A.O Cannot act as a reviewing authorithy u/s 147 of Income Tax Act,1961

CA Prarthana Jalan

Hon’ble Mumbai ITAT has in the case of DCIT V/s Century Textiles and Industries Ltd. held that

The Assessing Officer has though power to re–assess but no power to review and if the concept of “change of opinion” is removed, then in the garb of the re–assessment, review of earlier orders would take place. The “change of opinion” is in–built test to check the abuse of power by the Assessing Officer. Thus, in such cases, the Assessing Officer can re–open the case only when there is “tangible material” coming on record having direct bearing with the escapement of income.

The “reason to believe” must have live link nexus with the formation of the belief. The “reason to believe” as contemplated under section 147, does not mean to acquire jurisdiction of re–opening the case for reviewing the earlier order passed by the Assessing Officer, which has been done after application of his mind and expressing his opinion.

The Assessing Officer, under section 147, cannot sit as a reviewing authority on the order passed by the earlier Assessing Officer to re–examine the subject matter which has been duly considered by the Assessing Officer, de–hors any new material having live link nexus with the income escaping assessment.

The Assessing Officer cannot re–open the case even though he comes to a conclusion that earlier opinion expressed by the Assessing Officer was not correct. If in the earlier order, the Assessing Officer on a particular issue has formed any opinion, then the main provision of section 147, precludes the re–opening of the assessment.

The reason to believe cannot be for reviewing of earlier order as it will lead to arbitrary exercise of power by the Assessing Officer to re–open the case under the grab that the earlier opinion expressed was not correct view. Thus, on the facts of the present case, we are of the opinion that the “reasons recorded” by the Assessing Officer is purely based on “change of opinion” de–hors any tangible material coming into record. Thus, in view of the law laid down by the Hon’ble Supreme Court in Kelvinator of India Ltd. (supra), the notice dated 15th December 2011, under section 148, and consequent assessment order dated 22nd December 2011, passed under section 147 / 143(3), is held as void as the “reasons recorded” are based on “change of opinion” and do not clothe the Assessing Officer with jurisdiction to re–open the assessment. Consequently, the assessment order is quashed and the impugned order appealed against is set aside. Ground no.1, is thus allowed.

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