1997 (10) TMI 5 - SC - Income Tax

Reopening under s.147(b) upheld where internal audit revealed factual error or omission; legal questions reserved for larger Bench

SC held reopening under s.147(b) was valid where internal audit pointed out a factual error or omission; this case did not present merely a question of ... Reopening u/s 147(b) - justification for reopening of the assessment - HELD THAT:- This is not a case of information on a question of law. The dispute as to whether reopening is permissible after the audit party expresses an opinion on a question of law is now being considered by a larger Bench of this court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was valid in law. The judgment under appeal is set aside to this extent. The appeals are allowed. There will be no order as to costs. The Supreme Court allowed the appeals related to assessment years 1974-75 and 1975-76. The Tribunal and High Court erred in holding that reopening of assessment under section 147(b) was not permissible based on a report by the audit department. The internal audit party pointed out that a charitable trust's recognition had expired before the relevant years, making donations ineligible for deduction under section 80G. The Court held that reopening based on factual information from the audit party was valid. The judgment under appeal was set aside, and no costs were awarded.