INCOME TAX ACT, 1961

Section 147

Reassessment - Reason to believe - Change of opinion based on audit objections and no independent application of mind by AO -

AO issued section 148 notice so as to re-assess income at Rs. 37 lakhs as against assessed at Rs. 22 lakhs originally. Subsequently, the AO recorded another reasons and communicated to the assessee that income had escaped assessment on account of wrongful claim of deduction under sections 80-HHC and 80-IB. Assessee submitted that reopening had been made on the basis of audit objections, and there was no independent opinion on the part of AO. Held : Reasons for reopening of assessment were recorded twice by AO which was against the scheme of section 147. In subsequent reasons recorded, AO communicated to the assessee that income to the tune of Rs. 63 lakhs had escaped assessment. As such there was a mismatch in the reasons recorded and in notice with regard to income escaping assessment. This itself made clear that AO had not applied his mind while recording reasons. AO during original assessment proceedings had examined claims of assessee under section 80-HHC and 80-IB and had allowed the same. The Trading and Profit & Loss Account, Balance Sheet, Audit Reports were all part of information on record. Therefore no new information had come into possession of AO and it was merely a case of change of opinion. Even this “change of opinion” was not independent opinion of the AO but was based on audit objections raised by external Audit Party. Accordingly, conditions laid down in section 147 for reopening of assessment had not been fulfilled and reopening was, therefore, quashed.

REFERRED : Indian and Eastern Newspaper Society v. CIT 1979 TaxPub(DT) 1081 (SC) : (1979) 119 ITR 996 (SC), A.L.A. Firm v. CIT 1991 TaxPub(DT) 1170 (SC) : (1991) 183 ITR 285 (SC)..

FAVOUR : In assessee's favour.

A.Y. : 2004-05

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