NARENDRAKUMAR SOHANRAJ CHOUDHARY,,AHMEDABAD vs. THE ITO, WARD-3(1)(3),, AHMEDABAD

When the matter was called for hearing, the learned AR for the assessee submitted at the outset that action under s.147 of the Act has been wrongfully taken without authority of law. This being jurisdictional defect which goes to the root of the matter required to be given primacy in the matter of adjudication. The learned AR inter alia also pointed out with reference to the objections raised against the reasons of the re-opening (page nos. 2-4 of the paper book) and submitted that the AO has mechanically completed the assessment without disposing of the objections raised by the assessee. The learned AR submitted that the re-assessment completed under s.147 of the Act is clearly bad in law in view of the non-disposal of objections. The learned AR accordingly insisted that neither the reasons recorded meets the requirements of law as enjoined by section 147 of the Act nor does the action of the AO is in conformity with the standard operating procedure for disposal of objection raised as mandated by the several judicial precedents. The learned AR accordingly submitted that the aforesaid jurisdictional defects are not curable and therefore, the re-assessment order requires to be cancelled and set aside.

Since, the issue raised on behalf of the assessee towards jurisdictional defect is fundamental and cardinal in nature which goes to the very root of the controversy, we consider it expedient to deal with the same in the first instance. We notice from the decision of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO 259 ITR 19 (SC) that on receipt of reasons from the AO, the assessee is entitled to file objections to the issuance of the notice and the AO is bound to dispose of the same by passing a speaking order. The AO has admittedly failed to dispose of the objections raised by the assessee. In view of the decision of the Hon’ble Supreme Court, the AO was under a sacrosanct obligation to dispose of the preliminary objection raised by the assessee and could not have framed the re- assessment order without doing so. Similar issue was cropped up again before the Hon’ble Gujarat High Court for its consideration in the case of Arvind Mills Ltd. vs. ACWT 270 ITR 467 & Ors. (Guj.) and recently in MGM Exports vs. DCIT 323 ITR 331 (Guj). Applying the legal position as laid down in GKN Driveshafts (supra), the Hon’ble Jurisdictional High Court held the action of the AO in framing the re-assessment order without first disposing of the preliminary objections raised by the assessee to be unsustainable in law. Accordingly, the Hon’ble High Court quashed and set aside the re-assessment order. It however directed the AO to dispose of the preliminary objections by passing a speaking order and only thereafter proceed with the re-assessment proceedings in accordance with law. In the light of the decision of the Hon’ble High Court, the matter requires to be remitted back to the file of the AO for passing a fresh order after disposing of the objections with regard to alleged jurisdictional defect.

In the result, the appeal of the assessee is allowed for statistical purposes.