Now a days It is seen that the Excise and Taxation Department, Punjab has started issuing notices for amendment in assessment in many cases. These notices are being issued ussualy on the basis of audit objections received from State CAG or sometimes on the ground that some of the law points were misinterpreted by the predecessor of the assessing officer, while framing original assessment.
Being part of justice delivery system as a tax attorney I feel inclined to throw some light on the amendment in assessment.
Section 29(7) of Punjab VAT Act, 2005 provides for amendment in assessment under Punjab VAT Act, 2005 which can be made after taking approval from the Commissioner, within a period of three years from the date of the assessment order.
The amendment in assessment can be made only if under-assessment of tax payable by a person is discovered for the reason that-:
(a)Such a person has committed fraud or willful neglect; or
(b)Such a person has misrepresented facts; or
(c) a part of the turnover has escaped assessment.
Thus there are three grounds for the amendment in assessment as stated above. Any of the three grounds must exist before amendment in assessment can be carried out. Lets take one by one all the three grounds.
Fraud or willful neglect: Fraud has not been defined under Punjab VAT Act, 2005. I found the definition of fraud as given in the section 17 of Indian Contract act, 1872 as the best to understand the concept of fraud.
Section 17 of Contract Act defines fraud as following acts committed with intent to deceive or induce
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;”
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;”
(4) any other act fitted to deceive;”
(5) any such act or omission as the law specially declares to be fraudulent.
Further explanation to the above section provides that even silence can amount to fraud if there is a duty to speak.
Willful neglect is a conscious and voluntary disregard of the need to unreasonable care. Here the neglect must mean the unreasonable care committed willfuly so as to evade or avoid any payment of tax.
Escapement of turnover: A turnover can be said to have escaped assessment, if such turnover was not the subject matter of the assessment order. If a turnover has been part of the assessment order and all the material particulars relating thereto had been disclosed by the assessee at the time of assessment then subsequently assessing officer cannot change his opinion and say that such turnover has been wrongly assessed as it will amount to change of opinion and not escapement of turnover.
Jurisdiction of amendment in assessment: The amendment in assessment can be intitated only when the abovesaid conditions are in existance, in other words jurisdiction to make an amendment in assessment arises only on the existance of any one of the grounds mentionerd in section 29(7). Hence every assessee has the inherent right to ask for the reasons of the amendment in assessment as the same will decide whether the assessing officer has the jurisdiction to amke amendment in assessment or not. The assessee must also raise preliminary objections as to the jurisdiction of the assessing officer to initiate amendment in assessment if conditions stated u/s 29(7) are not prevelant.
Amendment in assessment on the basis of audit objections: It is ussualy seen that the Department tries to initiate amendment assessment proceedings o th basis of audit objections received from CAG. It is pertinent to mention here that objection of an audit party on a law point cannot form basis of amendment in assessment. There are catena of judgements on this issue given by various HCs and Supreme Court as well, under Income Tax Act where power of reassessment is exercised u/s 147/148 of the Act.
it has been held by the Supreme Court in the case of Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996/2 Taxman 197 that an opinion of an audit party on a point of law cannot be regarded as an information within the meaning of section 147 and it cannot lead to a valid initiation of reassessment proceedings.
The Apex Court has again upheld the decision of the High Court in the case of CIT v. Lucas T.V.S. Ltd. [2001] 249 ITR 306/117 Taxman 366 in which the High Court had quashed the reopening proceedings wherein apart from the information furnished by the audit party, the Income-tax Officer had no other information for reopening the assessment.
Change of Opinion: It is clear that power to amend assessment is not a power to review one’s order. If an amendment in assessment is to be made on a mere change of opinion, it would lead to granting an arbitrary power to the Designated officer, whereby DO would be able to make amendment in assessment at his sweet will, whenever he changes his opinion, which could not have been the intention of the legislature.
The Hon’ble Supreme Court while considering the power of assessing officer of reassessment in CIT vs Kelvinator of India Ltd 256 ITR 1 has observed that a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion.
Though the power to reopen under the amended s. 147 is much wider, one needs to give a schematic interpretation to the words “reason to believe” failing which s. 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the AO.”
Thus in view of the settled law by the Supreme court the change of opinion is no ground for making a reassessment or amendment in assessment.
Finally, to conclude the amendment in assessment can be initiated only on limited grounds as stated u/s 29(7) and therefore the same must be adhered to and mere change of opinion or an opinion of audit party cannot be ground for amendment in assessment.
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