Re-assessment cannot be initiated based on merechange of opinion : Delhi HC
June, 23rd 2007
Revenue invoking Sec 147 without caring much about either legal provisions or judicial discipline is a pedestrian news now. In fact, out of 100 such cases the percentage of cases going in favour of the Revenue has plummeted to as low as less than five per cent! And in this case also, involving a high-profile corporate M/s Eicher Ltd, the High Court's verdict was quite predictable. What made it predictable was the lack of proper case building and pursual of facts indicating mere change of opinion!
Since the Revenue suspected escapement of income purely on the basis of information submitted to it in its return, the High Court did not find any tangibly sound ground to invoke the Sec 147 and dismissed its case.
Brief Facts :
Assessee filed its returns for the relevant year 1993-94. It placed all material facts before the A.O., including the information which later on was taken as a ground by the officer for reopening assessment. It pertained to loans taken by the assessee from banks and financial institutions. Assessee was unable to pay the interest on the loans due to financial ill-health and thus negotiated with the lenders to reschedule them. The lenders converted arrears of interest into funded interest term loan and subsequently in the relevant previous year the funded interest loan was waived off which was duly credited in P&L A/c in the books. Assessee also appended a line in the return explaining that this waiver of interect is not chargeable to tax as its a capital receipt. The A.O. took note of and considered all these facts and agreed with the contention of the assessee with regard to non taxability of interest waived and as such framed assessment for the relevant year accordingly though he did not give a finding to that effect in the order.
However, subsequently A.O. sought to reopen assessment on the ground that interest which was waived was not offered to tax and thus there was escapement of assessment. A notice was served on the assessee u/s 148 who objected to it stating that it was a case of change of opinion by the officer and not escapement of assessment since all material facts were truly and fully disclosed to the A.O. who considered the same during assessment proceedings and framed assessment accordingly. A.O. rejected the contention of assessee.
Feeling aggrieved, assessee took the matter to CIT(A) who allowed the appeal.
Against this , Revenue filed an appeal before the Tribunal which rejected the appeal on the same reasoning given by assessee that it was a change of opinion and not escapement of income since all material facts were placed before the assessee and it wasn't a case of non disclosure of true and full facts.
Aggrieved, Revenue went in appeal to the High Court u/s 260-A which finally settled the issue. The court relied on the decision of full bench of the Court in CIT v. Kelvinator India Ltd. in which it was held that if a regular order of assessment is passed u/s 143(3) then a presumption is to be drawn that assessment was done with due application of mind and on the other hand if the A.O. is allowed to reopen a case due to non applicability of mind, then that would amount to giving premium to recalcitrant officer and allowing him to take advantage of his own wrong.
On consideration of entire facts, the Court observed that all relevant material facts were placed before the A.O. by the assessee at the time of original assessment. There was true and full disclosure of facts. These facts were duly considered by the A.O. and assessment order was passed after application of mind to the facts and on accepting the contention of the assessee. Just because the officer did not mention the same in his order does not mean he did not consider the facts and that income escaped assessment and it cannot become a ground for reopening of assessment. The Court observed that even if the officer did not apply his mind, the assessee cannot be faulted for it and made to suffer. It did not amount to non disclosure of facts fully and truly. All facts were in front of the officer when original assessment was made and later on if different view is taken on same facts, then its merely a change of opinion. In view of the above observation, the court rejected the appeal of revenue stating that it was a mere change of opinion and there was no justification in A.O.'s reopening of assessment.
Thus once all material facts are placed before the A.O. and he frames assessment after considering the same, then later on, relying on the same facts, assessment cannot be reopened on the ground of escapement of income. It merely amounts to change of opinion.