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2018 (12) TMI 131 - HC - Income TaxReopening of assessment - disallowance of expenditure under section 14A of the Act read with rule 8D had not been correctly worked out - Held that:- AO has not accepted the objections raised by the audit party and on the contrary, has objected to such objections by communicating internally as referred to hereinabove. Evidently therefore, the Assessing Officer has not formed any independent belief that the income chargeable to tax has escaped assessment and on the contrary has stated that he had considered the applicability of provisions of section 14A and was satisfied in adopting 0.5% of average value of investment for disallowance under section 14A of the Act. It is by now well settled that the assessment cannot be reopened merely on the basis of an audit report without the Assessing Officer independently forming the belief, may be on the basis of such report, that income chargeable to tax has escaped assessment. The above referred decision would, therefore, be squarely applicable to the facts of the present case. The impugned notice issued by the respondent under section 148 of the Act being based merely upon the audit objection and not because the Assessing Officer had reason to believe that any income chargeable to tax has escaped assessment, cannot be sustained. - Decided in favour of assessee.
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