Reopening of assessment on the basis of audit objection: Validity under section 147
- The Assessee company had filed the return of income on 31.10.2007 and the same was processed under section 143(1) of the Income Tax Act. The case was re-opened on 26.08.2010 by issuance of notice under section 148 and the assessment was completed under section 143(3) read with section 147.
- The Assessing Officer subsequently noted that certain incomes had escaped assessment for the assessment year 2007-08 and re-opened the case and thereafter passed the order. The Assessee filed an appeal to the Commissioner of Income Tax (Appeals) on the ground that the assessment was re-opened on account of audit objections merely and that there was no failure on the part of the Assessee to furnish truly and fully all material facts necessary for assessment.
- The duty of the assessee, in any case, does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Assessing Officer to draw the correct inference from the primary facts. It is not the responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment.
- The action under section 147 must depend directly and solely on the formation of the belief by the Assessing Officer on its own, (even where such information is passed on to it as a result of audit objection). The re-assessment proceedings were not valid when the Assessing Officer held no belief of his own at any point of time that income of the Assessee had escaped tax and was constrained to issue notice only on the basis of audit objection.
- Thus, in the present facts of the case, the re-assessment proceedings were not valid.