Reassessment beyond four years is impermissible based on a mere change of opinion without new tangible material.

The petitioner, a limited liability partnership, filed its return of income for Assessment Year (A.Y.) 2013-14 on September 29, 2013, declaring a loss

The case underwent scrutiny assessment under Section 143(3) of the Income Tax Act, 1961, during which the Assessing Officer (AO) specifically inquired into disallowances under Section 14A of the Act; the assessment was finalized on March 11, 2016, accepting the returned income

On March 18, 2020—beyond four years from the end of the relevant assessment year—the respondent issued a notice under Section 148 seeking to reopen the assessment on the grounds that interest expenses and investments in equity shares necessitated a disallowance of Rs. 9.31 crores under Section 14A

The petitioner’s objections were rejected by the respondent on August 10, 2021

1. Whether the respondent was legally permitted to reopen an assessment beyond the four-year period absent any failure by the assessee to fully and truly disclose material facts

2. Whether the reopening of the assessment, based on the same record available during the original scrutiny, constitutes an impermissible "change of opinion"

Under the proviso to Section 147, if an assessment is completed under Section 143(3), it cannot be reopened after four years unless there is a failure by the assessee to fully and truly disclose material facts

Principle of "Change of Opinion," which prohibits reopening assessments based on a mere re-examination of existing records without "tangible material"

Section 14A read with Rule 8D of the Income Tax Rules, 1962, concerning disallowance of expenditure incurred in relation to exempt income

The court found that the petitioner had disclosed all relevant information regarding exempt income and interest expenditures during the original assessment

The AO had specifically raised queries regarding Section 14A disallowances during the initial scrutiny, and the petitioner had satisfied those queries

The respondent failed to provide any "tangible material" sourced from outside the original record to justify the reopening; instead, the respondent admitted the reopening was based on an "examination of the records"

Since the assessment was being reopened after four years and there was no evidence of non-disclosure by the assessee, the court determined that the respondent’s actions amounted to an impermissible change of opinion and a second look at the same facts already examined during the regular assessment

The Writ Petition was allowed, and the impugned Notice dated March 18, 2020, and the Order dated August 10, 2021, were quashed and set aside