No Opinion, No Change: Madras High Court Upholds Reassessment Under Section 147 for Excess 80HHC Deduction

“A silent assessment isn’t a shield – if there's no discussion, reopening can't be a change of opinion”, ruled the Madras High Court in a key tax verdict. The Division Bench comprising Dr. Justice Anita Sumanth and Justice Mummineni Sudheer Kumar dismissed a challenge by Jasmine Towels (P) Ltd., upholding reassessment proceedings under Section 147 of the Income Tax Act for the Assessment Year 2004–2005.

In doing so, the Court firmly held that where the original assessment order is “wholly silent” on a deduction claim, the reassessment cannot be struck down as a “mere change of opinion”. The appeal was dismissed, and the substantial question of law was answered in favour of the Revenue.

“If Nothing Was Considered, There Can Be No Opinion To Change”: High Court Reaffirms Scope of Section 147

The assessee had claimed a deduction of over ₹35 lakhs under Section 80HHC for export profits. However, as per the revenue, the computation was incorrect, with an excess deduction of ₹17,33,542 allegedly claimed by omitting a negative factor in the prescribed formula.

The original assessment under Section 143(3) was completed in 2006. Crucially, the Court noted:

“The assessment order is wholly silent as to the deduction under Section 80HHC. Neither does it mention any discussion with the assessee, nor reference the formula applied.” [Para 3]

Relying on Explanation 2(c)(iii) to Section 147, the Court concluded that excess relief granted in the original assessment constituted valid grounds for reopening.

“Presumption Applies Only Where There’s Proof of Application of Mind”: Silence in Assessment Defeats Assessee’s Argument

The assessee’s counsel, Mr. Athiban Vijay, had argued that since the return included the Section 80HHC computation, the AO must be presumed to have considered and accepted it—hence, the reopening amounted to an impermissible change of opinion.

The Court rejected this contention, stating: “Normally, when an assessment is made under Section 143(3), a presumption arises that issues raised in the return have been considered… but only when supported by some evidence of such consideration, like a notice under Section 143(2) or a questionnaire under Section 142(1).” [Para 19]

In the absence of such discussion or evidence, the Bench ruled: “There is nothing in the assessment order to indicate any such application of mind. Therefore, no opinion had been formed at all.” [Para 20]

“Excess Deduction = Income Escaping Assessment”: Reassessment Within Statutory Scope

The reassessment proceedings were based on the AO’s finding that the assessee incorrectly ignored a negative figure in the 80HHC formula, thereby inflating its deduction claim.

Referring to the reassessment reasons (as extracted by the First Appellate Authority), the High Court found: “This is a textbook case where Explanation 2(c)(iii) to Section 147 applies—excessive relief under the Act, which justifies reassessment.” [Para 21–22]

Distinction from TechSpan & Hareshkumar Cases: “There, A Mind Was Applied – Here, It Was Not”

The Court carefully distinguished the precedents relied upon by the assessee, including the Supreme Court’s ruling in TechSpan India Pvt. Ltd. and the Gujarat High Court’s judgment in Hareshkumar Bhupatbhai Panchani.

“In both cases, there was documented correspondence before the assessment—specific notices were issued, replies were given, and detailed discussions recorded. Those facts indicated application of mind by the AO.” [Para 24–25]

In contrast, the present case involved a “non-speaking, silent assessment”, where the AO neither raised questions nor discussed the 80HHC claim in any form.

 “Reassessment Legally Justified – Appeal Dismissed”

Summing up, the Court held: “Though an assessment under Section 143(3) has been made, the income is admittedly subject to excessive relief under Section 80HHC… Hence, the assumption of jurisdiction is justified.” [Para 22]

Answering the substantial question of law against the assessee, the Bench dismissed the appeal with no order as to costs.

📌 Key Takeaways from Jasmine Towels (P) Ltd. v. ACIT:

• Silent assessment ≠ opinion formed. A reassessment cannot be labelled a “change of opinion” unless the original AO had clearly applied their mind.
• Explanation 2(c) to Section 147 is a powerful tool – if excess relief is evident, reassessment is permissible.
• The presumption of consideration under Section 143(3) is rebuttable and depends on presence of evidence like notices, queries, and discussions.
• Technical procedural lapses, such as non-mention of reasons in certain stages, cannot override valid statutory jurisdiction if not challenged at the right stage.

Date of Decision: 11/12/2025