Clipped from: https://taxguru.in/income-tax/change-opinion-scrutinised-issue-sc-quashes-reopening-notice.html
ACIT Vs Marico Ltd. (Supreme Court of India)
Supreme Court of India has upheld a High Court decision that set aside a notice issued by the Assistant Commissioner of Income Tax (ACIT) seeking to re-open the assessment of Marico Ltd. for the Assessment Year 2014-15. The top court’s brief order, which dismissed the revenue’s special leave petition, reinforces the principle that an issue already examined and considered by the Assessing Officer during the original assessment proceedings cannot form the basis for a subsequent re-opening under Section 148 of the Income-Tax Act, 1961, terming it a mere “change of opinion.”
The case originated from the assessment of Marico Ltd.’s income for the financial year 2013-14, relevant to Assessment Year 2014-15. The original assessment was completed, and an order under Section 143(3) of the Income-Tax Act was passed by the Assessing Officer on January 30, 2018.
During the course of these original assessment proceedings, records indicate that the Assessing Officer had raised specific queries related to certain aspects of Marico Ltd.’s financials on September 25, 2017. Marico Ltd., in turn, had provided detailed responses and justifications for its stands on these queries through letters dated October 10, 2017, and December 21, 2017. The Assessing Officer proceeded to pass the assessment order after considering these submissions.
However, little over a year later, on March 27, 2019, the Assessing Officer issued a notice to Marico Ltd. under Section 148 of the Income-Tax Act, signaling an intention to re-open the completed assessment for the same Assessment Year 2014-15. The grounds for issuing this notice were directly linked to the very issue that had been the subject of queries and responses during the initial assessment scrutiny.
Marico Ltd. challenged the validity of this re-opening notice before the High Court. The core of the company’s argument was that since the Assessing Officer had already applied his mind to the specific issue during the original assessment by raising queries and considering their responses, the decision not to make any disallowance or addition in the final assessment order on that issue amounted to the Assessing Officer having formed an opinion. Therefore, attempting to re-open the assessment based on the same issue constituted a “change of opinion” on the part of the revenue, which is not a permissible ground for initiating reassessment proceedings under Section 147 of the Act, particularly after a full scrutiny assessment under Section 143(3).
The High Court, in its judgment, agreed with the taxpayer’s contention. As noted in paragraph 12 of the High Court’s order, cited in the Supreme Court’s proceedings, the court found that the reasons provided for the Section 148 notice were precisely the same issue that the Assessing Officer had inquired about during the original assessment. The High Court observed that Marico Ltd. had provided comprehensive responses to these queries, justifying its position. The fact that the Assessing Officer did not reject the explanation offered by Marico Ltd. in the final assessment order was interpreted by the High Court as an acceptance of the assessee’s view, thereby constituting the formation of an opinion on that matter.
Consequently, the High Court concluded that the re-opening notice was based on a mere change of opinion and was, therefore, without jurisdiction. The impugned notice dated March 27, 2019, was accordingly quashed and set aside by the High Court.
Aggrieved by the High Court’s decision, the Income Tax Department filed a special leave petition before the Supreme Court. The Supreme Court, after considering the matter, found no grounds to interfere with the judgment of the High Court. The brief order of the Supreme Court simply stated, “In the circumstances, we see no reason to interfere in the matter. This special leave petition is, accordingly, dismissed.”
This decision by the Supreme Court, while concise, effectively upholds the High Court’s application of the “change of opinion” doctrine. This doctrine, which has been a subject of numerous judicial pronouncements over the years, including the often-cited Supreme Court case of CIT v. Kelvinator of India Ltd., is a crucial check on the powers of the Assessing Officer to re-open concluded assessments. The principle established through these judgments is that reassessment powers cannot be used for a mere review of the earlier assessment based on the same material that was available with the Assessing Officer during the original assessment proceedings. Re-opening is permissible only if the Assessing Officer has “reason to believe” that income has escaped assessment on the basis of some tangible material or information discovered subsequent to the original assessment, and not merely because he has second thoughts or a different interpretation of the same facts and law that were considered earlier.
In the Marico Ltd. case, the key factor was the interaction between the Assessing Officer and the assessee during the original scrutiny assessment where the specific issue was raised and deliberated upon. The High Court’s view, endorsed by the Supreme Court’s dismissal of the appeal, was that once an issue is raised, examined, and not disturbed in the original assessment order, it signifies that the Assessing Officer has formed an opinion on that matter. A subsequent attempt to re-open the assessment on the very same issue, without any new material, is a change of that previously formed opinion and thus outside the ambit of the re-opening provisions of the Income-Tax Act.
The dismissal of the revenue’s petition by the Supreme Court in this instance underscores the importance of the Assessing Officer forming a considered view during the original assessment proceedings and reinforces the legal protection against arbitrary re-opening of assessments based on a change of mind on issues already scrutinised. This judgment serves as a reminder that while the power to reassess exists to bring to tax income that has genuinely escaped assessment, it is not a power to review or re-examine issues already concluded during a comprehensive assessment process. The pending applications in the matter were also disposed of by the Supreme Court’s order.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
In the present matter, the assessment order was passed on 30.01.2018 as regards the Assessment Year 2014-15.
According to the record, certain queries were raised by the Assessing Officer on 25.09.2017 during the assessment proceedings which were responded to by the Assessee vide letters dated 10.10.2017 and 21.12.2017.
After considering said responses, the assessment order was passed on 30.01.2018.
Subsequently, by notice dated 27.03.2019 issued under Section 148 of the Income-Tax Act, the matter was sought to be re-opened. While accepting the challenge to the issuance of notice, the High Court in para 12 of its judgment observed as under:
“12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set-aside.”
In the circumstances, we see no reason to interfere in the matter. This special leave petition is, accordingly, dismissed. Pending application(s), if any, also stand disposed of.
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