ITAT Slams “Mechanical” Reassessment: Hospital Wins Relief as PCIT’s Enhancement Also Quashed

Healing Touch Hospital, a partnership firm running a medical facility in Jalandhar, was subjected to reassessment proceedings for AY 2018-19. The Assessing Officer reopened the case under Section 147, and later passed an assessment order making additions based on alleged income from undisclosed receipts. During the reassessment, the assessee also faced an adverse Section 154 order and a later Section 263 enhancement of Rs. 25,00,000 by the PCIT, despite repeated submissions that reasons for reopening had not been supplied and objections were never adjudicated.

Issue Before Tribunal: Whether the reassessment under Section 147 and the enhancement under Section 263/154 were valid when reasons for reopening were neither furnished nor adjudicated, and when authorities proceeded mechanically without independent verification.

ITAT Ruled: The ITAT held that the reassessment suffered from a fatal jurisdictional defect because the Assessing Officer failed to dispose of the assessee’s objections to reopening. The Tribunal highlighted that the records clearly showed the assessee repeatedly sought the reasons and raised objections, yet the AO never passed a speaking order addressing them. This violated the binding mandate in GKN Driveshafts and rendered the reassessment void. As the very foundation of reassessment collapsed, all additions made therein were necessarily quashed.

The ITAT found that the PCIT had merely reproduced statements and assumptions without conducting any independent examination. The enhancement of Rs. 25 lakh was therefore unsustainable. Since the reassessment itself stood annulled, the Section 154 rectification and Section 263 enhancement automatically fell. The entire assessment, rectification, and enhancement proceedings were set aside, granting full relief to the assessee.

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