2013 (5) TMI 157 - HC - Income Tax

Assessing Officer's Independent Judgment Upheld in Assessment Year 2007-08 Reopening

The High Court held that the notice for reopening assessment for Assessment Year 2007-08 was vitiated as the Assessing Officer was compelled by the audit ... Notice U/s 148 escaped assessment - Assessing Officer was compelled by the audit party to re-open the assessment - Held that:- It is well settled that even if an issue is brought to the notice of the Assessing Officer by the audit party, it would not preclude the Assessing Officer from acting on such communication as long as the final opinion to take appropriate action is that of the Assessing Officer and not that of the audit party. Referring to the decision in case of CIT v. P.V.S Beedies (P.) Ltd (1997 (10) TMI 5 - SUPREME Court). it is equally well settled however that if the Assessing Officer has acted only under compulsion of the audit party and not independently, the action of re-opening would be vitiated. It is well settled that it is only the Assessing Officer whose opinion with respect to the income escaping assessment would be relevant for the purpose of reopening of closed assessment. It is, of course true, as held by the decision of the Apex Court in case of PVS Beedies Private Limited [1997 (10) TMI 5 - SUPREME Court] and Indian & Eastern Newspaper Society [1979 (8) TMI 1 - SUPREME Court ], if the audit party brings certain aspects to the notice of the Assessing Officer and thereupon, the Assessing Officer forms his own belief, it may still be a valid basis for reopening assessment. It writs large on the face of the record that the Assessing Officer was compelled to issue notice for reopening, though he held a bona fide belief that the treatment to the income which he had accorded in the original assessment was as per the correct legal position. - Notice u/s 148 quashed - decided in favor of assessee. Issues:1. Challenge to notice for reopening assessment for Assessment Year 2007-08.2. Compulsion on Assessing Officer by audit party to issue notice for reopening.3. Treatment of income as business income or income from other sources.Analysis:1. The petitioner challenged a notice for reopening assessment for the Assessment Year 2007-08, issued by the Assessing Officer within four years from the end of the relevant assessment year. The reasons for reopening included the cessation of business by the assessee, leasing assets to others, and income from rent and food preparation charges. The Assessing Officer believed that income chargeable to tax had escaped assessment, leading to the notice for reopening.2. The petitioner contended that the Assessing Officer was compelled by the audit party to reopen the assessment, despite the Assessing Officer's belief that no income chargeable to tax had escaped assessment. The audit party highlighted discrepancies related to the cessation of business, income treatment, and tax implications, leading to a disagreement between the Assessing Officer and the audit party. The Assessing Officer's firm assertion that the income should be assessed as business income was challenged by the audit party.3. The High Court observed that the Assessing Officer was under compulsion from the audit party to issue the notice for reopening, even though he believed that the original assessment was correct in treating the income as business income. The court emphasized that the Assessing Officer's independent opinion should guide the decision to reopen assessments, rather than acting solely under the influence of the audit party. Citing relevant case law, the court concluded that the notice for reopening was vitiated due to the Assessing Officer's action under compulsion, leading to the decision to strike down the notice and allow the petition.