Case Law Details
If we compare the audit objections and the reasons recorded, we find that the Assessing Officer has included all objections pointed out by the audit party but has also included one more ground namely, of the escaped capital gain on sale of land by the petitioner to Shri Ashwin Kumar B. Patel. This ground was not part of the audit objection. In our opinion, this would indicate that the Assessing Officer had independently applied his mind and formed a belief that on the grounds mentioned by the audit party in its objection letter and additional ground which is recorded in the reasons, the income chargeable to tax in case of assessee had escaped assessment.
Relevant Extract of the Judgment
21………………. However, as is well settled, even if one ground succeeds, as in the present case, reopening would have to be permitted. It is in this context, the question of notice of reopening having been issued by the Assessing Officer at the behest of the audit party assumes significance. The law on the point laid down by the Supreme Court in judgement in case of Commissioner of Incometax v. P.V.S. Beedies Pvt. Ltd. reported in (1999) 237 ITR 13 and in case of Indian and Eastern Newspaper Society v. Commissioner of Incometax reported in (1979) 119 ITR 996 is well settled. We also have the decision of this Court in case of Adani Exports v. Deputy Commissioner of Income Tax reported in (1999) 240 ITR 224(Guj) on this issue. In case of Indian and Eastern Newspaper Society (supra), the Supreme observed that the opinion of the audit party on a point of law could not be regarded as information enabling the Assessing Officer to initiate reassessment proceedings. This aspect was elaborated by Division Bench judgement of this Court in case of Adani Exports (supra) observing that it is the satisfaction of the Assessing Officer for the purpose of reopening which is subjective in nature but when the reasons recorded show a nexus between the formation of belief and the escapement of income, a further enquiry about the adequacy or sufficient of the material to such a belief is not open to be scrutinised. However, the decision of the Supreme Court would indicate that though audit objection may serve as an information, the basis on which the ITO can act, ultimate action must depend directly and solely on the formation of belief by ITO on his own, where such information passed on to him by the audit party that income has escaped assessment. In the said case, it was held that Assessing Officer had acted at the behest of audit party and that notice for reopening was therefore, bad in law.
22. In case of V.S. Beedies Pvt. Ltd.(supra), the Supreme Court held and observed as under:
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