Vijay Rameshbhai Gupta vs. ACIT; 32 Taxman.com 41 (Guj):
In the course of assessment proceedings u/s. 143(3), the Assessing Officer took a view that income earned by assessee from leasing out his restaurant was taxable as business income. Subsequently, the Assessing Officer initiated reassessment proceedings on the ground that aforesaid lease income was liable to be taxed as income from other sources and, thus, business expenses were wrongly allowed against said income.
The assessee filed writ petition challenging the validity of reassessment proceedings contending that the Assessing Officer was compelled by the audit party to reopen the assessment, though on the reasons recorded, the Assessing Officer was of the belief that no income chargeable to tax had escaped assessment.
The Gujarat High Court allowed the petition and held as under:
“i) From the series of evidence, it stands clearly established that the Assessing Officer was under compulsion from the audit party to issue notice for reopening. This is so because after the audit party brought the controversial issue to the notice of the Assessing Officer, he had not agreed to the proposal for reexamination of the issue. Thereupon, he in fact, wrote a letter and gave elaborate reasons why he did not agree to make any addition on the controversial issue.
ii) In the said letter, the Assessing Officer firmly asserted that the assessee’s income from lease was to be assessed as business income and not as income from other sources. Despite his firm assertion, the audit party once again wrote to the jurisdictional Commissioner that the reply of the Assessing Officer was not acceptable.
iii) Thus, it is apparent on the face of the record that the Assessing Officer was compelled to issue notice for reopening, though he held a bona fide he had accorded in the original assessment was as per the correct legal position.
iv) By now, it is well settled that even if an issue is brought to the notice of the Assessing Officer by the audit party, it would not preclude the Assessing Officer from acting on such communication as long as the final opinion to take appropriate action is that of the Assessing Officer and not that of the audit party. It is equally well settled however that if the Assessing Officer has acted only under compulsion of the audit party and not independently, the action of reopening would be vitiated.
v) In view of above, the impugned notice seeking to reopen the assessment was to be quashed.”
