TMI Blog2022 (4) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the Assessing Officer. But thereafter it must be the independent decision of the Assessing Officer to reopen assessment upon formation of his belief that income chargeable to tax had escaped assessment. In the circumstances, in our view also notice issued u/s 148 of the Act, can not be sustained. - Decided in favour of assessee. - Writ Petition No. 694 of 2021 - - - Dated:- 23-3-2022 - K. R. Shriram N.R. Borkar, J.J. Mr. V. Sridharan, Senior Advocate a/w Ms. Neha Sharma i/b Mr. Sriram Sridharan for the petitioner Mr. Akhileshwar Sharma for the respondent Revenue ORAL JUDGMENT : Per K.R. Shriram, J. 1. The petitioner has impugned notice dated 30.03.2019 received under Section 148 of the Income Tax Act, 1961 (the Act). After petition was filed, an order dated 30.01.2021 u/s 92-CA(3) of the Act came to be passed. Petition was, therefore, amended pursuant to the liberty granted by this Court on 20.2.2021 by which respondent no.2 re-initiated transfer pricing proceedings which were already concluded pursuant to re-opening of assessment by respondent no.1. 2. Mr. Sridharan submitted that if the Court is going to set aside notice issued un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in calculating operating profits to operating revenue and, therefore, revenue audit was justified in raising objections. 6. In our view, Mr. Sharma s objections does not hold water because the reason to believe that income has escaped assessment, cannot be based on borrowed information. The Apex Court in Indian Eastern Newspaper Society Vs. Commissioner of Income Tax [(1979) 2 Taxman 197 (SC)] held that opinion of internal audit of Income Tax Department can not be regarded as information within the meaning of Section 147(d) of the Act. Paragraphs 7, 8, 9, 11 and 20 of the said judgment read as under :- 7. Insofar as the word information means instruction or knowledge concerning facts or particulars, there is little difficulty. By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its quintessential value lies in its definitive vitality. 8. But when information is regarded as meaning instruction or knowledge as to law, the position is more complex. The controversy between the parties centres around the point whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the assessee's tax liability. 11. Under that section, the audit by the Comptroller and Auditor-General is principally intended for the purposes of satisfying him with regard to the sufficiency of the rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. He is entitled to examine the accounts in order to ascertain whether the rules and procedures are being duly observed, and he is required, upon such examination, to submit a report. His powers in respect of the audit of income-tax receipts and refunds are outlined in the Board's Circular No. 14/19/56-II, dated 28-7-1960.[Internal Audit Manual, Vol.II, p.39J. Paragraph 2 of the Circular repeats the provisions of section 16 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971. And paragraph 3 warns that the audit department should not in any way substitute itself for the revenue authorities in the performance of their statutory duties. Paragraph 4 declares: Audit does not consider it any part of its duty to pass in review the judgment exercised or the decision taken in indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in the Internal Audit Manual Vol.2, we hold that the opinion of an internal audit party of the Income-tax Department on a point of law cannot be regarded as information within the meaning of section 147(b) of the Income Tax Act, 1961. 7. The Division Bench of this Court in Ananta Landmark (P) Ltd. Vs. Deputy Commissioner of Income-tax, Central Circle 5(3), Mumbai [(2021) 131 taxmann.com 52 (Bombay)] has also, following Indian Eastern Newspaper Society (Supra), held that true evaluation has to be made directly and solely by Income Tax Officer and the reasons for reopening of that by the Assessing Officer alone who is receiving the notice and he can not act merely on the dictates of any other person in issuing notice. 8. In Hamilton Housewares (P) Ltd. Vs. Deputy Commissioner of Income Tax [(2019) 104 taxmann.com 128 (Bombay)], this Court while quashing the notice issued u/s 148 of the Act reiterated settled position of law that the decision to reopen assessment must be on the basis of the belief found by the Assessing Officer. It must be open for the audit party to bring relevant aspect to the notice of the Assessing Officer. But thereafter it must be the indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the issue of the notice under section 148 of the Act dated 30th March 2019 (Ex. N ), the notice under section 143(2) of the Act dated 04th June, 2019 (Ex. P ), the notice under Section 92CA(2) read with section 92D(3) of the Act dated 21st November 2019 (Ex. S ) and the order dated 29th December 2020 rejecting the objections of the Petitioner (Ex. W ) and after going through the same and examining the question of legality thereof to quash, cancel and set aside the impugned notice under section 148 of the Act dated 30th March 2019 (Ex. N ), the notice under section 143(2) of the Act dated 04th June, 2019 (Ex. P ), the notice under section 92CA(2) read with section 92D(3) of the Act dated 21st November 2019 (Ex. S ) and the order dated 29th December 2020 rejecting the objections of the petitioner (Ex. W ). (aa) that this Hon ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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