INCOME-TAX OFFICER, WARD-1, KARUR, KARUR vs. KARUR GOVINDARAJ RAAJESH KRISHNA, KARUR

आदेश / O R D E R PER ABY T. VARKEY, JM: ITA No.1403/Chny/2024 is an appeal preferred by the Revenue and Cross-objection (CO) filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 12.03.2024 for the Assessment Year (hereinafter in short "AY”) 2012-13 allowing the grounds of appeal

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 2 :: preferred by the assessee against re-opening of assessment u/s.147 of the Income Tax Act, 1961 (hereinafter in short "the Act”); and holding consequent re-assessment order passed by the AO dated 31.12.2019 as bad in law.

Heard learned counsel for the parties. Leave is granted. By the order under challenge, a Division Bench of the High Court at Delhi dismissed the writ petition filed by the appellant challenging the validity of notices issued under Sections 148 and 143(2) of the Income Tax Act, 1961. The High Court took the view that the appellant could have taken all the objections in its reply to the notices and that, at that stage, the writ petition was premature. Accordingly, the writ petition was dismissed on 31st January, 2001. Aggrieved by that order, the appellant is in appeal before us. Mr. M.L. Verma, learned senior counsel appearing for the appellant, submits that the impugned notices relate to seven assessment years; that during the pendency of these appeals, in respect of two assessment years, viz., 1995-96 and 1996-97, assessment has been completed against which appeals have been filed. Notices relating to the other five assessment years, viz., 1992-93, 1993-94, 1994-95, 1997-98 and 1998-99, are now the subject-matter of these appeals. 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 notice 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.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 3 :: Insofar as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the appellate authority to dispose of the same, expeditiously. With the above observations, the civil appeals are dismissed. No costs.

Annexure As per records, you have received Rs.4 Crores on account of sale proceedings of land to M/s Grasim Industries (At present known as Ultra Tech Cement), Ariyalur during the FY 2011-2012 while the cash receipt has not been shown in the Return of Income for the AY 2012-2013. Hence, the case has been reopened uls 147 of the Income-tax Act, 1961.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 4 ::

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 5 :: 7. According to the Ld. Counsel, in the present case, the AO failed to follow the binding direction of Hon’ble Apex Court (supra). In the present case, the AO issued notice u/s 148 on 28.03.2019 and pursuant to it, the assessee filed return of income on 24.04.2019 and along with it sought reasons recorded for reopening the assessment in terms of the decision of Hon’ble SC in G.K.N. Drive Shaft (supra) and the AO furnished the above reasons on 14.10.2019 [after six (6) months] and pursuant to that, on 24.12.2019, the assessee filed his objections against the impugned re- opening; and the AO without bothering to dispose of the objections, passed the re-assessment order on 31.12.2019, which action/omission on the part of the AO, according to Ld Counsel is in violation of the binding order of the Hon’ble Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) and thus vitiates the re-assessment order passed by the AO dated 31.03.2019. The Ld. Counsel pointed out in this context that the AO without disposing of the objections raised by the assessee on 24.12.2019, had intriguingly dealt with the objections (against the re-opening of assessment) in the body of re-assessment order dated 31.03.2019, which action of the AO, according to the Ld. Counsel was in gross- defiance to the binding direction of the Hon’ble Supreme Court (supra) and was an attempt to over-reach the order of Apex Court by non- compliance to the procedure stipulated therein. Such an impugned action of the AO, according to the Ld. Counsel, is against the spirit of the

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 6 :: directions of the Hon’ble Supreme Court in M/s. GKN Driveshafts (India) Ltd. (supra), wherein, the Hon’ble Supreme Court has clearly held that the assessee upon receipt of notice under Section 148, should file ‘return of income’ and if assessee seeks the ‘reasons for reopening the assessment’, then AO is bound to furnish a copy of the same, within reasonable time. However, it was pointed out by the Ld. Counsel that in this case assessee upon receiving notice under Section 148 dated 28.03.2019 promptly filed return of income on 24.04.2019 sought copy of the “reasons recorded by AO for reopening the assessment” in terms of the decision of the Hon’ble SC in G.K.N. Drive Shaft (supra), by letter dated 24.04.2019, which is reproduced as under: -

“Date: 24.04.2019 From K.G. Rajesh Krishna, S/o T. Govindaraj, No.5, AVS & AVR Colony, Chinnandan Koil Road, Karur – 639002. To The Income Tax Officer, Ward I (2), Karur. Sir, Sub: Request for submission of reason for re-assessment – regarding Ref: K.G. Raajesh Krishna / Pan: AHZPR3034M / Notice u/s.148 – dt.28.03.2019 By the above notice under section 148 of Income Tax Act 1961 dated 28.03.2019, you have mentioned that you have reasons to believe that the income liable for the assessment for AY 2012-13, in my case, has escaped assessment and it is proposed to re-assess the same for the assessment year under consideration. By the same

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 7 :: notice, you have requested me to file a return disclosing the income liable for the said assessment year. I respectfully submit that I have filed my return of income for the said assessment year 2012-13 vide acknowledgement number 466475180240419 on 24.04.2019 in response to your above notice. I further request you to submit the reason recorded for the re- opening the assessment. This request has been made in terms of the decision of the Apex Court in the case of “GKN Drive Shafts (India) Ltd. vs. Income Tax Officer and others” (2003) 259 ITR 19. Thanking you. Yours faithfully, (Signature)” 8. Thus assessee is noted to have sought copy of the reasons recorded for reopening of the assessment, which was given to assessee on 14.10.2019 (after six (6) months) and pursuant to that, on 24.12.2019, the assessee filed its objections against the impugned re-opening; and the AO without bothering to dispose of the objections, passed the re- assessment order on 31.12.2019, which action of AO cannot be countenanced. As per the Hon’ble Supreme Court direction, if the assessee seeks the reason to reopen, then he should give it within a reasonable time and upon receiving the reason, then if assessee raised an objection to the issuance of notice u/s 148 of the Act, the AO is bound to dispose of the same by passing a speaking order before proceeding with the assessment. However in this case, according to Ld Counsel, the AO has flouted the binding direction on two counts. One by delaying furnishing of reason and two by not disposing of the objections preferred by the assessee against reopening. Therefore, according to him, the impugned action of the AO is clearly an attempt to defeat the purpose of

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 8 :: such an exercise to be carried out by the AO as laid by the Hon’ble Supreme Court in M/s. GKN Driveshafts (India) Ltd., and also the decision of the various High Courts including the Hon’ble Madras High Court in the case of CIT v. Pentafour Software Employees' Welfare Foundation reported in [2019] 418 ITR 427 (Mad) and also in the case of CIT v. Janak Shantilal Mehta in Tax Case Appeal No.273 of 2020 order dated 16.12.2020, wherein, the Hon’ble Madras High Court held that the violation of the procedure laid down by the Hon’ble Supreme Court in the case of M/s. GKN Driveshafts (India) Ltd., would go to the root of the matter and thereby, affecting the jurisdiction of the AO to re-open the assessment itself. The Hon’ble Division Bench also repelled the Revenue’s contention that even if objections weren’t disposed off by the AO that would tantamount to only a procedural error. The Ld. Counsel also fairly brought to our notice that there is a decision of the Hon’ble Madras High Court in the case of Home Finders Housing Ltd. v. ITO (2018) 404 ITR 611 (Mad-HC) order dated 25.04.2018, wherein the Hon’ble Madras High Court was of the view that non-compliance of the procedure indicated in the case of M/s. GKN Driveshafts (India) Ltd., was only an irregularity which could be cured by remitting the matter to the authority. The Ld. Counsel further pointed out that the Hon’ble Madras High Court in Home Finders Housing Ltd. (supra), noted that the assessee in that case at no point of time requested the AO to pass a speaking order disposing off the

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 9 :: objections (refer Para No.12). However, in the present case, the Ld. Counsel pointed out that the assessee had specifically requested the AO to drop the proposal to reopen after considering the detailed objections filed by assessee, which fact we find from perusal of Page No.15 to 17 of the Paper Book. Thus, according to the Ld. Counsel, it can be noted that the decision of the Hon’ble Madras High Court in the case of Home Finders Housing Ltd. (order dated 25.04.2018), is distinguishable on the facts and not applicable to the present case, whereas, the Hon’ble Madras High Court decision in the case of Pentafour Software Employees' Welfare Foundation (order dated 05.08.2019) and Janak Shanthilal Mehta (order dated 16.12.2020) are the latest decisions, wherein, it was has held that non-compliance with the binding directions of the Hon’ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd.(supra), would vitiate the re-opening and consequent framing of reassessment order. Therefore, the Ld. Counsel prayed that on this ground itself the re-opening/re- assessment order passed by the AO dated 31.12.2019 is bad in law and therefore, has been rightly quashed by the Ld CIT(A), which action doesn’t require any interference from our part.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 10 :: assessee on 28.03.2019. Pursuant to which, the assessee filed its return of income on 24.04.2019 and requested the AO for copy of the reasons recorded for re-opening of assessment vide letter dated 24.04.2019. The AO furnished a copy of the reasons recorded on 25.10.2019 (refer Page Nos.10-11 of Paper Book); and the assessee objected to the re-opening by letter dated 24.12.2019 (refer Page No.15-17 of Paper Book); and it is noted that the assessee while objecting to the action of AO to re-open the assessment had prayed to the AO to consider the objections and drop the proposed re-opening of assessment.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 11 :: Hon’ble jurisdictional High Court against the re-opening of assessment. It is noted that the Hon’ble Bombay High Court in the case of Bharat Jayantilal Patel (supra) had an occasion to examine such an omission on the part of the AO who failed to give four (4) weeks time (before passing re-assessment order) as directed in Asian Paints Ltd. (supra) and the Hon’ble Bombay High Court was pleased to quash the re-opening/re- assessment order. In this context, it would be gainful to refer to the decision the Hon’ble Bombay High Court in the case of Asian Paints Ltd., wherein, their Lordships held as under:-

The reasons recorded would be referred a little later.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 12 :: "21. For the first contention of Mr.Pardiwalla to be considered, it is material to note that on 11th September, 2014 the petitioner addressed a detailed communication setting out his objections to the recorded reasons. These objections which are elaborate run into about 9 pages. Thereafter, the petitioner pointed out on 8th December, 2014 that he was required to attend the office of the Deputy Commissioner of Income Tax on 9th December, 2014. He pointed out as to how the reasons were supplied and how they have been dealt with and objected to by him. The petitioner specifically requested the assessing officer not to proceed with the scheduled hearing till the objections raised to the reasons have been disposed of by a speaking order. 22. On 5th March, 2015 a communication was addressed to the petitioner which purported to reject his objections. The objections have not been referred to in detail but what has been stated is that the case has not been reopened merely on the basis of a change of opinion. The fact that came to light during the assessment proceedings for assessment year 2011-12 are the basis for reopening the case pertaining to the assessment year 2007-08. Since the petitioner is stated to have filed a new return of income, he was called upon to attend the office with the information required on 13th March, 2015. The petitioner addressed a letter on 12th March, 2015 and pointed out that the communication dated 5th March, 2015 was received on 12th March, 2015, but no speaking order has been passed rejecting the objections and which is required by the law laid down in the case of GKN Driveshaft (India) Ltd. V/s. Income Tax Officer reported in (2003) 259 ITR 19 and Asian Paints Ltd. V/s. Deputy Commissioner of Income Tax & Anr. reported in (2009) 308 ITR 195 (Bom). The petitioner specifically invited the attention of the assessing officer to the directions in the case of Asian Paints (supra) and to the effect that if the assessing officer does not accept the objections to the reopening of the assessment or the reasons recorded, he shall not proceed further in the matter within a period of four weeks from the date of receipt or service of the said order on the assessee. Since the order dated 5th March, 2015 is stated to be rejecting the objections, then, the assessee prayed that for a period of four weeks from that order, no steps should be taken. 23. However, as has been rightly contended by Mr. Pardiwalla, ignoring this mandate in the decisions of this Court and the Hon'ble Supreme Court which has been further reiterated in M/s.Aroni Commercials Ltd. (supra), the impugned assessment order has been passed, that is dated 27th March, 2015. That is clearly within the period of four weeks from 5th March, 2015. The first contention of Mr.Pardiwalla, therefore, deserves acceptance as nothing contrary to the same has been placed before us”. 12. Thus, we note in the light of the above discussions and the Hon’ble

Madras High Court (Division Bench) decision on 16.12.2020 in the case of

CIT v. Janak Shanthilal Mehta (supra) has clearly held that omission on

the part of the AO to follow the binding directions of the Hon’ble Supreme

Court in the case of M/s.GKN Driveshafts (India) Ltd., would vitiate the

re-opening of assessment and consequent re-assessment order passed

u/s.147/143(3) of the Act has to be quashed. For completeness, we note

the Hon’ble Madras High Court in the case of Home Finders Housing

Ltd.(supra), has held that non-compliance of the directions of the Hon’ble

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 13 :: Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd., would tantamount to irregularity and in such cases, the re-assessment be restored back to the file of the AO to pass speaking order on the objections raised by the assessee. Nevertheless, we find that the order in the case of Home Finders Housing Ltd., (supra) was a decision rendered earlier to the decision held by the Hon’ble Division Bench in CIT v. Janak Shanthilal Mehta (supra) and in such an event i.e. when there are two conflicting views between the order of Hon’ble High Court of co-equal strength (of the same Court) then, later pronouncement of the Hon’ble Court is binding on us as held by the Hon’ble Delhi High Court in the case of Bhika Ram & Ors. v. UOI reported in [1999] 238 ITR 113 (Delhi-HC) though in the context of two views expressed by the Hon’ble Supreme Court on an issue, wherein, it was held that the later view of the Hon’ble Supreme Court Bench of equal strength will prevail over the earlier view has held as under:-

The petitioners seek a direction to the Land Acquisition Collector to refund the amount of tax deducted from the amount of interest awarded to them under Sections 28 and 34 of the Land Acquisition Act, 1894. The tax was deducted at source consistently with the obligation of the Land Acquisition Collector created by Section 194A of the Income-tax Act, 1961. According to the petitioners, the amount of interest being not liable to tax, the Land Acquisition Collector was not justified in deducting the tax at source. The issue is no more res Integra in view of same pronouncement of the Supreme Court in Bikram Singh v. Land Acquisition Collector [1997] 224 ITR 551, wherein their Lordships have held that such an amount of interest on delayed payment of compensation determined under the Land Acquisition Act was a revenue receipt exigible to income-tax under Section 4 of the Act. However, the claimant would be entitled to spread over the income for the period for which payment came to be made, so as to compute the income for assessing tax for the relevant accounting year. In view of the law so laid down the petitioner is not entitled to the relief prayed for.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 14 :: However, learned counsel for the petitioner relied on Satinder Singh v. Umrao Singh, , to submit that compensation would not be treated as income. Learned counsel further submitted that the decision of the Supreme Court in Satinder Singh's case was not brought to the notice of the Supreme Court when Bikram Singh's case [1997] 224 ITR 551, was decided. It is also submitted that the reasoning on which their Lordships have proceeded in the case of Satinder Singh, , was also not argued before the Supreme Court in Bikram Singh's case [1997] 224 ITR 551. Not only are we not satisfied about the correctness of the submission so made, we are also of the opinion that such a plea is not open for consideration by us and Bikram Singh's case [1997] 224 ITR 551 (SC), being a later pronouncement of the Supreme Court by a Bench of co-equal strength, it is binding on us. The senior standing counsel for the Revenue has pointed out that the definition of interest has undergone a change after the pronouncement of the Supreme Court in the case of Satinder Singh, . He also submitted that in Satinder Singh's case , the interest paid was by way of compensation while in the case at hand interest has been allowed as interest on the amount of compensation in accordance with the statutory provisions. The petitioner is at liberty to have the income on account of interest assessed by seeking spread over consistently with the law laid down by the Supreme Court in the case of Bikram Singh [1997] 224 ITR 551. So far as the present petition is concerned, we hold the petitioner not entitled to any relief. The petition is dismissed. No order as to costs. 13. In the light of the above discussion, we are of the view that the assessee succeeds on the legal issue that the AO failed to comply with the binding directions of the Hon’ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd., before framing the reassessment order. The AO is noted to have erred on two counts. First by delaying furnishing of reason [i.e. more than six months, which is fatal in this case] and second by not disposing of the objections preferred by the assessee against reopening. Therefore, the impugned action of the AO is seen to be an attempt to defeat the purpose of such an exercise to be carried out by the AO and fly on the face of the binding decision of the Hon’ble Supreme Court in M/s. GKN Driveshafts (India) Ltd. The AO by rejecting objections of the assessee against re-opening by merely doing so while passing the

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 15 :: re-assessment order, wouldn’t come to the rescue of the Revenue because such an action of AO is noted to be in gross-defiance to the binding order of the Hon’ble Supreme Court; and the AO couldn’t have over reached the order of the Hon’ble Supreme Court by disposing off the objections while framing the re-assessment order, which defeats the purpose of such an exercise as discussed supra. Therefore, we hold that the omission on the part of the AO to comply with the directions of the Hon’ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd., strikes at the root of the jurisdiction of the AO to re-open the assessment and consequent passing of reassessment order dated 31.12.2019 is held to be non-est in the in the eyes of law and all other grounds are academic and not adjudicated. Therefore, on the legal issue as discussed, we uphold the impugned action of Ld CIT(A) allowing the challenge against reopening of the assessment and not on the reason given by the Ld CIT(A) to allow the appeal of assessee, since we find that AO gave copy of reason belatedly on 25.10.2019, though requested by assessee on 24.04.2019. Hence, we refrain to interfere with the impugned action of Ld CIT(A) and uphold it.

ITA No.1403/Chny/2024 & CO No.19/Chny/2024 (AY 2012-13) Karur Govindaraj Raajesh Krishna :: 16 :: 15. In the result, appeals & CO filed by the Revenue and assessee respectively are dismissed.

Order pronounced on the 27th day of May-2026, in Chennai. Sd/- Sd/- (पद्मावती .एस) (एबी टी. वर्की) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सदस्य/ACCOUNTANT MEMBER न्यानयक सदस्य/JUDICIAL MEMBER चेन्नई/Chennai, ददनांक/Dated: 27th May-2026. KB आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलधर्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. नवभधगीयप्रनिनिनर्/DR 5. गधर्ाफधईल/GF