Assessment Order quashed on ground of Non-Disposal of Objections filed by Assessee

The Income Tax Appellate Tribunal (ITAT) has quashed an assessment order against an Assessee. This decision was made because the Assessing Officer (AO) failed to properly dispose of the Assessee's objections before completing the assessment. The ITAT followed established legal precedent, including a Supreme Court ruling, which mandates that objections must be addressed before an assessment can be finalised.

In P.H. Chandrashekar v. ITO Ward-1(2) [C.O. No.106/Bang/2017] along with ITO Ward-1(2) Mysore v. P.H. Chandrashekar [ITA No.1080/Bang/2015 dated September 24, 2021], the current cross objection application by P.H. Chandrashekar ("the Assessee") has been filed challenging the Order dated March 20, 2015 passed by the Ld. Commissioner of Income Tax (Appeals) ("CIT(A)") which upheld the Assessment Order dated April 03, 2013 by the Assessing Officer ("the AO") under Section 147 read with Section 143(3) of the Income Tax Act, 1961 ("the IT Act").

The AO reopened the assessment of the Assessee after it was observed that the Assessee had not reflected or explained his investment in a hotel project during a survey operation. Thereafter, the Assessee filed an application before the CIT(A) challenging the validity of reopening of assessment, which was subsequently rejected and disposed of by the CIT(A) on the ground that the AO had correctly followed the procedure as contemplated in the IT Act and there was no infirmity in the action of the AO regarding reopening, all of which has been in accordance with law.

The Assessee contended that he had filed objections vide a detailed letter dated March 01, 2013, but the AO disposed those objections before completion of the assessment which was contrary to the procedure laid down in the case of GKN Drive Shafts (India) Ltd., V/s. ITO 259 1TR 19 passed by the Hon'ble Supreme Court. Therefore, the impuged assessment order is liable to be quashed.

The Hon'ble Income Tax Appellate Tribunal, Bangalore ("ITAT") relied on the judgments rendered by Hon'ble Karnataka High Court in Deepak Extrusions Pvt. Ltd. V. DCIT W.P.No.33125/2017 (T-IT) along with the case of Shri Lakshmana Vs. ITO in ITA No.382/Bang/2018 before the ITAT, Bangalore which held that the order of assessment by the AO cannot be sustained for the reason that due compliance and mandatory procedure of disposal of the objections before proceeding with the assessment was not followed by the AO.

Noted, and hold that non-disposal of objections filed by the Assessee before the completion of assessment is against the procedure prescribed in the case of GKN Drive Shafts (India) Ltd (supra) passed by the Hon'ble Supreme Court. For this reason, the impugned assessment order is vitiated and liable to be quashed.