|CORAM:||Ashwani Taneja(AM), Saktijit Dey (JM)|
|CATCH WORDS:||Audit Objection, Reopening|
|COUNSEL:||D. V. Lakhani|
|DATE:||March 16, 2016 (Date of pronouncement)|
|DATE:||April 13, 2016 (Date of publication)|
|FILE:||Click here to view full post with file download link|
|S. 147: If the AO objects to the audit objection, he cannot have reason to believe that income has escaped assessment and is not entitled to reopen the assessment|
One of the key sources of dispute is the existing arrangement for follow up on audit objections by Internal Audit Party and the Revenue Audit Party. In terms of the existing arrangement, the AO is required to take corrective steps following audit objections. The corrective measures take the form of rectification or reassessment (by reopening the case under section 147 or revision by the Principal Commissioner or Commissioner under section 263). In the case of rectification, these are general in the nature of correction for arithmetical errors and other mistakes which are apparent from the record. The problem arises when the AO seeks to take corrective measures by invoking the provisions of section 147 or 263 of the Income tax Act. Since the audit object ions are based on mater ial on record and there is no occasion for new mater ial to be brought on record in the course of audit, any reopening of assessment or review by the Pr incipal Commissioner constitutes “change of opinion” in the eyes of the law. This being so, the corrective measure under section 147 or section 263 of the Income tax Act is held to be invalid by Courts.