Non-Disposal of Objections by the AO through a Separate Speaking Order would make Re-Assessment Invalid: ITAT [Read Order]

Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that re-opening of assessment under section 147/148 of the Income Tax Act, 1961 is invalid when the assessing Officer has not disposed the objections of the assessee through a separate order is invalid.

In the instant case assessee was an entry operator and provided accommodation entries to various beneficiaries through a large number of shell companies managed by him. Cash was received and deposited in the bank account of these shell companies and through various conduits transferred to the bank accounts of the ultimate beneficiaries. It has found that assessee is the beneficiary for the accommodation entry from an entry operator amounting to Rs. 4,98,750.

During the course of assessment proceedings the Assessing Officer (AO) observed that the assessee has received unexplained sums from the entry operator and the identity, creditworthiness and genuineness of transactions with the person found to be entry operator cannot be established and it is clear that the assessee has introduced his own undisclosed income in the name of share application money, gifts, unsecured loan etc.  AO found that assessee furnished wrong facts at the time of filing of return. Accordingly he issued notice under section 148 of the Act within the meaning of section 147 of the Act.

Assessee replied that as the notice has been issued after the expiry of time limit prescribed in section 149 of the Income Tax Act, 1961, the issue of notice is time barred. AO does not accept the contention of the assessee and during the assessment proceedings the assessee has not filed any return in response to the notice under section 148. AO has initiated proceedings for the re-assessment since there are no formal objections furnished by the assessee.

The bench including Judicial Member H.H.Sidhu has observed that it is clear that the assessee has objections for the re-assessment and also challenged the proceedings under section 147 of the act. It is the responsibility of the AO to pass a speaking order against the objection of the assessee before initiating proceedings under section 147 of the act. In the absence of speaking order against the objection filed by the assessee re-assessment is invalid in this case. The bench relied up on the order of the Honorable Supreme Court in similar issues while allowing the appeal filed by the assessee.