TMI Blog2016 (10) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate proceedings for re-assessment. The assessing officer could have furnished reasons and reiterated his decision not to reopen the assessment. It is also important to note an aspect regarding the annotated reply. The audit objections were specifically with respect to the issue of TDS. The assessing officer's response was silent on this issue except for stating that he was informed that the record had been destroyed. He had admittedly not seen any other record pertaining to the issue. The Commissioner as a superior officer, in his administrative capacity was well within his rights to ask his subordinate to back his recommendation with reasons when the same were found lacking, especially when such recommendation was made contrary to the audit objections which contained both reasons and provisions of law. After the receipt of the above quoted letter, the assessing officer apparently now acting in a more responsible manner through a communication dated 23.09.2014 addressed to the TDS wing of the department sought the record pertaining to the deposit of TDS by the petitioner with regard to the expenses on which the petitioner was supposed to deduct TDS at the time of releas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as it had been destroyed in a fire which took place in the premises of the petitioner on 10.05.2011. A First Information Report (FIR) in that regard lodged by the petitioner with the police was also produced. After noticing the destruction of the record in the fire, the assessing officer perused the profit and loss account for the relevant year and finding expenses under certain heads like business, promotions conveyance expenses, travelling incentives etc. to be on the higher side when compared to the previous assessment year, made a disallowance of a lump sum amount of ₹ 10,00,000/-. On 03.03.2014, audit objections were raised with regard to the petitioner's assessment to tax for the relevant assessment year. The audit objections were as under: - During the course of audit, it has been noticed that the auditor vide para 27 of the audit report has been reported that provisions of chapter XVII b has not been complied with. In the profit and loss account, the assessee debited following expenses on which TDS provisions are applicable: - Rs.2,88,01,473.00/- ₹ 54,35,000.00/- ₹ 23,81,740.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed. Above omission resulted into under assessment of income of ₹ 5,69,34,217/-. In view of the above, I have reason to believe that the above mentioned amount has escaped assessment because of failure on the part of the assessee to disclose truly fully all material facts. After inspecting the record, on 09.03.2015 the petitioner filed its objections to the issuance of the aforesaid notice under Section 148 of the Act, which through order dated 16.04.2015 were rejected. It is in the background of the above facts that the petitioner through the present petition has knocked the doors of this Court for the afore-referred reliefs. Mr.Sanjay Bansal, Senior Advocate, appearing on behalf of the petitioner submitted that on receipt of the impugned notice under Section 148 of the Act, in order to respond to the same through an effective reply, the petitioner had sought from the respondents a copy of the audit memo No.99 in respect of audit conducted on 03.03.2014, annotated report dated 11.07.2014 and a copy of the letter dated 04.09.2014. However, the department did not supply the same. The petitioner was only permitted to inspect the record and it is on that basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer which was impermissible in law. Per contra, Ms.Urvashi Dhugga, Advocate, appearing on behalf of the respondent submitted that there was no violation of the principles of natural justice as alleged. The petitioner had admittedly been allowed to inspect the relevant record and that all the relevant documents, though at a later stage, had been supplied. No prejudice had been shown by the petitioner. The re-assessment proceedings were sought to be justified by submitting that though initially when the audit objections were put to the assessing officer, he had not recommended any further action but when through letter dated 04.09.2014, he was requested by the Commissioner, in his administrative capacity, to give reasons for the same, the assessing officer wrote to the TDS department and summoned the record pertaining to the petitioner and only on the receipt and perusal thereof he formed an independent opinion that the audit objections had been rightly raised and it is on such satisfaction on his part that the impugned notice dated 24.10.2014 under Section 148 of the Act, for initiating re-assessment proceedings against the petitioner, was issued. Under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 of the Act, by holding as under: - 6. The power to reopen a completed assessment under Section 147 of the Act has been bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. In fact, the Supreme Court in the matter of India Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi, reported in 119 ITR page 996 has held that whether an assessment has escaped assessment or not must be determined by the Assessing Officer himself. The Assessing Officer cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. In the present facts, it would be noticed that the reasons for which the assessment for the assessment year 20062007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to deal with the same, it cannot be said that he had not applied his mind to all the material before him. Further, as observed by the Full Bench of Delhi High Court in the matter of C.I.T. v. Kelvinator of India Ltd. Reported in 256 ITR 1, when the entire material is placed before the Assessing Officer at the time of original assessment and he passes an assessment order under Section 143(3) of the Act a presumption can be raised that he applied his mind to all the facts involved in the assessment. To the same effect is a Division Bench judgment of this Court in State Bank of Patiala Vs. Commissioner of Income Tax [2015] 375 ITR 109. On applying the above settled principles of law to the facts of the present case, we are of the opinion that the petitioner deserves no relief. Before the original assessment order dated 19.12.2012 was passed, the relevant record of the assessee had been destroyed in fire. On perusal of the profit and loss account finding the expenses shown therein, when compared with the previous assessment year to be higher, the assessing officer imposed a lump-sum deduction of ₹ 10,00,000/-. On 03.03.2014, an audit objection was raised qua the above as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l within his rights to ask his subordinate to back his recommendation with reasons when the same were found lacking, especially when such recommendation was made contrary to the audit objections which contained both reasons and provisions of law. After the receipt of the above quoted letter, the assessing officer apparently now acting in a more responsible manner through a communication dated 23.09.2014 addressed to the TDS wing of the department sought the record pertaining to the deposit of TDS by the petitioner with regard to the expenses on which the petitioner was supposed to deduct TDS at the time of release of payments. The record was supplied by the TDS wing to the assessing officer through letter dated 17.10.2014 on the examination of which the assessing officer found that the petitioner had, in fact, not deducted TDS as required by law on the expenses incurred by it towards advertisement, rent, courier services and event expenses. This information which would come under tangible material was not before him at the time when the original assessment was made and on the basis whereof, on recording of reasons, which were later supplied to the petitioner, the re-assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. not applicable. This was patently incorrect and misleading. We will assume that it was the petitioner's bonafide impression that TDS was not applicable. The fact remains, however, that the answer was incorrect. An assessee who makes an incorrect statement in the main body of the audit report cannot turn around and say that he had stated the facts in an annexure from which the assessing officer could have discovered the incorrect statement. Moreover, the assessing officer could legitimately have thought this statement to be correct even with respect to the payment mentioned in the annexure for instance on the basis that the payee had deposited the same and that therefore, the question of the assessee paying the same did not arise. The plea of violation of principles of natural justice raised on behalf of the petitioner, needs to be considered only to be rejected. It is the admitted position that the petitioner was permitted to inspect the relevant record before he filed his objections to the initiation of re-assessment proceedings. Even otherwise, the entire record, as asked for by the petitioner, was made available under the Right to Information Act, 2005. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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