2016 (12) TMI 413 - HC - Income Tax

Reasons for re-opening the case u/s. 147 - as contended by assessee that the assessment is sought to be reopened on the audit objections only and there is no independent opinion formed by the A.O. - Held that - We call for the original files from the office of the A.O. Mr. Parikh, learned counsel appearing on behalf of the revenue has produced the relevant files from the office of the A.O. On perusal of the files, noting and the relevant documents, it appears that after the audit party raised objections, A.O. in fact justified the assessment order and in fact requested to drop the audit objections. Even in the communication to the higher authority for approval to initiate proceedings under section 147, A.O. has reiterated and stated that according to him the audit objection is required to be dropped, however, remedial action is required to be taken as precautionary measures. Under the circumstances, there is no subjective satisfaction on the part of the A.O. that the income has escaped the assessment. Thus the impugned reopening proceedings cannot sustain and the same deserves to be quashed and set aside on the aforesaid ground alone. - Decided in favour of assessee

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act for reopening assessment for A.Y. 2011-12 based on lack of independent opinion by the Assessing Officer.

Analysis:
The petitioner sought to quash the notice issued under section 148 of the Income Tax Act, aiming to reopen the assessment for the A.Y. 2011-12. The reasons for reopening included discrepancies in TDS credits and rental income, leading to an alleged under-assessment of income. The petitioner contended that the assessment was reopened without independent opinion but based on audit objections, challenging the validity of the reassessment.

Upon receiving the reasons for reopening, the petitioner raised objections, claiming the assessment was based on borrowed satisfaction from audit objections. The Assessing Officer (A.O.) disposed of these objections, prompting the petitioner to file a Special Civil Application under Article 226 of the Constitution of India. The main argument presented was that the reassessment was solely initiated based on audit objections, lacking independent opinion by the A.O.

The petitioner heavily relied on precedents, citing relevant court decisions to support their argument. To verify the basis of the reassessment, the court examined the original files from the A.O.'s office. It was revealed that the A.O., after audit objections, justified the assessment order and recommended dropping the audit objections. The A.O. also communicated to higher authorities that the audit objection should be dismissed, indicating no subjective satisfaction regarding income escaping assessment.

The court concluded that the reassessment was initiated without independent application of mind by the A.O., aligning with previous court decisions. As a result, the court quashed and set aside the impugned notices for reopening the assessment, emphasizing the necessity of subjective satisfaction by the A.O. for such proceedings. The judgment highlighted the importance of independent assessment and subjective satisfaction in reopening assessments under the Income Tax Act, ultimately ruling in favor of the petitioner and against the validity of the reassessment based solely on audit objections.