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 reasoned that the Act does not confer any power of review on the Assessing Officer; rectification under s.154 is narrowly limited to mistakes apparent on the record and cannot be used for debatable issues, and what cannot be done directly cannot be achieved indirectly through reassessment. A completed assessment under s.143(3) carries a presumption of due application of mind, and reopening solely because the earlier order was allegedly passed without such application would improperly allow the authority to benefit from its own wrong. Consequently, the ITAT was correct in declaring the s.147 proceedings invalid, and the issue was decided 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.

---