CIT vs. Jet Speed Audio Pvt. Ltd (Bombay High Court)
S. 143(3) assessment order is not a scrap of paper & AO is expected to have applied his mind. Reopening on ground of "oversight, inadvertence or mistake" is not permissible
The assessee made a claim for deduction for bad debts
which was allowed by the AO u/s 143(3). Subsequently,
within four years from the end of the assessment year, the
AO reopened the assessment u/s 148 on the ground that the
amount written off as bad debts was a capital loss and
could not allowed as a deduction. The Tribunal allowed the
assessee’s appeal and quashed the reassessment
proceedings. Before the High Court, the department urged
that the reopening was valid because (a) the AO acted on an
audit objection which constitutes “tangible
material” and (b) as the AO had not dealt with the
issue in the original assessment order, he had jurisdiction
as held in Kalyanji Mavji & Co 102 ITR
287 (SC), New Light Trading Co 256 ITR 391
(Del) and Dr. Amin’s Pathology
Laboratory 252 ITR 673 (Bom). HELD by the High
Court dismissing the appeal:
(i) The Tribunal has rendered a finding of fact that the
AO raised a query with regard to the issue which was
responded to by the assessee and on satisfaction of the
same the AO passed the assessment order. Therefore,
reopening of assessment on an issue in respect of which a
query was raised and responded to by the assessee would
amount to a change of opinion;
(ii) The argument that the tangible material is the audit
objections received by the AO is not acceptable because
there is no mention of any tangible material in the reasons
recorded. A reopening notice can be sustained only on the
basis of grounds mentioned in the reasons recorded. It is
not open to the Revenue to add and/or supplement later the
reasons recorded at the time of issuing reopening
notice;
(iii) The argument that the AO has been careless in
bringing to tax a particular amount which is chargeable to
tax and that the Revenue should not be precluded from
issuing notice u/s 148 overlooks the fact that power to
reopen is not a power to review an assessment order. At the
time of passing assessment order, it expected of the AO that
he will apply mind and pass an order. An assessment order
is not a mere scrap of paper. To accept the submission of
the department would mean to negate the well settled
position in law as stated by the Supreme Court in CIT Vs.
Kelvinator of India Ltd 256 ITR 1 (Delhi)(FB) that the
concept of ‘change of opinion’ brought in so as
to have in built test to check abuse of power;
(iv) Kalyanji Mavji & Co 102 ITR 287
(SC), where it was held that “oversight,
inadvertence or mistake” in passing assessment
order will give the AO jurisdiction to reopen the
assessment, is not good law in view of the subsequent
decision in Indian and Eastern Newspaper Society Vs.
CIT 119 ITR 996. An error discovered on a
reconsideration of the same material (and no more) does not
give him that power. The aforesaid view on the above
proportion has been reiterated by the Apex Court in
A.L.A.Firm vs. CIT 183 ITR 285. New
Light Trading Co 256 ITR 391 (Del) and Dr.
Amin’s Pathology Laboratory 252 ITR 673 (Bom)
are also distinguishable on facts.
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