Reassessment on audit objection alone fails where the issues were already examined in scrutiny assessment and no fresh material existed.

Reassessment based only on audit objections was held unsustainable where the same issues had already been specifically examined in the original scrutiny assessment. The reopening was within four years, so the first proviso to Section 147 did not apply, but the record showed prior queries and replies on deductions and depreciation claims, including Section 80G, Section 32AC, Section 35(2AB), software and goodwill depreciation, and related expenses. As the original assessment under Section 143(3) had considered those matters, the audit objection furnished no fresh tangible material and amounted to a mere change of opinion. The notice under Section 148 and the order disposing objections were quashed and set aside.

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Issues: Whether the reassessment notice and the order disposing objections for Assessment Year 2016-17 were sustainable when they were founded on audit objections and on matters already examined in the original scrutiny assessment.

Analysis: The reopening was issued within four years, so the first proviso to Section 147 of the Income-tax Act, 1961 was not attracted. However, the record showed that the very issues on which reopening was sought, including deduction under Section 80G, additional depreciation, deduction under Section 32AC, depreciation on computer software, depreciation on goodwill, deduction under Section 35(2AB), legal and professional expenses, non-target based gifts and club membership expenses, had already been specifically queried during the original proceedings under Section 142(1) and were replied to by the assessee. The original assessment under Section 143(3) was thus formed after consideration of those matters. The only basis for reopening was the audit party's objections, which did not constitute fresh tangible material. Reopening on such material would amount to a mere change of opinion. The Court also held that the assessee's claims regarding additional depreciation on computers, carry forward of balance depreciation, and goodwill could not justify reopening in the facts of the case.

Conclusion: The reassessment notice under Section 148 and the order rejecting objections were unsustainable and were quashed and set aside.

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