{"id":2430,"date":"2016-04-30T16:10:58","date_gmt":"2016-04-30T10:40:58","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=2430"},"modified":"2021-11-15T13:10:06","modified_gmt":"2021-11-15T07:40:06","slug":"new-update-on-legality-of-reopening-of-assessment-us-147263-based-on-audit-objections","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/new-update-on-legality-of-reopening-of-assessment-us-147263-based-on-audit-objections\/","title":{"rendered":"reopening of assessment u\/s 147 Based on audit objections"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d78490201b4\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d78490201b4\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/new-update-on-legality-of-reopening-of-assessment-us-147263-based-on-audit-objections\/#NEW_UPDATE_ON_LEGALITY_OF_REOPENING_OF_ASSESSMENT_US_147263_BASED_ON_AUDIT_OBJECTIONS\" title=\"NEW UPDATE ON LEGALITY OF REOPENING OF ASSESSMENT U\/S 147\/263 BASED ON AUDIT OBJECTIONS\">NEW UPDATE ON LEGALITY OF REOPENING OF ASSESSMENT U\/S 147\/263 BASED ON AUDIT OBJECTIONS<\/a><ul class='ez-toc-list-level-2'><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/new-update-on-legality-of-reopening-of-assessment-us-147263-based-on-audit-objections\/#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\" title=\"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.\">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.<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<figure id=\"attachment_9005\" aria-describedby=\"caption-attachment-9005\" style=\"width: 768px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/23.png\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-9005\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/23.png\" alt=\"www.carajput.com; Company Registration\" width=\"768\" height=\"393\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/23.png 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/23-300x154.png 300w\" sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/a><figcaption id=\"caption-attachment-9005\" class=\"wp-caption-text\">www.carajput.com; Company Registration<\/figcaption><\/figure>\n<h1><span class=\"ez-toc-section\" id=\"NEW_UPDATE_ON_LEGALITY_OF_REOPENING_OF_ASSESSMENT_US_147263_BASED_ON_AUDIT_OBJECTIONS\"><\/span><strong><span style=\"text-decoration: underline;\">NEW UPDATE ON LEGALITY OF REOPENING OF ASSESSMENT U\/S 147\/263 BASED ON AUDIT OBJECTIONS<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p>One of the key sources of dispute is the existing arrangement for follow up on audit objections by <a href=\"https:\/\/carajput.com\/services-internal-audits.php\">Internal Audit<\/a> Party and the Revenue Audit Party.<\/p>\n<p>In terms of the existing arrangement, the AO is required to take corrective steps following audit objections.<\/p>\n<p>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).<\/p>\n<p>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.<\/p>\n<h2 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"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\"><\/span><strong>The problem arises when the AO seeks to take corrective measures by invoking the provisions of section 147 or 263 of the <a href=\"https:\/\/www.caindelhiindia.com\/blog\/implication-of-cash-transaction-under-income-tax-act\/\">Income tax Act.<\/a><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"text-align: justify;\">Since the audit objections are based on material on record and there is no occasion for new material to be brought on record in the course\u00a0of audit, any reopening of assessment or review by the Principal Commissioner constitutes &#8220;change of opinion&#8221; in the eyes of the law.<\/li>\n<li style=\"text-align: justify;\">This being so, the corrective measure under section 147 or section 263 of the Income tax Act is held to be invalid by Courts.<\/li>\n<li style=\"text-align: justify;\">In spite of several court judgments to this effect, the CBDT had issued a circular to the effect that in all cases of audit objections the AO should initiate corrective steps irrespective of whether the objection is valid or not in the eye of law.<\/li>\n<li style=\"text-align: justify;\">Consequently, steps are initiated by the AO to reopen the completed assessment or by the Principal Commissioner for revision of assessment orders.<\/li>\n<li style=\"text-align: justify;\">These steps give rise to several rounds of litigation:<\/li>\n<li style=\"text-align: justify;\">first the assessee challenges the very act of reopening or revision, as the case may be, and upon losing, the Department files appeal before the higher Courts thereby clogging the judicial system.<\/li>\n<li style=\"text-align: justify;\">While this process is on, the AO proceeds to complete the assessment on merit leading to another round of litigation.<\/li>\n<li style=\"text-align: justify;\">In large number of cases, the assessments on merit are completed even though the Department is in disagreement with the audit objection.<\/li>\n<li style=\"text-align: justify;\">The very issue has also been considered by the Income-Tax Simplification Committee constituted by the Govt. of India against such mechanical reopening .<\/li>\n<li style=\"text-align: justify;\">In a recent judgment in case of\u00a0<strong>Sunil Gavaskar vs. ITO,\u00a0<\/strong>the Hon\u2019ble bench of ITAT Mumbai considered the legality of such\u00a0reassessments based on audit objections.<\/li>\n<li style=\"text-align: justify;\">Primarily\u00a0reopening merely on the basis of audit objections and in absence of any new material indicating escapement of income, amounts to change of opinion and creates uncertainties for taxpayers.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>NEW UPDATE ON LEGALITY OF REOPENING OF ASSESSMENT U\/S 147\/263 BASED ON AUDIT OBJECTIONS 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 &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[150,9,1],"tags":[4440,4442,4441],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/2430"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=2430"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/2430\/revisions"}],"predecessor-version":[{"id":7722,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/2430\/revisions\/7722"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=2430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=2430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=2430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}