DCIT (EXEMPTION)-2(1), MUMBAI vs. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION, MUMBAI

The facts relating to the case are stated in brief. The main object of the assessee is to provide passenger transport facility within the state of Maharashtra. It is a Government of Maharashtra undertaking. The assessee is registered under section 12A of the I.T. Act. The return of income was filed by the assessee for the year under consideration on 30.9.2013 and subsequently the assessee also filed a revised return. The assessment was originally completed under section 143(3) of the Act on 30.3.2016. Subsequently the Assessing Officer reopened the assessment by issuing notice under section 148 of the Act on 5.3.2020. The assessee filed return of income in response to the above said notice on 08.1.2021. Thereafter it asked for the reasons for reopening of assessment and the same was supplied by the Assessing Officer on 19.9.2021. The assessee filed objections to the reopening of assessment on 23.9.2021. However, the Assessing Officer disposed of the objection in the assessment order passed on 30.9.2021 i.e. the Assessing Officer did not dispose of the objection by a separate order as mandated by Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (259 ITR 19). The Assessing Officer completed the reassessment by determining the total income of the assessee at Rs. 700.67 crores.

The assessee filed the appeal before the learned CIT(A), wherein it challenged the validity of reopening of the assessment on the ground that the Assessing Officer has not disposed of the objection filed by the assessee by passing a separate order before completing the assessment. The learned CIT(A) was convinced with the contention of the assessee and accordingly held that the Assessing Officer has failed to follow the mandatory procedure prescribed by Hon'ble Supreme Court in the case of GKN Driveshaft (India) Ltd (supra) for disposing of the objections filed by the assessee. Accordingly, the Ld CIT(A) held that the reassessment order passed by the Assessing Officer cannot be sustained. The Revenue has filed his appeal challenging the above said decision of the learned CIT(A).

The Learned DR submitted that the assessee has purposely delayed the proceedings by filing the return of income belatedly. She submitted that the assessee has filed return of income only on 8.1.2021 in response to the notice dated 5.3.2020 issued under section 148 of the Act. Thus there was a delay of almost ten months in filing the return of income. Thereafter the assessee has asked for the reasons for reopening only on 12.7.2021, which was supplied on 19.9.2021. The assessee filed objection on 23.9.2021. Since the due date for completing the assessment was 30.9.2021, the Assessing Officer disposed of the objection in the assessment order itself. Accordingly learned DR submitted that there was shortage of time with the Assessing Officer and hence non-disposal of the objection by a separate order should not vitiate the reassessment proceedings in view of the peculiar circumstances discussed above.

The Learned AR submitted that the assessee could file the return of income only on 8.1.2021 in response to the notice issued under section 148 of the Act on 5.3.2020 due to break out of Covid pandemic in the country and closure of the entire country. Thereafter the assessee received notice under section 143(2) of the Act on 3.5.2021 along with the reasons for reopening. Thereafter the assessee filed four letters requesting the Assessing Officer to provide documents and information mentioned in the reasons for reopening, so that the assessee could file its objections. The last letter was written by the assessee on 23.7.2021. However, the Assessing Officer sent a final reply on 9.9.2021 stating that all the details have been provided to the assessee. Accordingly, the assessee filed its objections to the reopening of assessment on 23.9.2021. Accordingly, the learned AR submitted that the assessee did not delay the proceedings purposely as alleged by learned DR. Learned AR further submitted that that the Assessing Officer has not disposed of the objections by passing a separate order which is mandatory procedure prescribed Hon'ble Supreme Court in the case GKN Driveshafts

We heard rival contentions and perused the record. The admitted fact is that the Assessing Officer has not disposed of the objections filed by the assessee to the reopening of the assessment by passing a separate speaking order. Instead, the Assessing Officer has disposed of the objections in the assessment order itself. We noticed that the issue as to whether non- disposing of the objections to the reopening of the assessment by passing a separate speaking order would vitiate reassessment proceedings or not, was examined by the Coordinate Bench in the case of M/s. General Electric Company (supra). Following the decisions rendered by Hon'ble Bombay High Court, which are cited above, it has been held by the Coordinate Bench that the reopening in this kind of situation is liable to be quashed.

For the sake of convenience we extract below the operative portion of the order passed by the Coordinate Bench in the case of M/s. General Electric Company (supra) :-

In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within which the Assessing Officer must pass an order on the notice of reopening i.e. within one year from the end of 6 Maharashtra State Road Transport Corporation the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh Assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be passed within one year from the end of the financial year in which the order under Section 254 of the Act, was passed by the Tribunal and received by the Commissioner of Income Tax.

Therefore, on the above facts and law, the substantial question of law is answered in the negative i.e. in favour of the Appellant Assessee and against the Respondent Revenue.”

In the instant case before us, the assessee had sought for the reasons recorded way back on 29.05.2008 and again on 26.11.2008. The learned Assessing Officer for reasons best known to him decided to provide the reasons recorded to the assessee only on 17.12.2008. The objections to the same were filed by the assessee immediately after the receipt of the said reasons recorded. If the learned Assessing Officer had consciously delayed the communication of the reasons recorded for reopening to the assessee, then he cannot cry over non-availability of time for disposing the objections filed by a separate speaking order. In the instant case as stated supra, the learned Assessing Officer had not even bothered to dispose of the objections even in the reassessment order framed on 31.12.2008. Hence it can be safely concluded that the objections filed by the assessee for reopening the assessment were never disposed of by the learned Assessing Officer in the instant case.

Similar matter also came up before the Hon'ble Jurisdictional High Court in the case of Bayer Material Sciences (P) Ltd Vs. DCIT reported in 382 ITR 333 wherein the relevant operative portion of the order is reproduced hereunder:

Yet another similar matter came up before the Hon'ble Jurisdictional High Court in the case of Fomento Resorts and Hotels Limited Vs. ACIT in Tax Appeal No.63 of 2007 dt.30.08.2019. This decision was rendered in the context of provisions of Expenditure Tax Act, 1987. The Tribunal which has passed this order under this Act is Income Tax Appellate Tribunal. Hence the ratio laid down in this decision would be applicable for the present proceedings and to the present facts also. The relevant operative portion of the decision is reproduced hereunder :

Virtually, an identical issue arose in the cases of Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) before the Division Benches of our High Court at Bombay.

In Bayer Material Sciences Pvt. Ltd……

Similarly in the case of KSS Petron Pvt. Ltd……

In the aforesaid case, the Assessing Officer had purported to dispose of the objections to the reasons in the assessment order, consequent upon reopening of the assessment. This Court, however, held that the proceedings for reopening of assessment prior to disposing of the Asessee’s objections by passing a speaking order, was an exercise in excess of jurisdiction.

KSS Petron Pvt. Ltd., this is what the Division Bench has observed in paragraphs 7 & 8 of the judgment; 7…… 8……

According to us, the rulings in Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) afford a complete answer to the contentions raised by Ms. Linhares in defence of the impugned order.

Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee’s objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd. (supra), Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra), we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue.

As noted earlier, in view of the aforesaid, there is no necessity to advert to the second substantial question of law, at least, in so far as this Appeal is concerned. The Appeal is, therefore, allowed and the impugned orders dated 26th March, 2004 made by the Assessing Officer, 30th November, 2004 made by the Commissioner (Appeals) and 12th January, 2007 made by the ITAT are set aside on the ground of want of compliance with jurisdictional parameters by the Assessing Officer, and without going into the second substantial question of law framed in this Appeal. Accordingly, we clarify that the second substantial question of law, raised in this Appeal, is not to be treated as decided in this Appeal, one way or the other.

The Appeal is allowed in the aforesaid terms. There shall be no order as to costs.”

Following the binding decisions rendered by Hon'ble Bombay High Court, which has been followed by the Coordinate Bench in the above said case, we are of the view that the learned CIT(A) was justified in quashing the assessment order passed by the Assessing Officer for non-disposal of the objections to the reopening by a separate speaking order. Accordingly, we do not find any reason to interfere with the decision rendered by Ld CIT(A) on this legal issue.

In the result, the appeal filed by the Revenue as well as cross objection filed by the assessee are dismissed.