PRIME ONE,CHENNAI vs. INCOME TAX OFFICER NON CORP. WARD 3(1) CHENNAI, CHENNAI

आयकरअपील�यअ�धकरण ’बी’ �यायपीठ,चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI �ी इंतूरी रामा राव लेखासद� एवं �ी मनु कुमार िग�र, �ाियक सद� BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER

आयकर अपील सं./ITA No. 1450/Chny/2026 �नधा�रण वष�/Assessment Year: 2014-15 Prime One, v. The Income Tax Officer, 6, SSM Corporate House, Dr. T.V. Non-Corporate Ward-3(1), Naidu Road, Chetpet, Channai, Chennai-600034 Tamil Nadu-600031 [PAN: AAJFP 3829 M] (अपीलाथ�/Appellant) (��यथ�/Assessee)

अपीलाथ� क ओर से/ Appellant by : Mr. G.S. Prashantha, Adv ��यथ� क ओर से /Respondent by : Mr. S. Sundar Rajan, CIT सुनवाई क तार�ख/Date of Hearing : 04.09.2026 घोषणा क तार�ख /Date of : 12.10.2026 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM:

The captioned appeal has been filed by the assessee against the order dated 30.01.2026 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], whereby the Ld. CIT(A) confirmed the assessment order dated 30.12.2019 passed u/s.143(3) r.w.s 147 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year (“AY”) 2014-15.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 2 :: 2. Brief facts of the case are that the assessee has challenged the validity of the reassessment proceedings initiated by the Assessing Officer under sections 147/148 of the Income tax Act, 1961 ("the Act") for Assessment Year 2014-15.The assessee had originally filed its return of income on 18.07.2014 declaring total income at Nil. The return was subjected to scrutiny assessment and an order under section 143(3) of the Act was passed on 30.06.2016, whereby the returned income was accepted.Subsequently, the Assessing Officer issued notice under section 148 dated 29.03.2019, proposing to reopen the assessment on the ground that income of Rs.28,07,30,000/- had allegedly escaped assessment on account of revaluation of the assessee's closing stock/land. The assessee filed its return in response to the notice and thereafter sought the reasons recorded for reopening. On receipt of the reasons, the assessee filed detailed objections dated 08.05.2019, specifically contending that the issue relating to revaluation of stock and its tax treatment had already been examined during the original scrutiny assessment.The Assessing Officer rejected the objections and proceeded with the reassessment proceedings. The assessee challenged the validity of the reopening before the learned CIT(A), but the learned CIT(A) rejected the challenge. Hence, the assessee is before us. 3. Assessee has raised the following grounds of appeal: 1. a) The orders of the authorities below in so far as these are against the Appellant are opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant's case.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 3 :: b) The Appellant demes its liability to the additions sustained by the learned CIT(A) as the same are unwarranted, contrary to the evidences on record and bad in law under the facts and circumstances of the case. 2. Grounds as regards to validity of reassessment proceedings: a) The learned CIT(A) failed to appreciate that the reasons recorded for issue of notice under section 148 of the Act are merely reasons to suspect & do not constitute reasons to believe as contemplated under the Act on the facts & circumstances of the case. b) The learned CIT(A) erred in upholding the assessment which is based solely on a mere change of opinion without any fresh tangible material and thus the orders of the authorities below are bad in law requires to be set aside on the facts of the case. c) The learned CIT(A) failed to appreciate that the notice issued under section 148 of the Act suffers from a material irregularity as the Assessing Officer failed to specify whether the income was sought to be "assessed" or "reassessed" and thus the order passed on such an invalid notice is liable to be set aside in the interest of equity and justice. d) The sanction as required under section 151 of the Act has not been obtained from the Commissioner of Income Tax before issue of notice under section 148 of the Act or having been obtained, the copy of the same has not been provided to the appellant on the facts of the case. 3. a) The learned CIT(A) erred in confirming the addition of Rs.28,07,30,000/- made by the Assessing Officer on account of increase in value of land upon revaluation by treating the same as business income of the appellant under the facts & circumstances of the case. b) The learned CIT(A) failed to appreciate that the revaluation of land was carried out only for the purpose of settling the accounts of the retiring partners at the time of reconstitution of the firm without giving rise to any real income in the hands of the appellant on the facts of the case. c) The learned CIT(A) erred in holding that the surplus arising on revaluation of land constituted business income under section 28 of the Act without appreciating that the appellant neither transferred nor sold the land during the year under the facts & circumstances of the case. 4. The learned CIT(A) failed to appreciate that the order of assessment is bad in law as the assessing officer completed the assessment proceedings without complying the directions issued by the Joint Commissioner under section 144A of the Act under the facts & circumstances of the case.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 4 :: 5. The learned CIT(A) failed to appreciate that the addition made in the hands of the appellant firm results in double taxation of the same income as the assessments of the retiring partners were also completed by making additions on account of the same revaluation of land on the facts of the case. 6. a) The appellant denies itself liable to be levied to interest under sections 234B of the Act, as the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. b) Without prejudice, the interest under sections 234B of the Act is not leviable and ought to have been waived on the facts of the case. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed in the interest of justice and equity.

3.1 The assessee has challenged the reassessment proceedings, inter alia, on the following grounds: "2. Grounds as regards validity of reassessment proceedings:

a) The learned CIT(A) failed to appreciate that the reasons recorded for issue of notice under section 148 of the Act are merely reasons to suspect & do not constitute reasons to believe as contemplated under the Act on the facts & circumstances of the case. b) The learned CIT(A) erred in upholding the assessment which is based solely on a mere change of opinion without any fresh tangible material and thus the orders of the authorities below are bad in law requires to be set aside on the facts of the case. c) The learned CIT(A) failed to appreciate that the notice issued under section 148 of the Act suffers from a material irregularity as the Assessing Officer failed to specify whether the income was sought to be "assessed" or "reassessed" and thus the order passed on such an invalid notice is liable to be set aside in the interest of equity and justice. d) The sanction as required under section 151 of the Act has not been obtained from the Commissioner of Income Tax before issue of notice under section 148 of the Act or having been obtained, the copy of the same has not been provided to the appellant on the facts of the case." Since Ground Nos. 2(a) and 2(b) go to the very jurisdiction of the Assessing Officer to reopen the assessment, we consider it appropriate to adjudicate these grounds first.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 5 :: 4. At outset, The ld.AR for the assessee has filed the following factual paper book as under:

Produced or Sl. Particulars Page No. available No. before

Copy of the return of income along with AO & 1 computation statement for the Assessment 1-2 CIT(A) Year 2014-15

Copy of financial Statements for the AO & 2 financial year 2013-14 relevant to 3-4 CIT(A) assessment year 2014-15

Copy of order passed under section 143(3) of the Income Tax Act, 1961 (the Act) AO & 3 5-8 dated 30.06.2016 for the assessment year CIT(A) 2014-15

Copy of the reply dated 20.06.2016 filed AO & 4 9-11 before the Assessing officer CIT(A)

Copy of the reply dated 21.06.2016 filed AO & 5 12 before the Assessing officer CIT(A)

Copy of notice issued under section 148 of AO & 6 13 the Act dated 29.03.2019 CIT(A)

Copy of the return of income filed in AO & 7 response to notice issued under section 14 CIT(A) 148 of the Act

Copy of reasons recorded for issuance of AO & 8 notice under section 148 of the Act dated 15 CIT(A) 30.04.2019

Copy of the objections filed by the Appellant on 08.05.2019 against the AO & 9 16-18 reasons recorded for issuance of notice CIT(A) under Section 148 of the Act.

Copy of letter dated 04.10.2019 issued by the learned assessing officer disposing the AO & 10 19-21 objections filed by the appellant for CIT(A) reopening the assessment

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 6 :: Produced or Sl. Particulars Page No. available No. before

Copy of notice under section 142(1) of the AO & 11 22-23 Act dated 22.11.2019 CIT(A)

Copy of reply dated 07.12.2019 filed in AO & 12 response to the notice issued under section 24-37 CIT(A) 142(1) of the Act

Copy of application under section 144A of the Act filed before the Joint Commissioner AO & 13 38-44 of Income Tax, Non-Corporate Range-3, CIT(A) Chennai on 12.12.2019

Copy of directions issued by the Joint AO & 14 Commissioner of Income Tax, Non- 45-46 CIT(A) Corporate Range-3, Chennai on 23.12.2019

Copy of order under section 154 of the Act AO & 15 passed by the learned assessing officer on 47-54 CIT(A) 21.01.2020

AO & 16 Copy of Partnership dated 12.03.2007 55-68 CIT(A)

Copy of deed of retirement dated AO & 17 69-74 01.11.2013 CIT(A)

Copy of Reconstituted Deed dated AO & 18 75-84 01.11.2013 CIT(A)

Copy of the Written Submission dated 19 85-98 CIT(A) 25.01.2022 filed before the CIT(A)

Copies of the assessment orders passed in the case of following retiring partners for 99-104 the assessment year 2014-15: 20 • Shri. Mahesh Jain AO 105-110 • Smt. Bhagyashree Jain 111-116 • Shri. Doutlat Jain

Certificate included at the bottom: Certificate: All the documents mentioned above are furnished or are available on the records of the authorities mentioned in column 4.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 7 :: 4.1 The ld.AR for the assessee also filed a case law paper book as under: Sr. Particulars Citation Authority Page No. Nos. 1 Kelvinator of India Ltd. vs. CIT 320 ITR 5561 Supreme Court 1-3 2 ITO vs. TechSpan India (P.) Ltd 404 ITR 10 Supreme Court 4-9 3 Mobis India Ltd vs. DCIT 450 ITR 60 Madras High Court 10-29 4 Schwing Stetter (India) (P.) 187 taxmann.com Madras High Court 30-34 Ltd. vs. NFAC 641 5 Aroni Chemicals Ltd vs. DCIT 362 ITR 403 Bombay High Court 35-50 6 PCIT vs. Salapuria Soft Zone 458 ITR 345 Calcutta High Court 51-60 7 DCIT vs. Paypal India (P.) Ltd 188 taxmann.com Chennai Trib. 61-69 309 8 Kizhakethil Prasad vs. ITO ITA NO. Cochin Trib. 70-76 272/Coch/2025 9 Sakthi Trading Co vs. CIT 250 ITR 871 Supreme Court 77-82 10 Sanjvee Woollen Mills vs. CIT 279 ITR 434 Supreme Court 83-91 11 Dynamic Enterprises vs. CIT 359 ITR 83 High Court of 92-101 Karnataka 12 G H Reddy & Associates vs. 409 ITR 514 Madra High Court 102-106 ACIT 13 PCIT vs. Orchid Girha Nirman 134 taxmann.com Calcutta High Court 107-113 (P.) Ltd. 281 14 ITO vs. M/s Fine Developers ITA Mumbai Trib. 114-151 5038/MUM/2012 15 ITO vs. Fine Developers 26 taxmann.com Mumbai Trib. 152-157 202 16 Well Pack Package vs. DCIT 130 taxmann.com Ahmedabad 158-163 215 Trib. 17 Mahul Construction Corporation 88 taxmann.com Mumbai Trib. 164-181 vs. ITO 181 18 Keshav & Company vs. ITO 76 taxmann.com Mumbai Trib. 182-195 18 19 M/s D S Corporation vs. ITO ITA 3526 & Mumbai Trib. 196-200 3527/MUM/2012

4.2 The ld.AR for the assessee contended that the assessee's return for AY 2014-15 was originally subjected to scrutiny. Notice under section 143(2) was issued on 18.09.2015. Thereafter, the Assessing Officer issued a notice under section 142(1) dated 14.06.2016, requiring the assessee to furnish various particulars. According to the assessee, during the course of the original assessment proceedings, the Assessing

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 8 :: Officer specifically required the assessee to explainthe basis of revaluation of the stock andthe manner in which such revaluation was required to be reckoned for tax purposes. 4.3 The assessee furnished detailed submissions dated 20.06.2016 (Page 9-11 of P.B.) and 21.06.2016(Page 12 of P.B.).The submission dated 20.06.2016 specifically dealt with the revaluation and stated, inter alia: "The basis of revaluation of the closing stock is arrived at for both the retirement and the incoming entity. Such revaluation has been reckoned based on the current market value of the said closing stock. As the above transaction is to pay out the outgoing partners and the entry of the new partner, these are primarily capital in nature. No tax implication will arise in the circumstances..." Thus, the issue of revaluation and tax treatment was not an issue which came into existence after the original assessment.It was specifically raised during the scrutiny proceedings and the assessee furnished its explanation.Thereafter, the Assessing Officer completed the assessment under section 143(3) on 30.06.2016, accepting the returned income at Nil. The assessment order u/s.143(3) dated 30.06.2016 (Page 5 of P.B.)records: "In response to the notices, firm's authorized representative Shri.Lalith Mehta complied with the notices by submitting the required documents and details through

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 9 :: mail. After due verification of the firm's Submission the assessment is completed u/s 143(3) accepting the Income Returned."

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 10 :: 6. The ld.AR for the assessee contended that the assessee specifically brought the aforesaid factual position to the notice of the Assessing Officer while filing its objections dated 08.05.2019 (Page 16-19 of P.B.) against the reasons recorded for reopening the assessment. It was specifically pointed out that, during the course of the original scrutiny assessment proceedings, the Assessing Officer had called upon the assessee to furnish the basis of revaluation of the closing stock and the manner in which such revaluation was to be treated for income tax purposes. In compliance with the said query, the assessee had furnished detailed submissions dated 20.06.2016 and 21.06.2016, wherein the basis of the revaluation, the circumstances in which the revaluation was undertaken on account of retirement of the existing partners and admission of the new partner, and the assessee's position regarding its taxability were specifically explained. The assessee further pointed out that, after considering the material and explanations furnished during the course of the scrutiny proceedings, the Assessing Officer completed the assessment under section 143(3) of the Act on 30.06.2016 (Page 5-8 of P.B.), accepting the returned income at Nil. Thus, according to the assessee, the issue of revaluation and its tax treatment was not a matter which had escaped the attention of the Assessing Officer or which came to the notice of the Department for the first time subsequent to the original assessment. On the contrary, the issue had been specifically

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 11 :: raised during the original assessment proceedings, examined in the context of the information and explanation furnished by the assessee, and the assessment was thereafter concluded without making any addition on this account. The assessee, therefore, contended that the subsequent reopening was founded upon the very same primary facts and material which were already available before and considered by the Assessing Officer at the time of the original assessment. According to the assessee, the Assessing Officer, while recording the reasons for reopening, had merely adopted a different view regarding the taxability of the revaluation surplus, without referring to any fresh tangible material coming into his possession subsequent to the completion of the original assessment. The assessee accordingly submitted that the reassessment proceedings constituted nothing but a mere change of opinion, which could not confer valid jurisdiction under section 147 of the Act. The assessee further relied upon the settled principle that the power of reassessment is a power to reassess and not to review an assessment already completed, and that a completed assessment cannot be reopened merely because the Assessing Officer subsequently forms a different opinion on the same set of facts and material. In this regard, reliance was placed upon the judgment of the Hon'ble Supreme Court in CIT v. Kelvinator of India Ltd., 320 ITR 561 (SC). The assessee also contended that where a specific query has been raised during the original assessment proceedings and the assessee has

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 12 :: furnished a specific response thereto, the mere absence of an elaborate discussion on the issue in the final assessment order would not justify reopening of the assessment on the same material. 7. The Hon’ble Supreme Court, in CIT v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC), while affirming the principle that the power of reassessment cannot be exercised as a power of review, has held as under: “However, one needs to give a schematic interpretation to the words ‘reason to believe’ failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of ‘mere change of opinion’, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and 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. One must treat the concept of ‘change of opinion’ as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is ‘tangible material’ to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.”

The aforesaid principle is directly applicable to the facts of the present case. The material placed on record demonstrates that the issue relating to the revaluation of the closing stock and its tax treatment was specifically raised during the original

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 13 :: scrutiny assessment proceedings. The Assessing Officer had called upon the assessee to explain the basis of such revaluation and the manner in which the same was to be considered for income tax purposes. The assessee, in response, furnished its detailed explanation dated 20.06.2016, followed by its further submission dated 21.06.2016. Thereafter, the assessment was completed under section 143(3) on 30.06.2016 accepting the returned income. It is, therefore, not a case where the relevant facts were merely embedded in the books of account and remained wholly unexamined by the Assessing Officer. The record establishes that the Assessing Officer had specifically raised a query on the very issue which subsequently constituted the basis for reopening, and the assessee had furnished a specific response thereto. The subsequent reasons recorded under section 148 do not refer to any new or fresh tangible material which came into the possession of the Assessing Officer after completion of the original assessment. The reasons merely proceed upon the same revaluation of land/stock, the same increase in value and the same accounting treatment which were already available on record during the original assessment proceedings. Thus, what has occurred in the present case is not the discovery of any new material indicating escapement of income, but a fresh examination and different interpretation of the very same material. The Assessing Officer has, in substance, sought to revisit the taxability of the revaluation surplus which had

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 14 :: already been specifically explained by the assessee during the original scrutiny assessment.Such an exercise falls squarely within the mischief sought to be prevented by the doctrine of change of opinion explained by the Hon’ble Supreme Court in Kelvinator of India Ltd. The power conferred by section 147 is undoubtedly a power to reassess escaped income, but it cannot be converted into a power to review an assessment merely because a subsequent Assessing Officer holds a different view on the same set of facts.The requirement of “tangible material” assumes particular significance in the present case. The reasons recorded must disclose some material, subsequent to the original assessment, which has a live and rational nexus with the formation of the belief that income has escaped assessment. In the absence of such material, a mere reappraisal of the existing record cannot constitute a valid reason to believe. 8. Per contra, the ld.DR relied upon the orders of the authorities below. The Revenue's principal argument is that although the assessee's books and submissions were before the Assessing Officer, the original assessment order does not contain any specific discussion or finding concerning the revaluation.We do not find this contention acceptable in the facts of the present case. The Bombay High Court in Aroni Commercials Ltd. v. DCIT, 362 ITR 403 (Bom.) has laid down an important principle in this regard. The Court held that once a specific query is raised during assessment proceedings and

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 15 :: the assessee responds to that query, it follows that the issue was a subject matter of consideration by the Assessing Officer while completing the assessment. The Court further held that it is not necessary for the assessment order to contain a specific discussion or reference to every such query. Hon’ble Bombay High Court held as under: 14. “ …………………………………………………………….. . We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. ……….. . “

The rationale is obvious. If every issue specifically examined during a scrutiny assessment could be reopened merely because the final assessment order did not contain a separate paragraph dealing with that issue, the protection against a change of opinion would become illusory. The Assessing Officer is not required to reproduce in the assessment order every

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 16 :: query raised by him and every answer furnished by the assessee. 9. Applying the aforesaid settled legal principles to the facts of the present case, we find substantial merit in the contention of the assessee that the reopening of the assessment was based merely on a change of opinion and not on any fresh tangible material coming into the possession of the Assessing Officer subsequent to the completion of the original assessment. The chronology of events, which emerges from the assessment records and the material placed before us, is particularly significant and may be summarized as below: First, the return of income filed by the assessee for Assessment Year 2014-15 was taken up for scrutiny and notice under section 143(2) of the Act was issued on 18.09.2015. Second, during the course of the scrutiny assessment proceedings, the Assessing Officer issued a notice under section 142(1) dated 14.06.2016 calling for various particulars and explanations from the assessee. Third, during the course of the said assessment proceedings, the Assessing Officer specifically required the assessee to furnish the basis of revaluation of the closing stock and the manner in which such revaluation was required to be reckoned for incometax purposes. Thus, the issue which subsequently became the very foundation of the reassessment proceedings was not an issue which remained outside the knowledge or consideration of the Assessing Officer.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 17 :: Fourth, in response to the specific query raised by the Assessing Officer, the assessee furnished detailed submissions dated 20.06.2016 and 21.06.2016 (as seen from the paper book referred supra). In particular, the assessee explained that the revaluation was undertaken in the context of retirement of the existing partners and admission of the incoming partner and also specifically stated its position regarding the tax implications of such revaluation. The assessee had, therefore, not merely produced its books of account, but had furnished a specific explanation concerning the very issue which has subsequently been made the subject matter of reassessment. Fifth, after obtaining the aforesaid information and explanation from the assessee, the Assessing Officer completed the original assessment under section 143(3) of the Act on 30.06.2016. Sixth, while completing the original scrutiny assessment, the Assessing Officer accepted the returned income of the assessee at Nil. The assessment order itself records that the authorised representative had complied with the notices by furnishing the required documents and details and that, after due verification of the submissions, the assessment was completed under section 143(3) accepting the returned income. Seventh, subsequently, after a lapse of nearly three years, the Assessing Officer issued notice under section 148 dated 29.03.2019. The reasons recorded for reopening proceeded upon the very same transaction of revaluation of the closing stock. The Assessing Officer noticed that the closing stock had been revalued from Rs.11,54,48,519/- to Rs.40,37,37,831/-

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 18 :: and took the view that the resulting difference of Rs.28,07,30,000/- represented business profit which ought to have been offered to tax. Eighth, significantly, the reasons recorded do not refer to any fresh fact, new information, subsequent discovery, third-party material, investigation report or any other tangible material which came into the possession of the Assessing Officer after the completion of the original assessment. The entire basis of the reassessment is the same revaluation, the same accounting treatment and the same underlying transaction which were already available before the Assessing Officer during the original scrutiny assessment.In the case of M/s.TANMAC India Vs Deputy Commissioner of Income Tax [Tax Case (Appeal) No.1426 of 2007 dated 19.12.2016], the Hon’ble jurisdictional High Court has answered the following substantial question of law in favour of the assessee as below: 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Assessing Officer is justified in reopening the assessment by issuance of notice under section 148 of the Act when no new material was unearthed justifying the re-opening of the assessment?

The aforesaid sequence assumes considerable importance when tested against the law laid down by the Hon'ble Supreme Court in CIT v. Kelvinator of India Ltd., 320 ITR 561 (SC) (supra). The power under section 147 is a power to reassess and not a power to review. Once an issue has been specifically examined during the original scrutiny assessment, the Assessing Officer cannot subsequently reopen the assessment merely because he forms a different opinion regarding the

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 19 :: taxability of that very issue. There must be some tangible material, subsequent to the original assessment, which provides the foundation for the belief that income has escaped assessment.In the present case, no such subsequent tangible material has been identified either in the reasons recorded or in the orders of the authorities below.On the contrary, the reasons recorded demonstrate that the Assessing Officer has merely revisited the same material and drawn a different conclusion regarding its taxability. In substance, therefore, what is sought to be done is not reassessment on the basis of newly discovered material, but a review of the conclusion which had already been accepted in the original scrutiny assessment. 10. We are conscious of the fact that the original assessment order does not contain an elaborate discussion specifically dealing with the revaluation of stock. However, in our considered view, the absence of a detailed discussion in the final assessment order cannot, in the peculiar facts of the present case, be determinative of the question whether the issue was considered during the original assessment proceedings. The assessment record demonstrates that the Assessing Officer had specifically raised a query concerning the revaluation and its tax treatment and that the assessee had furnished a specific response thereto. Thereafter, the assessment was completed under section 143(3).Thus, the present case is materially different from a case where the assessee had merely produced its books of account and other

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 20 :: records without the particular issue ever being raised or examined by the Assessing Officer. The principle laid down by the Bombay High Court in Aroni Commercials Ltd. v. DCIT, 362 ITR 403 (Bom.), is also apposite. Where a specific query is raised by the Assessing Officer during the assessment proceedings and the assessee furnishes a response thereto, the issue becomes a subject matter of consideration in the original assessment. The mere fact that the assessment order does not contain a detailed discussion of the issue does not, by itself, justify reopening the assessment on the very same material. Therefore, the Revenue cannot overcome the bar of change of opinion merely by pointing out that the original assessment order is silent on the issue. What is relevant is the course of the assessment proceedings as reflected from the assessment records, and not merely the language employed in the final assessment order.In the present case, the record establishes that the Assessing Officer had before him all the relevant facts concerning the revaluation. More importantly, he had specifically called upon the assessee to explain the basis and tax treatment thereof. The assessee had furnished its explanation. After considering the material placed before him, the Assessing Officer completed the scrutiny assessment under section 143(3) without making any addition on this account. The subsequent Assessing Officer, while reopening the assessment, has not brought on record any material which was not available at the time of the original assessment. The

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 21 :: reasons recorded merely reflect a different understanding of the tax consequences of the same transaction. In these circumstances, the subsequent formation of a different opinion regarding the taxability of the revaluation surplus cannot constitute a valid reason to believe that income had escaped assessment. To permit such reopening would effectively allow the Assessing Officer to review his predecessor's assessment on the same material, which is impermissible in law. We, therefore, hold that the live link between fresh tangible material and the alleged escapement of income, which is a necessary jurisdictional requirement for valid reopening, is conspicuously absent in the present case. The reassessment proceedings are accordingly found to be founded upon a mere change of opinion. Such a change of opinion cannot confer jurisdiction under section 147 of the Act. Accordingly, respectfully following the ratio laid down by the Hon'ble Supreme Court in Kelvinator of India Ltd. (supra) and the principle enunciated in Aroni Commercials Ltd. (supra), we hold that the notice issued under section 148 dated 29.03.2019 is without valid jurisdiction and the reassessment proceedings initiated pursuant thereto are liable to be quashed. Consequently, the assessment order passed pursuant to the impugned notice under section 148 cannot be sustained in law. The addition of Rs.28,07,30,000/-, having been made in the reassessment proceedings so initiated, consequently does not survive.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 22 :: 11. We have also examined the recorded reasons independently from the subsequent reassessment order.The reasons do not state that after completion of the original assessment the Assessing Officer received any new information concerning the revaluation, the partners' accounts, the nature of the land, the accounting treatment, the retirement of partners, the admission of the new partner or the tax treatment adopted by the assessee. The entire basis of the reasons was already contained in the books and records of the assessee. Indeed, the reasons themselves proceed upon the very transaction which had been specifically explained to the Assessing Officer during the original scrutiny assessment.Therefore, this is not a case where new tangible material led to a reassessment of an issue which had earlier escaped the attention of the Assessing Officer.It is a case where the same material has subsequently been interpreted differently. 12. The ld.CIT(A) placed considerable emphasis on the fact that the original assessment order does not contain a discussion about the revaluation.We find that this approach is legally unsustainable in the facts of the case.The question before us is not whether the original assessment order contains an elaborate discussion. The relevant question is: Was the issue placed before the Assessing Officer during the original assessment proceedings and did the assessee furnish an explanation in response to a specific query?

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 23 ::

The answer is clearly in the affirmative. The judicial principle in Aroni Commercials(supra) squarely addresses this situation. A specific query followed by a specific reply is sufficient to establish that the matter was considered in the assessment proceedings; the absence of an elaborate discussion in the final assessment order does not permit the Revenue to reopen the issue on the same material. 13. The CIT(A) also relied upon Explanation 1 to section 147.We find that the reliance is misplaced.Explanation 1 operates in a situation where production of books or other evidence from which material evidence could have been discovered with due diligence does not necessarily amount to disclosure of all material facts.The present case stands on a materially different footing.The assessee is not relying merely upon the production of books.The assessee relies upon the fact that the Assessing Officer specifically asked about the revaluation and its tax treatment, and the assessee specifically answered that query.Therefore, the Revenue cannot reduce the entire original scrutiny exercise to a mere mechanical production of books.The subsequent reopening is founded on a matter which had been specifically brought to the Assessing Officer's attention and explained by the assessee.

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 24 :: 14. The Assessing Officer/CIT(A) referred to decisions including CIT v. P.V.S. Beedies (P.) Ltd., 237 ITR 13 (SC) and CIT v. First Leasing Co. of India Ltd. for the proposition that reassessment can be made where information subsequently becomes available or where a factual/legal error is noticed. There can be no quarrel with the general proposition that reassessment is permissible where valid statutory conditions are satisfied. However, those authorities do not authorize reopening of an assessment merely because the subsequent Assessing Officer forms a different opinion on material which had already been specifically examined during the original scrutiny. The present case must be tested against the later and binding formulation of the Supreme Court in Kelvinator, namely, whether there is tangible material giving rise to a reason to believe and whether the reopening is anything other than a mere change of opinion. On the facts before us, there is no such fresh tangible material. 15. It is also settled that the validity of reassessment must be tested on the basis of the reasons recorded at the time of initiation. The Revenue cannot improve upon the recorded reasons by subsequently relying upon facts or arguments which do not form part of the reasons themselves. In the present case, the recorded reasons themselves demonstrate that the Assessing Officer was proceeding on the basis of the revaluation reflected in the assessee's books. There is no reference to any fresh material. Consequently, the

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 25 :: jurisdictional defect cannot be cured by the subsequent reassessment order or by the findings of the CIT(A). 16. The assessee has also challenged the sanction under section 151.The notice under section 148 is dated 29.03.2019 and the original assessment was completed under section 143(3).Since the present order can be disposed of on the substantive jurisdictional ground of change of opinion, it is not necessary for us to conclusively adjudicate the factual question regarding the sanction under section 151, particularly because the sanction document itself has not been placed before us in the material presently examined. However, we make it clear that the Revenue is required to demonstrate compliance with the statutory sanction requirement applicable on the date on which the notice under section 148 was issued.We therefore do not base our ultimate decision upon Ground 2(d). 17. Having held that the notice under section 148 itself was issued pursuant to an impermissible change of opinion, the reassessment proceedings are without valid jurisdiction. Once the reassessment is quashed, the consequential assessment made pursuant thereto cannot survive. Accordingly, we hold that the Assessing Officer did not validly assume jurisdiction under section 147 of the Act. The notice issued under section 148 dated 29.03.2019 is therefore held to be invalid, having been issued on the basis of a mere change of opinion on an issue which had already been specifically examined during the

ITA No. 1450/Chny/2026 (AY 2014-15) Prime One Vs. ITO NCW 3(1) Chennai :: 26 :: original scrutiny assessment. The reassessment proceedings initiated pursuant to the said notice are accordingly quashed. Since the reassessment itself is quashed, other grounds challenging the legality and merits of the addition, including the grounds relating to revaluation of stock-in-trade, Section 144A and alleged double taxation, are therefore rendered academic and require no separate adjudication. 18. In the result, the appeal filed by the assessee is allowed. Order Pronounced in the open Court on the 12th day of October, 2026 in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER चे�नई/Chennai, +दनांक/Dated: 12th October 2026. SANDEE Digitally signed by SNDP, Sr. PS SANDEEP KUMAR आदेश क ��त,ल-प अ.े-षत/Copy to: P KUMAR Date: 2026.10.14 1. अपीलाथ�/Appellant 12:08:18 +05'30' 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF