Reassessment cannot be initiated on a mere change of opinion after scrutiny examination.

NTPC Ltd.’s assessment for Assessment Year 2007–08 was originally completed under Section 143(3) of the Income-tax Act, 1961.

Subsequently, the Assessing Officer issued a notice under Section 148 on 23 March 2012 and recorded reasons alleging under-assessment on account of: (i) Oil and Gas Exploration expenses of ₹7.70 crore; (ii) preliminary/survey and investigation expenses; and (iii) prior-period income.

Reassessment proceedings culminated in an assessment order dated 28 March 2013 under Sections 143(3) and 147, making additions on the first two counts.

The Commissioner of Income Tax (Appeals) annulled the reassessment on the ground that it was based on a mere change of opinion, noting that the relevant issues had been examined during the original scrutiny assessment and that the assessee had furnished replies to the Assessing Officer’s queries.

The Income Tax Appellate Tribunal dismissed the Revenue’s appeal, leading to the present appeal before the Delhi High Court.

The Court applied Sections 143(3), 147 and 148 of the Income-tax Act, 1961.

While reassessment may ordinarily be initiated under Sections 147 and 148 where the Assessing Officer has reason to believe that income has escaped assessment, the power cannot be exercised merely because a subsequent Assessing Officer forms a different view on material that was already examined during the original scrutiny assessment.

Where the original Assessing Officer had raised queries, the assessee had furnished explanations, and the assessment was completed without additions, a subsequent reassessment on the same material constitutes a change of opinion and is impermissible.

The Court also considered the statutory requirement, invoked in the recorded reasons, that there must have been a failure by the assessee to disclose fully and truly all material facts necessary for assessment.

Although the Revenue relied upon decisions stating that an original Section 143(3) assessment does not, by itself, bar reassessment, the Court distinguished that principle on the facts of the present case.

The recorded reasons showed that the subsequent Assessing Officer sought to revisit the allowability of the Oil and Gas Exploration expenses, preliminary expenses and prior-period income because he disagreed with the treatment accepted in the original assessment.

The CIT(A) had found that NTPC responded to Query Nos. 7 and 8 during the original assessment proceedings and addressed all three matters forming the basis of reassessment.

The Court rejected the Revenue’s contention that no specific queries had been raised, holding that the assessee would not have furnished the relevant replies unless the issues had been queried during scrutiny; the mere failure of the CIT(A) to reproduce the questions in full did not negate their existence.

Since the original Assessing Officer had considered the assessee’s explanations and consciously made no additions, the subsequent initiation of reassessment amounted to a change of opinion rather than the discovery of escaped income based on a failure of disclosure.

It held that the reassessment proceedings were unjustified because they were founded on a mere change of opinion concerning matters already examined during the original scrutiny assessment.

The orders of the CIT(A) and the ITAT annulling the reassessment proceedings were upheld, and the Revenue’s appeal was rejected.