AO is not suo moto bound to supply reasons for reassessment under Income Tax Act -Delhi HC

The Delhi High Court in an important case namely CIT V Safetag International India Pvt Ltd. has held that in case of reassessment proceedings u/s 147 of Income Tax Act if the assessee doesnot demand reasons recorded by AO for reopening of case then AO is not bound to supply the same suo moto to the assessee. 

Brief Facts: The assessee’s assessment was reopened u/s 147. The assessee did not ask for the recorded reasons. Even before the CIT(A), though the assessee challenged the reopening as being without jurisdiction, it did not ask for the reasons. Before the Tribunal, the assessee claimed that it was not aware that it could demand the reasons and object thereto. Pursuant thereto the Tribunal remitted the case to the AO with direction that the reasons & opportunity to object be provided and denovo assessment be framed if objections were rejected. On appeal by the department, the appeal was allowed:

Verdict: The “short-cut method” adopted by the Tribunal is totally unsustainable. While the AO is required to record reasons, Law does not mandate the AO to suo moto supply the reasons to the assessee. It is for the assessee to demand the reasons and raise objections to the reopening which the AO is required to dispose of by passing a speaking order. As the assessee did not ask for the reasons and instead participated in the reassessment proceedings, the Tribunal could not have restored the matter back to the file of the AO and give another opportunity to the assessee to raise objections to the “reasons to believe” recorded by the AO. It was the assessee‟s own creation that it did not ask for the reasons or raise objection thereto. Merely because the assessee was oblivious of such a right would not mean that the Tribunal should have granted this right to the assessee, that too, at the stage when the matter was before the Tribunal and travelled much beyond the AO‟s jurisdiction. It is trite that what cannot be done directly, it is not allowed indirectly as well. This novel and ingenuousness method adopted by the Tribunal in setting aside the reassessment orders on merits cannot be accepted.
However, also held that as the assessee had challenged the validity of reassessment before the CIT(A), it ought to have been provided with the reasons and so the matter was remitted for supply of reasons.

 Full Judgement can be downloaded herebelow:

CIT V Safetag International India Pvt Ltd
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