1986 (2) TMI 84 - AT - Income Tax

Summary

Issues:
- Appeal against the order of CIT (A) cancelling assessment made under s. 147(B) by the ITO.
- Validity of initiation of proceedings under s. 147(B) based on information from the Audit party.
- Interpretation of whether the Audit party's report can form a valid basis for reopening the assessment under s. 147(B).
- Consideration of relevant case laws in determining the legality of the assessment reopening.

Analysis:

1. The appeal before the Appellate Tribunal ITAT Allahabad involves a challenge by the revenue against the cancellation of an assessment made under s. 147(B) by the ITO, as ordered by the CIT (A). The Tribunal is tasked with considering both the appeal of the revenue and the cross objection filed by the assessee together.

2. The CIT (A) based the cancellation of the assessment on a decision of the Supreme Court in the case of Indian and Eastern Newspaper Society vs. CIT. The Supreme Court held that the opinion of the audit party on a point of law does not constitute "information" for the ITO to initiate reassessment proceedings under s. 147(B). The Court emphasized that a mere change of opinion by the ITO on material already considered during the original assessment does not warrant reopening the assessment.

3. The CIT (A) determined that the initiation of proceedings under s. 147(B) was not legal in this case as there was no valid information with the ITO to support the reopening of the assessment. The revenue's argument that the opinion of the audit party could be relevant for reopening based on factual points was countered by the assessee, citing various case laws to support the requirement of new information post the original assessment for a valid reassessment.

4. Upon reviewing the facts and arguments presented, the Tribunal found that the information relied upon by the ITO for initiating proceedings under s. 147(B) was a report from the Audit party indicating that relief under s. 35B was not correctly worked out. However, the Tribunal concluded that the Audit party's opinion on a legal issue did not constitute valid information for reopening the assessment, as per the Supreme Court's decision. Therefore, the assessment reopened under s. 147(B) was rightfully cancelled by the CIT (A), and the Tribunal upheld this decision, dismissing the revenue's appeal.

5. Additionally, the Tribunal condoned a two-day delay in filing the cross objection by the assessee but found it to be inconsequential since the reassessment itself had been cancelled. Consequently, the cross objection was dismissed as moot.