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2022 (1) TMI 900 - HC - Income TaxReopening of assessment u/s 147 - Reopening on the basis of the audit objections - HELD THAT - Reopening is made on the basis of the objections received from the revenue audit cell, usually referred as audit objections. Identical objection, as raised in the reasons for reopening, was raised and communicated to Petitioner on 14.03.2019. Petitioner, in response to the audit queries, had provided clarifications to the Assessing Officer. It is a well laid down principle that the re-assessment proceedings initiated merely on the basis of the audit objections are illegal and not valid in law and as such re-assessment proceedings have been repeatedly again quashed and set aside by the Courts. See INDIAN AND EASTERN NEWSPAPER SOCIETY 1979 (8) TMI 1 - SUPREME COURT , JAGAT JAYANTILAL PARIKH 2013 (5) TMI 330 - GUJARAT HIGH COURT and ICICI HOME FINANCE CO. LTD. 2012 (8) TMI 312 - BOMBAY HIGH COURT As the reasons for reopening of the assessment are almost identically worded as that of audit report. In view of the foregoing, since, in the case at hand also the reopening of the assessment being at the behest of the audit party, the reopening of the assessment is misconceived, incorrect and bad in law. - Decided in favour of assessee.
Issues:
1. Validity of notice dated 30th March, 2019 under section 148 of the Income Tax Act, 1961 for reopening the assessment for the assessment year 2012-13. 2. Whether failure to disclose material facts justifies the reopening of assessment. 3. Legality of reopening assessment based on audit objections. Issue 1: Validity of Notice for Reopening Assessment: The petitioner filed its return of income for the assessment year 2012-13, declaring a loss. The assessment was completed under section 143(3) of the Act, determining the total income loss. However, a notice under section 148 was issued more than four years after the end of the relevant assessment year. The court noted that the reasons for reopening assessment indicated a change of opinion by the Assessing Officer, which is impermissible. The court held that the Assessing Officer cannot reopen the assessment based on the same material to take another view, as conclusively taken in the previous assessment order. Issue 2: Failure to Disclose Material Facts: The court analyzed the reasons recorded for reopening the assessment and found that the assertion of failure to disclose material facts was an attempt to circumvent the restrictions imposed by the proviso to section 147 of the Act. The court held that it was a clear case of change of opinion, which is not permissible as established by various court precedents. The Assessing Officer had already taken a conclusive view in the previous assessment order, making it impermissible to reopen the assessment based on the same material. Issue 3: Reopening Assessment Based on Audit Objections: The petitioner's objections to the reopening of assessment were based on audit objections raised by the revenue audit cell. The court cited legal precedents to establish that reassessment proceedings initiated solely on the basis of audit objections are illegal and not valid in law. The court referred to past judgments highlighting that reopening assessments based on audit objections without independent application of mind by the Assessing Officer are impermissible. In this case, the court found that the reopening of the assessment at the behest of the audit party was misconceived, incorrect, and bad in law, leading to the allowance of the petition. In conclusion, the High Court of Bombay held that the notice for reopening the assessment for the assessment year 2012-13 was invalid due to a change of opinion by the Assessing Officer, failure to disclose material facts, and the reliance on audit objections without independent application of mind. The court allowed the petition in favor of the petitioner, quashing the impugned notice and rejecting the objections raised by the respondents.
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