Notice u/s 148 set aside as it was issued on the basis of same facts and material which were already examined by the CIT(A) in favour of the assessee.
In a recent judgment, Hon’ble High Court has set aside notice issued u/s 148 for reopening the assessment, on the basis of same facts and material which were already examined by the CIT(A) in allowed the appeal in favour of the assessee of the assessee.
ABCAUS Case Law Citation:
5253 (2026) (10) abacus.in HC
In the instant case, the Petitioner had challenged the notice issued under Section 148 of Income Tax Act, 1961 (the Act), sanction note and all other consequential proceedings/actions.
The petitioner, a Hindu Undivided Family (HUF) acting through its Karta filed its return of income for A.Y. 2022-23 which included business and interest income resulting in a claimed refund of TDS.
Upon processing under Section 143(1), the Centralized Processing Center (CPC), vide intimation restricted the TDS credit on interest citing mismatch of the interest income with Form 26AS.
Aggrieved, the Petitioner filed a rectification application under Section 154 explaining that the entire interest income was duly recorded in the books, corresponding interest expenditure was accounted for, and only the net figure was reflected under business income and only net income was disclosed under “Income from Other Sources.” However, the CPC rejected the rectification application.
The petitioner then preferred an appeal before the Commissioner of Income Tax (Appeals) who allowed the appeal, accepted the Petitioner’s reconciliation of interest income, and directed grant of full TDS credit after verification with Form 26AS, along with consequential relief.
However, the AO issued a fresh notice under Section 148 seeking to reopen the assessment on the ground of alleged escapement of income based on the same discrepancy flagged earlier on the Insight Portal.
Before the Hon’ble High Court, the assessee contended that the impugned notice along with the sanction note was ex facie illegal, arbitrary, and mechanical, having been issued without proper application of mind to the facts on record. The reopening is founded solely on a system-generated flag under the “High Risk e-Verification” category on the Insight Portal, alleging mismatch of interest income, while completely disregarding that the entire interest income, as reflected in Form 26AS, had already been duly accounted for in the books and disclosed in the return under the head “Business Income” after netting off corresponding interest expenditure.
It was also submitted that impugned notice was a clear case of impermissible “change of opinion” on identical facts and material that stood thoroughly examined and decided in favour of the Petitioner by the Commissioner (Appeals).
It was further submitted that impugned proceedings were vitiated by borrowed satisfaction and gross non-application of mind, as the Assessing Officer had mechanically relied on system-generated data without conducting any independent inquiry or appreciating the detailed reconciliation already accepted in earlier proceedings. The reopening, based on superficial comparison of figures in Form 26AS, ignores settled principles that taxation must be based on real income and proper accounting treatment.
The Hon’ble High Court observed that the CIT(A), upon due examination of the same material on record adjudicated the matter on merits. No fresh material or new information had since come into the possession of the Assessing Officer that can possibly justify reopening the assessment on the ground of alleged escapement of income.
The Hon’ble High Court opined that issuance of the impugned show cause notice in the present case was, at best, one of a mere change of opinion by an assessing officer, which does not constitute a valid ground for reassessment. The sanction note raised no fresh ground, disclosed no new material, and advances no tangible information beyond what was already on record before the CIT(Appeals).
The Hon’ble High Court opined that there existed no fresh information suggesting escapement of income within the meaning of Section 148. The Assessing Officer was seeking to reopen an assessment on a premise already negated by a binding appellate order, which amounts to a collateral attack on a final adjudication and is wholly impermissible in law.
The Hon’ble High Court observed that reassessment is not a second innings for the Assessing Officer to reconsider or re-appreciate evidence that was already before him. If the Assessing Officer forms an opinion on a particular issue during the original assessment, whether expressly or by necessary implication, any subsequent attempt to reopen the assessment on the same facts constitutes nothing more than a change of opinion, which is not a valid jurisdictional ground for invoking Section 147.
The Hon’ble High Court observed that Hon’ble the Supreme Court authoritatively settled this position by holding that although the Finance Act, 1989 omitted the requirement of “reason to believe” based on “new tangible material”, the concept of “change of opinion” as a bar to reassessment continues to operate as an in-built check against arbitrary exercise of the power. It is held therein that the Assessing Officer must have tangible material to conclude that income has escaped assessment and that mere re-examination of the same facts cannot justify reopening. This principle has also been consistently affirmed by various High Courts including Delhi High Court and Gujarat High Court.
The Hon’ble High Court held that the appellate order having attained finality, the subsequent notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment, on the basis of same facts and material, was clearly beyond the jurisdiction of the Assessing Officer and constituted an overreach of authority.
Accordingly, the notice issued under Section 148 and sanction note and all other consequential proceedings arising therefrom were set aside.
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