2025 (7) TMI 1298 - AT - Income Tax

Reopening assessment invalid when based on same material already examined and accepted during original proceedings under section 147

Deputy Commissioner of Income Tax, Circle 1 (3) (1), Mumbai Versus TMF Holdings Limited And (Vice-Versa)

Deputy Commissioner of Income Tax, Circle 1 (3) (1), Mumbai Versus TMF Holdings Limited And (Vice-Versa) - TMI ISSUES: Whether reopening of assessment under section 147 of the Income-tax Act, 1961, is valid in the absence of any new tangible material and based solely on a change of opinion.Whether the proviso and Explanation 1 to section 147, relating to 'full and true disclosure' of material facts by the assessee, were correctly applied in validating or invalidating the reassessment notice.Whether judicial precedents, including Raymond Woollen Mills Ltd. and ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd., support the validity of reassessment in the present facts.Whether the Assessing Officer had 'reason to believe' that income chargeable to tax had escaped assessment on the basis of prima facie material.Whether the reopening notice issued under section 148 was issued following proper procedure, including disposal of objections and providing statutory time to the assessee. RULINGS / HOLDINGS: Reopening of assessment under section 147 without any new tangible material and based on the same material already examined during original assessment constitutes a mere 'change of opinion' and is 'bad in law' and invalid.The proviso and Explanation 1 to section 147 provide additional safeguards but were not relied upon by the CIT(A) to grant relief; the invalidity arose from the absence of fresh material and reliance on change of opinion.The decisions in Raymond Woollen Mills Ltd. and Rajesh Jhaveri Stock Brokers Pvt. Ltd. are distinguishable and do not apply where the issue was fully examined during original assessment and no fresh material emerges; thus, reliance on these precedents by the revenue was misplaced.The Assessing Officer must have 'reason to believe' based on fresh tangible material with a 'live link' to escapement of income; mere production of documents or existing material does not suffice for valid reassessment.The reopening notice was issued without following procedural requirements such as disposing objections before issuance and providing four weeks' time thereafter, violating established guidelines and law. RATIONALE: The Court applied the statutory framework of section 147 of the Income-tax Act, 1961, emphasizing that reassessment powers are exercisable only when there is 'reason to believe' that income chargeable to tax has escaped assessment, supported by fresh tangible material not previously considered.Judicial precedents such as CIT vs. Kelvinator of India Ltd. and recent High Court decisions (e.g., Shri Sai Baba Sansthan Trust (Shirdi), Marico Ltd., Union Bank of India) were relied upon to affirm that reassessment cannot be initiated on a mere 'change of opinion' or reappraisal of the same material.The Court distinguished the revenue's reliance on Raymond Woollen Mills Ltd. and Rajesh Jhaveri Stock Brokers Pvt. Ltd., noting that those cases involved situations where the Assessing Officer had prima facie material not considered earlier, unlike the present case where the issue was fully adjudicated in original assessment.The Court recognized the role of Explanation 1 to section 147 as an additional safeguard requiring 'full and true disclosure' of material facts by the assessee but clarified that the present case's invalidity was grounded on lack of fresh material rather than non-disclosure.The Court underscored the procedural safeguards mandated by law, including the necessity to dispose objections to reopening before issuing a notice under section 148 and to provide the assessee with adequate time thereafter, which were not complied with.