2025 (12) TMI 267 - AT - Income Tax

Reassessment u/s 147/148 quashed as impermissible change of opinion after full scrutiny assessment u/s 143(3) accepted

The ITAT Delhi allowed the assessee's appeal, quashing the reassessment initiated u/s 147/148. It held that a regular assessment u/s 143(3) had already ... Reopening of assessment u/s 147 - assessment completed u/s 143(3) - 'change of opinion' v/s 'reason to believe' - revisit of concluded issues HELD THAT:- Assessment u/s 143(3) was completed on 23.03.2016 and now the AO initiated the reassessment proceedings after recording the reasons to believe that income chargeable to tax has escaped assessment for the relevant assessment year under consideration. This fact is on record that the assessment u/s 143(3) was already completed. Upon completion of the regular assessment, the AO has invoked the provisions of section 147/148 after review of the abovesaid order. It is also fact on record that there was no tangible material in the possession of the AO and formation of plea that the income chargeable to tax had escaped for the relevant assessment year. We observe that the assessment u/s 143(3) was completed after raising a query on the relevant issue and AO has accepted the submissions of the assessee on the relevant issue and duly accepted the same, now on the same issue AO has no jurisdiction to reopen the assessment merely because the relevant issue in question was not specifically discussed in the assessment order. We rely on the decision of Ralsons India Ltd [2014 (2) TMI 27 - DELHI HIGH COURT] held that where assessment order u/s 143(3) after considering the assessee’s explanation in respect of documents seized in course of search proceedings, initiation of reassessment proceedings on the basis of same material now available on record could not be upheld. Therefore, the relevant notice and consequent proceedings cannot be sustained and are liable to be quashed by relying on the decision of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] held that the AO cannot resort to reassessment proceedings as envisaged u/s 147/148 of the Act to revisit the concluded issues, which were duly examined by him during the course of original assessment proceedings. Such action would be hit by judicial bar of change of opinion. Assessee appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the reassessment proceedings initiated under sections 147/148, after completion of a scrutiny assessment under section 143(3) on the same issue, were vitiated as a mere 'change of opinion' in the absence of any new or tangible material. 1.2 Consequentially, whether the reassessment order passed under sections 147/250/143(3) was liable to be quashed, rendering examination of the ground relating to set off of short-term capital gains against brought forward short-term capital loss unnecessary. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of reassessment under sections 147/148 - change of opinion and absence of tangible material Legal framework (as discussed) 2.1 The Court considered section 147 of the Act, which permits reassessment where the Assessing Officer has 'reasons to believe' that income chargeable to tax has escaped assessment. The Court noted the settled position that reassessment cannot be used to review concluded issues already examined in scrutiny assessment, and that such review is barred as a 'change of opinion' in terms of the ratio of the Supreme Court in the decision in Kelvinator of India Ltd. The Court also referred to the principle that reopening based on the same material, without new tangible material, is impermissible, as reiterated by the jurisdictional High Court in Ralsons India Ltd. Interpretation and reasoning 2.2 It was recorded that an assessment under section 143(3) had already been completed for the relevant year. In the original assessment, the Assessing Officer had raised a specific query under section 142(1) regarding brought forward losses, including the set-off of speculative loss and short-term capital gain, and the assessee had duly responded with detailed submissions and supporting charts and evidence. 2.3 The contemporaneous communication (email dated 25.11.2019) from the then Assessing Officer confirmed that, during the original assessment, the objection regarding set off of brought forward speculative loss for assessment year 2007-08 was raised, the assessee clarified that the claim was inadvertent and that short-term capital loss for assessment year 2008-09 was available and should be set off against current year's short-term capital gain, and the assessment under section 143(3) was completed after considering 'each and every detail'. 2.4 The Court found from the record that: (i) the same issue of set off of losses had been examined and accepted in the original scrutiny assessment; (ii) there was no new or tangible material with the Assessing Officer at the time of initiation of reassessment; and (iii) the initiation was based solely on review of the already completed assessment on the same material. 2.5 The Court held that the mere absence of specific discussion of the issue in the assessment order does not confer jurisdiction to reopen where a query was raised and answered during scrutiny, and the issue was actually examined. Thus, the subsequent initiation of reassessment on the same point was characterized as a 'review' of the earlier order and hit by the bar of 'change of opinion'. Conclusions 2.6 The Court concluded that the Assessing Officer lacked valid jurisdiction to initiate reassessment proceedings under sections 147/148 as: (a) there was no fresh or tangible material to form a new 'reason to believe' that income had escaped assessment; and (b) the reassessment amounted to revisiting a concluded issue already examined in the original scrutiny assessment, which is impermissible as a 'change of opinion'. 2.7 Accordingly, the reassessment proceedings were held to be bad in law. Issue 2: Consequence for reassessment order and remaining ground on set off of losses Interpretation and reasoning 2.8 Having held that the initiation of reassessment proceedings was invalid, the Court examined the consequence for the reassessment order passed under sections 147/250/143(3). The Court observed that once the very foundation of jurisdiction under section 147 is struck down, the entire reassessment order and consequent proceedings cannot survive. Conclusions 2.9 The Court quashed the reassessment order passed under sections 147/250/143(3) as void and without jurisdiction. 2.10 In view of the quashing of the reassessment, the Court did not adjudicate the substantive ground relating to allowability of set off of short-term capital gains with brought forward assessed short-term capital loss for an earlier assessment year, treating it as academic at this stage.