Reopening of Assessment Based on Change of Opinion (Section 147/148)

By | March 25, 2026
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Reopening of Assessment Based on Change of Opinion (Section 147/148)

Facts

  • Original Assessment: For AY 2013-14, the Assessee’s case was subjected to scrutiny under Section 143(3). During these proceedings, the Assessing Officer (AO) raised specific queries regarding cash deposits and the transfer of Transferable Development Rights (TDR).

  • Assessee’s Compliance: The Assessee provided the cash book and explained the sources of the deposits. The AO accepted these explanations for the cash deposits but made an addition regarding the profit from the TDR transfer.

  • The Reopening: Subsequently, the AO issued a notice under Section 148 to reopen the assessment on two grounds:

    1. A clerical error in the computation of “change in inventory.”

    2. Treating the same cash deposits (already examined) as unexplained credits under Section 68.

  • The Dispute: The Assessee challenged the reopening, arguing it was a “mere change of opinion” on facts already disclosed and verified during the original scrutiny.

Decision

The Court/Tribunal ruled in favor of the Assessee, quashing the reassessment based on the following legal reasoning:

  • Survival of Reasons: The first reason for reopening (inventory error) did not survive because the related addition had already been deleted by the Tribunal in separate proceedings.

  • Change of Opinion: Regarding the cash deposits, the record clearly showed that the AO had specifically examined the cash book and the source of deposits during the original Section 143(3) assessment. Reopening the case to re-examine the same material constitutes a “mere change of opinion,” which is not permissible under the law.

  • Full and True Disclosure: Since the Assessee had provided all necessary documents (cash book, etc.) during the initial scrutiny and the AO had formed a view on them, it cannot be said that there was any “failure on the part of the Assessee to fully and truly disclose” material facts.

  • Finality of Assessment: Reopening an assessment after a full scrutiny without any “new” tangible material is an abuse of power. A different AO cannot simply re-read the same file to reach a different conclusion.

Key Takeaways

  • Scrutiny Protection: If an issue has been specifically queried and recorded in the original assessment order (or the assessment folder), it creates a shield against future reopening on the same grounds unless new external evidence comes to light.

  • Tangible Material Requirement: For a valid reopening under Section 147, the AO must possess “tangible material” that was not available or considered during the original assessment. Merely “re-visiting” the same cash book is legally insufficient.

  • Check the Assessment Record: Tax professionals should always compare the “Reasons for Reopening” with the “Questionnaires” and “Submissions” of the original scrutiny. If the queries overlap, the reopening is likely a “change of opinion.”

  • Clerical Errors: Reopening based on a clerical error is often weak if the primary underlying addition has already been struck down by a higher forum (Tribunal/Court).

HIGH COURT OF BOMBAY
Magestic Premises (P.) Ltd.
v.
Assistant Commissioner of Income-tax, Central*
B. P. COLABAWALLA and FIRDOSH P. POONIWALLA, JJ.
WRIT PETITION NO. 3318 OF 2022
FEBRUARY  17, 2026
K. Gopal, Neha Paranjpe and Akhilesh Deshmukh, Advs. for the Petitioner. Ashok Kotangle, Suresh Kabra, Nikhil Kamble and Kishore Walanju, Advs. for the Respondent.
ORDER
1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally. The above Writ Petition is filed challenging the notice issued under Section 148 dated 12th January 2021 and the order dated 2nd December 2021 disposing of the objections filed by the Petitioner to the reasons for reopening the assessment. The assessment year in question is A.Y.2013-14.
2. The Return of Income for A.Y.2013-14 was filed on 26th December 2013 declaring a total income of Rs.17,50,690/-. Thereafter a notice under Section 142(1) dated 29th December 2015 was issued to the Petitioner raising certain queries with respect to cash deposits in various bank accounts as well as certain other issues. On 7th January 2016 the Petitioner files its response to the above notice explaining the cash deposits and its source. Thereafter, on 29th February 2016, during the course of assessment, a detailed explanation was sought by the Assessing Officer with respect to the transfer of Transferable Development Rights (TDR). The explanation with reference to the transfer of TDR was not to the satisfaction of the Assessing Officer, and therefore, whilst passing the Assessment Order under Section 143(3), an addition of Rs.1,34,87,990/- was made on account of the profit from sale of TDR. What is important to note is that the Assessing Officer made no addition with reference to the query raised by him regarding the cash deposits. In other words, the explanation furnished by the Petitioner for the cash deposits was accepted by the Assessing Officer whilst passing the Assessment Order dated 29th February 2016 [under Section 143(3) of the Act].
3. Be that as it may, against the said Assessment Order, the Petitioner preferred an Appeal before the CIT (Appeals). The CIT (Appeals) partly allowed the Appeal of the Petitioner vide its order dated 9th March 2022 and upheld the addition [with reference to profit from sale of TDR] to the extent of Rs.1,03,83,721/-. Being dissatisfied with the order of the CIT (Appeals), the Petitioner approached the ITAT. The ITAT, vide its order dated 30th November 2022, deleted the entire addition made on account of the transfer of TDR.
4. In the interregnum, the impugned notice dated 12th January 2021 under Section 148 was issued to the Petitioner. On 11th February 2021 the Petitioner, through its letter, requested Respondent No.1 to provide a copy of the reasons recorded. The reasons for reopening were accordingly furnished to the Petitioner on 28th June 2021. On 20th July 2021 the Petitioner filed its objections to the reasons recorded. Finally, the order disposing of the objections was passed on 2nd December 2021, a copy of which was provided to the Petitioner on 17th February 2022. It is in this light that the present Petition was filed by the Petitioner on 7th March 2022 challenging the notice issued under Section 148 as well as the order disposing of the objections.
5. From the record we find that the reasons recorded for reopening the assessment [for A.Y.2013-14] are from page 96 onwards. The first reason for reopening reads as under:-
“As pointed out in the above table there is clerical mistake in working of change in inventory which should be at Rs.14,62,97,393 instead of Rs.14,62,61,640/- which resulted into under assessment of income by Rs.35,752/- (Rs. 1,35,23,742 – Rs.1,34,87,990) (Rs.14,62,97,392 -Rs.13,27,73,650 = 1,35,23,742).”
6. As far as this reason is concerned, we find that the reasons for reopening the assessment appears to be some clerical mistake in the working of the change in inventory, and which according to the Assessing Officer, has resulted into as under assessment of Rs.35,752/-. As far as this reason is concerned, we find that as on date, the said reason does not survive for the simple reason that this entire addition has been deleted by the ITAT vide its order dated 30th November 2022 referred to by us above. This is not even disputed by the Revenue. We, therefore, find this reason today does not survive for reopening the assessment.
7. The second reason for reopening the assessment was that there were certain cash deposits that have been made during the year totaling to Rs.5,11,47,000/-. The Assessing Officer was of the view that according to the Assessee, cash deposits were made out of opening Cash in hand of Rs.5,74,72,858/- as per the cash book (which included additional income offered in the last assessment year). According to the Assessing Officer, from the cash book it was clear that it had been prepared to justify the expenditure of Rs.14,46,19,165/- and income earned of Rs.1,55,14,891/-. The Assessing Officer observed that neither any major amount was credited nor other amounts debited in the cash book. In light of these facts the Assessing Officer opined that to justify the expenses, the Assessee had made the said cash deposits in banks, out of his unexplained cash in hand of Rs.5,74,72,858/-, which were nothing but unexplained cash credits and deposits in the hands of the Assessee under Section 68 of the Act. For the sake of convenience the reason for reopening assessment on this ground by the Assessing Officer is reproduced hereunder:-
“2.2 Underassessment of Income: On perusal of the records, it is observed the following cash deposits have been made during the year in the Bank accounts maintained which are as under:
Kotak Mahindra BankRs.89,05,000 (17 April 2012 to 8 Dec 2012)
NKGSB BankRs.3,49,41,000 (7 April 2012 to 8 March 2013)
CIB detailsRs.73,00,000 (8 Sept 2012 to 8 March 2013)
TotalRs.5,11,47,000

 

In this respect, the assessee submitted that cash deposits were made out of opening Cash in hand of Rs.5,74,72,858 as per the cash book (which includes additional income offered in the last assessment year), it is clearly seen from the cash book, the cash book has been prepared to justify the expenditure of Rs.14,46,19,165/- and income earned of Rs.1,55,14,891/-. It is observed neither credited any major amount nor debited other amount to the cash book. In the light of these facts as such to justify the expenses the assessee has made the said cash deposits in the banks out of its unexplained cash in hand of Rs.5,74,72,858/- which are nothing but unexplained cash credit and taxable in the hands of assessee u/s 68 of the Act.”
8. As mentioned earlier, there was a scrutiny assessment in the case of the Petitioner which was undertaken by the Assessing Officer. In that scrutiny assessment, a specific query was raised [in the questionnaire] about the cash deposits that were made in each of the banks. In relation to each of these banks the Petitioner was asked to furnish the source of the cash deposit made as mentioned in the table of the questionnaire. In reply to this query, the Petitioner gave its explanation, and which can be found page 57 of the paper book. Against each of the entries mentioned in the questionnaire, an explanation was given, namely, that the amount deposited was out of the cash balance available in the cash book which was duly recorded in the books of accounts. Alongwith this explanation, the Petitioner also enclosed a copy of the cash book for the verification by the Assessing Officer. This exercise was done not only with reference to Kotak Mahindra Bank and NKGSB Bank, but also with reference to cash deposits as per the CIB details. After examining all this material, the Assessing Officer, being satisfied with the explanations furnished, did not make any addition in relation to the cash deposits in the scrutiny assessment proceedings under Section 143(3).
9. On perusing all this material, we fail to understand how the Assessing Officer has now come to the conclusion that there was any failure on the part of the Petitioner to disclose fully and truly all material facts in the original scrutiny proceedings. As mentioned earlier, in the original scrutiny proceedings, a specific query was raised by the Assessing Officer in relation to the cash deposits and a sufficient explanation was given in relation thereto. In fact, even the cash book was produced before the Assessing Officer (during the scrutiny proceedings) for verification. It is after examining the cash book, as well as the explanations given by the Petitioner, that the Assessing Officer chose not to make any addition in relation to these cash deposits. Once these are the facts, the Assessing Officer, in reassessment proceedings, could not have come to the conclusion that there was any failure on the part of the Petitioner to fully or truly disclose all facts in relation to the cash deposits. To our mind, the present case is nothing but a mere change of opinion on the part of the Assessing Officer to re-open the assessment for A.Y.2013-14. It is now too well settled that a mere change of opinion cannot be a ground for reopening the assessment.
10. In these circumstances, we find that the Petition succeeds and is allowed in terms of prayer clause (a) which reads thus:-
“(a)That this Hon’ble Court may be pleased to issue under Article 226 of the Constitution of India, an appropriate direction, order or a writ including a writ in the nature of ‘certioraris’ calling for the records of the case and after satisfying itself as the legality thereof quash the notice under section 148 of the Act issued by the Respondent No.1 dated 12.01.2021 being Exhibit-‘F’ and the order dated 02.12.2021 being Exhibit ‘N’ as bad in law.”
11. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.
12. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.