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Before: Shri V. Durga Rao & Shri Manoj Kumar Aggarwal
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
Both the cross appeals filed by the assessee as well as the Revenue are directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Tiruchirappalli dated 31.03.2016 relevant to the assessment year 2008-09. The assessee has challenged the order passed by the ld. CIT(A) on merits besides quashing the assessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 [“Act” in short].
On the other hand, the Department has challenged the order passed by the ld. CIT(A) with regard to quashment of the assessment order passed under section 143(3) r.w.s. 147 of the Act by relying on the decision in the case of Teekoy Rubbers (India) Ltd. Vs. CIT [without mentioning the citation] for the proposition that the reopening of assessment based on an audit objection is valid.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the Assessing Officer has completed the assessment order under section 143(3) r.w.s. 147 of the Act dated 29.03.2014 without recording reasons for reopening of assessment and simply forwarded the copy of audit objections of R.A.P. as reasons for reopening of assessment. On appeal, by following three-Judge decision of the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society vs. CIT (1979) 119 ITR 996 (SC), the ld. CIT(A) has held that the reassessment proceedings suffer from the voice of lack of jurisdiction as no reasons were found to have been recorded, as envisaged under section 148(2) of the Act, and the reopening has been solely made on the promptings of the of the R.A.P. on a question of law, which is not permissible, as held by the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society vs. CIT (1979) 119 ITR 996 (SC). We have gone through the decision of the Hon’ble Supreme Court, wherein, it has been held as under: “The opinion of an audit party on a point of law cannot be regarded as “information” within the meaning of section 147(b) of the I.T. Act, for the purpose of re-opening of assessment. But although an audit party does not possess the power to pronounce on the law, it nevertheless may draw the attention of the ITO to it…………. That apart alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes “information” within the meaning of s. 147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determiner for himself what is the effect and consequence of the law which has now come to his notice, he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief add to or colour the significance of such law. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO. 3.1 In view of the above decision of the Hon'ble Supreme Court in the Indian and Eastern Newspaper Society vs. CIT (supra), we are of the considered opinion that the ld. CIT(A) has legally quashed the assessment order passed under section 143(3) r.w.s 147 of the Act.
3.2 Once the assessment order passed under section 143(3) r.w.s. 147 of the Act has been quashed by the ld. CIT(A), the ld. CIT(A) was not required to adjudicate the grounds raised on merits since the grounds raised on merits in the appeal are mere academic in nature Accordingly, the decisions of the ld. CIT(A) on merits are dismissed. Thus, the appeal filed by the assessee is dismissed as infructuous.
The case of the Department in its appeal is reopening based on an audit objection can be regarded as “information” in view of the Supreme Court decision in the case of Teekoy Rubbers (India) Ltd. Vs. CIT. The citation was not mentioned in the grounds of appeal of the Revenue.
4.1 In the case of Teekoy Rubbers (India) Ltd. Vs. CIT before the Hon'ble Kerala High Court reported in 181 ITR 387, the case of the Department is that the audit report only drew the attention of the Income Tax Officer to the omission to assess capital gains. The real information on the basis of which the assessments were reopened was the subsequent correspondence which the Income-tax Officer entered into with the assessee and the subsequent investigation with regard to the value of the rubber trees as on January 1, 1954. The details available in the original returns were transmitted into an item of information in the possession of the officer only when its existence was realized and its implications were recognized. Therefore, the Hon’ble Kerala High Court has held that the reassessment proceedings had been validly initiated under section 147(b) of the Act. Thus, the case law referred by the Department has no application to the facts of the present case since in the case in hand, the Assessing Officer has only forwarded the photocopy of the audit objection after leaving the portion containing in the letter head appearing in the first page and signature of the Audit Officer appearing on the last page. Under the above facts and circumstances and in view of the above judgement of the Hon’ble Supreme Court in the Indian and Eastern Newspaper Society vs. CIT (supra), the ground raised by the Revenue is dismissed.
In the result, the appeal filed by the assessee is dismissed as infructuous and the appeal filed by the Revenue is dismissed.
Order pronounced on 24th February, 2022 at Chennai.