Reopening of Assessment

Subject Name: Taxation Law II

Academic Year: 2023-2024

Semester: VII

Submitted by

Sanskar Barekar

UG20-89

Submitted to

Prof. Dr. Ramesh Kumar Chamarthi

Associate Professor of
Law

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

 Table of Abbreviations

ACIT Assistant Commissioner of Income Tax

AO Assessing Officer
AY Assessment Year
CIT Commissioner of Income Tax
CPC-ITR Centralized Processing Centre– Income Tax
Return
DCIT Deputy Commissioner of Income Tax
DOR Department of Revenue
DT Direct Taxes
FY: Financial Year Financial Year
GTR: Gross Tax Receipts Gross Tax Receipts
ITR Income Tax Return

Table of Cases

Sr. No. Name of the Parties

1 Calcutta Discount Co. Ltd. v. ITO

MANU/SC/0113/1960: [1961] 41 ITR 191 (SC);
Sheth Bros. v. Jt. CIT MANU/GJ/0298/2001:
[2001] 251 ITR 270 (Guj).

2 Parshuram Pottery Works Co. Ltd. v. CIT

MANU/SC/0250/1976: [1977] 106 ITR 1 (SC)

3 Jindal Photo Films Ltd. v. Dy. CIT

MANU/DE/0729/1998: [1998] 234 ITR 170 (Del)
4 ITO v. Lakmani Mewal Das
MANU/SC/0241/1976: 1976 AIR 1753, 1976 SCR
(3) 956
5 Sita World Travel (India) Ltd. v. CIT
MANU/DE/1562/2004: [2004] 140 Taxman 381
(Del)

6 Chhugamal Rajpal v. S. P. Chaliha

MANU/SC/0241/1971: 79 ITR 603, Calcutta
Discount Co. Ltd. v. ITO MANU/SC/0113/1960:
41 ITR 191 and S. Narayanappa and Ors. v. CIT
MANU/SC/0124/1966: 63 ITR 219.
Supra n.4.

7 Ador Technopack Ltd. v. Dr. Zakir Hussein, DCIT,

WritPetition No. 2228 of 2003 at para 31.

Table of Statutes
Sr. No. Name of the Statutes
1) Income Tax Act , 1961
2) Indian Finance Act , 2019
3) Direct Tax Amendment Act of 1987

Table of Contents
Sr. No. Particulars Page No.
i Table of Abbreviations 2

ii Table of Cases 2

iii Table of Statutes 2

1 Introduction 4

2 Research Methodology 5

3 Interpretation of 7
“Reason to believe”
4 Evolving Judicial Reforms 9

5 What is material Information 11

6 Limitation Period 13

7 Recent Enactment 15

8 Salient features 17

10 Conclusion 18

iv Bibliography 19
The reopening of assessment processes is stipulated under Section 147 of the Income Tax Act,
1961. This particular provision grants the Assessing Officer (AO) the authority to initiate the
reopening of assessment proceedings if there exists a reasonable belief that some income has
not been properly assessed. The aforementioned section has come under judicial examination
due to the potential for subjective interpretation and exercise of authority conveyed by its
wording. At times, this phenomenon may extend beyond its initial scope and result in the
capricious use of authority. The judicial interpretation of this particular provision has proven
to be rather remarkable. The judiciary has consistently endeavored to prevent any potential
abuse of discretion by the Administrative Officer (AO) within the framework of the relevant
statute. Moreover, there has been substantial deliberation and discourse about the
modifications made to the phrasing of the section. The phrases “reason to believe” and
“material information” have undergone judicial examination. This study attempts to
comprehend the semantic interpretations of the aforementioned terms. Moreover, the current
discourse has also examined the judicial patterns in the interpretation of this particular clause
in order to comprehend the rationale behind the reopening of processes.

Keywords : Reopening , Assessment, Evasion etc.

Research Question
1) What are Judicial Reforms regarding reopening of assessment ?
2) Salient features regarding Enactment and reformation of Sec.147?
Introduction

Section 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) pertains to the
initiation of assessment proceedings. This section outlines the conditions under which the
Assessing Officer (AO) may reopen assessment proceedings if there is a reasonable belief that
income has not been properly assessed. Section 147 has resemblance to Section 263 of the Act
in that it grants the Commissioner the authority to initiate the reopening of assessment
procedures if he or she determines that the previous decision rendered in said proceedings was
detrimental to the revenue. There is a distinction between Section 147 and the aforementioned
provision in that the responsibility for reopening the proceedings is with the Commissioner
rather than the Assessing Officer.1

This section primarily addresses the topic of income evasion assessment. The authorised officer
is granted the authority to initiate a reopening of the proceedings in the event that there is a
reasonable basis to suspect that either the entirety or a portion of the income has not been duly
considered during the assessment processes. The section delineates two fundamental
components necessary for the initiation of evaluation proceedings. The administrative officer
(AO) must possess a reasonable basis for believing that,

There are two main reasons why income may not have been assessed.

Firstly, it may have evaded assessment initially.

Secondly, there is a possibility that revenue has been brought to the attention of the assessor
after the completion of the assessment processes.

The first assessment processes may exhibit a failure on the part of the assessing officer (AO) to
consider a portion of the revenue or to appropriately account for factors such as depreciation.
As a result, an incorrect assessment may occur. In the event of such a scenario, the relevant
requirements outlined in Section 147 would be deemed applicable, so allowing for the
reopening and subsequent reexamination of the proceedings. Section 147 of the Act
encompasses additional circumstances in which it is applicable. These include situations where
the income has been assessed but there has been an under-assessment, where the income has
been assessed at a rate that is too low, where excessive relief has been granted, and/or where
excessive loss, depreciation allowance, or any other allowance has been calculated under the
1
Income escaping assessment: “If the Assessing Officer has reason to believe that any income chargeable to tax has
escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess
such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice
subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or
any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections
148 to 153 referred to as the relevant assessment year)”
 provisions of the Act. It is important to note from the beginning that the Supreme Court has also
established three steps in the evaluation process. Initially, the Assessee discloses the primary or
important facts. Subsequently, deductions are made based on the initial evidence. The last step
entails deriving legal conclusions from the fundamental fact.2

Evolving judicial patterns in the interpretation of Section 147.

In Judgement the Supreme Court, there are two elements that must be fulfilled by the Assessing
Officer in order to issue a notice under Section 148 of the Act, as a result of the need to reopen
assessment proceedings. The following items are as follows:

1) The Income Tax Officer is required to possess a valid basis for believing that there is
income subject to taxation that has not been properly assessed.

2) The individual in question must possess a valid justification for believing that the
aforementioned earnings have evaded evaluation due to the Assessee's omission or failure to
completely and accurately provide pertinent information required for their assessment
during that particular year.3

In the aforementioned instance, the court determined that the calculation of depreciation
allowance was incorrect. The Appellant contended before the High Court that it had provided a
comprehensive disclosure of all pertinent and significant information. Nevertheless, the petition
was rejected. The Appellant was deemed by the High Court to have failed to provide certain
facts pertaining to the company's asset purchase.

The judiciary has consistently maintained the perspective that it is the responsibility of the
taxpayer to provide a comprehensive and accurate account of the fundamental details. The
individual being assessed has the responsibility of providing all relevant information to the
Assessing Officer throughout the assessment processes. Nevertheless, the Assessee is not
obligated to fulfil any more responsibilities beyond this. It is the responsibility of the assessing
officer (AO) to analyse the available factual information and make appropriate deductions. The
obligation of the taxpayer is limited to providing a comprehensive and accurate disclosure.

The determination of what constitutes a material fact is contingent upon the specific

2
Calcutta Discount Co. Ltd. v. ITO MANU/SC/0113/1960: [1961] 41 ITR 191 (SC); Sheth Bros. v. Jt. CIT
MANU/GJ/0298/2001: [2001] 251 ITR 270 (Guj).
3
Parshuram Pottery Works Co. Ltd. v. CIT MANU/SC/0250/1976: [1977] 106 ITR 1 (SC)
 circumstances inherent to each individual case. The act of presenting the account books or any
other kind of proof that may have been reasonably found by the Income-tax Officer does not
automatically constitute disclosure under the provisions of the Income Tax legislation.4

The Direct Tax Amendment Act of 1987, which was implemented in 1989, resulted in
modifications to the understanding and application of Section 147. Instead of stipulating two
elements that must be met for the Assessing Officer (AO) to initiate reassessment procedures, it
instead establishes that the AO may reopen the proceedings if there is a reasonable belief that
the income has evaded assessment.5

“Reopening Of Assessment” An Interpretation Of “Reason To Believe.”

Another noteworthy factor to consider is that the Assessing Officer (AO) must guarantee that
they possess adequate justification to assume that the income in question has evaded assessment
due to the Assessee's negligence or wrongdoing. The aforementioned scenario can be
understood as a situation where the Assessee has failed to reveal pertinent information that has
a direct impact on the assessment procedures. The income of the Assessee would be impacted
by the acquisition of a capital asset, and not informing the Assessing Officer (AO) about this
transaction would constitute a failure to disclose a crucial piece of information. The jurisdiction
to reopen the proceedings shall be conferred upon the AO solely upon the fulfilment of the
aforementioned circumstances.6 The judiciary has consistently provided clarification about the
interpretation of this phrase. The established norm has been that of a conscientious and
intelligent individual who would make decisions based on sound reasoning and arrive at a
logical conclusion.7

An important conclusion that can be drawn from the aforementioned case law is that a mere
change in opinion is not sufficient grounds for an Officer to reopen assessment proceedings. 8 If
the Officer forms an opinion during the original assessment proceedings based on the material
facts and later discovers it to be incorrect, this does not constitute a valid reason under the law

4
Income Tax Officer v. Lakhmani Mewal Dass MANU/SC/0241/1976: 103 ITR 437
5
After the Amending Act, 1989, Section 147 reads as under: Income escaping assessment. 147. If the Assessing Officer has
reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the
provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has
escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or
recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year
concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year).

6
Jindal Photo Films Ltd. v. Dy. CIT MANU/DE/0729/1998: [1998] 234 ITR 170 (Del)
7
ITO v. Lakmani Mewal Das MANU/SC/0241/1976: 1976 AIR 1753, 1976 SCR (3) 956
8
Sita World Travel (India) Ltd. v. CIT MANU/DE/1562/2004: [2004] 140 Taxman 381 (Del
 to reopen the assessment.9 Furthermore, if during the original proceedings the Assessing Officer
(AO) thoroughly examined all the facts on record and made a decision, the AO's belief that
there was an error in the decision cannot be used as a basis for reopening the proceedings.
Additionally, even if another officer holds the belief, due to a change in opinion, that the
proceedings should be reopened, this does not provide a valid reason to invoke Section 147.10

The Court holds the view that the phrase “reason to believe” 11 does not refer to the personal
satisfaction of the assessing officer. The phrase “it means” refers to an objective perspective of
the specific facts that must be revealed in the given scenario. The statement should be
understood as indicating a basis for belief rather than a basis for suspicion. This implies that the
officer's instinctual belief that an error has occurred in the assessment is insufficient to trigger a
reopening under the provisions of this section. The assertion must be grounded in a steadfast
and substantiated conviction, supported by empirical evidence, that the revenue in question has
evaded evaluation.12

It is noteworthy to observe that Section 34 of the 1922 Act, pertaining to the reopening of
assessment processes, included the phrase “definite information.” The aforementioned
amendment was made in the year 1948. The absence of these terms, however, does not imply
that the material utilised as a foundation for reopening might be imprecise. This amendment
was made to broaden the scope of the provision. The disclosure requirements may vary
depending on the specific circumstances of the case, such as the nature of the commercial
activities undertaken by the parties involved.

The assessing officer (AO) is required to operate in a systematic manner and infer instances of
non-disclosure when presenting a case for the reopening of assessment procedures. The
inclusion of the phrase “change in opinion” serves as an internal mechanism to regulate the
exercise of authority by the Officer.

There has been an observation that:

9
Supra n.7.
10
Chhugamal Rajpal v. S. P. Chaliha MANU/SC/0241/1971: 79 ITR 603, Calcutta Discount Co. Ltd. v. ITO
MANU/SC/0113/1960: 41 ITR 191 and S. Narayanappa and Ors. v. CIT MANU/SC/0124/1966: 63 ITR 219.
11
Supra n.4.
12
Jindal Photo Films Ltd. v. Dy. CIT MANU/DE/0729/1998: [1998] 234 ITR 170 (Del)
 The primary responsibility of the Assessing Officer is to effectively implement the Act,
ensuring the proper management of public funds and equitable treatment of taxpayers. If a
definitive and ultimate judicial ruling is in effect, the same problem cannot be the subject of an
administrative decision

According to the provisions outlined in Sections 147 and 148. Therefore, the notice issued
under Section 148 and the accompanying reasons recorded were subject to being invalidated
and nullified.

What is material information?

The court has primarily directed its attention towards scrutinising the material that was provided
during the assessment processes, with the subsequent objective of determining whether it
constituted a comprehensive disclosure. The revelation of information varies depending on each
individual circumstance. In the case when the party concerned is a corporate entity that has
acquired shares or is engaged in a share transfer arrangement, the disclosure of pertinent
company information, such as details included within the memorandum and articles of
association, assumes significance as material information.13

Moreover, in cases when revenue is still being evaluated, it would be inaccurate to claim that
the income has evaded assessment. This principle was also established in a ruling by the
Supreme Court. During the ongoing case or assessment procedures, the Assessing Officer (AO)
is prohibited from asserting that the income, or a portion thereof, has evaded assessment and is
unable to initiate a reopening of the assessment proceedings 14 This is apparent as the act of
“reopening” can only occur once the proceedings have been concluded. It is worth noting that
the reopening of procedures under Section 147 is not permissible when the income is being
assessed. However, it is possible to initiate reopening proceedings based on information that has
been brought to the attention of the Assessing Officer throughout the assessment process.

The non-disclosure of crucial information can be observed when there are significant gaps in
the provided information, such as the failure to reveal transactions related to the lending and
borrowing of funds, as well as the payment of interest. As previously stated, the materiality of
the information may vary depending on the specific circumstances.

Nevertheless, it is an established legal principle that the process of reassessment is primarily

intended to serve the interests of the revenue authorities rather than those of the Assessee.
13
Ador Technopack Ltd. v. Dr. Zakir Hussein, DCIT, Writ Petition No. 2228 of 2003 at para 31.
14
Consolidated Photo & Finvest Ltd. v. Asst. CIT [2006] 151 Taxman 41 (Del.).
 Hence, any reevaluation that results in a decrease in the initially assessed income would
essentially be rendered null and void.15

The limitation period pertaining to the reopening of proceedings.

Section 147 of the legislation allows for the invocation of its provisions within a time frame of
four years from the assessment year that is pertinent to the matter at hand. A recent legal ruling
has underscored the requirement for the Assessee to be provided with a justification for
initiating the reopening of reassessment procedures within a timeframe of six years. If the
necessary information is not provided, the reopening of the assessment processes will be
deemed invalid .16

According to the first proviso to Section 147, if an assessment has been conducted under
Section 143(3), it cannot be reopened after four years from the end of the relevant assessment
year, unless there is evidence that the Assessee failed to disclose all material facts necessary for
their assessment, resulting in income escaping assessment.

The comparative analysis of the power to review and the power to reassess is a topic of
academic interest. This examination focuses on the distinction between these two powers and
their respective implications within a given context.

It is important to comprehend that the Assessing Officer (AO) possesses the authority to initiate
the reopening of assessment procedures or undertake the reassessment of income. However, it is
crucial to distinguish this capacity from the ability to conduct a review. The AP lacks the
authority to conduct a comprehensive evaluation of the assessment processes. The Supreme
Court has determined that there exists a fundamental conceptual distinction between the two
terms. Upon a literal interpretation of the language, the power to review entails the
reconsideration of a previously rendered decision following an assessment, whereas the
reopening of proceedings entails a comprehensive reevaluation of the entirety of income and the
initiation of a fresh assessment process.17

The Evolution of Legal Frameworks and Analytical Examination

15
CIT v. Sun Engineering Works (P.) Ltd. MANU/SC/0707/1992: (1992) 198 ITR 297 (SC).
16
CIT v. Tirathram Ahuja (HUF) (2008) 6 DTR (Del) 335.
17
143(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, after hearing such
evidence as the Assessee may produce and such other evidence as the Assessing Officer may require on specified points, and
after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make
an assessment of the total income or loss of the Assessee, and determine the sum payable by him or refund of any amount due to
him on the basis of such assessment.
 A recent development in the understanding of Section 147 and 148 pertains to the imposition of
time constraints on the reopening of assessment processes. In the event that the grounds
provided for the reopening of proceedings are presented after the designated timeframe, the
reopening itself would be rendered invalid, despite the fulfilment of the notice serving
requirement. The legislators may have intended to provide for a broad range of interpretations
of the proviso stated in Section 147. Nevertheless, this also creates an opportunity for the
officer to abuse their position, and the Court has consistently stressed the significance of
limiting such abuses.

Examine the Arbitrary Use of Power

The Supreme Court has recently rendered a ruling that establishes the principle that the Income
Tax Department is prohibited from unilaterally initiating the reopening of assessment processes.
observable transformation in legislation

The use of the term “arbitrarily” has expanded the range of the aforementioned section. 18 At the
outset, the Courts adhered to a rudimentary interpretation of the aforementioned clause. It has
been observed that during the early phases, the provision was construed in a literal and stringent
manner. The court's approach was contingent upon the specific circumstances of each case, as it
limited itself to enumerating the elements outlined in the section and determining whether they
were satisfied in order to justify invoking the relevant legislative provision. The concept of
“reason to believe,” as previously discussed, was limited to a rational comprehension of the
information or essential facts shown in the record.19

While the court has considered instances in which the Income Tax Officer (ITO) may
reevaluate the assessment only due to a change in opinion, relying on the same set of facts, it is
important to note that the term “arbitrary” was introduced at a later stage. The aforementioned
statement highlights the expanding scope of interpretation, as the judiciary has increasingly
adapted to incorporate the discretionary exercise of authority by the Officer (ITO or AO).

The court has interpreted the legal provision outlined in Section 147 in a schematic manner, in
response to the arbitrary use of authority. The significance of this argument has been
consistently emphasised by the Supreme Court on several occasions. Particularly following the
enactment of the amending Act in 1989, the sole basis for initiating reassessment proceedings is
contingent upon the Assessing Officer (AO) possessing adequate grounds to substantiate the
belief that the income has evaded reassessment. Hence, it is important to exercise caution in
granting the authority to initiate proceedings to the Administrative Officer (AO) based on a
reasonable belief, ensuring that this privilege is not used casually and that measures are in place
18
CIT, Delhi v. Kelvinator of India Limited [2002] 256 ITR 1

19
Consolidated Photo & Finvest Ltd v. Asst. CIT [2006] 151 Taxman 41 (Del), para 9; Kantamani Venkata Narayana & Sons v.
First Addl. ITO MANU/SC/0143/1966: [1967] 63 ITR 638
 to prevent any misuse or abuse of this power. In a writ petition, the court has the authority to
scrutinise the factual circumstances of the case to determine whether the Assessing Officer
(AO) was working in good faith. This principle has been established in several rulings of the
Supreme Court.20

An additional significant restriction imposed on the assessing officer (AO) is that they are
prohibited from evaluating any income other than the one unrelated to the matters specified in
the original notice under Section 148. Furthermore, the AO is not authorised to initiate an
inquiry on grounds that are not encompassed by the reassessment notice.

The courts' interpretation of the conditions encompassed under the section.

The use of the term “opinion” by the AO was perceived as granting the Officer the autonomy to
subjectively evaluate the accessible evidence and capriciously determine whether the
assessment processes ought to be reopened. The elimination of the word “reason to believe”
was perceived to result .

The Supreme Court ruled in the case of CIT v. Kelvinator of India Ltd. The alteration in
perspective, nonetheless, is not a linear matter. If the assessing officer (AO) has not made an
intentional choice about the relevant evidence, a change in opinion cannot serve as a valid
justification for restricting the reopening of assessment processes. The Supreme Court has ruled
in this matter that:

The notion that a simple change of opinion cannot serve as grounds for revisiting finalised
assessments is only relevant in cases where the Assessing Officer has thoroughly considered
and made a deliberate judgement on a specific item in question. The evaluation's order will lack
relevance if it fails to consider the feature that serves as the foundation for revisiting the
assessment, as was the situation in the present case.

Moreover, the court has additionally determined that:

If one actively considers the pertinent facts and available information during the evaluation
process, and subsequently seeks an alternative or contrasting perspective, it can be considered a
“change of opinion”. However, if there is a failure to consciously consider the existing material,
it would be regarded as an oversight in acknowledging the relevant point or proposition, rather
than a “change of opinion”.

Put simply, if the assessing officer (AO) did not initially make a deliberate judgement based on
the factual information presented by the taxpayer, the reopening of the assessment cannot be

20
Explanation 3 to s. 147 was inserted to supersede the judgments in Vipin Khanna MANU/PH/2123/2001: 255 ITR 220
(P&H) & Travancore Cements 305 ITR 170 (Ker) where it was held that the AO could not assess income in respect of
issues unconnected with the issue for which the notice was issued.
 contested on the basis that it was just a change in opinion.

It is essential to consider that while it is the responsibility of the Assessee to provide full
disclosure of all relevant information to the authority, the determination made based on these
data lies within the purview of the Assessing Officer (AO). The AO is not permitted to act only
on mere suspicion or intuition regarding the presence of an assessment error. The established
criterion dictates that there must exist a connection between the evidence presented and the
decision made by the Assessing Officer (AO) in relation to the initiation of assessment
proceedings. The Court has noted that the Assessing Officer (AO) have jurisdiction to exercise
his powers under Section 147 if he has prima facie reasonable grounds to think that income has
evaded assessment. The standard of proof necessary differs from the standard required to reach
a final decision.

In a recent ruling by the Supreme Court, the central issue under consideration was the
elimination of the notion of “change of opinion” following the amendment of Section 147 of the
Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987, effective from 1st
April, 1989. The Court noted that there was significant opposition to the modification of the
section, specifically the removal of the phrase “reason to believe.” The re-introduction of the
terms in 1989 was motivated by the objective of preventing the arbitrary use of authority by the
AO. This significant verdict serves as a milestone and reflects the established legal stance on
Section 147.

Nevertheless, it has been argued that the reassessment cannot be initiated based on a Supreme
Court ruling if the taxpayer has already provided full and comprehensive disclosure of all
relevant information.

Recent Enactments

Analysis of case : Reopening of the assessment is indemonstrable in law as reasons inserted in

Section 147 IT Act were not considered as evidence.

[Jowheri Jalaluddin Mullick v Income Tax Officer, 2023 SCC OnLine ITAT 257, decided on 21-
03-2023]
According to the Tribunal, it is apparent that the Assessing Officer was cognizant of and
acknowledged the fact that the taxpayer had declared capital gains arising from the transaction of
a property, with the selling proceeds being Rs. 12,80,00,000. Nevertheless, the Assessing Officer
endeavoured to levy taxes on the income derived from capital gains that were not declared for
taxation in relation to the property sale transaction, which involved a sale price of Rs.
2,65,45,504. During the process of assessment, the Assessing Officer deviated from the original
computation method for determining the long-term capital gains on the property in question.
Instead of using the alleged sale consideration of Rs. 2,65,45,504, the officer recalculated the
capital gains based on the actual sale consideration of Rs. 12,80,00,000. It is important to note
that the assessee had already declared and subjected to taxation long-term capital gains
amounting to Rs. 9,50,51,636 in her income tax return for the relevant year. Hence, the
Assessing Officer did not include the alleged unassessed income in the final assessment order.
Instead, the disclosed transaction by the taxpayer was reviewed, and the capital gains were
recalculated in the assessment order without issuing a new notice under section 148 of the Act.
Citing the case of Hindustan Lever Ltd. v. R.B. Wadkar, [2004] 268 ITR 332 (Bom.), the
Tribunal stated that it is well-established legal principle that the reasons recorded for reopening
the reassessment must be evaluated independently to determine the validity of proceedings under
section 147 of the Act. Therefore, the Tribunal determined that the act of revisiting the
evaluation is not legally appropriate.

Sailent features of New law regarding Section 147

The term “reason to believe that any income has escaped assessment” is not utilised in Section
147. Hence, there is no need to posit any grounds for the belief that any revenue has evaded
evaluation. A notice under section 148 cannot be issued unless there is sufficient information
indicating that there has been an evasion of income assessment. Explanations 1 and 2 have been
included into section 148.

Section 148 of the legislation includes Explanation 1, which offers the legislative elucidation of
the term “information which suggests that the income has escaped assessment.”

Explanation 2 pertains to situations involving search, survey, and requisition, when the
Assessing Officer (AO) is not obligated to possess any information, as stated in Explanation 1 to
section 148, in order to issue a notice under section 148. Section 148A has been introduced,
which pertains to the process of conducting an investigation and giving an opportunity prior to
the issuance of a notice under section 148. The time restriction for the issuance of a notification
under section 148 is to be considered.- a) In typical scenarios, the prescribed duration for legal
proceedings is three years. b) In circumstances where income has been concealed via assets,
expenses, or entries exceeding Rs. 50 lakhs, the stipulated timeframe for legal action is ten years.
c) It is important to note that there is no distinct category for undeclared foreign assets in terms
of the prescribed duration for legal proceedings.

The designated duration for the completion of the reassessment.

 If the notice under section 148 is served on or after April 1, 2019, no order of assessment,
reassessment, or recomputation can be made under section 147 after twelve months have passed
from the end of the financial year in which the notice under section 148 was served. In the event
of receiving a Notice under Section 148A(b), what course of action should be pursued? The
issuance of the notice is required to be carried out by the authorised officer (AO). Please verify if
the Notice is applicable to the academic year 2016-17 and all following years. This is because,
according to the first proviso of the new section 149, any assessment year previous to the
academic year 2016-17 would be considered time barred and legally invalid for reopening
assessments. According to the newly enacted legislation, the notifications under section 148 in
conjunction with section 148A(b) must pertain to the assessment year 2016-17 and subsequent
years. Examine whether the material presented by the administrative officer, in conjunction with
the Notice under Section 148A(b), satisfies the aforementioned definition. Please verify if the
Notice has been duly authorised by the designated authority in accordance with the provisions
outlined in section 151. Please verify if you have allowed a minimum of seven days for a
response to the Notice. In the event that you identify any deficiencies or inadequacies, it is
imperative that you articulate objections to the aforementioned notification in your response.

It is advisable to submit a comprehensive written argument based on the strengths of the case and
request the Assessing Officer (AO) to provide a personal hearing prior to the issuance of the
decision under section 148A(d).

Conclusion

The evolution and modification of Section 147 have been studied via judicial interpretation.
The adjustments made to the Income Tax Act of 1961 have resulted in noteworthy alterations in
the comprehension and implementation of the aforementioned section. In the preceding section,
two primary circumstances were discussed in which the provisions might be used. However, by
examining the relevant case laws, it becomes evident that a change was necessary. This
expansion of the section's scope was undertaken in order to accommodate the unique
circumstances of each particular instance.

Previously, the emphasis mostly revolved around the responsibility of the Assessee to provide a
comprehensive and thorough disclosure of all relevant information. The interpretation of this
passage continues to be of utmost importance. Presently, the courts emphasise the requirement
for the Assessee to provide a genuine and sincere disclosure of all pertinent facts and
circumstances that may impact the final result of the legal proceedings. Currently, there is a
notable focus on the concept of “material information” and the criteria for justifiably reopening
legal processes. Nonetheless, the Assessee is not entitled to challenge the assessment or initiate
the reopening of assessment processes based on unforeseeable future circumstances. This
statement suggests that the provision does not possess the characteristic of being applicable
retrospectively.

The legislative amendment in 1989 introduced the inclusion of the phrase “reason to believe,”
as previously observed. Subsequent judicial rulings have shown that these specific terms
constitute the key elements within the provision.

The Assessing Officer (AO) is empowered to reopen the assessment processes if there is
reasonable cause to suspect an inaccuracy in the submitted evidence.

The Supreme Court has established another significant criterion, emphasising the need to use
vigilance to prevent arbitrary exercise of authority by the Assessing Officer (AO). Due to the
broadening of the section's scope, emphasis has been placed on this particular subject. The
assessing officer (AO) is not authorised to provide arbitrary justifications for the decision to
revisit an assessment. The inclusion of the term “opinion” grants the assessing officer the
discretion to evaluate the situation and initiate the reopening of assessment processes based on
their own conclusions. There exists potential for the misuse of authority, and it is imperative to
guarantee that instances of such misuse and abuse are prevented. Hence, a consistent practise
observed by the courts is to interpret the language of the provision in order to prevent the
Administrative Officer (AO) from exercising this authority in a capricious or trivial manner

The numerical value provided is 1.147. The concept of income escaping assessment refers to
the situation where the Assessing Officer possesses a reasonable belief that certain income that
is liable to be taxed has not been properly assessed for a particular assessment year. In such
cases, the Assessing Officer is empowered, in accordance with the provisions outlined in
Sections 148 to 153, to assess or reassess the aforementioned income. Additionally, the
Assessing Officer may also assess any other income that is liable to be taxed and has
subsequently come to their attention during the proceedings under this section. Furthermore, the
Assessing Officer may recompute the loss, depreciation allowance, or any other allowance
applicable to the relevant assessment year.

In cases where an assessment has been conducted under Sub-section (3) of Section 143 or this
section for the relevant assessment year, this section prohibits any further action from being
taken after four years from the end of the relevant assessment year, unless there is evidence of
income that should have been taxed but was not assessed due to the Assessee's failure to file a
return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142
or Section 148, or to provide complete and accurate information regarding all relevant facts
necessary for the assessment of that particular year.

BIBLIOGRAPHY

Books

1) Bhattacharjee, D.K. (2010). Direct Taxes Law. 45th ed., Taxmann Publications, New Delhi.

2) Bangur, A.N. (2010). Income Tax Law with Latest Amendments and Case Law. 10th ed.,
Taxmann Publications, New Delhi.

3) Shetty, D.N. (2010). Income Tax. 7th ed., Taxmann Publications, New Delhi.

4) Taxmann. (2010). Income Tax Act, 1961 with Rules and Notifications. 45th ed., Taxmann
Publications, New Delhi.

5) Vaish, S.P. (2009). Income Tax Law: A Practical Guide for Students and Professionals.
18th ed., Taxmann Publications, New Delhi.

Journal Articles

1) Aggarwal, R.K. (2009). Anti-Avoidance Measures in Income Tax Law. The Indian Journal
of Tax Law, 17(1), 1-20.

2) Garg, P.K. (2009). Tax Planning and Tax Management: A Comparative Analysis of Indian
and US Tax Laws. The Indian Journal of Tax Law, 17(2), 35-48.

3) Gupta, S.K. (2009). Income Tax Law: A Study of Assessment Procedure and Remedies.
The Indian Journal of Tax Law, 17(3), 61-72.

4) Jain, P.K. (2009). Taxation of Non-Resident Indians: A Critical Appraisal. The Indian
Journal of Tax Law, 17(4), 85-96.

5) Kapoor, R.K. (2009). Taxation of Capital Gains: A Comparative Analysis of Indian and US
Tax Laws. The Indian Journal of Tax Law, 17(5), 109-120.

Websites

1) Central Board of Direct Taxes (CBDT): https://www.incometax.gov.in/IEC/foportal

2) Income Tax Appellate Tribunal (ITAT): https://itat.gov.in/

3) Supreme Court of India: https://main.sci.gov.in/

4) Taxmann's Income Tax Web Services: https://www.taxmann.com/

5) CCIT's Knowledge Resource Centre: https://www.incometax.gov.in/iec/foportal/contact-us