Reopening Under Section 148 IT Act Not Change of Opinion If Based on New Evidence: Calcutta HC

Introduction

The High Court at Calcutta, in a judgment delivered by Justice Raja Basu Chowdhury on December 24, 2025, dismissed a writ petition filed by Mark Steels Limited challenging the initiation of reassessment proceedings under Section 148 of the INCOME TAX ACT , 1961, for the assessment year 2021-22. The court held that the reassessment notice and the order under Section 148 A(3) were not vitiated by a mere "change of opinion" since they were grounded in new tangible evidence unavailable during the original scrutiny. The petitioner, a steel manufacturing company, argued against the reopening, while the Income Tax Department defended it as a legitimate exercise based on fresh information regarding alleged cash transactions.

Case Background

Mark Steels Limited, a company engaged in steel product manufacturing with operations including a factory in Purulia, filed its income tax return for the assessment year 2021-22 (financial year 2020-21). During the original scrutiny under Section 143(2) and 142(1), the Assessing Officer examined certain financial transactions, including alleged cash payments totaling Rs. 2.45 crore to Majee Group for coal purchases, based on information from the department's investigation wing. The company denied any such transactions, claiming no business relationship with Majee Group. Lacking corroborative data from Majee Group or other sources, the Assessing Officer dropped the issue in the final assessment order dated December 22, 2022, under Section 143(3), without making any additions.

Subsequently, on March 11, 2025, a notice under Section 148 A(1) was issued, citing information from the Insight Portal and Taxpayer Annual Summary (TAS) report indicating potential escaped income of over Rs. 383 crore, linked to the same cash transactions. The petitioner responded, reiterating its earlier denial and arguing that the matter had been scrutinized and closed. However, on June 26, 2025, the Assessing Officer issued an order under Section 148 A(3) authorizing a notice under Section 148 . Mark Steels Limited then filed Writ Petition No. 584 of 2025, challenging these actions primarily on the grounds of "change of opinion" and lack of new information.

The main legal questions were: (1) Whether the reassessment proceedings constituted a prohibited "change of opinion" under Section 148 , given the prior scrutiny; and (2) Whether the Assessing Officer had jurisdiction to reopen the assessment based on the available evidence.

Arguments Presented

The petitioner, represented by senior advocate Mr. Mazumdar, contended that the transactions with Majee Group had been specifically flagged and examined during the original scrutiny notice under Section 142(1) dated November 15, 2022. The company had denied the cash payments in its response on November 28, 2022, and the Assessing Officer, after verification attempts yielded no data, dropped the issue in the December 22, 2022, assessment order. It argued that reopening under Section 148 was impermissible as it amounted to reviewing the prior decision without new facts, violating principles against "change of opinion." The petitioner highlighted similar unsubstantiated allegations for assessment year 2018-19 and noted that TAS report entries were from regular books of accounts, not escaped income. Reliance was placed on precedents like * Mangalam Publications v. Commissioner of Income Tax * (2024) and Seema Gupta v. Income Tax Officer (2023) to argue that reassessment requires tangible new information, not mere surmises.

In opposition, the Income Tax Department, represented by Mr. Dutt, argued that the original assessment dropped the issue solely due to lack of documentary evidence from Majee Group or related verifications, not on a conclusive finding of no escapement. The petitioner had withheld information, and the reassessment was triggered by fresh materials from the Insight Portal and TAS report, including specific transaction details uploaded post-assessment. The department emphasized that Section 148 allows reopening if there is "reason to believe" income escaped assessment due to non-disclosure, and prior lack of evidence does not bar action upon obtaining new documents. It cited * Principal Commissioner of Income Tax v. I.T.C. Ltd. * (2024) to support that reassessment can proceed with subsequent evidence acquisition.

Legal Analysis

The court meticulously analyzed the distinction between "change of opinion" and legitimate reopening under Section 147/148 of the INCOME TAX ACT , 1961. It reiterated that reassessment beyond the basic limitation period requires the Assessing Officer to have "reason to believe" that income chargeable to tax has escaped due to the assessee's omission or failure to disclose fully and truly all material facts—a principle enshrined in * Calcutta Discount Co. Ltd. v. ITO * (1961), as affirmed in * Mangalam Publications v. Commissioner of Income Tax * (2024, Supreme Court). The court clarified that "reason to believe" must stem from specific, subsequent information with a "live link" to escapement, not conjectures.

Drawing from * Kelvinator of India Ltd. v. ITO * (1996) and Income Tax Officer v. Techspan India Pvt. Ltd. (2018), the court explained that "change of opinion" implies an initial formation of opinion followed by a reversal, which is impermissible. Here, no such opinion was formed during the original assessment; the issue was dropped for want of evidence, not affirmative resolution. The subsequent Section 148 A(3) order introduced new tangible materials—like detailed transaction verifications and portal data—absent earlier, distinguishing it from mere review.

The court also referenced Seema Gupta v. Income Tax Officer (2023, Delhi HC) and * Bajaj Allianz Life Insurance Company Ltd. v. Deputy Commissioner of Income Tax * (2020, Bombay HC) to underscore that prior scrutiny without conclusive evidence does not bar reopening on fresh facts. Conversely, it distinguished the department's cited * Principal Commissioner of Income Tax v. I.T.C. Ltd. * (2024, Calcutta HC), noting that while new evidence justifies action, cryptic original orders may not imply opinion formation. Ultimately, the court found no jurisdictional error, as the new materials established a prima facie case of escapement.

Key Observations

• "From the aforesaid, it is crystal clear that the above issue though scrutinized, the jurisdictional assessing officer could not identify data in respect of Majee Group and hence, the alleged business relationship between the Majee Group and the assessee could not be verified. It is on such ground this issue was dropped."
• "The above, in my view, would not constitute formation of an opinion by the jurisdictional assessing officer... reassessment of income under Section 148 of the said Act cannot be made on the basis of a change of opinion."
• "I find that in the order impugned, a relationship between the petitioner and the Majee Group has been identified on the basis of additional materials, which were non-existent at the time when the scrutiny proceedings were initiated under Section 142(1) of the said Act."
• "If the assessing officer had earlier made an assessment for a relevant assessment year expressing an opinion on the matter either expressly or by necessary implication, a reassessment proceeding... cannot be initiated, as it would be a case of change of opinion."
• "In the facts noted hereinabove, I find that the petitioner has failed to make out any case of jurisdictional error committed by the jurisdictional assessing officer, on the ground of change of opinion."

Court's Decision

The High Court dismissed the writ petition, upholding the order under Section 148 A(3) dated June 26, 2025, and the consequent notice under Section 148 for assessment year 2021-22. However, noting potential jurisdictional issues under the newly notified Section 151A (which mandates central approval for certain reassessments), the court directed that no final decision in the reassessment proceedings be implemented without its express leave, while allowing the proceedings to continue.

This ruling reinforces that reassessment under Section 148 is viable when supported by genuinely new evidence, preventing abuse through "change of opinion" claims but safeguarding against premature closures. It may encourage tax authorities to pursue fresh verifications in similar cases involving portal data, while prompting assessees to ensure full disclosure during initial scrutiny. For future litigation, it highlights the need for assessing officers to document opinion formation clearly, potentially reducing challenges in high-value transaction disputes.