TMI Blog2022 (4) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been reopened beyond the period of four years because of assessee s failure to disclose fully and truly all material facts necessary for the assessment. Therefore, in our considered view the validity of reassessment proceedings are liable to fail on this account itself. Assessment has been reopened on the basis of audit objection - A perusal of the reasons for reopening reveal that the Assessing Officer while recording reasons has time and again referred to Audit scrutiny . In other words, what can be inferred from the manner in which reasons for reopening have been recorded is that the objections raised by the audit team triggered reopening of assessment. The requirement of the law is that it should be Assessing Officer s own reasons and not borrowed reasons which should form basis of reopening the assessment. Therefore, in the absence of Assessing Officer s own reason to believe that the income chargeable to tax has escaped assessment, the reassessment proceedings are bad in law. A perusal of reasons in the present case clearly indicate that it is not the belief of the Assessing Officer which has ignited the process of reopening but the observations in Audit scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . - ITA NO.797/MUM/2021 And ITA NO.798/MUM/2021 And ITA NO.799/MUM/2021 - - - Dated:- 25-3-2022 - Vikas Awasthy , Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Shri J.P. Bairagra with Ms. Rupa Nanda For the Respondent : Shri C.T. Mathews ORDER PER VIKAS AWASTHY, JM: These three appeals by the Revenue are directed against the orders of Commissioner of Income Tax(Appeals)-54, Mumbai [in short the CIT(A) ], for the assessment years 2010-11, 2011-12 and 2012-13, respectively. All the three impugned orders are of even date i.e. 17/02/2021. The Revenue in all the three appeals have raised identical grounds of appeal. The issue, validity of reopening of assessment beyond a period of four years is common in all these appeals. Since, the grounds of appeal and the issue in appeals are identical, these appeals are taken up together for adjudication and are decided by this common order. 2. The appeals are decided in seriatim of assessment year. The appeal of the Revenue in ITA No.799/Mum/2021 for assessment year 2010-11 is taken as lead case and hence, the facts are narrated from the said appeal. ITA NO.799/MUM/2021- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made his second argument that the assessment has been reopened on the basis of audit objections. The ld. AR of the assessee referring to the reasons submitted that the Assessing Officer has time and again in the reasons has mentioned, it is on Audit scrutiny of the records that some alleged short comings are revealed. Thus, it is evident that reopening is triggered by audit objection. The ld. Authorized Representative for the assessee asserted that reopening of assessment on the basis of mere audit objections is unsustainable. In support of his contention the ld. Authorized Representative for the assessee placed reliance on the decision rendered in the case of Indian Eastern Newspaper Society vs. CIT; 119 ITR 996 (SC). 5.2. The ld. Authorized Representative for the assessee further contended that in reply to the audit objections, the Assessing Officer furnished his detailed reply justifying the assessment order u/s. 143(3) of the Act and requested for dropping audit objection. The ld. Authorized Representative for the assessee referred to the letter of the Assessing Officer addressed to the Principal Director of Audit dated 20/07/2016 at page 7 to 9 of the paper book. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some cases, it is the Range Head on whose consent audit objections can be dropped. The letter dated 20/07/2016 that was referred to by the Authorized Representative for the assessee is merely a proposal. The final call to drop audit objections is taken by the PCIT and the orders of the PCIT on the aforesaid proposal have not been placed on record by the assessee. The ld. Departmental Representative placing reliance on CBDT Circular/Instruction dated 21/07/17, 16/04/2007, 18/10/2013 and 14/05/2015 submitted that the report of the Assessing Officer has no legal sanctity as it is against the instructions from Board issued from time to time. The ld. Departmental Representative submitted that there is no bar in reopening of assessment on the basis of audit objection. The ld. Departmental Representative in order to support his contention placed reliance on the following decisions: (i) Honda Siel Power Products Ltd. vs. DCIT, 340 ITR 53(Delhi) (ii) Calcutta Discount Co. Ltd. vs. ITO, 41 ITR 191 (SC) (iii) Gruh Finance Ltd. vs. JCIT, 243 ITR 482 (Guj) (iv) Central Province Manganese Ore Co. Ltd., 191 ITR 662(SC) (v) Raymond Woolen Mills vs. ITO, 236 ITR 34(SC) (vi) Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee allegedly made inaccurate claim of deduction u/s. 80IA of the Act. The assessee has furnished a copy of original scrutiny assessment order dated 30/03/2013 passed u/s. 143(3) of the Act at page 43 of the Act paper book. While framing the assessment u/s. 143(3) of the Act, the Assessing Officer had examined assessee s claim of deduction u/s. 80IA (4)(iii) of the Act. The Assessing Officer after examining the claim threadbare, restricted the deduction to ₹ 58,73,29,724/- as against ₹ 157,57,61,492/- claimed by the assessee in its return of income. In the reasons for reopening there is not even a single averment by the Assessing Officer that the assessee has failed to disclose truly and fully all material facts necessary for the assessment. Similarly, in the entire reassessment order there is no finding/observation by the Assessing Officer that assessment has been reopened beyond the period of four years because of assessee s failure to disclose fully and truly all material facts necessary for the assessment. Therefore, in our considered view the validity of reassessment proceedings are liable to fail on this account itself. 7.1 The Hon'ble Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio laid down in Indian Eastern Newspaper Society vs. CIT (supra) has held reopening of assessment on the opinion of internal audit party as bad in law. The relevant extract of the judgment reads as under:- 3. If one considers the orders passed by the Assessing Officer as well as CIT(A), reopening of assessment has been decided only because of audit objections. Of course the Assessing Officer, in his order has mentioned that compulsory scrutiny of the record has revealed, there was a statement of income but reopening has been because of audit objection. We have also noted that Assessing Officer had taken a stand contrary to the view expressed in the audit objection and had even addressed a letter to the Director of Audit intimating that objections raised by audit authority were not acceptable. Nevertheless the Assessing Officer reopened and issued notice under section 148 of the Act. 4. It is settled law that the opinion of the Internal Audit party of the Income Tax Department cannot be recorded as information within the meaning of section 147(b) of the Act for the purpose of opening the assessment. The courts have also held that notice of reassessment cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, we find merit in second contention of the assessee as well. 9. The third argument of the ld. Authorized Representative for the assessee is that the assessment has been reopened on the basis of change of opinion . A perusal of the reply filed by the Assessing Officer dated 20/07/2016 in response to the audit objection (at page 12 13 of Paper Book) shows that the Assessing Officer has recommended for dropping audit objection. After having recommended dropping of audit objection the Assessing Officer subsequently on 20/03/2017 records reason for reopening and on 27/03/2017 issued notice u/s. 148 of the Act. It is highly improbable that after recommending dropping of audit objection on the one hand, the Assessing Officer would be convinced and have own reasons to believe that the income chargeable to tax has escaped assessment. Though, a perusal of reasons reveal that while recording reasons the audit objections were weighing heavy on the mind of Assessing Officer, therefore, time and again the Assessing Officer has used the expression Audit scrutiny , thus, it was not Assessing Officer s own conviction or belief that income chargeable to tax has escaped assessment. Even if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened the assessment in respect of deduction u/s. 80IA claimed by the assessee, on the ground that the assessee has shown excess profit to avail higher deduction u/s. 80IA. The Assessing Officer in original assessment had already examined this issue. The CIT(A) held reopening to be without jurisdiction on the ground the Assessing Officer himself resisted the Revenue s audit objection. The Assessing Officer had applied his mind on the issue of deduction claimed u/s. 80IA in regular assessment proceedings. On appeal, the Tribunal upheld the order of CIT(A). The Department further carried the issue in appeal before the Hon'ble High Court. The Hon'ble High Court dismissed the appeal of Revenue by observing as under: 8. We are unable to understand how the mandate of the Act requiring the Assessing Officer to have reason to believe that income chargeable to tax has escaped assessment can be ignored on the altar of revenue collection. If such a submission is to be accepted, it would, be the beginning of the end of the Rule of Law. In fact, a Division Bench of this Court in IL FS Investment Managers Ltd. v. ITO [2008] 298 ITR 32 (Bom.) has concluded the issue by pointing out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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