A division bench of the Bombay High Court has held that the re-assessment under section 147 of the Income Tax Act, 1961 is bad in law since the same was at the behest of audit party.
Petitioner is a company engaged in the business, inter alia, of air conditioning and refrigeration etc. the petitioner received a notice dated 31.03.2021 under section 148 of the Act for A.Y. 2015-16 asserting that there are reasons to believe that petitioner’s income chargeable to tax for A.Y. 2015-16 has escaped assessment within the meaning of section 147 of the Act.
The petitioner contended that the reasons for reopening were provided by communication dated 18.11.2021. From the said communication, it is quite clear that the reopening is based on a change of opinion relying on materials already considered by Assessing Officer during the assessment proceedings in order to take a different view, which is not permissible, on the basis of audit scrutiny.
After considering the arguments from both the sides, Justice K.R. Shriram & Justice N.R. Borkar observed that“the statement in the reasons for reopening “it is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening under section 147 of the Act” is clearly made only as an attempt to take the case out of restrictions imposed by the proviso to section 147 of the Act.”
Relying on a catena of decisions, the bench quashed the order observing that “ it is quite clear that reopening of the assessment is also at the behest of audit party and therefore, reopening is misconceived, incorrect and bad in law.”
After perusing the provisions of section 151 of the Income Tax Act, the bench observed that “In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31.03.2021 issued under Section 148 of the Act, which is impugned in this petition.”
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