[S. 148 IT Act] Mere Change Of Opinion By AO, No 'Reason To Beleive' Assessee Failed To Disclose Info: Tripura HC Quashes Reassment Notice

The Tripura High Court recently invalidated a reassessment notice issued under Section 148 of the Income Tax Act, 1961. The court held the reassessment to be improper because it was based on already available data and thus it merely indicated that the Assessing Officer (AO) had had a change of opinion rather than a 'reason to believe' the assessee had hidden facts during the initial assessment. 

The Court clarified that reassessment is permissible only if the department uncovers fresh material, rather than relying on materials already considered in the original assessment.

A Division Bench of Chief Justice Aparesh Kumar Singh and Justice Biswajit Palit heard the Writ Petition filed by an assessee where the reassessment notice under Section 148 of the IT Act was served upon the Appellant's based on the appraisal report already forming part of consideration during the initial assessment.

A search and seizure operation was conducted at the business premises of Rajarshi Motors Pvt. Ltd. and the residence of the petitioner's father. Various books of accounts and incriminating documents were seized, leading to a reassessment notice against the petitioner.

An appraisal report prepared by the tax authorities formed the basis for the reassessment. Initially, the petitioner's return was assessed at Rs. 64,17,120/-, but the department later assessed it at Rs. 12,98,56,202/- after making certain additions.

The appellant argued that the reassessment was unjustified, as the appraisal report used for the reassessment was not new material, but rather a document already available to the Assessing Officer during the original assessment. The appellant maintained that reassessment is only allowed based on new material, not on information already considered in the initial assessment proceedings.

Finding force in the Appellant's contention, the Court held the reopening of the assessment as invalid. The Court reasoned that the appraisal report forming part of the reassessment was already available during the original assessment, and did not form new material for initiating reassessment proceedings.

“In the facts of the present case, the assessment was carried out at the first instance on the basis of the materials collected during search and seizure operation including the ledgers/cash book of different years found in the tally data of the petitioner and also the appraisal report based thereupon. The Appraisal report was placed before the Assessing Officer to examine the claim. Ifthe same material formed the basis of the Assessing Officer to pass the original assessment order, the reopening of the assessment by issuance of notice under Section 148 of the Act would be a mere change of opinion of the Assessing Officer and not a case of reason to believe on basis of the material which has subsequently come to his notice and/or which the assessee failed to truly and fully disclose during assessment proceedings.”, the court observed.

The Court rejected the department's argument that reassessment is allowed in cases where the income liable to tax has escaped assessment as per the ingredients of Section 147 of the Act. The Court noted that escapement of income liable to be taxed is no ground to reopen reassessment based on the same materials available with the Assessing Officer (AO) during the original assessment.

“Therefore, reopening of assessment on the ground that the income liable to tax has escaped assessment as per the ingredients of Section 147 of the Act either on account of failure to truly and fully disclose the full details of the income derived by the petitioner or on the basis of materials subsequently coming to the notice of the Assessing Officer are not satisfied. Therefore, the initiation of the reassessment proceedings by issuance of notice under Section 148 following the provisions of Section 147 of the Act is bad in law.”, the court observed.

Accordingly, the writ petition was allowed.

Case Title: Sri Abhijit Paul v. Union of India & Ors.

Citation : 2025 LiveLaw (Trip) 4

Click here to read/download the order

Appearances:

For Petitioner(s) : Mr. Raju Datta, Advocate.

For Respondent(s) : Mr. S. Chetia, Advocate, Mr. Koushik Roy, Advocate, Mr. U.S. Sinha, Advocate.