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1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 23RD DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A.No.450/2016
BETWEEN : 1. Pr. COMMISSIONER OF INCOME TAX-6, C.R.BUILDINGS, QUEENS ROAD, BANGALORE-560001.
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/S SASKEN COMMUNICATION TECHNOLOGIES LTD., 139/25, DOMLUR RING ROAD, DOMLUR, BANGALORE PAN: AAECS 6424 R.
…RESPONDENT
(BY SRI S.SHARATH, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 11/12/2015, PASSED IN ITA No.901/BANG/2014, FOR THE ASSESSMENT YEAR 2002-2003, ANNEXURE-A, PRAYING TO: (A) DECIDE THE FOREGOING QUESTION OF LAW AND / OR
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SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. (B) SET ASIDE THE APPELLATE ORDER DATED: 11/12/2015 PASSED BY THE ITAT, 'C' BENCH, BANGALORE, IN APPEAL PROCEEDINGS No. ITA No.901/BANG/2014 FOR ASSESSMENT YEAR 2002-2003, ANNEXURE-A, AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I.Sanmathi, Adv. for Appellants – Revenue. Mr. S.Sharath, Adv. for Respondent – Assessee.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore, in ITA No.901/Bang/2014 dated 11.12.2015, relating to the Assessment Year 2002-03.
The appeal has been admitted on 29.11.2017 to consider the following substantial question of law formulated in the appeal memorandum: “Whether, on the facts and in the circumstances of the case, the Tribunal is right in dismissing the appeal preferred by the Revenue
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by quashing the re-assessment order on the ground that the said order has been passed by without supplying the reasons for re-opening without appreciating that the assessee was well aware of the reasons for invoking reassessment proceedings and had filed return in response to 147 notice and contested the proceedings actively and decisions relied upon by Tribunal have not been reached finality, further without taking note of section 292BB of the Act?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “8. We have perused orders and heard rival contentions. It is not disputed by revenue that assessee had vide its letters dated 12/9/2006 and 10/12/2007 requested AO to furnish reasons for which reopening was being attempted. Extracts from these letters are reproduced here:
“xxxxx”
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Thus there could be no dispute that assessee had sought from the AO reasons for reopening. Case of the revenue is that assessee was aware about reason and this was evidenced from letter dated 17/12/2007 filed before AO. We have made a walk-through of this letter. The said letter itself mentions that assessee was furnishing the information called for by AO. Specific reference was made to a letter dated 11/12/2007 of AO. There is no case for revenue that letter dated 11/12/2007 written by AO had given the reason for reopening to assessee. In the letter dated 17/12/2007, assessee had not only dealt with deduction claimed by u/s 10A of the Act but also on various other disallowances which were proposed by AO during the course of re-assessment proceedings. Thus, claim of revenue that assessee was clearly aware about exact reasons for which reopening was attempted to, falls flat. In any case, even if we presume that assessee was aware about exact reason for which notice u/s 148 was issued, this is still not be sufficient to satisfy the requirement in this regard. No doubt Hon’ble Madras High Court in case of Areva T&D India Ltd. (supra) as well as CIT vs. C.Palaniappan (241 CTR 207) had held that non-furnishing of reasons was only a
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supervening illegality and would not render the proceedings void by itself. However, both Hon’ble Delhi High Court in case of Chetan Gupta (supra) as well as Hon’ble Mumbai High Court in the case of CIT vs. Trend Electronics (ITA 1867 of 2013 dated 16/09/2014) had held that jurisdictional aspects should be strictly complied with by the authorities concerned and no question of knowledge could be attributed on the basis of implication. In taking this view, we are also fortified by judgment of jurisdictional High Court in CWT vs. case of Kothari Metal (WA No.218/2015(IT) dated 14/8/2015. In the said case, reopening was attempted on a return which was subject to processing u/s 143(1) of the Act. Their Lordships had held as under at paragraph 6 of its judgment:
“xxxxx”
We are, therefore, of the opinion that ld.CIT(A) was justified in taking a view that necessary jurisdictional requirement for initiating a reopening proceedings u/s 147 of the Act was not satisfied. Ground No.2 of the revenue is dismissed.”
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The Co-ordinate Bench of this Court in Kothari Metals V/s. Income-tax Officer Ward 1[4], reported in [2015] 377 ITR 581 [Karnataka], has considered the identical issue and we quote the finding of this Court hereunder for ready reference: “6. The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. After filing of the return in response to the notice issued under Section 148 of the Act or on request of the assessee requesting that the return of income initially filed be treated as a return of income filed in response to such notice, the assessee is entitled to be furnished the reasons for such re-opening, which can also be challenged independently. Since such reasons had not been furnished to the appellant, even though a request for the same had been made, we are of the opinion that proceedings for the re-assessment could not have been taken further on this ground alone.
Besides this, it is not disputed that the statement of some other person which was recorded and the appellant was asked to explain
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the same, was itself not furnished to the appellant-assessee. As such, besides non- furnishing of reasons for re-opening, there was also gross violation of principles of natural justice and in view of the aforesaid, we are of the opinion that writ petition against the re- assessment order dated 31.01.2014 ought to have been entertained and that dismissal of the writ petition on the ground of availability of alternative remedy was not justified in the facts of the present case.”
Similarly, this Bench in the case of Pr. Commissioner of Income Tax-4 and Another V/s. Shri.V.Ramaiah, in ITA No.451/2017 [D.D. on 02.07.2018], had an occasion to consider the identical substantial question of law. Having heard the learned counsel for the parties, we have rendered the decision and the relevant portion of which is quoted hereunder: “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
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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.
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.
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
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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.
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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.”
In view of the aforesaid findings arrived at by us in the judgment referred to, supra, we do not find any
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substantial question of law arising for our consideration in this appeal also.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.