Reassessment Based on “Change of Opinion” Without New Tangible Material Held Invalid

By | May 22, 2025
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Reassessment Based on “Change of Opinion” Without New Tangible Material Held Invalid

Issue: Whether a reassessment notice issued after four years from the end of the relevant assessment year, based on information already available to the Assessing Officer (AO) during the original assessment proceedings (completed under Section 143(3)), amounts to a mere “change of opinion” and thus invalidates the reassessment proceedings.

Facts:

  • For the assessment year 2013-14, the assessee, an importer and refiner of edible oil, filed its return of income.
  • This return was accepted, and the assessment was completed under Section 143(3) (scrutiny assessment).
  • After more than four years, a reopening notice was issued against the assessee under Section 148.
  • The ground for reopening was information received from the DDIT(I), Panipat, indicating that a search action at the premises of one ‘H’ revealed that the assessee had dealings with dummy concerns and was a beneficiary of accommodation entries provided by ‘H’.
  • However, during the original assessment proceedings under Section 143(3), the assessee had already provided all necessary details, and the Assessing Officer, being satisfied with the information, had framed the assessment.

Decision: The Assessing Officer could not have assumed jurisdiction to issue the reopening notice, and therefore, the impugned reopening notice and the proceedings pursuant thereto could not be sustained. The decision was in favor of the assessee.

Key Takeaways:

  • No Reassessment on “Change of Opinion” (After 4 Years): After the expiry of four years from the end of the relevant assessment year, a reassessment can only be initiated if there is “failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.”1 If the original assessment was a scrutiny assessment under Section 143(3) and all relevant information was provided, the AO cannot reopen the assessment merely on a “change of opinion” based on the same facts.
  • Tangible Material is Essential: For reopening beyond four years, the AO must have new, tangible information that was not available or considered during the original assessment and that points to escapement of income due to the assessee’s failure to disclose material facts.
  • Original Scrutiny Assessment Matters: When an assessment is completed under Section 143(3), it is presumed that the AO has applied his mind to the facts and information presented. A subsequent reopening based on information that was already implicitly or explicitly examined during the original assessment is generally impermissible.
  • Invalid Jurisdiction: If the fundamental jurisdictional condition for reopening (i.e., new information and failure to disclose) is not met, the entire reassessment proceeding is invalid from the outset.
  • Distinction from Information Not Available: This ruling is distinct from cases where genuinely new and relevant information comes to light after the original assessment, which might justify reopening. Here, the information was essentially available or could have been gleaned during the original, thorough assessment.
HIGH COURT OF GUJARAT
Adani Wilmar Ltd.
v.
Assistant Commissioner of Income-tax Circle 1 (1)(1)
BHARGAV D. KARIA and D.N. Ray, JJ.
R/SPECIAL CIVIL APPLICATION NO. 2432 of 2021
MARCH  11, 2025
B.S. Soparkar, Adv. for the Petitioner. Ms. Maithili D. Mehta, Adv. for the Respondent.
JUDGMENT
Bhargav D. Karia, J. – Heard learned advocate Mr. B. S. Soparkar for the petitioner and learned advocate Ms. Maithili Mehta for the respondent.
2. Rule returnable forthwith. Learned advocate Ms. Maithili Mehta waives service of notice of Rule for the respondent.
3. By these petitions, the petitioner has challenged the notice dated 24.03.2020 issued under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) by the respondent – Assessing Officer seeking to reopen the completed assessment for the Assessment Year 2013-13 as well as order dated 30.12.2020 disposing off the objections raised by the petitioner against reopening the assessment.
4. The brief facts of the case are that the petitioner is a limited company and is one of the importers and refiners of edible oil in India. Petitioner filed its return of income for the Assessment Year 2013-2014 on 28.11.2013 declaring total income at Rs. Nil and paid tax of Rs. 25,43,81,347/- on Book Profit under section 115JB of the Act calculated at Rs.127,14,14,059/-.
5. The case of the petitioner was selected for scrutiny and the assessment order under section 143(3) of the Act was passed on 21.12.2016 determining the total income under MAT at Rs.134,86,55,336/-.
6. Respondent thereafter issued the impugned notice under section 148 of the Act dated 24.03.2020 reopening the Assessment for the Assessment Year 2013-2014. The respondent also supplied the reasons for reopening of the assessment.
7. The petitioner assessee raised various objections on merits and requested the respondent to drop the reassessment proceedings vide letter dated 10.12.2020.
8. Respondent vide order dated 30.12.2020 disposed off the objections.
9. Being aggrieved, the petitioner has preferred this petition.
10. Learned advocate Mr. B. S. Soparkar for the petitioner submitted that the impugned notice as well as the impugned order disposing off the objections are bad, illegal and contrary to law inasmuch as the reasons recorded are based on non application of mind and upon the borrowed satisfaction by the respondent. It was submitted that there is only one reason recorded to believe that income has escaped assessment i.e. information is received from DDIT (Inv.), Panipat that in a search action conducted on 23.05.2017 at the premises of one Hitesh Jain, it is found that there are 39 dummy concerns that did not exist on the address provided and while scrutinising the Bank statements of these entities, it was found that the petitioner had dealings with three of such concerns, based upon which the respondent has concluded that the petitioner is one of the beneficiaries of accommodation provided by Mr. Hitesh Jain and such benefit is received by the petitioner to the extent of Rs.1,92,57,338/-.
11. It was submitted that the reasons recorded does not reflect any independent application of mind on the part of the respondent inasmuch as the respondent has merely reproduced the information as received by it from the DDIT(Inv.) Panipat without applying his own independent mind as to the nature of information and how it affects the petitioner’s income disclosed and assessed for AY 2013-2014. It was further submitted that the information received is cryptic and the reasons recorded are not clear and in fact the reasons state that the respondent has assumed that the information received is self-explanatory and no further inquiry is required and therefore, the respondent has acted solely on the basis of letter from the DDIT(Inv) without any independent inquiry or belief and therefore, the mandatory requirement of section 147 of the Act of the Assessing Officer having to apply his own mind to record the reasons is not satisfied. In support of his submission reliance was placed on the following decisions:
1)In case of National Construction Co. reported in (Gujarat)
2)In case of Shodiman Investments (P.) Ltd reported inBombay).
12. It was further submitted that merely having a reason to believe that income had escaped assessment is not sufficient to reopen an assessment beyond the period of four years and the escapement of income must also be occasioned by a failure on part of the petitioner to disclose fully and truly all material facts. It was submitted that in the present case, there is no failure on part of the petitioner to disclose fully and truly any material fact inasmuch as the transactions are through banking channels and therefore, the respondent had no jurisdiction to issue the impugned notice under section 148 of the Act.
13. Learned advocate Mr. Soparkar submitted that the reasons recorded ex-facie demonstrate that the reopening proceeding is initiated for a fishing and roving inquiry which is not permissible in law inasmuch as the petitioner provided all the necessary details vide replies dated 15.12.2016 and 20.12.2016 and the respondent being satisfied with the information supplied by the petitioner framed the assessment under section 143(3) of the Act.
14. It was further submitted that reasons recorded must be germane, prudent and should disclose prima facie belief that income has escaped assessment and when the reasons do not show any nexus or connection with the allegation of under assessment, they fall in the realm of suspicion, surmises and conjectures. It was further submitted that the reasons to believe must have a rational connection and should be relevant for the formation of a belief regarding escapement of income and should not be extraneous or irrelevant, otherwise they will be considered as invalid since they do not meet the statutory preconditions/ prerequisites. In support of such submission reliance was placed on the following decisions:
1)In case of CIT v. Orient Craft Ltd. reported iN (Delhi) 2) In case of G.S. Engg. & Construction Corpn. v. Dy. CIT (international Taxation) reported in
15. It was further submitted that respondent is trying to exercise the power to reassess without providing any tangible material on record and there is no live link with the formation of belief and material on record and therefore, the word “reason to believe” in the reasons recorded does not confer unfettered power to respondent to initiate the reassessment proceedings.
16. It was submitted that the assessee company has filed Nil return under normal provisions and paid tax on book profit computed under MAT provision and it was found that after making proposed addition to income, assessee would still be governed by the provisions of section 115JB and be assessed on same book profit. Therefore, there would be no excess tax liability under the MAT provision and therefore, there is no income that has escaped assessment and reassessment proceeding could not have been initiated. In support o such submission, reliance was placed on the decision in case of Motto Tiles (P) Ltd. reported in
17. On the other hand, learned Assistant Government Pleader Ms. Maithili D. Mehta for the respondent submitted that the petition is filed at a premature stage inasmuch as only notice under section 148 read with section 147 of the Act has been issued and in the event the petitioner is aggrieved by the reassessment, alternative efficacious remedy is available by way of an appeal before the CIT (Appeals) and thereafter before the Tribunal.
18. It was submitted that information was received in relation to income chargeable to tax having escaped assessment and therefore, said information was verified in detail and it was noticed that the income in assessee’s case chargeable to tax for the year under consideration has escaped assessment and therefore, notice was issued under section 148 of the Act.
19. It was submitted that notice under section 148 of the Act was issued after following the due procedure mandated in the Act and all the statutory requirements as per the Act have been followed prior to issuance of notice. It was submitted that the Assessing Officer has recorded his reasons in writing after due application of mind and formed an independent opinion and also necessary approvals of the competent authority were also taken before such reopening proceedings.
20. It was submitted that the Assessing Officer based on new tangible material after independent application of mind observed that income chargeable to tax aggregating to Rs.1,92,57,338/- has escaped assessment. It was noticed that the assessee had entered into transaction of Rs,. 1,92,57,338/- during Financial Year 2013-2014 with M/s. Anurag Enterprises, M/s. Shree Shiva Agro Traders and M/s. Anupam Anurag Enterprises which were managed and controlled by Shri Hitesh Jain for providing accommodation entries. It was further submitted that said Hitesh Jain had deposed in his statement recorded on 23.03.2015 that he is engaged in the business of providing accommodation entry through his bogus entities and as per the bank statements of above concerns, it was clear that the assessee company had entered into transactions with shell/paper concerns controlled by Shri Hitesh Jain.
21. It was further submitted that the information of tax evasion was unearthed only after search and seizure action and post search investigation done by DDIT(Inv.) Panipat. It was submitted that though during the course of assessment proceedings, the assessee did submit Profit and Loss account, balance sheet and other details, the fact that the transactions were not genuine and only paper entries came to the knowledge of Assessing officer for the first time upon verification of seized documents. It was therefore, submitted that such transactions were not disclosed by the assessee at the original assessment stage and therefore, reopening of the assessment is not misconceived or baseless.
22. It was submitted that the contention of the assessee that reopening has been initiated after expiry of four years from the end of relevant year even though there is no failure on part of the assessee is not tenable inasmuch as during the original assessment proceedings, no specific details were called for in respect of the transactions entered with M/s. Anurag Enterprises, M/s. Shree Shiva Agro Traders and M/.s Anupam Anurag Enterprises. Moreover since the assessee itself never disclosed anything about the nature of transaction and kept this fact hidden from the department to evade tax implications on the said transactions and therefore, there is clear failure on part of the assessee to disclose fully and truly all necessary material. It was therefore, submitted that no interference may be made by the Court at this stage.
23. Having considering the submissions and material placed on record and considering the reasons recorded, it appears that the assessee has paid taxes under section 115JB of the Act in the return of income and has shown book profit under section 115JB of the Act for Rs.127,14,14,059/-. Even the Assessing Officer has assessed total income in the case of assessee as per the provision of section 115JB at Rs. 134,86,55,336/-. Furthermore, the petitioner was asked specific questions regarding cash credit received as well as sundry creditors along with Name, PAN, address, Copy of ITR and their confirmations. The petitioner had provided all the necessary details vide replies dated 15.12.2016 and 20.12.2016. The respondent thereafter being satisfied with the information supplied by the petitioner framed assessment under section 143(3) of the Act. The Assessing Officer therefore, could not have assumed the jurisdiction to issue impugned notice under section 148 of the Act and the impugned notice and the proceedings pursuant thereto cannot be sustained.
24. This Court in the case of very same assessee for the Assessment Years 20142015 to 2016-2017 in similar facts, vide order dated 03.09.2024 in Special Civil Application No. 19015 of 2021 and other allied matters held as under:
“[7] Having considering the submissions and material placed on record and considering the reasons recorded, it is apparent that the petitioner was assessed under the provisions of Section 115JB of the Act and has paid tax at the rate of 7.5% under the said section. Adding the amount calculated by the Assessing Officer towards the escaped income to the amounted computed under the ordinary provisions of the Act, the aggregate amount would be less than the amount of tax paid by the petitioner on being assessed under Section 115JB of the Act. Therefore, when the tax payable, as per the reasons recorded, is less than the amount paid by the petitioner under the assessment framed under Section 143(3) of the Act, the question of any income having assessed would not arise. Therefore, the reasons recorded itself would indicate that in fact no income has escaped assessment to form such belief. In such circumstances, the basic precondition for reopening of the assessment under Section 147 of the Act that the Assessing Officer should have “reason to believe” that income has escaped assessment is not satisfied. The Assessing Officer, therefore, could not have assumed the jurisdiction to issue impugned notices under Section 148 of the Act and the impugned notices and the proceedings pursuant thereto cannot be sustained.
[8] For the foregoing reasons, these petitions succeed and are accordingly allowed. The impugned notices dated 30th March 2021 / 31st March 2021 issued under Section 148 of the Act as well as all the proceedings pursuant thereto are hereby quashed and set aside. Rule is made absolute accordingly with no order as to cost.”
25. In view of above decision of this Court passed in the case of the assessee as well as considering the facts of the present case, this petition succeeds and is accordingly allowed. The impugned notice dated 24.03.2020 issued under Section 148 of the Act as well as the impugned order dated 30.12.2020 disposing off the objections raised by the petitioner against the notice of reopening the assessment are hereby quashed and set aside. Rule is made absolute accordingly with no order as to cost.