SHIKHA KEDIA,HYDERABAD vs. ITO, WARD-4(1), HYDERABAD

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ITA 178/HYD/2026Status: DisposedITAT Hyderabad07 August 2026AY 2017-1824 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was invalid as it was based on a change of opinion, reviewing the same facts and material already considered during the original scrutiny assessment. Furthermore, the Tribunal noted discrepancies in the approval dates and the date of dispatch of the notice under section 148, indicating procedural irregularities.

What were the facts?

The assessee's assessment was reopened based on an increase in the capital account balance, which the Assessing Officer considered an unexplained cash credit. The assessee argued that the reopening was based on a change of opinion, as the original assessment had accepted explanations for cash deposits, which would naturally increase capital. The notice under section 148 was also allegedly not received by the assessee.

What were the issues?

Whether the reopening of assessment under Section 147/148 was valid when based on a change of opinion and without new material. Whether procedural irregularities in obtaining approval and issuing notice invalidate the reassessment proceedings.

Which sections of the Income-tax Act were involved?

Section 148,Section 143(3),Section 151,Section 148A,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO

Pronounced: 07.08.2026

आदेश / ORDER

This appeal by the assessee is directed against the order dated 30.09.2025 of the learned CIT(A)-National

Faceless Appeal Centre [in short "NFAC"], Delhi, for the

assessment year 2017-2018.

2.

The Assessee has raised the following grounds of

appeal:

1) “The order of the Appellate Commissioner is contrary to law, facts and circumstances of the case. 2) The Appellate Commissioner erred in confirming the issue of the notice u/s.148 , which is contrary to the facts and needs to be quashed. 3) The Appellate Commissioner, erred in confirming the issue of notice u/s.148, by the A.O, which was based on change of opinion based on the same facts, which were available on the record, and not on any fresh incriminating facts. 4) The Appellate Commissioner, erred in confirming the order based on a notice issued u/s.148, which was never received by the Assessee and as such the Assessment reopening is bad in law. 5) The Appellate Commissioner, erred in not quashing the Assessment, on the ground that the notice u/s.143 (2) issued on 13.11.2021 was never received by the Assessee. 6) Without prejudice to the above grounds.

7) The Appellate Commissioner erred in confirming the addition of an amount of Rs.37,36,996/-. 8) Any other grounds which the assessee may urge either before OR at the time during the hearing.”

3.

In ground nos.1 to 4, the assessee has challenged the validity of the reopening of the assessment by issuing notice under section 148 of the Act for want to any new facts, record or information.

4.

The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has recorded the reasons for reopening of the assessment on 25.03.2021 placed at pages 3 and 4 of the paper book wherein the Assessing Officer has stated that the original return of income filed by the assessee was subjected to scrutiny assessment under section 143(3) vide assessment order dated 26.12.2019. He has pointed out that the return of income filed by the assessee under section 139 of the Act was selected for scrutiny and the issue of deposit in the bank account of the assessee which was duly explained during the assessment proceedings by filing the documentary evidence and confirmation of the parties from whom the assessee received gift. Thus, the source of the said cash deposit in the bank account was accepted by the Assessing Officer after considering the confirmation letters filed by the assessee. The learned Authorised Representative of the Assessee has further submitted that in the reasons recorded for reopening of the assessment by the Assessing Officer, has not referred any new fact or material coming to his knowledge after assessment order but based on the same facts and record and audited books of accounts and particularly, profit and loss account and balance sheet, the Assessing Officer proposed to assess the income escape assessment on account of increase in the closing balance of capital account. Thus, the learned Authorised Representative of the Assessee submitted that the reopening is not valid as it is based on change of opinion. Further, the learned Authorised Representative of the Assessee has submitted that the reasons were recorded by the Assessing Officer on 25.03.2021 whereas the Assessing Officer has referred to the sanction obtained under section 151 of the Act dated 29.03.2021 which shows that subsequent sanction obtained by the Assessing Officer is referred to in the reasons recorded on 25.03.2021. He has also referred to the communication dated 29.03.2021 from the O/o. Additional Commissioner granting sanction under section 151 of the Act and then, referring to the approval granted by the ACIT under section 151 of the Act dated 30.03.2021. This also shows that communication was made on the earlier date whereas the sanction was of the subsequent date. Thus, the learned Authorised Representative of the Assessee has submitted that reopening of the assessment is not valid as the reasons recorded by the Assessing Officer are contradictory to the sanction granted by the Authority. Further, there is no new material or information, but the assessment has been reopened based on the audit objection as stated by the Assessing Officer in the reasons recorded. The fact of increase in the closing balance of the capital account is part of the books of account and particularly the balance sheet. Further when the assessee has explained the source of the said cash deposit as gift received from the persons which would naturally increase the capital balance of the assessee. He has further submitted that even the notice under section 148 of the Act was not issued prior to 01.04.2021 but it was issued as sent by the Assessing Officer on 06.04.2021 as apparent from the envelope through which the notice was sent by the Assessing Officer. Copy of the envelope is placed at page 7 of the paper book. Thus, the learned Authorised Representative of the Assessee has submitted that when the notice was issued on or after 01.04.2021 then, the provisions of section 148A ought to have been followed. He has thus contended that the reopening of the assessment is not valid and liable to be quashed.

5.

On the other hand, the learned DR has submitted that in the original assessment only issue of deposit in the bank account was taken up for scrutiny and the issue of increase in the closing balance of capital was not at all taken up by the Assessing Officer. He has thus submitted that when the Assessing Officer has not expressed any view on this issue then, the reopening of the assessment on the issue of increase in the closing balance of the capital cannot be said to be on the basis of change of opinion. He has referred to the finding of the learned CIT(A) in para 5.3.1 of the impugned order and submitted that the discrepancies in the date of recording reasons and approval under section 151 of the Act are only typographical error and would not affect the validity of the reopening of the assessment. The learned DR has further contended that the source of deposit in the bank account and increase in the closing balance of the capital account is not necessarily the same. Therefore, the reopening is valid as per the provisions of secs.147 and 148 of the Act. He has relied upon the orders of the authorities below. 6. I have considered the rival submissions as well as relevant material on record. The assessee is an individual and engaged in the business under the name and style of M/s. Sanjana Traders. The assessee filed her return of income for the year under consideration on 06.11.2017 declaring total income of Rs.3,54,300/-. The case of the assessee was selected for scrutiny under CASS with the reasons that cash was deposited during the demonetization period. The assessment proceedings u/sec.143(3) were completed on 26.12.2019 wherein the income was assessed at Rs.4,02,100/-. Thereafter the Assessing Officer has reopened the assessment by recording the reasons placed at pages 3 and 4 of the paper book as under:

6.1. In para-2 of the reasons, the Assessing Officer has stated that on verification of the ITR filed by the assessee for the assessment year 2016-2017, it is observed that the capital account balance shown at Rs.12,33,973/- however the closing balance of the capital account for the year under consideration is shown at Rs.49,70,967/- and in para 5 of the reasons, the Assessing Officer has stated that the assessee has failed to explain the source and genuineness of the increase of the capital amounting of Rs.33,83,696/- the same has to be treated as unexplained cash credit. There is no dispute that the Assessing Officer has observed all these facts from the ITR for the assessment years 2016-2017 and 2017-2018 which was subjected to scrutiny assessment on the issue of cash deposit in the bank account and assessee in the scrutiny assessment produced the explanation that the assessee has received the gifts from various persons and confirmations of the same were filed before the Assessing Officer during the scrutiny assessment. The copy of those confirmations are placed at Page nos.8 to 13 of the paper book as under:

6.2. Thus, the assessee has explained total amount of Rs.40,32,000/- as gift received from these persons as source of deposit in the bank account. Since, it was a gift therefore, in the books of accounts the treatment of these gift would inevitably increase the capital balance of the assessee and hence, once the Assessing Officer accepted the source of the said amount of more than Rs.40 lakhs as gift received by the assessee then, the increase in the capital account of the assessee is also got explained by the said amount itself. Further in para 6 of the reasons recorded, the Assessing Officer has made reference to the audit objection dated 22.07.2020 which also corroborates that the reopening is based on the audit objection on the issue of source of increase in the capital of the assessee already explained by the assessee during the scrutiny assessment and accepted by the Assessing Officer and hence, the same documents which were accepted by the Assessing Officer in the scrutiny assessment cannot be questioned for the purpose of reopening of the assessment. In the absence of any fresh material or any fact brought on record to establish that the record filed by the assessee is either bogus or not admissible as source of the said amount deposited in the bank account of the assessee, the reopening is not permitted for review of the earlier decision of the Assessing Officer. Thus, it is clear that the reopening of the assessment based on the same facts and material already available with the Assessing Officer in the scrutiny assessment is not permissible being changed of opinion on the same set of facts and material. The Hon’ble Supreme Court in the case of CIT vs. Kelvinator India 320 ITR 561 (SC) while dealing with the issue arising from the Full Bench Judgement of Hon’ble Delhi High Court reported in 256 ITR 1 (Del.) (HC) has held in para 6 as under:

“6. We must also keep in mind “the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But, re-assessment has to be based on fulfilment of certain pre- condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re- opening the assessment, review would take place. 6.3. Thus, the Hon’ble Supreme Court has observed that the Assessing Officer has no power to review though he has power to re-assess but re-assessment has to be based on fulfillment of the conditions prescribed under section 147/148 of the Act. It was further observed that if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. The concept of change of opinion must be treated as an in-built test to check the abuse of power by the Assessing Officer. In the case in hand, as it is manifest from the record and particularly from the reasons recorded by the Assessing Officer that no new facts or material came to the knowledge of the Assessing Officer after completion of the scrutiny assessment under section 143(3) of the Act to form a belief that the income assessable to tax has escaped assessment. Thus, the reopening is nothing but change of opinion for reviewing and reanalyzing the same facts and evidence already available with the Assessing Officer at the time of passing the scrutiny assessment. The reopening of the assessment for re- examination of the very same material on the basis of which the original assessment order was passed is not permissible and therefore, the same is invalid and liable to be quashed.

Accordingly, the reopening of the assessment by issuing notice under section 148 of the Act dated 30.03.2021 is set aside being invalid. 6.4. Apart from no sufficient reasons and change of opinion it is also pertinent to note that the reasons were recorded by the Assessing Officer on 25.03.2021 whereas the approval was granted by the JCIT on 30.03.2021 placed at page-6 of the paper book as under:

Thus, there is a contradiction about the approval taken by the Assessing Officer as referred to in the reasons recorded prior to the approval. Further the notice u./sec148 was sent by the Assessing Officer through speed post and a copy of the envelope of the speed post is placed at page 7 of the paper book shows that the first postal stamp on the said envelope is dated 06.04.2021 and all other stamps are subsequent to the said date which clearly shows that the notice was sent through speed post on 06.04.2021. Thus, all these facts as evident from the record including the reasons recorded, approval under section 151 of the Act and notice sent through speed post shows that the proceedings conducted were not in accordance with the provisions of 148A of the Act when the notice was sent by the Assessing Officer through speed post on 06.04.2021. Further without going into this issue, once the reasons itself show that reopening is based on change of opinion, the same is not sustainable.

6.5. Even on the merits, when the assessee has explained before the Assessing Officer during re-assessment proceeding that the source of increase in the capital account is the gift received by the assessee and confirmations were already filed by the assessee during the original scrutiny assessment which were accepted by the Assessing Officer, then, the Assessing Officer cannot re-examine and re-verify the evidence which was already examined and accepted by the Assessing Officer in the scrutiny assessment. The Assessing Officer has given the details of the gift received in para-5 of the assessment order as under:

6.6. Thus, when the assessee explained the source of the increase in the closing balance of the capital account as the amount received as gift which was already subjected to verification and examination during the scrutiny assessment then, the same cannot be rejected in re-assessment proceedings in the absence of any contrary material or fact brought on record. Hence, even on the merits, the addition made by the Assessing Officer is not sustainable and liable to be deleted.

7.

In the result appeal of the assessee is allowed.

Order pronounced in the open court on 07.08.2026.

Sd/- VIJAY PAL RAO VICE PRESIDENT Hyderabad, Dated 07th day of August, 2026 VBP Copy to: SHIKHA KEDIA, FLAT NO. 109, HIMA APARTMENTS, 3- 1 4-130, BAGH LINGAMPALLY, HYDERABAD. PIN -500020, TELANGANA 2 ITO, WARD-4(1), INCOME TAX TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500004, TELANGANA 3 THE PR. CIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD SMC-BENCH, HYDERABAD. 5 GUARD FILE VADREV TRUE COPY Digitally signed by VADREVU U PRASADA RAO ASSISTANT REGISTRAR / PRASAD Date: I.T.A.T., HYDERABAD 2026.08.07 A RAO 11:30:29 +05'30'

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