Facts of the Case

The petitioner, KOA Investment Limited, filed its return for AY 2012–13 and underwent scrutiny assessment under Section 143(3) of the Income Tax Act.

During scrutiny:

  • The Assessing Officer (AO) examined details including non-current investments.
  • The petitioner disclosed investments including ₹1.80 crore in 0% Optionally Fully Convertible Debentures (OFCDs).

Subsequently:

  • A notice dated 27.03.2019 was issued under Section 148 alleging income escaping assessment.
  • The AO alleged discrepancy between:
    • Loans & advances: ₹74,50,000
    • Investment: ₹1.80 crore
  • Difference of ₹1,05,50,000 was treated as unexplained.

The petitioner objected, stating:

  • Investment was properly disclosed under “non-current investments”.
  • The issue had already been examined during original assessment.

However:

  • AO rejected objections without adequate reasoning.
  • Approval under Section 151 was not provided to the petitioner.

Issues Involved

  1. Whether reassessment under Section 148 is valid when the issue was already examined during scrutiny assessment.
  2. Whether failure to provide approval under Section 151 invalidates reassessment proceedings.
  3. Whether reassessment can be initiated merely on reappreciation of the same material (change of opinion).

Petitioner’s Arguments

  • The investment in OFCDs was fully disclosed in financial statements.
  • The AO had already examined “non-current investments” during original scrutiny.
  • There was no failure to disclose material facts.
  • Reassessment was based on same material, hence constitutes change of opinion.
  • Mandatory approval under Section 151 was not furnished, violating procedural requirements.
  • The objections were rejected without proper application of mind.

Respondent’s Arguments

  • The Revenue argued that:
    • The balance sheet notes indicated inconsistencies.
    • Investment details appeared misleading.
  • The AO had reason to believe income escaped assessment.
  • The petitioner could explain discrepancies during reassessment proceedings.
  • Court should not interfere at preliminary reassessment stage

Court Findings / Order

  • The issue of investment was already examined during original assessment proceedings.
  • All relevant disclosures were made by the assessee.
  • The AO had the opportunity earlier but did not pursue further inquiry.
  • Reassessment based on same material amounts to change of opinion, which is impermissible.
  • The AO failed to:
    • Properly consider petitioner’s explanation
    • Demonstrate escapement of income
  • There was procedural lapse in not furnishing approval under Section 151.

Final Order

  • Notice under Section 148 dated 27.03.2019 – Quashed
  • Order rejecting objections dated 17.10.2019 – Set Aside
  • Writ Petition – Allowed

Important Clarifications

  • Reassessment cannot be initiated merely due to reinterpretation of already examined facts.
  • Full disclosure by assessee protects against reopening unless there is tangible new material.
  • Approval under Section 151 is not a formality; it must be properly obtained and disclosed.
  • Lack of reasoning in rejection of objections can invalidate proceedings.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS12092023CW116702019_211209.pdf

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