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2015 (9) TMI 753 - HC - Income TaxReopening of assessment - certain expenses were not allowable under Section 36(1)(viia) - reliance on opinion rendered by the audit party - Held that:- In the instant case, we find that there has been an assessment under Section 143(3) of the Act. The books of account were produced and the same were scrutinized. The profit and loss account was checked and only thereafter net loss of ₹ 66,70,410/- was determined. Merely, because the audit report has opined that certain expenses were not allowable under Section 36(1)(viia) does not entitle the Assessing Officer to issue a notice under Section 148 of the Act. We find from a perusal of the reasons to believe that the Assessing Officer had not applied its own mind and has not considered as to what would be the effect of the audit report nor had come to any conclusion which he could reasonably believe that an income had escaped assessment. Consequently, merely on the basis of the opinion rendered by the audit party, the Income Tax Officer could not assume jurisdiction to issue a notice under Section 148 of the Act. He must, on its own wisdom, come to a conclusion and hold a belief that an income had escaped assessment to tax. Since this belief was not recorded by the Assessing Officer the issuance of the notice was done mechanically without any application of mind. Such action amounts to change of opinion, which is not permissible. Since the foundational requirement for issuance of a notice was lacking and the condition precedent for initiating a valid reassessment proceedings were not existing, we are of the opinion that the impugned notice issued under Section 148 of the Act initiating reassessment proceeding for the assessment year 2007-08 could not be sustained and is quashed. The order dated 19.09.2011 rejecting the objections is also quashed. - Decided in favour of assessee.
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