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Facts
The assessee's case was reopened under Section 147/148 of the Income Tax Act, 1961, based on information about accommodation entries received from a third-party. The Assessing Officer (AO) added Rs. 25,00,000/- to the assessee's income under Section 68. The assessee contended that the reasons for reopening were not fully provided.
Held
The Tribunal held that the partial furnishing of reasons for reopening the assessment is fatal to the assessment order. The assessee's argument that complete reasons were not provided was accepted, leading to the quashing of the assessment order.
Key Issues
Whether the partial furnishing of reasons for reopening of assessment makes the assessment order void ab-initio.
Sections Cited
147, 148, 143(1), 142(1), 133(6), 68, 131, 151, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Present for: Assessee by : Shri Ramesh Malpani, Ld. A.R. Revenue by : Shri Kiran Unavekar, Ld. Sr. D.R. Date of Hearing : 16 . 01 .2025 Date of Pronouncement : 28 . 03 .2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 21.08.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short „the Act‟) for the A.Y. 2012-13.
M/s. Ambaji Avenues Private Limited 2. In the instant case, the Assessee by filing its return of income on dated 28.09.2012 had declared its total income at Rs. “Nil”, which was processed u/s 143(1) of the Act, accepting the return of income. Subsequently, the case of the Assessee was reopened u/s 147 of the Act by recording the reasons for reopening and issuing the notice dated 30.03.2018 u/s 148 of the Act by the ITO, Ward 1(1)(1), Surat. Subsequently, the case was transferred to Income Tax Officer, 9(1)(2), Mumbai, who issued statutory notices specifically dated 10.07.2018 u/s 142(1) as well, however, the same was returned by the Postal Authority with the remarks “no such address is found”. Thereafter, various other statutory notices were issued to the Assessee, however, the Assessee made no reply. In the meantime, a notice u/s 133(6) of the Act on dated 27.06.2018 was issued to Union Bank of India, Bank: Surat Branch, requesting to provide bank statements of the Assessee for the period from 01.04.2011 to 31.03.2018. The Union Bank of India vide its reply dated 05.07.2018 furnished copy of the bank statements for the aforesaid period. On perusal of the bank statements, it was observed by the Assessing Officer (AO) that on dated 20.03.2012, an amount of Rs.25,00,000/- has been credited to the Assessee‟s bank account through RTGS. Thereafter, in response to the notice u/s 148 of the Act, the Assessee filed its return of income on dated 21.04.2018 declaring total income at Rs. ”Nil” and also sent a letter dated 25.09.2018 to the AO requesting to provide copy of the reasons recorded u/s 148 of the Act. As per assessment order, a letter dated 28.09.2018 was sent to the Assessee along with the reasons recorded u/s 148 of the Act, which reads as under:
“8. It is evident from the details submitted by the AO that the appellant was very much aware of the reasons for reopening of the assessment and hence, they have furnished such reply to the AO vide their reply dated 29-11-2018 by claiming that the receipt M/s. Ambaji Avenues Private Limited of share application money with the premium of Rs.25,00,000/- was genuine. In spite of being aware of the reasons for reopening. the appellant company raised such infructuous grounds. This action of the appellant is not acceptable”
3. Thereafter, another notice was sent to the Assessee, however, the Assessee made no compliance. Consequently, in the constrained circumstances, the AO ultimately made the addition of Rs. 25,00,000/- u/s 68 of the Act by observing and holding as under:
“8. The reason recorded for reopening the assessment for the AY 2012-13 was provided vide this office letter dated 28.9.2018. Information was received from the office of the DDIT(Inv) Unit 4(2), Kolkata vide letter bearing No DDIT(Inv)/U 4(2)/KOL/S.A. securities Pvt Ltd/2017-18/6753 dated 14.11.2017, it was found that M/s Harsharatna Finance & Investments P Ltd is one of such concern which is engaged in the business of providing accommodation entries and controlled by entry operator Shri Manohar Lala Nangalia. On the basis of fund/cash trail prepared, it is found that the assessee company M/s Ambaji Avenues Pvt Ltd is also one such beneficiary of obtaining accommodation entry from M/s Harsharatna Finance & Investments P Ltd o the tune of Rs 25,00,000/- during the FY 2011-12 relevant to A Y 2012-13, this is nothing but unaccounted income of the assessee company brought back into its books of accounts through these paper/shell company. In view of the above facts/material available on record and after analyzing the same, it can be concluded that the fund received by you in the year under consideration from M/s Harsharatna Finance & Investments P Ltd is nothing but in the nature of accommodation entry. This entry is nothing but your own unaccounted income in the garb of a bank entry and you have channelized its own unaccounted funds through this tained concem. Therefore, I, propose to make an addition of Rs 25,00,00/- u/s 68 of the IT Act. Therefore, you are requested to furnish your reply in writing on the next date of hearing. A notice u/s 142(1) of the IT Act is enclosed herewith for your compliance."
M/s. Ambaji Avenues Private Limited 9. However, in response to the said show cause notice, no reply was received from the assessee. Therefore, another show cause notice dated 26.10.2018 was issued to the assessee and also the said show cause notice was duly sent through the e-mail address of the assessee on 11.6.2018 However, in response to these show cause notices, there was no reply from the assessee. Hence, a final opportunity was provided to the assessee vide another show cause letter dated 15.11.2018 requiring the assessee to furnish its reply on or before 26.11.2018. However, in response to this show cause notice also no reply was received from the assessee till date.
In view of the facts it is clearly established beyond doubt that M/s Harsharatna Finance & Investments P Ltd is one of such concern which is engaged in the business of providing accommodation entries and controlled by entry operator Shri Manohar Lala Nangalia. On the basis of fund/cash trail prepared, it is found that the assessee company M/s Ambaji Avenues Pvt. Ltd is also one such beneficiary of obtaining accommodation entry from M/s Harsharatna Finance & Investments P Ltd to the tune of Rs 25,00,000/- during the FY 2011-12 relevant to A Y 2012-13, this is nothing but unaccounted income of the assessee company brought back into its books of accounts through these paper/shell company.
In view of the above facts/material available on record and after analyzing the same, it can be concluded that the fund received by you in the year under consideration from M/s Harsharatna Finance & Investments P Ltd is nothing but in the nature of accommodation entry. This entry is nothing but your own unaccounted income in the garb of a bank entry and you have channelized its own unaccounted funds through this tained concern. Therefore, an addition of Rs 25,00,000/- u/s 68 of the IT Act 1961.”
4. The Assessee, being aggrieved, challenged the reopening of the case u/s 147/148 of the Act, as well as the addition on merit by filing first appeal before the Ld. Commissioner, who not only affirmed the addition on merit but also the reopening of the case u/s 147/148 of the Act as well, and also dismissed the specific ground raised by the Assessee to the effect that the assessment has been completed without providing actual copy of “reasons recorded” to the Assessee.
5. The Assessee, being aggrieved, challenged the reopening of the case and the addition on merit, by filing second appeal before this Court. The Assessee, at the outset, has raised the issue that the reasons recorded for the reopening of the case u/s 147 of the Act, were not provided to the Assessee, as mentioned by the AO in para 2 of the assessment order (pages 1-3). The Assessee further submitted that the Assessee came to know about the reasons recorded only through the assessment order dated 27.11.2018, but not prior to that and therefore in view of the judgments passed by the Hon‟ble Jurisdictional High Court in the case of CIT vs. Videsh Sanchar Nigam Ltd. 340 ITR 66 (Bombay) and CIT vs. Fomento Resort & Hotel Ltd. (ITA No.71 of 2006), the reopening of the assessment and in pursuance thereof the assessment order, is liable to be set aside being void ab-initio.
On the contrary, the Ld. D.R. refuted the claim of the Assessee, by drawing attention of this court to the para no.5 of the assessment order, wherein it is specifically recorded by the AO that a letter dated 28.09.2018 was sent to the Assessee along with reasons recorded u/s 148 of the Act.
Heard the parties and perused the material available on record. In the instant case, the case of the Assessee was initially reopened u/s 147/148 of the Act, by issuing notice dated 30.03.2018 u/s 148 of the ACT by the ITO, Ward 1(1)(1), Surat. The Assessee, in response to the said notice, filed its return of income on dated 21.04.2018 and intimated the same to the ITBA portal on dated 24.04.2018. Thereafter, the case of the Assessee was transferred to the AO/ITO ward 9(1)(2), who issued notice u/s 142(1) of the Act, in response to the same, the Assessee vide its reply dated 04.09.2018 intimated the AO that the Assessee has already filed its return of income on dated 21.04.2018 in response M/s. Ambaji Avenues Private Limited to the notice dated 30.03.2018 u/s 148 of the Act and enclosed the copy of the same. The Assessee further requested the AO to provide the copies of the reasons recorded u/s 147/148 of the Act. Thereafter, on 19.09.2018, another show cause notice was issued by the AO to the Assessee, by mentioning the fact that the case of the Assessee for the A.Y.2011-12 was reopened by issuing the notice dated 30.03.2018 u/s 148 of the Act, however, in response to the same, the Assessee filed no return of income.
7. The Assessee vide its reply dated 25.09.2018 on the ITBA portal replied as under:
We are in receipt of show cause notice dated 19/09/2018 from your honour. We submit that vide our e-Proceeding Response submission dated 04/09/2018 we had requested your honour to provide copies of reasons recorded for re- opening our case u/s 147/148 of the Act. However, still the reasons have not been provided to us. We have to file the objections against re-assessment proceedings. We, therefore, request your honour to kindly provide us copies of reason recorded for re-opening our case u/s 147/148 of the Act. Further, we request your honour to kindly adjourn the case till filing and disposal of objection.
8. Thereafter, vide show cause notice dated 26.10.2018, the AO requested the Assessee to furnish its reply in writing and also intimated that the reasons recorded for reopening the assessment for the A.Y. 2012-13 were provided vide office letter dated 28.09.2018, which read as under:
“The reason recorded for reopening the assessment for the AY 2012-13 was provided vide this office letter dated 28.9.2018. Information was received from the office of the DDIT (Inv) Unit 4(2), Kolkata vide letter bearing No DDIT (Inv)/U 4(2)/KOL/S.A. securities Pvt Ltd/2017- 18/6753 dated 14.11.2017, it was found that M/s Harsharatma Finance & Investments P Ltd is one of such concern which is engaged in the business of providing accommodation entries and controlled by entry operator Shin Mancihan Lala Nangalia. On the basis of fund/cash trail prepared, it is found M/s. Ambaji Avenues Private Limited that the assessee company M/s Ambaji Avenues Pvt Ltd is also one such beneficiary of obtaining accommodation entry from M/s. Harsharatna Finance & Investments P. Ltd. to the tune of Rs.25,00,000/- during the F.Y. 2011-12 relevant to AY 2012-13, this is nothing but unaccounted income of the assessee company brought back into its books of accounts through these paper/shell company. In view of the above facts/material available on record and after analyzing the same, it can be concluded that the fund received by you in the year under consideration from M/s Harsharatna Finance & Investments Ltd is nothing but in the nature of accommodation entry. This entry is nothing but your own unaccounted income in the garb of a bank entry and you have channelized its own unaccounted funds through this tained concern. Therefore, I, propose to make an addition of Rs 25,00.00/- u/s 68 of the IT Act. Therefore, you are requested to furnish your reply in writing on the next date of hearing. A notice u/s 142(1) of the IT Act is enclosed herewith for your compliance”
9. Thereafter the AO vide letter dated 26.10.2018 issued final show cause notice to the Assessee, in response to which the Assessee vide email dated 26.11.2018 furnished its reply along with documentary evidence.
10. Thereafter, the AO considering the case of the Assessee, ultimately made the addition of Rs.25,00,000/- by passing the assessment order.
11. The Assessee has claimed and demonstrated that vide letter dated 28.09.2018, the AO intimated the following reasons for reopening:
“The reason recorded for reopening the assessment for the AY 2012-13 was provided vide this office letter dated 28.9.2018. Information was received from the office of the DDIT (Inv) Unit 4(2), Kolkata vide letter bearing No DDIT (Inv)/U 4(2)/KOL/S.A. securities Pvt Ltd/2017- 18/6753 dated 14.11.2017, it was found that M/s Harsharatma Finance & Investments P Ltd is one of such concern which is engaged in the business of providing accommodation entries and controlled by entry operator Shin Mancihan Lala Nangalia. On the basis of fund/cash trail prepared, it is found that the assessee company M/s Ambaji Avenues Pvt Ltd is also one such M/s. Ambaji Avenues Private Limited beneficiary of obtaining accommodation entry from M/s. Harsharatna Finance & Investments P. Ltd. to the tune of Rs.25,00,000/- during the F.Y. 2011-12 relevant to AY 2012-13, this is nothing but unaccounted income of the assessee company brought back into its books of accounts through these paper/shell company. In view of the above facts/material available on record and after analyzing the same, it can be concluded that the fund received by you in the year under consideration from M/s Harsharatna Finance & Investments Ltd is nothing but in the nature of accommodation entry. This entry is nothing but your own unaccounted income in the garb of a bank entry and you have channelized its own unaccounted funds through this tained concern. Therefore, I, propose to make an addition of Rs 25,00.00/- u/s 68 of the IT Act. Therefore, you are requested to furnish your reply in writing on the next date of hearing. A notice u/s 142(1) of the IT Act is enclosed herewith for your compliance”
Whereas the reasons recorded for reopening of the assessment as reproduced in the assessment order, read as under: “2. In this case, information has been received in this office from the DDIT(Inv), Unit 42 Kolkata vide letter bearing No DDIT (Inv)/U 4(2)/KOL/S.A. Securities Pvt Ltd/2017-18/6753 dated 14.11.2017 in relation to the above mentioned assessee. As per the information, certain enquiries related to movement of huge funds without any economic rationale in the bank accounts were made by the Investigation Wing, Kolkata in the case of M/s Sansakar Business Pvt Ltd., M/z Zenstar Business Securities Pvt Ltd, M/s S A Securities P Ltd and M/s Wipro Suppliers P Ltd. From the database available with the department, it was found that all the six companies are controlled and managed by a well known entry operator of Kolkata Shri Manohar Lal Nangalia and that all the transactions carried through bank accounts of the above mentioned companies are interlinked. On analysis of bank statements of the above concerns and 268 intermediary/beneficiary concerns all maintained with UCO Bank, 60 cash deposit bank accounts were identified. 2.1. Summons u/s.131 of the Act could not be served on these concerns. All concerns are related/interlinked and controlled by entry operator Manohar Lal Nangalia and engaged in the business of providing accommodation entries in the form of bogus share capital/share premium, pre-arranged bogus LTCG/STCG and unsecured loan etc. to various concerns in lieu of commission. On the basis of statement of Shri Manohar Lal Nagalia before the Directorate of Investigation Wing (Kolkata) and various other persons who happen to be dummy Directors in M/s. Ambaji Avenues Private Limited various concerns, it is evident that these were mere paper/shell companies controlled by Shri Manohar Lal Nangalia. Out of the these concerns in whose cases enquiry was conducted by Investigation Wing, Kolkata, it is found that M/s. Harsharatna Finance & Investments Pvt Ltd. is one of such concern which is engaged in the business of providing accommodation entries and controlled by entry operator Shri Manohar Lal Nangalia. Investigation Wing prepared a trail of flow of cash/funds and identified 134 ultimate beneficiaries. On the basis of fund/cash trail prepared by Investigation Wing Kolkata, it is found that the assessee company M/s. Ambaji Avenues Pvt Ltd is also of the such beneficiary of obtaining accommodation entry from M/s. Harsharatna Finance & Investments Pvt Ltd to the tune of Rs. 25,00,000/- during the F.Y. 2011-12, relevant A.Y.2012-13. This is nothing but unaccounted income of the assessee company brought back into its books of accounts through these paper/shell company.
On the basis of above information, after obtaining prior approval from the competent authority notice u/s. 133(6) of the Act was issued to the assessee company on 05.03.2018 calling for Audit report and ledger of M/s. Harsharatna Finance & Investments P.Ltd for the relevant period. However, no reply was received from the assessee company. On perusal of details available on records, it is gathered that the assessee company has received accommodation entry of Rs.25,00,000/- from the MUM alleged concern M/s. Harsharatna Finance & Investments P.Ltd. On basis of Information received as above, it is clear that the assessee company has obtained entry of Rs. 25,00,000/- from a concern, controlled and managed by an entry operator Shri Manohar Lal Nangaliya.
The information/investigation report so received is perused carefully. In view of above facts/material available on records and after analyzing the same, it can be concluded that the fund received by the assessee company in the year under consideration from M/s. Harsharatna Finance & Investments P.Ltd is nothing but in the nature of accommodation entry. This entry is nothing but the assessee's own unaccounted income in the garb of a banking entry and the assessee has channelized its own unaccounted funds through this tainted concern. Therefore, I have reason to believe that income of the assessee company to the extent of Rs.25,00,000/- has escaped assessed for A. Y.2012-13 within the meaning of section 147 of the I.T. Act.
In this case, a return of income was filed for the year under consideration but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to M/s. Ambaji Avenues Private Limited initiate proceedings u/s. 147 is reasons to believe which has been recorded above. (refer paragraphs 2 to 4). It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s.2(40) of the Act was made and the return of income was only processed u/s. 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s.148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.”
The Assessee further claimed that from the letter dated 28.09.2018 i.e. notice u/s 143(2) of the Act by which the AO has claimed that the copy of the reasons recorded were provided to the Assessee, goes to show that the complete reasons for reopening of the case were not provided to the Assessee. The Assessee further by drawing the attention of this Court to e-proceedings and demonstrated that in spite of making clear cut allegations, the Revenue Department has failed to provide the copy of complete reasons, as claimed along with notice/letter dated 28.09.2018 u/s 143(2) of the Act.
This Court has given thoughtful consideration to the submissions of the parties and facts and documents demonstrated by parties. Admittedly, the reasons intimated vide letter dated 28.09.2018 and the reasons recorded as reproduced in para 2 of the assessment order are not exactly same, as the reasons intimated to the Assessee were incomplete, as in the reasons intimated there is no allegation against the Assessee for failure of the Assessee for escapement of any income chargeable to tax etc. and therefore the AO had reason to believe that income of the M/s. Ambaji Avenues Private Limited Assessee company to the extent of Rs.25,00,000/- has escaped assessed for A. Y.2012-13 within the meaning of section 147 of the I.T. Act and therefore following question emerge:
“Whether partial furnishing of reasons for reopening to the Assessee, would be fatal to the Assessment Order and/or Assessment order is liable to be quashed”.
This Court observe that Hon‟ble Jurisdictional High Court in the case of PCIT vs. Shodiman Investment (P) Ltd. (2020) 422 ITR 337 (Bombay) has also dealt with the identical issue wherein complete reasons for reopening were not provided to the assessee and the Hon‟ble High Court held that in fact, partial furnishing of reasons will also necessarily meet the same fate i.e. render the assessment order on reopening notice bad. For ready reference and completeness, the concluding part of the judgment on the issue under consideration is reproduced herein below:
“7. Being aggrieved, the respondent filed a further appeal to the Tribunal. The impugned order of the Tribunal records the fact that it found that the reasons as communicated to the respondent, was not complete. Therefore, it called upon the Revenue to file complete reasons recorded by the AO, while issuing the notice dt. 30th March. 2010 for reopening the assessment. The complete reasons as recorded, read as under: "Intimation regarding reopening the assessment under s. 147 of the IT Act, 1961 has been received in this office on 29th March, 2010 from Dy. Director of IT (Inv.). Unit 1(4), Mumbai. It was intimated that search action was conducted under s. 132 of IT Act 1961 on 25th Nov., 2009. In the case of Mahasagar Securities (P) Ltd., where it is found suspicious transaction taken place in the bank account of the company and its related company. The copy of said letter which is self-explanatory which is forwarded to Your Honour. From verification of blue book, it is found that there is no such Assessee is assessed in his charge. Similarly, no PAN is furnished. However, the Assessee has jurisdiction in this charge and the action is going by bar by its of limitation of time.
I have reason to believe that there is escapement of the income within meaning of under s. 147 of the IT Act, 1961. As per proviso to s. 151(2) of the IT Act, no notice under s. 148 issued by the AO below the rank of the Jt. CIT after the expiry of 4 years from the end of relevant assessment year unless the JL. CIT is satisfied on the assessee recorded by the AO that it is fit case for the issue of such notice. In view of the above, sanction of issue of notice under s. 148 of the IT Act, 1961 for asst. yr. 2003-04 may be accorded if deemed fit." On the basis of the above reasons as recorded, the impugned order of the Tribunal found that the reasons proceed on the basis that there was no Assessee such as respondent in its charge. Nevertheless, the reopening notice was issued to the respondent- Assessee. It further holds that the reasons as recorded did not indicate any application of mind on the part of the AO to the information received from the Dy. Director of IT (Investigation). It observes that the reason as recorded only records that intimation received from the Dy. Director of IT (Investigation) only mentions that the Mahasagar Securities (P) Ltd.. was engaged in suspicious transactions. However, there is no further indication as to how the respondent-assessee could be linked to the activity of Mahasagar Securities (P) Ltd. (supra) which has led to escapement of income. Thus, relying upon the decision of this Court in Raja Bahadur Motilal (P) Ltd. vs. K.R. Vishwanathan, ITO & Anr. (1990) 82 CTR (Bom) 381: (1990) 183 ITR 80 (Bom) and the decision of the Delhi High Court in the case of CIT vs. SFIL Stock Broking Ltd. (2010) 233 CTR (Del) 69: (2010) 41 DTR (Del) 98: (2010) 325 ITR 285 (Del), the impugned order dt. 12th Dec., 2014 allowed the respondent-assessee's appeal.
Mr. Mohanty, learned counsel for the Revenue, submits that in view of the apex Court's decision in Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30: (2007) 291 ITR 500 (SC) is entitled to reopen an assessment for whatever reason. In particular, he places reliance upon the following sentence in para 17 of the above decision i.e., 'In other words, if the AO for whatever reason, has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. Therefore, this reopening notice cannot be challenged. This for the reason that it will be open to the assessee during reopened proceeding to establish that seeking to tax the additional income, was not warranted. It is his submission that information received from the Dy. Director of IT (Investigation) was sufficient reason for the AO to issue the reopening
We find that at the time of reopening of the assessment, the AO did not provide the reasons recorded in support of the reopening notice in its entirety, to the respondent-assessee. This was contrary to and in defiance of the decision of the apex Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 179 CTR (SC) 11: (2003) 259 ITR 19 (SC). The entire objects of reasons for reopening notice as recorded being made available to an assessee, is to enable the AO to have a second look at his reasons recorded before he proceeds to assess the income, which according to him, has escaped assessment. In fact, non- furnishing of reasons would make an assessment order bad as held by this Court in CIT vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom). In fact, partial furnishing of reasons will also necessarily meet the same fate i.c.. render the assessment order on reopening notice bad. Therefore, on the above ground itself, the question as proposed does not give rise to any substantial question of law as it is covered by the decision of this Court in Videsh Sanchar Nigam Ltd. (supra) against the Revenue in the present facts.” {Highlighted relevant part by us for clarity and better understanding}
The Hon‟ble Jurisdictional High Court in PCIT vs. Shodiman Investment (P) Ltd. has held that non-providing the complete reasons for reopening are contrary to and in defiance of the decision of the Hon‟ble Apex Court in GKN Driveshafts (India) Ltd. (supra). Entire objects of the reasons for reopening notice as recorded being made available to an Assessee, is to enable the AO to have a second look to his reasons recorded before he proceeds to assess the income, which according to him has escaped assessment. In fact, non-furnishing of reasons would make an assessment order bad as held by this court in CIT vs. Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 (Bom.). Further, in fact, partial furnishing of reasons will also necessarily meet the same fate i.e. render the assessment order on reopening the notice bad.
M/s. Ambaji Avenues Private Limited 17. This Court further observe that the Hon‟ble Jurisdictional High Court in CIT vs. Trend Electronics (2015) 379 ITR 456 (Bombay) also reminded that this Court (Mumbai High Court) in CIT Vs Videsh Sachar Nigam Ltd. (2012) 340 ITR 66 (Bom) has held “that it is axiomatic that power to reopen a completed assessment under the Act, is an exceptional power and whenever Revenue seeks to exercise such power it must consistently comply with the prerequisite conditions viz. the reopening of the reasons to indicate that the AO had reason to believe that income chargeable to tax has escaped assessment, which would warrant the reopening of an assessment. The reasons recorded must be furnished to the Assessee when sought for, so as to enable the Assessee to object to the same before the AO. Thus, in the absence of reasons being furnished, when sought for, would make an order passed on reassessment as bad in law. The recording of reasons and furnishing of the same has to be consistently complied with, as it is a jurisdictional issue. The requirement is very salutary as it not only ensures reopening notices are not lightly issued beside in case the same have been issued on some misunderstanding/ misconception, the Assessee is given an opportunity to point out that the reasons to believe as recorded in the reasons do not warrant reopening before the reassessment proceedings are commenced. 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 further”.
From the judgments referred to above, it is clear requirement for recording the reasons and furnishing of the same in entirety is not a mere formality but has to be strictly complied with and cannot be taken lightly and the Assessee is to be given an opportunity to point out that the reasons to believe as recorded in the reasons do not warrant reopening before the reassessment proceedings are commenced. Further where the jurisdictional issue such as reopening of the case is involved, the same must be strictly complied with by the authority concerned. Non-furnishing of the reasons would make an assessment order bad in law and/or M/s. Ambaji Avenues Private Limited the partial furnishing of the reasons as well would also face the same fate of rendering the assessment order on reopening notice as bad in law and would be liable to be quashed. Hence the question posed is answered accordingly.
Thus, considering the peculiar facts and circumstances of the case, as the reasons conveyed to the Assessee vide notice/letter dated 28.09.20218 along with notice u/s 143(2) of the Act and as reproduced in para 2 of the assessment order are not exactly same. In fact, in the reasons conveyed vide letter dated 28.09.20218, allegations qua failure on the part of the Assessee to disclose fully and truly all material facts necessary for the assessment for the year in question within the meaning of the provision to section 147 of the Act and the belief of the AO that income chargeable to tax has escaped within the meaning of section 147 of the Act and therefore he proposes to issue the notice u/s 148 of the Act, to reassess such income and also any other income chargeable to tax which has escaped assessment, are missing or not conveyed to the Assessee. Hence, respectfully following the judgment of Hon‟ble Jurisdictional High Court in the case of Shodiman Investment (P) Ltd. (supra), on this legal issue itself, the assessment order itself is liable to be quashed, thus the same is quashed and consequently the Impugned order is set aside being infructuous.
As this Court has quashed the assessment order on the legal issue and set aside the Impugned order being infructuous and resultantly allowed the appeal of the Assessee, hence are inclined not to delve into the merits of the case, as the adjudication of the same would prove futile exercise.
Order pronounced in the open court on 28.03.2025.