The Delhi High Court Full Bench decision addressed whether the reopening of a scrutiny assessment can be challenged as a "change of opinion" if the subject matter of the notice was not examined in the original assessment, even if the taxpayer made a full and true disclosure. The majority view was that reopening within four years is not barred by "change of opinion" in a "no opinion" case where the subject matter was not examined originally. One dissenting judge argued that reopening should not be allowed even within four years for "no opinion" cases unless failure to disclose was shown.

1. Recent Delhi HC Full Bench decision-CIT v Usha
International Ltd[2012]25taxmann.com200(Delhi) on
whether ‘change of opinion’ bars reopening of scrutiny
assessment in a ‘no opinion’ case
BY CA SRINIVASAN
ANAND.G
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2. Sum &substance of majority view
 Reopening of scrutiny assessment within the 4-year time limit
cannot be challenged as “change of opinion”
 if subject matter of notice u/s 148 was not examined by AO in
original assessment u/s 143(3)
 even though asessee made full & true disclosure of facts during
original assessment u/s 143(3)
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3. Backdrop-Questions of law referred by
Delhi HC Division Bench to Full Bench
 (i)What is meant by the term “change of opinion”?
 (ii)Whether assessment proceedings can be validly reopened
u/s147 of the Act, even within four years, if an assessee has
furnished full and true particulars at the time of original
assessment with reference to income alleged to have escaped
assessment? Whether and when in such cases reopening is
valid or invalid on the ground of “change of opinion”?
 (iii)Whether the bar or prohibition under the principle “change of
opinion” will apply even when the AO has not asked any
question or query with respect to an entry/note, but there is
evidence and material to show that the AO had raised queries
and questions on other aspects?
 (iv)Whether and in what circumstances Section 114 (e) of the
Evidence Act can be applied and it can be held that it is a case
of “change of opinion”?
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4. Majority View
 Reopening of scrutiny assessments within the 4-years
time limit not barred by ‘change of opinion’ principle
where no opinion formed in the original assessment on the
subject-matter of the notice u/s 148. This is so even where
assessee has made full and true disclosures.
 ‘Change of opinion’ postulates formation of opinion and
then change thereof;
 If subject matter/entry/deduction claim not examined by
AO in original assessment u/s 143(3), it is a case of ‘no
opinion’;
 No question of ‘change of opinion’ in a ‘no opinion case’;
 No deemed formation of opinion by operation of
presumption u/s 114(e) of the Evidence Act,1872.
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5. What is ‘change of opinion’-I
 ‘Change of opinion’ postulates formation of opinion and then
change thereof.
 It means that AO first formed an opinion in the proceedings
u/s143(3) and now by initiation of the reassessment, he wants
to take a different view.
 There is a difference between change of opinion and failure or
omission of the AO to form an opinion
 When the AO fails to examine a subject matter, entry, claim or
deduction, he forms no opinion. It is a case of no opinion.
 Reassessment proceedings will be invalid under ‘change of
opinion’ principle (i)if the assessment order itself records that
the issue was raised and is decided in favour of the assesse; or
(ii) if an issue or query is raised by AO and answered by the
assessee in original assessment proceedings but thereafter the
AO does not make any addition in the assessment order.
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6. What is ‘change of opinion’-II
 Omission to disclose material facts should be distinguished
from cases where the material facts on record are correct but
the AO did not draw proper legal inference or did not appreciate
the implications or did not apply the correct law.
 The latter Cases will be a case of “change of opinion” and
cannot be reopened for the reason that the assessee, as
required, has placed on record primary factual material but on
the basis of legal understanding, the AO has taken a particular
legal view. However, an erroneous decision, which is also
prejudicial to the interest of the Revenue can be revised u/s
Section 263 of the Act.
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7. Whether change of opinion can be invoked where scrutiny
assessment reopened with 4 year time limit and assessee had
made full & true disclosure in scrutiny assessment
 True & Full disclosure of material facts by assessee bars
reopening initiated after expiry of 4 years time limit-i.e.after 4
years from the end of the relevant assessment year.
 True & Full disclosure does not invalidate reopening initiated
within 4 years time limit. Such reopening can be invalidated by
“change of opinion” principle. However, failure to state true and
correct facts can vitiate and make the change of opinion
principle inapplicable.
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8. Whether section 114(e) of Evidence Act,1872
operates to deem that AO has formed an opinion
even when he hasn’t done so
 No ‘deemed formation of opinion’ by AO in a ‘no opinion case’
by reason of operation of the Presumption u/s 114(e) of
Evidence Act,1872.
 The said presumption of regularity of acts done by an authority
operates when act proved to have been done; It does not
presume an act not proved to be done as an act done.
 Further, the presumption is permissive and not a mandatory
provision.
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9. How to ascertain whether AO has
formed an opinion or not?
 Cases have to be examined individually.
 Some matters may require examination of the assessment
order or queries raised by the AO and answers given by the
assessee. In others cases, a deeper scrutiny or examination
may be necessary.
 The stand of the Revenue and the assessee would be relevant.
 Several aspects including papers filed and submitted with the
return and during the original proceedings are relevant and
material.
 Sometimes application of mind and formation of opinion can be
ascertained and gathered even when no specific question or
query in writing had been raised by the AO.
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10. DISSENTING VIEW-PER EASWAR J
 No reopening of scrutiny assessments even within the 4
year time limit in ‘no opinion cases’ except where failure to
furnish full & true particulars is shown in the reasons
recorded for reopening the assessment
 If ‘no opinion’ argument accepted, then all that the AO
needs to do to reopen an assessment is to record reasons
along the following lines: “The assessee has no doubt
disclosed fully and truly all material facts necessary for the
assessment. The assessment was also completed under
section 143 (3). However, I have not examined those
particulars while completing the assessment. I, therefore,
did not form any opinion. I now want to reopen the
assessment so that I can take the opportunity to examine
the full and true particulars furnished by the assessee and
form an opinion. I am, therefore, issuing notice under
section 148.”
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