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2015 (12) TMI 1468 - GUJARAT HIGH COURT

2015 (12) TMI 1468 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Held that:- The facts as revealed from the original record relating to the proceedings as recorded hereinabove, make it amply clear that insofar as the first respondent - Assessing Officer is concerned, he has, in the communications referred to hereinabove, given a clear opinion that no case has been made out for reopening of the assessment and that the objection raised by the Audit was not acceptable. However, it is only .....

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artment. Under the circumstances, the primary requirement for reopening the assessment under section 147 of the Act, namely that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment has clearly not been satisfied. The assumption of jurisdiction on the part of the Assessing Officer by reopening assessment for the year under consideration by issuance of notice under section 148 of the Act is, therefore, without any authority of law. Resultantly, .....

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ted against the notice dated 25th March, 2013 issued by the first respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) seeking to reopen the assessment of the petitioner assessee for assessment year 2008-09. Having regard to the view that the court is inclined to take in the matter as delineated herein below, it is not necessary to refer to the facts and contentions in detail. 2. The petitioner, a public limited company and a scheduled Bank, filed its re .....

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ment under section 143(3) of the Act on 21st December, 2010 after making several additions/disallowances including certain portion of bad debt written off whereby claim under section 36(1)(vii) came to be disallowed. The assessee carried the matter in appeal before the Commissioner (Appeals) inter alia on the issue pertaining to disallowance of claim of bad debts written off on non-performing assets. By an order dated 1st December, 2011, the Commissioner (Appeals) decided the particular issue ag .....

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the requisite belief having been formed by the Assessing Officer, under the circumstances, in the absence of Assessing Officer having formed the belief that income chargeable to tax has escaped assessment, the requirements for reopening the assessment under section 147 of the Act are not satisfied and consequently, the assumption of jurisdiction by the Assessing Officer by issuance of notice under section 148 of the Act is without any authority of law. In support of such submission the learned .....

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of the Act for the perusal of this court. A perusal of the file shows that the Audit Officer had raised certain objections as recorded in the reasons for reopening the assessment and had called upon the Assessing Officer to submit his remarks thereon. The Assessing Officer by a communication dated 3rd June, 2011 had opined that the objection raised was based on incorrect appreciation of facts and position of law and has requested the Audit Officer to drop the said objection. By a communication d .....

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th the objection and by a communication dated 29th August, 2011, called upon the Assessing Officer to reconsider the reply and report remedial action taken, if any. In response thereto, the first respondent, by a communication dated 31st August, 2012, submitted that the objection raised by Audit is not acceptable, however, to settle the objection, a remedial action may be taken under section 263 of the Act. By another communication dated 13th September, 2012 addressed to the Audit Officer, the f .....

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h the audit objection, the second respondent by a communication dated 21st January, 2013 addressed to the Additional Commissioner of Income-Tax, called upon him to direct the Assessing Officer to initiate proceedings under section 147 after obtaining prior sanction under section 151 of the Act. Ultimately, with a view to comply with the audit objection, the Assessing Officer initiated proceedings under section 147 by recording the reasons (Annexure L ) and issued notice under section 148 of the .....

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erein it has been held thus:- It is true that satisfaction of the AO for the purpose of reopening is subjective in character and the scope of judicial review is limited. When the reasons recorded show a nexus between the formation of belief and the escapement of income, a further enquiry about the adequacy or sufficiency of the material to reach such belief is not open to be scrutinised. However, it is always open to question existence of such belief on the ground that what has been stated is no .....

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As the aforesaid decision of the Supreme Court indicates that though audit objection may serve as information, the basis of which the ITO can act, ultimate action must depend directly and solely on the formation of belief by the ITO on his own where such information passed on to him by the audit that income has escaped assessment. In the present case, by scrupulously analysing the audit objection in great detail, the AO has demonstrably shown to have held the belief prior to the issuance of noti .....

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im. He has no authority to surrender or abdicate his function to his superiors, nor the superiors can arrogate to themselves such authority. It needs hardly to be stated that in such circumstances conclusion is irresistible that the belief that income has escaped assessment was not held at all by the officer having jurisdiction to issue notice and recording under the office note on 8th Feb., 1997 that he has reason to believe is a mere pretence to give validity to the exercise of power. In other .....

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, held thus:- 14. Under the circumstances, it clearly emerges from the record that the AO was of the opinion that no part of the income of the assessee has escaped assessment. In fact, after the audit party brought the relevant aspects to the notice of the AO, she held correspondence with the assessee. Taking into account the assessee s explanation regarding non-requirement of TDS collection and ultimately accepted the explanation concluding that in view of the Board s circular, tax was not requ .....

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of the apex Court in the cases of P.V.S. Beedies (P) Ltd. (supra) and Indian & Eastern Newspaper Society (supra), if the audit party brings certain aspects to the notice of the AO and thereupon, the AO forms his own belief, it may still be a valid basis for reopening assessment. However, in the other line of judgment noted by us, it has clearly been held that mere opinion of the audit party cannot form the basis for the AO to reopen the closed assessment that too beyond four years from the e .....

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