Reassessment proceedings u/s.147 read with 148 of the Act cannot be initiated merely based on the audit report

CIT Versus The Simbhaoli Sugar Mills Limited (Delhi HC) Reassessment proceedings under Section 147 read with 148 of the Act cannot be initiated merely based on the audit report . An audit is principally intended for the purpose of satisfying the auditor with regard to sufficiency of rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. As per para (3) of the circular issued by the Board on July 28, 1960, also an audit department should not in any way substitute itself for the revenue authorities in the performance of their statutory duties.

There is also catena of judgments to the effect that initiation of reassessment proceedings on the basis of audit report objections is bad in law. A reference in this regard can be made to judgment of our High Court titled Trans world International Inc. v. Joint Commissioner of Income Tax, (2005) 273 ITR 242 and also judgments of Supreme Court in Indian and Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi, (1979) 119 ITR 996 and Commissioner of Income Tax v. Lucas T.V.S. Ltd., (2001) 249 ITR 306.