Audit objection cannot by itself justify reassessment when the Assessing Officer does not accept the audit view.

Reassessment under sections 147 and 148 could not be sustained where it was founded only on an audit objection and the Assessing Officer did not agree with that objection. The audit function is limited to checking compliance with prescribed rules and procedures and cannot replace the statutory judgment of the income-tax authority. On the facts, the reopening lacked valid basis because the revenue authority itself had not accepted the audit view, so the cancellation of the reassessment was upheld.

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Issues: Whether reassessment under sections 147 and 148 of the Income-tax Act, 1961 could be sustained on the basis of an audit objection when the Assessing Officer was not in agreement with that objection.

Analysis: The reassessment was founded on an audit objection. The statutory position under section 16 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 and paragraphs 2 and 3 of Board Circular No. 14/19/56-II dated 28.07.1960 shows that the audit wing is confined to examining whether prescribed rules and procedures are followed and cannot take over the functions of the revenue authorities. On the facts, the Assessing Officer had himself not accepted the audit view, which supported the assessee's challenge to the reopening.

Conclusion: The reopening could not be sustained merely on the audit objection. The order cancelling the reassessment was upheld and the revenue's appeal failed.

Final Conclusion: The decision affirms that an audit objection, by itself, does not authorise reassessment where the revenue authority does not accept the audit view.

Ratio Decidendi: Audit machinery cannot substitute itself for the statutory functions of the income-tax authorities, and a reassessment based solely on an audit objection is not sustainable when the Assessing Officer does not concur with that objection.

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