Now a days It is seen that
the Excise and Taxation Department, Punjab has started issuing notices for
amendment in assessment in many cases. These notices are being issued ussualy
on the basis of audit objections received from State CAG or sometimes on the ground that some of the law points were misinterpreted by the predecessor of the assessing
officer, while framing original assessment.
Being part of justice delivery system as a tax attorney I feel
inclined to throw some light on the amendment in assessment.
Section 29(7) of Punjab VAT
Act, 2005 provides for amendment in assessment under Punjab VAT Act, 2005 which
can be made after taking approval from the Commissioner, within a period of
three years from the date of the assessment order.
The amendment in assessment
can be made only if under-assessment of tax payable by a person is discovered
for the reason that-:
(a)Such a person has
committed fraud or willful neglect; or
(b)Such a person has
misrepresented facts; or
(c) a part of the
turnover has escaped assessment.
Thus there are three
grounds for the amendment in assessment as stated above. Any of the three
grounds must exist before amendment in assessment can be carried out. Lets take
one by one all the three grounds.
Fraud or willful neglect: Fraud
has not been defined under Punjab VAT Act, 2005. I found the definition of
fraud as given in the section 17 of Indian Contract act, 1872 as the best to
understand the concept of fraud.
Section 17 of
Contract Act defines fraud as following acts committed with intent to deceive
or induce
(1) the suggestion,
as a fact, of that which is not true, by one who does not believe it to be
true;"
(2) the active concealment of a fact by one having knowledge or
belief of the fact;
(3) a promise made without
any intention of performing it;"
(4) any other act
fitted to deceive;"
(5) any such act or
omission as the law specially declares to be fraudulent.
Further explanation to the
above section provides that even silence can amount to fraud if there is a duty
to speak.
Willful neglect is a conscious and voluntary disregard of the need to
unreasonable care. Here the neglect must mean the unreasonable care committed willfuly so as
to evade or avoid any payment of tax.
Escapement of turnover: A
turnover can be said to have escaped assessment, if such turnover was not the
subject matter of the assessment order. If a turnover has been part of the
assessment order and all the material particulars relating thereto had been
disclosed by the assessee at the time of assessment then subsequently assessing
officer cannot change his opinion and say that such turnover has been wrongly
assessed as it will amount to change of opinion and not escapement of turnover.
Jurisdiction of amendment in assessment: The amendment in assessment can be intitated only when the
abovesaid conditions are in existance, in other words jurisdiction to make an
amendment in assessment arises only on the existance of any one of the grounds
mentionerd in section 29(7). Hence every assessee has the inherent right to ask
for the reasons of the amendment in assessment as the same will decide whether
the assessing officer has the jurisdiction to amke amendment in assessment or
not. The assessee must also raise preliminary objections as to the jurisdiction
of the assessing officer to initiate amendment in assessment if conditions
stated u/s 29(7) are not prevelant.
Amendment in assessment on the basis of audit objections: It is ussualy seen that the Department tries to initiate
amendment assessment proceedings o th basis of audit objections received from
CAG. It is pertinent to mention here that objection of an audit party on a law
point cannot form basis of amendment in assessment. There are catena of
judgements on this issue given by various HCs and Supreme Court as well, under
Income Tax Act where power of reassessment is exercised u/s 147/148 of the Act.
it has been held by the
Supreme Court in the case of Indian & Eastern Newspaper Society v. CIT
[1979] 119 ITR 996/2 Taxman 197 that an opinion of an audit party on a point of
law cannot be regarded as an information within the meaning of section 147 and
it cannot lead to a valid initiation of reassessment proceedings.
The Apex Court has again
upheld the decision of the High Court in the case of CIT v. Lucas T.V.S. Ltd.
[2001] 249 ITR 306/117 Taxman 366 in which the High Court had quashed the
reopening proceedings wherein apart from the information furnished by the audit
party, the Income-tax Officer had no other information for reopening the
assessment.
Change of Opinion: It
is clear that power to amend assessment is not a power to review one’s order.
If an amendment in assessment is to be made on a mere change of opinion, it
would lead to granting an arbitrary power to the Designated officer, whereby DO
would be able to make amendment in assessment at his sweet will, whenever he
changes his opinion, which could not have been the intention of the
legislature.
The Hon’ble Supreme Court
while considering the power of assessing officer of reassessment in CIT vs
Kelvinator of India Ltd 256 ITR 1 has observed that a presumption can be raised that such an order has been passed
on application of mind. It was held that if it be held that an order which has
been passed purportedly without application of mind would itself confer
jurisdiction upon the Assessing Officer to reopen the proceeding without
anything further, the same would amount to giving premium to an authority
exercising quasi-judicial function to take benefit of its own wrong. It was
held that section 147 of the Act does not postulate conferment of power upon
the Assessing Officer to initiate reassessment proceedings upon a mere change
of opinion.
Though the power to
reopen under the amended s. 147 is much wider, one needs to give a schematic
interpretation to the words “reason to believe” failing which s. 147 would give arbitrary powers to the AO to re-open assessments on
the basis of “mere change of opinion”, which cannot be per se reason to re-open. One
must also keep in mind the conceptual difference between power to review and
power to re-assess. The AO has no power to review; he has the power to
re-assess. But re-assessment has to be based on fulfillment of
certain pre-condition and if the concept of “change of opinion” is removed, as
contended on behalf of the Department, then, in the garb of re-opening the
assessment, review would take place. One must treat the concept of
“change of opinion” as an in-built test to check abuse of power by the AO.”
Thus in view of the settled
law by the Supreme court the change of opinion is no ground for making a
reassessment or amendment in assessment.
Finally, to conclude the
amendment in assessment can be initiated only on limited grounds as stated u/s
29(7) and therefore the same must be adhered to and mere change of opinion or
an opinion of audit party cannot be ground for amendment in assessment.
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