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Facts
The assessee declared a total income of Rs. 11,167/- and claimed an exemption of Rs. 19,38,938/- under Section 10(38). A notice under Section 148 was issued, and after objections, the AO made an addition of Rs. 19,38,940/- under Section 68, treating the capital gain as bogus.
Held
The Tribunal held that the AO did not follow the mandatory procedure laid down by the Supreme Court in the GKN Drive Shaft case and that the assessment proceedings were bad in law. The Tribunal quashed the proceedings and allowed the appeal.
Key Issues
Whether the reassessment proceedings initiated under Section 148 were valid when the AO failed to follow the mandatory procedure laid down by the Supreme Court, rendering the proceedings void ab initio.
Sections Cited
10(38), 148, 68
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI PRAKASH CHAND YADAV
PER PRAKASH CHAND YADAV, JUDICIAL MEMBER:
Present appeal of the assessee is arising from the order of ld. CIT(A)-11, Bangalore dated 25.11.2024 having DIN & Order No.ITBA/APL/M/250/2024- 25/1070615084(1) and relates to assessment year 2013-14.
Brief facts of the case as coming out from the orders of authorities below are that the assessee has filed its return of income on 29.11.2014 declaring total income of Rs. 11,167/-. The assessee has claimed exemption u/s 10(38) of the Income Tax Act, 1961 (in short “The Act”) for an amount of Rs.19,38,938/-. Thereafter, a notice dated 23.4.2020 was issued to the assessee u/s 148 of the Act. In response to the notice, the assessee filed its return of income on 23.6.2020 and called for the copy of reasons recorded. In pursuance to the reply of the assessee, the AO provided the reasons recorded on 4.2.2022. Against these reasons, assessee filed its objections on 1.3.2022 and objected to the re-assessment proceedings. Thereafter, the AO completed the assessment and made the addition of Rs.19,38,940/- u/s 68 of the Act by
Aggrieved with the order of AO, the assessee filed an appeal before the ld. CIT(A) and inter-alia argued the matter on the illegality of the proceedings as well as on the merits of the addition. Ld. CIT(A) confirmed the jurisdiction of AO u/s 148 of the Act and has also sustained the additions made by the AO.
Aggrieved with the order of ld. CIT(A), the assessee has come up in appeal before us and has raised so many grounds.
In ground No.4 to 8, the assessee has challenged the assumption of jurisdiction by the AO u/s 148 of the Act on the ground that the AO has violated the procedure as laid down by the Hon’ble Supreme Court in the case of GKN Drive Shaft reported in 259 ITR 19 and hence the entire proceedings are void-ab-initio.
Counsel for the assessee further pointed out that perusal of the assessment order would show that the AO has disposed of the objection of the assessee on 23.2.2021. However, the fact of the matter is that the assessee has filed its objection on 1.3.2022. Therefore, it is not possible for the AO would have decided the objections even before the filing of the same.
Ld. D.R. appearing on behalf of the revenue argued that probably the date mentioned by the AO in the assessment order i.e. 23.2.2021 is not a correct date and hence 7 days’ time (from 26.06.2025 the date on which matter has been heard) shall be given to the ld. D.R. to find out the correct date.
After considering the rival submissions, we observe that, till today i.e. (07 July 2025) the ld. D.R. could not file any reply with the bench and therefore, we are constrained to take adverse observations against the department. We further observe that in the present case the AO has not followed the procedure of Hon’ble Supreme Court laid down in the case of GKN Amit Kumar Banthia (HUF), Bangalore Page 3 of 4 Drive Shaft cited (supra) and hence, we are of the firm opinion that the present proceedings are bad in law. Further, a reference can be made to the decision of jurisdictional High Court in the case of Hewlett Packard Financial Services (India) (P) Ltd. Vs. DCIT reported in 294 Taxman 25 (Karn.), wherein the Hon’ble High Court after distinguishing the case of Home Finders Housing Ltd. of the Hon’ble Madras High Court reported in 404 ITR 611 has observed as under: “12. The contention of the learned counsel for the revenue relying on the judgment of the Madras High Court in the case of Home Finders Housing Ltd. (supra) cannot be accepted in light of the declaration of the Division Bench of this Court in the case of Deepak Extrusions (PY the procedure prescribed in Ltd. (supra) is a mandatory procedure which would vitiate the assessment order and the same having been concurred with in another judgment of the Division Bench in W.A. No. 919/2019 disposed-off on 24th Jan., 2023. It is impermissible for this Court to accept the contention of the revenue and pass orders contrary to that of the Division Bench orders referred to above. Even otherwise, a perusal of the observations made by the apex Court in GKN Driveshafts (India) Ltd. (supra) clearly records a finding that the AO is bound to dispose-off the objections filed by passing a speaking order.”
8.1 Respectfully following the verdict of Hon’ble Apex Court in the case of GKN Drive shaft and the jurisdictional High Court in the case of Hewlett Packard Financial Services(Supra), we hereby quash these proceedings and allow the appeal of the assessee.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 7th July, 2025