OFFICE OF THE COMMISSIONER OF INCOME TAX (JUDICIAL)

R.NO. 371-C, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020.

No. CIT (J)/HC.WP/2007-08/445 12th November 2007

All the Commissioners of Income-tax,

Mumbai.

Sir,

In the case of a pharmaceutical company, the Assessing Officer reopened the assessment under section 147 of the Income-tax on the basis of an audit objection that addition on account of deferred tax liability should have been made while calculating the took profits under section 115 JB of the Income-tax Act, 1961. In the assessment order passed u/s. 143(3), the Assessing Officer did not make any addition to the book profit on account of provision for deferred taxation on being satisfied with the explanation given by the assessee in response to a show cause that the provision was in accordance with the Accounting Standard 22 and the same could not be taken into account for determining book profit as the same was not covered by any of the clauses (a) to (f) set out in the Explanation to section 115 JB of the I.T. Act. Later, an audit objection was raised by the Revenue Audit. While the A.O. did not accept the audit objection, he, however, issued notice u/s. 148 of the I.T. Act for reopening of assessment. The assessee sought from the A.O. the reasons for re-assessment and issuance of notice under section 148. The A.O. merely sent notices u/s. 143(2) and 142(1) of the IT. Act along with a general questionnaire having all sorts of queries except on the controversy in question, in a routine manner and rejected the objection of the assessee regarding issue of notice u/s. 148. The assessee filed a Writ Petition in the Bombay High Court, which quashed on 17 10.2007, the notice under section 148 issued by the A.O. following the decision of Hon’ble Supreme Court in the case of Apollo Tyres V/s. CIT reported in 255 ITR 273. While allowing the Writ Petition filed by the assessee, the Hon'ble Court came down heavily on the department for reopening of assessment and issuing notice u/s. 148 in a callous manner. The Court took serious exception to non-application of mind by the AO in reopening the assessment in a routine and casual manner.

You are requested to direct the A.O. under your charge to be careful while reopening the assessment and issuing notices. It may be carefully noted that reopening the assessment in a casual manner and issuing notices routinely without application of mind would draw ire of the Court besides quashing of such action.

Yours faithfully,

(M. P. Varshney)

Commissioner of Income-tax (Judicial)