Failure to Comply with Procedural Safeguards: ITAT quashes Re-Assessment as Null and Void [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that the re-assessment order passed by the Assessing Officer (AO) is null and void, as the AO had failed to dispose of the objections filed by the assessee before passing the re-assessment order and this failure to comply with the procedural safeguards required has resulted in the re-assessment order being set aside.

The assessee, Shree Raj Foundation filed its income return for Assessment Year 2009-10 on March 31, 2010, and the Assessing Officer (AO) issued a notice of reopening of assessment on March 23, 2014. The assessee filed objections on January 23, 2014, and the AO did not address them before passing a re-assessment order on March 7, 2014. The assessee challenged the re-assessment order in the ITAT.

The assessee argued that the Assessing Officer (AO) should dismiss the objections filed by the assessee before re-assessing the order. They cited two cases: GKN Driveshafts (India) Ltd. v. ITO (2003) and Asian Paints Ltd. v. ITO (2007). 

The Supreme Court in GKN Driveshafts v. ITO (2003) ruled that the AO should dismiss the objections to ensure a fair hearing. In Asian Paints Ltd. v. ITO (2007), the Bombay High Court ruled that the AO should give the assessee four weeks to reply to the order rejecting their objections, ensuring a fair chance to challenge the order.

The Assessing Officer (AO) argued that he is not obligated to address the assessee's objections before a re-assessment order is passed. The AO relied on Supreme Court cases in Hindustan Steel Corporation and Delhi Cloth Mills, which ruled that the re-assessment is a fresh assessment and not an appeal against the original assessment.

The Two Bench Members comprising ruled that the Assessing Officer (AO) was obligated to address the objections of the assessee before a re-assessment order was passed. The decision was based on previous cases, such as GKN Driveshafts (India) Ltd. v. ITO (2003) and Asian Paints Ltd. v. ITO (2007). 

The Tribunal found that the AO's failure to address the objections was arbitrary, whimsical, and against the rule of law. The AO's arbitrary and whimsical actions, including rejecting objections and passing the re-assessment order, were deemed against the rule of law. Therefore, the re-assessment order was deemed null and void.

To Read the full text of the Order CLICK HERE

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