The AO recorded reasons pursuant to an audit objection and reopened assessee\u2019s assessment. However, the AO replied to the audit objection stating that the issue was debatable in nature. The AO replied that in principle the objections raised by the audit are not acceptable. However, still the AO proceeded to reopen the assessment. The Tribunal held that once the AO himself disagreed with the audit objections, reopening could not be done. The requirement of law for reopening of the case is that the AO should be in a position to form a belief about escapement of income. Although, it is true that at the stage of reopening, the belief need not be conclusive, but it is equally expected that the position of law should be clear in the mind of the AO, at least prima\u2013facie. The belief need not be conclusive but it should be firm and clear. No belief can be formed out of confusion and doubtful thoughts.<\/p>\n","protected":false},"excerpt":{"rendered":"
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.<\/p>\n