Assessment Strayed from Guidelines of Income Tax Act is Crucial for Reopening of Assessment: Kerala HC [Read Order]

The Kerala High Court in a single judge verdict held that if the revenue audit raises an objection that the assessment was not completed in accordance with the provisions of the Income tax Act,1961 it cannot be treated as a change of opinion because this is the statutory prescription and statutory ground/reason for re-opening the assessment

Assessee, M/s Sree Narayana Guru Memorial Educational and Cultural Trust contended that the corpus fund received by the petitioner could not be part of the income of the petitioner under Section 11 of the Income Tax Act. The audit objections are against the statutory prescription in Section 11 of the Income Tax Act. The assessee replied to the notice issued under Section 148A(b) of Income Tax Act, bringing to the notice of the Assessing Officer the applicability of Section 11 of Income Tax Act to the corpus fund, and, therefore, the reasons recorded for reopening of the assessment are incorrect. The assessee further contended that the assessee’s reply has not been considered and no proper consideration has been given to Section 11 of the Income Tax Act. Therefore, the order passed under Section 148A(d) of Income Tax Act is bad in law and liable to the set-aside.

Revenue contended that with effect from 01.04.2022, Section 148 of Income Tax Act  has been amended and clause (ii) of Explanation 1 has been inserted which provides that any audit objection to the effect that the assessment in the case of an assessee for the relevant assessment year has not been made in accordance with the provisions of the Act would be a ground for re-opening of the assessment. Revenue contended  that the impugned order, recording the satisfaction for re-opening of the assessment in the case of the petitioner, is perfectly in accordance with the statutory prescription as provided under Clause (ii) of Explanation 1 of Section 148 of Income Tax Act. Therefore, there is no error of law or jurisdiction for this Court to interfere with the impugned order passed under Section 148A(d) of the Income Tax Act.

In a single judge verdict Justice Dinesh Kumar Singh held that ”If the revenue audit raises an objection that the assessment was not completed in accordance with the provisions of the Income Tax Act, it cannot be treated as a change of opinion because this is the statutory prescription and statutory ground/reason for re-opening the assessment. The Assessing Authority has proceeded strictly in accordance with the provisions of Clause (ii) of Explanation 1 to Section 148 of the Income Tax Act. Therefore, I find no error of law or jurisdiction in the impugned order.” The court further observed that  if the assessee has not filed the return of his income in pursuance of the notice, the assessee may file his return within a period of four weeks.

Assessee was represented by Bijoy Chandran, A.S.Sriraman, Rajesh Nair and Nikhil Viswam. Revenue was represented by Cristopher Abraham.

To Read the full text of the Order CLICK HERE

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