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Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment year 1997-98 - Whether reassessment proceedings cannot be initiated merely on basis of audit report - Held, yes - Whether, therefore, where assessee made complete disclosure of particulars before Assessing Officer in proceedings of assessment under section 143(3), Assessing Officer was not justified in initiating reassessment proceedings after expiry of four years from relevant assessment year merely on basis of internal audit report - Held, yes FACTS The assessee filed return declaring loss of Rs. 17.20 crores. The said return was processed under section 143(1)(a). Subsequently, the case was selected for scrutiny and assessment was completed under section 143(3) on 26-11-1999 at a total loss of about Rs. 5.28 crores after making certain additions and unabsorbed losses and depreciation. The assessee preferred appeal before the Commissioner (Appeals), who allowed certain reliefs to the assessee. Subsequently, after expiry of four years, on the basis of information available with the department primarily based on the audit report, it surfaced that certain income chargeable to tax had escaped assessment for the assessment year under consideration. Based on said information, the Assessing Officer issued a notice under section 148. Thereupon the Assessing Officer completed the reassessment proceedings wherein the two main additions were - (i) excise duty payable on stock of finished goods and (ii) interest incurred on the term loan. On appeal, the commissioner (Appeals) confirmed the additions. On further appeal, the Tribunal taking a view that opinion of an internal audit party on a point of law could not be regard as information within meaning of section 147, cancelled the reassessment proceedings. On revenue's appeal : HELD It was seen that the basis of issue of notice under section 148 for reassessment for the assessment year under consideration was nothing but the internal audit report. In the reasons to believe as recorded by the Assessing Officer, he had mentioned about the objections as raised in the audit report. Based on said audit report, a…

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