According to the Delhi High Court, the order issued under Section 143(1) of the Income Tax Act of 1961 is not an assessment for the purposes of Section 147, and as a result, the Assessing Officer does not need to find any new tangible evidence to come to the conclusion that the assessee’s income has escaped assessment in order to reopen the assessment. The Court of Justices Manmohan and Manmeet Pritam Singh Arora ruled that because only an intimation is given to the assessee when the return it initially filed is processed and no opinion is formed as a result of the order made under Section 143(1), the doctrine of change of opinion is not applicable.
The petitioner Ernst and Young U.S. LLP received a Show Cause Notice in an effort to reopen its assessment on the grounds that the assessee failed to offer to tax certain professional fees it had received in its income tax return. The Assessing Officer then issued an order in accordance with Section 148A(d) of the Income Tax Act, ruling that the case qualified for the issuance of a notice under Section 148 since the assessee had neglected to submit any pertinent supporting documentation for its claim. The assessee filed a writ petition with the Delhi High Court in opposition to this.
In cases when the assessee’s income has eluded taxation, Section 148 allows the Assessing Officer to issue a notice.
Because of Article 15 of the India-US Double Taxation Avoidance Agreement, the petitioner/assessee Ernst and Young U.S. LLP argued before the Delhi High Court that the professional fees it had received were not taxable in India. As a result, the assessee did not include the relevant receipts in its income tax return, The assessee claimed that the Revenue Department’s decision to accept the assessee’s submitted income tax return and determine his or her taxable income in accordance with Section 143(1) of the Income Tax Act constituted an adverse assessment. The assessee argued that no Show Cause Notice under Section 148A(b) of the Income Tax Act could have been issued by the department in the absence of any new physical evidence or information that would suggest that the assessee’s income for the relevant assessment year had eluded assessment.