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2014 (12) TMI 1114 - HC - Income TaxReopening of assessment u/s 147 - AO after examining the records and the documents filed by the Assessee, allowed the expenses as revenue expenditure Whether, merely because the audit party has raised objections in relation to the allowability of the expenditure, the assessment cannot be reopened on the basis of change of opinion Held that:- The Tribunal was rightly of the view that there is much substance in the contention of Assessee's representative revenue could not produce the reasons recorded for reopening the assessment and opportunity was given to the departmental representative by the Tribunal to produce these reasons or a copy of thereof - However, beyond producing a copy of the letter written by the AO to the CIT seeking permission for reopening the assessment, nothing was produced by the revenue - the AO has initially given his own reason in the body of assessment order - the AO in the assessment has mentioned that the assessment was reopened with the prior approval of CIT(A) on the objections raised by the audit - the assessment made u/s. 143(3) r.w.s. 147 is devoid of any application of mind on the part of AO - AO has no reason to believe that income has escaped assessment or the assessee has filed inaccurate particulars of income as no new facts are brought on record - all the expenses claimed by the assessee have been verified in detail in the original assessment therefore the reopening of assessment to disallow the same merely on the basis of audit report is not justifiable. The Tribunal proceeded to consider the correctness of the submission of the departmental representative that compliance u/s 148 was made in this case and by relying on the audit report - The audit objections could form the basis for initiation of the proceedings was the Department's stand and further that reasons are recorded in the letter which has been addressed by the AO to the Commissioner - an opinion was given by the audit party with regard to the receipts from the occupation of conference hall and rooms - in every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment - The basis of his belief must be the law of which he has not become aware - 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 - the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO - It is his belief and the statutory exercise contemplated by section 147(1) and 148(2) must be carried out by him - The Tribunal has rightly held that once the audit party raised objections, one of which was not accepted, then, the AO was expected to record reasons for his belief - Those reasons have not been recorded, as is clear from the material placed before the Tribunal as such no substantial question of law arises for consideration Decided against revenue.
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