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Facts
The assessee filed an appeal against an order by the Ld.CIT(A) for AY 2012-13. The assessee raised additional grounds of appeal arguing that the reassessment proceedings were bad in law due to procedural violations by the AO, including non-disposal of objections and non-issuance of a notice under Section 143(2).
Held
The Tribunal held that the AO's failure to dispose of the assessee's objections before proceeding with the assessment and issuing notice u/s 142(1) constituted a breach of mandatory procedure, as laid down by the Supreme Court. Furthermore, the reasons for reopening were based on information pertaining to a different assessee (HUF), making the reopening invalid.
Key Issues
Whether the reassessment proceedings are bad in law due to the AO's failure to dispose of objections and the basis of reopening being incorrect.
Sections Cited
147, 148, 143(2), 142(1), 69A, 144
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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI RAHUL CHAUDHARY
Assessment Year : 2012-13 Haresh Nagindas Mehta, The Income Tax Officer, B/6, Samadhan Bldg, Ward-26(1)(7), L.T. Road, Mulund (E), vs. Kautilya Bhavan, Mumbai-400081. Mumbai-400051. PAN : AABPM4028K (Appellant) (Respondent) For Assessee : Ms. Neha Paranjpe For Revenue : Shri Surendra Mohan, Sr.DR Date of Hearing : 30-07-2025 Date of Pronouncement : 31-07-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : 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 28-02-2025, pertaining to Assessment Year (AY) 2012-13.
2. During the course of hearing, the Ld.AR submitted that the assessee has moved a prayer for admission of the following additional grounds of appeal: “
Reopening is bad in law:
1. The reassessment proceedings initiated by the AO and the assessment order passed pursuant to the same are bad in law and without jurisdiction as the Ld.A.O. has failed to follow the procedure as prescribed by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Limited vs. ITO [259 ITR 19].
The Ld.A.O. failed to pass the order disposing off the objections raised by the Appellant against the reasons recorded to issue a notice under section 148 of the Act. Hence, the entire assessment proceedings are bad in law as there is a violation of the procedure laid down by the Hon'ble Supreme Court. Non-issuance of the notice u/s143(2) of the Act 3. The notice under section 143(2) of the Act has never been issued and served to the Appellant before conducting the reassessment proceedings. The Issuance of the notice under section 143(2) of the Act is mandatory before initiating the assessment proceedings. Thus, in absence of the same, the assessment order is without jurisdiction and bad in law. The same may be quashed.
4. The Appellant craves leave to add, alter or amend any of the above grounds of appeal.”
3. It was submitted that these are purely legal grounds and the same may be admitted in light of the decision of the Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd., Vs., CIT [229 ITR 383] (SC). The Ld.DR has been heard. After hearing both the parties and considering the fact that the grounds are legal in nature, the same are hereby admitted.
Firstly, regarding the additional ground of appeal, our reference was drawn to the assessee‟s paper book and it was submitted that the notice u/s. 148 of the Act was issued by the AO on 31-03-2019. Thereafter, in response to the notice, the assessee filed his return of income on 09-05- 2019 and has sought reasons for reopening of the assessment which has provided by the AO vide his letter dt. 21-06-2019. It was submitted that on receipt of the reasons, the assessee filed his objections on 23-06-2019 and without disposing off the objections so raised by the assessee, the AO proceeded further and issued notice u/s. 142(1) of the Act, dt. 29-08-2019 and thereafter, the assessment proceedings were completed u/s. 144 r.w.s. 147 of the Act wherein an amount of Rs. 13,72,250/- was brought to tax u/s. 69A of the Act.
In this regard, our reference was drawn to the objections so raised wherein the assessee has submitted that in the reasons so recorded, the AO has stated that there are total credits of Rs. 13,72,250/- in the bank account of Haresh Nagindas Mehta (HUF) and, therefore, he has reason to believe that income chargeable to tax has escaped assessment in the hands of the assessee and accordingly, the notice was issued. In this regard, it was submitted that Haresh Nagindas Mehta and Haresh Nagindas Mehta (HUF) are two separate assessees and the information in respect of Haresh Nagindas Mehta (HUF) formed the basis for reopening and not in the case of the assessee and, therefore, there is no reason to believe that certain income has escaped assessment in the hands of the assessee. It was submitted that the objection goes to the root of the matter where the information pertain to some other assessee, whereas the reasons have been recorded in the case of the assessee and the notices have been issued to the assessee. It was submitted that non-disposal of the objections so raised by the assessee are in clear violation of mandatory prescribed procedure and in complete violation of the decision of the Hon‟ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO [2003] 259 ITR 19(SC).
It was further submitted that the Hon‟ble Bombay High Court in its recent decision in the case of Kesar Terminals & Infrastructure Ltd. vs. DCIT (2025) 171 taxmann.com 800 (Bombay) has held that where objections of the assessee against reopening of the assessment were never disposed of and a combined order disposing of the objections and making assessment was made since the assessee‟s objections were not disposed by way of separate order nor the assessee was granted any reasonable opportunity, such a procedure violates the principles of natural justice, fair play and the same deserves to be quashed. It was submitted that in the instant case, the facts are on a stronger footing as the objections so raised by the assessee have not been disposed off by the AO either separately or as part of assessment order. It was accordingly submitted that the order so passed by the AO deserve to be quashed on this ground itself and the assessee deservers necessary relief.
It was further submitted that in the case of Haresh Nagindas Mehta (HUF), the AO has reopened the case by recording identical reasons to believe that income has escaped assessment and has since passed the assessment order in the hands of the Haresh Nagindas Mehta (HUF) for the assessment year 2012-13. A copy of the same also been placed on the Paper Book at page Nos. 62 to 64. It was submitted that even on this ground where the assessment in the hands of the Haresh Nagindas Mehta (HUF) in respect of whom the information was in possession of the AO has already been initiated and completed, there is no basis to invoke the jurisdiction in the instant case wherein the assessee has been made liable for taxation. It was accordingly submitted that on this ground as well, the assessee deserves the necessary relief.
Per contra, the Ld.DR has been heard who has relied on the order passed by the AO as well as that of the Ld.CIT(A).
We have heard the rival contentions and perused the material available on record. It is an admitted fact that on receipt of the reasons recorded by the AO, the assessee has filed his objections before the AO against the reopening of his assessment. However, the said objections have not been disposed off and the AO has proceeded and issued notice u/s. 142(1) of the Act and, thereafter, the assessment was completed u/s. 144 r.w.s. 147 of the Act. We, therefore, find that there is clearly a breach of the mandatory procedure as so laid down by the Hon‟ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (supra) and in light of the same, the assessment order so passed by the AO deserves to be dismissed.
Further, we also take note of the fact that on identical reasons, the reopening has been initiated in the hands of the Haresh Nagindas Mehta (HUF) and the assessment has since been completed vide order passed u/s. 144 r.w.s. 147 of the Act, dt. 08-12-2019. On perusal of both the assessment orders, we find that it is not a situation where in one case, the assessment has been completed on protective basis and in another case on substantive basis, therefore, basis the same reasons specially where the information in the reasons so recorded and in possession of the AO does not belong to the assessee and there is no basis to hold that any income has escaped assessment in the hands of the assessee, the assessment order so passed by the AO deserve to be set-aside and is hereby set-aside.
Other grounds of appeals have become academic and the same are dismissed as infructious.