment proceedings, the matter may be adjourned for at least three weeks’ time. It was submitted that thereafter another notice under section 142(1) was issued on 03.12.2014, intimating change of the jurisdiction of the Assessing Officer, and the matter was listed for hearing on 12.12.2014. It was submitted that the assessee thereafter filed another letter dated 18.12.2014, wherein the Assessing Officer was again requested for copy of the reasons so recorded prior to the issuance of notice under section 148 of the Act. It was submitted that thereafter the reasons for reopening were provided to the assessee for the first time by the ACIT, Circle 25(3) vide letter dated 03.03.2015, and thereafter another notice under section 142(1) was issued on 05.03.2015, and thereafter the assessee filed its objections on 11.03.2015, objecting to the validity and legality of the notice issued under section 148 of the Act. It was submitted that without disposing off the objections, a fresh show cause dated 11.03.2015 was issued. In response, the assessee, without prejudice to its legal submissions, filed necessary documentation, and without taking the same into consideration, the Assessing Officer passed the assessment order under section 143(3) read with 147 vide order dated 23.03.2015.
6. It was submitted that in light of the above factual sequence of events, it is evident that, firstly, the reasons have not been provided to the assessee within the reasonable time frame in spite of the specific request made to the Assessing Officer, and the same is clearly in defiance of the decision of the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. (supra), and also the decision of Hon’ble Delhi High Court in case of Haryana Acrylic Manufacturing Co. vs. Commissioner of Income-tax [2008] 175 Taxman 262 (Delhi)/[2009] 308 ITR 38 (Delhi) [03-11-2008]. It was further submitted that the reasons were provided at the fag-end of the limitation period, and that is as good as not providing the reasons at all, and even though the assessee has raised specific objections, even those objections have not been disposed off by way of a speaking order, and again violating the principles laid down by the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. (supra).
7. Further in support, reliance was placed on the decision of Hon’ble Bombay High Court in case of Commissioner of Income-tax vs. Videsh Sanchar Nigam Ltd. [2012] 21 taxmann.com 53 (Bombay)/[2012] 340 ITR 66 (Bombay)[20-07-2011], wherein it was held that where the AO fails to provide copy of the reasons till completion of the assessment proceeding, the reassessment proceedings are bad in law. Further, reliance was placed on the decisions of Hon’ble Bombay High Court in case of Asian Paints Ltd. vs. Deputy Commissioner of Income-tax [2008] 296 ITR 90 (Bombay)[29-01-2007] and in the case of Allana Cold Storage Ltd. vs. ITO, [2006] 287 ITR 1 (Bom.), wherein it was held that where the assessee filed objections to reopening, it is obligatory for the Assessing Officer to dispose of the objections by passing a speaking order.
8. The ld. DR has been heard, who has relied on the order passed by the Assessing Officer as well as that of the ld. CIT(A). It was submitted that the reassessment proceedings were initiated based on specific information that the assessee has obtained bogus accommodation entries and income chargeable to tax has escaped assessment. Thereafter, notice under section 148 was issued on 27.03.2014 after recording reasons in writing and obtaining necessary sanction from the competent authority under section 151 of the Act. Notice was duly served on the assessee on 30.03.2014, and the copy of the reasons were also provided to the Assessing Officer vide letter dated 03.03.2015, and thereafter the assessment proceedings were completed under section 143(3) read with 147 of the Act after taking into consideration the entirety of the submissions so filed by the assessee and after giving proper opportunity to the assessee.
9. We have heard the rival contentions and perused the material available on record. It is a settled legal proposition as laid down by the Hon’ble Supreme Court that once a notice under section 148 is issued by the Assessing Officer, the proper course of action for the assessee is to file return of income, and where he so desires, to seek reasons for issuance of notice, and thereafter the Assessing Officer is bound to furnish reasons within a reasonable period of time, and thereafter, on receipt of the reasons, the assessee 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, we find that the assessee has filed its return of income stating that the return earlier filed may be taken as return filed in compliance to notice under section 148 vide letter dated 14.03.2014 and in the same communication, the assessee has sought certified copy of the reasons so recorded by the Assessing Officer before issuance of notice under section 148 of the Act. The Assessing Officer instead of providing the reasons so sought by the assessee proceeded and issued notices under section 143(2) and 142(1) of the Act. Thereafter, there was change of the jurisdiction of the Assessing Officer and again the assessee requested for copy of the reasons vide his letter dated 18.12.2014 and which were only provided by the Assessing Officer on 03.03.2015 and in spite of the objection so raised by the assessee vide letter dated 11.03.2015 which were not disposed off by way of speaking order, the Assessing Officer has gone ahead and passed the assessment order under section 143(3) read with 147 vide order dated 23.03.2015. We therefore find that this is a clear breach of the principles laid down by the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. (supra). Further, the Courts have also held from time to time that the reasons have to be supplied along with the notice under section 148 of the Act and the same cannot be stretched to a time period which is close to the limitation of passing of the assessment order, which will result in the nullifying the whole purpose of allowing the assessee to seek reasons and file its objections. We therefore, find that in the present case, there is a clear breach of the principles laid down by the Hon’ble Supreme Court and various Courts from time to time, and in light of the same, the consequent assessment order passed under section 143(3) read with 147 of the Act deserves to be set aside. In the result, the grounds of appeal are allowed.
10. In light of above, the other grounds of appeal have become academic, and the same are dismissed as infructuous
11. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 24.09.2026
