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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI PAWAN SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 01.01.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The various grounds raised by the assessee are as under: “1. (i) Commissioner of Income Tax (A) failed to appreciate following facts;
The Assessing Officer failed to provide inspection of documents held / relied upon for re-opening Assessment u/s. 147/148 and also failed to address objections raised by the Appellant Company for re-opening the assessment.
(ii) The Assessing Officer failed to obtain prior permission of CIT before issuing notice u/s. 147 / 148.
2. Commissioner of Income Tax (A) erred in confirming addition of Rs. 11,03,027/- out of alleged bogus purchases of Rs. 44,12,110/- being additions made by 4.0. while passing order u/s. 143(3) r.w.s. 147.
The issue raised in ground No.1 is against the action of the AO of not providing inspection of documents held/relied upon for reopening assessment under section 147/148 and also failed to address the objections raised by the assessee for reopening the assessment.
The facts in brief are that return was filed on 12.09.2009 declaring income of Rs.8,89,240/- followed by scrutiny proceedings which culminated in passing of assessment order under section 143(3) of the Act on 14.10.2011 determining the total income at Rs.9,07,230/-. Thereafter, the case of the assessee was reopened on the basis of information received from DGIT(Inv.) vide letter dated 26.12.2013 that assessee is the beneficiary of a hawala racket operating in the market and accordingly after issuing a notice under section 148 of the Act on 28.01.2014. The said notice was replied by the assessee vide letter dated 04.02.2014 submitting that the jurisdiction rests with the ITO 18(1)(3) and also pointing out various other defects in the said notice. It is also submitted that subject to the objections raised by the assessee in the said letter the return filed under section 139(1) on 12.09.2009 may be treated as return filed in response to this notice. Thereafter, again the intimation was sent to the present ITO and he again issued notice under section 148. Thereafter, the assessee vide letter dated 09.04.2014 requested the AO to supply
3 M/s. Multiple Images reason for reopening. Thereafter, the assessee filed objections on 28.04.2014 after receiving the reason recorded for reopening the assessment and also notice under section 143(2) of the Act. According to the assessee, the AO has not disposed of the objections filed by the assessee against reassessment proceedings initiated under section 148 of the Act.
In the appellate proceedings before the ld CIT(A), the assessee challenged the non disposal of objections by the AO before framing the assessment by way of speaking order. However, the Ld. CIT(A) dismissed the ground raised by the assessee by holding that the objections against re- assessment proceedings are invalid having considered the various contentions and the submissions as made during the appellate proceedings.
The Ld. A.R. vehemently submitted before us that AO supplied the copy of reasons along with notice under section 143(2) of the Act for which the assessee filed objections on 28.04.2014. The Ld. A.R. submitted before us that it is wrong on the part of the AO to hold that assessee has raised objections after the receipt of notice under section 143(2) of the Act and not for the notice issued under section 148 reopening the assessment proceedings. The Ld. A.R. submitted that the non disposal of objections filed by the assessee against reopening of assessment proceedings goes to the route of the jurisdiction of the AO by relying upon the decision of GKN Driveshafts (India) Ltd. vs. ITO & Others (2003) 259 ITR 19 (SC). The Ld. A.R. further relied on the 4 M/s. Multiple Images decision of Hon’ble Bombay High Court in the case of Bayer Material Science Pvt. Ltd. vs. DCIT (2016) 382 ITR 333 (Bom.) and submitted before the Bench that the reassessment proceedings were being without jurisdiction and should be quashed.
The Ld. D.R., on the other hand, relied on the order of authorities below and submitted that the case of the assessee was reopened by the AO after following the due process laid down under the Act and therefore the first appellate authority has rightly dismissed the appeal of the assessee on the ground of jurisdiction.
After hearing the rival submissions and pursing the material on record including the decisions relied upon by the assessee, we find that the order of the AO that assessee has filed objections to the initiation of reassessment proceedings under section 148 of the Act which were not disposed of by the AO before framing the assessment under section 143(3) read with section 147 of the Act. In our opinion, the disposal of objections is of paramount importance and goes to the root of the assessment. The non disposal of objections by the AO is a serious defect which is incurable and the assessment will have go in that event. In the case of GKN Driveshafts (India) Ltd. vs. ITO & Others (supra) the Hon’ble Supreme Court has held that the AO has to dispose of the objections if filed by the assessee by way of speaking order before proceeding with the assessment. However, in the present case there has been no disposal of objections filed by the assessee. The case of the assessee is further fortified by the decision of the Hon’ble
5 M/s. Multiple Images Bombay High Court in the case of Bayer Material Science Pvt. Ltd. vs. DCIT (supra) wherein the Hon’ble Court has held that passing a draft assessment order without having disposal of objections filed by the assessee to the reasons recorded in support of the notice the draft assessment order was not sustainable being without jurisdiction. Similar ratio has been laid down by the Hon’ble Bombay High Court in the case of KSS Petro Pvt. Ltd. vs. ACIT in ITA No.224 of 2014 (Bom. – HC), CIT vs. Tupperware India Pvt. Ltd. (2016) 234 Taxman 494 (Del.) and DCIT vs. National Bank for Agriculture and Rural Development in ITA No.4964/M/2014 dated 28.10.2016. Considering the facts of the assessee’s case in the light of the ratio laid down by the decisions of Apex Court, jurisdictional court and other judicial forum, we are of the considered view that the assessment framed by the AO is without jurisdiction and cannot be sustained. We accordingly quash the proceedings u/s 147 of the Act and also the consequent order.
Since we have allowed the appeal on legal issue, the grounds raised on merits need not to be adjudicated.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 02.08.2018.