2015 (3) TMI 635 - AT - Income Tax

Tribunal Invalidates Reopening of Income Tax Assessment

The Tribunal upheld the decision that the reopening of the assessment under section 148 of the Income Tax Act, 1961 was invalid. The reassessment was ... Reopening of assessment on the basis of audit objection - CIT(A) held he reopening to be incorrect - Held that:- Comparison of audit objection with the reasons recorded by the AO would show that the AO has simply copied the audit objections in verbatim and it clearly shows that the assessing officer has not applied his mind independently. Though, the audit objection can be a source of information, yet AO has to independently apply his mind in order to arrive at the conclusion that he had reason to believe about escapement of income. The high-lighted the portion in the reasons recorded for reopening, viz., “seems to have been included” and “since the value of assets pertaining to paper and chemicals divisions could not be ascertained separately out of block of assets, no tax effect has been computed” would only show that the AO did not have any reason to believe about the escapement of income, which is the vital ingredient to uphold the reopening of assessment. One more point to be noticed is that the AO/audit party is making reference of a letter dated 11.12.2008 furnished by the assessee during the course of original assessment proceedings, meaning thereby, a reference is being made to the very same material, which was examined by him in the original assessment proceedings. It was not shown to us that the assessing officer could not have considered the above said letter during the course of original assessment proceedings. This fact also supports the case of the assessee. - Decided in favour of assessee Issues Involved:Validity of reopening of assessment under section 148 of the Income Tax Act, 1961 based on audit objection without independent application of mind by the Assessing Officer.Analysis:Issue 1: Validity of Reopening of AssessmentThe appeal pertains to the reopening of the assessment for the assessment year 2006-07 by the Assessing Officer (AO) under section 148 of the Income Tax Act, 1961. The Revenue challenged the decision of the ld. CIT(A) in holding the reopening of the assessment as bad in law. The AO reopened the assessment based on the observation that the assessee had not made a full and true disclosure in the return of income, specifically regarding the assets of closed divisions included for depreciation allowance. The ld. CIT(A) found that the reasons recorded by the AO were vague and lacked a definite conclusion about the escapement of income. The ld. CIT(A) referred to case law to support the contention that reopening based on audit objection without independent application of mind is not justified. The Tribunal agreed with the ld. CIT(A) that the reassessment was incorrect, emphasizing that the AO did not have a valid reason to believe about the escapement of income, as required for reopening an assessment. The Tribunal noted that the AO merely copied audit objections without independent assessment, supporting the decision to annul the reassessment.Conclusion:The Tribunal upheld the decision of the ld. CIT(A) that the reopening of the assessment was bad in law, leading to the annulment of the reassessment. As a result, the appeal of the Revenue was dismissed without the need to adjudicate the remaining grounds on merits. The judgment highlighted the importance of the Assessing Officer independently applying his mind to determine the escapement of income before initiating the reassessment process.