Whether reopening of assessment u/s 147 amounts to an impermissible review if “reasons to believe” are not based on new “tangible materials”?

Last updated: 20 August 2014

Court :
Delhi High Court

Brief :
The respondent AO re-opened the assessment by notice u/s 147 after sending a notice of scrutiny and questionnaire. The petitioner responded to notice requesting reasons for reopening the assessment be furnished. The Revenue acceded to the petitioner’s request. The petitioner objected to reasons for reopening the assessment contending that all true and material facts were disclosed and that the revenue was forming an opinion of case of escapement of income.The assessee argued that the expression “reasons to believe”under Section 147 refers to objective circumstances. In the present case, the assessment was completed under Section 143 (3) after notice was issued under Section 142 (1) was issued and explanation sought in respect of all relevant matters. The assessee could not be faulted for the omission to discuss the materials on record stressing that “reasons” were to be on the basis of “tangible materials”which must be in possession of the revenue, which alone can result in a valid re-opening.Held that if there are no“reasons to believe” based on new, “tangible materials”, then the reopening amounts to an impermissible review.

Citation :
Madhukar Khosla – Petitioner – Versus – Assistant Commissioner of Income Tax - Respondent