Case Law Details
In a recent ruling Supreme Court (SC) [2010-TIOL-06- SC-IT-L13] in the case of Kelvinator of India Ltd. (Taxpayer) held that income cannot be reassessed on a mere change of opinion, as that would imply conferring arbitrary powers on the Tax Authority. It is only when there is a ‘tangible material’ to believe that income has escaped assessment that the power of reassessment can be exercised and the reasons for reassessment must have a live link with the formation of the belief.
Background
The pre-amended provision of the ITL empowered the Tax Authority to reassess the income if it has ‘reason to believe’ that income has escaped assessment either because (a) the taxpayer has not disclosed fully and truly all material facts necessary for assessment or (b) as a consequence of information in Tax Authority’s possession.
- Subsequently, by an amendment, the aforesaid conditions (a) and (b) were dropped and the concept of reason to believe was substituted by the concept of ‘opinion of the tax authority’. This implied that the Tax Authority could reassess the income, if, in its opinion, the income has escaped assessment.
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