By TIOL News Service

ALLAHABAD, JULY 25, 2017: THE ISSUE BEFORE THE COURT IS - Whether intimation issued by ministerial staff of AO u/s 143(1) as deemed acknowledgment of AO, cannot be construed as an 'opinion by AO' on the return submitted by assessee and when there was no expression of opinion earlier at any stage by the AO, there cannot be a change of opinion in giving notice u/s 148. YES is the verdict.

Facts of the case:

The assessee filed its return for the A.Y 1997-98 and the same was accepted u/s 143(1). Even the revised return so filed by him was accepted u/s 143(1) and there was no regular assessment proceedings as contemplated by Section 143(3). Thereafter, a notice u/s 148 was issued on the ground that the income of assessee had escaped assessment and therefore, proceedings for re-assessment were necessary. The objections of assessee with regard to reasons for reopening were disposed of and were not challenged any further by means of a writ petition. Thus, the controversy with regard to initiation of proceedings u/s 147/148 were set to rest. Thereafter, the AO proceeded to pass re-assessment order u/s 143(3). On appeal, the ITAT held that re-assessment proceedings were bad in law as they could not have been initiated on the basis of change of opinion.

On appeal, the HC held that,

++ the Tribunal in recording the finding that it was a case of change of opinion and therefore, the proceedings are bad in law observed that the AO while preparing the intimation u/s 141(1) of the Act has considered the material and that there was no fresh material for recording the reason to believe that the income has escaped assessment. In Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. - 2007-TIOL-95-SC-IT, the Supreme Court had considered the provisions of Section 143(1) and has held that the notice of intimation u/s 143(1) is given without prejudice to the provisions of Section 143(2) and it does not preclude the right of the AO to proceed u/s 143(2). The legislative intent is very clear from the use of the word “intimation” in place of assessment and the scheme of things compels to hold that the use of the word “intimation” u/s 143(1) cannot be treated to be an order of the assessment. Even an acknowledgment of filing of the return is deemed to be an intimation u/s 143(1), where either no sum is payable by the assessee or no refund is due to him. Acknowledgment is not done by the AO but mostly by the ministerial staff. In view of the aforesaid authority, it is clear that the intimation u/s 143(1) has been treated to be an acknowledgment given by the ministerial staff of the Department and is not an order of assessment passed by the AO. In such a situation, there is no expression of any opinion by the AO on the return submitted by the assessee;

++ in the present case, as no order of assessment had been passed by the AO, simply on the basis of intimation contemplated u/s 143(1), it cannot be said that any opinion was expressed by the AO, which could have been changed for the purposes of giving notice for re-assessment. Thus, when there was no expression of opinion earlier at any stage by the AO, there cannot be a change of opinion in giving notice u/s 148 of the Act as has been held by the Tribunal. In addition to the above, the very fact that the objections of assessee against the notice for re-assessment and the reasons to believe were disposed of by the AO by detailed order and the said order was allowed to attain finality, the matter with regard to the validity of the notice and the proceedings had come to rest. The Tribunal therefore had no jurisdiction in law to allow the appeal on a technical ground that the proceedings were invalid for the reason that they were initiated on the basis of change of opinion rather than on any valid ground.

(See 2017-TIOL-1390-HC-ALL-IT)