Kripa Amar Alva Vs DCIT (ITAT Bangalore)
Calling an Objection “Invalid” Inside the Final Order Is Not a Speaking Order: Reassessments u/s 147/148 for Two AYs Quashed—Bangalore ITAT
Summary: The Bangalore ITAT quashed reassessments for AYs 2010-11 & 2011-12 because the AO failed to dispose of the assessee’s objections to reopening through a separate speaking order before completing assessment. Following its decision in Nisha Dudheria & the binding Karnataka High Court ruling in Hewlett Packard Financial Services (India) Pvt. Ltd., the Tribunal held that merely rejecting the objections through observations incorporated in the final assessment order did not satisfy the mandatory procedure laid down in GKN Driveshafts (India) Ltd.
Notice u/s 148 & Belated Return
For AY 2010-11, the AO issued notice u/s 148 on 27.03.2014, requiring the assessee to furnish her return within 30 days, on or before 27.04.2014.
The assessee did not file the return within that period. It was eventually filed on 14.01.2015, after a considerable delay. The AO thereafter issued notice u/s 143(2) on 16.02.2015.
The recorded reasons for reopening were supplied through a communication dated 27.02.2015. After examining them, the assessee submitted a letter dated 02.03.2015, expressly stating that the reasons recorded u/s 148 were not in accordance with the Income-tax Act & were therefore invalid.
The same fundamental controversy arose for AY 2011-12.
AO Dealt With Objection Only in Assessment Order
The AO did not pass a separate order accepting or rejecting the objections before proceeding further with reassessment.
Instead, the final assessment order recorded that apart from stating that the reasons were contrary to the Act & invalid, the assessee had not filed any “valid objections” against reopening.
Thus, the AO purported to reject the objection only while completing the reassessment itself. The assessee challenged this procedure before the CIT(A), relying upon the Supreme Court’s ruling in GKN Driveshafts.
The CIT(A) dismissed the challenge by broadly observing that the AO had followed the procedure prescribed u/s 147 before issuing notice u/s 148. He did not address the specific grievance that objections filed after receipt of the reasons had not been separately decided before reassessment.
Revenue Said There Was No Specific Objection
Before the Tribunal, the Department contended that the assessee’s letter was vague & did not raise any specific objection. It merely described the recorded reasons as contrary to law without explaining the exact jurisdictional defect.
On that basis, Revenue argued that the AO was not required to pass a separate speaking order.
The assessee relied upon the Bangalore ITAT’s decision in Nisha Dudheria v. ITO, where reassessment had been quashed because objections were not disposed of separately before the final order.
Once an Objection Is Raised, AO Must Decide It First
The Tribunal found the material facts identical to those considered in Nisha Dudheria. The assessee had sought the reasons, received them & thereafter questioned the validity of reopening in writing.
Once the assessee objected to the initiation of reassessment, the AO could not bypass the prescribed procedure merely by labelling the objection as invalid or inadequate in the final assessment order.
The purpose of a separate speaking order is to communicate the AO’s reasoning before reassessment is completed. It allows the assessee to understand why the jurisdictional objections have been rejected & pursue an appropriate legal remedy without waiting for the final assessment.
If the objection is rejected only within the reassessment order, that procedural protection becomes meaningless.
GKN Driveshafts Procedure Is Mandatory in Karnataka
The Tribunal relied upon the Karnataka High Court’s decision in DCIT v. Hewlett Packard Financial Services (India) Pvt. Ltd., which followed GKN Driveshafts.
The Karnataka High Court held that after recorded reasons are communicated & objections are filed, the AO is bound to dispose of them through a speaking order before passing an order u/s 143(3) r.w.s. 147. Non-compliance with this sequence vitiates the reassessment.
The Supreme Court had dismissed the Department’s SLP against the Karnataka High Court’s ruling, thereby leaving the jurisdictional declaration undisturbed.
The Tribunal reiterated that the procedure is not an optional administrative formality. It is a mandatory safeguard governing assumption & continuation of reassessment jurisdiction.
Observations in Final Order Could Not Cure the Defect
The fact that the AO eventually referred to the assessee’s letter in the assessment order did not cure the defect. There is a substantive difference between:
first deciding the objections by a speaking order & thereafter proceeding with reassessment, and rejecting the objections while simultaneously completing reassessment.
The latter course denies the assessee an effective opportunity to challenge the jurisdictional ruling before the assessment crystallises.
Accordingly, the Tribunal held that the reassessment framed u/s 147 was invalid & unsustainable in law for AY 2010-11.
Both parties agreed that the facts for AY 2011-12 were identical. Applying the same reasoning, the reassessment for that year was also quashed.
Merits Became Academic
Once the reassessment proceedings failed on the threshold legal issue, the Tribunal found it unnecessary to adjudicate the assessee’s grounds relating to the additions on merits. Those issues became academic & were treated as infructuous.
Both appeals were accordingly partly allowed, with the legal ground decided in the assessee’s favour.
Author’s Comments
The ruling confirms that an objection need not persuade the AO to trigger his duty to decide it. Even if he considers it vague or legally weak, he must say so through a separate reasoned order before completing reassessment.
The requirement is about procedural sequence, not the eventual strength of the objection. The final assessment cannot retrospectively perform the role of the preliminary speaking order.
In short, the AO may reject an objection -but he cannot hide its rejection in the last chapter after finishing the reassessment story.
Cases Discussed
- Nisha Dudheria v. ITO, ITA No. 316/Bang/2025, Assessment Year 2015-16, order dated 12.03.2026.
- GKN Driveshafts (India) Ltd. v. ITO, (2003) 259 ITR 19 (SC).
- DCIT v. Hewlett Packard Financial Services (India) Pvt. Ltd., Karnataka High Court.
- M/S. Deepak Extrusions Pvt. Ltd. v. DCIT, (2017) 80 taxmann.com 77 (Karnataka).
- Home Finders Housing Ltd. v. ITO, (2018) 93 taxmann.com 371 (Madras).
- W.A.No.919/2019, disposed of on 24.01.2023.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE
These appeals are filed by the assessee against the order of the ld. CIT(A) for the Assessment Years 2010-11 & 2011-12.
ITA No. 1410/Bang/2025
2. The assessee has challenged the validity of the assessment framed under section 147 of the Act on the ground that the objections raised by the assessee against the reopening of the assessment were not disposed of by the Assessing Officer by way of a separate speaking order before completion of the assessment proceedings.
2.1 The necessary facts emerging from the records available before us reveal that a notice under section 148 of the Act was issued on 27 March 2014 requiring the assessee to furnish the return of income within a period of 30 days, i.e., on or before 27 April 2014. However, the assessee filed the return of income after a considerable lapse of time on 14 January 2015. Thereafter, a notice under section 143(2) of the Act was issued on 16 February 2015. Subsequently, the assessee raised objections against the initiation of reassessment proceedings before the Assessing Officer vide letter dated 02.03.2015. The objections raised by the assessee read as under:
“We have received your letter dated 27-02-2015 for the A.Y 2010-11, 2011-12 and 2012-13 furnishing reasons recorded u/s 148 and after going through the same, we are of the opinion that, the said reason recorded u/s 148 is not in accordance with the Income Tax Act and therefore not valid.”
2.2 The aforesaid objections raised by the assessee were rejected by the Assessing Officer, as is evident from the observations recorded in the assessment order. The relevant findings of the Assessing Officer are reproduced below:
“10.6 The present proceedings were initiated vide notice u/s 148 dated 27.03.2014 after recording the reasons. Except stating that reason recorded u/s 148 is not in accordance with the Income Tax Act and therefore not valid, no valid objections have been filed by the assessee against the reopening.”
2.3 The assessee also challenged the validity of the reassessment proceedings before the learned CIT(A). However, the learned CIT(A) dismissed the contention of the assessee and upheld the action of the Assessing Officer. The relevant submissions of the assessee and the findings recorded by the learned CIT(A) are reproduced as under:
The appellant has further submitted that,
“We again reiterate that the notice u/s 148 is not valid for which were rely on the judgment of the Honorable Apex Court int eh case of GKN Drive Shaft where the Honorable Apex Court directed that the AO should have disposed off the objection by separate order before proceeding further. The AO has not followed the ratio laid down int eh Apex Court Order.”
Finding of the ld. CIT-A
Reply filed by the appellant is considered. From the Assessment Order it is very clear that the A.O has followed procedure laid out in Sec. 147 of the I.T Act before issuing notice u/s. 148 of the I.T Act. Therefore, objection of the appellant to the proceedings are not accepted. Hence, all the grounds are rejected.
3. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
4. The learned AR appearing on behalf of the assessee reiterates the submissions advanced before the lower authorities. The learned AR further placed reliance on the order of this Tribunal in the case of Ms. Nisha Dudheria in ITA No. 316/Bang/2025 for Assessment Year 2015-16, vide order dated 12.03.2026, and contended that the issue involved in the present appeal is squarely covered in favour of the assessee.
5. On the other hand, the learned Departmental Representative (DR) vehemently supported the orders of the authorities below and submitted that the reassessment proceedings had been validly initiated and completed in accordance with law. To this effect, the ld. DR also filed a letter dated 29-06-2026 stating that no specific objection was raised by the assessee against the initiation of the proceedings under section 147 of the Act.
6. We have heard the rival submissions of both the parties and carefully perused the materials available on record. At the outset, we note that the issue arising in the present appeal stands directly covered by the order of the Co-ordinate Bench of this Tribunal in the case of Ms. Nisha Dudheria (supra), wherein an identical issue was adjudicated in favour of the assessee. The relevant findings of the Tribunal are reproduced below:
“7. We have carefully considered the rival contention and perused the orders of the Ld. lower authorities. In this case the assessee filed her return of income on 31.08.2015. The notice u/s. 148 was issued to the Assessee on 31.03.2018. The Assessee on 20.04.2018 by way of a letter reiterated her return of income filed originally. The Assessee asked for the reasons recorded for reopening of the assessment on 07.05.2018 which were provided to the assessee on 08.05.2018. Subsequently, on 21.12.2018, the assessee objected to the reopening of the Assessment. Meanwhile, on 09.05.2018, the notice u/s. 143 (2) was issued to the
Assessee and the Assessment was passed on 28.12.2018. Thus, it is apparent that the Assessee has raised an objection before the Ld. Assessing Officer on 21.12.2018. The same have not been disposed of by the Assessee by a speaking order. The excuse raised by the revenue is that the Assessee objected the same at the fag end of the Assessment Proceedings is not sustainable for the reason that the Ld. Assessing Officer could have disposed of those reasons at any time after 21.12.2018 by passing a speaking order prior to passing of the Reassessment Order. Even otherwise the Assessing Officer was having the time for passing the final assessment order up to 31.03.2019.
8. The Hon’ble Supreme court in Deputy Commissioner of Income-tax vs. Hewlett Packard Financial Services (India) (P.) Ltd. [2026] 183 taxmann.com 696 (SC)[16-02-2026] dismissed SLP against decision of Honourable Karnataka High court in Deputy Commissioner of Income-tax vs. Hewlett Packward Financial Services (India) (P.) Ltd. [2026] 183 taxmann.com 596 (Karnataka) [12-02-2025] has categorically held that it is mandatory for the Ld. Assessing Officer to dispose of the objection raised by the Assessee against the reopening of the Assessment and then he has to pass the order of reassessment thereafter. If the above procedure is not followed, the order of reassessment passed u/s. 143 (3) r.w.s. 147 of the Act cannot be sustained. The Hon’ble Karnataka High Court followed the decision of the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd (2003) 259 ITR 19 (SC) (2002) 125 taxmann.com 963 (SC) in passing of the above order. Honourable High court held as under:- 4. Having heard the learned counsel for the parties and having perused the Appeal Papers, we decline indulgence in the matter broadly agreeing with the views of learned Single Judge. The submission of learned Sr. Advocate appearing for the Assessee that the reasons for issuing Notice under Section 143(2) of the 1961 Act are once communicated and Objections filed by the Assessee have not been considered, then the proceedings of reAssessment are liable to be voided, is supported by the decision in GKN DRIVESHAFTS supra, wherein the Apex Court has observed as under:
“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if 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.”
5. Learned Single Judge at Paragraph Nos. 11 & 12 of the impugned order has rightly observed as follows:
“11. In the present case, it needs to be kept in mind that the proceedings under Section 148 will have the effect of reopening the assessment. It is in this context, the Court has to decide while construing the effect of non-following of the procedure under GKN Driveshafts (supra). Admittedly, the reasons for reopening having been communicated as per Annexure-F and reply to such reasons having been furnished by the petitioner, the Assessing Officer is bound to dispose off the same by passing a speaking order before proceeding to pass an order under Section 143(3) read with Section 147 of the Act. In light of the limitation expiring on 31.12.2018, the practical difficulties of the Assessing Officer could be of no reason to condone the nonadherence to the procedure in GKN Driveshafts (supra). The effect of nonfollowing such procedure has been dealt with by the judgment of the Division Bench of this Court in Deepak Extrusions, ITA No. 316/Bang/2025 Page 7 of 8 wherein the Division Bench of this Court has rightly held that the mandatory procedure of disposal of objections by the Assessing Officer not having been followed, the order of assessment cannot be sustained. If that were to be so, the assessment order issued under Section 143(3) read with Section 147 requires to be set aside and the question of issuing notice under Section 148 would not arise.
12. The contention of the learned counsel for the revenue relying on the judgment of the Madras High Court in the case of Home Finders (supra) cannot be accepted in light of the declaration of the Division Bench of this Court in the case of Deepak Extrusions stating that the procedure prescribed in GKN Driveshafts (supra) is a mandatory procedure which would vitiate the assessment order and the same having been concurred with in another judgment of the Division Bench in W.A.No.919/2019 disposed off on 24.01.2023. It is impermissible for this Court to accept the contention of the revenue and pass orders contrary to that of the Division Bench orders referred to above. Even otherwise, a perusal of the observations made by the Apex Court in GKN Driveshafts (supra) clearly records a finding that the Assessing Officer is bound to dispose off the objections filed by passing a speaking order.” In the above circumstances, this Appeal being devoid of merits is liable to be rejected and accordingly it is, costs having been made easy.
9. In view of the above facts, respectfully following the decision of the Hon’ble Karnataka High Court, we quash the Reassessment Order passed by the Ld. Assessing Officer on 20.12.2018 and also reverse the order of the Ld. CIT(A) upholding the reassessment of the income in case of the Assessee as valid.”
6.1 On perusal of the facts available on record, we find that the facts involved in the present case are identical to the facts considered by the Co-ordinate Bench in the case referred to above. Therefore, respectfully following the ratio laid down therein, we hold that the assessment framed under section 147 of the Act is not sustainable in the eyes of law. Accordingly, the legal ground raised by the assessee is allowed.
6.2 Since we have held the reassessment proceedings to be invalid and unsustainable in law, the other grounds raised by the assessee on the merits of the additions do not survive for adjudication. Consequently, the grounds raised on merits are rendered infructuous and, therefore, do not require separate adjudication.
7. In the result, the appeal of the assessee in ITA No. 1410/Bang/2025 is partly allowed.
8. Coming to ITA No. 1411/Bang/2025, both the learned representatives fairly submitted that the facts and issues involved in the present appeal are identical to those adjudicated by us in ITA No. 1410/Bang/2025. Therefore, following our findings and conclusions recorded therein, we hold that the assessment framed under section 147 of the Act is not sustainable in law. Accordingly, the legal ground raised by the assessee is allowed.
9. Since we have quashed the reassessment proceedings, the issues raised by the assessee on the merits of the additions become merely academic in nature and, therefore, do not call for separate adjudication. Accordingly, the grounds raised on merits are treated as infructuous.
10. In the result, the appeal of the assessee in ITA No. 1411/Bang/2025 is partly allowed.
11. In the combined result, both the appeals of the assessee in ITA Nos. 1410/Bang/2025 and 1411/Bang/2025 are hereby partly allowed.
Order pronounced in court on 31st day of August, 2026
