TMI Blog2022 (11) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MS. JUSTICE MANMEET PRITAM SINGH ARORA Petitioner Through : Ms. Suruchi Mittal, Advocate. Respondents Through: Mr. Abhishek Maratha, Senior Standing Counsel for Revenue. Mr. Asheesh Jain, CGSC along with Mr. Keshav Mann and Mr. Gaurav Kumar, Advocates for R-2. J U D G M E N T MANMEET PRITAM SINGH ARORA, J: 1. The present writ petition has been filed by the Petitioner, Assessee, seeking quashing of the rectification order dated 15th February, 2021, passed by the Respondent during the consideration of the Assessee s application for settlement of disputed tax under the Direct Tax Vivad Se Vishwas Act, 2020 ( Act of 2020 ). 2. The Assessee is also seeking a direction to the Respondent No. 1 to reconsider its application for settlement of disputed tax under the Act of 2020, for the Assessment Year ( AY ) 2017-18. 3. The Assessee filed its Return of Income ( ROI ) on 2nd November, 2017, and thereafter, filed its revised return on 14th May, 2018, both times declaring an income of NIL, as there was business loss in the AY 2017-18. 4. The Assessing Officer ( AO ) initiated scrutiny assessment proceedings under Section 143(3) of the Income Tax Act, 1961 ( th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses. It was stated that the AO s stance of changing sequence of set-off of business loss from one head to another head is nothing but change of opinion. 9. The Respondent No. 1, sent an email to the Assessee on 9th January, 2021, rejecting the objections raised by the Assessee and reiterated the earlier position communicated vide email dated 4th January, 2021. 10. The AO consequently passed the impugned rectification order dated 15th February, 2021, purportedly in exercise of his jurisdiction under Section 154 of the Act of 1961, modifying the original assessment demand dated 21st December, 2019, and raising a fresh enhanced demand of Rs. 9,27,047/along with the interest. 11. The Assessee aggrieved by the aforesaid order, filed an application under Section 154 of the Act of 1961 on 11th March, 2021, for rectification of order dated 15th February, 2021, raising its objection to the modified computation and stated that there was error apparent in the AO s treatment of disallowed bad debt by himself. The Assessee, therefore, requested AO to consider the application and rectify the mistake apparent from record since business income needs to be adjusted against business loss fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and income from other sources second. The Audit Party then calculated the tax at 30% of the balance income. 15. The Respondent states that the AO has only followed the audit objection raised by the Audit Party and consequently, he amended the original assessment order dated 21st December, 2019. It is further stated that the rejection of the application filed by the Assessee under the DTVSV Scheme was a consequence of the rectification order dated 15th February 2021. 16. We have considered the submissions of the parties. 17. The computation of the returned income made by the AO in the Assessment order dated 21st December, 2019, and as modified vide rectification order dated 15th February, 2021, following the Audit objection are as under 1 : - Computation as per the Assessment order dated 21st December, 2019 TABLE A S. No. Particulars Amount (in Rs.) 1. Income from Capital Gain Rs. 36,58,439/- Income from other Sources Rs. 34,79,649/- Business Loss (Rs. 41,37,936) Business Loss (Rs. 71,38,088) Add: bad debts disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such indication, the general rule to be followed in all fiscal enactments is that where words used are neutral in import, a construction most beneficial to the assessee should be adopted ]. The words he shall be entitled to have the amount of loss setoff occurring in Section 24(1), would seem to be consistent with the conferment of a benefit on the assessee which he can claim as of right. 20. Section 24 (1) of the erstwhile Income Tax Act, 1922 corresponds to Section 71 (2) of the Act of 1961 and the audit objection has been raised under the said Section. She states that the audit objection raised by the Audit Party is in ignorance of the aforesaid Circular, which allows the Assessee to select a sequence of set-off, which is more beneficial to it. 21. No legal error in the method of computation made in the original assessment order dated 21st December, 2019 has been brought to our attention during the course of arguments. The amount of disallowed bad debt has been added as income and consequently the business loss of the Assessee stood reduced to Rs. 41,37,936/-. The said business loss has then been set-off first against income from other sources and balance from sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21, 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. 27. 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. 28. In this regard, it would be instructive to refer to the decision of the Supreme Court in M/s Indian Eastern Newspaper Society, New Delhi v. Commissioner of Income Tax, New Delhi, (1979) 119 ITR 996 (SC), 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. The relevant portion of the said judgment is reproduced hereinunder: 13. In every case, the Income Tax Officer must determine for himself what is the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 31. We are, therefore, of the considered view that since the objection raised by the Audit Party was in regard to the law, which objection in the facts of the present case was debatable in light of the Circular bearing No. 26 (LXXVI-3) dated 7th July, 1955, and thus, it could not have formed the basis for passing a rectification order under Section 154 of the Act. We, therefore, set aside the impugned rectification order dated 15th January, 2015. 32. 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 applicati ..... 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