Reopening an assessment on a settled issue is an invalid “change of opinion”.
Issue
Can an Assessing Officer validly reopen a completed assessment under Section 148 of the Income-tax Act, 1961, to disallow a claim that was already examined and allowed during the original scrutiny, especially when the underlying legal issue has been decided in the assessee’s favour by the jurisdictional High Court in a prior year?
Facts
- An assessee, who was in the business of hiring out earth-moving equipment, claimed a higher depreciation rate of 30% on its tippers.
- In the original scrutiny assessment under Section 143(3), the Assessing Officer (AO) had examined this specific claim and allowed it.
- Sometime later, the AO issued a reopening notice under Section 148 seeking to disallow the very same claim. The AO’s new argument was that the 30% rate was not admissible because the assessee’s business was not eligible.
- The High Court, when the matter reached it, found multiple and serious flaws with the AO’s action to reopen the case:
- The specific issue of the 30% depreciation rate on tippers had already been decided in the assessee’s own favour by the same High Court in a previous assessment year, creating a binding precedent.
- The assessee had fully and truly disclosed all the material facts during the original assessment, so there was no failure on their part.
- The AO had no new tangible material to justify the reopening. The entire exercise was a “mere change of opinion” on the same set of facts.
- The High Court quashed the notice. The revenue department then filed a Special Leave Petition (SLP) before the Supreme Court.
Decision
The Supreme Court ruled in favour of the assessee by dismissing the revenue department’s SLP.
- The primary reason cited by the Supreme Court for the dismissal was the inordinate and unexplained delay of 244 days by the revenue in filing their appeal.
- This dismissal effectively brings the matter to a close and upholds the High Court’s detailed order, which had found the reopening to be an invalid exercise of power based on a mere “change of opinion.”
Key Takeways
- A “Change of Opinion” is Not a Valid Reason to Reopen: An AO cannot simply change their mind or take a different view on an issue that has already been considered and decided upon during the original assessment. To reopen a case, there must be new, tangible material that came to light after the original assessment was completed.
- A Binding Precedent Must Be Respected: An AO is bound by the decisions of the jurisdictional High Court, especially a decision in the assessee’s own case on the very same issue. Attempting to reopen an assessment in direct defiance of such a binding precedent is an invalid exercise of power.
- Full and True Disclosure is a Strong Shield: When a taxpayer has disclosed all material facts fully and truly during the original assessment, the AO’s power to reopen the case after the initial time limit is severely restricted. The reopening can then only be done if there is a failure on the part of the assessee to disclose, which was not the case here.
- The Government is Also Bound by Timelines: The Supreme Court’s dismissal of the case on the grounds of delay is a strong reminder that all litigants, including government departments, are expected to adhere to the statutory timelines for filing appeals.
SUPREME COURT OF INDIA
Assistant Commissioner of Income-tax
v.
P.C. Patel and Company
PAMIDIGHANTAM SRI NARASIMHA and ATUL S. CHANDURKAR, JJ.
SLP (CIVIL) Diary No(s). 39491 of 2025
SEPTEMBER 17, 2025
S. Dwarakanath, A.S.G., Ms. Madhulika Upadhyay, AOR, Yashraj Singh Bundela, Bhakti Vardhan Singh, Rajat Vaishnaw, Mudit Bansal and S. Vijay Adithvaa, Advs. for the Petitioner.
ORDER
1. Having heard the learned Additional Solicitor General, we see no reason to condone the inordinate delay of 244 days in filing the Special Leave Petition as the explanation sought to be provided, does not constitute sufficient cause.
2. Hence, petition(s) stands dismissed on the ground of delay.
3. Pending application(s), if any, shall stand disposed of.
S.N. Divatia for the Petitioner. Karan G. Sanghani for the Respondent.
JUDGMENT
Bhargav D. Karia, J. – Heard learned advocate Mr.S.N.Divatia for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr.Sanghani waives service of notice of rule on behalf of respondent.
3. Having regard to the controversy involved which is in a narrow compass, with the consent of learned advocates for the respective parties, the matter is taken up for final hearing.
4. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice issued under Section 148 of the Income Tax Act, 1961 (for short “the Act”) for reopening the assessment for the Assessment Year 2016-2017.
5. The brief facts of the case are that the petitioner which is a partnership firm is engaged in the business of hiring of Earth Moving equipment and Commercial Vehicles for providing excavators, dozor, graders, rock drill machines etc. with operators for excavation of overburden and minerals.
5.1. For the year under consideration, the assessee filed return of income on 15.09.2016 declaring total income at Rs.18,29,24,740/- which included the depreciation on tipper at the rate of 15% amounting to Rs.7,81,66,149/-.
5.2. The case of the petitioner was selected for scrutiny assessment and after considering the various details and evidence, the Assessing Officer completed regular assessment under Section 143(3) of the Act on 01.12.2018 by determining the total income of Rs.18,35,05,070/-. The petitioner thereafter received notice under Section 148 of the Act dated 30.06.2021 proposing to reassess its total income and consequent upon the order passed by the Hon’ble Supreme Court in case of Union of India v. Ashish Agarwal 183/444 ITR 1 , the notice under Section 148A(b) of the Act was issued on 23.05.2022.
5.3. By the aforesaid notice under Section 148A(b) dated 23.05.2022, the assessment was sought to be reopened on the basis of the information in possession with the Assessing Officer to the effect that the claim of higher depreciation on TipperPlant & Machinery was not admissible at 30% since the petitioner was in business of mining and not in business of motor lorries on hire and accordingly, the depreciation amounting to Rs.7,81,66,149/-was not allowable.
5.4. The petitioner in response to the aforesaid notice, submitted the reply on 03.06.2022 contending inter alia that the petitioner was not engaged into the business of mining but was engaged in the business of hiring the equipments and it was further stated that the nature of business has not changed since Assessment Year 2010-11.
5.5. The respondent however by order dated 30.07.2022 passed under Section 148A(d) of the Act held that the income of the depreciation of Rs.7,81,66,149/- has escaped assessment for the year under consideration by way of excess allowance of depreciation.
5.6. Being aggrieved, the petitioner has preferred this petition.
6. Learned advocate Mr.Divatia for the petitioner submitted that the respondent Assessing Officer while rejecting the objections raised by the petitioner has recorded that the disallowance was made on similar issues in past and the matter was carried in appeal in this Court wherein it was held in favour of the assessee however the SLP preferred by the Department was dismissed on the ground of delay, and therefore the respondent Assessing Officer has invoked the provision of Section 148 for reopening as the Hon’ble Supreme Court had not decided the case on merits.
6.1. It was further pointed out that during the course of regular assessment also, the assessee has submitted the details about the nature of business carried on by the petitioner as well as the details of the depreciation claimed at the rate of 30% and after considering the same, the order under Section 143(3) of the Act was passed.
7. On the other hand, learned Senior Standing Counsel Mr.Karan Sanghani for the respondent submitted that the claim of the petitioner for depreciation on tippers at the higher rate of 30% is not allowable as the petitioner is engaged in the business of mining and excavation of contractors and not in the business of running the tippers/ motor lorries on hire. It was submitted that the petitioner has not shown any income from the transportation exclusively during the year under consideration as reflected in the Profit & Loss account for the year ended on 31.03.2016 which substantiate the fact that the petitioner is not engaged in the business of running the tipper and motor lorries on hire. It was therefore submitted that claiming depreciation on tipper at the rate of 30% has not reached in finality as the decision of this Court in Pr. CIT v. Durga Construction Company [R/Tax Appeal Nos. 418, 420 and 421 of 2018, dated 1-5-2018], for the Assessment Years 2012-13, 2011-12 and 2013-14 dated 01.05.2018 was not accepted by the Revenue and against the same, SLP was filed before the Hon’ble Apex Court being Pr. CIT v. P. C. Patel & Co. [SLP (Civil) Diary No.48030 of 2018, dated 18-1-2019] and subsequently, the SLP was dismissed by the Hon’ble Supreme Court due to delay in filing without going into the merits of the case. It was therefore submitted that the impugned notice is issued so as to keep the issue alive while reconsidering the same during the course of reassessment.
8. Having heard learned advocates for the respective parties and considering the facts of the case, it is not in dispute that the issue with regard to the claiming of depreciation at the rate of 30% on tippers is already decided by this Court vide Judgment and Order dated 01.05.2018 rendered in the Tax Appeal referred to herein above. The said decision is binding upon the respondent Assessing Officer and therefore, the information in possession of the respondent Assessing Officer cannot be said to result in escapement of the income on the same facts of the petitioner. It is pertinent to note that the petitioner has already provided all the material information during the course of the regular assessment and after considering the same, the assessment order under Section 143(3) of the Act was passed.
9. In view of the above facts, when the issue which is sought to be kept alive is already decided by this Court, the respondent Assessing Officer cannot be said to have assumed the jurisdiction to reopen the assessment on the same facts which have achieved finality for disallowing the excess claim of the depreciation. Moreover, the petitioner has disclosed fully and truly all the material facts relevant for the assessment and there is no failure on the part of the petitioner for the same. The respondent Assessing Officer has also failed to point out any tangible material other than what is available on the record and as such the entire exercise of reopening is nothing but a change of opinion on the part of the Assessing Officer.
10. Considering the above facts and for the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notice dated 30.07.2022 issued under Section 148 of the Act is hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to cost.