Case Note & Summary
The petitioner, a company engaged in software development and providing services to foreign clients, challenged the reopening of its assessment for the assessment year 2012-13 by the revenue authorities under Sections 147 and 148 of the Income Tax Act, 1961. The assessment had originally been completed under Section 143(3) after a transfer pricing adjustment. Subsequently, the Assessing Officer issued a notice under Section 148 on 23-03-2018, proposing to reassess income on the ground of escaped assessment. Without withdrawing the first notice, a second notice was issued on 29-03-2019. The petitioner filed objections, which were rejected on 07-11-2019, leading to the filing of the writ petition.
The core legal issues raised were: (i) whether the reopening was barred by limitation under the first proviso to Section 147, as more than four years had elapsed since the end of the assessment year and the assessee had fully disclosed all material facts; (ii) whether the reassessment was based on a mere change of opinion; and (iii) whether issuing a second notice without withdrawing the first was legally valid.
The petitioner argued that all primary facts were disclosed during the original assessment under Section 143(3), and no failure to disclose was alleged. It was contended that the Assessing Officer had considered the same payments and that reopening was an impermissible review of the record. The revenue argued that if income had escaped assessment, reopening was justified and that the first notice was merely abandoned, not withdrawn. However, it admitted that the first notice was not formally withdrawn.
The court examined the provisions of Sections 143, 147 and 148 as they stood at the relevant time. It noted that the first proviso to Section 147 requires a failure on the part of the assessee to fully and truly disclose material facts when reassessment is initiated beyond four years. The court also considered the principles against change of opinion and the jurisdictional defect of dual notices. The judgment was reserved on 21.08.2025 and pronounced on 19.09.2025. The text provided does not contain the final operative order, but the analysis indicates serious doubts about the validity of the reopening on limitation and jurisdictional grounds.
Headnote
A) Income Tax – Reassessment – Limitation under first proviso to Section 147 – Income Tax Act, 1961, Sections 147, 148, 143(3) – The assessment for the assessment year 2012-13 was completed under Section 143(3). The first proviso to Section 147 permits reopening beyond four years from the end of the relevant assessment year only if there is failure on the part of the assessee to disclose fully and truly all material facts. The petitioner contended that all primary facts were disclosed and no such failure existed. The court examined the submission and the relevant provisions (Paras 6, 9)
B) Income Tax – Reassessment – Change of Opinion – Income Tax Act, 1961, Sections 147, 148 – Reopening of assessment is not permissible on a mere change of opinion. The petitioner argued that the very same material was available and considered by the assessing officer during the original assessment. The court noted that an assessment cannot be reopened based on a review of the existing material, as it would amount to a change of opinion (Paras 6, 8)
C) Income Tax – Reassessment – Second Notice without Withdrawing First – Income Tax Act, 1961, Section 148 – The assessing officer issued a second notice under Section 148 without withdrawing the earlier notice. The petitioner contended that such procedure is impermissible in law and vitiates the proceeding. The revenue admitted that the first notice was not withdrawn but was merely abandoned. The court considered the implication of this dual notice on jurisdiction (Paras 6, 7)
Issue of Consideration
Whether the reassessment proceedings initiated under Sections 147 and 148 for the assessment year 2012-13 were barred by limitation and without jurisdiction
Law Points
- First proviso to Section 147 limits reopening beyond four years after scrutiny assessment to cases of failure to disclose fully and truly all material facts
- reassessment cannot be based on change of opinion
- issuance of second notice under Section 148 without withdrawing first is impermissible in law
Case Details
2020 LawText (KAR) (09) 8
Writ Petition No. 51586 of 2019
T. Suryanarayana, Tanmayee Rajkumar, Y.V. Raviraj
The Joint Commissioner of Income Tax (Special Range-4), The Assistant Commissioner of Income Tax (Special Range-4), Principal Commissioner of Income Tax-4
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging the validity of reassessment proceedings initiated under Sections 147 and 148 of the Income Tax Act, 1961 for the assessment year 2012-13 on grounds of limitation and jurisdiction.
Remedy Sought
The petitioner sought a declaration that the impugned proceedings were barred by limitation and without jurisdiction, and a writ to quash the order dated 07.11.2019 rejecting its objections to the reopening.
Filing Reason
The respondent authorities issued notices under Section 148 proposing to reassess income for AY 2012-13; the petitioner contended that the reopening was beyond the limitation period prescribed by the first proviso to Section 147, was based on a change of opinion, and the second notice was issued without withdrawing the first.
Previous Decisions
Assessment was completed under Section 143(3) on 21-04-2016 after a transfer pricing adjustment; the petitioner's appeal against the assessment order is pending before CIT(A). The Assessing Officer issued notice under Section 148 on 23-03-2018 and again on 29-03-2019; the petitioner's objections were rejected by the Assistant Commissioner of Income Tax on 07-11-2019.
Issues
Whether the reopening of assessment under Sections 147/148 for AY 2012-13 is barred by limitation under the first proviso to Section 147 since the assessment was completed under Section 143(3) and there was no failure to disclose fully and truly all material facts.
Whether the reassessment notice is vitiated by change of opinion as all material was already considered in the original assessment.
Whether issuance of a second notice under Section 148 without withdrawing the first notice is permissible in law.
Submissions/Arguments
The petitioner contended that in terms of the first proviso to Section 147, reopening beyond four years after assessment under Section 143(3) requires failure by the assessee to fully and truly disclose all material facts; the petitioner had disclosed everything.
The petitioner argued that the assessment cannot be reopened on a mere change of opinion based on the same material already considered.
The petitioner submitted that issuance of a second notice under Section 148 without withdrawing the first is impermissible and renders the proceedings void.
The revenue contended that no bar exists to reopen if income has escaped assessment and the assessing officer had reasons to believe.
The revenue admitted that the first notice was not withdrawn but was abandoned.
The revenue argued that the petition should be dismissed, leaving the petitioner to avail other remedies.
Judgment Excerpts
The petitioner is before this Court calling in question proceedings instituted under Section 148 r/w Section 147 of the Income Tax Act, 1961 on the ground of it being barred by limitation and has sought consequential action to be obliterated on the question of jurisdiction as well.
The learned senior counsel for the petitioner would vehemently contend that in terms of first proviso to Section 147 of the Act, where a case for scrutiny assessment is completed under Section 143(3) of the Act, the assessment can be reopened after a period of 4 years from the end of the relevant assessment year only, if there is failure on the part of the assessee to make a full and true disclosure of all primary facts.
He would further contend that the assessing officer issued first notice, but later found material and therefore, issued the second notice. He would admit the fact that the first notice is not withdrawn, but is only abandoned.
Procedural History
The petitioner filed return of income for AY 2012-13. A notice under Section 201(1) was issued for non-deduction of TDS on payments to associated enterprises. The return was taken up for scrutiny under Section 143(3); a notice dated 02-05-2014 was issued, and a reference was made to the Transfer Pricing Officer, who passed an order on 29-01-2016 making a transfer pricing adjustment. The Assessing Officer completed the assessment under Section 143(3) on 21-04-2016. The petitioner filed an appeal before CIT(A) against the transfer pricing adjustment, which is pending. Subsequently, the Assessing Officer issued a notice under Section 148 on 23-03-2018 for the same assessment year, alleging escaped income. The petitioner responded seeking reasons; no reasons were provided. A second notice under Section 148 was issued on 29-03-2019 without withdrawing the first. The petitioner filed objections, which were rejected by the Assistant Commissioner of Income Tax on 07-11-2019. Aggrieved, the petitioner filed the present writ petition challenging the reassessment proceedings and the rejection order.
Acts & Sections
- Income Tax Act, 1961: 10A, 10AA, 10B, 44AB, 92CA, 143, 147, 148, 151, 195(2), 201(1)
- Constitution of India: Article 226
- Companies Act, 1956:
