2015 (12) TMI 1468 - HC - Income Tax

Reopening of assessment - Held that - The facts as revealed from the original record relating to the proceedings as recorded hereinabove, make it amply clear that insofar as the first respondent - Assessing Officer is concerned, he has, in the communications referred to hereinabove, given a clear opinion that no case has been made out for reopening of the assessment and that the objection raised by the Audit was not acceptable. However, it is only on account of the persistence of the Audit Department, that the Assessing Officer has reopened the assessment for the assessment year under consideration by issuing notice under section 148 of the Act. Clearly, therefore, the Assessing Officer has not formed any belief that income chargeable to tax has escaped assessment and on the contrary, is of the opinion that there is no cause for reopening the assessment; however, he has sought to reopen assessment only upon the insistence of the Audit Department. Under the circumstances, the primary requirement for reopening the assessment under section 147 of the Act, namely that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment has clearly not been satisfied. The assumption of jurisdiction on the part of the Assessing Officer by reopening assessment for the year under consideration by issuance of notice under section 148 of the Act is, therefore, without any authority of law. Resultantly, the impugned notice under section 148 of the Act cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
Reopening assessment under section 147 of the Income Tax Act based on Audit Department's objections without Assessing Officer forming a belief of income escaping assessment.

Analysis:

Issue 1: Reopening assessment based on Audit Department's objections
The petition challenged a notice under section 148 of the Income Tax Act, seeking to reopen the assessment for the assessment year 2008-09. The Assessing Officer initiated proceedings following objections raised by the Audit Department. The petitioner contended that the assessment was being reopened solely on the Audit Department's remarks without the Assessing Officer forming the required belief of income escaping assessment. The petitioner cited the Adani Exports case, emphasizing the need for the Assessing Officer to independently form the belief for reopening an assessment under section 147. The court examined the communication between the Audit Department and the Assessing Officer, revealing that the Assessing Officer had consistently opined against reopening the assessment. Despite this, the assessment was reopened based on the Audit Department's insistence, not on the Assessing Officer's belief. The court held that the Assessing Officer must independently form the belief of income escaping assessment before reopening an assessment under section 147, which was not the case here. The court quashed the notice under section 148, ruling it lacked legal authority.

Conclusion:
The court found that the assessment was reopened without the Assessing Officer forming the necessary belief of income escaping assessment, solely based on the Audit Department's objections. As per legal precedents, the Assessing Officer must independently form the belief for reopening an assessment under section 147. Since the Assessing Officer did not satisfy this requirement, the court quashed the notice under section 148, declaring it invalid and lacking legal authority.