By TIOL News Service

ERNAKULAM, JULY 21, 2018: THE ISSUE BEFORE THE COURT IS - Whether re-opening sought u/s 147 by a new incumbent AO towards an issue can be said to be a 'mere change of opinion' even though, such an issue was not touched upon by the earlier AO. AND THE ANSWER IS NO.

Facts of the case:

The assessee company, had returned income for the relevant AY. Accordingly, the AO completed the assessment u/s 143(3). Thereafter, a rectification application in respect with the unabsorbed depreciation for earlier years and credit for unabsorbed business loss was filed by the assessee u/s 154 whereby, an order was passed on 09.04.2010. Aggrieved by the said order, the assessee preferred an appeal wherein, the assessee's claim for credit of unabsorbed business loss was allowed. However, the new incumbent AO re-opened the assessment by recording his reasons and issued the notice u/s 148. In the re-opening notice, the AO pointed that prior period, the depreciation was debited to P&L account during the AY 2007-08 but, the same were not disallowed while computing the tax. It was also noted by the AO that pre-payment premium on IDFC Term Loan was directly debited to P&L account with regard to the assessee's capital base however, the same was disallowed while computing the its total income. Further, excess depreciation was claimed by the assessee on Plant and Machinery and the same was not disallowed. The excess depreciation was allowed on the intangible asset "Brand Name" by wrongly adopting the WDV as on the first day of the year of amalgamation instead of adopting the same as on the last day of the year of amalgamation. Aggrieved assessee had challenged the said reassessment proceeding however, the Tribunal refused to interfere with the action of the AO.

High Court held that,

++ the formation of opinion has now been amended to 'has reason to believe' from 1989 onwards. The decision of the Usha International Ltd.'s case was also followed in the case of Kelvinator of India Ltd. and the principle laid down is to the effect that even with the amendment, the concept of 'change of opinion' survives and if there is an opinion formed by the AO at the earlier instance, necessarily, there cannot be a re-assessment by the very same AO or a new incumbent in the office having a different opinion with respect to any of the aspects on which the assessment has already been completed. After the assessment order was passed, the assessee had applied for rectification with respect to the unabsorbed depreciation for earlier years and credit for unabsorbed business loss. The claim for unabsorbed depreciation was allowed. But, however, the other issue was rejected on rectification finding that the same would not fall within the scope of a rectification. An appeal was filed by the assessee in which an order was passed wherein, the claim for credit of unabsorbed business loss was also allowed. None of these issues are now sought to be reopened by the AO. In such circumstances, we do not think that the rectification application filed by the assessee has any bearing on the issue of re-assessment;

++ in the instant case, we do not see any reason to find any information being in the possession of the ITO obtained after the assessment order was passed so as to attempt a re-assessment for escapement of income; which requirement as the provision exists now is also not mandatory. The provision as it stands during the subject year requires only recording of a reason to believe that there has been escapement of income in the earlier assessment order passed. As has been found by the Supreme Court in Kelvinator of India Ltd., the amendment does not alter the earlier position of the pre-amended provision; and a mere change of opinion will not be permitted even under the present Sec. 147. In this context, we again go to the assessment order passed, wherein there is no opinion formed with respect to any of the issues on which now a re-assessment is attempted. True, the AO could have found the wrong claims made by the assessee from the P&L account as also the depreciation Schedule filed under the IT Rules. However, obviously, there is no discussion nor is there any finding entered into in the assessment order. We do not see any of the issues having been discussed by the AO, nor is there an opinion expressed specifically with respect to the issues now sought to be reopened u/s 147. In such circumstances, it cannot be said that there was a mere change of opinion in initiating the re-assessment proceedings u/s 147 within the four year period by the new incumbent AO.

(See 2018-TIOL-1416-HC-KERALA-IT)