SHRI. S K RAMPRASAD,BENGALURU vs. COMMISSIONER OF INCOME TAX, (APPEALS)5, BENGALURU

This appeal by the assessee is directed against the order of CIT(A)-5, Bangalore, dated 28.09.2017 for Assessment Year 2008-09.

2.1 The assessee, an individual, deriving income from salaries, business and capital gains, filed the return of income for Assessment Year 2008-09 on 25.03.2009 declaring income of Rs.6,82,340/-. The Assessing Officer (AO) initiated proceedings under section 147 of the Income Tax Act, 1961 (in short ‘the Act’) to reopen the assessment for Assessment Year 2008-09 and issued notice under section 148 of the Act on 20.03.2015. In response thereto, the assessee filed letter dated 09.04.2015 requesting that the original return of income for Assessment Year 2008-09, filed on 25.03.2009, be treated as filed in response to notice under section 148 of the Act. In this letter dated 09.04.2015, the assessee also requested the AO to furnish to him the reasons recorded for taking up proceedings under section 147 and 148 of the Act. The assessment was concluded under section 143(3) r.w.s. 147 of the Act vide order dated 30.03.2016, wherein the assessee’s income was determined at Rs.41,40,740/-; in view of the AO making an addition of Rs.34,58,400/-; on account of the assessee’s 1/5th share of the guidance value of a property sold on 30.11.2007; by invoking the provisions of section 50C of the Act. The assessee’s appeal was dismissed by CIT(A)-5, Bangalore, vide order dated 28.09.2017.

3.1 Aggrieved by the order of CIT(A)-5, Bangalore, dated 28.09.2017 for Assessment Year 2008-09, the assessee has preferred this appeal before the Tribunal, wherein he has raised the following grounds and additional grounds:

3.2 We have heard / considered the rival contentions / submissions, including the details filed in paper book (pages 1 to 146) and judicial pronouncements cited.

Ground Nos.11 to 13 4.1 At the outset of proceedings, the assessee through the learned AR has raised a preliminary objection, though for the first time before the Tribunal; in regard to the procedure adopted by the AO in initiating re-assessment proceedings and subsequent proceedings in completing the assessment for Assessment Year 2008-09 in the case on hand. As this is a legal ground, we proceed to address the same before taking up the grounds raised by the assessee on merits. We have heard the rival contentions in the matter of admission of additional grounds 11 to 13. (supra). Taking into account the factual matrix of the case on hand and the additional grounds raised, we find that they are purely legal grounds that do not involve facts other than those that are already on the records of the Department. In our view, the additional grounds raised go to the very root of the matter of jurisdiction and validity of proceedings under section 147 / 148 of the Act. Following the ratio of the decision of the Hon’ble Apex Court in the case of NTPC Ltd., (229 ITR 383) (SC), we admit the additional grounds raised (supra) for consideration and adjudication.

4.2 The learned AR for the assessee submitted that the AO served a notice under section 148 of the Act dated 20.03.2015 on the assessee for re-opening the assessment for Assessment Year 2008-09. In response to the said notice under section 148, the assessee filed letter dated 09.04.2015 on 13.04.2015 requesting the AO (i) to treat the original return of income filed by the assessee on 25.03.2009 for Assessment Year 2008-09 as one filed in response / compliance to the notice under section 148 of the Act and (ii) to furnish to him the reasons recorded for taking re- opening proceedings under section 147 and 148 of the Act. According to the learned AR, the AO, without providing the assessee with the reasons recorded for initiation of re-assessment proceedings under section 147 / 148 of the Act, completed the assessment under section 143(3) r.w.s. 147 of the Act vide order dated 30.03.2016; which is against the law as enunciated by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd., 259 ITR 19 (SC). In this regard, the learned AR also placed reliance, inter alia, on the decision of the Hon’ble Karnataka High Court in the case of PCIT Vs. V. Ramaiah (2019) 103 taxmann.com 201 (Kar), which has been upheld by the Hon’ble Apex Court in (2019) 103 taxmann.com 202 (SC) i.e.,; where the Hon’ble High Court upheld the Tribunal’s order quashing re-assessment proceedings on the ground that reasons recorded by AO for re-opening assessment were never communicated to the assessee, the SLP filed by the Department against the said decision was dismissed by the Hon’ble Apex Court. The learned AR prayed that in view of the above, the order of assessment passed by the AO under section 143(3) r.w.s. 147 of the Act vide order dated 30.03.2016 for Assessment Year 2008- 09 requires to be quashed.

4.3 Per contra, the learned DR for Revenue, on this issue, placed reliance on the decision of the Hon’ble Madras High Court in the case of Home Finders Housing Ltd., Vs. ITO (2018) 93 taxmann.com 371 (Madras), wherein on further appeal by the assessee, the Hon’ble Apex Court has dismissed the assessee’s appeal. It is submitted that on similar facts i.e., the completion of assessment by the AO, without disposing off the objections raised by the assessee to the reasons recorded for assumption of jurisdiction under section 147 of the Act without passing a speaking order thereon. The learned DR submits that such non-compliance of the procedure laid down by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd., (supra) would not render the order void or non est, as such a violation is a procedural irregularity which could be cured by remitting the matter to the assessing authority for considering the matter afresh after disposal of the assessee’s objections.

4.4 In rejoinder, the learned AR of the assessee submitted that the decision of the Hon’ble jurisdictional High Court of Karnataka in the case of V. Ramaiah (supra), wherein the Hon’ble Court had quashed the re-assessment proceedings on the ground of non-furnishing of reasons recorded by the AO for re-opening the assessment to the assessee, the SLP filed by Revenue against the said decision was dismissed by the Hon’ble Apex Court. It is further submitted that while passing the decision in the case of Vs. Ramaiah (supra), the Hon’ble Karnataka High Court had also considered the decision of the Hon’ble Madras High Court in the case of Home Finders Housing Ltd., (404 ITR 611) (Mad) before quashing the reassessment proceedings on ground of non furnishing of reasons recorded by AO for re-opening the assessment to the assessee. In the light of the above, the learned AR submitted that binding decision of the Hon’ble Karnataka High Court, affirmed by the Hon’ble Apex Court, in the case of V. Ramaiah (supra) ought to be followed and the order of assessment for Assessment Year 2008-09 passed under section 143(3) r.w.s. 147 of the Act vide dated 30.03.2016 be accordingly quashed.

4.5.1 We have heard and considered the rival contentions in regard to the legal issue raised by the assessee in Additional Ground Nos. 11 to 13 (supra) and considered the material on record; including the judicial pronouncements cited. The facts of the matter, as emerge from a perusal of the record are that re-assessment proceedings were initiated by the AO for Assessment Year 2008-09 under section 147 of the Act and thereafter notice under section 148 of the Act was issued to the assessee on 20.03.2015. In response to the notice under section 148 of the Act, the assessee admittedly filed letter dated 09.04.2015 (acknowledged to have been received by the Department on 13.04.2015); a copy of which is placed at page 2 of paper book; stating therein that the return of income filed on 25.03.2009 for Assessment Year 2008-09 be treated as filed in response to the aforesaid notice under section 148 of the Act and further requesting the AO to furnish the reasons recorded for taking up proceedings under sections 147 and 148 of the Act. As per the records before us and the impugned order of assessment, there is no proof of the reasons recorded having been furnished to the assessee by the AO. The learned DR for Revenue was also not able to controvert the factual position of the matter as laid out above i.e., that the reasons recorded by the AO for initiating re-assessment proceedings under sections 147 / 148 of the Act was not furnished to the assessee by the AO as requested by the assessee vide letter dated 09.04.2015. Having considered the rival contentions and the material on record, there is no dispute that the AO is bound to furnish the reasons recorded for initiating re-assessment proceedings to the assessee as requested for vide letter dated 09.04.2015, as per the law laid down by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd., Vs. ITO (259 ITR 19) (SC). The Hon’ble Karnataka High Court in the case of PCIT Vs. V. Ramaiah (2019) 103 taxmann.com 201 (KAR); which was upheld / affirmed by Hon’ble Apex Court in its order (2019) 103 taxmann.com 202 (SC); while rendering its decision, has considered the decision of the Hon’ble Madras High Court in the case of Home Finders Housing Ltd., Vs. ITO (2018) 93 taxmann.com 371 (Madras), and then proceeded to hold that the re-assessment order / proceedings are to be quashed on the ground that the reasons recorded by the AO for re-opening the assessment were never furnished to the assessee as requested for.

4.5.2 In the case of Vs. Ramaiah (supra), the substantial question of law framed was as under:

4.5.3 The consideration of the issue, the reference to the decision of the Hon’ble Madras High Court in Home Finders Housing Ltd., (supra) and their decision at paras 3 to 9 thereof, the Hon’ble Karnataka High Court in the case of PCIT Vs. V. Ramaiah (supra) is extracted hereunder:

4.5.4 Taking into consideration the factual and legal matrix of the case, as discussed above from paras 4.1 to 4.5.3 of this order (supra), we are of the view that the decision of the Hon’ble Karnataka High Court in the case of PCIT Vs. V. Ramaiah (supra), is squarely applicable to the facts of the assessee in the case on hand, where also the AO has not provided the assessee with the reasons recorded for re-opening the assessment as requested for by the assessee vide letter dated 09.04.2015. Respectfully following the aforesaid decision of the Hon’ble Karnataka High Court in the case of V. Ramaiah (supra), we are of the view and hold and direct that since the AO has failed to provide the assessee with reasons recorded for re- opening the assessment, in spite of the assessee’s written request for being provided with the same, the re-assessment order passed under section 143(3) r.w.s. 147 of the Act dated 30.03.2016 for Assessment Year 2008-09 is liable to be quashed. Consequently, the additional grounds No.11 to 13 raised by the assessee are allowed.

raised on merits by the assessee at Sl. Nos. 1 to 9. (supra) are rendered academic and do not require to be adjudicated at this juncture.

Order pronounced in the open court on this 24th day of May, 2019.