Dell India Pvt Ltd v. The Joint Commissioner of Income Tax (2015) - Reopening of Assessment due to 'Change of Opinion'

• JUDGMENT SUMMARY: Dell India Pvt Ltd v. The Joint Commissioner of Income Tax
• DATE OF JUDGMENT: 2^nd September, 2015
• JUDGES: Justice Vineet Saran & Justice B. Manohar
• PARTIES: Dell India Pvt Ltd (Appellant) & The Joint Commissioner of Income Tax (Respondent)

SUBJECT

Many a times it happens that reassessment of an assessee has to be done for the filing of income tax. The question in the present case was whether such a reassessment can be initiated only on the basis of ‘change of opinion’ of the assessment officer. It is a case in which the initiation of proceedings under Sections 147 & 148 of the IT Act was challenged.

OVERVIEW

1. The appellant of this case is a manufacturer and seller of computer hardware and related products, for the income received from which the assessee pays income tax.
2. However, the amount received in the assessment year 2009-2010 was not shown as income but as deferred revenue receipt and was accepted by the assessment officer.
3. In the assessment year2010 – 2011, a notice was issued to the assessee for reassessment under Section 147 of the Income Tax Act on the ground that income assessable as tax had escaped assessment.
4. It was against this reassessment that the assessee filed a writ petition to declare it to be out of the jurisdiction of the Assessing Officer.

IMPORTANT PROVISIONS

Income Tax Act, 2016:

Section 147: Income Escaping Assessment

Section 148: Issue of Notice where Income has Escaped Assessment

ISSUES

1. Whether there was ‘change of opinion’ of the Assessing Officer?
2. Whether an already concluded assessment can be reopened on the ‘change of opinion’ of the Assessing Officer?

JUDGMENT ANALYSIS

In the present case, it was contended by the appellants that the basis of the reopening of the assessment which had earlier been concluded is mere ‘change of opinion’ of the Assessing Officer and that there existed no reason for the Officer to believe that the income had escaped assessment. The Karnataka High Court held the following:

1. While assessing the assessee’s income for the year 2009-2010, it is clear that the Assessment Officer was aware of the ‘Smart Debit Deferred Revenue Account’ method of accounting opted by the assess.
2. It was held that the Assessment Officer had made a conscious decision of not including the amount as income and that the Officer had assumed that the deferred amount would be subject to tax in the next assessment year.
3. The issue had arisen when the assessment method followed by the assessee had been rejected in the year 2010-2011. Regarding this, the Court held that “The rejection of a system of Accounting Maintained by the Assessee in a subsequent year cannot be a reason for reopening an already concluded assessment”.
4. Hence, it was held by the Karnataka High Court that this case was a case of change of opinion and reassessment could not be initiated under Section 147 and 148 of the Income Tax Act.

CONCLUSION

In summary, it can be said that in this particular judgment, the Karnataka High Court made it clear that an already concluded assessment could not be reopened merely because of the ‘change of opinion’ of the Assessment Officer. It was clear from the facts that the Assessment Officer had the knowledge of the assessment method followed by the assessee and had made a conscious decision in not including the amount as income for the year 2009-2010.