This document discusses the requirements for validly reopening an assessment under sections 147/148 of the Income Tax Act. It begins by outlining the objectives of presenting key cases and the Commissioner's power of review. It then explains that for a reopening to be valid, the Assessing Officer must have a 'reason to believe' that income was escaped within the 6 or 4 year time periods, depending on the amount. Several important cases are summarized that describe what constitutes a valid reason to believe. The document concludes by noting the judicial stance favors the assessee when all relevant information was disclosed originally, and warns the Commissioner to use review powers responsibly.

1. Reopening &Review
Debate &Controversy

2. Objectives of the Presentation
• To elucidate the situations when reopening u/s.
147/148 would be illegal with case laws.
• To discuss the Commissioner’s power of review.
• To understand the judiciary’s position on this legal
issue.

3. Requirements
for a valid
reopening u/s.
147/148
‘Reason to
Believe’ that
certain income
has escaped
assessment.
Within 6yrs
time period if
income
escaped is >
Rs.1 lac
Not mere
change of
opinion
Within 4yrs
time period if
income escaped
is < Rs.1 lac

4. Reason
to
believ
Not mere
rumour,
gossip or
suspicion
but relevant
info.
Definite info
not far-
fetched,
fanciful and
vague.
Rational
nexus b/w
material of
info and
formation of
belief.Should be
own belief of
A.O after
application
of mind.
Can’t infer diff.
conclusion on
second thought
from same
facts already
disclosed.
New evidence
emerges
subsequent to
completion of
assessment.
‘Reason
To
Believe’

5. • Ram Swarup Cold Storage & Allied Industries v.
ACIT (1991)
• ACIT Vs. Rajesh Jhaveri Stock Brokers (P.) Ltd 291
ITR 500 (SC)
• 3i Infotech Ltd. Vs. ACIT (2010) 329 ITR 257 (Bom.)
• CIT v. Kelvinator of India 256 ITR 1
Important Cases Laws S. 147/148

6. Ram Swarup
Cold Storage &
Allied
Industries v
ACIT
Reason to believe
should be formed
within subjective
realm of A.O
Emergence of
relevant material is
crucial at this stage
– Evidence in possession
of AO that the assessee
has understated his
income.
–Evidence in possession
of AO that the assessee
has claimed excessive
loss/deductions,
allowances, reliefs.
Conclusive proof
not needed at the
stage of
reopening

7. So after intimation u/s.
143 (1) reopening can be
done.

8. If certain disclosed claims were hidden and
inexplicit then the A.O couldn’t’ve taken note of it.
So he couldn’t have applied his mind to it nor
formed an opinion upon it. So there can’t be a
change of opinion when he seeks reopening on this
basis.
3i Infotech
Ltd. Vs.
ACIT (2010)
329 ITR 257
(Bom.)

9. CIT v. Kelvinator of India
• A.O hath not the power to review his own
decision.
• Reopening would be arbitrary & irrational if
it’s based on mere change of opinion.
• Reason to believe contemplates the existence
of reasons on which the belief is founded and
not merely a belief in the
existence of reasons inducing the belief.
• Considering S.114 IEA, non application of
mind can’t be presumed when an issue isn’t
discussed in the speaking order.

10. CIT v.
Sivananda: if
new material is
unearthed
reopening is
valid.
This reasoning moves
away from fault
theory: there can be
no failure on part of
the assessee since the
material unearthed is
pursuant to a search.
158BC(a)
provides no
notice u/s.148
was required to
proceed under
Chapter XIVB.
Cargo clearing
agency v. JCIT:
this special
provision is
abhorrent to S.
147.
Reopening of
Block
Assessments
(Illegal)
S. 147 contemplates the
reopening of closed
assessments concerned with
a particular assessment
year. Here there is only a
block period of 10 previous
years.

11. Commissioner’s
power to review
u/s. 263
A.O’s decision
should be
erroneous.
Principles of Natural
Justice:
1. Enquiry
2. Audi alterum partum
It should be
prejudicial to
the Revenue.

12. Judicial Stand on S.147/148
• The courts have been reluctant to reopen a completed
assessment when the assesse had disclosed all relevant
information during assessment.
• So the essence of this legal provision has been reduced
to a wrong conduct on part of the assessee (fault
theory).
• Also Commissioner has been warned to use his powers
of review with utmost responsibility since it’ll reflect
upon the work done by the A.O.

13. Thank You
Lakshana R