ITO Vs Mahogany Logistics Services Private Ltd (Madras High Court)
Conclusion: Reassessment proceedings could not be sustained in respect of other issues raised in the audit except in respect of two specific expenditure heads: processing charges and professional fees as the same could be treated as “information” under Section 148A.
Held: Assessee-company had 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. Assessee contended 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 was not permissible. Revenue 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 was no longer a valid ground under the new regime and that AO had applied his mind to new facts flagged in the audit. It was held that the audit objections failed to show any such statutory violation, except in respect of two specific expenditure heads: processing charges and professional fees. 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. Revenue was permitted to issue a fresh notice under Section 148A limited to those two issues.
