Reopening based on escaped assessment upheld where earlier scrutiny did not consider the income characterisation issue.

A reopening notice under sections 147 and 148 was upheld where the earlier assessment under section 143(3) had not meaningfully examined the valuation and character of income from transfer of the right to purchase a plot. The recorded material showed that the Assessing Officer formed a reason to believe that income had escaped assessment after applying mind, so the case was not treated as a mere change of opinion. At the notice stage, the existence of relevant material and recorded reasons was sufficient, and writ interference was declined.

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Issues: Whether the notice reopening the assessment under section 148 of the Income-tax Act, 1961, was valid where the earlier assessment had been completed under section 143(3) of the Income-tax Act, 1961, and whether the reopening was based merely on a change of opinion.

Analysis: The earlier assessment order was found to contain no meaningful application of mind to the valuation and characterization of the income arising from the transfer of the right to purchase the plot, and the issue of capital gain versus casual income had not been dealt with in substance. On the recorded material, the Assessing Officer had reason to believe that income had escaped assessment and had formed that belief after applying his mind. At the stage of issuance of notice, the existence of relevant material and recorded reasons was sufficient, and the court declined to interfere in writ jurisdiction. The case was treated as one where reopening was justified and not as one involving a mere change of opinion.

Conclusion: The reopening notice under sections 147 and 148 was held valid and the challenge to it failed.

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