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Facts
The assessee's case was reopened under Section 147 based on information regarding Long Term Capital Gain from alleged shell companies, leading to an addition of ₹89,80,000/-. Despite repeated requests during assessment proceedings, the Ld. AO failed to provide the assessee with a copy of the reasons recorded under Section 148(2). The Ld. CIT(A) upheld the reopening and assessment.
Held
The tribunal held that the assessment framed under Section 143(3) read with Section 147, without supplying the reasons recorded for reopening to the assessee despite repeated requests, is bad in law and must be quashed. Citing precedents from the Hon'ble Apex Court and High Courts, the tribunal emphasized that non-communication of reasons is a fundamental procedural lapse.
Key Issues
Whether the non-supply of reasons recorded for reopening an assessment under Section 147/148, despite repeated requests by the assessee, renders the subsequent assessment order invalid.
Sections Cited
147, 148, 143(3), 148(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 13.12.2024 for the AY 2011-12.
The legal issue raised by the assessee is against the order of ld. CIT (A) upholding the reopening of assessment u/s 147 of the Act, which is invalid as assessee has not been provided the copy of reasons recorded u/s 148(2) of the Income-tax Act, 1961 (the Act) during the assessment proceedings despite being requested repeatedly by the assessee.
In the appellate proceedings, the appeal of the assessee was dismissed by the appellate authority by observing and holding as under:-
“6. Decision: I have considered the facts of the case, written submission and case laws relied upon by the appellant as against the observations and findings of the AO. in the assessment order. The submissions and contentions of the appellant are discussed and decided as under.
6.1.1 Before me in the appellate proceedings, the appellant has filed written submission and has stated that the entries are genuine and it has done transaction with these parties M/s. Faruk Enterprises, M/s. Nano Traders, M/s. Star Mark Trade Links and M/s. Rose Valley Trade Links. The AO has clearly made out the case that all these four companies are paper companies and are giving bogus LTCG /credits in garb of cash. The AO pointed out that Shri Ashok Gupta properiter of M/s. Nano Traders is a non-filler and even PAN was not available on the Database. Regarding other three parties, the AO has also made out the case that these are shell companies. Reliance is made here on the judgment of Hon. Kolkata High Court in the case of Smt. Swati Bajaj vs. PCIT on the identical issue of bogus LTCG. This judgment of Hon. Kolkata High Court has been confirmed by Hon. Supreme Court Hence, addition of the AO is confirmed and appeal of the appellant is dismissed.”
After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 29.03.2018, which was complied with by the assessee by filing the return of income on 04.04.2018. Thereafter the assessee requested to the AO on several occasion to supply the copy of the reasons recorded for re-opening the assessment, however, the ld. AO failed to supply the reasons recorded u/s 148(2) of the Act to the assessee. The copies of these letters/ reminders addressed to the AO are available at page no.13, 15-16 and 20-21 of the Paper Book. The ld. CIT (A) passed a very cryptic order as extracted above by justifying the reopening of assessment on basis the information received from the investigation wing. We observed that undisputedly, the reasons were not supplied to the assessee despite being requested by the assessee time and again as noted above.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 06.05.2025.