M/S. KHURANA CONSTRUCTIONSASS vs. ASSISTANT COMMI. OF INCOME TAX and ANR

The petitioner seeks quashing of the notice dated 26.03.2013 issued under Section 148 of the Income Tax Act, 1961 (hereinafter, ‘the Act’). The notice seeks to reopen the assessment for the assessment (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:58 AM) [2026:RJ-JD:48915-DB] (2 of 9) [CW-198/2014] year 2006-07. The petitioner also assails the order dated 04.12.2013, which rejected its objections to the reopening. The challenge rests on two grounds. The reassessment is barred by limitation. It is also founded on a mere change of opinion.

The issues arising in both the above titled petitions are substantially similar. They have, therefore, been heard together. They are being decided by this common order.

For the sake of brevity, the facts are taken from D.B. Civil Writ Petition No. 198/2014, titled M/s. Khurana Constructions v. Assistant Commissioner of Income Tax.

The petitioner is a partnership firm. It carries on the business of civil construction. Its assessment for the assessment year 2006-07 was completed under Section 143(3) of the Act by order dated 24.12.2008.

During those assessment proceedings, the Assessing Officer specifically raised a query. He asked the petitioner to explain the difference between the contract receipts shown in its profit and loss account and those appearing in the TDS certificates. The petitioner furnished its explanation by letter dated 06.11.2008. The assessment was then completed.

Over four years later, reasons were recorded in a satisfaction note dated 14.03.2013 (Annexure-4). On that basis, the notice dated 26.03.2013 was issued under Section 148 of the Act. The petitioner raised objections. The respondent rejected them by order/letter dated 04.12.2013. The reassessment was sought to be continued on the same material.

Hence, this writ petition.

The respondents have filed a reply. They state that the proceedings under Sections 147 and 148 of the Act were initiated by the (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:58 AM) [2026:RJ-JD:48915-DB] (3 of 9) [CW-198/2014] competent authority. Reasons to believe were duly recorded. The action is in accordance with law. The reasons were communicated to the petitioner. The Assessing Officer acted within his jurisdiction. According to the respondents, the petitioner has shown no illegality or lack of jurisdiction. They further contend that a reassessment notice cannot ordinarily be challenged in writ jurisdiction when the statutory remedy under the Act has not been exhausted.

The respondents further submit that the reopening followed a verification of the contractual receipts in the TDS certificates as against those in the profit and loss account. As per the TDS certificates, the receipts were Rs.30,48,68,411/-. The petitioner disclosed Rs.28,85,97,728/- in its profit and loss account. The difference was Rs.1,62,70,683/-. The respondents say this discrepancy furnished a valid basis for the belief that income had escaped assessment. They add that the petitioner did not show the retention money as receivables in its balance sheet. The Department, therefore, had no means to verify whether the amounts claimed to be received in later years were in fact received and offered to tax. The respondents maintain that the reasons rest on material on record. They are not founded on suspicion, conjecture or non existent grounds.

The respondents also contend that the petitioner has an alternative statutory remedy under Sections 246 and 246A of the Act. It ought to have participated in the reassessment proceedings. If aggrieved by the assessment order, it could then have appealed to the Commissioner of Income Tax (Appeals).

Learned counsel for the petitioner argues that the very assumption of jurisdiction under Sections 147 and 148 of the Act is bad in law. The notice is barred by limitation. The assessment year 2006-07 (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:58 AM) [2026:RJ-JD:48915-DB] (4 of 9) [CW-198/2014] ended on 31.03.2007. The notice was issued beyond the period of four years prescribed by the first proviso to Section 147 of the Act. The extended period is not available to the Assessing Officer. The petitioner had disclosed all material facts during the original assessment under Section 143(3) of the Act. There was no failure on its part to disclose fully and truly all material facts necessary for the assessment.

Learned counsel further submits that the Assessing Officer had specifically sought an explanation on the very difference in receipts during the original assessment. The petitioner duly furnished it. The Assessing Officer considered it, found no infirmity and completed the assessment on 24.12.2008. Explanation 1 to Section 147 of the Act is, therefore, not attracted. The discrepancy was examined in terms. The relevant details, including Form 26AS, were already before the Assessing Officer. Reopening on the same material is nothing but a change of opinion.

It is further urged that the reopening rests on a non existent basis. The differential receipts had not accrued as income during the relevant year under the mercantile system of accounting. The Assessing Officer also erred in recording that interest income of Rs.2,32,686/- received from Sardar Sarovar Narmada Nigam Ltd. was not disclosed in the profit and loss account. That amount had in fact been taken into account while computing the income of the petitioner. There was, thus, no valid reason to believe that income had escaped assessment.

Lastly, learned counsel submits that the order dated 04.12.2013 rejecting the objections is arbitrary. It violates Articles 14 and 265 of the Constitution of India. He relies on the judgment of this Court in (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:58 AM) [2026:RJ-JD:48915-DB] (5 of 9) [CW-198/2014] Ashok Kumar v. Joint Commissioner1. He submits that there is no fresh material and the reopening is beyond limitation. The notice and the proceedings founded on it, therefore, deserve to be set aside.

Per contra, learned counsel for the respondents opposes the petition on the lines of the reply. He submits that the reopening rests on the discrepancy between the receipts in the TDS certificates and those in the profit and loss account. The notice is valid and within jurisdiction. Any grievance can be raised in the statutory appeal.

In the aforesaid backdrop, we have heard learned counsel for the parties and perused the case file.

Two questions arise. The first is whether the notice is within limitation. The second is whether the reopening rests on fresh material or is a mere change of opinion.

Before we examine them, it is apposite to notice Section 147 of the Act as it stood at the relevant time. Its relevant part reads as under. “147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year : 1Ashok Kumar v. Joint Commissioner, judgment dated 01.05.2026 in D.B. Civil Writ Petition No. 8724/2026, rendered by this Court. (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:58 AM) [2026:RJ-JD:48915-DB] (6 of 9) [CW-198/2014] * * * Explanation 1. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.”

A perusal of the statutory provision, ibid, reveals that its scheme is plain. The power to reopen arises only when the Assessing Officer has reason to believe that income has escaped assessment. Where the original assessment was made under Section 143(3) of the Act, the first proviso imposes a further condition. After four years from the end of the relevant assessment year, the assessment can be reopened only if the escapement is due to a failure of the assessee. The failure must be to file a return, or to disclose fully and truly all material facts necessary for the assessment. Both conditions must be met. If either is absent, the Assessing Officer has no jurisdiction.

We first take up limitation. The assessment year 2006-07 ended on 31.03.2007. The period of four years from its end expired on 31.03.2011. The assessment year 2007-08 ended on 31.03.2008. The period of four years from its end expired on 31.03.2012. The impugned notice was issued on 26.03.2013. For both years, therefore, it is concededly beyond four years. Since the original assessment was made under Section 143(3) of the Act, the first proviso squarely applies. The notice could survive only if the respondents showed a failure of the petitioner to disclose fully and truly all material facts.

No such failure is shown. The difference between the receipts in the books and those in the TDS certificates was the very issue raised by the Assessing Officer in the original proceedings. The petitioner answered it by letter dated 06.11.2008. The assessment was completed thereafter. The fact was thus not hidden in the books. It was specifically (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:59 AM) [2026:RJ-JD:48915-DB] (7 of 9) [CW-198/2014] put to the petitioner and specifically answered. Explanation 1 does not help the respondents either. It covers a case where the material fact lies buried in books or evidence and could be discovered only with due diligence. Here, the Assessing Officer had not merely the books but a direct query and a direct answer on the very point. The reply of the respondents does not point to any material fact that was withheld. The extended period is, therefore, not available. On this ground alone, the notice is without jurisdiction.

We now turn to the second question. We have perused the reasons recorded in the satisfaction note dated 14.03.2013 (Annexure- 4). They are not based on any fresh material. They rest on the material that was already before the Assessing Officer when he passed the original assessment orders. The respondents, in their reply, also rely only on the same discrepancy in receipts.

It is a firmly settled position of law that the power under Section 147 of the Act cannot be exercised on a mere change of opinion. Reassessment is not a second innings for the Assessing Officer. It is not a means to reconsider or reappraise evidence that was already before him. If he formed an opinion on an issue during the original assessment, whether expressly or by necessary implication, he cannot reopen the assessment on the same facts. That would be nothing more than a change of opinion. It is not a valid ground to invoke Section 147 of the Act.

The Hon’ble Supreme Court settled this position in Commissioner of Income Tax v. Kelvinator of India Ltd.

Section 147 of the Act was substituted with effect from 01.04.1989. The earlier conditions for reopening, namely an omission or failure of the assessee or information 2(2010) 320 ITR 561 (SC), (2010) 2 SCC 723 (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:59 AM) [2026:RJ-JD:48915-DB] (8 of 9) [CW-198/2014] in the possession of the Assessing Officer, were then dropped. The power now turns only on reason to believe. The Supreme Court cautioned that this power is not a power to review. It held that the concept of change of opinion survives as an in built test against abuse of the power. The Assessing Officer must have tangible material to conclude that income has escaped assessment. A mere re examination of the same facts cannot justify reopening.

Other High Courts have also consistently followed this principle. The Delhi High Court in Commissioner of Income Tax v. Eicher Ltd.3 held that where the original assessment was completed after due application of mind to the material on record, a reassessment notice on the same material is impermissible. The Gujarat High Court in Praful Chunilal Patel v. M.J. Makwana4 held that reopening on information already available during the original assessment amounts to a change of opinion and is liable to be quashed. We are in respectful agreement with both views and need add nothing more.

Applying these principles, the conclusion is inescapable. The Assessing Officer raised the precise question during the original assessment. He received an answer. He accepted it and completed the assessment. His successor has now taken a different view on the same material. That is a classic change of opinion. It does not furnish reason to believe that income has escaped assessment.

In view of aforesaid findings, we need not examine the further plea regarding the interest income of Rs.2,32,686/-. The objection of alternative remedy also does not detain us. The challenge here goes to the very jurisdiction of the Assessing Officer. A notice that is barred by 3(2007) 294 ITR 310 (Del) 4(1999) 236 ITR 832 (Guj) (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:59 AM) [2026:RJ-JD:48915-DB] (9 of 9) [CW-198/2014] limitation and founded on a change of opinion is without jurisdiction. The petitioner cannot be compelled to undergo such proceedings only to challenge them later in appeal.

To sum up, it was not open to the subsequent Assessing Officer to reopen the assessment for the reasons that (a) for want of fresh material and (b) because the proceedings were barred by limitation.

The writ petitions are accordingly allowed. The notice dated 26.03.2013 issued under Section 148 of the Income Tax Act, 1961 and the proceedings initiated pursuant thereto are set aside, with consequences to follow.

All pending applications stand disposed of. (YOGENDRA KUMAR PUROHIT),J (ARUN MONGA),J 64-65/K.P. Singh Dewasi Powered by TCPDF (www.tcpdf.org) (Uploaded on 16/10/2026 at 04:26:16 PM) (Downloaded on 28/10/2026 at 12:44:59 AM)