Interesting Judgment : Reassessment not valid if done without disposal of assessee’s objections to reasons for reopening

short overview : Not passing a speaking order rejecting the objections of assessee to reopening of assessment but passing an order under section 147 making the additions based on reasons recorded had caused serious prejudice to interest of assessee. Thus, reopening had not been done in accordance with the law by AO and, therefore, reassessment order was set aside.

AO issued notice under section 148. Despite assessee making repeated requests for furnishing reasons recorded for reopening of assessment, AO did not provide the reason even before 13 months of the 1st request and when assessee filed objection to such reasons within 60 days, he did not disposed of the same by a speaking order but passed the assessment order under section 143(3) reead with section 147 making the additions based on reasons recorded.

 it is held that Not passing a speaking order rejecting the objections of assessee to reopening of assessment but passing an order under section 147 making the additions based on reasons recorded had caused serious prejudice to the interest of assessee. Thus, reopening of assessment had not been done in accordance with the law by AO and, therefore, reassessment order was set aside.

Decision: In assessee’s favour.

Relied: Bharatmaiya Memorial Foundation v. Dy. CIT (Exemption)-2, Ahmedabad (2018) 91 taxmann.com 25 (Gujarat) : 2018 TaxPub(DT) 1106 (Guj-HC) and GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC).

Supported by: Samsung India Electronics (P) Ltd. v. Dy. CIT, Circle-7 (I) & Ors. (2014) 362 ITR 460 (Del) : 2014 TaxPub(DT) 384 (Del-HC).

IN THE ITAT, DELHI BENCH

H. S. SIDHU, J.M. & PRASHANT MAHARISHI, A.M.

Nimitaya Hotel and Resorts Ltd. v. ACIT

ITA Nos. 1830, 1831, & 1832/Del/2014

ITA Nos. 1717, 1718, & 1719/Del/2014

1 April, 2019

Assessee by: Salil Kapoor, Advocate and Soumya Singh, Advocate

Revenue by: Pramita M. Biswas, Commissioner Departmental Representative

Prashant Maharishi, A.M.

This is the bunch of six appeals of Nimitaya Hotel & Resorts Ltd. for three assessment years i.e. assessment year 2007-08, 2008-09, and 2009-10 filed by the assessee as well as the learned assessing officer involving identical issue, therefore we have heard them together and disposed of by this common order.

2. First we deal with the appeal for assessment year 2007-08 in ITA Number 1830/Del/2014 filed by the assessee against the order of The Commissioner (Appeals)–. New Delhi dated 27-1-2014 raising following grounds of appeal.

“1. That the learned Commissioner (Appeals) erred in law as well as on facts to upheld the action of assessing officer to invoke reassessment proceedings under section 147 of the Income Tax Act, 1961.

2. That the learned Commissioner (Appeals) erred in law and on facts in observing and directing the assessing officer to take action against the assessee for infringement of section 269SS of the Income Tax Act, 1961 on the basis of alleged document on the basis of which assessment was made by the assessing officer and addition of Rs. 11.25 crores was made by the assessing officer.

3. That the learned Commissioner (Appeals) has exceeded his powers and jurisdiction in giving the direction to the assessing officer to take action against assessee for infringement of section 269SS.

4. That Commissioner (Appeals) has grossly erred in law and on facts in holding that the assessee company has taken or accepted a loan from Sanjeev Mahajan of Rs. 11.25 crores.

5. That the directions and observation of the Commissioner (Appeals) are illegal, bad in law and without jurisdiction and the same needs to be expunged.”

3. The learned assessing officer has also filed the appeal in ITA No. 1717/Del/2014 for the assessment year 2007-08 raising following grounds :–

“1. On the facts and in the circumstances of the case, the Commissioner (Appeals) has erred in deleting the addition of Rs. 11,25,00,000 made by the assessing officer on account of unexplained cash receipts by the assessee company outside the books of account.

2. On the facts and in the circumstances of the case the Commissioner (Appeals) has erred in holding that this cash received by the assessee company is a loan.

3. On the facts and in the circumstances of the case the Commissioner (Appeals) has erred in ignoring the fact that the amount of cash was given outside the books to Shr. Ram Mehar Garg, Director, to acquire controlling interest in the company which owns Hotel City Mart.

4. On the facts and in the circumstances of the case the Commissioner (Appeals) has erred in not appreciating the fact that the hotel was the property of the assessee company and the debentures were issues so as to convert them into equity shares and to pass the controlling interest of hotel to Sanjeev Mahajan’s Group concerns.

5. The order of the learned Commissioner (Appeals) is erroneous and is not tenable on facts and in law.”

4. Brief facts of case shows that search and seizure action under section 132 of The Income Tax Act (The Act) was carried out on 6-11-2008 on “Nimitaya group” of cases. During search at the residence of Sri Sanjeev Mahajan, certain loose papers containing details of payment made in cash and cheque was found. On the basis of the findings of search, it was found that unaccounted cash payment of INR 201,000,000 were made by Mr. Sanjeev Mahajan to Mr. Ram Maher Garg, director of the company M/s. Nimitaya Hotels & Resorts limited, for purchase of hotel building. Therefore, case of the assessee was reopened under section 148 of the income tax act. The learned assessing officer recorded the following reasons :–

“In the Nimitaya group of cases search under section 132 was carried out on 6-11-2008 at the various premises of the group concern as well as residential premises of directors. During the course of search at the residence of Sri Sanjeev Mahajan, loose papers containing details of payment made in cash and cheque was found which has been annexurised as page 35 and 37 of annexure A–6. On the basis of finding of search, it is proved that unaccounted cash payment of INR 201,000,000 were made by Sri Sanjeev Mahajan to Sri Rama Mahar Garg director of M/s. Nimitaya hotel and resorts Ltd. for purchase of hotel building. On this issue additions have been made in the hands of Sri Sanjeev Mahajan and Sri Ram Maher Garg under section 153A read with section 143 (3) of the act.

To verify the said facts the assessment records of M/s. Nimitaya hotel and resorts Ltd. has been produced and it is found that no such cash transactions have been shown in the books of account or in its return of income. This proves that the assessee company has failed to disclose truly and fully all material facts necessary for its assessment and in fact has concealed the true particulars of these transactions. As the assessee company owns the asset and the entire company has been taken over by the Nimitaya group addition on this account is also required to be made in the hands of the assessee company.

In view of the said facts, I have reason to believe that income of Rs. 112500000 chargeable to tax has escaped assessment for the assessment year 2007-08 within the meaning of section 147 of the act in the case of the assessee company. Accordingly notice under section 148 has been issued to the assessee.”

5. Necessary notices under section 143 (2) was also issued on 1-9-2010 in response to the return filed by the assessee on 23-8-2010 under section 148 of the income tax act. Subsequently on 8-12-2011 assessee filed the objection stating that the notice under section 148 is void ab initio and the reasons recorded are illegal and beyond the provisions of the law. It was stated that assessee has not sold any hotel property to Sri Sanjeev Mahajan as stated in the reasons recorded. It was further stated that assessee did not receive any cash amounting to INR 112,500,000 and assessee requested for providing the evidences with respect to that. It was further objected that addition has already been made in the hands of Shri Sanjeev Mahajan and Mr. Ram Mahar Garg and therefore as these amounts have already been taxed in the hands of somebody else it cannot now be taxed in the hands of the assessee. Assessee also objected that in case of the assessee only survey took place. It was further argued that lose documents mentioned in the reasons recorded are seized from third party and cannot be used against the assessee company in absence of any documentary evidence. The assessee also objected that the statement of Sri Sanjeev Mahajan has been recorded and therefore such a statement be given to the assessee as well as cross-examination of the gentleman be afforded before proceeding in this matter.

6. The issue is that the project named Hotel city Mart was initially developed by Ninex developers Ltd. a company controlled and owned by Mr. R. M. Garg and his associates. Subsequently Shri R.M. Garg and his associate incorporated the appellant company on 27-9-2006. Thereafter on 6-11-2006 Hotel city Ninex developers Ltd. sold Mart to the assessee for INR 200,000,000. Thus, the assessee became owner of Hotel city Mart. Later on the appellant issued debentures of INR 425,200,000 in assessment year 2007-08 to assessment year 2009-10 in favour of four different entities such as Nimitaya properties private limited, Nimitaya promoter’s Private Ltd, Mrs. Anita Rani and Express Earthmovers and equipments private limited. The amount received through cheque from all these four persons were found in annexure A–6 seized from Mr. Sanjeev Mahajan. There was also cash payment mentioned in the same document along with the cheque amount. In the books of account of the appellant, the cheque amounts were recorded however, the cash amount was not found recorded. On examination of the order of Mr. Sanjeev Mahajan passed by the Commissioner (Appeals) in case of that assessee it was found that Mr. Sanjeev Mahajan group subscribed the nonconvertible debentures in the appellant company which could not be letter on redeemed by the appellant therefore it got converted into equity shares and thereby Mr. Sanjeev Mahajan group got majority shareholding in the appellant company. Therefore according to this transaction Mr. Sanjeev Mahajan group got control of the Hotel city Mart project which did Mr. Rama Mahar Garg earlier control through the shareholding of this company. Therefore, in total relations of the events and the documents the subscription for purchase of nonconvertible debentures made it a case of an arrangement, which was already fixed, and only the emotions were to be gone through. Accordingly, it is apparent that at the time of issue of the nonconvertible debentures it was predetermined that appellant would fail to redeem the debenture and Mr. Sanjeev Mahajan group would be granted equity shares in the assessee company, which will give control of the assessee company through the shareholding and ultimately indirect ownership of total city Mart project. Thus, Hotel city Mart owned by the assessee company was transferred between Mr. Sanjeev Mahajan and Mr. Ram Meher Garg for consideration of INR 62,50,00,000. However, Hotel city Mart is owned by the assessee company, however, ownership of this company was transferred through above arrangement between Mr. Sanjeev Mahajan and Mr. Ram Maher Garg. Out of the above transaction of INR 625,000,000, INR 201,000,000 is transacted in cash. This was the issue examined by the assessing officer in the case of this company. The learned assessing officer noted that during the course of search at the residence of Sri Sanjeev Mahajan one handwritten page was found from the backside drawer in the bedroom of Shri Sanjeev Mahajan which were seized as annexure one as page number 37 of annexure A–1/parties G–1. The above paper shows some figure written against the person and also captioned as “CQ” for cheques and “C” for cash. Therefore the learned assessing officer noted that Sanjeev Mahajan and the Mr. Garg has entered into the transaction which shows the deal value of INR 625,000,000 which was to be paid at various stages. They have shown only part payment by cheque and balance in cash, which has not been shown. Thus, the cash payment of INR 201,000,000 is not shown. It was also noted by the learned assessing officer that the payment shown to have been made by Mr. Sanjeev Mahajan to Mr. Garg in page number 37 is linked with the schedule given in page number 35. He also noted that the content of the page number 37 are correct and it proves that the cash payment given in this page are made outside the books of accounts. Based on this finding the learned assessing officer confronted the same to Mr. Sanjeev Mahajan on the date of search as well as during the post search enquiries. However MR. Mahajan stated that handwriting on page number 37 is not of him and belongs to some of his staff members or somebody else but not known to him. Though he admitted that the page contains some rough calculation, however he stated that the paper does not pertain to his business transactions. He further stated that the number of cheque payment could not be corroborated with payments made by his group. After considering the submission of the assessee, the learned assessing officer concluded that assessee has received total cash payment of INR 20.10 crore that is unaccounted. Out of this unaccounted cash, Rs. 1125,00,000 has been received during the year under consideration (i.e. assessment year 2007-08) and therefore he made an addition of INR 112,500,000 in the hands of the assessee on protective basis. The reason for making the protective assessment in the hence of this company was that that same amounts have already been added in the hands of Sri Ram Maher Garg for respective years. For assessment year 2007-08 the addition of INR 112,500,000, for assessment year 2008-09 addition of INR 53,500,000 and for assessment year 2009-10 addition of INR 35,000,000, totaling to INR 201,000,000 was made on protective basis in the hands of the appellant assessee company and on substantive basis in the hands of Shri Ram Mehear Garg. Consequently the assessment under section 143 (3) read with section 147 of the income tax act was passed on 15-12-2011 making the above addition in the hands of the assessee company and assessing the company of INR 112,500,000 against the NIL return filed. Additions on the similar basis of the amount stated above for assessment year 2008-09 and 2009-10 were made on protective basis.

7. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned Commissioner (Appeals). Assessee challenged the issue before the learned Commissioner (Appeals) with respect to the reopening of the assessment. It was submitted that assessee filed objection against the reopening of the assessment on 8-12-2011, which were never disposed of by the assessing officer or even discussed in the assessment order itself. Therefore, it was pleaded that when no order is passed against the objection filed in response to reasons recorded the assessment order passed under section 147 of the act is invalid. The second argument that was raised was that the learned assessing officer issued notice under section 148 on 10-8-2010 and which were served on assessee on 10-8-2010. The assessee requested for copies of the reasons recorded on 14-10-2010, 10-6-2011, 17-6-2011, 28-6-2011 but such reasons were only provided to the assessee on 10-10-2011. Therefore, it was pleaded that non-provision of the reason to the assessee in time vitiates the assessment proceedings and hence the order is illegal. It was further argued that assessment is framed without dealing with the objection even in the assessment order therefore the assessment is invalid. On the merits of the issue, it was argued that the addition has already been made originally on substantive basis in the hands of Shri Ram Mehar Garg and therefore it cannot be made in the hands of the assessee company. The assessee also contested that the above income added by the learned assessing officer cannot be falling under any of the specific head of income and therefore it cannot be taxed. It was also prayed that there is no transaction with Sri Sanjeev Mahajan of the assessee and therefore addition on that basis cannot be made. The assessee also objected that the copies of the statement or explanation of Sri Sanjeev of March and was not confronted to the assessee. Assessee also objected to the arbitrary interpretation of the seized document made by the assessing officer. It was further argued that seized documents does not belong to the assessee company but is pertaining to somebody else and therefore no addition in the hands of the assessee could be made. The assessee also extensively relied on the order of the learned Commissioner (Appeals) in the hands of Sri R Garg wherein the additions substantively made has also been deleted stating that there is no correlation between the documents seized and the addition made. Therefore it was prayed that when the addition itself has been deleted on substantive basis in the hands of Mr. are M Garg on altogether a different reason, but not for the reason that it is chargeable to tax in the hands of the assessee company, the addition itself cannot now be sustained in the hands of the company.

8. The learned Commissioner (Appeals) passed an Order, dt. 27-1-2014 wherein he noted the facts in brief that the assessee is engaged in the business of developing the Hotel purchased for a consideration of INR 200,000,000 under an agreement to sale dated 13-11-2006 in the year under consideration. He also noted that on the basis of the Seas annexure unaccounted cash payment of rupees 20.10 crores was made out of which for assessment year 2007-08 INR 112,500,000, for assessment year 2008-09 INR 53,500,000 and for assessment year 2009-10 sum of INR 35,000,000 is been paid by Sri Sanjeev Mahajan to Shri Ram Meher Garg director of the assessee for purchase of hotel building and as such addition has been made both in the hands of Mr. Sanjeev Mahajan and Mr. Garg under section 153A and section 143 (3) of the act. He further noted that the addition has been made on protective basis in the hands of the assessee company and on substantive basis in the hands of Mr. Garg.

9. On the issue of the reopening of the assessment challenged before him, he confirmed the action of the learned assessing officer. He held that that the learned assessing officer has followed all the procedures laid down in the act on recorded reasons, which had a live link with the material in his possession. Therefore, he has reason to believe that income has escaped the assessment. He further held that by assessing officer during the course of assessment proceedings, the submissions of the assessee were also duly considered before framing the assessment order, and therefore there is no infirmity with respect to reopening. He further held that reopening in the case of the assessee was made on 10-8-2010 and the assessment in case of Mr. Ram Maher Garg was passed on 31-12-2010 March after the reopening in the case of the assessee he further noted that Mr. Garg filed the reply only on 25-8-2010 and therefore everything put together on the date of reopening the assessing officer had genuine belief to infer that the income has escaped assessment. He even otherwise held that there is no prejudice caused to the assessee by providing reasons of reopening recorded by the assessing officer and therefore there is no infirmity in the order of the learned assessing officer for reopening of the assessment. Accordingly, he rejected the ground against reopening of assessment.

10. With respect to the addition of INR 112,500,000, in paragraph number 8 of his order he noted that arrangement with respect to the issue of nonconvertible debenture by the appellant company in favour of Mr. Sanjeev Mahajan resulting into subsequent allotment of shares, he noted that when the appellant company has received the cheques which are duly recorded in the books of the appellant company the sums received in cash have not been recorded therefore he held that INR 201,000,000 which is received by the appellant company outside the books of the account. He further noted that as Hotel Metro continues to be the property of the appellant company, the conclusion that this sum was received towards the sale of property is not justified at this moment, as there was no sale of property by the appellant. Therefore, ultimately he held that the above sum couldn’t be chargeable to tax in the hands of the assessee.

11. However he issued notice under section 269SS of the act to the assessee for raising loans in cash from Sri Sanjeev Mahajan or his group of companies. The assessee submitted reply, which is, recorded at para number 8.3 of his order. The assessee submitted that as it has not received any loan from Mr. Sanjeev Mahajan group there is no question of applicability of provisions of section 269SS of the act. The learned Commissioner (Appeals) rejected the explanation of the assessee and held that when there was a sum of INR 201,000,000 remitted in cash by the Sanjeev Mahajan which is evident from the seized paper found during the course of search which is supported by the corroborative evidences of the bank statement and the financial statements of the appellant company, coupled with the statement of Mr. Sanjeev Mahajan and provisions of section 292C, relying on the decision of the honourable Delhi High Court, he took a view that the noting is on the documents are required to be read as a whole, when cheque entries are duly found to be recorded in the appellant’s books of accounts, cash amount reflected therein leads to the conclusion that assessee has raised cash loan. Therefore he held that the cash loan has been accepted by the assessee outside the books of accounts which is an infringement of section 269SS of the act and therefore he directed the learned assessing officer accordingly to take the necessary action.

12. Therefore ultimately he deleted the addition of INR 112,500,000 made by the learned assessing officer on protective basis in the hands of the company for the reason that there is no sale of property, however, he directed the assessing officer to take action for infringement of section 269SS of the act.

13. Therefore, assessee aggrieved with the order of the learned Commissioner (Appeals) has preferred appeal before us. As per ground number 1 assessee has challenged the reopening of the assessment proceedings, as per ground number 2 and 3 assessee has challenged the action of the learned Commissioner (Appeals) giving direction to the learned assessing officer to take action against the assessee for infringement of section 269SS of the act and also challenged the powers of the learned Commissioner (Appeals). Ground number 4 is challenged the finding of the learned Commissioner (Appeals) that assessee company has taken/accepted a loan from Sanjeev Mahajan of INR 112,500,000. Therefore the only grievance of the assessee is with respect to reopening of the assessment as well as on the issue of powers of the learned Commissioner (Appeals) giving direction to the assessing officer and applicability of section 269SS of the act to the whole transaction.

14. On the issue of reopening the assessee stated that the assessment order under section 143 (3 read with section 147 has been passed without disposing of the objections filed by the assessee against the issuance of notice under section 148 and the reasons recorded for reopening. The claim of the assessee is that that assessee has filed objections before the learned assessing officer against the reopening wide letter dated 8-12-2011 which have never been disposed of by the assessing officer and therefore it is violated the law laid down by the honourable Supreme Court in case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC). He further stated that such an action is fatal to the reassessment proceedings and the consequent reassessment order. To support his contention he relied on the decision of the honourable Delhi High Court in (2016) 284 CTR 68 (Del) CIT v. Tupperware India private limited and Ferrous Infrastructure (P) Ltd. v. DCIT 63 taxmann.com 201 : 2015 TaxPub(DT) 2616 (Del-HC) wherein it has been held that noncompliance by the assessing officer of the mandatory procedure laid down by the honourable Supreme Court is an illegality resulting in quashing of the reopening order and the consequent reassessment.

15. The second contention against reopening was that notice under section 148 of the act was issued to the assessee on 10-8-2010, thereafter-repeated requests for made for copies of the reasons recorded which were supplied to the assessee only on 10-8-2010, and therefore same are recorded on that date only. The learned Authorised Representative referred to the reasons recorded by the assessing officer wherein the about it was mentioned. He therefore submitted that at the time of issue of the notice no reasons were recorded. He once again relied upon the decision of the honourable Delhi High Court in 63 taxmann.com 201 : 2015 TaxPub(DT) 2616 (Del-HC).

16. The 3rd contention against the reopening was that reasons recorded do not show escapement of income and the income alleged to have been escaped assessment is already added in the hands of other assesses Sri Sanjeev Mahajan and Mr. Rama Mahar Garg. He submitted that as the income has already been taxed in the hands of these persons there is no reason that the income has escaped assessment in the hands of the assessee. It was further submitted that assessee is nowhere in the picture in the whole transaction and therefore the reasons recorded by the learned assessing officer do not show any escapement in the hands of the assessee company.

17. He further stated that reopening could not be made to assess the income in the hands of the assessee company on protective basis. The assessment in the hands of the assessee on protective basis itself shows that there is no escapement of income in the hands of the assessee and assessing officer himself believes that the income is belonging to somebody has however just to protect the revenue the income is taxed in the hands of the assessee. He referred to the decision of the coordinate bench in (2008) 123 ITD 568 (Bang) : 2009 TaxPub(DT) 561 (Bang-Trib) and 101 taxmann.com 19 : 2018 TaxPub(DT) 8061 (Mum-Trib).

18. On the issue of initiation of proceedings under section 269SS he submitted that the learned Commissioner (Appeals) has held that assessee has contravened the provisions of the above section merely on the basis of the presumption regarding loan, which is otherwise not supported by any material on record or any entry in the books of accounts of the assessee. The revenue has held that it is the unaccounted income of Shri Rama Mahar Garg being sale proceeds of the property. Even otherwise stated that the allegation of the learned Commissioner (Appeals) violation of provisions of section 269SS is wholly unfounded and is not even the case of the learned assessing officer therefore it cannot be sustained.

19. Even otherwise, he stated that as per the provisions of section 251 (1) of the act, the Commissioner appeal does not have any power to give such a direction to the learned assessing officer.

20. In view of this he submitted that the learned Commissioner (Appeals) has wrongly upheld reopening of the proceedings for reassessment under section 147 of the act as valid and also exceeding is jurisdictional power in direction to the learned assessing officer to initiate action under section 269SS of the act.

21. The learned Departmental Representative vehemently supported the order of the learned assessing officer and the learned Commissioner (Appeals) on the issue of reopening of the assessment. With respect to the merits of the addition, she submitted that the learned Commissioner (Appeals) has wrongly deleted the whole addition as the property belongs to the assessee company, which has been transferred. On the issue of powers of the learned Commissioner (Appeals), in issuing direction to the learned assessing officer, she submitted that the learned Commissioner (Appeals) has merely given direction to the learned assessing officer to look into the applicability of the provisions of section 269SS of the act. She submitted that it is within his powers to give such direction. She submitted that the learned Commissioner (Appeals) has neither levied penalty under section 271E or D of the income tax act but has merely directed the learned assessing officer to look into whether same applies to the facts of the case are not.

22. The learned Authrorised Representative on the merits of the addition stated that that the learned Commissioner (Appeals) has relying on the findings of the learned Commissioner -Appeal in case of Mr. Sanjeev Mahajan and hold that presumption under section 132 (4A) and 292C is applicable in the instant case. He stated that Sanjeev Mahajan was covered under the search, where in the instant case of appellant, there was no search conducted on the assessee and therefore the presumption under section 132 (4A) read with section 292C of the act is not available to the revenue against the assessee. Even otherwise, it was submitted that these documents have not been recovered during the course of search pertaining to the assessee or belonging to the assessee.

23. He further stated that the income has already been assessed in the hands of Mr. Sanjeev Mahajan and Shri Ram Mahar Garg and therefore addition once again cannot be made in the hands of the assessee.

24. He further submitted that the learned assessing officer has already made the addition in the instant case as unaccounted income received by the assessee against the sale of the property without noticing that assessee has not at all sold any property and is still the owner of the city Mart Hotel. The assessing officer has already assessed the same as income in the hands of Shri Ram Mahar Garg as unaccounted sale proceeds received on sale of property, therefore, there is no basis for adding the same income again in the hands of the assessee in the instant case.

25. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the various judicial precedents relied up on by both the parties.

26. We 1st attend to the issue of the reopening of the assessment. In the present case, notice under section 148 of the income tax act was first issued on 10-8-2010. Such notice is placed at page number 94 of the paper book. It was also received by the assessee on 10-8-2010. On receipt of such notice assessee submitted a letter dated 23-8-2010 wherein it has been stated that the return originally filed by the assessee on 22-4-2010 may kindly be treated as return filed in response to notice under section 148 of the income tax act. Such letter is placed at page number 95 of the paper book. After filing the return of income the assessee submitted letter dated 14-10-2010, sick 10-6-2011 and 28-6-2011 for providing the copy of the reasons recorded under section 148 (2) of the income tax act. The reasons were provided to the assessee on 10-10-2011. Thereafter the assessee submitted objections against initiation of proceedings under section 147 of the income tax act on 9-12-2011. The learned assessing officer passed an assessment order under section 143 (3) read with section 147 of the income tax act on 15-12-2011. Therefore, firstly, that assessee was not provided reasons for almost 13 months, when the assessment was getting time barred on 31-12-2011, shortly before that on 10-10-2011 the assessee was provided the copies of the reasons recorded. The assessee also took almost 60 days to file objections against the reasons of reopening. Assessee also filed such objections only before 21 days of the assessment order getting time barred. The assessing officer also passed an assessment order on 15-12-2011.

27. Honourable SC in GKN Drive Shaft (India) Limited (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC) has held that :–

“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years.”

28. Honourable Gujarat High court notices that there is no time limit for performing such acts. Therefore in Sahkari Khand Udyog Mandal Ltd. v. Asstt. CIT (2014) 46 taxmann.com 69 : 2014 TaxPub(DT) 2465 (Guj-HC) : (2015) 370 ITR 107 (Guj.) (para 5.2) it held as under :–

“13. It can thus be seen that there are four important stages once the assessing officer issues notice for reopening of the assessment. Such stages are: (i) the assessee if he so wishes, may demand the reasons recorded by the assessing officer after filing return in response to notice under section 148 of the Act, (ii) the assessing officer supplying such reasons to the assessee, (iii) the assessee raising objections to the notice for reopening and (iv) the assessing officer disposing of the objections raised by the assessee.

14. In various cases referred to above, at different stages, unduly long time is consumed either by the assessee or by the assessing officer. Cases referred above are only few out of many cases where similar situation has arisen. It is not necessary to refer to all such cases since we have referred to some cases which would represent the cross-section. Stages (i) and (iii) mentioned above are in the hands of the assessee while stages (ii) and (iv) are in the hands of the assessing officer. With a view to streamlining this procedure, and to ensure, as far as possible, the assessing officer is not faced with the unenviable task of completing the assessment proceedings in a few days left before the same became time barred, we would like to give certain directions of general implication which, we would expect, are followed by all concerned. While doing so, we are conscious that these stages are provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) and we would be giving directions only to the extent the said judgment already does not provide for. We have noticed that considerably long time is consumed sometimes by the assessee demanding the reasons recorded by the assessing officer and sometimes the assessing officer complying with such a request of the assessee. It is an accepted proposition that the reasons recorded by the assessing officer are not confidential and the assessee whose assessment is being reopened has a right to know such reasons. We therefore thought that these two stages can be substantially eliminated by giving suitable directions. The further stage is of the assessee raising objections which often times is done after much delay and the last stage comes where the assessing officer deals with such objections. This is yet another problem area where unduly long time is consumed by the assessing officer. Under the circumstances, following directions are issued :–

(1) Once the assessing officer serves to an assessee a notice of reopening of assessment under section 148 of the Income Tax Act, 1961, and within the time permitted in such notice, the assessee files his return of income in response to such notice, the assessing officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons.

(2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons.

(3) If objections are received by the assessing officer from the assessee within the time permitted hereinabove, the assessing officer would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee.

(4) This is being done in order to ensure that sufficient time is available with the assessing officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the assessing officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided hereinabove would not apply in such cases.

(5) In the communication supplying the reasons recorded by the assessing officer, he shall intimate to the assessee that he is expected to raise the objections within 60 days of receipt of the reasons and shall reproduce the directions contained in sub para 1 to 4 hereinabove giving reference to this judgment of the High Court.

(6) The Chief Commissioner and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all the assessing officers for scrupulously carrying out the directions contained in this judgment.”

29. Honourable Gujarat High Court once again the objections were belatedly filed by the assessee in Bharatmaiya Memorial Foundation v. Dy. CIT (Exemption)-2, Ahmedabad (2018) 91 taxmann.com 25 (Gujarat) : 2018 TaxPub(DT) 1106 (Guj-HC) the objections raised by the assessee were filed even after hundred days of the receipt of reasons recorded, has held as under :–

“11. However, a disturbing aspect of the matter is that in this case the assessee had filed objections in response to the reasons recorded by the assessing officer. While it is true that such objections were filed belatedly after a considerable time, however, the same had been filed before the assessment order came to be framed. Once the objections had been submitted by the petitioner, in view of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), the assessing officer was duty bound to decide the same by a reasoned order. In the present case, the assessing officer has placed reliance upon the decision of Sahkari Khand Udyog Mandal Ltd.’s case (supra) while holding that the objections raised by the assessee at a belated stage beyond the time framed stipulated by the court in the above decision need not to be entertained. In this regard it may be germane to refer to the following observations made by the court in the above referred decision, the relevant portion whereof reads as under :–

“4. This is being done in order to ensure that sufficient time is available with the assessing officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the assessing officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply in such cases.”

12. Thus, it is clear that the court has set out a time line for submission of objections and deciding the same. However, at the same time, the court has also clarified that it would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided therein would not apply in such cases. Thus, in case where the objections are submitted by the assessee belatedly the time prescribed by the court would not apply, however, this does not absolve the assessing officer from deciding the objections in the light of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra). Therefore, the assessing officer was not justified in proceeding to pass the impugned order without deciding the objections raised by the petitioner. In any case, since the notice, which is the foundation for the assessment order, itself is held to be unsustainable, the assessment order would also be rendered unsustainable.”

30. Honourable Delhi High court in 2013) 40 taxmann.com 299 (Delhi) : 2014 TaxPub(DT) 384 (Del-HC) : (2014) 362 ITR 460 (Delhi) has laid down the importance of filing objections and its treatment by learned assessing officer as under :–

“7. In order to protect the interest of the petitioner, as some apprehension has been expressed that the assessing officer may directly pass the re-assessment order, we are inclined to pass directions. It is directed that the petitioner will file objections before the assessing officer within a period of two weeks from today. The petitioner through their Authorised Representative will appear before the assessing officer on 28-11-2013, when a date of hearing will be fixed for addressing arguments on the said objections. The assessing officer will first dispose of the objections by a speaking order meeting the contentions and issues raised by the petitioner. In case the objections are rejected, the assessing officer will give at least three weeks’ time to the petitioner to approach the court before taking up the re-assessment proceedings on merits. The aforesaid directions will protect the interest of the petitioner and in case the objections are rejected, it will be open to them to approach the court and raise all contentions and issues, including the contentions and issues raised in the present writ petition. We have deliberately only referred to the contentions of the counsel for the parties and not expressed our opinion on any contention raised to avoid prejudice to any party as an order of remit is being passed.”

31. In view of above facts that the learned assessing officer despite making repeated requests by the assessee for furnishing the reasons recorded for reopening of the case did not provide the reasons even before 13 months of the 1st request and when assessee files objection to such reasons within 60 days, he does not disposal of them by a speaking order but passes the assessment order under section 143 (3) read with section 147 of the act. This itself shows that reassessment proceedings requires to be quashed as the neither rejection not acceptance of the objections of the assessee has prejudiced the interest of the assessee to challenge the same before the higher forum. Therefore not passing a speaking order rejecting the objections of the assessee but passing an order under section 147 of the act making the additions based on reasons recorded has caused serious prejudiced to the interest of the assessee. In view of this respectfully following, the judicial precedent cited above the reopening of the assessment is quashed. Therefore, the learned Commissioner (Appeals) was not correct in holding that the reopening has been done in accordance with the law by the assessing officer. Accordingly, ground number 1 of the appeal of the assessee is allowed.

32. In view of our decision on ground number 1 of the appeal of the assessee ground number 2–4 of the appeal are not required to be adjudicated.

33. Accordingly, appeal of the assessee in 1830/Del/2014 is allowed.

34. Both the parties submitted that facts in the appeal of the assessee for assessment year 2008-09 and 2009-10 in ITA number 1831 and 1832/Del/2014 are identical. They also stated that their arguments are also similar.

35. We have carefully considered the rival contentions and perused the orders of the lower authorities. For assessment year 2008 9 the notice under section 148 of the income tax act was issued on 10-8-2010, assessee submitted a letter dated 23-8-2010 stating that the return or originally filed may be treated as return in response to the notice. The reasons were provided to the assessee on 10-10-2011 despite request dated 14-10-2010, 10-6-2011, and 28-6-2011. The assessee filed objection on 9-12-2011. The learned assessing officer passed the assessment order without passing a speaking order on the objections of the assessee. Therefore, for the similar reasons as stated by us for assessment year 2007–at we crash the reassessment proceedings initiated by the assessing officer for assessment year 2008-09. Accordingly, ground number 1 of the appeal of 1831/Del/2014 is allowed.

36. Not all other grounds in that appeal are required to be adjudicated in view of our decision in ground number 1 of the appeal of the assessee.

37. Accordingly, appeal of the assessee in ITA Number 1831/Del/2014 is allowed.

38. The similar are the facts and the dates for assessment year 2009-10. Therefore for the reasons given by us in disposing of the appeal of the assessee for assessment year 2007-08, we also reverse the order of the learned Commissioner (Appeals) and hold that reopening of the assessment made by the learned assessing officer for this year is invalid. Accordingly, ground number 1 of the appeal of the assessee in ITA number 1832/Del/2014 is allowed.

39. As we have allowed the ground number 1 of the appeal of the assessee for assessment year 2009-10 the other grounds are not required to be adjudicated.

40. In view of above facts the appeal of the assessee for assessment year 2009-10 is allowed.

41. In the result all 3 appeals filed by the assessee in ITA number 18330/Del/2014 for assessment year 2007-08, ITA number 1831/Del/2014 for assessment year 2008-09 in ITA number 1832/Del/2014 for assessment year 2009-10 are allowed wherein we have crash the reopening proceedings based on the judicial precedent where the learned assessing officer has failed to pass a speaking order on the objections against the reopening raised by the assessee.

42. As we have already quashed reopening of the assessment for assessment year 2007-08 and 2008-09 and 2009-10, ITA number 1717/Del/2014, ITA number 1718 /Del/2014 in ITA number 1719/Del/2014 of the learned assessing officer are also dismissed.

43. Accordingly, all six appeals are disposed of by this common order.