Income Tax Act, 1961

--Reassessment--Validity of notice Audit objection vis-a-vis non-application of mind by assessing officer independently--Assessee's assessment was completed under section 143(3) and after assessment audit party objected assessing officer's allowability of some allowance/expenses involving short levy of tax to exchequer. assessing officer after audit objection issued notice under section 148 which was identically worded as that of audit party without independent application of mind by assessing officer. Held: Not acceptable. Reassessment was not valid and impugned notice under section 148 was to be quashed.

It is thus clear from this communication that the assessing officer himself was convinced that audit party's query was raised on wrong understanding of accounting principles and on failure to differentiate between business expenditure and personal expenditure. The assessing officer also opined that as far as the personal expenditure was concerned that was pure and simple business expenditure on which liability was booked on provisional value till the actual event get crystalized. [Para 5.8] It is a well laid down principle that the assessing officer requires to form his own belief at the time of reopening the assessment and while issuing notice of reopening. However, on having noticed certain aspects from the report of the audit party if the assessing officer chooses to form his opinion to reopen, validity of reopening of such assessment cannot be challenged on the ground of such reopening of assessment being at the instance of audit party. [Para 5.9] On 1-4-1989, after the Amending Act, 1989, the powers of reopening assessment under section 147 have been made very wide. What is predominantly questioned in this petition is the absence of exercise of powers given by the Statute under section 147 by the assessing officer and his having reopened the assessment despite his own objection. The assessing officer needs to have reason to believe that income has escaped assessment for any assessment year. The term reason to believe provided in section 147 would indicate that it is his own subjective satisfaction based on reasonable grounds. [Para 5.10] As is more than apparent, assessment was completed on scrutiny. In post assessment period, audit party raised the objection and assessing officer had strongly objected to such objections by communicating internally. [Para 5.11] In such background, reasons for reopening if are noted, they are almost identically worded as that of audit report. No material worth the name emerges to indicate any independent application of mind. Facts are quite glaring on the contrary and they clearly establish absence of subjective satisfaction of assessing officer. Thus, the ground raised by the petitioner that such notice of reopening is invalid for the assessing officer having not formed his independent belief requires to be sustained. [Para 7] As regards other two grounds raised by the petitioner which are also contested heavily, petitioner sought support from the decision of the Apex Court in GKN Driveshafts (India) Ltd. (supra) which makes it obligatory on the part of assessing officer to pass a reasoned order on receipt of objections from assessee before finalizing assessment and from CIT v. Kelvinator of India Ltd. 2010 TaxPub(DT) 1335 (SC) : (2010) 320 ITR 561 (SC) which does not permit change of opinion of assessing officer at the time of reopening of assessment. These aspects need not be gone into when the challenge of petitioner on the main ground itself has succeeded effectively. Resultantly, the impugned notice of re-opening dated 21-11-2011 needs to be quashed. Petition is allowed and the same stands disposed of in the above terms. No order as to costs. [Para 8]