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TMI Blog1991 (9) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... rest from sticky loans in an account called 'Interest Suspense Account' and, therefore, it was not taxable ? and (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the audit objection bearing No. 1186, dated June 20, 1976, could not form the basis for reopening the assessment under section 147(b) of the Income-tax Act, 1961 ?" The reference has been occasioned in the following background. The Orissa State Financial Corporation established under the State Financial Corporations Act, 1951 (hereinafter referred to as "the assessee"), was assessed to tax under the Act for the assessment years 1974-75, 1975-76 and 1976-77, on the same date, i.e., March 6, 1979. While the assessments for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under section 147(b) and the addition made in respect of amounts credited to the interest suspense account, so far as they are relevant to the concerned assessment years, were questioned. The Commissioner of Income-tax (Appeals) was of the view that reassessments completed under section 147(b) for the assessment years 1974-75 and 1975-76 were not in accordance with law because the reopening of the assessment was on the basis of a revenue audit objection. He deleted the additions made in respect of amounts credited in the interest suspense account for all the years. The combined order of the Commissioner of Income-tax (Appeals) was assailed by the Revenue before the Tribunal which confirmed the view of the Commissioner of Income-tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. According to Mr. A. K. Roy, learned standing counsel for the Department, the communication to which reference was made by the Commissioner of Income-tax (Appeals) and the Tribunal related to the legal position and, based on the opinion of the Assessing Officer, reopening was done. It is submitted that in that background the decision in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has no application. Reliance of the Commissioner of Income-tax (Appeals) and the Tribunal on the said case to hold that the reopening was bad is not a correct conclusion in law. Learned counsel for the assessee, however, submits that the said forums having concluded that there was non-application of mind by the Assessing Officer, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the effect and consequence of law mentioned in the audit note and whether, in consequence of the position of law which has come to his notice, a reasonable belief can be made that income has escaped assessment. The basis of his belief must be the position of law indicated to him of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. Therefore, the evaluation of the legal position and its bearing on the assessment has to be directly and solely undertaken by the Assessing Officer. If the Assessing Officer solely acts on the opinion expressed by the Revenue audit party without indication of application of mind by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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