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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal filed by the assessee is directed against the order of ld.
CIT (Appeals)-V, Gurgaon dated 27.10.2014 for the Assessment Year 2007-08.
Grounds of appeal taken by the assessee read as under :-
“1. The Ld. CIT (A) has erred in law and facts of the case in upholding the reopening u/s 147 and further upholding the validity of notice u/s 148 of Income Tax Act, 1961 which is beyond jurisdiction, void-ab-initio Since we have already quashed the reassessment order, there is no need to adjudicate the other grounds on merits being academic o and needs to be quashed.
2 /Del./2014 2. The Ld. CIT (A) has erred in ignoring assessee’s contention regarding non disposal of objections by the AO which were raised by assessee during the assessment year against the reopening of case which is highly arbitrary, unjustified and uncalled for.
3. The Ld. CIT (A) has erred in law and facts of the case in upholding the addition u/s 2(22)(e) of Rs.18,00,000/- which is highly unjustified, uncalled for and bad in law.”
Brief facts of the case are as under :-
“ In this case, assessment u/s 153A read with sec.143 (3) was completed on 24.12.2010 at an income of Rs. Rs.12,75,260/-, as returned in response to notice u/s 153A(1)(a). A search & seizure operation had been carried out at the residential premises of the assessee on 29.04.2008.
Later on proceedings u/s 147 was initiated and notice u/s 148 was issued on 14.3.2013. In response, the assessee stated that return filed on 14.05.2010 may be treated as having been filed in response to the aforesaid notice. Thereafter notice u/s 143(2) of the Act was also issued. It emerges that M/s G.P. and Company (P) Ltd, a company in which assessee is a substantial shareholder had raised loan of Rs. 36.00,000/- from M/s SVS Propmart (P) Ltd. The AO observed that the assessee Sh. Vipin Sharma and his brother Sh. Aman Sharma were substantial shareholders of more than 20% shares in both the companies. Hence, 50% of the loan of Rs.36,00,000/- was treated as deemed dividend in their respective hands. An addition u/s 2(22)(e) of Rs.18,00,000/- was therefore made in the hands of the assessee and assessment in the case completed at Rs.30,75,260/-.”
Ld. CIT (A) passed a very short order in this case referring to assessee’s brother, Shri Aman Sharma case as under :-
“5. Grounds of appeal nos.1 and 2: Here the assessee has challenged the proceedings u/s 147.
5.1 Identical grounds have been adjudicated in the case of assessee's brother, Shri Aman Sharma in Appeal no.49/CIT(A)(C)/GGN/2013-14 dated 27.10.2014 wherein at para 5.2, I have upheld the action of the AO. The same will also hold good here.
3 /Del./2014 6. Ground no: 3: Here the assessee has challenged the addition of Rs.18,00,000/- as deemed dividend. 6.1 Identical ground has been adjudicated in the case of assessee's brother, Shri Aman Sharma in Appeal no:49/CIT(A)(C)/GGN/2013- 14 dated 27.10.2014 wherein at para 6.2, I have upheld the action of the AO. The same will also hold good here.”
Against the above order, assessee is in appeal before us. We have heard both the parties and perused the records.
Ld. Counsel for the assessee submitted that the order of ld. CIT (A) in the case of assessee’s brother, Aman Sharma, which was identical, has been set aside by the ITAT and ITAT has allowed the appeal of the assessee by holding that jurisdiction assumed was not legal.
Per contra, ld. DR for the Revenue did not dispute that the facts are identical in the case of Aman Sharma.
Upon careful consideration, we note that identical order in the case of assessee’s brother, Aman Sharma has been set aside by the ITAT in for AY 2007-08 vide order dated26.04.2018 and ITAT has concluded as under :-
“5.1 ………..On being aggrieved by the order of Ld.CIT (A), the assessee company preferred an appeal before the Tribunal on the following grounds and argued the ground no. 2 regarding non- disposal of objections by the AO which were raised by the assessee during the assessment year against the reopening of case which is highly arbitrary, unjustified and uncalled for. With regard to this ground, we find that the case of the assessee was reopened by issuing notice u/s. 148 of the Act on 14.3.2013 (PB-17) and in response to the same, the assessee has filed detailed objections (PB- 23-46) against the notice of reassessment under section 147 of the Act and AO without disposing of the objections filed by the assessee, passed the assessment order u/s. 147 of the Act dated
4 /Del./2014 30.9.2013 thereby making an addition of Rs. 18 lacs on account of deemed dividend u/s. 2(22)(e) of the Act. We note that it is settled law that in case the objections were filed by the assessee against the notice u/s. 147 of the Act, then the AO is bound to dispose of the said objections by a comprehensive order, but in this case the AO has not done this, which is against the mandate of the decision of the Hon’ble Gujarat High Court in the case of Vishwanath Engineers vs. ACIT (2013) 352 ITR 549 wherein, the Hon’ble High Court has relied on the judgment of Hon’ble Apex Court in the case of GKN Driveshafts vs ITO reported in 259 ITR 19. We find that the Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/ [2002] 125 has observed as under:-
“19. Apart from the aforesaid fact, in case of GKN Drioeshafts (India) Ltd. (supra), the Supreme Court has clearly laid down the law that the Assessing Officer is bound to disclose the reason of reassessment within reasonable time and on receipt of the reasons, the assessee is entitled to raise objection and if any such objection is filed, the same must be disposed of by a speaking order before proceeding to reassess in terms of the notice earlier given.
In the case before us, in spite of repeated reminders by the assessee even pointing out the above law laid down by the Supreme Court, the Assessing Officer failed to dispose of the said objections and instead of that, straightaway passed the order of reassessment.
Thus, we find that the Assessing Officer acted without jurisdiction in initiating the proceedings for reassessment in spite of non-existence of the required conditions specified under the Act and even did not care to follow the norms laid down by the Supreme Court in the above decision by not disposing of the objections before passing the order of reassessment."
5.2 In view of the binding decision of the Hon'ble Supreme Court, as aforesaid, the re-assessment cannot be sustained. As observed herein above though the detailed objections were raised against reopening of the assessment, the AO did not dispose of the same till the conclusion of re-assessment proceedings and passed order under section 147 of the Act.
5.3 In the instant case, Ld. CIT(A) at para 2 of page no.9 of the order has made an attempt to distinguish the decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. by 5 /Del./2014 placing reliance on the decision of ITO vs. Smt. Gurinder Kaur (2006) 102 ITD 189 (Del ITAT) in which it was held that non- communication of reasons is not fatal. However, Ld. CIT(A) has been misled by the said decision since the said judgment is not applicable to the present facts of the case. The assessee has not contested the non-communication of reasons by the AO but has challenged the action of AO in not disposing off objections of the assessee which is mandated by the Hon'ble Supreme Court decision in the case of GKN Driveshafts (India) Ltd. 5.4 Keeping in view of the facts and circumstances of the case as explained above and respectfully following the precedent, as aforesaid, we are of the considered view that AO is under a mandate to dispose of such objections before proceeding with the assessment by passing a speaking order, which has not been done by him, therefore, the reassessment under section 147 cannot be sustained and hence, we quash the reassessment order and allow the ground no. 2 raised by the assessee. Since we have already quashed the reassessment order, there is no need to adjudicate the other grounds on merits being academic.”
Since the facts are identical, respectfully following the aforesaid precedent, we also held that jurisdiction assumed was not legal, hence we quash the assessment order. Since we have already quashed the reassessment order, there is no need to adjudicate the other grounds on merits being academic
In the result, the assessee’s appeal stands allowed.
Order pronounced in the open court on this 28th day of August, 2023.