I seek esteemed clarification on the following issues:
1. Can Assessing Officer issue a generic letter seeking clarifications on various issues presumably pursuant to Audit Objections, after completion of assessment u/s.143(3). Such a letter does not contain any reference to the section under which it is being issued or the purpose for which it is issued. Is it possible for the Assessing Officer to issue letters generally without reference to any section under which it is being issued?
2. Can the assessee refuse to reply, on the ground that such letter has not been issued under any provision of the Income Tax Act and hence, there is no legal requirement to reply to such a generic letter under the I.T.Act.
Theoretically, you can. But that will not stop the AO. He may issue a s. 133(6) notice. Alternatively, he may issue a s. 147 notice based on the audit objection.
In practice, it is better to co-operate with the AO and help him draft a reply to the audit objection. Generally speaking, the AO is anxious to show that he is right and that the audit is wrong. So, it is better to strengthen his hand by giving him the material and case laws to support your stand.
If the AO still issues a s. 148 notice, then apply under RTI for a copy of the AO's response to the audit objection. If, in that, the AO has supported the assessee's stand and opposed the audit's stand, you can argue that he had no "reason to believe" that income has escaped assessment.
This letter issued will me much help during 147. You always have the record to show that after comoletion of assessment, certain quesries were raise by A.O. Give reply officially and keep a copy of the reply with acknowledgement.There is one high court case pending , where based on audit objection , AO issued a notice u/s 154. asseessee filed the reply.Thereafter department did not take any further action for along period. Then after some2 years , AO issued 148on same point. High court stayed the proceedings.
Please also refer delhi HC USha International whihc is recent where the reopening based on audit objection is made. this may help you in understanding the whole issues. It has tried to discuss what is "new material' .
If it is beyond four years apply Gujarat hoghcourt deciion in case of cadilla healthcare limited 65 DTR 385 guj in favour of assessee.