2017 (6) TMI 956 - HC - Income Tax

Reopening of assessment - objections of the petitioner against reopening - non application of individual mind by AO - Held that - The very action of the Assessing Officer to deal with the objections of the petitioner in the final order of reassessment, runs contrary to the judgment of the Supreme Court in case of GKN Driveshafts (India) Ltd. v. ITO and Ors. 2002 (11) TMI 7 - SUPREME Court wherein held hen a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. Assessing Officer was acting under the compulsion of the audit party. As noted, the audit party raised its objections on 16.01.2012. While issuing notice for reopening on 26.03.2012, the Assessing Officer had cited three very reasons. Subsequently on 24.05.2012, he sent a detailed note to the audit party, justifying why the audit objections should be dropped. It is true that in the present case such resistance from the Assessing Officer came after the notice for reopening. Nevertheless, if we see entire sequence, it becomes clear that the Assessing Officer was clearly acting under the dictates of the audit party. Even after issuing the notice, he still maintained an opinion that no income chargeable to tax had escaped assessment. If that be so, he ought to have dropped the assessment proceedings, at least at that stage when the petitioner raised the objections which even without such objections, the Assessing Officer was convinced, were valid. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for the assessment year 2007-08 based on audit objections.

Analysis:
The petitioner, a cooperative bank, challenged a notice seeking to reopen its assessment for the assessment year 2007-08. The Assessing Officer issued the notice based on the petitioner's treatment of a staff colony sale as a Long Term Capital Gain, which the officer believed should be treated as a Short Term Capital Gain. The officer also questioned the treatment of provisions for bad debts and gratuity contributions. The petitioner objected to the reopening process, alleging the officer acted under audit party pressure. The High Court examined the sequence of events and found that the officer's actions were influenced by the audit party's objections. The court cited a previous judgment emphasizing that the Assessing Officer's opinion on income escaping assessment is crucial for reopening assessments. As the officer's actions were deemed to be at the behest of the audit party, the court set aside the notice for reopening, ruling in favor of the petitioner.

In summary, the High Court allowed the petition challenging the notice for reopening the assessment for the assessment year 2007-08. The court found that the Assessing Officer's actions were influenced by audit party objections, contrary to the officer's own belief that no income had escaped assessment. Citing previous judgments, the court emphasized that the Assessing Officer's opinion is paramount in reopening assessments. Consequently, the court set aside the notice for reopening, concluding in favor of the petitioner, a cooperative bank.