Tax payers need not pay more if the income-tax officer changes his opinion on their income and asks for more taxes, according to a recent order passed by the Income Tax Appellate Tribunal (ITAT), Mumbai.

The ITAT’s order was on an appeal filed by Mumbai-based Sudarshan Securities and serves as a reminder to assessing officers that tax cannot be levied at the whims and fancies of tax officers. Sudarshan Securities was taxed 30 per cent of the book profit under Minimum Alternate Tax (MAT). The assessing officer, while passing the order for 1997-98, concluded that the capital gain should be taxed at a concessional rate of 21.5 per cent and the balance at 43 per cent.

Later, the assessing officer changed his opinion and held that the entire book profit should be taxed at 43 per cent. The Commissioner (A) also took the same view, citing an amendment in 1989 to the Income Tax Act , which gave it the power to reopen such cases.

Then, Sudarshan Securities, represented by Jignesh R Shah, moved the ITAT. The tribunal ruled against such changes in opinion, which put additional tax burden on the taxpayer. Mr Shah argued that section 147 of the Income-tax Act is not a weapon in the hands of the assessing officers to use it whenever they feel like changing his opinion and views.

The ITAT accepted Mr Shah’s argument and quashed the order of the assessment officer. The Income-tax laws give wide powers to assessing officers for reopening a case if they feel that some income has escaped the tax net. But the department cannot reopen an assessment already made, if the officer has merely changed his opinion after reappraising the very same facts which were available when the original assessment was made, too.

In 1989, amendments were introduced to section 147 of the Income-tax Act, widening the power of the assessing officer to reopen cases, if there is enough ground to suggest that income had escaped the tax net. Even there, reopening a case on the basis of a change of opinion on existing facts are not permitted.