Reassessment – Validity – Section 147 – A. Y. 1993 -94 – Non-supply by the AO of reasons recorded for reopening the assessment (even where the 14 reopening is prior to GKN Driveshafts 259 ITR 19 (SC)) renders the reassessment order bad as being without jurisdiction

CIT vs. IDBI (Bom); ITA No. 494 of 2014 dated 19/09/2016; www.itatonline.org:

For the A. Y. 1993-94, the
assessment of the assessee was reopened by issuing notice u/s. 148 of the
income­ tax Act, 1961. The assessee filed return in response to the notice and
requested the reasons for reopening. In spite of the repeated request the
reasons were not furnished but the reassessment was completed. The assesee
challenged the reassessment order on the ground that the reassessment made
without furnishing the reasons for reopening is invalid. The tribunal accepted
the assessee’s claim and held that the reassessment order is invalid.

On appeal by the revenue, the
Bombay high Court upheld the decision of the tribunal and held as under:

“i) The   question as framed proceeds on the basis
that the respondent assessee was aware of the reasons for reassessment.
the  only basis for the aforesaid
submission is the submission made by the revenue before the tribunal that the
respondent assessee is a public sector institution who was aware that search
action has been initiated on certain lessees in respect of transactions with
idBi i.e. assessee. On the basis of the above, it is to be inferred that the
reason for reassessment was known to the respondent assessee.

ii) The supply of reason in
support of the notice for reopening of an assessment is a jurisdictional
requirement. The reasons recorded form the basis to examine whether the
Assessing Officer had at all applied his mind to the facts and had reasons to
believe that taxable income has escaped reassessment. It is these reasons,
which have to be made available to the assessee and it could give rise to a
challenge to the reopening notice. It is undisputed that the reasons recorded
for issuing reopening notice were never communicated to the respondent assessee
in spite of its repeated requests. Thus, the grievance of the revenue on the
above count is unsustainable.

iii) An  alternative submission is made on behalf of
the revenue that the obligation to supply reasons on the Assessing Officer was
consequent to the decision of the apex Court that GKN Driveshafts (India) Ltd.
vs. Income-tax Officer (2003) 259 ITR 19 (SC) rendered in 2003 while, in the
present case, the reopening notice is dated 9th 
December 1996. Thus it submitted at the time when the notice u/s. 148 of
the act was issued and the time when assessment was completed, there was no
such requirement to furnish  to the  assessee 
a  copy of the reasons recorded. This
submission is not correct. We find that the impugned order relies upon the
decision of this Court in Seista Steel Construction (P.) ltd.  [1984] 17 taxman 122(Bom.) when it is held
that in the absence of supply of reasons recorded for issue of reopening notice
the assessment order would be without jurisdiction and needs to be quashed. The
above view as taken by the tribunal has also been taken by this Court in CIT
vs. Videsh Sanchar Nigam Ltd. [2012] 21 Taxmann 53 (Bombay) viz. non-supply of
reasons recorded to issue a reopening notice would make the order of assessment
passed thereon bad as being without jurisdiction.

iv) In view of the above, the
appeal is dismissed”