Reassessment Proceedings Under Sec 147 Income Tax Act On Basis Of Change of Opinion is invalid: Madras HC [Read Judgment]

The Madras High Court on November 18, 2019, in the case of City Union Bank Limited v. The Assistant Commissioner of Income Tax, reiterated that the mere change of opinion of the assessing officer is not a ground to initiate reassessment proceedings under Section 147 of Income Tax Act, 1961. 

The ruling was passed by Justice G.R. Swaminathan of Madurai bench on a writ petition filed against the re-opening of assessment.

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 referred to a judgment in 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 reassessment 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, the court allowed the writ petition noting that "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 ActThe 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." 

[Read Judgment]