Limited scrutiny reassessment, insolvency moratorium, and section 263 limitation principles clarified for tax proceedings

Reassessment under section 147 is not treated as a change of opinion where the original limited scrutiny assessment never examined the escaped-income issue, so the reassessment remains valid. Tax proceedings may also be initiated during the corporate insolvency resolution process, provided coercive recovery is not pursued in breach of the moratorium framework. For revision under section 263, where the revisional issue is independent of the reassessment order, limitation runs from the original assessment order; on that basis, an order passed beyond the prescribed period is time-barred.

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Issues: (i) whether reassessment initiated under section 147 was invalid as a mere change of opinion in a case originally completed under section 143(3) on limited scrutiny; (ii) whether initiation of reassessment during the corporate insolvency resolution process was barred in law; (iii) whether revision under section 263 was barred by limitation where the revisional issue was not the subject matter of the reassessment order.

Issue (i): Whether reassessment initiated under section 147 was invalid as a mere change of opinion in a case originally completed under section 143(3) on limited scrutiny.

Analysis: The original assessment was a limited scrutiny assessment confined to a different issue. The reassessment was based on an issue that had not been examined in the limited scrutiny assessment. Since the matter forming the basis of reassessment was outside the earlier scrutiny scope, there was no prior examination of that issue and therefore no question of change of opinion. The absence of verification of that issue in the original assessment meant that the reassessment could not be invalidated on that ground.

Conclusion: The reassessment under section 147 was held to be valid and not vitiated by change of opinion.

Issue (ii): Whether initiation of reassessment during the corporate insolvency resolution process was barred in law.

Analysis: The legal position applied was that proceedings may be initiated to determine tax liability, but recovery action cannot be pursued in violation of the moratorium regime. The Court relied on the principle that assessment or reassessment is permissible notwithstanding the insolvency process, so long as coercive recovery is not undertaken contrary to the insolvency framework.

Conclusion: The reassessment proceedings initiated during the corporate insolvency resolution process were held to be permissible.

Issue (iii): Whether revision under section 263 was barred by limitation where the revisional issue was not the subject matter of the reassessment order.

Analysis: The revisional jurisdiction was invoked on an issue distinct from the one considered in reassessment. In such a situation, the limitation under section 263(2) runs from the date of the original assessment order and not from the reassessment order. Applying that rule, the permissible period had expired well before the revisional order was passed.

Conclusion: The revisional order under section 263 was held to be barred by limitation and was quashed.

Final Conclusion: The reassessment proceedings were upheld, but the revisional order was set aside as time-barred, resulting in partial success for the Revenue and complete success for the assessee in the revision challenge.

Ratio Decidendi: Reassessment is not barred by change of opinion when the escaped-income issue was never examined in the original limited scrutiny assessment, and limitation for revision under section 263 is computed from the original assessment order where the revisional issue is independent of the reassessment proceedings.

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