JAYSHREE RAVI SANCHETI,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE-27(1), NAVI MUMBAI

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ITA 5998/MUM/2026Status: DisposedITAT Mumbai10 September 2026AY 2013-1413 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the failure of the AO to pass a speaking order disposing of the assessee's objections before proceeding with reassessment is a jurisdictional infirmity. Such a failure vitiates the entire reassessment proceedings and cannot be cured by dealing with objections in substance within the assessment order.

What were the facts?

The assessee filed objections against the reasons for reopening of assessment under Section 147. The Assessing Officer (AO) failed to dispose of these objections by passing a separate speaking order before proceeding with the reassessment.

What were the issues?

Whether the failure of the Assessing Officer to dispose of objections against the reasons for reopening by a separate speaking order invalidates the reassessment proceedings.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘F’ BENCH

Before: SHRI AMIT SHUKLA & SHRI MAKARAND VASANT MAHADEOKAR

For Appellant: Shri Prakash Jhunjhunwala a/w. Shri Saiprasad Ghosh
For Respondent: Ms. Sandhya Mathur, SR DR
Hearing: 10/09/2026Pronounced: 10/09/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeals have been filed by the assessee against two separate impugned orders passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, arising from the reassessment orders passed under section 147 of the Income-tax Act, 1961, for the assessment

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years 2013–14 and 2015–16. Since an identical jurisdictional issue arising from substantially similar facts is involved in both the appeals, they were heard together and are being disposed of by this consolidated order.

2.

At the outset, the learned counsel for the assessee pressed the jurisdictional ground challenging the validity of the reassessments on account of the failure of the Assessing Officer to dispose of the objections filed by the assessee against the reasons recorded for reopening by passing separate speaking orders before proceeding to frame the reassessments. For assessment year 2013–14, the said challenge has been raised in Ground No. 2, which reads as under:

“On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the validity of re-assessment order passed u/s 147, though the objections raised by the assessee on disputing the validity of notice u/s 148 had not been disposed by the AO on passing a separate disposal of objection order.”

For assessment year 2015–16, the corresponding challenge has been raised in Ground No. 4, which is identically worded.

3.

Brief facts relevant for adjudicating the aforesaid jurisdictional grounds are that, for both the assessment years, notices under section 148 were issued on 31.03.2021. Thereafter, the reasons recorded for reopening were communicated to the assessee along with notices dated

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15.07.2021 issued under section 143(2) read with section 147. For assessment year 2013–14, the reasons referred to alleged financial transactions aggregating to ₹5,70,77,676, which, inter alia, included transactions in the shares of M/s JRI Industries & Infrastructure Ltd. For assessment year 2015–16, the reasons referred to the sale of shares aggregating to ₹1,87,55,938 and the exempt long-term capital gain arising from transactions in the shares of the same company.

4.

Upon receipt of the recorded reasons, the assessee filed detailed objections/replies dated 02.11.2021 in both the assessment years, traversing the allegations forming the basis of the reopening and furnishing supporting documentary evidence. For assessment year 2013–14, the assessee explained the acquisition, subdivision and subsequent sale of the shares and also specifically disputed the existence of two of the alleged transactions, calling upon the Assessing Officer to furnish their underlying particulars. For assessment year 2015–16, the assessee explained the purchase and sale of 1,00,500 shares of M/s JRI Industries & Infrastructure Ltd. through the recognised stock exchange and furnished the corresponding bank statements and computation of income. The filing of these objections/replies is duly evidenced by the e-proceedings response acknowledgements generated by the Income-tax Department under Acknowledgement No. 778755601021121 for assessment year 2013–14 and Acknowledgement No.

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779780201021121 for assessment year 2015–16. Thus, the filing and receipt of the objections are established from the Department’s own electronic record.

5.

It is also an admitted position that the Assessing Officer did not dispose of the objections by passing any separate speaking order before proceeding to frame the reassessments. Indeed, the learned CIT(A) has expressly acknowledged this factual position in the impugned orders. However, the legal challenge was rejected on the reasoning that, although separate speaking orders had not been passed, the Assessing Officer had dealt with the objections in substance during the assessment proceedings and in the assessment orders and, therefore, the lapse was merely procedural. The relevant finding of the learned CIT(A) reads as under:

“With respect to the contention regarding non-disposal of objections, it is noted that although a separate speaking order disposing of objections was not passed, the A.O. has dealt with the objections in substance during the assessment proceedings and in the assessment order. The lapse, if any, is procedural in nature and does not invalidate the reassessment proceedings when the appellant was provided adequate opportunity of being heard. Further, it is observed that the assessment has been completed after issuing statutory notices u/s 142(1), and after considering submissions and material placed on record. Accordingly, violation of principles of natural justice is not established.

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In view of the above, the reassessment proceedings are held to be validly initiated and duly completed in accordance with law. Accordingly, Grounds No. 1 to 3 are dismissed.”

6.

Before us, the learned counsel submitted that the factual position having been expressly accepted by the learned CIT(A), the only issue which survives is the legal consequence of the failure of the Assessing Officer to dispose of the objections by separate speaking orders before proceeding with the reassessments. He submitted that the requirement prescribed by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [(2003) 259 ITR 19 (SC)] is a mandatory jurisdictional safeguard and cannot be substituted by a discussion of the objections in the terminal assessment order. According to him, the learned CIT(A) has erred in treating this jurisdictional infirmity as a mere procedural lapse. The learned Departmental Representative, on the other hand, relied upon the impugned orders and submitted that the explanations and supporting material furnished by the assessee had been duly considered by the Assessing Officer while framing the reassessments and, therefore, no prejudice had been caused to the assessee.

7.

We have heard the rival submissions and perused the relevant material placed on record. The short issue before us is whether, once the assessee has filed objections against the reasons recorded for reopening, the Assessing Officer can

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proceed to complete the reassessment without first disposing of those objections by a separate speaking order, merely because the objections have been dealt with in substance in the final assessment order. The procedure to be followed upon issuance of a notice under section 148 was authoritatively laid down by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (supra) in the following terms:

“When a notice under s. 148 of the IT 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 AO 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 AO 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 AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment.”

8.

The mandate is clear and admits of no ambiguity. Once objections are filed against the reasons recorded, the Assessing Officer is required first to adjudicate those objections by passing a speaking order and only thereafter can he proceed further with the reassessment. This is not an empty formality designed merely to ensure that the assessee’s explanation receives consideration at some stage of the proceedings. It regulates the sequence in which reassessment jurisdiction is to be exercised and provides an opportunity to the assessee, if aggrieved by the rejection of the objections, to pursue the remedy available in law before being subjected to a completed reassessment.

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Consequently, what the law requires to be done at an anterior stage cannot be regarded as duly performed through a discussion contained for the first time in the terminal assessment order.

9.

The above principle has been consistently applied by the Hon’ble jurisdictional High Court. In Allana Cold Storage Ltd. v. ITO [(2006) 287 ITR 1 (Bom)], the Hon’ble Bombay High Court held that where the assessee has filed objections to the reopening, it is incumbent upon the Assessing Officer to decide those objections separately before proceeding further with the reassessment. The relevant observations are:

“The law as laid down by the apex Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) is binding on this Court as well as on the authorities functioning under the statute. This being the position, one fails to understand as to why the first respondent did not decide the objections separately which he is duty-bound to decide. …………… That being so, the orders of assessment passed in all these four petitions are quashed and set aside.”

10.

Similarly, in CIT v. Trend Electronics [(2015) 379 ITR 456 (Bom)], the Hon’ble Bombay High Court explained that the recording of reasons, furnishing of the same to the assessee when sought and disposal of the objections by a speaking order form part of the jurisdictional requirements for invoking section 147. The relevant observations read as under:

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*“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. Thus in the absence of reasons being furnished, when sought for would make an order passed on reassessment bad in law. The recording of reasons (which has been done in this case) and furnishing of the same has to be strictly complied with as it is a jurisdictional issue …. The Assessing Officer disposes of these objections and if satisfied with the objections, then the impugned reopening notice under Section 148 of the Act is dropped/withdrawn. Otherwise it is proceeded with further. In issues such as this, i.e. where jurisdictional issue is involved, the same must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise.”

10.1 Thus, where compliance with a jurisdictional requirement is mandated, it cannot be inferred by implication or replaced by constructive disposal of the objections. Nor can the assessee’s participation in the proceedings or filing of submissions on the merits confer jurisdiction where the prescribed jurisdictional procedure has not been followed.

11.

In Bayer Material Science Pvt. Ltd. v. DCIT [(2016) 382 ITR 333 (Bom)], the Hon’ble Bombay High Court again struck down the assessment order passed without first disposing of the objections filed against the reopening. The relevant observations are:

“In the present facts, the draft assessment order was passed on 30-3-2015 without having disposed of the assessee’s objections

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to the reasons recorded in support of the impugned notice. The reasons were supplied to the assessee only on 19-3-2015 and the assessee had filed the objections to the same on 25-3-2015. The passing of the draft assessment order without having disposed of the objections is in defiance of the Supreme Court’s decision in GKN Driveshafts (India) Ltd. v. ITO [(2003) 259 ITR 19/(2002) 125 Taxman 963]. Thus, the draft assessment order dated 30-3- 2015 is not sustainable, being without jurisdiction. This for the reason that it has been passed without disposing of the objections filed by the assessee to the reasons recorded in support of the impugned notice. Accordingly, the draft assessment order dated 30-3-2015 is set aside.”

12.

The consequence of the failure to follow the mandate of GKN Driveshafts and whether the matter can thereafter be restored to the Assessing Officer was considered by the Hon’ble Bombay High Court in KSS Petron Pvt. Ltd. v. ACIT [Income Tax Appeal No. 224 of 2014, judgment dated 03.10.2016]. The Hon’ble High Court answered the issue in favour of the assessee after observing:

“We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening a notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/old matters.”

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13.

A similar view was adopted by the Hon’ble Bombay High Court in Fomento Resorts & Hotels Ltd. [Tax Appeal No. 63 of 2007]. After referring to the judgments in Bayer Material Science Pvt. Ltd. and KSS Petron Pvt. Ltd., the Hon’ble High Court observed:

“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.”

13.1 The Hon’ble High Court thereafter held that where the Assessing Officer purported to assume jurisdiction for reopening the assessment without first disposing of the assessee’s objections to the recorded reasons by passing a speaking order, such assumption of jurisdiction could not be sustained, and the substantial question of law was answered in favour of the assessee and against the Revenue.

14.

Applying the aforesaid principles to the facts before us, it is beyond dispute that the assessee filed her objections on 02.11.2021 and the filing thereof stands established by the respective electronic acknowledgements generated on the Department’s portal. The Assessing Officer proceeded to frame the reassessment orders without first adjudicating those objections through separate speaking orders. Indeed, the learned CIT(A) has expressly acknowledged this factual position but has sought to sustain the reassessments on the reasoning

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that the objections were dealt with “in substance” during the assessment proceedings and in the final assessment orders. Such reasoning cannot be sustained in law. Consideration of the assessee’s explanation while examining the substantive addition and adjudication of her objections to the very assumption of reassessment jurisdiction operate at two legally distinct stages. One cannot serve as a surrogate for the other.

15.

The requirement of a separate speaking order is intended to ensure that the objections to jurisdiction are independently examined and the decision thereon is communicated to the assessee before the reassessment is carried to its conclusion. If the objections are rejected for the first time in the assessment order itself, the prescribed sequence is reversed and the opportunity recognised in GKN Driveshafts is rendered entirely illusory. Issuance of subsequent statutory notices, consideration of evidence on merits, participation of the assessee in the reassessment proceedings or the grant of an opportunity of hearing cannot cure this defect. Equally, it is immaterial whether the assessee has demonstrated any further prejudice, because once the statute, as judicially interpreted, requires a jurisdictional safeguard to be observed in a particular manner, its breach constitutes the prejudice. Jurisdiction cannot be conferred by participation, acquiescence or a theory of substantial compliance.

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16.

We are, therefore, unable to endorse the finding of the learned CIT(A) that the admitted failure to pass separate speaking orders was merely procedural and stood cured because the objections were dealt with in substance in the assessment orders. This reasoning runs contrary to the binding principles laid down in GKN Driveshafts (India) Ltd., Allana Cold Storage Ltd., Trend Electronics, Bayer Material Science Pvt. Ltd., KSS Petron Pvt. Ltd. and Fomento Resorts & Hotels Ltd. The failure of the Assessing Officer to dispose of the assessee’s objections by separate speaking orders before proceeding to frame the reassessments constitutes a jurisdictional infirmity which vitiates the entire reassessment proceedings.

17.

Further, having regard to the specific ratio laid down by the Hon’ble jurisdictional High Court in KSS Petron Pvt. Ltd., the completed reassessments cannot be restored to the Assessing Officer merely to enable him to cure, after the event, a jurisdictional defect committed at the threshold. Accordingly, the reassessment orders passed under section 147 for assessment years 2013–14 and 2015–16 are quashed as being without jurisdiction, and the additions made pursuant thereto consequently do not survive.

18.

Since the assessee succeeds on this foundational jurisdictional ground, Ground No. 1 in both the appeals, the remaining grounds challenging the validity of the reopening on

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other legal grounds, and the grounds relating to the additions on merits have become academic and are, therefore, left open without adjudication.

19.

In the result, both the appeals filed by the assessee are allowed.

Order pronounced in the open Court on 10th September, 2026.

Sd/- Sd/- (MAKARAND VASANT (AMIT SHUKLA) MAHADEOKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 10/09/2026 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai

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