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Facts
The assessee filed a return for AY 2013-14. Subsequently, a notice under Section 148 was issued for reopening the assessment. The assessee raised objections to the reopening, which were not disposed of by the Assessing Officer by way of a speaking order. The Assessing Officer proceeded to pass an assessment order.
Held
The Tribunal held that the failure of the Assessing Officer to dispose of the assessee's objections to the reopening by way of a speaking order is a violation of mandatory procedure laid down by the Supreme Court and renders the reassessment proceedings void. The reassessment order is quashed.
Key Issues
Whether the non-disposal of objections to reopening by the Assessing Officer in a speaking order vitiates the reassessment proceedings.
Sections Cited
147, 148, 143(2), 142(1), 56(2)(vii)
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
The present appeal is filed by the assessee against the order dated 12.03.2025 passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (hereinafter referred to as “ld.CIT(A)”) for the Assessment year (A.Y) 2013-14, dismissing the appeal filed by the assessee against the assessment order dated 14.12.2018 passed u/s. 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).
Brief facts of the case are that for the A.Y.2013-14, the assessee had filed his return of income on 31.03.2015 and declared an income of Rs.5,54,040/-. Thereafter,
:-2-: ITA. No.:1348/Chny/2025 notice u/s.148 of the Act was issued on 25.04.2018. In response, the assessee had filed a letter dated 11.06.2018, requesting the Assessing Officer to treat the return filed on 31.03.2015 as the return in response to notice u/s.148 of the Act. Thereafter, notice u/s.143(2) of the Act and notice u/s.142(1) of the Act were issued on 14.06.2018 and 08.10.2018 respectively. Subsequently, objections to reopening on both under jurisdiction as well as on merits were also raised by the assessee by filing a letter dated 12.12.2018. Thereafter, assessment order was passed by holding that the assessee had not filed any return in response to the notice u/s.148 of the Act, nor replies were filed in response to the notices issued to the assessee and thus an addition of Rs.1,09,44,205/- was made u/s.56(2)(vii).
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A), who dismissed the appeal.
4. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.
5. Before us, the Ld.AR of the assessee filed a paper book and argued on the jurisdictional issue of non-disposal of objections to the reopening, by a speaking order. It was contended that while the assessee promptly questioned the reopening and raised detailed objections on jurisdiction and merits, the Assessing Officer ought to have disposed of the same. Non-disposal of the objections to the reopening renders the reassessment void. He took us through the pages of the paper book (pages 2-7) wherein these objections are recorded. It was further contended that in the remand report furnished by the assessment unit to the appeal unit, the fact of filing the objections to reopening were also recorded (page 87 of the paper book). It was submitted that it is mandatory that the objections of the assessee on the reopening be disposed by way of a speaking order, as held by the Hon’ble Supreme Court in the :-3-: ITA. No.:1348/Chny/2025 case of GKN Drive Shafts India Ltd - 259 ITR 19 (SC). Failure on the part of the Assessing Officer to pass an assessment order, without first disposing of the objections by way of a separate speaking order, renders the entire exercise of reopening a nullity and as a consequence, the reassessment order is liable to be quashed. The Ld.AR relies on the judgment rendered by this Hon’ble Tribunal in the case of Laggisetty Manohar Karthik vs ITO in decided on 21.08.2025, wherein, the proposition that non-disposal of the objections to reopening by way of valid and separate speaking order renders the reassessment proceedings a nullity.
6. The Ld.AR also took us through the findings of the ld.CIT(A), wherein it is held that the assessee had not filed any objections to the reopening, as seen from the assessment order and hence there is no requirement to dispose of the objections. The Ld.AR submitted that the findings of the ld.CIT(A) are contrary to record and referred to pages 39-44 of the paper book, wherein, it is clearly seen that the assessee had filed the objections to the reopening and the proof of submission was also filed before the ld.CIT(A). It was thus prayed that the appeal be allowed based on the above arguments.
7. Per contra, the Ld.DR contended that non adherence to the procedure laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (supra) was only a curable irregularity and not vitiate the entire re-assessment order passed in terms of Section 147 of the Act. It was further argued that the moment reasons for reopening are recorded and the approval for reopening, from the competent authority is obtained, the reopening is valid and the validity of reopening on the ground of non-disposal of objections cannot be raised.
:-4-: ITA. No.:1348/Chny/2025
We have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities along with judicial precedents relied on by the parties and paper book filed. We find that the assessee had raised the objections to the reopening and the same was not disposed of by the Assessing Officer. We also find that the fact being recorded by the assessment unit in its remand report. We do not find any merit in the order of the ld.CIT(A). The question that lies before us is, whether it is necessary that the Assessing Officer must dispose of the objections to reopening by way of a speaking order and if it is necessary, whether the non-adherence to the same would render the entire reassessment proceedings otiose or it is merely a procedural irregularity that does not make the reassessment invalid.
In our view, it is mandatory for the Assessing Officer to dispose of the objections to reopening by way of a speaking order and non-adherence to the same would render the entire reassessment proceedings void. Once the Hon'ble Supreme Court lays down a law (GKN Driveshafts (supra)), all the parties concerned are bound to follow it. Non-adherence to the same is not merely a procedural irregularity but goes to the root of the matter. As relied on by the ld.AR we have already decided the same issue in the case of Lagisetty Manohar Karthik (supra) relevant paras from 24 to 32 of the order are extracted herein below.
“24. Hence, the issue to be decided in the present case is whether the non-adherence to the law laid down by the Apex Court would be curable or fatal to the consequential reassessment proceedings.
We find that the Hon'ble Madras High Court in the case of Pentafour Software Employees' Welfare Foundation (supra), decided on 05.08.2019 as well in the case Janak Shanthilal Mehta (supra) decided on 16.12.2020 had 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 of the Act.
We find further in another decision of the Hon'ble Madras High Court in the case of Home Finders Housing Ltd.(supra) dated 25.04.2018,
:-5-: ITA. No.:1348/Chny/2025 the Hon'ble Madras High Court had held that non-compliance of the directions of the Hon'ble 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.
However, we find that the decision rendered in the case of Home Finders Housing Ltd., (supra) was a decision rendered earlier to the decision held by the Hon'ble Madras High Court in the case of 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 this Tribunal.
In this regard we draw support of the decision rendered by the Hon'ble Delhi High Court in the case of Bhika Ram & Ors. v. UOI reported in [1999] 238 ITR 113, wherein the Hon'ble Delhi High Court had held that 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:- "3. 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.
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.
:-6-: ITA. No.:1348/Chny/2025
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." 29. In the light of the above discussion, we are of the view that failure on part of the Assessing Officer in not complying with the binding decision / procedure laid down by the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd would vitiate the reassessment order passed in terms of Section 147 of the Act. The AO rejecting objections of the assessee against re-opening by merely doing so while passing the re- assessment order was not suffice the requirement of the law laid down by the Hon'ble Supreme Court. 30. Further, the co-ordinate bench of this Tribunal under identical circumstances in the case of M/s.IDFC First Bank Ltd (supra) had held that non adherence to the procedure laid down by the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd would vitiate the re- assessment order passed u/s.147 of the Act. Further, the co-ordinate bench of this Tribunal recently in the case of Damayanti Ramachandran in & Ors, following the decision rendered by this Tribunal in the case M/s.IDFC First Bank Ltd (supra) had proceeded to quash the re-assessment order passed u/s.147 of the Act.
In light of the above discussion and reasoning and respectfully following decisions rendered by the Hon'ble Madras High Court, we find that the failure on the part of the AO in not complying with the directions of the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd. would strike at the root of the jurisdiction of the AO to re-open the assessment in terms of Section 147 of the Act and the consequential re- assessment order passed u/s.147 of the Act are to reckoned as non-est in the in the eyes of law. Therefore, the order of the AO u/s.147 of the Act is quashed.
Since we have decided the grounds of appeal
raised by the assessee in challenging the validity of the assumption of jurisdiction u/s.147 of the Act in favour of the Assessee, the grounds of appeal raised on merits challenging the additions made in the re-assessment order would become academic and left open.
33. In the result the appeal of the assessee is allowed.
9. We find that the present facts and circumstances of the case is similar to the facts of the Tribunal decision of the co-ordinate bench(supra) and hence following :-7-: ITA. No.:1348/Chny/2025 decision cited above, we hold that the Assessing Officer ought to have disposed of the objections by way of speaking order before passing an reassessment order. Therefore, we are of the considered opinion that the failure on the part of the AO in not complying with the directions of the Hon'ble Supreme Court in the case of M/s.GKN Driveshafts (India) Ltd. would strike at the root of the jurisdiction of the AO to re-open the assessment in terms of Section 147 of the Act and the consequential re- assessment order passed u/s.147 of the Act are to reckoned as non-est in the in the eyes of law. Accordingly, the reassessment order dated 14.12.2018 and the consequent demand are quashed as void. Since we have decided the legal issue in favour of the assessee, rendering a decision on the merits of the matter becomes academic in nature and hence not adverted to in the present appeal.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20th November, 2025 at Chennai.