2022 (11) TMI 386 - HC - Income Tax
Rectification of mistake u/s 154 - Reopening of assessment u/s 147 - Disallowance of write off of the ‘bad debt’ - objection raised by the Audit Party on the sequence of set-off of losses - HELD THAT:- There was no mistake apparent in the computation of income in the assessment order dated 21st December, 2019, within the meaning of Section 154 of the Act, which could have been a subject matter of rectification.
No find merit in the submission of the learned counsel for the Petitioner that the rectification order dated 15th February, 2021, effectively resulted in re-assessment of income and not rectification. She states that in the facts of this case, even a reassessment on the basis of the audit objection was not permissible.
Upon a perusal of the counter-affidavit, it is borne out that the objection raised by the Audit Party on the sequence of set-off of losses is an opinion on law and that the AO had passed the rectification order only on the basis of the direction of the Audit Officer. The AO himself was not of the independent opinion that the original assessment order passed by him on 21st December, 2019, was erroneous in law.
As it would be instructive to refer to the decision of the Supreme Court in M/s Indian & Eastern Newspaper Society, New Delhi. [1979 (8) TMI 1 - SUPREME COURT] wherein, the Court held that an audit opinion by itself with respect to application or interpretation of law cannot be treated by the Income Tax Officer as ‘information’ for reopening the assessment.
In the facts of the present case, there was no new or fresh material before the AO except the opinion of the Audit Party. Since, it is settled law that mere change of opinion cannot form the basis for initiating reassessment proceedings as per the decision of the Supreme Court in CIT Vs. Kelvinator of India Ltd., [2010 (1) TMI 11 - SUPREME COURT] no reassessment could also have been permissible in the facts of the present case. It is also not apparent from record if the AO agreed with the objection of the Audit Party. Infact, the contents of the counter affidavit evidences that the AO was satisfied with the initial computation and has acted only upon the direction of the Audit Party while passing the impugned order.
Lastly, as regards the objection of the counsel for the Petitioner that the impugned rectification order is barred under Section 5 of the Act of 2020, we find that the bar of the said provision is not attracted in the facts of his case. She contends that the provisions of the Act of 2020, have an overriding effect on the provisions of the Act of 1961, insofar as the determination of the tax arrears under Section 5 of the Act of 2020, is to be made on the basis of the facts, as they existed on the date of the filing of the application and the Revenue was precluded from undertaking any rectification after receipt of the Forms 1 and 2.
The right of the Revenue to initiate any further proceedings with respect to the calculation of the disputed tax arrears are foreclosed after Form 3 has been issued by the Designated Authority under Section 5(1) of the Act of 2020, determining the full and final settlement of tax arrears. The Form 3 has admittedly not been issued in the present matter and therefore, the rigour of Section 5(3) of the Act of 2020 is not attracted in the facts of this case.
Further, in the facts of this case, as per record the rectification proceeding was initiated consequent to an audit objection dated 31st August, 2020, even though, the rectification order finally came to be passed on 15th February, 2021 and therefore, we are unable to agree with the contention of the Petitioner that the rectification proceedings were initiated only upon receipt of the application of the assessee on 28th December, 2020 under the Act of 2020.
Since we have held that the rectification order itself was incorrect and as held above, we have set aside the impugned rectification order dated 15th February, 2021. We also set aside the consequential order of the Respondent rejecting the Petitioner’s application for settlement under the DTVSV Scheme, on the ground that the tax liability was not ascertained, and restore the application to the file of the AO as on 28th December, 2020. We direct the Respondent to determine the amount payable by the assessee in accordance with the provisions of the Act of 2020 and grant a Certificate to the assessee containing particulars of tax arrears and amount payable, in accordance with law, within a period of two weeks.