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Facts
The revenue filed an appeal against the order of the CIT(A) which had quashed the reassessment proceedings initiated under section 147 of the Income-tax Act, 1961. The original assessment was completed under section 143(3) of the Act. The reassessment was initiated based on an audit objection, which the assessee contended was a mere change of opinion without new tangible material.
Held
The Tribunal held that the reassessment proceedings were initiated solely on the basis of a change of opinion, without any new tangible material. The CIT(A) had rightly relied on judicial precedents to quash the reassessment proceedings as invalid. Therefore, the notice issued under section 148/148A and the subsequent reassessment proceedings were held to be invalid and quashed.
Key Issues
Whether the reassessment proceedings initiated based on an audit objection, without new tangible material, are valid when based on a change of opinion?
Sections Cited
147, 143(3), 148, 148A, 35D, 250, 151
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKAR
DCIT vs Kotak Mahindra Bank Limited 552, 5TH Floor Aaykar Bhavan, C-27, G Block 27 BKC, Bandra (E) M.K. Road, Mumbai-400020 S.O. Mumbai-400051 PAN : AAACK4409J APPELLANT RESPONDENT Assessee by : Shri Madhur Agrawal a/w Shri Bhargav Parekh Respondent by : Shri Ritesh Misra (CIT DR) Date of hearing : 08/01/2026 Date of pronouncement : 29/01/2026 O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the revenue filed against the order of the NFAC, Delhi [for brevity, ‘Ld.CIT(A)’] order passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act) for the Assessment Year 2018-19, date of order 06/05/2025. The impugned order emanated from the order of the Learned Assessment Unit, Income-tax Department (for brevity, ‘the Ld.AO’) order passed u/s 147 r.w.s. 144B of the Act, date of order 25/03/2024.
Kotak Mahindra Bank Limited 2. The revenue has taken following grounds:
1. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in holding that reopening is not sustainable due to lack of new tangible material, whereas the reassessment was initiated on the basis of information and inference based on revenue audit objection which constituted valid reasons to believe under section 147 of the Act?
2. "Whether on the facts and circumstances of the case and in law, Ld. CITA) has erred in relying upon the decisions of the Hon'ble Bombay High Court in GKN Sinter Metals Ltd. v. ACIT (371 ITR 225) and ICICI Home Finance Ltd ACIT (25 taxmann.com 241), and the Hon'ble Supreme Court in ACIT ICICI Securities Primary Dealership Ltd. (24 taxmann.com 310) without distinguishing them on facts. The present case involved a tangible mistake in interpretation/application of law and not a case of mere change of opinion? 3. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) failed to appreciate that an issue made to Qualified Institutional Buyers (QIBs) under Chapter VI of the SEBI ICDR Regulations does not constitute a public issue or subscription by the public at large, and therefore, expenses incurred in connection therewith are not eligible for amortization under section 35D of the Act?" 4 "The appellant craves the leave to add amend, alter and/ or delete any of the grounds of appeal as above.
The Ld. DR argued and stated that the order passed by the Ld. CIT(A) without considering the proper fact of the case. The Ld. CIT(A) erred in rejecting the jurisdiction of the Ld. AO for reopening U/s 148 of the Act for absence on new tangible material. He stands in favor of the order of the Ld. Ld. AO.
The Ld. AR argued and filed a paper book containing pages 1 to 238, which was taken on record. At the outset, the Ld. AR advanced submissions challenging the reopening under section 148 of the Act on the ground that it was based solely on a mere change of opinion and in the absence of any new tangible material. He invited our attention to pages 157 to 160 of the Assessee’s Paper Book (APB),
Kotak Mahindra Bank Limited wherein copies of the return of income for A.Y. 2018-19 along with the computation of income are annexed. From the computation, it was pointed out that the assessee had claimed deduction under section 35D of the Act in respect of expenses incurred on the QIB issue during F.Y. 2013-14, being the fifth year of the eligible claim. The case was selected for scrutiny, and a notice under section 142(1) of the Act dated 01.12.2020 was issued to the assessee. In query No. 9 of the said notice, the assessee was specifically required to justify the deduction claimed under the head “any other deduction” in Schedule BP of the return. The relevant query No. 9 of the said notice is reproduced below: “9. Please justify Large "any Other deduction" claimed in Schedule BP of return filed by you: With respect to Other deduction claimed in Schedule BP of return, kindly provide the following details: i) Please furnish detail of other deduction claimed in schedule BP of the ITR along with documentary evidence to support your claim. ii) Please state if the above item has been shown under any other head of income.”
The assessee had complied the said query by the letter dated 23.12.2020 bearing No. KMBL/KS/12810/2020. The reply of the assessee is contended in point no.6 which is reproduced as below: “Point No 6- Deduction u/s 35D IngVysya Bank (which was merged with Kotak Bank with effect from 01.04.2015) during the AY 2014-15 had come out with a Private placement issue popularly known as "Qualified Institutional Placement" (QIP) issue wherein 3,00,00,000 shares were issued @ Rs.10 plus a premium of Rs.602/- to various Investors /Institutions. The total proceeds mobilized were Rs.1806 cr. The proceeds were mainly utilized for making Investments in acquiring loans given to agriculture sector and weaker sections in accordance with RBI regulations to meet the Priority sector lending targets set by RBI. The assessee made these investments by investing in Pass
Kotak Mahindra Bank Limited Through certificates (PTC) in Trusts, which acquired these loans. The investment in PTC as on 31.3.2014 was Rs.1412 cr which was made out of QIP. The remaining funds were used for general lending purposes. Following statistical figures clearly suggest that lending unit has significantly increased their operations with the help of QIP proceeds and due to such expansion, it is eligible for deduction u/s 35D.
Particulars FY 2012-13 FY 2013-14 Increase Total Advances 31,777.03 crores 35,828.85 crores 4,056 crores Based on above the bank has claimed Rs.2,00,80,346/- u/sec. 35D being 20% of the total QIP issue expenses incurred in A.Y. 2014-15 of the Act in A.Y. 2018-19.”
The Ld. AR further stated that without any tangible material the reopening was made only on the basis of change of opinion. It is further observed that the said notice U/s 148 was issued beyond the three years from the relevant assessment year which was duly approved by the Ld. PCIT. The said notice was issued under section 148A on 25.04.2022. The Ld. AR contended that the impugned notice was duly invalid considering the order of Hon'ble Bombay High Court in the case of Vodafone Idea Limited vs DCIT and Others (2024) 468 ITR 346 (Bom) the relevant para 3 and 4 are reproduced as below: “3. The impugned order and the impugned notice both dated April 7, 2022 state that the authority that has accorded the sanction is the Principal Commissioner of Income-tax, MumbaI 5. The matter pertains to assessment year ("AY") 2018-19 and since the impugned order as well as the notice are issued on April 7, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the Principal Chief Commissioner of Income-tax as provided under section 151 (ii) of the Act. The proviso to section 151 has been inserted only with effect from April 1, 2023 and, therefore, shall not be applicable to the matter at hand.
Kotak Mahindra Bank Limited 4. In these circumstances, as held by this court in Siemens Financial Services Pvt. Ltd. v. Deputy CIT the sanction is invalid and consequently, the impugned order and impugned notice both dated April 7, 2022 under sections 148A(d) and 148 of the Act are hereby quashed and set aside.”
The Ld. AR advanced his argument on basis of the legal issue for reasons recorded by the Ld. AO on basis of mere change of opinion. The issue is squarely dealt by the Ld. CIT(A) and the observations of the Ld. CIT(A) in para no.7.1 to 7.3 which is reproduced as below: “7.1 I have perused the facts of the case and the submission filed by the appellant. In this case, original assessment u/s 143(3) of the Act was completed on 23.04.2021. I find from the reasons recorded by the AO, the case of the appellant was reopened u/s 147 on the basis of audit objection. The appellant has contended that there is no new material, based on which the reopening of the assessment is done. Considering the decisions of Hon'ble Jurisdictional Bombay High Court in the case of GKN Sinter Metals Ltd s. ACIT (371 ITR 225) and in the case of ICICI Home Finance Ltd vs. ACIT reported in 25 Taxmann.com 241 and the decision of Hon'ble Supreme Court of India in the case of ACIT vs. ICICI Securities Primary Dealership Ltd (24 taxmann.com 310). The contention of the appellant is found to be correct. I find that the re- opening of the assessment merely change of opinion and there is no new tangible material is brought on record by the AO. In this contest, the following judicial pronouncements are relied upon, as under. S. 147: Reassessment Change of opinion- Operational expenses - No new facts Reassessment is held to be not valid. (S. 147] Dismissing the appeal of the revenue the Court held that that issue was examined by Assessing Officer during original scrutiny assessment and there was no new material available with Assessing Officer Reassessment proceedings on ground that same were based on mere change of opinion. Order of Tribunal is affirmed. Followed CIT v. Kelvinator of India Ltd (2010) 320 ITR 561 (SC). (AY. 2008-09) PCIT v. Zee Media Corporation Ltd. (2020) 114 taxmann.com 192 (Bom.) (HC) Editorial SLP of revenue is dismissed, PCIT v. Zee Media Corporation Ltd. (2020) 270 Taxman 180 (SC) 7.2 Further reliance is placed on the Jurisdictional High Court of Mumbai in the case of PCIT v. Zee Media Corporation Ltd. (2020) 423 ITR 304 (Bom.) (HC) - Head Note is as under:
Kotak Mahindra Bank Limited S. 147: Reassessment - Change of opinion - No new tangible material Reassessment is held to be bad in law. [S. 148] Dismissing the appeal of the revenue the Court held that, the Tribunal correctly came to the conclusion that in the absence of any new tangible material not already on record in the original proceedings, any attempt on the part of the AO to reopen the assessment on this ground would be based on a mere change of opinion. As long as the claim made by the assesseewas examined by the AO whether or not the AO raised the correct queries and came to the correct conclusion, in the context of the reopening of the assessment would be of no consequence. No question of law arose. (AY.2008-09) 7.3 In view of the above discussion, it is held that the reopening is based on mere change of opinion as there is no tangible material to show that there is indeed escaped income. Therefore, the reopening proceedings are held to be invalid.”
The Ld. DR argued in support of, and placed reliance upon, the order passed by the Ld. AO. During the course of the hearing, the Ld. DR sought time to file a written note of submissions before the Bench. Subsequently, the Ld. DR filed a letter dated 19/01/2026 submitting a brief note and stated that he was relying primarily on his oral arguments.
In view of the foregoing discussion and after considering the rival submissions and the material available on record, we find that the Ld. CIT(A) has correctly adjudicated the legal issue relating to the validity of reassessment proceedings. The reopening in the present case has been initiated solely on the basis of a mere change of opinion, without the support of any new tangible material coming to the possession of the Assessing Officer subsequent to the original assessment completed under section 143(3) of the Act. Such reopening is impermissible in law. The Ld. CIT(A) has rightly relied upon the binding judicial precedents of the Hon’ble Bombay High Court, including the decision in PCIT v. Zee Media Corporation Ltd. (2020) 423 ITR 302 (Bom), and has correctly held that Kotak Mahindra Bank Limited the reassessment proceedings are bad in law. We do not find any infirmity or perversity in the findings recorded by the Ld. CIT(A). Accordingly, the notice issued under section 148/148A of the Act is held to be invalid, and consequently, the entire reassessment proceedings conducted under section 143(3) read with section 147 of the Act are quashed. Since the legal issue has been decided in favour of the assessee and against the revenue, the remaining grounds raised on merits are rendered academic in nature and are, therefore, left open. In the result, the appeal filed by the revenue is dismissed.