2016 (10) TMI 324

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....a fire which took place in the premises of the petitioner on 10.05.2011. A First Information Report (FIR) in that regard lodged by the petitioner with the police was also produced. After noticing the destruction of the record in the fire, the assessing officer perused the profit and loss account for the relevant year and finding expenses under certain heads like business, promotions & conveyance expenses, travelling incentives etc. to be on the higher side when compared to the previous assessment year, made a disallowance of a lump sum amount of Rs. 10,00,000/-. On 03.03.2014, audit objections were raised with regard to the petitioner's assessment to tax for the relevant assessment year. The audit objections were as under: - "During the course of audit, it has been noticed that the auditor vide para 27 of the audit report has been reported that provisions of chapter XVII b has not been complied with. In the profit and loss account, the assessee debited following expenses on which TDS provisions are applicable: - Rs.2,88,01,473.00/- Rs. 54,35,000.00/- Rs. 23,81,740.00/- Rs.2,03,16,004.80 Total- Rs. 5,81,62,260/-   No ledger accounts of....

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....aid notice under Section 148 of the Act, which through order dated 16.04.2015 were rejected. It is in the background of the above facts that the petitioner through the present petition has knocked the doors of this Court for the afore-referred reliefs. Mr.Sanjay Bansal, Senior Advocate, appearing on behalf of the petitioner submitted that on receipt of the impugned notice under Section 148 of the Act, in order to respond to the same through an effective reply, the petitioner had sought from the respondents a copy of the audit memo No.99 in respect of audit conducted on 03.03.2014, annotated report dated 11.07.2014 and a copy of the letter dated 04.09.2014. However, the department did not supply the same. The petitioner was only permitted to inspect the record and it is on that basis only that the initial responses to the impugned notice as also the objections to the same were filed. It was submitted that the denial of the documents by the respondents was a clear violation of the principles of the natural justice. It was further submitted that it was only much later on the petitioner's filing an application under the Right to Information Act, 2005 that the respondents supp....

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....y the petitioner. The re-assessment proceedings were sought to be justified by submitting that though initially when the audit objections were put to the assessing officer, he had not recommended any further action but when through letter dated 04.09.2014, he was requested by the Commissioner, in his administrative capacity, to give reasons for the same, the assessing officer wrote to the TDS department and summoned the record pertaining to the petitioner and only on the receipt and perusal thereof he formed an independent opinion that the audit objections had been rightly raised and it is on such satisfaction on his part that the impugned notice dated 24.10.2014 under Section 148 of the Act, for initiating re-assessment proceedings against the petitioner, was issued. Under Section 147 of the Act, if the assessing officer has reasons to believe that any income which should have been chargeable to tax has escaped assessment, he is well within his rights to initiate proceedings, as prescribed by law, to bring such income to tax. However, the satisfaction to initiate re-assessment proceedings has to be his own and not based on the diktat of another or based solely on audit objec....

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.... and cannot be an opinion and/or belief of some other authority. In fact, the Supreme Court in the matter of India Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi, reported in 119 ITR page 996 has held that whether an assessment has escaped assessment or not must be determined by the Assessing Officer himself. The Assessing Officer cannot blindly follow the opinion of an audit authority for the purpose of arriving at a belief that income has escaped assessment. In the present facts, it would be noticed that the reasons for which the assessment for the assessment year 20062007 is sought to be reopened by communication dated 12.10.2011 are identical to the objection of the audit authority dated 29.12.2009. The reasons do not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there was no independent application of mind by the Assessing Officer before he issued the impugned notice. On this ground alone, the assumption of jurisdiction by the Assessing Officer can be faulted. 7. However, as submissions were made on other issues also we are examining them also. ....

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....3) of the Act a presumption can be raised that he applied his mind to all the facts involved in the assessment. To the same effect is a Division Bench judgment of this Court in "State Bank of Patiala Vs. Commissioner of Income Tax [2015] 375 ITR 109. On applying the above settled principles of law to the facts of the present case, we are of the opinion that the petitioner deserves no relief. Before the original assessment order dated 19.12.2012 was passed, the relevant record of the assessee had been destroyed in fire. On perusal of the profit and loss account finding the expenses shown therein, when compared with the previous assessment year to be higher, the assessing officer imposed a lump-sum deduction of Rs. 10,00,000/-. On 03.03.2014, an audit objection was raised qua the above assessment which was to the effect that as required, no TDS had been deducted by the petitioner qua expenses on advertisement, rent, courier services and event expenses. Thus, as per the provisions of Section 40(a)(ia) of the Act these expenses were liable to be disallowed and added back to the assessee's income. On the above objections the comments of the assessing officer were sought who....

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....with regard to the expenses on which the petitioner was supposed to deduct TDS at the time of release of payments. The record was supplied by the TDS wing to the assessing officer through letter dated 17.10.2014 on the examination of which the assessing officer found that the petitioner had, in fact, not deducted TDS as required by law on the expenses incurred by it towards advertisement, rent, courier services and event expenses. This information which would come under "tangible material" was not before him at the time when the original assessment was made and on the basis whereof, on recording of reasons, which were later supplied to the petitioner, the re-assessment proceedings were initiated. It may be noted that at the time of framing of the original assessment, the assessing officer had sought record from the petitioner which was not produced on the ground that the same had been destroyed in a fire which took place in the premises of the petitioner. This fact would have also contributed towards the escapement of the above income from tax. Mr.Bansal placed strong reliance upon the audit report, the profit and loss account and the assessment order under Section 143(3). The a....