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Facts
The Revenue appealed against the CIT(A)/NFAC's order quashing the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, for AY 2011-12. The original assessment was completed under Section 143(3) on 27.02.2014, and the reassessment notice was issued on 22.09.2017, beyond four years from the end of the assessment year.
Held
The Tribunal held that the reopening of assessment after four years from the end of the assessment year requires the Assessing Officer to prove that income escaped assessment due to the assessee's failure to disclose material facts. In this case, the reasons for reopening indicated a mere change of opinion by the AO and not any new information.
Key Issues
Whether reassessment proceedings initiated beyond four years are valid without establishing failure on the part of the assessee to disclose material facts, and whether a mere change of opinion can form the basis for reopening.
Sections Cited
143(3), 147, 148, 115JB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
National Faceless Appeal Centre (NFAC) Delhi’s order dated 25.01.2023 [DIN & Order No. ITBA/NFAC/S/250/2022-23/1049092156(1)] in proceedings u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961, hereinafter referred to as the ‘Act’.
Heard both the parties. Case file perused.
CIT(A)/NFAC’s lower appellate findings, quashing the reopening in question itself as follows:
“5.1 The submissions of the appellant are considered carefully in the light of facts of the case. In this case pertaining to A.Y. 2011-12, original assessment order u/s 143(3) was passed on 27.02.2014. The notice u/s 148 proposing reassessment is dated 22.09.2017. Therefore, the reassessment has been opened after expiry of four years form the end of the assessment year in a case where scrutiny assessment u/s 143(3) had also been carried out. Such a case would be covered by proviso to section 147 which casts a duty on the assessing officer to establish that escapement of income is on Account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 5.2 The relevant extracts of the reasons recorded by the AO while reopening the assessment are as follows: “….4. The original return for the A.Y 2011-12 was filed by the assessee on 27.09.2011, which was later revised on 25.03.2013, wherein it was expected that the assessee should have duly checked its books of Accounts and furnished the correct particulars. Even in the revised return, the assessee didn’t add the provision made for standard assets in computation of Book Profit. This shows that the intention of the assessee was clearly to avoid tax by furnishing the wrong computation. Since, the onus was on the assessee to furnish true particulars of its income, which was not discharged, thus, it is a failure on part of the assessee. Therefore, an income of Rs.35,00,00,000/- having a total tax effect of Rs. 6,47,50,000/- for the A.Y 2011- 12, has escaped assessment within the meaning section 147 of the Income Tax Act, 1961, and to assess the same, initiation of income escaping assessment proceedings is necessary….” 5.3 In this case, the provision for Standard Assets was an item of the balance sheet, and there is no explanation as to why the AO could not have considered making the addition during the first round of assessment proceedings. It was not as if in the second round, there was some enabling factor for making the addition which could not have been possible earlier.
The mention of failure on the part of the assessee in the reasons recorded appears merely to be an attempt to somehow satisfy the legal requirement for reopening the assessment. All the facts relating to the issue were available with the AO at the time of original assessment, and it is not the case of the AO that anything new had come to the light prompting the AO to invoke the provisions related to section 148. 5.4 The law is very clear that where there is no failure on the part of the assessee to disclose fully and truly all material facts in a case where reopening has been done after the expiry of four years from end of the relevant Assessment Year, the reassessment proceedings are vitiated. MERE CHANGE OF OPINION 5.5 It is a settled legal principle that reopening of an assessment is not valid on a mere change of opinion. The relevant extracts of the reasons recorded by the AO while reopening the assessment and as extracted in para 5.2 above clearly show that there was no new information or fresh evidence which had come into the possession of the AO and which was not already there when original assessment was framed. Therefore, reopening of the assessment is nothing but a mere change of opinion. In a number of decisions, various courts have ruled that in such situations, the reopening is not valid in law. Reliance is placed on the following decisions : 1) Judgment of this Court in case of Dharmnath Shares & Services (P) Ltd. v. Assistant Commissioner of Income-tax, Central Cir1(2) reported in (2018) 94 com 458 (Gujarat); 2) Decision of Apex Court in case of Assistant Commissioner of Income-Tax (Central) Circular1(2) v. Dharmnath Shares & Services (P) Ltd reported in (2018) 100 com 416(SC); 3) Decision of Apex Court in case of Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. reported in (2019) 107 com 375(SC). 5.7 Also, in a recent decision in the case of Shahlon Silk Industries Pvt Ltd Vs AOIT (Special Civil Application No. 20436 of 2018) (2023), Gujarat High Court) has also held that reopening of an assessment on a mere change of opinion is not permissible and is liable to be quashed. 5.8 It is apparent from the facts of this case that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2011-2012. In the reasons recorded by the AO while reopening the AO which was not in his possession during the first round of assessment. Under such circumstances, the Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration, more particularly when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax vs. Kelvinator of India Ltd. reported in 2010(2) SCC 723: “2. A short question which arises for determination in this batch of civil appeals is, whether the concept of “change of opinion” stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987? xxx 6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only onecondition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post- 1st April, 1989, power to re-open is much wider. 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 re-open 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 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. 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, Assessing Officer has power to re-open, 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. Our view gets support from the changes made Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word “opinion” in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words “reason to believe”, Parliament reintroduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: “7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe’ in Section 147.–A number of representations were received against the omission of the words `reason to believe’ from Section 147 and their substitution by the `opinion’ of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe’ had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe’ in place of the words `for reasons to be recorded by him in writing, is of the opinion’. Other provisions of the new section 147, however, remain the same.” 5.9 In addition, it is noted that in the original assessment proceedings, while passing the order dated 27.02.2014, the AO limited himself to computing the income under normal provisions of the Act, and did not at all compute the income as per the provisions u/s 115JB. In the reassessment proceedings, the AO went on to compute the income, in addition to normal provisions, u/s 115JB also. This shows that any adjustment u/s 115JB which the AO might have missed out on, in the first round of proceedings, was not due to some failure on the part of the appellant, or nonavailability of some information with the AO (which could have been obtained by him while reopening the assessment), but due to failure of the AO to compute the income u/s 115JB which he should have done while passing the assessment order dated 27.02.2014 u/s 143(3). If this is the case, no fault can be attributed to the appellant as regards true and full disclosure. 5.10 In view of foregoing reasons, various case laws on the issue and considering the facts of the case, impugned reassessment proceedings 148 of the Act, 1961 are not tenable in law, and is accordingly quashed. Grounds of appeal related to validity of reassessment notice on Account of mere change of opinion along with the contention that there was no failure on the part of the appellant to disclose all material facts fully and truly succeed.
6. As the reassessment proceedings have already been quashed, the remaining Grounds of Appeal become Academic in nature and do not require separate adjudication.” This is what leaves the Revenue aggrieved.
3. We have given our thoughtful consideration to the Revenue’s and assessee’s respective vehement submissions against and in support of the CIT(A)’s above extracted detailed discussion quashing the impugned reopening itself thereby invoking section 147 first proviso. There is hardly any dispute between the parties that the learned Assessing Officer had already assessed the assessee u/s 143(3) of the Act on 27.02.2014. He, thereafter, set into motion section 148/147 reopening mechanism by way of issuing his notice dated 22.09.2017 without specifying in his reasons recorded that the assessee had not disclosed the relevant particulars “fully” and “truly” in the above first round. That being the clinching factual position, we hereby quote Hindustan Lever Ltd. v. R.B. Wadekar (2004) 268 ITR 332 (Bombay) that such reopening reasons do not have any scope of addition, deletion or substitution therein at any latter stage since the same have to be read on standalone basis only. This is indeed coupled with the fact that the Revenue’s grounds raised even do not rebut all these clinching facts in the instant appeal. We finding quashing the impugned reopening in very terms.
All other pleadings on merits between the parties stand rendered academic.
Order pronounced in open court on 29.08.2025.