Mere Change Of Opinion Not A Ground To Reopen Assessment Under Sec.147 Income Tax Act : Madras HC [Read Judgment]

Reiterating that the mere change of opinion of the assessing officer is not a ground to re-open assessment under Section 147 Income Tax Act, the Madras High Court allowed a writ petition filed against the re-opening of assessment.

The order was passed in the case City Union Bank Ltd vs The Assistant Commissioner of Income Tax and others by Justice G R Swaminathan of Madurai bench.

The reason for reopening was purportedly that the claim for disallowance under Section 14A of the Income Tax Act was not computed as per Income Tax Rules 1961.

In this context, the court also referred to Income Tax Officer Ward No. 16 v. TechSpan India Private Ltd., (2018) 6 SCC 685, wherein the Apex Court had held that an officer was not empowered to reopen an assessment merely because of change in his opinion.

"The use of the words 'reason to believe' in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of same facts and circumstances which has already been considered by him during the original assessment proceedings," it was held therein.

Referring to the facts of the present case, Justice Swaminathan noted :

"In this case, there is no failure on the part of the assessee. On the other hand, there appears to be a failure on the part of the assessing officer to make an appropriate determination of the amount of expenditure in terms of Section 14 A of the Income Tax Act. In such a case, the remedy for the Revenue is elsewhere and not in assuming jurisdiction under Section 147 of the Act." 

Noting that in the present case failure appeared to have occurred on the part of the assessing officer and not the assessee, the court said,

"In such a case, the remedy for the Revenue is elsewhere and not in assuming jurisdiction under Section 147 of the Act…The authority cannot take advantage of their own wrong. If they failed to perform their statutory duty, the consequence of default cannot fall on the assessee."

"The assessee can make any claim, even wrong or fanciful, regarding disallowance…If the assessing officer failed to properly determine the amount of expenditure, it cannot furnish a reason for reopening the concluded assessmentAccordingly, the order of reassessment passed under Section 147 was quashed."

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