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TMI Blog2019 (8) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO changed his opinion and decided to reopen the assessment. Consequently, the reopening of the assessment in the present case, which was based on a change of opinion was vitiated in law as it did not satisfy the legal requirement of Section 147. In the circumstances, the view taken by the ITAT calls for no interference. No substantial question of law - ITA 1444/2018 - - - Dated:- 21-8-2019 - S. MURALIDHAR AND TALWANT SINGH JJ. Appellant Through: Mr. Ajit Sharma, Sr. Standing Counsel with Ms. Adiba Mujahid and Ms. Priya Sarkar, Advocates. Respondent Through: Mr.Gagan Kumar with Mr. Amit Kaushik, Advocates. O R D E R Dr. S. Muralidhar, J.: 1. The Revenue is in appeal against an order dated 9th March 2018 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No.5833/Del/2015 for Assessment Year ( AY ) 2006-07. 2. The issue sought to be urged by the Revenue is whether the ITAT was justified in quashing the reassessment proceedings under Section 147 of the Act on the ground of change of opinion on the applicability of Section 40 (a) (ia) of the Act even when the Assessing Officer ( AO ) had not expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the reassessment proceedings initiated against the respondent - Lalit Bagai for the assessment year 2006-07 were contrary and bad in law. 3. It is an accepted and admitted position that the original tax return of the respondent/assessee for the assessment year 2006-07 was taken up for scrutiny assessment. Vide assessment order under Section 143 (3) dated 28th March, 2008, additions were made including dis-allowance of one per cent of the wage expenses of ₹ 4,71,86,794, i.e. ₹ 4,71,867/- to cover up leakage or wrongful claims. 4. At this stage itself, we may record, that the respondent/assessee had claimed that he had incurred wage expenses of ₹ 4.71 crores based upon the muster roll which was relied upon before Assessing Officer. 5. Subsequently, re-assessment proceedings under Section 147 read with Section 148 of the Income Tax Act were initiated by issuance of notice to the respondent/assessee after four years from the end of the relevant assessment year recording the following reasons: Reasons for reopening the case u/s 147. The assessment in this case was completed u/s 143(3) on 28.3.2008 at an inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax CP-1 (Audit-1) to the Deputy Commissioner of Income Tax (DCIT) Circle 38(1), New Delhi calling for comments on the audit observations enclosed with the letter. The said audit observations referred to the payment of labour charges, job work and rent for hiring. 10. On 10th May 2010 the Assistant Commissioner of Income Tax Circle 38(1) i.e. the Assessing Officer ( AO ) replied to the above audit objections. A perusal of the said reply reveals that the issue of non-deduction of TDS on labour charges, job work and rent were specifically addressed. The facts and figures were set out by the AO and it was concluded that the Assessee had correctly accounted for its turnover also by the Income Tax Laws. Accordingly, the AO requested the ACIT audit to treat the said issue as settled. 11. For the second time on 28th November 2011 yet another letter was addressed by the CIT Audit to the AO calling for an explanation. On 7th December 2011 the AO sent again addressing in detail the above issue. 12. On 11th December 2012 for the third time the Income Tax Officer (Audit 1) wrote to the AO stating as under: To The Asstt. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under Section 19 of Bihar Finance Act, 1981 in respect of the return of a registered dealer for the period 1991-92. Section 19 of the BFA is in para materia with Section 147 of the Act. There again the reopening required the forming of an independent opinion by the AO regarding escapement of turnover for the purpose of tax. On the facts of that case, having examined the note of the audit party and the correspondence between AO and the audit party the Supreme Court came to the following conclusion in para 29 of the order which reads as under: 29. From a perusal of the last paragraph of the aforementioned report of the audit party, it is clear that the Assessing Officer was of the opinion that as the goods had not been transferred to Appellant-Company but had been consumed, so it does not come under the purview of taxation. In other words, the Assessing Officer was not satisfied on the basis of information given by the audit party that any of the turnover of the Appellant-Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he had considered the applicability of provisions of section 14A of the Act and was satisfied in adopting 0.5% of average value of investment for disallowance under section 14A of the Act. Evidently, therefore, the notice under section 148 of the Act has merely been issued on the basis of the audit objection without the Assessing Officer having formed the requisite belief regarding escapement of income as contemplated under section 147 of the Act. It is by now well settled that the assessment cannot be reopened merely on the basis of an audit report without the Assessing Officer independently forming the belief, may be on the basis of such report, that income chargeable to tax has escaped assessment. The above referred decision would, therefore, be squarely applicable to the facts of the present case. The impugned notice issued by the respondent under section 148 of the Act being based merely upon the audit objection and not because the Assessing Officer had reason to believe that any income chargeable to tax has escaped assessment, cannot be sustained. 18. In the present case also the Court finds that the AO had in fact applied his mind to the audit party objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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