2002 (4) TMI 37 - HC - Income Tax

Reopening a completed s.143(3) income tax assessment u/s147 based only on changed opinion struck down

Reassessment under s.147 was held impermissible where the Assessing Officer sought to reopen a completed assessment merely on a change of opinion. The HC ... Reassessment - Income escaping assessment - Whether, the Income-tax Appellate Tribunal was correct in holding that the proceedings initiated under section 147 of the said Act were invalid on the ground that there was a mere change of opinion? - HELD THAT:- It is a well settled principle of interpretation of statute that the entire statute should be read as a whole and the same has to be considered thereafter chapter by chapter and then section by section and ultimately word by word. It is not in dispute that the Assessing Officer does not have any jurisdiction to review his own order. His jurisdiction is confined only to rectification of mistakes as contained in section 154 of the Act. The power of rectification of mistake conferred upon the Income-tax Officer is circumscribed by the provisions of section 154 of the Act. The said power can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. Even the Income-tax Appellate Tribunal has limited jurisdiction under section 254(2) of the Act. Thus when the Assessing Officer or Tribunal has considered the matter in detail and the view taken is a possible view the order cannot be changed by way of exercising the jurisdiction of rectification of mistake. It is a well settled principle of law that what cannot be done directly cannot be done indirectly. If the Income-tax Officer does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment or by way of rectification of mistake. In the event it is held that by reason of section 147 if the Income-tax Officer exercises his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. We are therefore of the opinion that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. We, however, may hasten to add that if 'reason to believe' of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 read with section 148 of the Act. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding with out anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Thus, we are of the opinion that the answer to the question raised before this Bench must be rendered in the affirmative, i.e., in favour of the assessee and against the Revenue. Issues: (i) Whether an assessment can be reopened under section 147 of the Income-tax Act, 1961, on the basis of a mere change of opinion of the Assessing Officer.Analysis: The Court examined section 147 as it stood before and after April 1, 1989, the proviso to amended section 147, and the binding departmental Circular No. 549 (31.10.1989). Authorities on the meaning and requirements of 'reason to believe' and 'information' (including Calcutta Discount Co., Indian & Eastern Newspaper Society, Jindal Photo Films, Bawa Abhai Singh and related decisions) were considered. The Court analysed the distinction between a reassessment founded on new information received after completion of assessment and an exercise of reassessment grounded solely on the Assessing Officer's fresh application of mind to facts already before him. The Court further considered the legal effect of circulars issued under section 119 and held that Circular No. 549, being binding on the Revenue, shows the legislative intent that mere change of opinion should not permit reopening. The Court confirmed that where a regular assessment under section 143(3) has been passed, a presumption of application of mind arises and that reopening cannot be justified merely because the original assessment did not contain detailed reasons; jurisdiction to reopen requires a proper 'reason to believe' founded on relevant information received after assessment.Conclusion: The Assessing Officer cannot initiate proceedings under section 147/148 on the basis of a mere change of opinion. Reopening is permissible only where the 'reason to believe' is founded on information or material coming into the Assessing Officer's possession after the completion of the original assessment. This conclusion is in favour of the assessee and against the Revenue.