2025 (8) TMI 278 - AT - Income Tax

Reopening of Assessment Beyond Four Years Under Section 147 Invalid Without Fresh Evidence

The ITAT Chennai held that the reopening of assessment under section 147 beyond four years was invalid as the reasons for reopening were based on the same ... Reopening of assessment u/s 147 - notice issued beyond period of four years - reasons to believe - change of opinion - case has been reopened on the ground that upon perusal of Profit & Loss Account, it was noted that though the assessee claimed loss, it did not reflect any business income and only income was interest on fixed deposits against which the assessee claimed business expenditure - HELD THAT:- Upon perusal of reasons recorded by Ld. AO to reopen the case of the assessee, it could very well be seen that formation of belief of escapement of income is on same set of material and financial documents which were already available before Ld. AO during the course of original assessment proceedings. The reasons do not indicate any event as to the receipt of any fresh tangible material coming to the possession of Ld. AO subsequent to culmination of original assessment proceedings. The formation of belief is on the same set of material as available during assessment proceedings u/s 143(3). This being the case, reopening would be nothing but mere change of opinion on existing material which is impermissible as per the decision of Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT]. It was held that the review of order is impermissible. Thus no hesitation in holding that the reopening, in the present case, was on mere change of opinion without there being any fresh tangible material which is impermissible - Assessee appeal allowed. ISSUES: Whether the reassessment proceedings initiated beyond four years from the end of the relevant assessment year are valid in absence of any new tangible material.Whether reopening of assessment on the basis of the same material already available to the Assessing Officer amounts to impermissible change of opinion.Whether business expenditure claimed against interest income can be disallowed as pre-operative expenditure when the business had commenced.Whether the notice issued under section 156 containing arithmetical errors affects the validity of demand. RULINGS / HOLDINGS: The reassessment initiated beyond four years was held to be invalid as it was based on the 'same set of material' already available to the Assessing Officer, without any 'fresh tangible material,' thus violating the First Proviso to section 147 of the Act.The reopening of assessment on the basis of 'mere change of opinion' is impermissible and amounts to an unlawful review of the original order, consistent with the principle established in Kelvinator of India Ltd.The disallowance of business expenditure was not upheld on legal grounds due to invalid reassessment; hence, the merits of business expenditure claim were not adjudicated.The issue regarding the notice under section 156 with arithmetical errors was not specifically adjudicated in the final order and thus remains unaddressed. RATIONALE: The Court applied the statutory provisions of the Income Tax Act, particularly section 147 and its First Proviso, which restrict reassessment beyond four years unless new material is found.The Court relied on the established precedent that reopening assessment on 'mere change of opinion' without new tangible evidence is impermissible and amounts to an impermissible review of the original assessment order.The Explanation 1 and Explanation 2(c)(iv) to section 147 were considered, but the absence of evidence that the Assessing Officer had formed an opinion on the issue during original assessment led to the conclusion that reopening was unjustified.No dissenting or concurring opinions were noted; the decision reflects adherence to settled legal principles without doctrinal shift.