Pr.commissioner Of Income Tax-4 & Anr v. Shri.v.ramaiah

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 2[na]DAY QF JULY JZO18| PRESENT| THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND| THE HON'BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.451/2017 BETWEEN: 1.Pr. Commissionerot | Income Tax-4, BMTC Complex, Koramangala, Bengaluru. 2.Income Tax Officer, Ward-7(3), Bengaluru. APPELLANTS (By Mr.Sanmathi.E.I, Advocate) AND: Shri.V.Ramaian,No.49, Kaggadasapura,C.V.Raman Nagar,Bengaluru-560 093. RESPONDENT| (By Mr.A.Snankar & Sri.M.Lava, Advocates) Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah Tnis I.T.A is filed under Section 260-A of Income Tax Act.1961, arising out of order dated:10/01/2017 passed in ITA|No.1282/Bang/2013, for the Assessment Year 2009-2010.praying to: (a) Decide the foregoing question of law and/or such|other questions of law as may be formulated by the Hon bleCourt as deemed fit. (db) Set aside the appellate order dated:10/01/2017passed by tne Income Tax Appellate Tribunal, A Bencn,|Bengaluru, in appeal proceedings ITA No. 1282/Bang/2013 for|Assessment Year 2009-2010, as sought for in this appeal and to.grant such other relief as deemed fit, in the interest of justice. Tnis I1.T.A. coming on for admission, this dayDr, VINEE.KOTHARIJ. delivered the following:-_ JUDGMENT Mr.Sanmatn..E.I,Adv. for AppellantMr.A.Shankar and M.Lava,Advs. for Respondents Tne Revenue has filed this appeal under.Section| 260Aof theIncome Tax Act, 1961raising following| suggested substantial question of law as arising from the)order of the learned Income Tax Appellate Tribunal passedon10.01.2017In.ITA No.1282/Bang/2013, which is quoted below: “Whetner on tne facts and in tnecircumstances of the case, the TridDunal was Date of Judgment 02-07-2018 I.T.A.No.451/2017 Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 3/16 justified in law in setting aside the re-assessmentOrder|DYnoldingthattneassessing authority had not supplied tnereasons for re-assessment even tnough theassessee was made aware of tne crux of tnecase and assessee was provided sufficientopportunity of hearing and assessee hadactively contested the case before assessingauthority?” 2. The findings of the learned Tribunal with regard toquasning of the aforesaid impugned reassessment order is.that the reasons recorded by the assessing authority forreopening were never communicated to tne assessee|though the same were produced before the learnedTribunal for perusal. The findings of the Tribunal arequoted below for ready reference: | “Thus|ItIS|clearthatvideletterat.71.12.2011, the assessee nas once againreiterated a request for furnishing the reasonsrecorded for reopening of the assessment. Theassessee has stated that the Assessing Officerhas not furnisned tne reasons recorded for' reopening despite earlier request vide letterdt.10.07.7010. It is the case of the revenue|that the reasons were furnisned to the' dSSCSSCECOf)O04,11.701]1The.learned|DepartmentalRepresentativehas placedreliance on the order sneet at.04.11.7011 inthe assessment proceedings wnicn reads asUnder: "@.11.7011 In response to tne_ notice, tne|applicant's A/R-aC,S.ST]VoVenkatanarasimhan appeared & filed|the power, the case was discussed.The A/R was asked to furnish the copyof the R/I for 2009-10 & furnish|further details. Case is reposted for|nearing on 99.11.2011.” The order sheet at.4.11.2011 reproducedabove indicates that in response to tne Noticeissued under Section 142 dt.24.10.2011, the|Authorised Representative of the assesseeappeared before the Assessing Officer and filedthe Power of Attorney. The case was discussedwith the Authoriseaq Representative. The dSSCSSCECOf)O04,11.701]1The.learned|DepartmentalRepresentativehas placedreliance on the order sneet at.04.11.7011 inthe assessment proceedings wnicn reads asUnder: "@.11.7011 In response to tne_ notice, tne|applicant's A/R-aC,S.ST]VoVenkatanarasimhan appeared & filed|the power, the case was discussed.The A/R was asked to furnish the copyof the R/I for 2009-10 & furnish|further details. Case is reposted for|nearing on 99.11.2011.” The order sheet at.4.11.2011 reproducedabove indicates that in response to tne Noticeissued under Section 142 dt.24.10.2011, the|Authorised Representative of the assesseeappeared before the Assessing Officer and filedthe Power of Attorney. The case was discussedwith the Authoriseaq Representative. The Assessing Officer asked the A.R. to furnish thecopy of income for the Assessment Year 2009-10 and furtner detalis. Apart from wnat isrecorded in tne order sneet note, notning canbe read into these proceedings regardingsupply of reasons recorded for reopening of theassessment. Thus by no stretch of imaginationit can be inferred from the proceedingsrecordeq on 4.11.7011 that the reasons.recorded for reopening of the assessment werefurnished to the A.R. of the assessee. This factis again supported by tne letter at.21.12.2012wherein tne assessee has again stated thatdespite nis request at.10.2.2011 the reasonsrecorded for reopening were not furnished andagain requested the Assessing Officer forfurnisning the same. The CIT (Appeals) issueda remand order to ascertain tne fact of supplyof furnishing of tne reasons recorded forreopening of the assessment. The relevant:part of the remand report has been reproducedby the CIT (Appeals) at pages 3 & 4 of theimpugned order as under: In this case Information was received from theDeputy Director of Investigation (Inv) Unit II(1), Bangalore on 26/08/2010 tnat auring the InvestigationproceedingswithSri,RK.GovinaarajJ, he revealed that nis fatner in lawMr. V. Ramaian nad sold property situated atThimmatian Road, Bilakanalli Village, KasabaHobii, Bangalore and at Domulr 2[nd]Stage, 3[rd]Phase on 19/11/2008 for a total consideration|of Rs.45 crores. Further investigations bythem had revealed that the said Sri. Ramalah|nad not paid Capital gain tax on the above salefrom tne A.Y.7Z00-10. As Sri. V Ramaian wes|assessed to tax under this ward, the above|information was passed on this office. Sri. V.—Ramalian has stated in the statement recordedu/s 131 of IT Act that a sale proceeds ofRs.45.67 Crores has not been offered to tax.Accordingly, notice u/s 148 of IT Act wasissued asking assessee to file return of income.Shri Rameajian vide letter dated 10.02.270filed in the office on 11.07.7011 hes stated|that the return filed by him on 30.07.2009 with[TO|Werd5(2)videacknowleagementNo.000760 declaring income of Rs.2,56,922/-—snould be taken as return filed in response tosection 148 of the IT Act. Subsequentlyassessee filed a letter dated 2727.11.701 wherein he has stated that the return filed:under protest on 11.02.2011 declaring anincome of Rs.3,06,9272/- snould be taken asreturn filed in response to notice u/s 148 of ITAct. The assessee has also filed a copy ofcomputation of total income along witn thereturn. | That last para of the above remand reportstates that a copy of reasons for reopening.was duly handed over to tne assessee on4.11.2011 vide order sneet nothing. We navealready aiscussed tne order sneet at.4.11.2011.and found that there is nothing in the saidproceedings to indicate tnat the reasonsrecorded for reopening of the assessment werefurnished by the Assessing Officer of thedssessee.,ThusthisStatement.oftheAssessing Officer in the remand proceedingsdoes not borne out from the record particularlythe order sheet dt.4.11.7011. We find thet theCIT (Appeals) nas accepted the remand reportwitnout verifying tne claim of the assessee tnatthe reasons recorded for reopening were notsupplied to tne assessee. It is pertinent tonote that the statement in the remand report 8/16 That last para of the above remand reportstates that a copy of reasons for reopening.was duly handed over to tne assessee on4.11.2011 vide order sneet nothing. We navealready aiscussed tne order sneet at.4.11.2011.and found that there is nothing in the saidproceedings to indicate tnat the reasonsrecorded for reopening of the assessment werefurnished by the Assessing Officer of thedssessee.,ThusthisStatement.oftheAssessing Officer in the remand proceedingsdoes not borne out from the record particularlythe order sheet dt.4.11.7011. We find thet theCIT (Appeals) nas accepted the remand reportwitnout verifying tne claim of the assessee tnatthe reasons recorded for reopening were notsupplied to tne assessee. It is pertinent tonote that the statement in the remand report 8/16 is not an independent statement of theAssessing Officer but it is based on the ordersneet at.4.11.2011. Therefore, this statement|of the Assessing Officer is contrary to tne factas recorded in the order sheet and cannot be|accepted. I[nus it is clear that despite therepeated requests|DytheaSSESSE2E,theAssessingOfficerhascompletedtheassessment without furnishing the reasonsrecordedforreopeningOf|assessment.Furnisning the reasons recorded for reopening.of the assessment is mandatory condition asneid by the Hon’ble Supreme Court in the caseof GKN Driveshaft (India) Ltd. Vs. ITO (Supra)wherein the Hon'ble Supreme Court Nas laidaqown the principie that recorded reasons mustbe furnisned to tne assessee when ftheassessee sougnt for tne reasons. It is not anempty formality but the purpose is to enablethe assessee to file objection to the samebefore the Assessing Officer. Recording ofreasons and furnishing of the same has to bestrictly complied witn since it is Jurisdictionalissue. It is settied proposition of law that if theassessee sought the reasons recorded for thereopening then the Assessing Officer is bound 9/16 to supply the same and on filing of theobjections by tne assessee, the AssessingOfficer nas to first decide the same before|completing tne reassessment. Therefore theAssessing Officer is bound to dispose of theobjectionsbeforethecompletion|ofthereassessment and tnus it gives the jurisaictionto the Assessing Officer to complete thereassessment. The condition of supply of thereasons and aisposing of the objections prior to’completion of reassessment is manaatory andtherefore any aevelopment post completion ofreassessment without furnishing of the reasonswould not affect or obliterate the mandatorycondition and the legal consequence thereof.The reasons supplied after completion of thereassessment Decomes irrelevant as far as thejurisdiction issue of tne Assessing Officer isconcernedtodecidethevalidityofreassessment. Similar view nas been taken by tneHon’‘bie Bombay Hign Court in the case of CITVs. Trend Electronics in [ITA No.186/7 of 701as well as Delni High Court in the case of Prin.CIT Vs. Samcor Glass Ltd. & Anr. (supra). In 10/16 view of the facts and circumstances of the|case, we are of the considered view that theAssessing Officer has failed to furnisn theFed@SO?}recordedforreopeningOf|theassessment despite the repeated requests ofthe assessee then tne reassessment compileteawithout compliance of the mandatory conditionof furnishing the reasons recorded is notsustainable and therefore the same is bad in|law. Accordingly, we quasn the reassessmentorder passed under Section 134(3) r.w.s.147of the Act. 3.Tne.learned.counselfortneRevenue|Mr.Sanmathi.E.I, relying upon the decision of the MadrasHign Court in the case of|ROME FINDERS HOUSING| LTD. Vs. INCOME-TAX OFFICER, CORPORATE WARD2(3),CHENNAL|(2018)93|TAXMANN,COM361(MADRAS)nas submitted that this was a proceduralrequirement and any lapse in sucn compliance cannot.result in the quashing of the reassessment order and the.Tribunal ought to nave remanded the case back to the. 11/16 learned assessing authority.Para 18of the. said|Judgment is quoted below for ready reference: 3.Tne.learned.counselfortneRevenue|Mr.Sanmathi.E.I, relying upon the decision of the MadrasHign Court in the case of|ROME FINDERS HOUSING| LTD. Vs. INCOME-TAX OFFICER, CORPORATE WARD2(3),CHENNAL|(2018)93|TAXMANN,COM361(MADRAS)nas submitted that this was a proceduralrequirement and any lapse in sucn compliance cannot.result in the quashing of the reassessment order and the.Tribunal ought to nave remanded the case back to the. 11/16 learned assessing authority.Para 18of the. said|Judgment is quoted below for ready reference: “The disposal of objections is in the valueof a procedural requirement to appraise theassessee of the actual grounds which made theAssessing Officer to arrive at a prima facieSatisfactionthatthereWase€SCdPeOf|assessmentwarrantingreopeningtheassessment proceedings. The disposal of sucnobjection must be before the date of hearingand passing a fresh order of assessment. Incase, on a consideration of the objectionssubmitted by the assessee, the AssessingOfficer is of the view that there is no groundmade out to proceed, ne can pass an oraer towind up the proceedings. It is only wnen adecision was taken to overrule the objections,and to proceed further with the reassessmentprocess, the Assessing Officer is obliged to givedisposalTO theStatemengyOf|objectionssubmitted by tne assessee. ” 4. On the other hand, the learned counsel for the|assessee Mr.A.Shankar submitted that non-supply of the. Date of Judgment 02-07-2018 I.T.A.No.451/2017 Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 12/16 reasons recorded for re-assessment goes to the root of thematter and is a jurisdictional issue and in view of the)Hon’‘ble Supreme Court decision in the case ofGKNDRIVESHAFTS(INDIA)LID.Vs,INCOMETAX. OFFICER AND ORS. (259 ITR 19 (SC)), It cannot betreated only as a procedural lapse on the part of the.assessing authority. He further submitted that the facts ofthe case before tne Madras High Court in the aforesaid.case were different, where the assessing authority failed to|pass a preliminary order once the assessee raised the.objections with regard to the reassessment proceedings. 5. Having heard the learned counsels for tne parties, we are satisfied that no substantial question of law arisesin the present appeal filed by the Revenue in as mucn as.the recording of reasons for reassessment under Section147/148 of the Income Tax Act or non-communicationtnereof to tne assessee does not amount to a mere!procedural lapse. In view of the aforesaid Supreme Court.decision in)GKN DRIVESHAFT 'scase, it goes to the root Date of Judgment 02-07-2018 I.T.A.No.451/2017 Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 13/16 of the matter and renders the reassessment order passedby the assessing autnority without recording such reasons|and communicating the same to the assessee, as Deing.without jurisdiction. 6. The contention raised by the learned counsel fortne Revenue tnat in the order sneet dated 04.11.2011 In/the reassessment proceedings were duly noted by the.autnorised representative appearing on behalf of the)assessee and therefore, such assessee should be deemed.to nave been made aware of the reasons for reopening.does not impress us. 7. The Tribunal has clearly noted in its order afterlooking 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 duringthe 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 reasons for such reopening. The Date of Judgment 02-07-2018 I.T.A.No.451/2017 Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 14/16 7. The Tribunal has clearly noted in its order afterlooking 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 duringthe 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 reasons for such reopening. The Date of Judgment 02-07-2018 I.T.A.No.451/2017 Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 14/16 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 Nave raised|objections before the assessing authority and the assesseecould nave rebutted tne material on tne basis of which tne|impugned reassessment proceedings were undertaken Dy)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 didnot 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 aresupplied 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 quasnecd. Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 15/16 8. Tne decision relied upon by the learned counselfor the Revenue is distinguisnabie on facts. The order)which was to be passed by assessing authority as)preliminary objection of assessee, once the assessee Nas)raised the objection to sucn reassessment proceedings, the)meeting of such objections in the main reassessment|order, could be procedural aspect of the matter, but therecording of the reasons before the initiation of the)reassessment proceedings and communication thereof tothe assessee is sine qua non, as held by Hon’ble Supreme.Court and that goes to the root of the matter and confersor deprives the assessing authority of the jurisdiction to)undertake sucn reassessment proceedings, as the case.may be. — 9. In the present case, admittedly, such reasonswere not supplied to the assessee during the contemporary|periodbeforegoinganeac|witnthe.reassessmentproceedings. Therefore, the Tribunal in our opinion was)perfectly justified in quashing such reassessment order. | Pr.Commissioner of Income Tax-4 & anr. Vs. Shri.V.Ramaiah 16/16 10. We do not find any substantial question of lawarising in the matter. Therefore, the appeal of Revenue)Stands dismissed. No costs. Sd/-JUDGE. Sd/-. JUDGE. bnv.