IMPORTANT POINT
The amendment to Section 148 allowing audit objections as grounds for reopening assessments is valid, and such objections must be considered by the Assessing Officer, distinguishing them from mere changes of opinion.

JUDGMENT :

THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH

The present writ petition under Article 226 of the Constitution of India has been filed impugning order dated 07.02.2023 passed under Clause (d) of Section 148A of the Income Tax Act 1961 (for short, ‘the Act’), whereby on the basis of the revenue audit objection the Assessing Officer has decided to re-open the assessment in the case of the petitioner for the Assessment Year 2016-17, as in the estimation of the Assessing Officer the income chargeable to tax to the tune of Rs.1,60,39,464/- has escaped assessment for the Assessment Year 2016-17 and therefore it has been decided to issue notice to the petitioner under Section 148 of the Act directing the petitioner to furnish a fresh return within a period of 30 days from the date of the notice.

2. The petitioner is a Trust registered under Section 12A of the Act and filed returns for the Assessment Year 2016- 17 on 15.10.2016 declaring ‘Nil’ income. The assessment was completed under Section 143(3) of the Act on 21.12.2018 at ‘Nil’ income.

2.1 The revenue audit party, however, objected to the finalization of the return of the petitioner at ‘Nil’ for the reason: ‘During the Assessment Year, the assessee received corpus donation of Rs.10,30,00,000/-. Corpus donations were not included in the income for application under Section 11. So the corpus donation received to the extent of Rs.9,05,00,000/- (Rs.10,30,00,000 – 1,25,00,000) should have been reduced from the current year application. Expenditure of earlier years Rs.8,29,89,369/- considered in the current year should also have been disallowed from the claim of application.’ The revenue audit worked out the income of Rs.1,60,39,464/- to have escaped assessment.

2.2 After receipt of the said revenue audit objection, notice was issued to the petitioner on 05.12.2022 with the prior approval of the Principal Commissioner of Income Tax (Exemption), Kochi. The petitioner was asked to show cause why notice under Section 148 of the Act should not be issued. The petitioner, vide reply dated 20.12.2022, submitted a detailed explanation. The petitioner, in his reply, submitted that the returns filed by the petitioner were subjected to complete scrutiny before the assessment was finalized at ‘nil’ income. It was further said that there could not be any scope for fresh information that has come to the notice of the Assessing Authority, and, on that basis, notice under Section 148A(b) has been issued to the petitioner. It was also said on behalf of the petitioner that the petitioner had already furnished all the information required for completion of the assessment under Section 143(3) of the Act. Therefore, the notice issued under Section 148A(b) of the Act was merely a change of opinion which would not warrant re-opening of the assessment completed.

2.3 The Assessing Officer, vide impugned order, disposed of the objection filed by the petitioner. The Assessing Officer placed reliance on clause (ii) of Explanation 1 to Section 148 of the Act which provides that any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of the Act, could be the basis for issuing the notice under Section 148A(b) of the Act. It was also said that the audit objection was based on the information submitted by the assessee during the assessment proceedings under Section 143(3) of the Act. It is from the documents submitted by the petitioner himself, that the revenue audit concluded that there was a deficiency in the application of income of Rs.1,60,39,464/- which had escaped assessment. Therefore, the Assessing Officer recorded the reason that the income to the tune of Rs.1,60,39,464/- had escaped assessment for the relevant assessment year and it was a fit case for issuing notice under Section 148 of the Act.

3. Learned Counsel for the petitioner has vehemently submitted that the corpus fund received by the p