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2012 (12) TMI 895 - HC - Income TaxValidity of notice u/s 148 – Reason to believe - Deduction on account of royalty - Adverse comment in the Audit report in relation to the royalty amount for the assessment year - Held that:- As the “reasons to believe” are a mere recital of events, including the previous order of assessment, which permitted the deduction, the order of the TPO, the assessment order of the subsequent year which made disallowance for royalty. The notice does not anywhere indicate what was the new material which came to light, that threw into focus the fact that the assesse’s behavior in not disclosing material particulars, attracted the provision u/s 148. Following the decision in case of Eastern Newspaper Society (1979 (8) TMI 1 - SUPREME COURT) that the opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax officer Assessing Officer can re-open an assessment under Section 147 of the Act, only if there is 'tangible material' to show that income has escaped assessment. The Assessing Officer shall not be allowed to arbitrarily re-open assessment. The mere fact that a transfer pricing order had led to a partially adverse order, or that in the subsequent year, the amount claimed was disallowed, does not constitute a valid basis for issuance of the notice. On the contrary, the materials on record disclose a detailed inquiry into the nature and character of the royalty, which had been dealt with by the AO in the first instance. Therefore, that the impugned notice, to the extent it was based on the report and opinion of the audit report, is indefensible. In favour of assessee
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