Reopening Assessment Without New Tangible Material Amounts

Reopening Assessment Without New Tangible Material Amounts To Invalid Change Of Opinion

Issue

Whether reopening an assessment under Section 147 based on an Investigation Wing report is legally sustainable when no new tangible material was discovered and the original assessment under Section 143(3) had already evaluated the relevant income.

Facts

Original Assessment: The assessee’s return for Assessment Year 2013-14 was selected for scrutiny, and an assessment under Section 143(3) was completed after the Assessing Officer (AO) examined dividend and interest income.
Reopening Notice: The AO subsequently initiated reassessment proceedings under Section 147 based on information received from the Investigation Wing regarding bank credits and total sale/gross receipts.
AO’s Finding: Based on the investigation report, the AO formed an opinion that a certain amount constituted unexplained income for the year under Section 69A.
Assessee’s Challenge: The reopening was challenged on the ground that it was based on the same existing material without any new tangible evidence, amounting to a mere change of opinion.

Decision

Absence of New Material: In favor of Assessee. The Revenue failed to demonstrate that the Investigation Wing’s report was based on any new tangible material that was not already in the possession of the AO during the original Section 143(3) assessment.
Impermissible Change of Opinion: In favor of Assessee. Reopening the assessment on the same facts without fresh material constitutes a mere change of opinion, which is legally impermissible.
Quashing of Reopening Notice: In favor of Assessee. The reassessment proceedings and the impugned notice issued under Section 147 were set aside and quashed.

Key Takeaways

Requirement of Tangible Material: Reassessment under Section 147 requires fresh, tangible, and external material coming into the possession of the AO post the original assessment.
Bar on Change of Opinion: Where an issue has been examined during original scrutiny proceedings u/s 143(3), tax authorities cannot re-examine the same facts merely by adopting a different view.
Investigation Wing Reports Not Absolute: A routine report or information from the Investigation Wing cannot justify reopening an assessment unless it reveals new facts not previously available on record.

HIGH COURT OF GUJARAT

Mahendra Gumanmalji Lodha

Assistant Commissioner of Income-tax

A.S. Supehia and Vaibhavi D. Nanavati, JJ.

R/SPECIAL CIVIL APPLICATION NO. 22608 of 2019

JULY 31, 2026

Tushar Himani, Sr. Adv. and Ms Vaibhavi K Parikh for the Petitioner. Dev D Patel for the Respondent.

ORDER

A.S. Supehia, J.- Learned Senior Advocate, Mr.Tushar Himani, at the outset, has submitted that the reopening of the assessment in the case of the present petitioner is done for the Assessment Year (for short ‘A.Y.’) 2013-14 (the subject matter of the present petition) and 2014-15, however, so far as the reopening of the assessment for A.Y. 2014-15 is concerned, he has tendered the order dated 29.03.2024 passed under Section 147 read with Section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) and has submitted that total income of the assessee remained the same and hence, it is urged that the impugned notice as well as the order may be quashed and set aside. Moreover, he has pointed out that in the original assessment proceedings initiated under the provision of Section 143(2) of the Act is culminated into the scrutiny assessment order under Section 143(3) of the Act, dated 29.01.2016. All the aspects relating to the dividend as well as the earned interest income was considered and accordingly, the assessment order was passed. It is submitted that so far as the Mahendra Gumanmal Lodha (HUF) is concerned, it had challenged the reopening of the assessment for the A.Y. 201415, which has been set aside by this Court vide order dated 21.07.2026 passed in Special Civil Application No.22636 of 2019/Mahendra Gumanmalji Lodha HUF v. Asstt. CIT (Gujarat). Thus, it is urged that the present writ petition may be allowed by setting aside the notice dated 29.03.2019.

2. In response to the foregoing submissions, learned Senior Standing Counsel, Mr.Dev D. Patel has submitted that since the new information was received by the Investigation Wing and there are sufficient reasons to conclude that the income more than Rs.1 lakh escaped assessment, the reopening of the assessment for the A.Y.2013-14 was undertaken under the provisions of Section 147 of the Act. It is submitted that there is ample material which would point out that the income chargeable to tax has escaped assessment. Thus, it is urged that the petition may not be entertained.

3. The facts which are established from the pleadings are that for the A.Y. 2013-14, the income tax returns filed by the petitioner were undertaken under scrutiny assessment under Section 143(3) of the Act and accordingly, the assessment order was passed therein on 29.01.2016. The said assessment order has been passed after considering all the relevant material relating to the earned net interest income of Rs.2,03,59,901/- and after examining the profit and loss account and the debit of an amount of Rs.26,82,419/- as expenses including an amount of Rs.24,43,488/- as finance charges (interest) was examined and the scrutiny assessment order was passed.

4. By the impugned notice, the petitioner was again called upon to explain the amount credited in his bank account aggregated to Rs.1,01,59,07,691/- and also the total sale/gross receipts for the year under consideration which is Rs.1,02,65,196/-. The respondent in light of the investigation report opined that Rs.98,86,61,322/- was required to be treated as unexplained income in the hands of the petitioner for the year under consideration. Accordingly, the impugned notice has been issued.

5. The petitioner objected the same reiterating that all the aspects were already undertaken in the assessment. It is not the case of the respondent that the Investigation Wing has formed its opinion upon any new tangible material, which was not in the possession of the Assessing Officer, who passed the order dated 29.01.2016 under Section 143(3) of the Act. The petitioner’s case was selected for scrutiny assessment. All the bank statements including the bank account in question were already submitted by the petitioner when examined in the scrutiny assessment and ultimately, the same has been accepted.

6. Under the circumstances, we are of the opinion that the reopening is nothing but a change of opinion. Additionally, we have also noticed that for the A.Y. 2014-15, the Assessing Officer while passing the order under Section 147 read with Section 143(3) of the Act, has not made any additions and the income of the assessee has been determined as the same. Hence, as a settled legal precedent, the impugned notice dated 29.03.2019 is quashed and set aside. The present writ petition succeeds.