DCIT-2(1)(1), MUMBAI, MUMBAI vs. BANK OF BARODA , BANK OF BARODA
Facts
The Revenue filed appeals challenging the CIT(A)'s order which quashed the reassessment proceedings. The Revenue contended that the reopening was based on a revenue audit objection, which constitutes tangible material. The assessee argued that there was no new tangible material and no failure to disclose material facts by the assessee.
Held
The Tribunal held that the reassessment proceedings were initiated after the expiry of four years from the end of the assessment year. The Revenue failed to establish that there was a failure on the part of the assessee to disclose fully and truly all material facts, which is a prerequisite for reopening beyond four years. The Tribunal relied on the decision of the jurisdictional High Court in Godrej & Boyce Manufacturing Co. Ltd.
Key Issues
Whether the reopening of assessment beyond four years was valid without establishing failure of the assessee to disclose material facts, and if an audit objection constitutes tangible material for reopening.
Sections Cited
147, 148, 115JB, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT, AM
Per contra, the Ld. DR extensively relied on the decision of Hon’ble Supreme Court in the
ITA Nos.4913 & 4869/Mum/2025 CO Nos.259 & 258/M/2025 M/s. Bank of Baroda & Ors. case of P.V.S. Beedies (P) Ltd. (supra) wherein it was held that the information given by
the internal audit party tantamounts to tangible material basis which re-assessment is held
to be valid. It is pertinent to note that in the said decision the Ld. AO was not aware of the
fact that the recognition granted to the assessee trust had expired, which fact was brought
to the knowledge of the Ld. AO by the audit party. It was also specified that a Larger
Bench was constituted to consider the issue whether reopening is permissible after the audit
report opines on a question of law. In a subsequent decision by the Hon’ble Supreme Court
in the case of Indian & Eastern Newspaper Society vs. Commissioner of Income-tax
[1979] 2 Taxman 197 (SC)/[1979] 119 ITR 996 (SC)/[1979] 12 CTR 190 (SC)[31-08-
1979] held that the opinion on law rendered on the basis of audit report cannot be the basis
for re-assessment rather it has to be the Ld. AO who should apply his mind not merely on
the information by external agency but by evaluation of law, else it could lead to grave
consequence of the external agencies taking the power of re-assessment rather than the Ld.
AO. It further held that the note put up by the internal audit party cannot be termed to be
“information” within the meaning of section 147(b) of the Act per se where the provision
emphasizes that the Ld. AO should first have information in his possession and in
consequence of which he must have reason to believe that income has escaped assessment.
The issue was decided in favour of the assessee after duly considering various decisions of
the Hon’ble High Courts and also the earlier decision of the Hon’ble Supreme Court itself.
This view was also reiterated in the subsequent decisions where the Hon’ble Supreme
Court in the recent decision in the case of Asst. Commissioner of Income Tax Vs. Adani
Power Rajasthan Ltd. (2026) 182 taxmann.com 367 (SC) upheld the finding of the
ITA Nos.4913 & 4869/Mum/2025 CO Nos.259 & 258/M/2025 M/s. Bank of Baroda & Ors. Hon’ble Gujarat High Court that reopening was merely on the basis of audit party opinion
and not on the basis of the Ld. AO’s own conviction lacking in subjective satisfaction while
issuing notice u/s 148 of the Act. It further held that reopening on the basis of the same
materials tantamounts to change of opinion which is impermissible in law. On the above
observation, we do not find any infirmity in the order of the Ld. CIT(A) and therefore deem
it fit to dismiss the grounds of appeal raised by the Revenue and hereby quash the impugned
notice as well as the impugned order. As we have already quashed the impugned
assessment order, the grounds raised by the assessee in its cross objection challenging the
merits of the case are also dismissed. Accordingly, the appeal filed by the Revenue and
the Cross Objection filed by the assessee are dismissed.
The finding given in this appeal and cross objection i.e. ITA No.4913/M/2025 &
CO No.259/M/2025 will apply mutatis mutandis to other appeal and cross objection i.e.
ITA No.4869/M/2025 & CO No.258/M/2025 as well and hence the same are also hereby
dismissed.
In the result, both the appeals filed by the Revenue and both the cross objections
filed by the assessee are dismissed.
Order pronounced in the open court on 12.02.2026
Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 12.02.2026 *Kishore, Sr. PS
ITA Nos.4913 & 4869/Mum/2025 CO Nos.259 & 258/M/2025 M/s. Bank of Baroda & Ors. Copy of the Order forwarded to:
The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,
(Dy./Asstt.Registrar) ITAT, Mumbai
