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2013 (5) TMI 330 - HC - Income TaxReopening of assessment petitioner contested that AO had not applied his mind independently but acted on the objection of audit party and reopened the case thus based on change of opinion - Held that - Reasons for reopening if are noted, are almost identically worded as that of audit report. No material worth the name emerges to indicate any independent application of mind. Facts are quite glaring on the contrary & they clearly establish absence of subjective satisfaction of AO. Thus, the ground raised by the petitioner that such notice of reopening is invalid for the Assessing Officer having not formed his independent belief requires to be sustained. As regards other two grounds raised by the petitioner which are also contested heavily, petitioner sought support from the decision of GKN Driveshafts (India) Ltd. v. ITO. 2002 (11) TMI 7 - SUPREME COURT which makes it obligatory on the part of AO to pass a reasoned order on receipt of objections from assessee before finalizing assessment and from CIT v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA which does not permit change of opinion of AO at the time of reopening of assessment. These aspects need not be gone into when the challenge of petitioner on the main ground itself has succeeded effectively. Thus the impugned notice of re-opening needs to be quashed. In favour of assessee.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961 for reopening the assessment. 2. Whether the notice for reopening was based on a change of opinion. 3. Whether the Assessing Officer independently applied his mind or acted solely on the audit party's objection. 4. Whether the Assessing Officer violated the procedure by not disposing of the objections separately. Detailed Analysis: 1. Validity of the Notice Issued Under Section 148: The petitioner challenged the notice issued under Section 148 dated 21.11.2011, which sought to reopen the assessment for the Assessment Year 2007-2008. The petitioner argued that the reopening was based solely on the audit objection without independent application of mind by the Assessing Officer, making the notice invalid. The court found that the notice was issued following an audit objection that the Assessing Officer initially disagreed with, indicating a lack of independent belief that income had escaped assessment. 2. Change of Opinion: The petitioner contended that the notice for reopening was based on a change of opinion, as the issue had already been addressed during the original scrutiny assessment. The court observed that the original assessment was completed on scrutiny under Section 143(3), and the same issues were raised in the audit objection. The court emphasized that reopening based on a change of opinion is not permissible, aligning with the precedent set in CIT v. Kelvinator of India Ltd. 3. Independent Application of Mind by the Assessing Officer: The court examined whether the Assessing Officer had independently formed a belief that income had escaped assessment. The records showed that the Assessing Officer had initially objected to the audit party's observations, indicating a lack of independent application of mind. The court referenced the principle that the Assessing Officer must form his own belief for reopening an assessment, as established in cases like Cadila Healthcare Ltd. v. Asstt. CIT and Adani Exports v. Deputy CIT. The court concluded that the reopening was based on the audit party's objection without independent assessment, rendering the notice invalid. 4. Violation of Procedure: The petitioner argued that the Assessing Officer violated the procedure by not disposing of the objections separately before proceeding with the reassessment. The court noted that the Assessing Officer directly passed the reassessment order without addressing the petitioner's objections in a separate, reasoned order. This contravened the procedure outlined in GKN Driveshafts (India) Ltd. v. ITO, which mandates that objections must be disposed of before finalizing the reassessment. Conclusion: The court allowed the petition, quashing the impugned notice of reopening dated 21.11.2011. The court found that the notice was invalid due to the lack of independent application of mind by the Assessing Officer, reliance on the audit party's objection, and procedural violations. The petition was disposed of with no order as to costs.
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