Audit-objection reassessment beyond three years requires new documentary evidence and cannot revisit completed scrutiny assessments through a changed opinion.
Reassessment beyond three years requires books of account, documents or evidence showing income escapement; an audit objection alone, particularly one reappraising material examined in scrutiny, cannot satisfy this condition or permit review through a change of opinion. Writ jurisdiction remains available for a jurisdictional challenge to a reassessment notice despite an alternative appellate remedy or consequential assessment order. Excise-duty refunds received under an industrial incentive scheme for establishing an undertaking are capital receipts rather than taxable revenue income. Goodwill arising on amalgamation qualifies as a depreciable intangible asset, and an audit-based contrary view without new material cannot support reopening of an earlier allowance.
Issues: (i) Whether writ challenges to reassessment notices remained maintainable despite an alternative remedy and subsequent assessment orders; (ii) Whether reassessment initiated after three years could validly rest solely on audit objections without newly available books of account, documents or evidence; (iii) Whether excise-duty refund under the industrial incentive scheme was a capital receipt; and (iv) Whether depreciation on goodwill arising from amalgamation was allowable and could be reopened merely on an audit objection.
Issue (i): Whether writ challenges to reassessment notices remained maintainable despite an alternative remedy and subsequent assessment orders.
Analysis: A jurisdictional challenge to a reassessment notice is amenable to writ jurisdiction. The availability of an appellate remedy against a later assessment does not bar such a challenge, and completion of consequential assessment proceedings cannot render it infructuous where the foundational notice is alleged to be without jurisdiction.
Conclusion: The writ challenges were maintainable in favour of the assessee; neither the alternative remedy nor subsequent assessment orders defeated the jurisdictional challenge.
Issue (ii): Whether reassessment initiated after three years could validly rest solely on audit objections without newly available books of account, documents or evidence.
Analysis: Sections 147, 148, 148A and 149 of the Income-tax Act, 1961 require, for reassessment beyond three years, that the Assessing Officer possess books of account, documents or evidence revealing the stipulated escapement of income. An audit objection is information for the purposes of Section 148, but is not by itself the new documentary material mandated by Section 149(1)(b). An audit objection that merely reappraises records available during the original assessment is an opinion and cannot convert reassessment into a review through a change of opinion. The scope of an earlier scrutiny assessment does not dilute these statutory jurisdictional preconditions.
Conclusion: The reassessment actions were barred by limitation and without jurisdiction, in favour of the assessee, because they were founded solely on audit objections and not on the requisite new books of account, documents or evidence.
Issue (iii): Whether excise-duty refund under the industrial incentive scheme was a capital receipt.
Analysis: The excise-duty refund or re-credit was received under an industrial incentive scheme for establishing an undertaking in Sikkim and had been disclosed and accepted in the original assessment. The applicable legal position treated such incentives as capital receipts rather than taxable revenue income.
Conclusion: The excise-duty refund was a capital receipt not chargeable to tax, in favour of the assessee.
Issue (iv): Whether depreciation on goodwill arising from amalgamation was allowable and could be reopened merely on an audit objection.
Analysis: Under Explanation 3(b) to Section 32(1) of the Income-tax Act, 1961, goodwill arising on amalgamation is an intangible asset qualifying for depreciation. The depreciation claim had been allowed in scrutiny assessments, and the audit objections disclosed no new material capable of supporting a reassessment.
Conclusion: Depreciation on the goodwill was allowable, and its earlier allowance could not be reopened merely because an audit objection advanced a contrary opinion; this finding is in favour of the assessee.
Final Conclusion: Closed assessments cannot be reopened beyond the ordinary limitation period where audit observations merely invite a different view on disclosed and previously assessed material, without the statutorily required new evidence of income escaping assessment.
Ratio Decidendi: An audit objection may constitute information under Section 148, but, without independent new books of account, documents or evidence satisfying Section 149(1)(b), it cannot confer jurisdiction to reopen a completed assessment beyond three years or justify a change of opinion.