9911796707
TMI Blog1986 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, the ITO received the information from the ST Department that Special Investigation Branch of that Department carried out a survey in the business premises of the assessee wherein certain books of account and certain incriminating documents were found, which showed that the assessee and a turnover in sugar. Consequent on the seizure of the books in the survey, the assessee s turnover was determined at Rs. 10 lacs. The turnover shown for income tax purposes was much below, namely, Rs. 1,22,445. The ITO, therefore, thought that income from business relatable to the turnover found in the seized books escaped assessment and to bring that income to tax a notice under s. 148 was issued. In response to this notice the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been carried on by the ST authorities was in fact the business of the firm and that income had escaped assessment and that income should be brought to tax in the hands of the firm and it was following that note that the ITO reopened the assessment and since the ITO reopened the assessment accepting the opinion rendered by the audit party, that opinion could not in law form information for the purpose of forming a belief that income libel to tax had escaped assessment and, therefore, the reopening of assessment was bad in law. Strong reliance was placed before him on the decision of the Supreme Court in Indian Eastern Newspapers Society Ltd. vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC). The AAC quoting extensively from tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astern Newspapers Society Ltd. vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC) has pointed out that the Revenue Audit is not a proper authority constituted under the IT Act vested with the power of interpreting the law and that interpretation could not be a source of information to the ITO. The Supreme Court also pointed out that it is open to the Revenue Audit to inform the ITO about certain facts on the basis of which it is open to the ITO to form his opinion a to the escapement of income. While conveying of information was not struck down as illegal, conveying of opinion on question of law was turned down as improper and without sanction of law behind it. Therefore, when the audit party conveyed only the information regarding fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion. We have gone through the audit note very carefully as well as the reasons recorded by the ITO for the reopening of the assessment. We do not find anything in the audit note which would amount to converging any expression on question of law. The audit party faithfully conveyed to the ITO the information they gathered relating to the turnover found on the search by the ST authorities to the ITO, no doubt by calculating the possible income that could be deemed to have been earned on the turnover. It is also true that this income was adopted by the ITO for the purpose of reopening. That does not mean that the ITO was acting at the information conveyed to him by the audit party to form an opinion that income liable to tax had escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO had reason to believe that income had escaped assessment based upon information coming into his possession and whether that information was genuine and not pretence. We are convinced in this case that there are reasons to form the belief that income had escaped assessment. Secondly, we do not know from where the AAC has got the material to hold that on the basis of the same information the ITO had changed the opinion, which suggests that the raid conduct by the ST Department and the consequent assessment made upon the assessee was available to the ITO at the time when the original assessment was made. This appears to us to be factually incorrect. We are therefore of the opinion that the order of the AAC is incorrect and we set aside his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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