Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: form 3cd :: ACCOUNTING STANDARDS :: VAT Audit :: TDS :: list of goods taxed at 4% :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: cpt
« News Headlines »
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout
 Income-tax (27th Amendment) Rules, 2016 - 92/2016

Assessing reassessments
September, 02nd 2006
A case where the Gujarat High Court quashed a reassessment notice -------------------------------------------------------------------------------- The belief that income has escaped assessment must be held by the AO and such a belief cannot be thrust on him either by audit or superiors in the I-T Department. -------------------------------------------------------------------------------- Litigation and audit fetter the judicial discretion of the income-tax officer (ITO) in the exercise of his assessment functions. The ITO may honestly believe that the course of action adopted by the taxpayer during the assessment proceedings was legally correct. Yet, he may have to scrutinise the assessment lest he is faulted by the superior authorities. Audit is another bugbear. Often, long after the assessment, the audit party of the Comptroller and Auditor-General (C&AG) visit the offices of the ITO and carry out detailed scrutiny of completed assessments. There is generally no word of commendation for the good work done by the ITO. The purpose of scrutiny by audit has always been to pick holes in the ITO's work. A long-established procedure requires the ITO to study the audit objection and send a reply. Generally, ITOs defend the assessments and reject the audit note. The matter then goes to the higher authority. Audit paras figure in the Public Accounts Committee report that is laid before Parliament every year. Even if the Revenue Department does not accept the audit objection, it is open to the C&AG to insist that its point of view is correct and that remedial action be taken. Quite often, reassessment proceedings are initiated to give effect to the audit's point of view. The Rajesh Jhaveri case In this case (Rajesh Jhaveri Stock Brokers (P) Ltd vs Assistant Commissioner of Income-Tax 2006 284 ITR 593 Gujarat), the company, Rajesh Jhaveri Stock Brokers (P) Ltd, filed its returns for assessment year (AY) 2001-02 in October 2001, declaring a total loss of Rs 2,70,85,105. The return was accepted. In May 2004, the Assistant Commissioner of Income-Tax (ACIT) reopened the completed assessment proceedings by issuing a notice under Section 148 of the Income-Tax Act, 1961. It came to light that the re-opening was based on audit party objection. It was also found that the I-T Department did not accept the objection and was pressing for its withdrawal. The objection related to the claim for allowance of bad debts under Sections 36(1)(vii) and 36(2) of the Act. According to the audit, there was under-assessment of income of Rs 1,014.59 lakh. The assessing officer (AO) did not accept the objection and wrote to the Deputy Accountant-General to drop the same. The ACIT agreed with the AO's view. Even the Central Board of Direct Taxes (CBDT) concurred with the AO's views. However, the Accountant-General insisted on remedial action. In this background, the AO made a note in the file to the effect that the claim for bad debts was not correct and observed that there was escapement of income. The company filed a writ petition before the Gujarat High Court challenging the reopening notice. The court scrutinised the records of the case and found that the audit para alone was responsible for the reassessment notice. Now, audit objection may serve as information on the basis of which the ITO can act. However, ultimate action must depend directly and solely on the formation of belief by the ITO on his own when such information is passed on to him by audit indicating escapement of income. In the case before the Gujarat High Court, the AO had scrupulously analysed the audit objection and reiterated his belief that the original assessment was not erroneous. The court pointed out that the ITO had no authority to surrender or abdicate his function to his superiors. The belief that income has escaped assessment must be held by the AO and such a belief cannot be thrust on him either by audit or superiors in the I-T Department. Notice issued in such cases will represent a colourable exercise of jurisdiction by the AO, by recording reasons for holding a belief which, in fact, demonstrably he did not hold about income escaping assessment. The court held that the exercise of recording reasons on the file is a mere pretence to give validity to the exercise of power for assuming jurisdiction. Instructions of the CBDT directing remedial action by way of reassessment even when the audit objection is not accepted by the ITO were considered ultra vires. The Gujarat High Court quashed the reassessment notice. In yet another case (Ajay Oxycholoride Floorings vs Iyer ACIT 2006 203 CTR Bombay 232), the Bombay High Court held that when a protective assessment has been made on the ground that the income is assessable in the hands of the assessee, initiation of reassessment proceedings cannot be resorted to. Audit objections and protective assessments were long considered to be excuses for reopening completed assessments. The judiciary has now held that such reassessment notices are bad in law. T. C. A. Ramanujam (The author is a former Chief Commissioner of Income-Tax.)
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Sitemap

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions