The Chhattisgarh High Court held that a reassessment under Section 147 of the Income Tax Act, 1961 cannot be initiated merely on the basis of a change of opinion by the Assessing Officer; there must be fresh tangible material not previously considered and a live link between that material and the belief that income escaped assessment. The Court upheld the Tribunal’s quashing of a reassessment order for AY 2009-10, emphasizing that the Assessing Officer’s reasons were drawn from the original assessment record and lacked the requisite jurisdictional foundation.
Background & Facts
The Dispute
The Revenue appealed the order of the Income Tax Appellate Tribunal, Raipur Bench dated 25.06.2024 which allowed the assessee’s appeal and quashed the reassessment order passed by the Assessing Officer under Section 147 of the Income Tax Act, 1961 for the assessment year 2009-10. The assessee, M/s Jindal Power Limited, had filed a return declaring income of Rs.95,29,85,465/-. The Revenue contended that certain deductions and allowances were erroneously granted, leading to escapement of income chargeable to tax.
Key Facts
- The assessee filed an e-return for AY 2009-10 declaring income of Rs.95,29,85,465/-.
- The Assessing Officer issued a notice under Section 143(2) of the Act (date not specified in the judgment).
- On 28.12.2011, the Assessing Officer passed an assessment order determining total income chargeable to tax.
- Subsequently, the Assessing Officer noticed that certain deductions and disallowances were wrongly allowed and, after obtaining sanction under Section 151(1), reopened the assessment under Section 147.
- The reassessment order dated 13.02.2015 enhanced taxable income from Rs.9655.13 lakhs to Rs.23890.05 lakhs with book profit of Rs.193131.85 lakhs and raised a demand of Rs.1,93,13,18,000/-.
- The assessee appealed the reassessment order to the CIT (Appeals); the CIT (Appeals) dismissed the appeal on 31.03.2014 and sustained the reassessment order.
- The assessee then approached the Tribunal. The Tribunal, after considering the relevant provisions and Supreme Court and High Court decisions, held that the reassessment was based on a mere change of opinion and quashed the reassessment order.
- The Revenue filed the present tax appeal under Section 260A of the Income Tax Act, 1961 challenging the Tribunal’s order.
- The High Court reserved its order on 30.06.2026 and delivered the judgment on 24.09.2026.
Procedural History
- 28.12.2011: Original assessment order passed by the Assessing Officer for AY 2009-10.
- 07.12.2011: Notice under Section 142(1) issued calling for evidence on depreciation, additional depreciation, disallowance under Section 14A and pre-production interest.
- 05.07.2013: Notice under Section 148 issued directing filing of return on grounds of escaped assessment.
- 13.02.2015: Reassessment order passed under Section 143(3) read with Section 147 enhancing income and raising demand.
- 31.03.2014: CIT (Appeals) order dismissing assessee’s appeal and sustaining reassessment order.
- Date not specified: Assessee’s appeal filed before the Tribunal.
- 25.06.2024: Tribunal order (ITA No.200/RPF/2017) allowing assessee’s appeal and quashing the reassessment order.
- Present appeal: TaxC No.15 of 2025 filed by the Revenue challenging the Tribunal’s order.
- 30.06.2026: Order reserved by the High Court.
- 24.09.2026: Judgment delivered and uploaded.
Relief Sought
The Revenue sought to set aside the Tribunal’s order dated 25.06.2024, uphold the reassessment order of the Assessing Officer dated 13.02.2015, and restore the demand of Rs.1,93,13,18,000/-. The assessee sought to uphold the Tribunal’s order and have the reassessment order quashed.
The Legal Issue
The central question was whether the reassessment initiated by the Assessing Officer under Section 147 of the Income Tax Act, 1961 for the assessment year 2009-10 was valid, i.e., whether there existed "reason to believe" that income chargeable to tax had escaped assessment due to the assessee’s failure to disclose fully and truly all material facts, or whether the reassessment was based merely on a change of opinion by the Assessing Officer regarding the same set of facts already on record.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the Tribunal erred in holding that the reassessment was based on a mere change of opinion. It argued that the Assessing Officer had discovered fresh tangible material - namely, excess depreciation on dam (Rs.8,50,32,403/-), non-disallowance under Section 14A (Rs.11.53 crores), excess additional depreciation under Section 32(ii)(a) (Rs.377.81 crores) and pre-production interest and other income (Rs.3.47 crores) - which justified reopening the assessment. Reliance was placed on Phool Chand Bajrang Lal & another v. ITO, (1993) 203 ITR 456 (SC) to assert that the information forming the basis for reopening need not be extrinsic; it could be derived from the original assessment record, and the mere fact that the Assessing Officer derived such information from the record did not amount to a mere change of opinion.
For the Respondent (Assessee)
The assessee argued that at the time of the original assessment, all material facts regarding depreciation on dam, additional depreciation under Section 32(ii)(a), disallowance under Section 14A and earned interest and other income during the pre-production period had been disclosed and considered by the Assessing Officer. The reasons recorded by the Assessing Officer for reopening the assessment were already examined in detail during the original assessment proceedings; no fresh tangible material had come to light after the original assessment order. Consequently, the reassessment was based solely on a change of opinion, which is impermissible under Section 147 as clarified by Ganga Saran And Sons Pvt. Ltd. v. Income Tax Officer & Ors, (1981) 3 SCC 143, Kelvinator of India Ltd. v. Commissioner of Income Tax Delhi, (2010) 2 SCC 723 and State of Uttar Pradesh v. Aryaverth Chawl Udyoug, 2014 SCC OnLine SC 1205.
The Court's Analysis
The Court began by extracting the relevant provisions of Section 147 of the Income Tax Act, 1961 and its proviso, noting that jurisdiction to reopen an assessment requires two concurrent conditions: (i) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) such escapement must be by reason of the assessee’s failure to disclose fully and truly all material facts necessary for assessment. The Court emphasized that the belief must be held in good faith and must not be arbitrary, irrational, vague, distant or irrelevant; there must be a rational nexus or live link between the material coming to the Officer’s notice and the formation of the belief.
Turning to the facts, the Court observed that the reasons recorded by the Assessing Officer under Section 148(2) - excess depreciation on dam, non-disallowance under Section 14A, excess additional depreciation and pre-production interest - were all derived from the materials already on record during the original assessment proceedings. The Assessing Officer had, during the original assessment, called upon the assessee to furnish evidence on these very points and, after being satisfied with the genuineness of the replies, had framed the assessment order. The Court held that drawing an inference from the same material already considered and concluding that certain deductions were erroneously allowed amounted to a mere change of opinion, not a reason to believe based on fresh tangible material.
The Court further noted that the Assessing Officer had nowhere recorded his satisfaction that the assessee had failed to disclose fully and truly all material facts, nor had he indicated that any fresh facts had come to light after the original assessment order. Relying on Phool Chand Bajrang Lal v. Income-tax Officer, (1993) 4 SCC 77 and Commissioner of Income Tax Delhi v. Kelvinator of India Limited, (2010) 2 SCC 723, the Court held that the power to re-assess under Section 147 is conditioned on the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". Since the reasons were wholly based on the original assessment record, the live link was missing and the reassessment was without jurisdiction.
The Court also considered the Supreme Court’s recent pronouncement in Sanand Properties Pvt. Ltd. v. Joint Commissioner of Income-tax and others, (2026) SCC Online SC 851, which clarified that reliance on "tangible material" already considered and appreciated in the original assessment amounts to review, not reassessment, and is impermissible. Accordingly, the Tribunal’s view that the reassessment was based on a mere change of opinion was correct and justified.
"The reasons to believe recorded by the AO was totally unfounded and not bonafide and as such, initiation of reassessment proceeding by the AO under Section 147 of the Act of 1961 was patently invalid and without any jurisdiction."
The Verdict
The appeal filed by the Revenue was dismissed. The Court upheld the Tribunal’s order dated 25.06.2024 quashing the reassessment order of the Assessing Officer dated 13.02.2015. No order as to costs was passed. The reassessment demand of Rs.1,93,13,18,000/- was thus set aside.
What This Means For Similar Cases
Fresh Tangible Material Is Essential
Practitioners must ensure that any reassessment under Section 147 is premised on tangible material that was not previously considered or acted upon by the Assessing Officer during the original assessment. Merely re-evaluating the same record and forming a different opinion does not satisfy the jurisdictional threshold.
Live Link Between Material and Belief Required
The Assessing Officer must demonstrate a rational nexus or live link between the material relied upon and the belief that income escaped assessment. The belief must be held in good faith and cannot be a mere pretence; subjective satisfaction without objective foundation is insufficient.
Procedural Safeguards Against Review
The power to re-assess is distinct from the power to review. Courts will scrutinize whether the reassessment amounts to a review of the original assessment. If the material relied upon had already been appreciated and accepted in the original assessment, the reassessment will be struck down as impermissible review.
