· For the A.Y. 1991-92, the company filed returns under the State Act. However, the assessment proceedings in relation to the above period, i.e. A.Y. 1991-92 was completed in the year 1996 and an assessment order dated 24.01.1996 was passed by the assessing authority.
· After the assessment proceedings, an audit team of the Auditor General, Bihar, audited the assessment order dated 24.01.1996 and found that the dealer was wrongly allowed exemption of Rs. 3,12,47,916/-, and the said fact was conveyed to the assessing authority.
· On 28.09.2000, the assessee company was served a show cause notice for the taxability of the amount of Rs.3,12,47,916/-, which was wrongly exempted from being taxed under the provision of the State Act.
· After affording an opportunity of hearing to the appellant-Company, a re-assessment order dated 27.02.2006 was passed. Being aggrieved by the re-assessment order dated 27.02.2006, the appellant-Company preferred a writ petition before the High Court, which was dismissed, and thus, the appellant-Company has preferred this appeal by way of special leave.
· The issue for consideration before the Apex Court was whether an 'audit objection' can be construed as 'information' within the meaning of Section 19 of the State Act, based on which the assessing officer was satisfied that reasonable grounds exist to believe that any part of the turnover of the appellant-Company had escaped assessment under Section 19 of the State Act.
· The Court observed that there are catena of judgments of the Apex Court holding that assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.
· The Hon’ble Court held that the audit objections were well within the parameters of being construed as 'information' for the purpose of section 19 of the State Act, however, the Court was of the clear view that on the basis of information received and only if the assessing officer was satisfied that reasonable ground exists to believe, then in that case only the power of the assessing authority extends to re-opening of assessment.
For further reading, refer the attachment.
Further Reading