TaxTMI 
TaxTMI 
2005 (3) TMI 55
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....ing and final disposal today. The petitioner, a private limited company, filed its return of income for the assessment year 2001-02 on October 30, 2001, declaring total loss of Rs. 2,70,85,105. The said return was processed under section 143(1) of the Income-tax Act, 1961 (the Act), accepting the loss returned by the petitioner. On May 12, 2004, the respondent issued impugned notice under section 148 of the Act. On May 31, 2004, a return of income declaring the loss at the same figure, as declared in the original return, was filed by the petitioner under protest. After writing to the respondent a couple of times, a copy of the reasons recorded was furnished by the respondent some time in November, 2004. The petitioner raised various obje....
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....as submitted that despite the aforesaid categorical averment on oath in the petition, the respondent has failed to respond to the same even though affidavit-in-reply dated March 21, 2005, has been tendered. In the light of the aforesaid position, learned standing counsel was directed by the court on March 22, 2005, to produce the original record. The same has been placed for perusal before the court today. On going through the record the following facts emerged: On October 16, 2003, senior audit officer has raised an objection to the effect that in the profit and loss account, the assessee had debited a sum of Rs. 1,285.72 lakhs as bad debt out of total expenditure of Rs. 1,307.64 lakhs. However, total loans and advances outstanding a....
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....it is also seen that the objection raised by the Revenue audit is beyond their purview, for which detailed reasons have been given by the Assessing Officer in his report. The scheme of processing of returns was a deliberate shift on the part of the Government from the scheme of scrutiny of all cases knowing fully well the possible leakage of revenue, which might be caused by this scheme. This is evident from the Board's Circular No. 176, bearing F.No. RA/1/86-87/DIT, dated August 16, 1987, of the DIT (Audit), New Delhi, wherein the Member (R & A) is quoted as under: 'No remedial action is necessary in summary assessment cases as the revenue loss, if any, is consciously suffered by the Government to utilise resources for scrutiny and inve....
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....21 lakhs and loans and advances, members security deposit Rs. 26.12 lakhs). It is, therefore, prima facie not possible to write off a bad debt of Rs. 1,285.72 lakhs during the year under consideration. Further, the assessee by virtue of its business nature would not be debiting the amount claimed as bad debt in the credit side of the profit and loss account. Under such scenario, such amount shall not be eligible for deduction under section 36(1)(vii) read with section 36(2) of the Income-tax Act. In view of the above facts of the case, I have reason to believe that income assessable to tax has been escaped assessment by accepting the return of income under section 143(1) of the Income-tax Act." In the circumstances, it is apparent ....
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....n good faith or the belief which is projected in papers is not belief held by him in fact, the exercise of authority conferred on such person would be ultra vires the provisions of law and would be an abuse of such authority. As the aforesaid decision of the Supreme Court indicates though audit objection may serve as information on the basis of which the Income-tax Officer can act, ultimate action must depend directly and solely on the formation of belief by the Income-tax Officer on his own where such information is 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....