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TMI Blog2013 (11) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... UDGEMENT:- PER : Sonia Gokani, J The following is the substantial question of law arising in this Tax Appeal preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) aggrieved by the order passed by the Income Tax Appellate Tribunal ( ITAT for short) dated 26/10/2012 in ITA No. 1138/Ahd/2010; Whether in the facts and circumstances of the case, the learned ITAT has erred in law in confirming the order of CIT(A) in holding the reopening of assessment under Section 147 by issuing notice under Section 148 of the Income Tax Act as invalid? 2. The only question that we are required to deal with is as to whether notice of reopening issued under Section 148 of the Act and thereby seeking to reopen the assessment under Section 147 of the Act was at the instance of the audit objection or was there any subjective satisfaction of the Officer in issuance of such a notice. 3. Having heard learned Counsel, Mr. Varun Patel, appearing on behalf of the revenue, who has strenuously argued before us that once the audit objection was raised, it could be a starting point, however, eventually that has resulted into issuance of noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raising the aforesaid proposed substantial question of law. 7. We have heard learned Counsel Mr. Varun Patel for the revenue and also deemed it fit to call for the files for our satisfaction. It could be noticed from the correspondence dated 09/02/2009 addressed to the Commissioner of Incometax while seeking the permission for taking remedial action under Section 147 of the Act that an objection had been raised by the auditor in the following manner; GIST OF AUDIT OBJECTION:- The assessee-company engaged in the business of manufacturing and job work in electronically engraved copper rollers filed its return of income for assessment year 200405 declaring total income of Rs.1,54,66,000/. The case was taken under scrutiny under Section 143(3) of the Act on 29/12/2006 and scrutiny was completed determining total income of Rs.1,74,89,890/. The audit has found that the assessee has debited an amount of expenses of Rs.54.07 lakhs in Profit Loss Account treating it as revenue expenditure. However, according to Section 35AB of the Act the assessee was eligible for a deduction of 1/3rd of Rs.54.07 lakhs paid in the previous year on research and development and the balance amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax for any particular assessment year has escaped the assessment and as the notice is being issued by the Assessing Officer it should be his subjective satisfaction, which the law has made obligatory. 7.5. Any reassessment proceedings initiated at the instance of the audit party objection, without the Assessing Officer himself having reason to believe that the income chargeable to tax has escaped the assessment must fail and such issue is no longer res integra and requires no further elaboration except by reproducing relevant findings of this Court, in the case of Cadila Health Care Ltd. Vs. Assistant Commissioner of Income Tax Anr. reported in (2012) 65 DRT (Guj.) 385 wherein it is held that any such initiation of reassessment proceedings solely at the instance of the audit objection would not be maintainable. (i) CIT Vs. Lucas T.V.S. Ltd. (2001) 168 CTR (SC) 311 : (2001) 249 ITR 306 (SC) in which the apex Court upheld the decision of the High Court in which the High Court had quashed the reopening proceedings wherein apart from the information furnished by the audit party, the ITO had no other information for reopening the assessment. (ii) Agricultural Prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by him. He has no authority to surrender or abdicate his function to his superiors, nor the superiors can arrogate to themselves such authority. It needs hardly to be stated that in such circumstances conclusion is irresistible that the belief that income has escaped assessment was not held at all by the office having jurisdiction to issue notice and recording under the office note on 8th Feb, 1997 that he has reason to believe is a mere pretence to give validity to the exercise of power. In other words, it was a colourable exercise of jurisdiction by the AO by recording reasons for holding a belief which in fact demonstrably he did not held that income of assessee has escaped assessment due to erroneous computation of deduction under Section 80HHC, for the reasons stated by the audit. The reason is not far to seek. 12. Under the circumstances, it clearly emerges from the record that the AO was of the opinion that no part of the income of the assessee has escaped assessment. In fact, after the audit party brought the relevant aspects to the notice of the AO, she held correspondence with the assessee. Taking into account the assessee s explanation regarding non-requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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