TaxTMI 
TaxTMI 
2014 (12) TMI 1114
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....total income was on account of unexplained expenditure under section 69C of the Income Tax Act, 1961 (for short "the IT Act") at Rs. 21,60,000/-. The matter went up to the level of Income Tax Appellate Tribunal (ITAT) and it passed order on 6th December, 2006 restoring the issue of addition of Rs. 21,60,000/- to the file of the Assessing Officer. In the meanwhile, the Assessing Officer, on receiving certain audit objections, proposed to reopen the assessments under section 148 of the IT Act and after receiving an approval from the Commissioner of Income Tax-12, Mumbai, the assessments were reopened. Since the ITAT restored the addition made under section 69C of the IT Act for reverification, the Assessing Officer merged the reopening with the directions of the ITAT. A notice under section 148 of the IT Act was issued and served upon the Assessee, in response to which, return of income was filed on 29th November, 2006. This was objected to on the ground that all the points raised by the audit party were considered at the first assessment stage itself. The Assessee contended that it had filed detailed explanation in relation to the expenditure and also furnished all details. The Asse....
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....val of Ld. CIT(A) on the objections raised by the audit. We find that the assessment made u/s. 143(3) r.w.s. 147 is devoid of any application of mind on the part of AO. We therefore reverse the finding of Ld. CIT(A) and hold that AO has no reason to believe that income has escaped assessment or the assessee has filed inaccurate particulars of income as no new facts are brought on record. All the expenses claimed by the assessee have been verified in detail in the original assessment therefore the reopening of assessment to disallow the same merely on the basis of audit report is not justifiable. Therefore, ground 1 is allowed." 4. Mr. Chhotaray appearing for the Revenue submits that the substantial question of law is "whether the Tribunal was justified in questioning the reassessment because the reasons therefor have not been assigned and independent of the audit objections". Mr. Chhotaray endeavors to submit that the objections raised by the audit party are enough and to undertake the exercise as undertaken by the Assessing Officer. In that he relied upon a Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. P. V. S. Beedies Pvt.Ltd. reported....
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....in para 7 and reproduced above is under issue. The Hon'ble Supreme Court in the case of P. V. S. Beedies Pvt. Ltd. (supra), relied upon by Mr. Chhotaray, held that the internal audit party merely pointed out a fact which had been overlooked by the Income Tax Officer in the assessment. The Income Tax Officer did not notice that recognition granted to the charitable trust had expired on 22nd September, 1972. This was not a case of information on a question of law. The internal audit party was entitled to point out a factual error or omission in the assessment. The reopening of a case on the basis of factual error pointed out by the audit party was permissible under law. In recording that conclusion, the Supreme Court held as under: "1. These cases relate to Assessment Years 1974-75 and 1975-76. The relevant accounting years ended on 31-3-1974 and 31-3-1975 respectively. Originally the assessment was completed on 21-6-1977. There were various other proceedings which ended in the Tribunal. The Tribunal after considering all aspects of the cases remanded the cases back to the Income Tax Officer for passing a fresh order in accordance with law. One of the points raised before the ....
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....he earlier decision, which was rendered in the case of Kalyanji Mavji and Co. vs. Commissioner of Income Tax (supra), the Hon'ble Supreme Court found that the reassessment was valid as held by the High Court because the information on the basis of which the Income Tax Officer sought to reopen the assessment was based on subsequent facts as also on the materials of the original assessment proceedings. The decision was confirmed by the Hon'ble Supreme Court and it laid down certain principles. 8. However, the notice and which has to be issued in terms of the legal provision, namely, section 148 of the IT Act and the satisfaction that is required to be recorded therein was not in issue in the decisions relied upon by Mr. Chhotaray. Section 147 of the IT Act enables the Assessing Officer to record his reasons and for a belief that any income chargeable to tax has escaped assessment for any year, he may subject to the provisions of section 148 and 153 of the IT Act, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recommpute....
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....ised by the audit party. There was no application of mind by the Assessing Officer. It is in these circumstances and when one of the objection of the audit party has been rejected by the Assessing Officer, that we find substance in the contention of Ms. Sathe that the Tribunal did not commit any error of law apparent on the face of the record and in allowing the Assessee's Appeal. The reliance placed by Ms. Sathe on the Judgment of the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society (supra) is therefore wellplaced. The Hon'ble Supreme Court in that case found that the Assessing Officer/Income Tax Officer had before him a view of the internal audit party that the money realised by the Assessee on account of the occupation of its conference hall and rooms should not have been assessed as income from business. It should have been made under the head "income from property". The Income Tax Officer treated the contents of the report as 'information' in his possession for the purpose of section 147(b) of the IT Act and reassessed the income on that basis. The ITAT noticed a conflict of judicial opinion on the question "whether the internal aud....
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....cribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. He is entitled to examine the accounts in order to ascertain whether the rules and procedures are being duly observed, and he is required, upon such examination, to submit a report. His powers in respect of the audit of incometax receipts and refunds are outlined in the Board's Circular No. 14/19/56-II dated July 28, 1960. Paragraph 2 of the circular repeats the provisions of s. 16 of the Comptroller and AuditorGeneral's (Duties, Powers and Conditions of Service) Act, 1971. And para 3 warns that "the audit department should not in any way substitute itself for the revenue authorities in the performance of their statutory duties" Paragraph 4 declares: "4. Audit does not consider it any part of its duty to pass in review the judgment exercised or the decision taken in individual cases by officers entrusted with those duties, but it must be recognized that an examination of such cases may be an important factor in judging the effectiveness of assessment procedure....... It is, however, to forming a general judgment rather than to, the detection of individual errors ....