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TMI Blog2016 (1) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer and, as noted above, directed the Assessing Officer to take appropriate action and submit an action taken report on finalization of the proceedings, with supporting evidences through proper channel. This was a clear directive to the Assessing Officer not only to initiate action but also to finalize the same and report finalization with supporting evidences. As if this much was not enough to hold that the Assessing Officer was being controlled by the audit party, his letter dated 20.02.2014 to the audit party left no possibility of any doubt. In such letter, he recorded the objection of the audit party at length and finally meekly stated that, in view of the above, the internal audit party has not accepted the reply on the said issues and ultimately proceeded to record that the most suitable remedial action in such case would be to reopen the assessment under section 147 of the Act which is contrary to his earlier view where on a limited ground of depreciation he had advocated measures of rectification.- Decided in favour of assessee - Special Civil Application No. 5440 of 2015 - - - Dated:- 30-11-2015 - Akil Kureshi And Mohinder Pal, JJ. For the Appellant : M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation table which also forms its part of the statement of total income. However, on perusal of the final accounts and schedules to the accounts, it it seen that schedule 6t of the balance sheet reveals that depreciation of ₹ 2,88,369/- has been claimed in the expenses incurred during the year and included in the WIP. The assessee's WIP therefore requires to be reduced to the extent of depreciation of ₹ 2,88,369/- claimed therein whereas the assessee has disallowed the depreciation of ₹ 2,43,512/- instead of ₹ 2,88,369/- in computation of income filed along with revised return of income. Therefore, the difference of ₹ 44,857/- (Rs.2,88,369 ₹ 2,43,512) is required to be disallowed.... 2.2 The third ground was of interest earned by the petitioner from associated concern which was not offered to tax. The relevant portion of this ground read as under: As per the company's accounting policy, only expenses incidental to the project would be included in the inventory and as regards interest, only interest on borrowings is earmarked to be included in the inventory. Therefore, any interest receipt should not have project cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of Division Bench of this Court in case of Damodar H.Shah v. Assistant Commissioner of Income-tax reported in (2000) 245 ITR 774 in which it is observed that the nature of power of reopening of assessment under section 147 is different from that of of the power under section 154 for rectifying any mistake which is apparent from the record. 6. Learned counsel Ms.Mauna Bhatt for the Department, however, opposed the petition contending that the Assessing Officer had formed his independent belief. Merely because certain issues which were omitted during the original scrutiny of assessment were brought to his notice by the audit party would not vitiate his decision. She relied on the decision of the Supreme Court in case of Commissioner Of Income Tax vs P.V.S. Beedies Pvt. Ltd. reported in 237 ITR 13. 7. Having heard learned counsel for the parties and having perused the documents on record, we find that the law on the subject is sufficiently clear. It is by now well settled by series of judgments that exercise of issuing notice for reopening by the Assessing Officer has to be based on reasons for reopening to be recorded by him. Such reasons have to reflect his bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been consistent in his submission of his report to the superior officers. The mere fact that as a subordinate officer he added the suggestion that if his view is not accepted, remedial actions may be taken cannot be said to be belief 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 officer having jurisdiction to issue notice and recording under the office note on 8th February, 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 s. 80HHC, for the reasons stated by the audit. The reason is not far to seek. 8. This view flowing from the judgment of the Supreme Court in case of Indian Eastern Newspaper Society (supra) and ela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t agree to any of the audit objections cited in such communication dated 24.09.2013, except in case of excess claim of depreciation. With respect to this, he pointed out that the assessee has disallowed depreciation of ₹ 2,43,512 instead of 2,88,369 in computation of income and the assessee has stated that by mistake it had disallowed the amount pertaining assessment year 2009-2010 instead of 2010- 2011. It was concluded on this issue that: on verification of the reply of the assessee and facts of the case, it is seen that the mistake is being apparent from the record and disallowance of depreciation should be made of ₹ 2,88,369 instead of ₹ 2,43,512. Therefore, such mistake may be rectified by passing order under section 154 of the I.T.Act . 12.1 In the concluding portion of the said communication, the Assessing Officer stated as under: In view of the above, the audit objection raised by the internal audit party on various issues is not acceptable, except the issue of excess claim of depreciation. Reply dated 12.11.2013 of the assessee along with enclosure is attached for kind perusal,, 12.2 Despite such clear stand by the Assessing Officer, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise. 13. Learned counsel for the revenue pointed out from original records that in response to such letter of the audit party, the Assessing Officer had replied on 20.02.2014 (a copy of which is taken on record). Perusal of such letter shows that, in the first portion the Assessing Officer has recorded the stand of the audit party on different contentious issues. After reproducing the contents of the letter of the audit party dated 14.02.2014 at length, his response was confined to the following expression: In view of above, the internal audit party has not accepted the reply on the above-said issues, except the issue mentioned in (10(b) (c He thereafter referring to the three remedies of rectification, reopening of assessment and revision, in the concluding portion of the said letter, stated as under: Considering the facts of the case, the most suitable remedial action, in my opinion, would be reopening of assessment u/s.147 of the IT Act. Therefore, necessary approval for the same may kindly be granted, if deemed fit. 14. Bare perusal of the correspondence reveals that the assessment was completed and, upon scrutiny, the internal audit party found c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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