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Income Tax Appellate Tribunal, BANGALORE BENCHES “A”, BANGALORE
Before: Shri George George K, JM & Shri B.R.Baskaran, AM
O R D E R Per George George K, JM These appeals at the instance of the assessee are directed against consolidated order of the CIT(A) dated 10.09.2008. The relevant assessment years are 1994-1995 and 1995-1996. Common issues are raised in these appeals, hence they were heard together and are being disposed of by this consolidated order.
The brief facts of the case are as follows: The assessee is a Garment Exporter. For the assessment years 1994-1995 and 1995-1996, the returns of income were filed on 27.10.1995 declaring `NIL’ income after claiming deduction u/s 80HHC of the I.T.Act amounting to Rs.1,41,75,924 and Rs.59,68,514, respectively. For assessment years 1994-1995 and 1995-1996, the -1368/Bang/2008. Sri.Hajee Omar Farook. assessments were completed by orders dated 28.03.2003 passed u/s 144 r.w.s. 147 of the I.T.Act wherein the claim of deduction u/s 80HHC of the I.T.Act was denied.
Aggrieved by the orders of the assessment for assessment years 1994-1995 and 1995-1996, the assessee preferred appeals to the first appellate authority. Before the first appellate authority, the assessee raised various issues both on legal and on merits. The assessee submitted that he was not served with reasons recorded for reopening the assessment inspite of specific request, therefore, the reassessment orders are invalid. The CIT(A) dismissed the appeals of the assessee. The relevant findings of the CIT(A) rejecting the contention of the assessee that reassessment is bad in law on account of non-service of reasons recorded, reads as follows:-
“10. I see the remedy lies only in filing a writ petition before the Hon’ble High Court (vide Ajay Oxyeholride Floorings v. ACIT (2006) 283 ITR 168) That being not done, it is not open to the assessee to plead at this stage to set aside the assessment as has been done by the Jurisdictional High Court in the case of L.Sohanraj vide supra because I have no power to setaside an assessment. Secondly, I have strong presumption that the appellant was having the constructive and judicial notice of the reasons of reassessment after the search conducted on 16/08/2000 in his residence. It can be presumed so from the plea taken by the assessee during the course of assessment proceedings that From No.3CD, 3CB, 10CCAC were filed along with the return filed on 27/10/1995 and A.O. has wrongly concluded that such documents were not available to him at the time of assessment. In the case of Smt.Reena Jain v. CIT (2007) 160 Taxman 173 (All.). Initiation of proceedings u/s 147 of I.T.Act has been found valid holding that supply of reasons to the assessee is not necessary when the assessee is in full knowledge of the matter evidenced by their submissions and reply and explanations.
In view of the above, though the additional ground is admitted, it is dismissed because (i) Firstly, I have no power to set aside and (2) secondly, without prejudice to the above (i), I hold that the appellant had full knowledge of the reasons recorded for reopening the assessment u/s 147 of the I.T.Act.
The above also disposes of ground No.1 and 2 of the original grounds of appeal.”
4. Aggrieved by the CIT(A)’s order, the assessee has preferred these appeals before the Tribunal. The learned AR limited his submission to the legal issue namely reassessment order is invalid because the reasons recorded for reopening the assessment was not supplied to the assessee inspite the assessee making specific request for the same. In this context, the learned AR relied on the judgment of the Hon’ble jurisdictional High Court in the case of Pr.CIT v. V.Ramaiah reported in 409 ITR 518 (Kar.). It is further submitted by the learned AR that the SLP filed by the Revenue against the judgment of the Hon’ble jurisdictional High Court was dismissed by the Hon’ble Apex Court [reported in (2019) 103 taxmann.com 202 (SC)].
The learned Standing Counsel, on the other hand, by referring to first paragraph of the assessment order submitted that the assessee has not furnished necessary details / documents during the course of reassessment proceedings and consequently, the assessment was completed u/s 144 r.w.s. 147 of the I.T.Act. Further, the learned Standing Counsel submitted that the reasons for reopening the assessments were recorded.
We have heard rival submissions and perused the material on record. The assessments for assessment years 1994-1995 and 1995-1996 were reopened by issuance of notice u/s 148 of the I.T.Act (notice dated 31.05.2001). In response to the notice issued u/s 148 of the I.T.Act, the assessee filed a letter dated 09.06.2001. In the said letter assessee stated that the returns furnished earlier for the aforesaid assessment years may kindly be treated as returns filed in pursuance to notice u/s 148 of the I.T.Act. Further, in the said letter, it was requested that the reasons recorded for issuance of notice u/s 148 of the I.T.Act may be furnished for the effective representation of the case. The relevant portion of the letter of the assessee dated 09.06.2001 reads as follows:-
“There is no income escaping assessment for the aforesaid assessment years and therefore, the notice issued by your Honour u/s 148 of the Act is invalid and illegal. Further, the reasons recorded for issuance of notice u/s 148 of the Act have not been furnished to me and it is prayed that the same may be furnished for effective representation of my case.” 6.1 Inspite of the assessee’s specific requests to furnish the reasons recorded for issuance of notice u/s 148 of the I.T.Act the same was not furnished and the reassessment for assessment years 1994-1995 and 1995-1996 were completed on 28.03.2003.
6.2 The Hon’ble jurisdictional High Court in the case of Pr.CIT v. V.Ramaiah (supra) by placing reliance on the judgment of the Hon’ble Apex Court in the case of GKN Driveshaft (India) Ltd. v. ITO (2002) reported in 259 ITR 19(SC) -1368/Bang/2008. Sri.Hajee Omar Farook. had decided an identical issue in favour of the assessee. The Hon’ble jurisdictional High Court was considering the following substantial question of law:-
“Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the re- assessment order by holding that the assessing authority had not supplied the reasons for re-assessment even though the assessee was made aware of the crux of the case and assessee was provided sufficient opportunity of hearing and assessee had actively contested the case before assessing authority?”
6.3 The Hon’ble jurisdictional High Court in adjudicating the above substantial question of law, distinguished the Hon’ble Madras High Court judgment in the case of Home Finders Housing Ltd. v ITO reported in (2018) 404 ITR 611 (Mad.) (relied on by the learned Standing Counsel) and held that recording of reasons before initiation of reassessment proceedings and communication thereof to the assessee is sine qua non for a valid reassessment. The relevant finding of the Hon’ble Apex Court reads as follows:-
“5. Having heard the learned counsels for the parties, we are satisfied that no substantial question of law arises in the present appeal filed by the Revenue in as much as the recording of reasons for reassessment under Section 147/148 of the Income-tax Act or non-communication thereof to the assessee does not amount to a mere procedural lapse. In view of the aforesaid Supreme Court decision in GKN DRIVESHAFT's case, it goes to the root of the matter and renders the reassessment order passed by the assessing authority without recording such reasons and communicating the same to the assessee, as being without jurisdiction.
6. The contention raised by the learned counsel for the Revenue that in the order sheet dated 04.11.2011 in the reassessment proceedings were duly noted by the authorised representative appearing on behalf of the assessee and therefore, such assessee should be deemed to have been made aware of the reasons for reopening does not impress us.
-1368/Bang/2008. Sri.Hajee Omar Farook.
7. The Tribunal has clearly noted in its order after looking into the record of the case that the reasons which were placed before the learned Tribunal itself only for the first time were never communicated to the assessee during the contemporary period. Mere participation of the assessee or Authorized Representative in the reassessment proceedings does not amount to the assessee being made aware or known of the reasons for such reopening. The reasons now quoted by the learned Tribunal in the impugned order clearly indicates that they are purportedly detailed reasons and had the assessing authority given the said reasons before hand, the assessee could have raised objections before the assessing authority and the assessee could have rebutted the material on the basis of which the impugned reassessment proceedings were undertaken by the assessing authority. The assessee in the present case twice made a request to the assessing authority, but despite the specific requests, the assessing authority did not comply with the said request and supplied the reasons to the assessee. That casts a doubt even on fact of the recording of the reasons in the contemporary period by the assessing authority. The fact that such reasons are supplied before the learned Tribunal only for the first time was enough for by the learned Tribunal to hold that in view of the decision of the Hon'ble Supreme Court, the assessing authority lacked the jurisdiction in invoking the reassessment proceedings and therefore, the impugned reassessment order deserves to be quashed.
The decision relied upon by the learned counsel for the Revenue is distinguishable on facts. The order which was to be passed by assessing authority as preliminary objection of assessee, once the assessee has raised the objection to such reassessment proceedings, the meeting of such objections in the main reassessment order, could be procedural aspect of the matter, but the recording of the reasons before the initiation of the reassessment proceedings and communication thereof to the assessee is sine qua non, as held by Hon'ble Supreme Court and that goes to the root of the matter and confers or deprives the assessing authority of the jurisdiction to undertake such reassessment proceedings, as the case may be.
In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order.” (underline supplied by us) 6.4 The judgment of the Hon’ble jurisdictional High Court was challenged by the Revenue and the SLP was dismissed by the Hon’ble Apex Court (supra). Admittedly, in this case, the reasons recorded for issuance of notice u/s 148 of the I.T.Act for assessment years 1994-1995 and 1995-1996 has not been supplied to the assessee inspite of specific request by the assessee. Therefore, going by the dictum laid down by the 6.5 Since we have decided that the reopening assessment is bad in law, the issue on merits is not adjudicated.
In the result, the appeals filed by the assessee are partly allowed.