AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 753
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....sment order, which was apparent on the face of the record. On an objection being filed, the proceedings were dropped and, thereafter, a notice dated 23.02.2011 was issued under Section 148 of the Act contending that the internal Revenue Audit Party in its report had submitted that the petitioner had debited an amount of Rs. 5,87,16,00/- and Rs. 31,63,868/-, which was not allowable under Section 36 (1) (viia) of the Act and, therefore, the Department has "reasons to believe" that an income of Rs. 6,18,79,868/- had escaped assessment. The petitioner filed his objection contending that reassessment proceedings were patently erroneous and that reasons to believe was nothing but a change of opinion on which no reassessment proceedings could be initiated. By an order dated 19.09.2011, the objection of the petitioner was rejected. We have heard Sri Shakeel Ahmad, the learned counsel for the petitioner and Sri Ashish Agarwal, the learned counsel for the Income Tax Department. The learned counsel for the petitioner submitted that the reassessment proceedings could not be initiated on the basis of an audit report. According to the learned counsel, such audit report does not amount to "info....
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....use or justification to know that income had escaped assessment, it can then be said that the Assessing Officer had reasons to believe that an income had escaped assessment. The scope and effect of Section 147 of the Act as substituted with effect from 01.04.1989 and also Section 148 of the Act are substantially different from the provisions as they stood prior to such substitution. Clause (a) and (b) of Section 147 of the Act laid down the circumstances under which income escaped assessement could be assessed or reassessed. Section 147 contemplated two conditions which were required to be satisfied, namely, that the Assessing Officer must have reasons to believe that income, profit or gain chargeable to tax have escaped assessment, and secondly, he has reasons to believe that such escapement had occurred by reason of omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. Both these conditions are conditions precedent and are required to be satisfied before the Assessing Officer could assume jurisdiction under Section 148 of the Act read with Section 147 of the Act. After 01.04.1989 only the first condition is re....
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.... audit of income-tax 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 section 16 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. And paragraph 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 recognised 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 of assessment, etc. that the audit enquiries should be directed. The detection of individual errors is an incident rather than the object of audit." Other provisions stress that the primary function of audit in relation to assessments and refunds is the consideration whether the internal procedures are adequate an....
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....ment should have been made under section 9. While sections 9 and 10 can be described as law, the opinion of the audit party in regard to their application is not law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the Income Tax officer constitutes "information" within the meaning of section 147 (b); the part which embodies the opinion of the audit parts in regard to the application or interpretation of the law cannot be taken into account by the Income Tax Officer. In every case, the Income Tax officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income ....
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.... General, they perform essentially administrative or executive functions and cannot be attributed the powers of judicial supervision over the quasi-judicial acts of income tax authorities. The Supreme Court also held that the opinion of the audit party in regard to their application is not law nor was a declaration by a body authorised to declare the law. The Supreme Court held that the part which embodied the opinion of the audit party with regard to the application or interpretation of the law could not be taken into account by the Income-tax Officer and that the Income Tax Officer must determine as to what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which had not come to his notice he could reasonably believe that income had escaped assessment. The Supreme Court held that the basis of this belief must be recorded. In the light of the aforesaid decision, the Gujarat High Court in Adani Exports Vs. Deputy Commissioner of Income Tax (Assessments),240 ITR 224 held that merely on the basis of the opinion of the audit report reassessment proceedings could not be initiated and, accordingly, quashed the reassessment proceed....