SHRI SHARAD D. SAMPAT,MUMBAI vs. ITO 14(1)(3), MUMBAI

As ground no.3 is on legal and jurisdictional issue, we propose to deal with the same at the outset.

Briefly stated the facts are, assessee is an individual. For the assessment year under dispute, assessee filed his return of income on 7th January 2002, declaring total income of ` 83,383. On the basis of information obtained, as a result of search conducted on the assessee by FEMA authorities on 29th September 2000, the Assessing Officer having reason to believe that income chargeable to tax for the impugned assessment year has escaped assessment re– opened the same under section 147 by issuing notice under section 148 of the Act on 28th March 2008. In response to the said notice, assessee submitted his reply on 28th April 2008, requesting the Assessing Officer to treat the return of income filed originally to be the return in response to notice under section 148. Subsequently, in course of assessment proceedings, in response to the statutory

Being aggrieved by the assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals) challenging the assessment order, inter–alia, on the issue of re– opening under section 147 as well as on the merits of the additions made.

The first appellate authority, however, did not find merit in any of the grounds raised by the assessee and ultimately passed the impugned order dismissing the appeal.

Learned Departmental Representative vehemently opposing the contention of the A.R. submitted, assessee while complying to the notice issued under section 148 did not ask for communication of reasons recorded for re–opening the assessment. Only in the course of assessment proceedings, assessee on 10th December 2008, submitted a letter requesting for communicating the reasons. On receipt of the aforesaid letter of the assessee, the Assessing Officer on very same day issued a letter to the assessee communicating the reasons recorded for re–opening the assessment. Learned Departmental Representative submitted since the assessment in case of the assessee was required to be completed by 31st December 2008, as otherwise it would have become time barred, the Assessing Officer was compelled to 24th complete the assessment on December 2008, after communicating the reasons to the assessee and on the basis of submissions / compliance made by the assessee during the 8 Tata Communications Limited assessment proceedings. Learned Departmental Representative submitted, assessee all along was conscious of the reasons on which the assessment was re–opened as not only he participated in the assessment proceedings, but in compliance to the statutory notices issued under section 143(1) and 143(2) of the Act assessee has responded to the queries made by the Assessing Officer. Learned Departmental Representative submitted, in these circumstances, if at all there is any procedural irregularity in not communicating the reasons that will not invalidate the assessment proceedings as the assessee participated in the assessment proceedings and was given full opportunity to explain his case. He, therefore, submitted, if the bench feels that due to non–communication of reasons recorded before completion of assessment there is violation of rules natural justice, the matter can be restored back to the Assessing Officer for enabling the assessee to raise objection against the validity of re– opening and the Assessing Officer can dispose of the same by complying to the rules of natural justice. In this process, the procedural irregularity would be removed. For such proposition, he relied upon the decision of the Hon'ble Jurisdictional High Court in Rabo India Finance Ltd. v/s DCIT, [2011] 346 ITR 81 (Bom.). Learned Departmental Representative disputing the claim of the 9 Tata Communications Limited assessee that reasons were communicated to the assessee only on 29th December 2008, submitted, the Assessing Officer as per record has communicated the reasons to the assessee vide letter dated 10th December 2008, and once the letter was issued by the Assessing Officer prior to completion of assessment it is deemed that Assessing Officer has communicated the reasons to assessee.

We have patiently heard the parties and perused the material available on record. At the outset, certain facts need to be reiterated. As could be seen from the materials on record, the Assessing Officer on 28th March 2008, recorded reasons for re– opening of assessment for the impugned assessment year and sent the same for approval of the ACIT, in terms of section 151 of the Act. On the very same day, the ACIT granted approval for issuance of notice under section 148 and notice under section 148 was issued by the Assessing Officer on 29th March 2008. Therefore, the contention of the learned A.R. that no sanction was taken prior to issuance of notice under section 148 does not stand. The next issue arises for consideration is whether the assessment order passed under section 143(3) r/w section 147 is invalid for non– communication of reasons recorded prior to completion of assessment. As could be seen, in response to the notice under 10 Tata Communications Limited section 148, dated 29th March 2008, the assessee submitted its compliance vide letter dated 28th April 2008. However, a perusal of the said letter a copy of which has been submitted in the paper book would demonstrate that in the said letter the assessee had only requested the Assessing Officer to treat the return of income filed originally as a return in response to notice issued under section 148. Nowhere in the said letter, assessee had requested the Assessing Officer to communicate the reasons for re–opening. Assessee vide letter dated 10th December 2008, had requested the Assessing Officer to communicate the reasons for re–opening the assessment. However, as claimed by the assessee, reasons recorded for re– opening the assessment was served on the assessee only on 29th December 2008. In this context, the assessee has referred to the copy of envelope submitted in paper book. However, the Department has disputed the aforesaid claim of the assessee by stating that the letter communicating the reasons for re–opening of assessment was issued on 10th December 2008 and the postal cover referred to by the assessee, with certainty, cannot be said to be containing the letter issued by the Assessing Officer communicating the reasons for re–opening the assessment as such envelop could also have contained the assessment order passed by the Assessing

As far as the decision relied upon by the learned A.R. though we agree with the proposition laid down therein that communication of reasons recorded for enabling the assessee to raise objection is sin–qua–non for a valid assessment under section 143(3) r/w section 147 but at the same time such principle has to be applied looking into the facts and situations of each case. In case of GKN Driveshafts India Ltd. (supra), the Hon'ble Supreme Court has observed that after receiving notice under section 148, the proper course of action for the assessee is to file a return of income and if he so desire to seek reasons for issuing notices. If after receipt of reasons recorded, the assessee files objections for issuance of notice, the Assessing Officer is bound to dispose of the same by passing a speaking order. If we apply the principle laid down by the Hon'ble Supreme Court as aforesaid to the facts of the present case, it is to be seen that the assessee while complying to the notice under section 148 has not sought communication of reasons recorded for re–opening of assessment. In case of Videsh Sanchar Nigam Ltd. (supra) also the facts are different as even after repeated requests by the assessee reasons recorded were furnished to assessee only after completion of assessment. In case of Tata International Ltd. (supra) also the assessee in response to the notice

However, in the present case, assessee had admittedly sought the reasons for re–opening of assessment only in course of assessment proceedings on 11th December 2008 and not earlier. As observed earlier, since the assessment was getting time barred by end of December 2008, quite possibly the Assessing Officer without affording an opportunity to the assessee to raise objections on the reasons recorded for re–opening the assessment proceedings completed the assessment. Though, we are of the view that non– communication of the reasons for re–opening for enabling the assessee to raise objection is in violation of rules of natural justice but considering the peculiar facts and circumstances of the case to be fair to both the assessee and the department, we are inclined to restore the matter back to the file of the Assessing Officer for the purpose of affording the assessee an opportunity to raise objections against the re–opening of assessment considering the fact that assessee is now in possession of the reasons recorded for re– opening the assessment. We have come to the aforesaid decision being guided by the ratio laid down in case of GKN Driveshafts India Ltd. (supra) and Rabo India Finance Ltd. (supra). Only after

As far as the contention of the learned A.R. that reasons communicated to the assessee in letter dated 10th December 2008, is at variance with the reasons originally recorded at the time of re– opening of the assessment, after examination of record, we do not find the same to be valid as according to us the reasons communicated to the assessee vide letter dated 10th December 2008, is almost identical to the reasons recorded at the time of re– opening of assessment which was communicated to the assessee, as claimed by the learned A.R. on 16th February 2014, except for the fact that in place of “Sharad D. Sampat”, the name appears as “Bharat D. Sampat”. This, according to us, is a mere typographical / error. We hold such view because, as evident on record, the transactions referred to in both the reasons are not only identical but has also been owned up by the assessee not only in the statement recorded by the ADIT (Inv.) on 17th December 2007, a copy of which is at Page–30 of the paper book, but also in the 16 Tata Communications Limited submissions made by the assessee in course of assessment proceedings vide letter dated 10th December 2008, a copy of which is available at Page–8 of the paper book.

Before parting, we may observe, though both the sides were also heard on merit of the additions made but considering the fact that we have restored the matter back to the file of the Assessing Officer on the legal issue the issues relating to the additions made by the Assessing Officer are also restored back to his file to be considered denovo only after disposing of the objections of the assessee against the re–opening of assessment. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee in the matter.

In the result, appeal stands allowed for statistical purposes. Order pronounced in the open Court on 29.02.2016