Reopening of assessment- Change of Opinion or Failure to apply Mind- Crescent Construction Co vs. ACIT (ITAT Mumbai)

Discussion on reopening of assessments in the context of “change of opinion” vs. “failure to apply mind,” under s. 147/148, read with section 114 of the Indian Evidence Act, 1872 and related judgements.

What is “Change of Opinion”by Tax Official while reopening of assessment?

(i) The term “change of opinion” literary means formation of an opinion and then a change thereof. With reference section 147 of the Act, it implies that the Assessing Officer should have first form an opinion for any proceedings under section 143(3), and then only any proposed reassessment proceedings can be initiated.

(ii) Hence, before we proceed, let us first understand the meaning of the word “opinion”. The word “opinion” is a Latin word “opari” which means “to think”, or “to believe”.  The book titled Advanced Law Lexicon explains the term “opinion” to mean “something more than retaining of gossip or hearsay; it means belief, which results from what one thinks on a particular question . . .

According to Black’s Law Dictionary, “opinion”, means a decision reached by a court or statement made by a judge, for any cases argued before them and detailing the reasons upon which the judgment is based.

Therefore, an opinion is a conviction based on testimony. In other words, it is result of experience, reading, and reflection.

Hence, “opinion” in context of assessment proceedings, to means formation of belief by an Assessing Officer which results from what AO thinks on a particular question. In sense, it is a result of understanding, experience and reflection. 

Hence, after above discussion, we can say that the question of change of opinion arise only when an Assessing Officer first forms an opinion and decides to holds that the assessee is correct and accepts his position or stand or not to make an addition.

Punjab and Haryana High Court rightly observed that the way an assessment order is drafted an assessee has hardly any control over its language

(iii) A Division Bench of the Hon’ble Punjab and Haryana High Court, in a case of Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H), observed that the way an assessment order is drafted, an assessee has hardly any control over it. The observation of bench was that in the given order of assessment contains only such points, on which the explanations of assesse are rejected, and addition/disallowances are made, and the issues which Assessing Officer accepts do not find mention there.

(iv) Therefore, with the observations of the Punjab and Haryana High Court and also principles as laid down by this court as well, we find that if the assesse has placed before the Assessing Officer the entire material at the time of original assessment, and the Assessing Officer accepted the view canvassed by the assessee by applying his mind to that material. But due to any reason, for the time being, he did not merely express this in his assessment order, that by itself would not give him ground to conclude that income has escaped assessment, and hence, the assessment needed to be reopened. On the contrary, if the Assessing Officer makes lapses by did not applying his mind, then court held that there is no reason for which an assessee needs to suffer due to any such lapses.

(v)The Section 114 of the Evidence Act, 1872, is not a mandatory rather it is permissive provision. In sense, there is no scope of presumption when facts are known. Permissive provision is just an enabling provision which just support judge judgment.

Under section 144, presumptions of facts are rebuttable. Therefore any presumption raised under illustration Sec. 114(e) of the Act to means that the given acts are presumed to have been done regularly when an official act is proved to have been done,  but it should not raise any presumption that acts was done for which there was no proof or evidence.

(vi)Therefore after careful analysis, we can conclude that Section 114(e) of the Act can also be applied to any assessment order made under section 143(3) of the Act. However, it should be noted that for that true and full disclosure of all material facts at the time of original assessment are need to be done. In such circumstances, it would amount to change of opinion, if the assessment is reopened in respect of any matter covered by such disclosures.