A judgment on CAG Activism

This is a judgment I read about just today... however I see that it has strong consequences and every assessing officer should know about this judgment when facing an audit objection wherein the audit party has resorted to audit activism. The case is Carlton Overseas Pvt Ltd Vs. Income Tax Officer & Others [2009-TIOL-461-HC-DEL-IT].

In the above case the assessing officer had completed the case u/s. 143(3) giving allowance to the assessee for Section 80IA exemption. Later the case was reopened u/s. 147 of IT Act in response to an objection by Revenue Audit Party. High Court quashed the order.

Hon'ble High Court also stated that the primary function of audit in relation to assessment and refunds is the consideration whether the internal procedures are adequate and subsequent. It is not intended that the purpose of audit should go any further. Whether it is the internal audit party of the IT department or an audit party of the CAG, they perform essentially administrative and executive functions and can not be attributed the powers of judicial supervision over the quasi-judicial acts of the income tax authorities. The income tax act does not contemplate such powers in any internal audit organisation of the income tax department but only in those authorities which are specifically authorised to exercise adjudicatory functions.