Commissioner Of Income Tax-24 v. M/S Trend Electronics

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1867 OF 2013 Commissioner of Income Tax-24 Vs. M/s Trend Electronics ..Appellant ..Respondent .... Mr. Arvind Pinto, Advocate for Appellant.Mr. P.J. Pardiwalla, Senior Advocate i/b L.J. Law for Respondent. .... CORAM : M.S. SANKLECHA & G.S. KULKARNI, JJ. DATED : 16 SEPTEMBER 2015 P.C.: This appeal under Section 260A of the Income Tax Act,1961 (the 'Act') challenges the order dated 25 March 2013 passed by the Income Tax Appellate Tribunal (the 'Tribunal'). The impugned order is in respect of Assessment Year 2008-09. 2.Following questions of law are urged by revenue for ourconsideration: “1)Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in applying the ratio of the Apex Court inGNK Driveshafts (India) Ltd. Vs. ITO 259 ITR 19 (SC)when the facts are contrary to the facts of the instantcase? 2)Whether on the facts and in thecircumstances of the case and in law, the Tribunalhad ignored the fact that in the proceedings beforethe AO in subsequent hearings prior to assessment,the firm had neither sought for the reasons recorded,since by interference, they were already aware of thesame?” 3.The respondent-assessee filed it's return of income for theAssessment Year 2008-09 declaring total income of Rs.7.67 lakhs.This return of income was processed under Section 143(1) of theAct accepting the returned income. 4.On 26 March 2010, the Assessing Officer initiatedreassessment proceedings by issuing notice under Section 148 of theAct seeking to reopen the assessment for the Assessment Year 2008-09. On receipt of notice, the respondent-assessee by letter dated 28April 2010 sought copy of recorded reasons for reopening of 2 / 8 assessment in respect of notice dated 26 March 2010 under Section148 of the Act. The Assessing Officer by letter dated 29 April 2010directed the respondent-assessee to file it's return of income andalso informed the respondent-assessee that the reasons would befurnished after the return of income is filed. The respondent-assessee thereafter by letter dated 7 May 2010 informed theAssessing Officer that return of income filed on 29 September 2008under Section 139 of the Act be treated as the return of incomeconsequent to notice under Section 148 of the Act. The AssessingOfficer thereafter completed the reassessment proceedings on 30December 2010 under Section 143(3) r/w 147 of the Act withouthaving given a copy of the reasons recorded for issue of reopeningnotice dated 26 March 2010 to the respondent-assesse. 5.Being aggrieved, the respondent-assessee preferred anappeal to Commissioner of Income Tax (Appeals) (the 'CIT(A)').However, the appeal was not entertained by the CIT(A) whoconfirmed the action of the Assessing Officer and order dated 30December 2010. 5.Being aggrieved, the respondent-assessee preferred anappeal to Commissioner of Income Tax (Appeals) (the 'CIT(A)').However, the appeal was not entertained by the CIT(A) whoconfirmed the action of the Assessing Officer and order dated 30December 2010. 6.A further appeal was preferred by the respondent to theTribunal. The impugned order of the Tribunal records theundisputed fact that the respondent-assessee had sought for reasonsfor reopening notice dated 26 March 2010 from the AssessingOfficer. The reasons were admittedly not furnished to therespondent-assesee before the completion of the reassessmentproceedings. The impugned order places reliance upon the decisionof Apex Court in GNK Driveshafts (India) Ltd. Vs. ITO[1] wherein ithas been specifically provided that the Assessing Officer is bound tofurnish reasons for issuance of reopening of notice when sought forby the assessee. Further, reliance was placed upon the decision ofthis Court in CIT Vs. Videsh Sanchar Nigam Ltd.[2] wherein thisCourt has held that failure to furnish the recorded reasons for issueof reopening notices to the assessee before completion of theassessment proceedings would make the reassessment order passedin pursuance of such a notice bad in law. In the abovecircumstances, the appeal of the respondent-assessee was allowedby the Tribunal. 1 259 ITR 19 2 340 ITR 66 4 / 8 7.Mr. Pinto, the learned Counsel for the revenue submitsthat the respondent-assessee had only asked for reasons once anddid not further ask for reasons. Further he submits that as therespondent-assessee had participated in the proceedings before theAssessing Officer, it must be implied that reasons were furnished. 8.We find that the impugned order merely applies thedecision of the Apex Court in GNK Driveshafts (India) Ltd. (supra).Further it also follows the decision of this Court in Videsh SanchanrNigam Ltd. (supra) in holding that an order passed in reassessmentproceedings are bad in law in the absence of reasons recorded forissuing a reopening notice under Section 148 of the Act beingfurnished to the assessee when sought for. It is axiomatic thatpower to reopen a completed assessment under the Act is anexceptional power and whenever revenue seeks to exercise suchpower, they must strictly comply with the prerequisite conditionsviz. Reopening of reasons to indicate that the Assessing Officer hadreason to believe that income chargeable to tax has escapedassessment which would warrant the reopening of an assessment. 5 / 8 These recorded reasons as laid down by the Apex Court must befurnished to the assessee when sought for so as to enable theassessee to object to the same before the Assessing Officer. Thus inthe absence of reasons being furnished, when sought for wouldmake an order passed on reassessment bad in law. The recording ofreasons (which has been done in this case) and furnishing of thesame has to be strictly complied with as it is a jurisdictional issue.This requirement is very salutary as it not only ensures reopeningnotices are not lightly issued. Besides in case the same have beenissued on some misunderstanding/misconception, the assessee isgiven an opportunity to point out that the reasons to believe asrecorded in the reasons do not warrant reopening before thereassessment proceedings are commenced. The Assessing Officerdisposes of these objections and if satisfied with the objections, thenthe impugned reopening notice under Section 148 of the Act isdropped/withdrawn otherwise it is proceeded with further. Inissues such as this, i.e. where jurisdictional issue is involved thesame must be strictly complied with by the authority concerned andno question of knowledge being attributed on the basis of 6 / 8 6 / 8 implication can arise. We also do not appreciate the stand of therevenue, that the respondent-assessee had asked for reasonsrecorded only once and therefore seeking to justify non-furnishingof reasons. We expect the state to act more responsibly. 9.In view of the fact that the order of the Tribunal has onlyapplied the settled position of law in allowing the respondent-assessee's appeal. No substantial question of law arises for ourconsideration. 10.Accordingly appeal dismissed. No order as to costs. [G.S. KULKARNI, J] [M.S. SANKLECHA, J.] Order. CERTIFICATE Certified to be true and correct copy of the original signed