(2010) 320 ITR 561 (SC)
Income escaping assessment; issue of reassessment notice
No. Reopening requires tangible material indicating escapement of income. A mere change of opinion confers no power to reassess, which would amount to a power of review the statute does not grant.
After the 1989 amendment, may an Assessing Officer reopen a completed assessment simply because he takes a different view of material already on record?
A regular assessment had been completed after scrutiny, in which the material relevant to the issue in question had been placed before the Assessing Officer and considered. The officer subsequently formed a different view on the same material and issued a notice reopening the assessment. The Revenue contended that the 1989 amendment, which replaced the earlier requirement of failure to disclose with the simpler formulation of reason to believe that income had escaped assessment, had widened the power and removed the change of opinion restriction.
The Delhi High Court, sitting in a Full Bench, held that a mere change of opinion did not justify reopening. The Revenue appealed to the Supreme Court, which affirmed.
For the assessee
The amended provision still requires a reason to believe that income has escaped assessment, which imports an objective foundation. Where all material was disclosed and considered, nothing has escaped; the officer has simply changed his mind, and permitting reopening on that basis would make every completed assessment permanently vulnerable.
For the Revenue
The amendment deliberately removed the precondition of failure to disclose, leaving the officer free to reopen whenever he has reason to believe income has escaped assessment. The formation of that belief is a subjective matter, and the fact that the material was previously on record does not preclude it.
The Court traced the legislative history and held that the 1989 amendment did not confer an unfettered power. Although the precondition of failure to disclose was removed for certain situations, the requirement of a reason to believe was retained, and that expression imports an objective foundation rather than a mere subjective satisfaction. The Court held that the officer must have tangible material coming to his notice which indicates that income has escaped assessment; reopening cannot rest on a reappraisal of material already considered. It emphasised that the distinction between the power to reassess and the power to review is fundamental: the statute confers the former and not the latter, and permitting reopening on a change of opinion would collapse the distinction and confer review powers by the back door. The Court also referred to the Board's own circular explaining the amendment, which stated that the object was to remove ambiguity and not to enable reopening on the basis of a mere change of opinion. Since the material had been before the officer at the original assessment and no fresh tangible material had come to light, the reopening was held bad.
The single most cited authority on reassessment, applying to Sections 279 and 280 of the IT Act 2025. The statutory framework has since been recast to require an inquiry and information-based trigger before a notice issues, which in substance codifies the tangible material requirement. Kelvinator remains the reference point for the change of opinion objection, particularly where the issue was examined in the original scrutiny.