The Supreme Court held that reopening under Section 148 was valid because the Department had fresh tangible material from survey proceedings. The Court further held that the 35% share received by the Assessee from AOP was revenue/business receipt, not share of profit, and was taxable in the Assessee’s hands.


Issue:
Whether Section 148 reopening was valid and whether 35% received from AOP was taxable in the Assessee’s hands.

Application:
The Assessing Officer had not earlier examined the true effect of Clause 7. The survey material and the director’s statement showed that the Assessee received 35% of the gross sale proceeds before deduction of expenses. This showed revenue share, not profit share.

Court Judgment 
The Supreme Court held that reopening was not a mere change of opinion. The Assessee had merely disclosed income from AOP as profit share, but had not specifically brought Clause 7 and its true legal effect to the Assessing Officer’s attention. When survey material and the director’s statement showed that the 35% share was linked to gross receipts, the Department had valid “reason to believe” that income had escaped assessment.

On merits, the Court held that Clause 7 allowed the Assessee to withdraw 35% of gross sale proceeds upfront, while expenses were to be met out of the remaining 65%. Therefore, the amount was not profit share but business receipt/revenue share, taxable in the Assessee’s hands.

Key Takeaways 
Mere disclosure of income from AOP does not bar reopening if the true nature of receipt was not examined.
“Change of opinion” defence fails where no conscious opinion was earlier formed.
Reopening must be tested only on the reasons recorded under Section 148.
Clause 7 showed revenue sharing, not profit sharing.
35% share was taxable in the hands of the Assessee as a business receipt.
Interpretation of a contractual clause is a question of law, not merely a factual finding.

Sanand Properties Pvt. Ltd. vs Joint Commissioner of I.T. Range 6
Supreme Court | 2026:INSC:472 | Civil Appeal Nos. 9107/2012, 744/2013 & 19487/2017 | Dated: 12-May-2026
Judgment by: J.B. Pardiwala, J. and K.V. Viswanathan, J.