TaxTMI 
TaxTMI 
2013 (5) TMI 330
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....ment of income and audit report under Section 44AB accompanied the return. In the audit report, under the heading of "Money Market Trading Account-Tax Free" reflected computation of the transaction. The petitioner had claimed a net loss of Rs.13,22,953.43 in one account. All other accounts clubbed together had shown a net loss of Rs.11,52,464/-. 1.2 A notice under Section 143(2) was issued on 30.10.2009. A letter was addressed by the petitioner-assessee to the Assessing Officer on 09.11.2009, inter alia, urging that qualitative particulars along with valuation had already been furnished in terms of the account. On the basis thereof, the Assessing Officer completed scrutiny assessment under Section 143(3) & passed an order on 14.12.2009. 1.3 Subsequent thereto, it emerges from record that the audit objection in this regard was raised. The Assessing officer, of course, did not agree with office objection. However, on 21.11.2011, the petitioner received a notice under Section 148 of the Act for reopening of the assessment on the ground that the income of the petitioner has escaped the assessment & he was directed to file his return within 30 days. 1.4 The return was submitted....
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....rovided for such reopening. The assessee also appeared during the re-assessment proceedings and sought various details. It is further contended that the assessee-petitioner had not objected to such reopening. It is only after tax liability fixed to the tune of Rs.34,96,100/-, such objection have been raised. 2.1 It is further contended that the petitioner has also filed an appeal before the CIT (A) and on his having availed alternative remedy, this petition is not maintainable. 3. Heard learned senior counsel Mr. J.P. Shah with learned counsel Mr. M.J. Shah for the petitioner who submitted that the notice is based on one of the issues, already previously raised in the scrutiny assessment. The Assessing Officer had not applied his mind independently but acted on the objection of audit party and reopening, therefore, is based on the change of opinion only. Learned counsel has also taken a firm stand that while issuing notice for reopening the assessment, action has been initiated at the instance of the audit party and therefore also, notice is contrary to the well laid down ratio that any notice for reopening solely on the objection of audit party without application of mind, c....
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....on 09.11.2009. It also enclosed along with the monthly particulars of the trading in G-Security, MMD and Bonds by further mentioning that qualitative particulars with money value had already been given in the account. No further queries were raised and the assessment order was passed on 14.12.2009 on scrutiny, under Section 143(3) of the Income-tax Act taking into account all these aspects. 5.3 It appears that, subsequent to this, audit objections were raised in the following manner: "Under Section 37 of the Income Tax Act, 1961, any expenditure, not being expenditure of the nature described in Section 30 to 36 and not being in the nature of capital or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head "Profit and gains of business or profession. The assessee, Shri Jagat Jayant Parikh, an individual, a dealer in securities, filed its return of income for the Assessment Year 2007-2008 on 30.10.2007 declaring total income, including salary income at Rs.1,89,040 under Section 143(1) of the Income Tax Act, 1961. The return was processed on....
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.... Rs.1,89,040. The return was processed on 19.03.2009 accepting the same income. Thereafter, the return was selected for scrutiny under section 143(3) and the same was finalized on 24.12.2009 determining total income at Rs.2,12,320. It is seen that you had returned gross total salary income of Rs.2,99,040/- and gross business loss of Rs.15,85,666/- as per the statements of computation of total income. It is further noticed that you have debited an amount of Rs.1,24,31,189 towards "provision for purchase" (short sale-inclusive of interest) in the Money Market Trading Account and out of this, an amount of Rs.52,65,699/- had been credited towards "provision for purchases reversed". The net loss of Rs.13,22,953.43 of this Money Market Trading Account was debited to the Profit & Loss Account and net business loss of Rs.11,52,464/- was take for computation of business income. After adjustment of various items depreciation etc., the net business loss of Rs.15,85,666/- was claimed to be carried forward for set off in future assessment years. Thus, allowance of net provision of [Rs.71,65,489.92 (1,24,189.18 - 52,65,669) was not therefore, laid out or expended wholly and exclusively for th....
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....riate to call for the record of the Assessing Officer for our perusal. 5.7 It could be noticed from the said record that the Assistant Commissioner of Income-tax had serious objections to the said report of audit party & vide his letter dated 23.03.2011 addressed to the Senior Audit Officer, he, in his communication, ventilated his objections in following fashion: "2. The main contention of the Audit Party is that the assessee has debited an amount of Rs.1,24,31,189 towards the provision of purchase and out of this an amount of Rs.52,65,699 has been credited towards provisions for purchase reverse. The provisions for the expenses is not admissible expenditure. 3. The audit objection raised is not acceptable as it is contrary to the facts of the case. It may be mentioned that every expenditure related to business transaction is allowable in Income tax and when there is a determined and defined expenditure there is entry in the books of accounts. When such defined but indetermined expenditure in incurred, it referred to as provision. This provision is allowable as expenditure in Income Tax Act. Only un ascertained transactions when provided, are disallowed. 4. In the pres....
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....fferentiate between business expenditure and personal expenditure. The Assessing Officer also opined that as far as the personal expenditure was concerned that was pure and simple business expenditure on which liability was booked on provisional value till the actual event get crystalized. 5.9 It is a well laid down principle that the Assessing Officer requires to form his own belief at the time of reopening the assessment & while issuing notice of reopening. However, on having noticed certain aspects from the report of the audit party if the Assessing Officer chooses to form his opinion to reopen, validity of reopening of such assessment cannot be challenged on the ground of such reopening of assessment being at the instance of audit party. 5.10 On 01.04.1989, after the Amending Act, 1989, the powers of reopening assessment under Section 147 have been made very wide. What is predominantly questioned in this petition is the absence of exercise of powers given by the Statute under Section 147 by the Assessing Officer and his having reopened the assessment despite his own objection. The Assessing Officer needs to have reason to believe that income has escaped assessment for any....
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....se of authority conferred on such person would be ultra vires the provisions of law and would be abuse of such authority. As the aforesaid decision of the Supreme Court indicates that though audit objection may serve as information, the basis of which the ITO can act, ultimate action must depend directly and solely on the formation of belief by the ITO on his own where such information passed on to him by the audit that income has escaped assessment. In the present case, by scrupulously analysing the audit objection in great detail, the assessing officer has demonstrably shown to have held the belief prior to the issuance of notice as well as after the issuance of notice that the original assessment was not erroneous and so far as he was concerned, he did not believe at any time that income has escaped assessment on account of erroneous computation of benefit u/s 80HHC. He has been consistent in his submission of his report to the superior officers. The mere fact that as a subordinate officer he added the suggestion that if his view is not accepted, remedial actions may be taken cannot be said to be belief held by him. He has no authority to surrender or abdicate his function to hi....
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....aised an objection in regard to non deduction of tax under section 195 of the Income-tax Act, 1961 in respect of international transactions with associated enterprises in regard to payment for product registration services availed amounting to Rs.51,94,204/- and based on the same opined that the said expenditure was liable to be disallowed under section 40(1)(i) of the Act. The petitioner respectfully submits that since this objection had been raised on the basis of the information available on the assessment records of the petitioner's case for the A.Y. 2004-05, it clearly establishes that there was no default on the part of the petitioner in fully and truly disclosing the primary facts." Since the specific case of the petitioner was that the Assessing Officer had acted at the behest of the Audit Party and held no independent opinion on its own with respect to the income escaping assessment, we had called for the original records pertaining to the files of the assessee from the Revenue Department. Learned counsel Shri Bhatt after detailed search, made available a copy of the letter dated 21.5.2009 from one Ritu Singh Sharma, Asstt. Commissioner of Income-tax, in charge of this ....