LexCOMMISSIONER OF INCOME TAX, DELHI versus M/S. KELVINATOR OF INDIA LIMITED
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A B [201 OJ 1 S.C.R. 768 COMMISSIONER OF INCOME TAX, DELHI v. M/S. KELVINATOR OF INDIA LIMITED (Civil Appeal Nos. 2009-2011 of 2003) JANUARY 18, 2010 [S.H. KAPADIA, AFTAB ALAM AND SWATANTER KUMAR, JJ.] Income Tax Act, 1961: s.147 - Power to reassess - The C word "opinion" inserted in s.147 after the enactment of Direct Tax Laws (Amendment) Act, 1987 i.e. prior to 1st April, 1989, vested arbitrary powers in the Assessing Officer to reopen past assessments on mere change of opinion - The concept of "change of opinion" stood obliterated with effect from 1st April, D 1989, i.e. after substitution of s.147 of the Act by Direct Tax Laws (Amendment) Act, 1989- Direct Tax Laws (Amendment) Act, 1987 - Circular No.549 dated 31st October, 1989. The question which arose for consideration in the present appeal is whether the concept of "change of E opinion" stands obliterated with effect from 1st April, 1989, i.e. after substitution of section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1989. F Dismissing the appeals, the Court HELD: Post-1st April, 1989, power to re-open is much wider. The words "reason to believe" need to be given a schematic interpretation failing which, Section 147 of the Income Tax Act, 1961 would give arbitrary powers to the G Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot per se be reason to re-open. The Assessing Officer has no power to review but he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre- H 768 COMMISSIONER OF INCOME TAX, DELHI v. 769 KELVINATOR OF INDIA LIMITED condition and if the concept of "change of opinion" is A removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to·the conclusion that there is B escapement of income from assessment. Reasons must have a live link with the formation of the belief. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. c However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. The D Circular No.549 dated 31st October, 1989, stated that the omission of expression 'reason to believe' from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. The Amending Act, 1989, has again amended section 147 E to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. [Para 6] [772-C- H; 773-A-E] CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2009-2011 of 2003. F From the Judgment & Order dated 19.04.2002 of the High Court of Delhi at New Delhi in l.T.C. No.4 of 2000 and dated G 15.05.2002 in LT.A. No. 81 of 2000. WITH C.A. No. 2520 of 2008. H 770 SUPREME COURT REPORTS [2010] 1 S.C.R. A Arijit Prasad, Kunal Bahri, B.V. Balaram Das for the B Appellant. Kavita Jha, Bhargava V. Desai, Rahul Gupta, Nikhil Sharma for the Respondent. The Judgment of the Court was delivered by S.H. KAPADIA, J. 1. Heard learned counsel on both sides. 2. A short question which arises for determination in this C batch of civil appeals is, whether the concept of "change of opinion" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1989? 3. To answer the above question, we need to note the D changes undergone by Section 147 of the Income Tax Act, 1961 [for short, "the Act"]. Prior to Direct Tax Laws (Amendment) Act. 1987, Section 147 reads as under: E F G H "Income escaping assessment. 147. If-- [a] the Income-tax Officer has reason to believe that, by . reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his a
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