Reassessment cannot be reopened on a mere change of opinion without fresh tangible material.

The petitioner filed its income-tax return for A.Y. 2022–23 on 31 December 2022, declaring total income of ₹32,13,74,078.

The return was selected for scrutiny, and the Assessing Officer issued notices under Sections 143(2) and 142(1) of the Income-tax Act, 1961, calling for, inter alia, details concerning expenses, TDS deductions, statutory liabilities and deductions under Section 43B.

The petitioner furnished the requested information, including details of TDS deducted from salary payments.

The Assessing Officer thereafter completed the scrutiny assessment under Section 143(3) read with Section 144B on 4 March 2024, accepting the returned income and recording that no adverse inference was warranted.

Subsequently, an audit objection was raised alleging that the petitioner had wrongly claimed ₹17,54,62,925 as a deduction under Section 43B in respect of TDS, although TDS was not an expenditure.

A notice under Section 148A was issued proposing reassessment.

The petitioner replied that it had neither treated the TDS amount as expenditure nor claimed it as a deduction; the only deduction claimed under Section 43B was ₹51,94,482 towards leave encashment.

Despite the reply, the Assessing Officer passed an order under Section 148A(3) and issued a consequential notice under Section 148 on 16 March 2026.

1. Whether the order under Section 148A(3) and the consequential notice under Section 148 were invalid for non-application of mind, when the alleged TDS deduction had not in fact been claimed by the petitioner

2. Whether the reassessment proceedings constituted a mere change of opinion, where the relevant TDS and deduction-related material had already been examined during the original scrutiny assessment under Section 143(3)

3. Whether the audit objection supplied fresh or tangible material establishing that income chargeable to tax had escaped assessment under Section 147

The Court applied Sections 147 and 148 of the Income-tax Act, 1961, which permit reassessment only where the Assessing Officer has a legally sustainable basis to believe that income chargeable to tax has escaped assessment; Sections 148A(3), 148A and 148, which require consideration of the assessee’s response before issuing a reassessment notice; Section 143(3), governing scrutiny assessment; and Section 43B, concerning specified deductions allowable subject to statutory conditions.

The Court applied the settled principle that reassessment cannot be initiated on a mere change of opinion on material already examined during the original assessment and that there must be fresh or tangible material indicating escapement of income.

It further held that proceedings founded on an incorrect factual premise and passed without proper consideration of the assessee’s explanation suffer from non-application of mind.

The Court examined the original scrutiny proceedings and found that the Assessing Officer had specifically required the petitioner to reconcile expenses with TDS deducted and paid, provide computation of disallowances, and furnish details relevant to Section 43B.

The petitioner supplied the requisite information, after which the assessment was completed under Section 143(3) without any adverse inference.

On examining the income-tax return and audit material, the Court found that the petitioner had claimed only ₹51,94,482 under Section 43B towards leave encashment and had not claimed the alleged TDS amount as an expenditure or deduction.

The alleged amount represented TDS relating to salary, contractor payments, consultancy and professional fees, and not a deduction claimed under Section 43B.

Consequently, the reassessment was based on a misreading of the audit report and an incorrect factual assumption.

Since the relevant material had already been available to and considered by the Assessing Officer during the original scrutiny assessment, the subsequent action amounted to a change of opinion and was unsupported by any fresh or tangible material indicating escapement of income.

The writ petition was allowed, and the impugned show-cause notice, the order under Section 148A(3), and the consequential reassessment notice were quashed and set aside.