Case Law Citation- DCIT vs. Naroda Enviro Project Ltd. (ITAT Ahmedabad), I.T.A. No.931/Ahd/2011, A.Y. 2003-04, Date of Order: 19.06.2015
Brief of the Case
Relying on judgment of jurisdictional High Court in the case of Raajratna Metal Industries Ltd. vs. ACIT,  49 taxmann.com 15 (Gujarat) ITAT Ahemdabad held in the case of DCIT vs. Naroda Enviro Project Ltd. that the reopening of assessment solely on the ground of audit objection is not valid. It was further held that the ITAT working in the State of Gujarat is bound by the decision of Hon’ble Gujarat High Court which is the jurisdictional High Court. The decision of the jurisdictional High Court is binding upon all the authorities working within the jurisdiction of the Hon’ble Gujarat High Court.
Facts of the Case
The case of the assessee was re-opened u/s 147 of the Act. The A.O. disallowed the provision for bad and doubtful debt amounting to Rs.1,13,13,831/- in computation of book profit u/s 115JB. The assessee before the CIT(A) challenged the validity of reopening of assessment. The CIT(A) discussed the assessee’s contention; however, ultimately did not agree with assessee’s contention and decided the appeal of the assessee on merit, deleting the addition made by the Assessing Officer. Since the entire addition made by the Assessing Officer was deleted by the CIT(A), the assessee did not preferred any appeal. The Revenue filed the appeal against the order of Ld. CIT(A) deleting the addition of Rs.1,13,13,831/-. However, the assessee choose to support the order of the CIT(A), relying upon Rule 27 of the ITAT Rules.
Contention of the assessee
The Ld. Counsel of the assesse submitted that in the statement of facts furnished, alongwith memo of appeal, Assessing Officer has mentioned that the case was reopened u/s 147 on the basis of audit objection raised by the Revenue audit. He stated that the Hon’ble jurisdictional High Court in the case of Raajratna Metal Industries Ltd. vs. ACIT,  49 taxmann.com 15 (Gujarat) has held that the reopening of assessment solely on the ground of audit objection is not valid. Therefore, once the assessment order itself is not valid, the addition made to the book profit cannot survive. Since the assessee has not filed the appeal or cross-objection against the order of the CIT(A), the assessee cannot claim the quashing of the assessment order, but the only prayer of the assessee was to sustain the order of the CIT(A).
Contention of the Revenue
The ld. Departmental Representative, on the other hand, relied upon the order of the Assessing Officer and also on the decision of Hon’ble Delhi High Court in the case of New Light Trading Co. vs. CIT, 256 ITR 391, wherein the Hon’ble Delhi High Court has held that audit objection on the point of fact can be a valid ground for re-opening of assessment.
Held by Tribunal
After having carefully considered the arguments of both the sides, perused the material placed and the statement of facts furnished before, the Tribunal noted that the Assessing Officer has clearly mentioned that the case was reopened u/s 147 of the Income-tax Act on the basis of audit objection raised by the Revenue audit after obtaining the approval of the Commissioner of Income-tax. The Hon’ble jurisdictional High Court considered the validity of reopening of assessment u/s 147 in the case of Raajratna Metal Industries Ltd and held that the reopening of assessment on the basis of audit objection is not permissible. Be that as it may be, the assessee has not filed any appeal or cross-objection against the order of the CIT(A). Under rule 27, the respondent may support the order appealed against on any of the grounds decided against him. Therefore, under Rule 27, the maximum relief assessee can get is the sustenance of the order of the CIT(A). In view of above and respectfully following the decision of Hon’ble Jurisdictional High Court it was held that the assessment for the year under consideration was not validly reopened u/s 147. The appeal filed by the Revenue dismissed.
Re opening due to mere audit objection not valid
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