Reassessment u/s 148 quashed as impermissible change of opinion on identical transactions and search material

HC quashed the reassessment proceedings initiated against the petitioner for AY 2019-20 under s.148. It held that the AO was impermissibly attempting a "change of opinion" on the same transactions, between the same parties, based on the identical search/seizure material earlier used to reassess the transporter's income for the same year. Having already accepted both parties' denial of cash return while completing the transporter's reassessment, the AO could not review that conclusion indirectly through reopening the petitioner's assessment. Such a reassessment on the same point amounted to a prohibited review, rendering the notice and proceedings without jurisdiction.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment proceedings initiated under Section 148 for a later assessment year, on the same material and identical issue already examined in the assessment of a connected assessee, are vitiated as an impermissible "change of opinion" and hence without jurisdiction.

1.2 Whether, in the facts of the case, the writ petition challenging the notice under Section 148 was maintainable at the pre-assessment stage in view of alleged lack of jurisdiction and arbitrariness in reopening.

1.3 Whether the prior assessment/reassessment orders, said to be "cryptic" or non-speaking, could be treated as not involving any formation of opinion, thereby negating the plea of "change of opinion".

1.4 Whether the contention that reopening was bad for not being initiated under the faceless scheme in terms of Section 151A required adjudication.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reassessment under Section 148 on the ground of "change of opinion"

Legal framework (as discussed):

2.1 The Court referred to the settled distinction between the Assessing Officer's power to "reassess" and the absence of any power to "review", and to the doctrine that reassessment cannot be based on a mere "change of opinion" on the same material. Reliance was placed on the principle laid down in Commissioner of Income Tax v. Kelvinator of India Ltd., that if "change of opinion" is removed, reassessment becomes a vehicle for review, which is impermissible.

Interpretation and reasoning:

2.2 The Court noted that reassessment proceedings for the transporter's income for AY 2019-20 were initiated on two issues, one being alleged "cash return" of Rs. 80,62,000/- to the petitioner, based on material impounded during survey/search on 09.04.2021. A notice under Section 142(1) was issued to the transporter, and a notice under Section 133(6) to the petitioner on the same issue; both assessees denied any cash return.

2.3 After considering replies of both the transporter and the petitioner, the Assessing Officer passed an order dated 26.08.2022 for AY 2019-20 in the transporter's case, making addition only under Section 40A(3) and making no addition on account of alleged cash return or under Section 68. The Court treated this as an acceptance of the genuineness of transactions and of the denial of any cash return.

2.4 Separately, reassessment of the petitioner's income for AY 2018-19 had also been initiated on the same "cash return" theme, based on the same material from the 09.04.2021 search/survey. Notices under Sections 148, 143(2) and 142(1) were issued, specific queries regarding dealings with the same transporter were raised, and the petitioner filed detailed replies denying any cash return. The reassessment order dated 26.08.2022 for AY 2018-19 adopted the same income as originally assessed and made no addition on the alleged cash return.

2.5 The Court highlighted that both assessment/reassessment orders dated 26.08.2022-(i) the transporter's assessment for AY 2019-20, and (ii) the petitioner's reassessment for AY 2018-19-were passed by the same Assessing Officer, on the same day, on the same material obtained from the 09.04.2021 search/survey, and after considering the replies of both parties on the same allegation of cash return.

2.6 The impugned reopening notice under Section 148 and order under Section 148A(3) for AY 2019-20 against the petitioner again relied on the very same survey/search material (impounded data with identical ID marks), alleged identical cash return of Rs. 80,62,000/-, and the same pattern of purported bogus bills and return of cheque amounts in cash. A comparative reading of (a) the Section 142(1) notice to the transporter, (b) the Section 133(6) notice to the petitioner, and (c) the Section 148/148A materials in the petitioner's case revealed that the very same transaction, figures and basis were being re-agitated.

2.7 The Court reasoned that in the reassessment of the transporter for AY 2019-20 the Assessing Officer had already formed an opinion, on the same material, that no addition was warranted on the allegation of cash return of Rs. 80,62,000/- to the petitioner. Initiating reassessment of the petitioner for AY 2019-20 on the identical issue and material necessarily meant revisiting and reviewing that opinion, which the Assessing Officer was not empowered to do.

2.8 The Court extended the "change of opinion" doctrine to these facts even though the assessees and/or assessment years differed, holding that where the same Assessing Officer, on the same material and in respect of the same alleged transaction between the same parties for the same assessment year (AY 2019-20), had already taken a view in one assessment (the transporter's), reopening another assessment (the petitioner's) on the identical ground is in substance a review of that earlier decision.

2.9 The Court also emphasized that when, on 26.08.2022, the Assessing Officer reassessed the petitioner for AY 2018-19 and the transporter for AY 2019-20, he had all relevant information about transactions between the petitioner and the transporter pertaining to AY 2019-20 yet did not initiate reopening of the petitioner for AY 2019-20 at that time, which further indicated that he had accepted that there was no issue of cash return.

Conclusions:

2.10 The Court held that the impugned reassessment proceedings against the petitioner for AY 2019-20 were clearly based on a prohibited "change of opinion", amounting to an impermissible review of an earlier decision on the same material and same transaction, and thus without jurisdiction.

2.11 On this ground, the notice under Section 148 and the consequential reassessment proceedings were held unsustainable and were set aside.

Issue 2: Maintainability of writ petition at the notice stage under Section 148

Legal framework (as discussed):

2.12 The Court referred to the principle that while ordinarily writ courts do not interfere at the stage of notice where statutory remedies exist, they may intervene in exceptional cases, particularly where there is a wrongful assumption of jurisdiction, arbitrary reopening, or violation of settled legal limits on reassessment. Reference was made to Calcutta Discount Co. and Jeans Knit (P) Ltd. v. CIT, where the Supreme Court recognized maintainability of writs challenging reassessment notices based on lack of jurisdiction.

Interpretation and reasoning:

2.13 The revenue contended, with reliance on Anshul Jain and other decisions, that the writ petition was premature and that the matter should proceed through the statutory assessment and appellate hierarchy, arguing that this case did not fall within the exceptions warranting writ interference.

2.14 The Court held that where reassessment is initiated not on "fresh material" but on the same material that had earlier been considered, the Assessing Officer lacks jurisdiction to reopen; such a case is one of wrongful assumption of jurisdiction, constituting an "exceptional circumstance" justifying writ intervention at the notice stage.

2.15 The Court reasoned that reassessment based on a mere change of opinion is itself an abuse of process and that, in such situations, Article 226 jurisdiction can and should be invoked without insisting upon exhaustion of alternate statutory remedies.

2.16 The Court distinguished the authorities cited by the revenue:

(a) The decision in Shri Shyam Sundar Dhanuka was said to involve a factual controversy requiring "deeper probe" and not a pure change-of-opinion issue; therefore, it did not govern the present situation.

(b) In M/s. Britannia Industries Limited, interference was declined because no exceptional circumstances were shown; by contrast, the present case involved clear jurisdictional error based on change of opinion.

(c) In Principal Commissioner of Income Tax, Kolkata-III, the original assessment order contained no formation of opinion, being entirely silent on the relevant liability; here, by contrast, the Assessing Officer had clearly dealt with the issue and dropped it.

(d) Anshul Jain was held inapplicable as the present case involved a direct challenge to the very assumption of jurisdiction in reopening on the same material.

Conclusions:

2.17 The Court concluded that the writ petition was maintainable at the stage of notice under Section 148 because the reassessment was initiated without jurisdiction, being founded on an impermissible change of opinion on the same material, and thus fell within the recognized exceptions permitting writ interference.

Issue 3: Effect of alleged "cryptic" prior assessment orders on the plea of change of opinion

Legal framework (as discussed):

2.18 The Court considered the nature of assessment proceedings as administrative/quasi-judicial rather than strictly judicial, with reference to S.S. Gadgil v. Lal & Co., which clarified that income tax authorities are administrative authorities tasked with estimating income under statutory machinery, and that assessment proceedings are not equivalent to a civil suit between the citizen and the State.

Interpretation and reasoning:

2.19 The revenue argued that the assessment/reassessment orders dated 26.08.2022 were "cryptic" and did not disclose how the replies of the transporter or the petitioner had been dealt with, and therefore no real opinion could be said to have been formed; on that premise, the bar of change of opinion would not apply.

2.20 The Court observed that both assessment orders specifically referred to the assessees' replies (even if briefly) and that the Assessing Officer, after issuing detailed notices and receiving detailed responses, chose not to make any addition on the issue of alleged cash return. This necessarily implied that the Assessing Officer had accepted the explanation and had formed an opinion that no addition was warranted on that ground.

2.21 The Court held that an assessment order need not elaborate reasons for every point accepted in favour of the assessee; where a query has been raised and answered and no addition is made on that point, the formation of an opinion is implicit. The brevity of the order, by itself, does not negate the existence of such opinion.

Conclusions:

2.22 The Court rejected the contention that the prior assessment orders were too cryptic to evidence any opinion. It found that an opinion had in fact been formed and the issue of cash return had been consciously dropped; hence, reopening on the same material and issue was barred as a change of opinion.

Issue 4: Challenge on ground of non-faceless reassessment (Section 151A)

Interpretation and reasoning:

2.23 The petitioner had also challenged the reassessment proceedings on the ground that the impugned notice was issued by the jurisdictional Assessing Officer instead of being issued in a faceless manner as contemplated by the scheme notified under Section 151A of the 1961 Act.

2.24 The Court expressly recorded that since the writ petition was being allowed on the ground of change of opinion and consequent lack of jurisdiction to reopen, the other ground of challenge, namely non-faceless issuance of notice, was not examined.

Conclusions:

2.25 No decision was rendered on the validity of the reassessment notice on the ground of alleged violation of the faceless regime under Section 151A; that issue was left open.

Overall Disposition

2.26 The Court held that the reopening notice under Section 148 and the reassessment proceedings initiated on that basis were unsustainable as they amounted to a prohibited change of opinion and a wrongful assumption of jurisdiction. The notice and proceedings were set aside, and the writ petition was allowed, without any order as to costs.

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