Reassessment based on tangible material upheld where reasons to believe existed and change of opinion was not shown.

Reassessment under Sections 147 and 148 was initiated within four years on the basis of tangible material indicating possible escapement of income, so the decisive question was whether there was reason to believe rather than a mere change of opinion. The Court accepted that the recorded reasons showed fresh material concerning deduction of loan guarantee fee paid to a foreign group company without tax deduction at source, and held that the reopening was not barred at the threshold. The assessee's disclosure of facts did not prevent reassessment, and the merits of the disallowance were left to be examined in the reassessment proceedings. The challenge to the notice and the order disposing of objections was rejected.

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Issues: Whether the reassessment notice under Section 148 of the Income-tax Act, 1961 and the order disposing of objections were valid when issued within four years of the assessment, and whether the reopening was vitiated by change of opinion for want of tangible material and reason to believe.

Analysis: The return had originally been processed and the assessment completed under Section 143(3) of the Income-tax Act, 1961 after scrutiny. The reopening was founded on material noticed by the Assessing Officer that the assessee had claimed deduction of loan guarantee fee paid to a foreign group company without deduction of tax at source, and this issue was said to have tax implications under the Act. The Court held that, since the reopening was within four years, the decisive question was whether there existed reason to believe that income had escaped assessment. It accepted the Revenue's stand that the reasons recorded disclosed tangible material and not a mere review of the earlier assessment. The Court also held that the assessee could not defeat reopening at the threshold by asserting that all facts had earlier been disclosed, and that the merits of the disallowance had to be examined in reassessment proceedings.

Conclusion: The reopening was upheld and the challenge to the notice under Section 148 and the consequential order was rejected.

Ratio Decidendi: Where reassessment is initiated within four years on the basis of tangible material leading to a reason to believe that income has escaped assessment, the writ court will not interfere merely on the plea of change of opinion if the reopening is otherwise in accordance with Section 147 of the Income-tax Act, 1961.

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