TaxTMI 
TaxTMI 
2026 (8) TMI 968
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....ed its return of income for Assessment Year (A.Y.) 2010-11 under Section 139(1) of the Act on 29.09.2010. The return was accompanied by copies of the audited accounts and the report of the auditors in Form No. 3CB read with Rule 6G(1)(b) of the Income Tax Rules, 1962. The tax audit report was duly certified by the auditors and was accompanied by all the prescribed statutory forms, annexures, and audited annual financial statements. 4. The case of the petitioner was selected for scrutiny. Notices under Sections 143(2) and 142(1) of the Act, along with detailed questionnaires, were issued and the petitioner duly complied with the same by filing detailed replies on 24.11.2011 and 02.12.2011. 5. After examining the books of account and the relevant material furnished by the petitioner, the Assessing Officer framed the assessment under Section 143(3) of the Act on 23.12.2011. 6. Thereafter, the respondent issued the impugned notice under Section 148 of the Act on 27.03.2015 seeking to reopen the assessment. 7. Prior thereto, queries were raised regarding the difference in the purchase price of gold and the non-payment of interest on partners' capital, to which the petiti....
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....pared the prices based on a Troy ounce instead of a normal ounce. Once these differences are properly accounted for, it cannot be said that any income had escaped assessment. It is submitted that this very issue had also arisen in Special Civil Application No. 3595 of 2016 and allied matters, wherein this Court had quashed the reopening. 12. Finally, it is contended that the impugned reopening is merely based on a change of opinion. During the original assessment proceedings, all the relevant materials and details concerning the aforesaid issues were thoroughly examined by the Assessing Officer, who, after due scrutiny, accepted the petitioner's explanation and completed the assessment under Section 143(3) of the Act. It is urged that the reopening deserves to be quashed and set aside. 13. Responding the foregoing submissions and opposing the writ petition, learned Senior Standing Counsel Ms. Mehta, while referring to the averments made in the affidavit-in-reply dated 29.04.2016 filed on behalf of the respondent, has submitted that the reopening ought not to be interfered with since, during the original assessment proceedings, no specific query had been raised regarding t....
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.... After considering the replies of the petitioner, the audit report the audited financial statements and other relevant material relating to the business of manufacturing and exporting precious metal products such as medallions, gold chains, gold bangles and other jewellery, the Assessing Officer observed from the computation of income that the assessee had claimed deduction under Section 10AA of the Act, which was duly supported by the statutory audit report in the prescribed Form No.56F. Accordingly, the Assessing Officer completed the assessment under Section 143(3) of the Act by order dated 23.12.2011. 20. Thereafter, the assessment was sought to be reopened by issuance of a notice under Section 148 of the Act dated 27.03.2015 on two grounds: (i) that the assessee had not provided for interest on the partners' capital, thereby inflating its profits; and (ii) that the assessee had purchased gold from its sister concern at a price lower than the prevailing market rate. It was alleged that, on both these counts, the profits stood inflated, resulting in a higher claim of deduction under Section 10AA of the Act. 21. The assessee, both in the writ petition ....
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....he assessment by observing as under: "8. In background of such contentions, we may peruse the reasons recorded by the Assessing Officer more minutely. From such reasons, we gather that the assessee which is in the business of manufacturing an export of gold and diamond jewelery, was a partnership firm comprising of two partners viz. AEL and AAPL which had profit/loss sharing ratio of 99:1% respectively. The reasons cite two different grounds for the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. First was that, as per the partnership deed dated 01.06.2006, the partners would receive simple interest at the rate of 9% per annum or such other rates as may be prescribed under section 40(b)(iv) of the Act on the balance amount to the credit on the capital or current account of the firm. Despite this covenant, the assessee firm did not pay any interest to its partners which had the effect of increasing the assessee's profit from the eligible business. Thus, the assessee claimed higher deduction than what was justified. The second ground was that the assessee firm had made purchases of gold on various occasions from its sister concern....
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....e firm or AEL. On consideration of the above explanation, your honour will find a fact that the figure of Rs. 11.01 crore is nothing but notional difference and the audit objection requires to be dropped." 10. Thus, prima-facie at-least at one stage, the Assessing Officer was convinced that the audit objection was not valid. However, for want of full clarity on this issue, we are not inclined to conclude the matter only on this aspect. It is by now well settled that if the Assessing Officer has recorded his own reasons uninfluenced by audit objection, such action would not be bad in law merely because certain issues were brought to his notice by the audit party. It is equally well settled that when the Assessing Officer does not accept the audit objections, but has issued the notice for reopening based solely on the audit objections, such action would not be valid. ............xxxx xxxx.......... 13. With respect to non payment of interest to the partners on the borrowed capital, counsel for the petitioner submitted that though the original partnership deed dated 01.06.2006 provided for such interest, this deed was amended on 06.01.2007 which del....
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..... On the basis of such material, the assessee had contended that the transactions were at the arm's length price. Thus, according to the assessee, the supply of gold by AEL to the assessee firm was at the prevailing market price. This explanation had to have relation only to the question of proper pricing of gold purchased by the assessee from AEL. This issue thus, was examined by the Assessing Officer during the original assessment. It would thereafter, not be open for the Assessing Officer to reopen the assessment on this ground particularly after four years." 26. As clarified previously, in the earlier writ petition, though the re-opening of assessment for AY.2008-09, 2009-10 was on identical issue, there was an additional issue relating to the reopening having been initiated beyond the period of four years, which is not the issue before us. However, we are in agreement with the observations made by the Coordinate Bench regarding the audit objections considered by the Assessing Officer and the effect thereof on the validity of the reopening proceedings. 27. We also concur with the findings recorded by the Coordinate Bench regarding the alleged discrepancy in the determ....