Reassessment cannot be reopened on an issue already examined without fresh tangible material.

The petitioner filed his return for A.Y. 2016–17 declaring total income of ₹11,22,23,090.

The return was scrutinised and an assessment was completed under Section 143(3) of the Income-tax Act, 1961, after the petitioner was asked to explain long-term capital gains.

The Assessing Officer later issued a notice under Section 148A(b), alleging that the petitioner had set off short-term capital loss from mutual-fund redemptions against long-term capital gains.

The information arose from a survey of JM Financial Asset Management Limited concerning alleged manipulation of the distributable surplus of a JM fund.

After considering the petitioner’s objections, the Assessing Officer passed an order under Section 148A(d) and issued a notice under Section 148, both dated 28 March 2023.

The petitioner challenged those actions by writ petition.

1. Whether the Assessing Officer had a sufficient, assessee-specific basis to reopen the assessment where the alleged manipulation concerned JM Financial and no material showed that the petitioner knowingly participated in a sham transaction.

2. Whether reopening was impermissible as a change of opinion because the short-term capital-loss issue had already been examined during the scrutiny assessment and no fresh tangible material was shown.

Sections 148A and 148 of the Income-tax Act govern the pre-reopening procedure and issuance of a reassessment notice.

Reopening must rest on relevant material having a rational connection or live link to the belief that the assessee’s income escaped assessment; vague or remote material, or mere suspicion, is insufficient.

An assessment cannot be reopened on a change of opinion absent fresh tangible material.

The Court relied on Pranav Ramesh Parikh v. Deputy Commissioner of Income Tax and Karan Maheshwari v. Assistant Commissioner of Income Tax for the principle that allegations against JM Financial do not, without material linking the assessee to knowing participation in a sham transaction, justify reopening.

It also referred to Commissioner of Income-tax v. Walfort Share & Stock Brokers (P) Ltd. and Income Tax Officer v. Lakhmani Mewal Das on dividend-stripping transactions and the required nexus between material and the belief of escapement.

The Court distinguished SEBI v. Rakhi Trading Private Limited as concerning synchronised trading under SEBI regulations, rather than the issue before it.

The reassessment was founded on allegations that JM Financial had manipulated its accounting methodology and that investors had claimed fictitious short-term capital losses.

The Court found no material or recorded finding establishing that this petitioner knowingly participated in a sham transaction or otherwise earned income that had escaped assessment.

Further, the petitioner’s short-term capital-loss claim had been examined during the earlier scrutiny assessment, and the Revenue had not demonstrated possession of fresh tangible material.

Reopening therefore amounted to a change of opinion and lacked the necessary assessee-specific nexus to escaped income.

The Rule was made absolute.