MUMBAI: The issue whether an assessing officer has the power to reopen an assessment under Section 147 of the Income Tax Act (The Act) based on a mere "change of opinion" has been the subject matter of considerable debate. Judicial opinion has been divided on the matter. While the majority of High Courts were of the opinion that no reopening lies on a mere "change of opinion" certain High Courts held otherwise. More than 20 years after the amendment to Section 147 of the Act, the Supreme Court has put at end to the controversy.

The Supreme Court in its order dt 18th January 2010 has set at rest the controversy, whether, under the provisions of Section 147 of  the Act, as amended with effect from 1st April 1989, the concept of "change of opinion" stands obliterated. While dismissing the civil appeals filed by the revenue against the Full Bench decision of the Delhi High Court in CIT v/s Kelvinator of India reported in 256 ITR Pg 1, the three member Bench of the Supreme Court noted that post amendment the only condition conferring jurisdiction on the assessing officer to invoke section 147 of the Act is that he must have "reason to believe" that income has escaped assessment. The Supreme Court held that a schematic interpretation is to be given to the words "reason to believe" failing which arbitrary powers would be given to the assessing officer to reopen assessments on the basis of a mere change of opinion.  While observing that that there is a conceptual difference between power to review and power to reassess the Bench noted that while the assessing officer has no power to review he only has the power to reassess.

The Bench thereafter observed that if the concept of "change of opinion" were to be given the go by, then, in the garb of reaopening the assessment, review would take place. The Bench held that the concept of "change of opinion" is an inbuilt test to check abuse of power by the assessing officer and even after 1st April 1989 the assessing officer has power to reopen only if  there is "tangible material" to come to the conclusion that income has escaped assessment and the reasons must have a live link with the formation of belief. The Bench drew support from the fact that originally in Section 147 of the Act, the words "reason to believe" were deleted and the word " opinion" was inserted by the Direct Tax Laws ( Amendment ) Act, 1987. However based on representations received that the word "opinion"  would give arbitrary powers to the Assessing officer to reopen past assessments on a mere change of opinion, the Amending Act of 1989 reintroduced the expression "reason to believe" in Section 147 of the Act. The relevant portion of Circular No 549 dt 31st October 1989 issued by the Central Board of Direct Taxes was also was quoted by the Bench to support the legislative intent behind the amendment.

The Supreme Court judgement provides much awaited   relief to assessees and should dispose of pending litigation at various levels.