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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 ..... TAT 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited entire amount in P & L account treating the same as revenue expenditure was not accepted by the Assessing Officer. He consequently disallowed the amount of Rs.36.05 lakhs being 1/3 rd of the total amount of Rs.54.07 lakhs. 5. The reassessment proceedings were thereafter challenged before the CIT(A). The CIT(A) quashed the said proceedings by holding that it was nothing but a mere change of opinion on the part of the Assessing Officer. It was further held that the assessee commenced its business in Assessment Year 1994-95 and Section 32A(2B) would not be applicable as the same applies to plant installed after 30/06/1977 and before 01/04/1987. 6. The said decision of CIT(A) same came to be challenged before the tribunal. The tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Total amount spent on R & D : Rs.54.07 lakh Less : 1/3rd (eligible deduction) : Rs.18.02 lakh Rs.36.05 lakh Thus the allowance of deduction for entire expenditure of Rs.54.07 lakh against Rs.18.02 lakh resulted in an under assessment of income of Rs.36.05 lakh with consequential short levy of tax of Rs.25,78,929/. 7.1. The Assessing Officer maintained the stand that the R & D expenses incurred by the Company on inhouse research, being in the nature of consumption of raw material on test production and salary / wages of personnel deployed for R & D activities, have been rightly claimed as revenue expenses. It also maintained the stand that the objections raised by the audit party is not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer must have a reason to believe that the income chargeable 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.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting on record. Undoubtedly, in the face of record, burden lies, and heavily lies, on the petitioner who challenges it. If the petitioner is able to demonstrate that in fact the AO did not have any reason to believe or did not hold such belief in good faith or the belief which is projected in papers is not belief held by him; in fact, the exercise of authority conferred on such person would be ultra vires the provisions of law and would be abuse of such authority. As the aforesaid decision of the Supreme Court indicates that though audit objection may serve as information, the basis of which the ITO can act, ultimate action must depend directly and solely on the formation of belief by the ITO on his own where such information passed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-requirement of TDS collection and ultimately accepted the explanation concluding that in view of the Board's circular, tax was not required to be deducted at source. No income had therefore escaped assessment. Despite such opinion of the AO, when ultimately the impugned notice came to be issued the only conclusion we can reach is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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