HC Sets Aside Section 148 Notice for Lack of Fresh Evidence

The petitioner, M/s Creamline Dairy Products Limited, had undergone a detailed scrutiny assessment for AY 2016-17, which was completed under Section 143(3) on 17.12.2018 after examining all relevant transactions, including share valuation and disallowance under Section 14A. Subsequently, the Department issued approval under Section 151 and a reopening notice under Section 148 dated 30.03.2021. However, reasons for reopening were communicated much later, on 11.03.2022, along with a show-cause notice, granting fewer than four working days to respond.

The petitioner challenged the reopening on the grounds that it was based on a mere change of opinion, as all material facts were already disclosed and examined during the original assessment. It was further argued that no fresh tangible material existed and that procedural lapses, including delayed communication of reasons and denial of proper opportunity, violated principles of natural justice.

Main Issue: Whether reassessment proceedings under Section 147/148 are valid when initiated on the same material already examined during original scrutiny, without any fresh tangible evidence.

HC’s Decision: The High Court allowed the writ petition and quashed the reassessment proceedings. It held that the reopening was based solely on a change of opinion, which is impermissible in law. The Court observed that once the Assessing Officer had examined the issues during original scrutiny and accepted the petitioner’s position, reopening on the same material amounts to a review, not a reassessment.

Relying on settled law, including CIT v. Kelvinator of India Ltd, the Court reiterated that reassessment must be backed by fresh tangible material indicating escapement of income. In the absence of such material, reopening is without jurisdiction. The Court also noted serious procedural lapses, including delayed furnishing of reasons and inadequate opportunity of hearing, which further vitiated the proceedings. Accordingly, the impugned notice and consequential proceedings were set aside.

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