Facts of the Case

The petitioner, Modi Industries Limited, filed its return of income which was scrutinized under Section 143(3) of the Income Tax Act. During the original assessment proceedings, the Assessing Officer (AO) raised specific queries regarding discrepancies in sales turnover as reflected in the ITR and Tax Audit Report (Form 3CD).

The petitioner furnished a reconciliation statement in response to such queries before completion of the assessment.

Subsequently, the AO issued a notice dated 30.03.2021 under Sections 147/148 seeking to reopen the assessment for AY 2017–18 on the same issue of discrepancy in turnover.

The petitioner challenged the reassessment proceedings before the Delhi High Court.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148 can be initiated on issues already examined during original assessment under Section 143(3).
  2. Whether reopening of assessment on the same material amounts to change of opinion.
  3. Whether the impugned notice and order are liable to be set aside in absence of new tangible material.

Petitioner’s Arguments

  • The discrepancy in sales turnover had already been examined during original assessment proceedings.
  • A reconciliation statement was duly submitted before passing the assessment order.
  • The reassessment notice is based on the same material already considered, and hence constitutes a mere change of opinion.
  • Reopening under Sections 147/148 without new tangible material is impermissible in law.

Respondent’s Arguments

  • The Revenue sought to justify the reassessment proceedings based on discrepancies in turnover.
  • However, despite opportunities, the Revenue failed to file a counter-affidavit to substantiate its stand before the Court.

Court’s Findings

  • The Court observed that a specific query regarding discrepancy in sales turnover was raised during original assessment proceedings, and the petitioner had responded with a reconciliation statement.
  • The assessment was completed under Section 143(3), indicating due application of mind by the AO.
  • Reopening of assessment on the same issue constitutes change of opinion, which is not permissible under law.
  • The Court also noted that similar issues arose in earlier assessment years (AY 2014–15, 2015–16, 2016–17), where reassessment proceedings were either set aside or dropped.

Court Order / Decision

  • The impugned notice dated 30.03.2021 and order dated 29.12.2021 were set aside.
  • Liberty was granted to the Assessing Officer to take fresh steps in accordance with law, if permissible.
  • The AO must consider that reassessment proceedings on the same issue were dropped in earlier assessment years.
  • Interim protection granted earlier was continued until fresh decision.

Important Clarification by Court

  • Reassessment cannot be used as a tool for review or reconsideration of the same material.
  • The doctrine of change of opinion strictly prohibits reopening of completed assessments without new tangible material.
  • Past treatment of identical issues in earlier years is a relevant factor in determining validity of reassessment.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/59027032023CW19482022_120635.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.