Audit Objections Can Qualify as "Information" u/s 148A Only If AO Violated Statutory Provisions in Original Assessment: Madras HC [Read Order]
The Madras High Court held that audit objections can justify reassessment under Section 148A only if they clearly show a statutory violation in the original assessment.
![Audit Objections Can Qualify as Information u/s 148A Only If AO Violated Statutory Provisions in Original Assessment: Madras HC [Read Order]](https://images.taxscan.in/h-upload/2025/07/16/2064259-audit-objection-reassessment-taxscan.webp "Audit Objections Can Qualify as Information u/s 148A Only If AO Violated Statutory Provisions in Original Assessment: Madras HC [Read Order]")
In a recent decision, the Madras High Court held that audit objections can be treated as “information” under Section 148A of the Income Tax Act only if they clearly point out that the assessing officer violated statutory provisions during the original assessment. Mahogany Logistics Services Private Limited filed a writ petition challenging the reassessment proceedings initiated for...
In a recent decision, the Madras High Court held that audit objections can be treated as “information” under Section 148A of the Income Tax Act only if they clearly point out that the assessing officer violated statutory provisions during the original assessment.
Mahogany Logistics Services Private Limited filed a writ petition challenging the reassessment proceedings initiated for the assessment year 2017–18. The company argued that it had already undergone a scrutiny assessment under Section 143(3), and the reopening was based solely on audit objections without any new or tangible material.
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The petitioner's counsel argued that the audit objections were vague and did not specifically state that there was a failure to follow any statutory provision during the original assessment. They claimed that reopening amounted to a change of opinion, which is not permissible.
The income tax department argued that reassessment was valid under the amended provisions and that audit objections qualify as “information” under Explanation 1 to Section 148, warranting reopening.
They also relied on Supreme Court judgments to argue that a change of opinion is no longer a valid ground under the new regime and that the assessing officer had applied his mind to new facts flagged in the audit.
The division bench comprising Justice R. Mahadevan and Justice Mohammed Shaffiq observed that audit objections can be considered as “information” under the new provisions but they must clearly indicate that the assessment was not done in accordance with the law.
In this case, the court found that the audit objections failed to show any such statutory violation, except in respect of two specific expenditure heads: processing charges and professional fees.
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The court ruled that the reassessment proceedings could not be sustained in respect of other issues raised in the audit. It set aside the reassessment notice and order except for the two heads where the audit objection had clearly pointed to potential non-compliance.
The income tax department was permitted to issue a fresh notice under Section 148A of the Income Tax Act limited to those two issues. The appeal was partly allowed.
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