Mere Change In Assessing Officer’s View Not 'Reason To Believe'; Reassessment Cannot Review Completed Assessment After Full Disclosure Of Documents: Bombay High Court
Isabella Mariam
The High Court of Bombay Division Bench of Justice B. P. Colabawalla and Justice Amit Satyavan Jamsandekar held that reassessment proceedings under Sections 148 and 148A of the Income Tax Act, 1961 cannot be invoked to reopen questions already examined and accepted in the original assessment, and that a mere change in the Assessing Officer’s view does not constitute “reason to believe” so as to permit reassessment. Allowing a writ petition by a charitable trust against the income tax authorities, the Court quashed the show cause notices under Section 148A(b), the order under Section 148A(d), and the consequent notice under Section 148, noting that the assessee had complied with Section 11(2) and that the reopening was based on a change of opinion.
The petitioner, a charitable trust registered under Section 12A of the Income Tax Act, filed its return of income for AY 2018–2019 declaring ₹1,96,983 and claiming exemption under Section 11. Along with the return, the trust filed Form 10 stating that 66.72% of its income amounting to ₹3,17,00,000 was being accumulated pursuant to a trustee resolution dated 26 September 2018 for medical, educational and social relief to members of the Zoroastrian community and for conservation, maintenance and upkeep of properties until 31 March 2023.
The case was selected for scrutiny on the issue of “Accumulation of Income by Trust.” The Assessing Officer issued notices under Sections 143(2) and 142(1), calling for details of accumulation under Section 11(2), utilisation charts for the past ten years and copies of Form 10 and the trustee resolution. The petitioner supplied all information including a certified true copy of the 26 September 2018 resolution.
The National Faceless Assessment Centre issued an order under Section 143(3), accepting the accumulation claim. On 9 August 2024, the Assessing Officer issued a notice under Section 148A(b) alleging that Form 10 lacked a specific purpose and merely repeated the trust’s objects. The petitioner replied that Form 10 had limited space and that the resolution already furnished set out specific purposes.
A further notice was issued on 20 August 2024, followed by a reply reiterating full compliance with Section 11(2). On 28 August 2024, the Assessing Officer passed an order under Section 148A(d) relying on an internal audit objection and holding that the resolution was allegedly dated 28 January 2020 and therefore beyond the due date. A notice under Section 148 was issued reopening the assessment. The petitioner challenged these proceedings, contending compliance with Section 11(2) and that the reopening was a change of opinion.
The Court recorded that “the reasons stated by the 1st Respondent in the impugned notices and the impugned order are factually wrong.” It observed that the petitioner had “specifically stated the particular purpose for which the income is being accumulated” in Form 10 and had also furnished the trustee resolution. It noted that “it is not the fault of the Petitioner that a more specific purpose could not be mentioned in Form 10 due to the limited space provided therein.”
The Bench stated that the Assessing Officer “clearly erred in reading the copy of the Resolution dated 26th September, 2018.” It recorded that the finding that the resolution was dated 28 January 2020 was “factually wrong,” because the resolution itself was dated 26 September 2018 and only the certification bore the date of 28 January 2020. The Court further stated that the assertion that the petitioner had not produced the resolution was “factually wrong,” since it was explicitly referred to in Form 10 and provided via letter on 30 January 2020.
On statutory compliance, it observed that the petitioner had “fully complied with all the requirements of section 11(2) of the Act and Rule 17 of the Income-tax Rules.” It recorded that there was “nothing more that the Petitioner could have done to comply with the provisions of Section 11(2).”
The Court noted that the assessment order under Section 143(3) was passed after examining all materials, and therefore reopening amounted to a review. It stated that “the proceedings under Section 148 of the Act cannot be initiated to review the earlier stand adopted by the Assessing Officer.” It further observed that there was “no new material before the Revenue, nor are there any new facts or information to justify the reopening of the assessment.”
The Bench recorded that the reassessment order was “based not only on a change of mind but also on the non-application of the mind.” It referred to precedents holding that reassessment cannot be initiated on a mere change of opinion and must be backed by new tangible material.
The Court stated: “For all the reasons set out above, we quash and set aside the impugned show cause notices dated 9th August 2024 and 20th August 2024, the impugned order dated 28th August 2024 and the impugned notice dated 28th August 2024.”
The Court further directed that “the Rule [is] made absolute in terms of the prayer clause (a) which reads as follows”:
“a) that this Hon’ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, or any other appropriate Writ, order or direction under Article 226 of the Constitution of India, calling for the records of the Petitioner’s case and after examining the legality and validity thereof quash, cancel and set aside the impugned show cause notices dated August 9, 2024 and August 20, 2024, the impugned order dated August 28, 2024 and the impugned notice dated August 28, 2024 issued by Respondent No.1.”
“All other grounds of challenge to the impugned show cause notices dated 9th August 2024 and 20th August 2024, the impugned order dated 28th August 2024 and the impugned notice dated 28th August 2024 are expressly kept open. However, there shall be no order as to cost.”
Advocates Representing The Parties
For the Petitioner: Mr. J. D. Mistri, Senior Advocate with Jeet Kamdar, instructed by Mr. Atul K. Jasani
For the Respondents: Mr. Dinesh R. Gulabani
Case Title: Sir Jamsetjee Jejeebhoy Charity Fund v. Income Tax Officer (Exemption) & Ors.
Neutral Citation: 2025: BHC-OS:20205-DB
Case Number: Writ Petition No. 4941 of 2024
Bench: Justice B. P. Colabawalla and Justice Amit Satyavan Jamsandekar
