Kiran Raj

The Tripura High Court has set aside a reassessment notice issued under Section 148 of the Income Tax Act, 1961, ruling that the reopening of the petitioner’s tax assessment was not based on fresh material but on information already considered during the original assessment. The court held that reassessment proceedings could not be initiated merely on a change of opinion, reaffirming the necessity for "tangible material" to justify reopening a completed assessment.

The case arose from a petition filed by Abhijit Paul, who challenged a notice dated March 31, 2021, issued under Section 148 of the Income Tax Act for the assessment year 2014-2015. The petitioner contended that the reassessment proceedings were initiated without fresh material and were therefore illegal and time-barred.

A search and seizure operation was conducted at the premises of Rajarshi Motors Pvt. Ltd. and the residence of Swapan Kumar Paul, the petitioner’s father, on August 23, 2023. Various financial records, including books of account and tally data, were seized. Based on this, an assessment order was issued on March 29, 2016, assessing the petitioner’s total income at ₹12,98,56,202, which included additional amounts of ₹9,62,33,682 as undisclosed investment and ₹2,72,33,682 as undisclosed income.

The petitioner successfully appealed against these additions before the Commissioner of Income Tax (Appeals), which deleted them. The Income Tax Department, however, challenged this deletion before the Income Tax Appellate Tribunal, where the matter remained pending.

Subsequently, on March 31, 2021, the Deputy Commissioner of Income Tax issued a notice under Section 148, citing "reason to believe" that certain income had escaped assessment. The petitioner challenged this notice, arguing that it was issued based on the same materials previously considered in the original assessment.

The court examined whether the reassessment was valid under Sections 147, 148, 149, and 151 of the Income Tax Act. The primary contention of the petitioner was that the reassessment proceedings were based on an audit objection and the same appraisal report used in the original assessment, rather than any fresh material.

Referring to the Supreme Court’s ruling in Commissioner of Income Tax v. Kelvinator of India Ltd., (2010) 2 SCC 723, the court stated: "The Assessing Officer has the power to reopen an assessment, provided there is 'tangible material' to come to the conclusion that income has escaped assessment. Mere change of opinion is not a valid reason for reopening assessment."

The court also cited Mangalam Publications, Kottayam v. Commissioner of Income Tax, Kottayam, (2024) 10 SCC 433, which reaffirmed that reassessment cannot be initiated without fresh material. It further noted that the Income Tax Department’s reliance on the appraisal report and tally data seized during the original search did not qualify as new material.

The Division Bench stated: "Reassessment proceedings must be based on fresh material that was not available during the original assessment. In the present case, the materials relied upon for reopening were part of the initial assessment process, making the reassessment proceedings legally unsustainable."

The court also considered whether the notice under Section 148 was time-barred. Under Section 149(1)(b) of the Income Tax Act, reassessment notices can be issued within six years if the escaped income exceeds ₹1,00,000. The petitioner argued that the notice was uploaded on April 1, 2021, after the limitation period expired on March 31, 2021. However, the court accepted the department’s contention that the notice was digitally signed on March 31, 2021, and the delay in online transmission was due to an automated system, which did not invalidate the notice.

The Tripura High Court concluded that the reassessment notice was unsustainable and directed as follows:

1. The reassessment notice dated March 31, 2021, under Section 148 of the Income Tax Act was quashed.

2. The rejection of the petitioner’s objections, as recorded in the order dated February 21, 2022, was set aside.

3. No further proceedings could be initiated against the petitioner under Section 147 for the assessment year 2014-2015 based on the same materials.

Case Title: Abhijit Paul v. Union of India & Ors.
Case Number: WP(C) No. 284 of 2022
Bench: Chief Justice Aparesh Kumar Singh, Justice Biswajit Palit

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