Understanding Critical Issues Related to Notice u/s 148

NOTICE U/S 148
OF
INCOME TAX ACT 1961
18th June 2020
CA. PRAMOD JAIN
B. Com (H), FCA, FCS, FCMA, LL.B.
DISA, MIMA, IP
This document would help in better
understanding of critical issues related to
notice u/s 148 of the Income Tax Act, 1961
through various judicial pronouncements

CA. PRAMOD JAIN
B. COM (H), FCA, FCS, FCMA
LL.B, DISA, MIMA, IP
Income Tax- Notice u/s 148 Page 1
S. NO CONTENT PAGE NO.
1 Statutory Summary 2
2 Non-Service of Notice u/s 148 2
3 Barred by Limitations 4
4 Audit Objection 8
5 Reopening on the Basis of Valuation Report 10
6 Satisfaction by the Competent Authority (Fit Case) 11
7 Non-Application of Mind 13
8 Reasons not Recorded / Supplied or Invalid Reasons 17
9 Change of Opinion 23
10 Reassessment in pursuance of Order / Direction 25
11 Reason to Believe – Subsequent Years 25
12 Disposal of Objections raised by Assessee 26
13 Non–Service of Notice u/s 143(2) 26
14 Scope of Powers 29
15 Other Pronouncements 31

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STATUTORY SUMMARY
1. According to the provisions of section 148 of the Income Tax Act, 196 before making
assessment, reassessment or recomputation under section 147, the Assessing Officer has to
serve on the assessee a notice requiring him to furnish within such period, as may be specified
in the notice, a return of his income where the income has escaped assessment provided that
the Assessing Officer shall, before issuing any notice under this section, record his reasons for
doing so.
2. The reasons recorded by the Assessing Officer should by satisfied by the Principal Chief
Commissioner or the Principal Commissioner or the Chief Commissioner or the Joint
Commissioner the Commissioner, depending on the case, about the fitness of the case for
issuing notice under section 148 of the Income Tax Act, 1961.
3. Time limit for notice to be issued u/s148 is provided under section 149, which is as under:
a) Up to 4 years from the end of the relevant assessment year, unless the case falls in (b) or (c)
below
b) Exceeding 4 years but up to 6 years from the end of the relevant assessment year, if the
escaped income amounts to or is likely to amount to Rs. 1 Lakh or more for that year
c) Exceeding 4 years but up to up to 16 years from the end of the relevant assessment year, if
the income in relation to any asset (including financial interest in any entity) located outside
India, chargeable to tax, has escaped assessment.
Non - Service of Notice u/s 148
Notice u/s 148 of the Income Tax Act should be issued within the prescribed limit, if the notice is
not issued served to the appellant then the reassessment proceedings u/s 148 would be considered
invalid. Some of the judicial pronouncements are as follows:
1. Hon’ble Supreme Court in Y. Narayan Chetty vs. ITO (1959) 35 ITR 388 (SC); CIT vs.
Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC); and CIT vs. Kurban Hussain
Ibrahimji Mithiborwala (1971) 82 ITR 821 (SC) has held that the notice prescribed by

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section 148 cannot be regarded as a mere procedural requirement. It is only if the said
notice is served on the assessee that the ITO would be justified in taking proceedings
against the assessee. If no notice is issued or if the notice issued is shown to be invalid,
then the proceedings taken by the ITO would be illegal and void.
2. Hon’ble Delhi High Court in case of CIT vs. Hotline International Pvt. Ltd. (296 ITR
0333) has held that in the absence of a valid service of notice u/s 148 on the assessee, the
reassessment proceedings are bad in law.
3. Hon’ble Delhi High Court in case of CIT (Central)-I vs. Chetan Gupta ITA No.
1891/del/2012 dated 15.09.2015; 382 ITR 613 has held that no reassessment can take place
without service of notice being affected on the assessee or his authorized representative.
4. Hon’ble Punjab & Haryana High Court in case of CIT vs. Ceban India Ltd. ITA No. 85 of
2009, Jul 7, 2009 has held that in absence of notice being served, the AO had no
jurisdiction to make assessment.
5. Hon’ble Delhi High Court in case of CIT vs. Mani Kakkar (2009) 18 DTR (Del) 145 has
held that no notice u/s. 148 having been served on the assessee prior to re-opening of
assessment, assessment made u/s. 147 was bad in law; argument based on S. 292BB was
not sustainable on the facts of the case.
6. In Hon’ble Delhi High Court in CIT vs. Lunar Diamonds Ltd. ITA No. 62 of 2015; DHC
281 ITR 1 notice u/s. 148 of the Act was not received by the Assessee and the same was
sent on the wrong address and no attempt was made to serve the assessee at the correct
address. However, the correct address was mentioned in the income tax return, which was
not mentioned while sending the notice u/s. 148 of the Act, as a result thereof, the
reassessment proceedings and notice u/s. 147 r.w.s. 148 is illegal, bad in law, without
jurisdiction and time barred
7. Delhi ITAT Bench in case of DCIT vs. Mascomptel (India) Ltd., ITA No. 4672/Del/2009
held that in view of the facts above and the categorical stand of the assessee supported by
an affidavit that he did not receive any notice, the burden was on the AO to prove that it
was dispatched to the correct address. In this case, it was not even doing something out of
the ordinary, a mere glance at the address on the return or last years record or a little

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presence of mind when the assessee responded to a TDS verification notice could have
sorted the issued.
8. ITAT Delhi Bench “G”, in the case of Somlata Gahalaut, Noida Vs ITO, Ward-9(1), New
Delhi in ITA No. 413/Del/2013 has held that if notice is not issued by AO before
completion of reassessment, then reassessment order would be unsustainable.
9. Hon’ble Allahabad High Court in case of Universal Subscription Agency (P) Ltd vs.
JCIT (2007) 293 ITR 244 (All) has held that AO having accepted the claims of the
assessee for deduction u/s. 80-O on the basis of details furnished by the assessee, it cannot
be said that the assessee had not made full and true disclosure of all material facts for
claiming deduction and therefore notice u/s. 148 issued after expiry of 4 years from the end
of relevant assessment years were wholly illegal and without jurisdiction
10. Hon’ble Delhi High Court in case of CIT vs. Harish J. Punjabi (2008) 297 ITR 424 (Del.)
held that where notice was not sent by registered post nor served upon assessee in any other
manner whatsoever, proceedings for assessment were void.
11. Delhi ITAT Bench in case of ITO vs. Hepta Developers Pvt. Ltd. ITA No. 3608/ 2014 has
held that the notice u/s 148 and subsequent notices, were issued at a wrong address, due to
the mistake attributable to the Assessing Officer, in making due diligence of issuing the
notice at the correct address given in the return of income itself. The latest address of the
assessee was also available with the AO as return of income for assessment year 2010-11
and 2011-2012 also show the latest address. As the notice u/s 148 which is foundation of
the reassessment proceeding, was not served upon the assessee, the whole proceedings are
held as void- ab –initio. Under the circumstances, the action of the AO of making Best
Judgment assessment u/s 144, in respect of which evidently no material was gathered by
the AO, is not sustainable. In view of this, the additions made by the AO are not sustainable.
Barred by Limitations
As the issuance of the s. 148 notice has to be within the time limits of s. 149. If the same is not
done, then the notice u/s148 is invalid. Also, where there is no failure on the part of assessee to
disclose fully and truly all material facts necessary for assessment, reopening of assessment is
barred by limitation. Some of the case laws on the same are as follows:

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Some of the judicial pronouncements are as follows:
1. Hon’ble High Court of Punjab and Haryana in the case of Mohinder Singh Malik vs. CIT
& ORS., (2003) 71 CCH 0239 PHHC dated Mar 11, 2003; 267 ITR 0716 has held that
since the reasons recorded by the AO under s. 148 could not lead to the conclusion that the
escaped income was likely to be more than Rs. 1 lac, the impugned notice under s. 148
issued after expiry of four years from the end of the relevant assessment year could not be
sustained in view of bar of limitation under s. 149, irrespective of the fact that sanction was
obtained under s. 151.
2. Hon’ble Delhi High Court in case of Haryana Acrylic Manufacturing Co. vs.
Commissioner of Income Tax & ANR., Writ Petn. No. 4074 of 2007, Nov 3, 2008 (308
ITR 0038) it was held that AO while making assessment under s. 143(3) having made
specific queries with regard to share application money in response to which assessee
furnished all relevant documents and after considering this material, AO having completed
the assessment, it could not be said that income escaped assessment on account of failure
on the part of assessee to disclose fully and truly all material facts necessary for assessment,
hence reopening of assessment after expiry of four years from the end of the relevant
assessment year was invalid. There being no whisper in the reasons supplied to assessee
that income escaped assessment by reason of assessee’s failure to make a full and true
disclosure of all material facts necessary for assessment, notice u/s. 148 issued beyond four
years from the end of relevant asst. year was barred by limitation under proviso to S. 147,
hence without jurisdiction.
3. Hon’ble High Court of Bombay in case of Hindustan Lever ltd. Vs. R.B. Wadkar (writ
petn. No. 1505 of 2003) dated Feb 25, 2004; 268 ITR 0332 has held that reasons recorded
by AO nowhere stating that there was failure on the part of assessee to disclose fully and
truly all material facts necessary for assessment, reopening of assessment made under s.
143(3) after expiry of four years from the end of the relevant assessment year was invalid.
4. Hon’ble Supreme Court of India in case of New Delhi Television Ltd. Vs. DCIT, Civil
Appeal no. 1008 of 202, Apr 3, 2020 has held that the revenue cannot take benefit of the

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extended period of limitation of 6 years if it is found that the assessee had fully and truly
disclosed all material facts necessary for its assessment.
5. Hon’ble Bombay High Court in case of Bhor Industries Ltd. Vs. ACIT & ORS., Writ Petn.
No. 1909 of 2002, Feb 26, 2003 (264 ITR 0180) has held that assessee having filed its
annual report before the AO indicating spread over of the expenditure incurred on
voluntary retirement scheme over a period of 60 months and the AO having granted
deduction to the extent of amount written off during the relevant year acting on that report,
there was no failure on the part of the assessee to disclose fully and truly the material facts
and, therefore, reopening of assessment after expiry of four years was not valid.
6. Hon’ble High Court of Calcutta in case of Amiya Sales &Industries & ANR. vs. ACIT &
ORS., Writ Petn. No. 291 of 2000, Sep 14, 2004; 274 ITR 0025 has held that in the absence
of any omission or failure on the part of the assessee to disclose fully and truly all material
facts, AO could not assume jurisdiction to reopen the assessment after expiry of four years
from the end of relevant assessment years merely on the basis of incorrect interpretation of
accounts by him at the time of original assessment under s. 143(3).
7. Hon’ble High Court of Madras in case of CIT vs. Elgi Finance Ltd., (Appeal) Nos. 65 &
66 of 2003, Mar 14, 2006; 286 ITR 0674 has held that assessee-company having fully and
truly disclosed all material facts necessary for working out the quantum of depreciation,
notices under s. 148 issued after expiry of four years from the end of the relevant
assessment years to withdraw the excess depreciation allowed to the assessee were barred
by limitation and illegal.
8. Delhi ITAT Bench in case of Richa Industries Ltd. Vs. ACIT, ITA No. 1476/Del/2014,
Mar 14, 2017 has held that reassessment proceedings u/s 147 r.w.s 148 of the Act cannot
be initiated after expiry of 4 years from end of relevant assessment year unless there is
failure on part of assessee to disclose fully and truly all material facts.
9. ITAT Delhi bench in Sh. Balwant Rai Wadhwa vs. ITO [2011-ITRV-ITAT-DEL-024}
ITA No. 4806/Del/10 pronounced on 14th January 2011 discussing Haryana Acrylic case
has held that despite service of s. 148 Notice in time, non-supply of ‘Reasons for
Reopening’ within time renders the reopening void. A notice u/s 148 without the

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communication of the reasons therefore is meaningless inasmuch as the AO is bound to
furnish the reasons within a reasonable time. Where the notice has been issued within the
said period of six years but the reasons have not been furnished within that period is hit by
the bar of limitation because the issuance of the notice and the communication and
furnishing of reasons go hand-in-hand.
10. Hon’ble Delhi High Court in case of Wel Intertrade (P) Ltd. & Anr. vs. ITO (2009) 308
ITR 22 it was held that assessee having fully and truly disclosed all the material facts
necessary for the assessment as required by the AO the precondition for invoking the
proviso to S. 147 was not satisfied and therefore AO acted wholly without jurisdiction in
issuing notice u/s. 148 beyond four years period mentioned in S. 147.
11. Hon’ble Delhi High Court in case of CIT vs. Kapil Dev (2009) 177 Taxman 6 (Del) has
held that Tribunal having concluded that all the material facts were fully and truly disclosed
by the assessee at the time of original assessment, invocation of provisions of S. 147 after
the expiry of four years from the end of the relevant asst. year was not valid.
12. Hon’ble Delhi High Court in case of Sita World Travels (India) Ltd vs. CIT (2005) 274
ITR 186 (Del) has held that AO who allowed assessee is claim for deduction under S.
80HHD was well above of the primary facts and therefore assessments could not be
reopened after the expiry of four years on the ground that income had escaped assessment
on account of excessive relief u/s. 80HHD.
13. Hon’ble Gujarat High Court in case of Gujarat Fluorochemicals Ltd. vs. DCIT (2008) 15
DTR (Guj) has held that assessee having made full disclosure of material facts in the return
which was accompanied by several enclosures, assessment could not be reopened beyond
four years from the end of the relevant asst. year for the reason that certain income has
been wrongly assessed under the head ‘Capital gains’ instead of ‘Profits and gains’ of
business or profession.
14. Hon’ble Allahabad High Court in case of Universal Subscription Agency (P) Ltd. vs. JCIT
(2007) 293 ITR 244 (All) has held that A.O. having accepted the claim of the assessee for
deduction u/s. 80-O on the basis of details furnished by the assessee it cannot be said that
the assessee had not made full and true disclosures of all material facts for claiming

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deduction and therefore, notices u/s. 148 issued after expiry of 4 years from the end of
relevant asst. year were wholly illegal and without jurisdiction.
15. In CIT vs. Tirathram Ahuja (HUF) (2008) 6 DTR (Del) 335 has held that there was no
failure on the part of assessee to disclose a material fact where rateable value of the property
was enhanced by the Municipal Corporation after assessment for assessment year 1991–
92 to 1993-94 had been computed, hence reopening of assessment after expiry of four years
from the end of relevant assessment year was barred by the proviso to S. 147.
16. Hon’ble Bombay High Court in the case of Smt. Mira Ananta Naik (2009) 183 Taxman
40 (Bom.) has held that merely because block assessment is time barred, the department
cannot have reasons to believe that income has escaped assessment and assessment for a
particular year cannot be re-opened on that ground.
17. Hon’ble Delhi High Court in case of Techspan India (P) Ltd & Anr vs. ITO (2006) 283
ITR 212 (Del) has held that an assessment order passed after detailed discussion cannot be
reopened within a period of 4 years unless the AO has reason to believe due to some
inherent defect in the assessment.
18. - German Remedies Ltd vs. DCIT & Ors. (2006) 285 ITR 26 (Bom)
- Techspan India (P) Ltd & Anr vs. ITO (2006) 283 ITR 212 (Del)
In both of the above cases it was held that an assessment order passed after detailed
discussion cannot be reopened within a period of 4 years unless the AO has reason to
believe due to some inherent defect in the assessment.
Audit Objection
Re-opening on the basis of audit objection is invalid. Some of the case laws on the same are as
follows:
1. Hon’ble Gujarat High Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. vs.
ACIT (2006) 284 ITR 593 (Guj) has held that AO having reopened the assessment at the
benefit of the Audit department while disagreeing with the later objection and without
entertaining his own belief that the income of the assessee had escaped assessment on the

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ground that assessee had claimed loss on the basis of erroneous computation as indicated
by the audit party reopening is not sustainable, notice u/s. 148 quashed.
2. Hon’ble Bombay High Court in the case of Asian Cerc Information Services (P) Ltd vs.
ITO (2007) 293 ITR 271 (Bom) has held that A.O. having communicated to the auditor
that a certain decision of a High Court did not apply to the facts of the petitioner case but
later rejected the objections raised by the petitioner to the notice u/s. 148 taking a contrary
view without giving any reasons as to why he has departed from the earlier view that the
decision was not applicable there was total non-application of mind on the part of the AO,
impugned communication is set aside and the matter is remanded back to the AO for de
nevo consideration.
3. Hon’ble Gujarat High Court in the case of Adani Exports vs. DCIT (1999) 240 ITR 224
(Guj) has held that reassessment was not valid as the AO held no belief on his own at any
point of time that income of assessee had escaped assessment on account of erroneous
computation of benefit u/s 80HHC and was constrained to issue notice only on the basis of
audit objection.
4. Hon’ble Supreme Court in the case of Indian & Eastern Newspaper Society vs. CIT
(1979) 119 ITR 996 (SC) has held that Audit Objection cannot be the basis for reopening
of assessment to income tax by the revenue.
5. Hon’ble Supreme Court in CIT vs. Lucas T.V.S. Ltd. (2001) 249 ITR 306 (SC) has held
that Rectification and reassessment due to audit objection on interpretation law, cannot be
the basis for reopening of assessment.
6. Hon’ble Bombay High Court in the case of IL & FS Investment Managers Ltd. vs. ITO
& Ors (2008) 298 ITR 32 (Bom); Vijaykumar M. Hirakhanwala (HUF) vs. ITO &
Ors (2006) 287 ITR 443 (Bom) has held that AO having allowed assessee’s claim for
depreciation in the regular assessment and reopened the assessment pursuant to audit
objection, it cannot be said that he had formed his own opinion that the income had escaped
assessment, and the reopening being based on mere change of opinion, same was not valid.

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Re-opening on basis of Valuation Report
Re-opening on the basis of Valuation Report is invalid. Some of the case laws on the same are as
follows:
1. Hon’ble Supreme Court of India in ACIT vs. Dhariya Construction Co., Feb 16, 2010 47
DTR 0288; (2010) 236 CTR 0226; (2010) 328 ITR 0515 has held that opinion of District
Valuation Officer (DVO) per se is not an information for purposes of reopening of an
assessment under section 147; Assessing Officer has to apply his mind to information, if
any, collected and must form a belief thereon.
2. Hon’ble Madhya Pradesh High Court in the case of Prakash Chand vs. Dy. CIT & Ors
(2004) 269 ITR 260 (MP) has held that AO had no jurisdiction to reopen the concluded
assessments on the strength of valuation report of valuation officer obtained subsequently
and that too not in exercise of powers u/s. 55A impugned notices under S. 148 quashed.
3. Hon’ble Allahabad High Court in the case of Girdhar Gopal Gulati vs. UOI (2004) 269
ITR 45 (All) has held that Assessing Authority having made a detailed enquiry before
making the assessment of the petitioner u/s. 143(3) the impugned notice u/s. 148 was issued
only on the basis of change of opinion and was therefore, invalid, notice was also illegal
on the ground that it was based on the valuation report of cost of construction.
4. Hon’ble Rajasthan High Court in the case of CIT vs. Smt. Meena Devi Mansinghka (2008)
303 ITR 351 has held that mere DVO’s report cannot constitute reason to believe that
income has escaped assessment for the purpose of initiating reassessment and therefore
Tribunal was justified on holding that the reassessment proceedings initiated on the basis
of DVO’s report were invalid ab initio, more so when it has found that the DVO’s report
suffers from various defects and mistakes.
5. Hon’ble Gujarat High Court in the case of Manjusha Estate Pvt. Ltd. v ITO (2009) 314
ITR 263 (Guj) has held that reference to the valuation officer only in the course of the
assessment. Reopening on the basis of valuation report not valid.
6. Hon’ble Calcutta High Court in the case of ITO vs. Santosh Kumar Dalmia (1994) 208
ITR 337 (Cal.)has held that where apart from the valuation report which was relied upon
by the ITO there was no material before him to come to the prima facie conclusion that the

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assessee had received the higher consideration than what had been stated in the sale deed,
reassessment would not be justified.
7. Hon’ble Bombay High Court in the case of Western Outdoor Interactive (P) Ltd. vs. A.K.
Phute, ITO & Ors (2006) 286 ITR 620 (Bom) has held that Dept. having taken one of the
two possible views in the matter of calculation of deduction u/s. 10B and 80HHE
assessment cannot be reopened by taking the other view more so when the CIT(A) has
already quashed the rectification u/s. 154 which was made on the very same ground.
8. Hon’ble Allahabad High Court in the case of Smt. Jamila Ansari vs. ITO & Anr (1997)
225 ITR 490 (All) held that allowance u/s. 80HHC having been granted by the ITO in
rectification proceedings the remedy against lay with the dept. either u/s. 154 or S. 263 and
not S. 147 further reassessment having been made on a date earlier than fixed same was
bad. Alternative remedy was no bar for the maintainability of writ in such circumstances.
Satisfaction by the Competent Authority (Fit Case)
Notice u/s 148 of the Income Tax Act can be issued only after the CCIT or CIT, as the case may
be, has recorded his satisfaction with the reasons recorded by the AO of the rank of an ITO or the
ACIT or the DCIT that it is a fit case for reopening. Some of the case laws on the same are as
follows:
1. Hon’ble Delhi High Court in case of CIT vs. GEE KAY Finance & Leasing Co. Ltd. ITA
935/2009, Feb 8, 2018 (401 ITR 0472) has held that after expiry of 4 years from end of
relevant assessment year, scrutiny assessment could be re-opened only with approval of
Chief Commissioner or Commissioner.
2. ITAT Delhi in case of Tara Alloys Ltd. vs. ITO, ITA No. 2421/Del/2017 dated Mar 1,
2018 (63 ITR (Trib) 0484) held that Hon’ble Delhi High Court in the case of United
Electrical Co. Pvt. Ltd. Vs CIT 258 ITR 317 has held that the proviso to sub-section (1) of
section 151 of the Act provides that after the expiry of four years from the end of the
relevant assessment year, notice under section 148 shall not be issued unless the Chief
Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons
recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice.

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Therefore Section 151 guards that the sword of Sec. 147 may not be used unless a superior
officer is satisfied that the AO has good and adequate reasons to invoke the provisions of
Sec. 147.
3. Hon’ble Calcutta High Court in case of East India Hotels Ltd. Vs. DCIT & ORS., Matter
No. Nil of 1991 dated Feb 13, 1992 (204 ITR 0435) has held that where notice is issued
after the expiry of four years after the end of the relevant assessment year under s. 148,
Chief CIT or the CIT must be satisfied with the reasons recorded by the AO of the rank of
an ITO or the Asstt. CIT or the Dy. CIT that it is a fit case for reopening. Satisfaction of
CIT is a sine qua non, therefore, notice issued under s. 148 beyond four years after the end
of the relevant assessment year is bad in law in as much as the sanction of the Chief CIT
or the CIT was not obtained before issuance of the notice.
4. Hon’ble High Court of Allahabad in case of Dr. Shashi Kant Garg vs. CIT & ORS., Civil
Misc. Writ Petn. Nos. 533, 534, 539 & 540 of 2002 dated Aug 10, 2005; 285 ITR 0158
has held that if the assessment has been made under sub-s. (3) of s. 143 or s. 147 and the
proceedings for reassessment are to be initiated after the period of four years, then the
notice can be issued only after the Chief CIT or CIT, as the case may be, has recorded his
satisfaction for issuance of notice as provided under the proviso to sub-s. (1) of s. 151;
impugned notice under s. 148 issued after the expiry of four years from the end of the
relevant assessment year without obtaining the prior sanction of the Chief CIT or the CIT
was invalid and entire proceedings taken in pursuance of said notice are set aside.
5. Hon’ble High Court of Rajasthan in case of CIT vs. Shree Rajasthan Syntex Ltd. (2009)
212 Taxation 275 (Raj.) held that reopening is not permissible on borrowed satisfaction of
another Assessing Officer.
6. Hon’ble Delhi High Court in case of CIT vs. Gee Kay Finance & Leasing Co. Ltd. ITA
935/2009, Feb 8, 2018; 401 ITR 0472 has held that after expiry of 4 years from end of
relevant assessment year, scrutiny assessment could be re-opened only with approval of
Chief Commissioner or Commissioner.
7. Hon’ble High Court of Delhi in the case of United Electrical Company (P) Ltd. vs. CIT &
ORS., Civil writ petn. no. 5746 & CM No. 9769 of 2002, Oct 10, 2002 (258 ITR 0317)
held that as per under s. 147 was being initiated after the expiry of four years from the end

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of the relevant assessment year. The legislature has provided certain safeguards to prevent
arbitrary exercise of powers by an AO, particularly after a lapse of substantial time from
completion of assessment. The power vested in the CIT to grant or not to grant approval is
coupled with a duty. The CIT is required to apply his mind to the proposal put up to him
for approval in the light of the material relied upon by the AO. The said power cannot be
exercised casually and in a routine manner. We are constrained to observe that in the
present case, there has been no application of mind by the Addl. CIT before granting the
approval.
Non-Application of Mind
According to section 148 reopening is bad in law, where there is non-application of mind by
Assessing Officer. Some of the judicial pronouncements on the same is as follows:
1. Hon’ble High Court of Delhi in case of Best Cybercity (India) Pvt. Ltd. vs. ITO & ANR.,
dated May 21, 2019; 178 DTR 0409 (Del); (2019) 414 ITR 0385 held that there was no
fresh tangible material on the basis of which the AO could have formed an opinion about
any taxable having escaped assessment during the AY in question. Also, the reasons
recorded by the AO for re-opening the assessment do not refer to the said facts. It merely
repeats the language of Section 147 that there was a failure by the assessee to disclose fully
and truly all material facts necessary for the assessment. The Court is, therefore, satisfied
that the jurisdictional requirement of the first proviso to Section 147 proviso has not been
satisfied in the present case.
2. Hon’ble Delhi High Court in case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. ITA
692/2016 dated May 26, 2017, (2017) 99CCH 0028 DelHC; 395 ITR 677; 154 DTR 0100
(Del); (2017) 395 ITR 0677 (Delhi)) has held that there is no independent application of
mind by the AO to the tangible material which forms the basis of the reasons to believe
that income has escaped assessment. The conclusions of the AO are at best a reproduction
of the conclusion in the investigation report. Indeed, it is a 'borrowed satisfaction'. The
reasons fail to demonstrate the link between the tangible material and the formation of the
reason to believe that income has escaped assessment.

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3. In Delhi High Court in case of Agya Ram vs. CIT ITA No. 290/2004(2016) 386 ITR 0545
(Delhi) dated 01.08.2016 it was emphasized that the reasons to believe "should have a link
with an objective fact in the form of information or materials on record…" It was further
emphasized that “mere allegation in reasons cannot be treated equivalent to material in
eyes of law. Mere receipt of information from any source would not by itself tantamount to
reason to believe that income chargeable to tax has escaped assessments.”
4. Kolkata ITAT bench ‘SMC’ in Subodh Chandra Das vs. ITO, ITA no. 2246 &
2247/Kol/2019, Mar 4, 2020 has held that reopening is bad in law, where there is non-
application of mind by Assessing Officer to information received from investigation wing.
5. Delhi ITAT bench ‘SMC’ in Goel was (P) Ltd. vs. ITO, ITA no. 2075/del/2018, Jan 7,
2020 has held that mere information received from DDIT(Inv) cannot constitute valid
reasons for initiating reassessment proceedings in the absence of anything to show that AO
had independently applied his mind to arrive at a belief that the income had escaped
assessment.
6. The Hon’ble Delhi High in case of Yum Restaurants Asia Pte. Ltd. vs. Deputy Director
Income Tax, W.P.(C) 614/2014, Aug 31, 2017; 397 ITR 0665 (Delhi), has held that where
authorities appeared to have concurred with reasons for reopening assessment without
applying their mind, reopening of assessment would be invalid
7. Hon’ble High Court of Delhi in case of CIT vs. Batra Bhatta Company, IT appeal no. 109
of 2008, Aug 8,2008; 13 DTR 0115; (2008) 220 CTR 0531; (2010) 321 ITR 0526 has held
that mere belief of the AO that certain issue requires ‘much deeper scrutiny’, in the absence
of any material or reason for such belief, is not enough for invoking S. 147.
8. Hon’ble High Court of Delhi in case of CIT Vs. Insecticides (India) Ltd., ITAS 608/2012
& 609/2012 dated May 20, 2013; 357 ITR 0330 has held that reasons recorded by AO do
not disclose AO’s mind as to what was nature and amount of entries, which had been given
or taken by assessee in relevant year. The reasons recorded by the AO for initiating
proceedings u/s 147 of the Act are to be examined for sustaining or setting aside a notice
issued u/s 148. Reasons are required to be read as they are recorded by AO. No substitution
or deletion is permissible.

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9. The Hon’ble Delhi High Court in case of Sabh Infrastructure Ltd. vs. ACIT, W.P.(C)
1357/2016 Sep 25,2017; 398 ITR 0198 (Delhi), has held that where assessee could not be
said to have failed to disclose fully and truly all material facts then assumption of
jurisdiction under Sections 147 and 148 of the Act was erroneous and notice issued for
reassessment should be quashed.
10. Hon’ble Delhi High Court in the case of PCIT vs. G&G Pharma India Ltd I.T.A.
No.545/2015 (2016) 384 ITR 0147 (Delhi) dated 8th October 2015, has held that when
basic requirement that AO must apply his mind to materials on record in order to have
reasons to believe that income of the assessee escaped assessment was missing, reopening
of assessment not justified.
11. Delhi High Court in the case of Signature Hotels (P) Ltd. vs. ITO dated 21.07.2011 [2011]
338 ITR 51 (Del.); 60 DTR 0030 has held that it was apparent that the Assessing Officer
did not apply his own mind to the information and examine the basis and material of the
information. The Assessing Officer accepted the plea on the basis of vague information in
a mechanical manner. The Commissioner also acted on the same basis by mechanically
giving his approval. Therefore, the proceedings under section 148 were to be quashed.
12. Hon’ble High Court of Delhi in CIT vs. SFIL Stock Broking Ltd., appeal no. 1056 of
2009, Apr 27, 2010; (2010) 325 ITR 285 (Del) has held that mere information received
from the Dy. Director of IT (Inv.) and directions of the said officer and the Addl. CIT to
initiate proceedings under s. 147 cannot constitute valid reasons for initiating reassessment
proceedings in the absence of anything to show that the AO has independently applied his
mind to arrive at a belief that income has escaped assessment.
13. Hon’ble High Court of Bombay in Asian Cerc Information Services (P) Ltd vs. ITO
(2007) 293 ITR 271 (Bom) has held that AO having communicated to the auditor that a
certain decision of a HC did not apply to the facts of the petitioners case but later rejected
the objections raised by the petitioner to the notice u/s. 148 taking a contrary view without
giving any reason as to why he has departed from the earlier view that the decision was not
applicable, there was total non-application of mind on the part of AO; matter remanded
back to AO for de novo consideration.

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14. Hon’ble High Court of Delhi in case of Sarthak Securities Co. (P) Ltd. Vs. ITO, writ petn.
No. 6087 of 2010, Oct 18, 2010; 47 DTR 0201; (2010) 236 CTR 0362; (2010) 329 ITR
0110 has held that where the identity of the companies who had invested in the shares of
petitioner-company was not disputed and neither the reasons in the initial notice nor the
communication providing reasons remotely indicated independent application of mind by
AO, reassessment proceedings were unwarranted and notice issued under s. 148 was liable
to be quashed. Before the Income Tax Officer can assume jurisdiction to issue notice u/s
147(a), two distinct conditions must be satisfied. First, he must have reason to believe that
the income of the assessee has escaped assessment and secondly, he must have reason
to believe that such escapement is by reason of the omission or failure on the part of the
assessee to disclose fully and truly all material facts necessary for his assessment. Held
that neither of the two conditions necessary for attracting the applicability of s. 147 (a) was
satisfied in the present case and the notice issued by the ITO must be held to be without
jurisdiction.
15. Hon’ble Supreme Court of India in case of Chhugamal Rajpal vs. S.P. Chaliha &ORS.179
ITR 603(SC), Jan 21, 1971 has held that notice under s. 148 to initiate proceeding for
reassessment was to be quashed as it was issued mechanically without satisfying the
requirements of s. 147 and s. 151.
16. Hon’ble ITAT Agra in case of Deepraj Hospital vs. ITO, 41/Agra/2017, dated 01.06.2018;
65 ITR (Trib) 0663 (Agra) has held that if the reopening is based on information received
from the investigation dept, the reasons must show that the AO independently applied his
mind to the information and formed his own opinion. If the reopening is done
mechanically, it is void. Also, if the reasons refer to any document, a copy should be
provided to the assessee. Failure to do so results in breach of natural justice and renders
the reopening void.
17. Delhi ITAT in case of ACIT vs. M/s. Pankaj Gas Cylinders Ltd. ITA No.
5273/del/2013dated 3rd May 2016 has held that the AO has not applied his mind so as to
come to an independent conclusion that he has reason to believe that income has escaped
during the year, hence the order deserves to be quashed.

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Reasons not Recorded/ Supplied or Invalid Reasons
Furnishing the reasons recorded for reopening of the assessment is mandatory condition. If no
reasons have been supplied by the Ld. AO to the appellant, the whole reassessment proceedings
u/s 147 was invalid. Further the reasons recorded could be invalid for opening the proceedings u/s
147. Some of the judicial pronouncements on the same are as follows:
1. Hon’ble Karnataka High Court in case of Kothari Metals (writ appeal no.218/2015, order
dated 14th August 2015 377 ITR 0581 has held that the question of non-furnishing the
‘Reasons’ for reopening an already concluded assessment goes to very root of the matter,
and that the assessee is entitled to be furnished the ‘Reasons’ for such reopening and that
if ‘Reasons’ are not furnished to the assessee, then the proceedings for the reassessment
cannot be taken any further, and reopening of the assessment would be bad in law.
2. Hon’ble Bombay High Court in case of CIT v. Videsh Sanchar Nigam Ltd. 340 ITR 66,
order dated 20th July, 2011 has held that in case reasons are not furnished by the AO to
the assessee, before completion of reassessment proceedings, reassessment order cannot
be upheld. It is further noted that SLP filed by the Revenue against the order of Hon’ble
Bombay High court, has been rejected by Hon’ble Supreme Court.
3. Hon’ble High Court of Delhi in case of Pr. CIT Vs. Jagat Talkies Distributors order dated
Aug 29, 2017; 398 ITR 0013 has held that where AO has failed to furnish reasons for
reopening of assessment u/s 148 to assessee, reassessment proceedings is not justified.
4. The Hon’ble Delhi High Court in the case of Pr CIT v. RMG Polyvinyl (I) Ltd. ITA29/2017
& CM No. 10/09/2017; 396 ITR 0005 (Delhi), has held that the Court is unable to discern
the link between the tangible material and the formation of the reasons to believe that
income had escaped assessment. In the present case too, the information received from the
Investigation Wing cannot be said to be tangible material per se without a further inquiry
being undertaken by the AO. In the present case the AO deprived himself of that
opportunity by proceeding on the erroneous premise that Assessee had not filed a return
when in fact it had.
5. Hon’ble Punjab & Haryana High Court in CIT vs. Rajindra Rosin & Turpentine
Industries. (2008) 305 ITR 161 (Punj. & Har.) has held that recording of reasons is a
condition precedent to invoke jurisdiction under section 147/148

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6. Hon’ble Gujarat High Court in Rajoo Engineers vs. Dy. CIT (2008) 218 CTR (Guj.) 53
has held that language of section 148(2) does not permit recording of reasons between date
of issuance of notice and service of notice, words used by provisions in no uncertain terms
require recording of reasons before issuing any notice.
7. Hon’ble High Court of Delhi in case of CIT vs. Atul Jain299 ITR 383 (Del.) IT Appeal
No. 1384 of 2006, May 23, 2007 (299 ITR 0383) held that mere statement of facts in the
form of report is no substitute for reasons that are required to be recorded before issuing
notice under s. 148. In the absence of reasons recorded mere writing of "yes" by the CIT
in the appropriate column would not save the proceedings from being vitiated. AO has not
even recorded his satisfaction about the correctness or otherwise of the vague or scanty
information or his satisfaction that a case is made out for issuing notice under s. 148.
Reopening and the consequential assessment rightly quashed
8. ITAT Pune in case of M/s Gangabisan Muralidhar Maniyar vs. ITO, ITA No.
2340/Pun/2017, dated 18.03.2019 has held that recorded reasons as laid down by the Apex
Court must be furnished to the assessee when sought for so as to enable the assessee to
object to the same before the AO. It has further held that the recording of reasons and
furnishing of the same has to be strictly complied with as it is a jurisdictional issue and in
the absence of reasons being furnished when sought for would make an order passed on
reassessment bad in law.
9. ITAT Chennai in case of Shri Janak Shantilal Mehta Vs. Asstt. CIT, ITA no.
1372/Mds/2017, dated 10.01.2018 has held that the reasons recorded having not been given
to the assessee before the completion of the assessment, the re-assessment is invalid and
liable to be annulled.
10. ITAT Mumbai in case of Tata International Ltd. Vs. DCIT [2012] 52 SOT 465 (Mum)
order dated Jun,29,2012 has held that Assessing Officer has failed to furnish the reasons
recorded for reopening of the assessment within the reasonable time and rather prior to the
completion of assessment, than the reassessment order passed without supply of reasons as
recorded for reopening of the assessment, is invalid and cannot sustain. Accordingly, we
set aside the reassessments for all 3 years under consideration being invalid.

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11. Hon’ble ITAT Delhi Bench in case of DCIT & ANR. Vs. Tupperware India Pvt. Ltd. &
ANR., ITA No. 2140/Del/2011 & 1323/Del/2012, C.O. No.191/Del/2011 & 168/Del/2012
dated Aug 29, 2014 has held that where there is no fresh material in possession of
Assessing Officer, reassessment proceedings are not valid. Assessing Officer had formed
an opinion regarding escapement of income on basis of audit report which was a part of
return and which was already available with Assessing Officer. Thus, reassessment
proceedings were not legally initiated and, therefore, assessment order passed in
consequence thereof is liable to be quashed.
12. Hon’ble ITAT Kolkata Bench ‘C’ in case of Classic Flour & Food Processing Vs. CIT,
ITA Nos.764 to 766/Kol/2014, Apr 5, 2017 has held that it is for the AO to disclose and
open his mind through reasons recorded by him. He has to speak through his reasons. It is
for the AO to reach to the conclusion as to whether there was failure on the part of the
assessee to disclose fully and truly all material facts hence initiation of reassessment
proceedings u/s 147 r/w/s 148 without satisfying mandatory requirements of s. 147 but
merely for the purpose of verification and examination which is not the scope of re-
assessment proceedings, is invalid and thus, liable to be quashed.
13. Hon’ble Bombay High Court in case of PCIT vs. M/s Shodiman Investments Private
Limited, ITA no. 1297/2015, dated 16.04.2018; 167 DTR 0290 (Bom) has held that if
material is not linked by any reason to come to conclusion that assessee has indulged in
any activity which can give rise to reason to believe on part of AO that income chargeable
to tax had escaped Assessment, then re-opening of assessment is not sustainable in law and
should not be allowed.
14. ITAT Kolkata in case of Sri Bikramjit Paul Vs. DCIT, ITA no. 1466/kol/2016, order dated
01.03.2017 has held that as the reasons for reopening of assessment have not been
furnished by the assessee despite request for the same, the assessment order passed under
section 148 read with section 143(3) is quashed as illegal.
15. Hon’ble Bombay High Court in case of Pr.CIT Vs. Shodiman Investments (P) Ltd. (2018)
93 order Apr,16, 2018; 167 DTR 0290 has held that that at the time of re-opening of the
Assessment, the Assessing Officer did not provide the reasons recorded in support of the
re-opening notice in its entirety, to the Respondent-Assessee. The entire objects of reasons

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for reopening notice as recorded being made available to an Assessee, is to enable the
Assessing Officer to have a second look at his reasons recorded before he proceeds to
assess the income, which according to him, has escaped Assessment. In fact, non-
furnishing of reasons would make an Assessment Order bad as held by this Court in CIT
v. Videsh Sanchar Nigam Ltd. [2012] 21 taxmann.com 53, 340 ITR 66. In fact, partial
furnishing of reasons will also necessarily meet the same fate i.e. render the Assessment
Order on reopening notice bad. Therefore, on the aboveground itself, the question as
proposed does not give rise to any substantial question of law as it is covered by the
decision of this Court in Videsh Sanchar Nigam Ltd.’s case (supra) against the Revenue in
the present facts.
16. Hon’ble High Court of Bombay in case of CIT vs. Trend Electronics, ITA No. 1867 of
2013 order dated Sep 16, 2015 (379 ITR 0456) has held that where assessee had sought
for reasons for reopening notice from the AO but reasons were not furnished to the assessee
before the completion of the reassessment proceedings then the reassessment proceedings
were bad in law.
17. Hon’ble Supreme Court in Raymond Woollen Mills Ltd. vs. ITO & Ors (1999) 236 ITR
34 (S.C.) held that in determining whether commencement of reassessment proceedings
was valid it has only to be seen whether there was prima facie some material on the basis
of which the department could reopen the case. The sufficiency or correctness of the
material is not a thing to be considered at this stage.
18. ITAT Hyderabad in case of Jasti Rama Rao Vs. Income Tax Officer, ITA No.
630/HYD/2007; Asst. yr. 2000-01 dated Jan 29, 2010 has held that reasons not disclosing
by what process of reasoning the AO held a belief that income has escaped assessment,
AO having not complied with the mandatory requirement of recording the reasons before
issue of notice under s. 148, reassessment is invalid. Reasons recorded by the AO must
disclose prima facie facts which would justify the issuance of the notice and reasons should
be obvious as to how the mind of the AO worked when he issued notice for reopening of
assessment. Reasons do not indicate any material on record which lead to believe that the
assessee had any income from the crusher unit which escaped assessment. Reassessment
based on such notice is invalid.

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19. Hon’ble Calcutta High Court in Indra Co. Ltd. v. ITO (1971) 80 ITR 559 (Cal.) has held
that the ITO cannot seek to reopen an assessment under section 147 on the basis of the
Supreme Court decision in a case where assessee had disclosed all material facts.
20. Hon’ble Bombay High Court in Dr. H. Habicht v. Makhija (1985) 154 ITR 552 (Bom.)
has held that the mere fact that the ITO was not aware of the circular of the board is not
sufficient to reopen the assessment.
21. Hon’ble Guwahati High Court in Assam Co. Ltd vs. UOI & Ors (2005) 275 ITR 609 (Gau)
has held that reopening of assessment on the basis of wrong interpretation of High Court
decision was invalid.
22. Hon’ble Calcutta High Court in S.P. Agarwalla Alias Sukhdeo Prasad Agarwalla vs. ITO
(1983) 140 ITR 1010 (Cal) held that Statements by the third party cannot form the basis. A
mere confessional statement by the third party (who is the lender of the assessee) that he
was the mere name lender and that all his transactions of loans were bogus, without naming
the assessee as one who had obtained bogus loans, would not be sufficient to hold that the
assessee’s income had escaped assessment
23. Hon’ble Supreme Court in S. Narayanappa vs. CIT (1967) 63 ITR 219 (SC) and in
Discount Co. vs. ITO (1961) 59 (SC) 41 ITR 191 has held that information for
reassessment should be based upon good faith and not mere pretense or purely subjective
satisfaction
24. Hon’ble Bombay High Court in Western Outdoor Interactive (P) Ltd. vs. ITO (2006)
286 ITR 620 (Bom) has held that Dept. having taken one of the two possible views in the
matter of calculation of deduction u/ss. 10B and 80HHE assessment cannot be reopened
by taking the other view, more so when the CIT(A) has already quashed the rectification
u/s. 154 which was made on the very same ground.
25. Hon’ble Gujarat High Court in Praful Chunilal Patel vs. M.J. Makwana, ACIT (1999)
236 ITR 832 (Guj); and JCIT & Ors vs. George Williamson (Aassam) Ltd. (2002) 258
ITR 126 (Guj) has held that in the absence of any material before the AO a statement by
an unconnected person did not constitute reason to believe that assessee income had
escaped assessment especially when the assessee had produced all the material and relevant
facts and therefore the reassessment proceedings could not be sustained.

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26. Hon’ble Gujarat High Court in Bakulbhai Ramanlal Patel v. ITO (2011) 56 DTR (Guj.)
212, has held that wherein Division Bench of this Court observed that the assessment
cannot be reopened to verify whether any income chargeable to tax has escaped assessment
and further that reopening of assessment cannot be permitted on vague and nonexistent
reasons for a mere fishing inquiry.
27. Delhi ITAT bench ‘SMC’ in Giggle infotech pvt. Ltd. Vs. ITO, ITA no. 1284/DEL/2018,
Jan 1, 2020 has held that when AO has initiated re-assessment proceeding, merely
recording certain unsubstantiated allegations on the basis of some information received,
same is non-est in law and without jurisdiction.
28. Hon’ble Gujarat High Court in Hotel Oasis (Surat) (P) LTD. v. DCIT (2011) 57 DTR
(Guj) 378, has held that that assessment cannot be reopened merely to make inquiries.
29. Hon’ble High Court of Gujarat in case of Bakulbhai Ramanlal Patel Vs. ITO (2011) 56
DTR 0212, Special Civil Appln. No. 12853 of 2010, Mar 4, 2011 has held that where the
reasons recorded reflect that the matter requires detailed investigation and further
verification, the AO has reason to suspect and not reason to believe that income chargeable
to tax has escaped assessment and therefore, the assumption of jurisdiction by the AO is
invalid and as such, the impugned notice under s. 148 is not sustainable and is quashed.
30. Hon’ble Delhi High Court in Northern Exim (P) Ltd. v. DCIT [2013] 357 ITR 586 (Del)
has held that they have to spell out that (i) there was a failure of the Assessee to disclose
fully and truly all the material facts necessary for the assessment and (ii) the reasons must
provide a live link to the formation of the belief that income had escaped assessment. These
reasons cannot be supplied subsequent to the recording of such reasons either in the form
of an order rejecting the objections or an affidavit filed by the Revenue
31. Hon’ble Delhi High Court in Gulati Fabrication 217 CTR 494 (Del.) has held that re-
assessment proceedings are not permissible in a case where third party admitting to be an
entry operator do not specifically named assessee. He submitted that reasons will clearly
tell that none of the so-called entry operator has mentioned the name of the assessee in any
of the investigation or statement by the Department
32. Hon’ble Calcutta High Court in Berger Paints India Ltd vs. ACIT & Ors (2004) 266 ITR
462 (Cal) held that the assessee is entitled to be supplied with the reasons in the event he

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challenges the notice for reassessment; assessee is not estopped from challenging the
impugned notice after having submitted to the jurisdiction of the officer by filing returns.
33. Hon’ble Supreme Court in ITO, & Ors v. Lakhmani Mewal DAS (1976) 103 ITR 437(SC),
held that wherein it was observed that for reopening of assessment, there must be a rational
connection or relevant bearing on the formation of belief that income chargeable to tax has
escaped assessment.
34. Hon’ble High Court of Bombay in case of Prashant S. Joshi v. ITO & Anrs (2010) 324
ITR 154(Bom) held that while examining the validity of reassessment proceedings, reasons
recorded by the Assessing Officer alone would be relevant and such reasons could not be
supplemented by affidavit.
Change of Opinion
Where during assessment proceedings issue was raised and is decided in favour of the assessee,
reassessment proceedings u/s 147 will be hit by the principle of change in opinion. Some of the
judicial pronouncements on the same are as follows:
1. Hon’ble Delhi High Court in the case of CIT vs Usha International Ltd [TS-29-HC-
2012(DEL) dated 21.08.2012 has observed that the reassessment proceedings in case the
assessment order itself records that the issue was raised and is decided in favour of the
assessee. Reassessment proceedings will be hit by the principle of change in opinion. And
Reassessment shall also be invalid in case of an issue or query is raised and answered by
the assessee in the original assessment proceedings but thereafter the AO doesn’t make any
addition in the assessment order. In such a situation, it should be accepted that the issue
was examined but the AO didn’t find any ground or reason to make additions or reject the
stand of the assessee. He forms as opinion the reassessment will be invalid because the AO
had formed an opinion in the original assessment, though he had not recorded the reasons.
2. Hon’ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) 256
ITR 1 (Del) (FB) has held that amendment as per Direct Tax Laws (Amendment) Act,
1989 w.e.f. April 1, 1989 as also of sec. 148 to 152 have been elaborated in Circular No.

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549, dated October 31, 1989. A perusal of clause 7.2 of the said circular makes it clear that
the amendments had been carried out only with a view to allay fears that the omission of
the expression reason to believe from sec. 147 would give arbitrary power to AO to reopen
past assessments on a mere change of opinion i.e. a mere change of opinion cannot form
basis for reopening a completed assessment.
3. Hon’ble Delhi High Court in the case of Jagdish Prashad Gupta vs. JCIT & Anr. (2006)
283 ITR 585 (Del) has held that Assessee having already filed his objections to the
impugned notice u/s. 148 contending that it is a case of change of opinion and the issuance
of notice was not justified, without making out a case of lack of jurisdiction the objections
are to be considered by the competent authority and not in writ proceeding.
4. Hon’ble Bombay High Court in the case of M.J. Pharmaceuticals Ltd. vs. CIT (2008)
297 ITR 119 (Bom) has held that issue regarding addition of amount of deferred taxation
for computing book profits u/s. 115JB having been raised by the AO at the time of original
assessment u/s. 143(3) and no addition having been made by AO on the account on being
satisfied with the explanation of the assessee reopening of assessment on the very same
issue suffered from change of opinion in the absence of any fresh material hence invalid.
5. Hon’ble Bombay High Court in the case of Yuvraj vs. Union of India (Bom.) (2009) 315
ITR 84 has held that points not decided while passing assessment order under section
143(3) is not a case of change of opinion. Assessment reopened validly.
6. Hon’ble Madras High Court in the case of Apollo Hospital Enterprises Ltd. vs. ACIT
(2006) 287 ITR 25 (Mad.) has held that AO having granted benefit of S. 72A to the
assessee in respect of unabsorbed depreciation of the amalgamating company after the
assessee had furnished the relevant particulars and the AO was satisfied about the eligibility
of the assessee for the benefit of S. 72A are not applicable to the facts of the case amounted
to a case of change of opinion and, therefore, reassessment proceedings cannot be
sustained.
7. Hon’ble Supreme Court in the case of CIT vs. Former Finance (2003) 264 ITR 566 (SC)
has held that Change of opinion is bad in law.

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Reassessment in Pursuance of an Order/Direction
Where reassessment proceedings are opened in pursuance of an order or direction, the re-opening
is invalid. Some of the judicial pronouncements on the same are as follows:
1. Hon’ble Bombay High Court in the case of CIT vs. Moduri Rajaiah Gari Kishtaiah (1980)
123 ITR 494 (AP) has held that the assessment or reassessment made by virtue of an order
has to be confined to item in respect of which such finding or direction is given, it is not
open to the AO to deal with other item of escaped income.
2. Hon’ble Supreme Court in the case of K.M. Sharma vs. ITO (2002) 254 ITR (SC) has held
that direction to make an assessment or reassessment which has become time barred is not
valid.
3. Hon’ble Bombay High Court in the case of Lotus Investments Ltd. vs. Asst. CIT (2007)
288 ITR 459 (Bom) has held that remarks that reassessment proceedings could be taken.
Not a finding or direction within meaning of section 150. Approval of Commissioner not
obtained before issue of notice of reassessment - notice not valid.
Reason to Believe – Subsequent Years
Where reassessment proceedings are opened in pursuance some material from subsequent years,
the same cannot form the basis of a valid re-opening. Some of the judicial pronouncements on the
same are as follows:
1. Hon’ble Delhi High Court in the case of CIT vs. Gupta Abhushan (P) Ltd. (2008) 16 DTR
(Del) 76 has held that detection of excess stock or unaccounted expenditure as renovation
of business premises at the time of survey u/s. 133A in a subsequent year, could not
constitute reason to believe that such discrepancies existed in earlier years also and,
therefore, reopening of assessments for those years on the basis of aforesaid reason to
believe was not valid.
2. Hon’ble Bombay High Court in the case of Multiscreen Media Private Limited v. UOI &
Anrs (2010) 324 ITR 54(Bom.), has held that on the basis of additional material in form
of subsequent assessment year, if the Assessing Officer issued notice on the ground of

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reason to believe that income chargeable to tax has escaped assessment, such notice cannot
be stated to be invalid. The Court relied on the decision of the Apex Court in case of Ess
Ess Kay Engineering Co. P. Ltd. v. CIT reported in (2001) 247 ITR 818 (SC).
3. Hon’ble Allahabad High Court in the case of Dass Friends Builders P. Ltd. v. DCIT
(2006) 280 ITR 77(All), held that to contend that reopening of assessment would not be
permissible on the basis of findings of earlier assessment years.
Disposal of the Objection Raised by Assessee
Reassessment framed by the assessing officer without disposing of the primary objection raised
by the assessee to the issue of reassessment notice issued by him was liable to be quashed. The
same was held in various cases including:
1. GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 259 ITR 19 (SC)
2. Paresh Kumar Jain Vs. ITO, ITA No. 477/JP/2019 dated Mar 20, 2020.
3. MCM Exports vs. DY CIT (2010) 323 ITR 331 (Guj).
4. Premier Ltd vs. Dy CIT WPN o 2340 dt 22-10-2008 (Bom).
Non-Service of Notice u/s 143(2)
If the AO fails to issue the notice under Section 143(2) of the Income Tax Act, it would result in
the entire proceedings, including any order of assessment, to be quashed. Some of the judicial
pronouncements on what constitutes non service of notice u/s 143(2) are as follows:
1. Hon’ble Supreme Court in case of ACIT & Anr. Vs. Hotel Blue Moon, civil appeal no.
1198 of 2010 Feb 2, 2010 has held that if the AO, for any reason, repudiates the return
filed by the assessee in response to a notice under s. 158BC(a), he must necessarily issue
notice under s. 143(2) within the time prescribed in the proviso to s. 143(2); omission on
the part of the assessing authority to issue notice under s. 143(2) cannot be a mere
procedural irregularity and the same is not curable.
2. Hon'ble Delhi High Court in the case of PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd.
(2016) 383 ITR 448 (Del) has held that failure by the Assessing Officer to issue a notice

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to the assessee u/s 143(2) of the Act subsequent to 16th December, 2010 when the assessee
made a statement before the Assessing Officer to the effect that the original return filed
should be treated as a return pursuant to a notice u/s 148 of the Act is fatal to the order of
the reassessment.
3. ITAT Bangalore Bench in ITO & ANR. Vs. P.N. Krishnamurthy & ANR., ITA no.
1590/bang/2018 (co no. 41/bang/2019), Apr 27, 2020 has held that before framing any
assessment, there should be valid notice u/s 143(2).
4. Delhi ITAT in case of Rishav Prakash Jain Vs. ITO, New Delhi, ITA no. 2061/Del/2012,
dated 18.02.2019 has held that since, in the instant case, admittedly, no notice u/s 143(2)
of the Act was issued and served on the assessee after the return in response to notice u/s
148 of the Act was filed by stating that the original return filed may be treated as return
filed in response to notice u/s 148, therefore, the reassessment order passed by the
Assessing Officer is not sustainable in law.
5. Hon’ble Allahabad High Court in the case of ACIT v. Greater Noida Industrial
Development Authority 379 ITR 14 has held that it is mandatory requirement for initiation
of assessment proceedings to issue notice u/s. 143(2) of the Act and in the absence of issue
of notice u/s.143(2) the assessment made u/s. 143(3) r.w.s. 147 is invalid and void ab-initio.
6. Hon'ble Calcutta High Court in Principal CIT vs. Oberoi Hotels Pvt. Ltd., ITA no.152 of
2015 & GA no. 3671 of 2015, Jun 22, 2018 has held that issuance of notice u/s 143(2) of
Act is mandatory if AO seek not to accept any part of return as furnished by assessee or
make assessment order contrary thereto.
7. ITAT Vishakapatnam in ACIT & ANR. Vs. Ande Sri Rama Murthy & ANR. ITA No.
237/Viz/2019 (Cross Objection no. 70/Viz/2019), Dec 31, 2019 has held that Section
292BB comes to the rescue of the department only after issue of notice u/s 143(2).
8. Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines vs. ACIT (2007) 292
ITR 49 (Del) has held that proceeding u/s. 147 cannot be initiated once return is filed by
the assessee and no assessment is finalized by AO; since inquiries had been initiated u/s.
143(2) it became mandatory that they should have culminated in an order u/s. 143(3).
9. Hon'ble Madras High Court in the case of Bapalal & Co. Exports vs. JCIT (2007) 289
ITR 37 (Mad) has held that notice u/s. 143(2) cannot be issued after the expiry of 12 months

CA. PRAMOD JAIN
from the end of the month in which the return was furnished reopening of assessment
without any fresh material and without assigning any reason cannot be sustained.
10. Kolkata ITAT in case of DCIT Vs. M/s Sutco Bearings India Pvt. Ltd., ITA no.
1253/Kol/2015, dated 22.09.2017 has held that there was no valid service of notice
u/s.143(2) by way of affixation. Since in the instant case, the department has not been able
to demonstrate that notice u/s.143(2) was served within the statutory time limit, the
assessment made on the basis of such invalid notice could not be treated to be valid
assessment and, hence, such assessment order deserves to be treated as null and void and
liable to be quashed.
11. Hon'ble Madras High Court in the case of CIT vs. C. Palaniappan, (appeal) nos. 1143 to
1146 of 2005, Feb 11, 2006 held that completion of reassessment without issue of notice
under s. 143(2) within twelve months is not valid.
12. Hon'ble Delhi High Court in the case of Principal CIT v. Silver Line in ITA.No.578 to
581,585, 587 and 588/2015 dated 04.11.2015 has held that decision of the ITAT in holding
that the re-assessment order cannot be passed without complying with the mandatory
requirement of notice being issued by the Assessing Officer to the assessee u/s. 143(2) of
the Act and therefore the re-assessment order was legally unsustainable.
13. Hon’ble Bombay High Court in the case of ACIT v. Geno Pharmaceuticals Ltd [214
Taxmann 83] dated Feb 14, 2013 held that notice u/s. 143(2) is mandatory and in absence
of service of such notice Assessing Officer cannot proceed to make an inquiry on return
filed in compliance with notice issued u/s. 148 of the Act.
14. ITAT Mumbai in case of Ramesh Salecha HUF, ITA no. 3312/Mum/2015. Dated
25.10.2017 has held that since the Revenue could not produce before us any evidence to
show that notice u/s. 143(2) has been issued or served to the assessee the re-assessment
made u/s. 143(3) r.w.s. 147 is void ab-initio in view of the above decisions of the Hon'ble
Allahabad High Court in the case of ACIT v. Greater Noida Industrial Development
Authority (supra) and the Hon'ble Delhi High Court in the case of ACIT v. Geno
Pharmaceuticals (supra). Thus, respectfully following the said decisions we hold that the
re-assessment made u/s. 143(3) r.w.s. 147 of the Act is legally unsustainable. Thus, quash

CA. PRAMOD JAIN
the re-assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 147 of the Act
dated 31.01.2014 for the Assessment Year 2011-12 under appeal.
15. Kolkata ITAT in case of DCIT Vs. M/s Sutco Bearings India Pvt. Ltd., ITA no.
1253/Kol/2015, dated 22.09.2017 held that there was no valid service of notice u/s.143(2)
by way of affixation. Since in the instant case, the department has not been able to
demonstrate that notice u/s.143(2) was served within the statutory time limit, the
assessment made on the basis of such invalid notice could not be treated to be valid
assessment and, hence, such assessment order deserves to be treated as null and void and
liable to be quashed.
16. Hon’ble Delhi High Court in the case of DIT Vs Society for Worldwide Inter Bank
Financial Telecommunications (2010) 323 ITR 249 has held that in the memorandum of
appeal, the Revenue had stated that the return was filed by the assessee on March 27, 2000
and the notice under section 143(2) was served upon the authorized representative of the
assessee by hand when the authorized representative of the assessee came and filed return
and that the date of the notice was mistakenly mentioned as March 23,2000. Even if it was
true, the notice was served on the authorized representative simultaneously on his filing
the return which clearly indicated that the notice was ready even prior to the filing of the
return. The provisions of section 143(2) make it clear that the notice could only be served
after the Assessing Officer had examined the return filed by the assessee. Thus, even if the
statement of the Assessing Officer was taken at face value, it would amount to gross
violation of the scheme of section 143(2) of the Act.
Scope of Powers
1. Hon’ble Supreme Court in CIT vs. Sun Engineering Works (P.) Ltd. (1992) 198 ITR 297
(SC) held that since the proceedings under section 147 are for the benefit of the revenue
and are aimed at gathering the escaped income of the revenue, the same cannot be allowed
to be converted as revisional or review proceedings at the instance of the assessee, thereby
making the machinery workable.

CA. PRAMOD JAIN
2. Hon’ble Bombay High Court in K Sudhakar S. Shanbhag vs. ITO (2000) 241 ITR 865
(Bom.) held that proceeding under section 147 are for the benefit of the revenue and not
the assessee and hence the assessee cannot form the be permitted to convert the
reassessment proceedings as his appeal or revision in disguise and seek relief in respect of
items earlier rejected, or claim relief in respect of items not claimed in the original
assessment proceedings unless relatable to the escaped income and reagitate concluded
matters. Allowance of such a claim in respect of escaped assessment in the case of
reassessment has to be limited to the extent to which they reduce the income to that
originally assessed. Income for the purpose of reassessment cannot be reduced beyond the
income originally assessed.
3. Hon’ble Delhi High Court in Vipin Khanna vs. CIT (2001) 251 ITR 782 (Del.) has held
that Assessing Officer cannot launch an inquiry on grounds not covered in reassessment
notice. Where the Assessing Officer initiated proceedings for reassessment on the only
ground that the assessee had claimed excess depreciation by adopting a higher rate as
against the normal rate, he would not be justified in launching inquiry into issues which
were not connected with the claim for depreciation. A letter issued to the assessee requiring
the assessee to furnish information on issues in respect of which there was no allegation of
any escapement or under assessment of income either in the reasons recorded or during the
course of proceedings under the section would tantamount to reviewing the whole
assessment which is not permissible. The letter was therefore vacated.
4. Hon’ble Bombay High Court in CIT vs. P. Munercherjii and Co. (1987) 167 ITR 671
(Bom.) held that dealing with the powers of 263, the court held that when the
Commissioner (A) passes the order the entire order of AO, merges with the order of CIT
(A), hence 263 cannot be initiated in respect of any other issue. The same principle will
apply to reassessment under section 147 of the Act.

CA. PRAMOD JAIN
Other Pronouncements
a. Enhancement in Appeal
• Hon’ble Supreme Court in CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC)
has held that in appeal against the order under section 147, the Deputy Commissioner
(Appeals) cannot enhance the assessment by adding new items of escaped income.
b. Order set aside by the Commissioner
• Hon’ble Bombay High Court in Ador Technopark Ltd. vs. DCIT (2004) 271 ITR 50
(Bom.) has held that when the assessment is set aside by the commissioner under
section 263, no fresh order was passed, issue cannot be said to be escaped assessment,
hence the reassessment notice held to be bad in law, void ab initio and illegal.
c. Disclosure in balance sheet
• Hon’ble Supreme Court in CIT vs. Corporation Bank Ltd. (2002) 254 ITR 791 (SC)
has held that disclosure in balance sheet also amounts to disclosure.
d. Direction of the Higher Authorities
• N. Seetharaman vs. CIT (2008) 298 ITR 210 (Mad) held that Revisional authority
having directed the AO to adjudicate specific issues which were addressed and
examined by him, assessment made by the AO on a higher total income by assuming
more powers than that of the revisional authority is patently illegal and without
jurisdiction.
• CIT vs. Greenworld Corporation (2009) 314 ITR 81 (SC). held that the assessing
officer for the assessment year 2000-01 recorded a specific note in the assessment order
which indicated that the assessment order was passed under the dictates of the
Commissioner. The Supreme Court in the challenge to the reopening for the same
assessment year held that the assessment order passed on the dictates of the higher
authority being wholly without jurisdiction, was a nullity. Therefore, with a view to
complete the justice to the parties, the Supreme Court directed that the assessment
proceedings should be gone through again.
e. AO should be same

CA. PRAMOD JAIN
• Hon’ble Gujarat High Court in Hyoup Food and Oil Industries Ltd. vs. ACIT (2008)
307 ITR 115 (Guj.) held that Assessing officer recording reasons for assessment and
assessing officer issuing notice under section 148 must be the same person. Successor
assessing officer cannot issue notice under section 148 on the basis of reasons recorded
by predecessor assessing officer. Notice issued invalid and deserves to be quashed.
I thank Ms. Princy Sharma and Adv. Mukul Gupta in helping me to compile this document. I hope
this document would be of use to you.
Best Regards
CA. Pramod Jain
pramodjain@lunawat.com
+91 9811073867
(Disclaimer: Though full efforts have been made to state the interpretations and case laws
correctly, yet the author is not responsible / liable for any loss or damage caused to anyone due to
any mistake / error / omissions)
ABOUT CA. PRAMOD JAIN
He is a commerce graduate [B. Com (H)] from Shri Ram College of Commerce (SRCC). He is a
fellow member of the Institute of Chartered Accountants of India (FCA). He is a fellow member
of the Institute of Companies Secretaries of India (FCS). He is a fellow member of the Institute of
Cost Accountants of India (FCMA). He is a Bachelor of Law (LL.B). He has qualified Information
System Auditor [DISA (ICAI)]. He is also a member of All India Management Association
(MIMA). He is also an Insolvency Professional (IP). He has also passed the Proficiency Self-
Assessment Test for Independent Director’s Databank. He has passed certification course NCFM
of National Stock Exchange of India (NSE). He has also done certification course CAAT of ICAI.
He has also done post qualification certificate course on Valuation of ICAI.
He has been elected as Central Council Member of ICAI for the period 2019 – 2021. Apart from
being member in more than 25 committees / groups / directorates of ICAI, he is Chairman of

CA. PRAMOD JAIN
Valuation standards Board and CSR Committee of ICAI for year 2020-21, member of ICAI
Disciplinary Committee Bench 1 for year 2020-21 and Vice Chairman of Direct Tax Committee
for year 2019-20 and 2020-21. He has been nominated as member of Quality Review Board (QRB)
for 3 years from 2020 to 2022.
He is the conceptualizer of the portal www.expertspanel.in which is a one stop solution for all
professional queries which has given more than 20000 answers since its launch in mid of year
2018.
He is delivered more than 1000 lectures and articles on various topics of Income Tax, Corporate
Laws, LLP, Audits, Peer Review, Quality Review, etc. at more than 150 forums throughout the
country. Most of his presentations and articles since 2013 are available for free download from
www.lunawat.com and from 2018 at www.expertspanel.in also.
He is president, founder convener and member of various associations, circles, committees, etc. of
ICAI, ICSI and other prestigious bodies and associations. He is a member of Financial Reporting
Review Board, Audit and Assurance Standards Board, Accounting Standards Board, Taxations
Audit Quality Review Board, Ethical Standards Board, Editorial Board, Valuations Standard
Board and Internal Audit Standards Board of ICAI. He has been a Technical Reviewer with FFRB
and Quality Review Board and Peer Reviewer with Peer Review Board.
He has authored books on “Chartered Accountant’s Documentation and Compliance for Audits
and Reviews”, Limited liability Partnership – A Complete Resource Book”, “Chartered
Accountant’s Documentation and Compliance for Audits and Reviews”, “Importance of LLP after
Companies Act, 2013”, “Chartered Accountant’s Documentation and compliance under
Companies Act 2013, Peer Review and Quality Review”, “Limited Liability Partnership – Law,
Procedures and Taxation”, “Documentation for Chartered Accountants”, “Limited Liability
Partnership – Law and Procedures with Ready Reckoner”, “Fringe Benefit Tax & Banking Cash
Transaction Tax”, “Documentation for Audits” and “Accounting Standards and CARO”.

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