Re-Assessment merely on the basis of Tax Audit Filed before the Assessing Officer during Scrutiny Proceedings is Invalid: ITAT [Read Order]

The Cuttack bench of Income Tax Appellate Tribunal in the case of Mahanadi Coalfields Ltd versus ACIT  has quashed the reassessment and held that re-assessment merely on the basis of tax audit filed before the Assessing Officer during scrutiny proceedings is Invalid.

In present issue, Assessee filed its return of income in twice declaring taxable income of 275926.69 lakhs. Upon perusal, Assessing Officer found that income chargeable to tax has escaped assessment on account of the wrong valuation of closing stock and incorrect allowance of depreciation and raised many additions. As a result, Assessing Officer issued notice u/s.148 of the Act, response to this Assessee raised objection against the reopening of assessment and furnished some details.

However, AO passed an order for reopening the case and assessed the income of the assessee at Rs.289232.18 lakhs. Assessee filed appeal with the CIT (A) challenging the reopening of assessment and also against various additions made by the Assessing Officer.

The CIT (A) rejected the appeal of Assessee with regard to reopening of assessment u/s.147. When this matter carried to the tribunal, the counsel for Assessee contended that the issue of notice u/s.148 of the Act is based on the change of opinion only as no new fact has come to the notice of the Assessing Officer.

Also, Assessee demanded to quash of the reassessment order passed by the Assessing Officer and submitted that AO has not disposed of the objection filed by the assessee. On the counterpart revenue supported the orders of lower authorities.

The Tribunal Bench asked the Assessee to explain the reasons for such act which were demonstrated with the copy of reasons recorded for reopening of assessment. Those reasons were on six aspects and all these reasons recorded are based on the tax audit report and financial statements., which were verified by the AO in the original assessment proceedings and the Assessing Officer has passed order u/s.143(3) of the Act after making additions and determined the total income.

The tribunal bench comprising of Judicial Member Pavan Kumar Gadale and Accountant Member N.S Saini were relied on the full bench of High Court in the case of Commissioner of Income Tax v. Eicher Ltd and also calls for various High Court decision wherein held that no new tangible material has come on the basis of which it could be said that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment.

Finally, the tribunal held that AO has not brought on record any new tangible material to initiate reassessment proceedings but relied only on tax audit report and financial statements, which were already, filed before the Assessing Officer in the scrutiny proceedings.

Accordingly, the tribunal decided to quash the reopening of Assessment since the decision was merely on the basis tax audit report and financial statements