2008 (1) TMI 907 - HC - Income Tax

Reopening of the assessment - issued notice u/s 148 - escapement of income - mere change of opinion - HELD THAT - There is nothing to suggest anything in the reasons or note recorded by the AO that there is an independent examination of the material collected by the audit party nor is there any independent conclusion arrived at by the AO. In fact the reasons itself do not make any reference to the objection of the audit but it is only the note that makes a reference and the note merely states a fact that an objection has been raised. There is nothing to suggest from the language of the note that the AO had applied his mind to the contents of the audit objection before issuing a notice u/s 148 of the Act. On the contrary the note suggests that the notice was issued mechanically as a result of the audit objection. We find that there is no independent application of mind by the AO for the purposes of issuing a notice under section 148 of the Act. In our opinion no substantial question of law arises - Appeal is dismissed.

Summary

Issues:
1. Re-opening of assessment under section 147/148 of the Income-tax Act, 1961.

Analysis:
The High Court of Delhi considered the appeal by the revenue against the order passed by the Income-tax Appellate Tribunal regarding the re-opening of assessment for the assessee under section 147/148 of the Income-tax Act, 1961 for the assessment year 1995-96. Both the Commissioner of Income-tax (Appeals) and the Tribunal concluded that the Assessing Officer's action was not justified as it was deemed a mere change of opinion.

The reasons recorded by the Assessing Officer for re-opening the assessment were scrutinized by the Court. It was noted that the reasons provided did not demonstrate any application of mind by the Assessing Officer to the objections raised by the Audit. The Court observed that the reasons indicated a change of opinion based on admitted facts, without any independent examination of the materials collected by the audit party.

The revenue's counsel argued that re-opening the case due to factual errors or omissions pointed out by the audit party was permissible, citing a previous decision. However, the Court emphasized that there must be an independent examination of the audit party's materials before concluding an escapement of income. In this case, the Court found no evidence of independent examination or conclusion by the Assessing Officer, indicating a mechanical issuance of the notice based on audit objections.

The Court rejected the revenue's argument, stating that there was no independent application of mind by the Assessing Officer before issuing the notice under section 148 of the Act. It was highlighted that all facts were available during the original assessment, and the re-opening was deemed a mere change of opinion. Consequently, the Court dismissed the appeal, concluding that no substantial question of law arose in the case.