Reassessment under Section 147 of the Income Tax Act is invalid if initiated solely based on an audit objection without the discovery of fresh tangible material, as this amounts to an impermissible change of opinion.

ORDER

PER SUDHIR PAREEK, JM:

The instant appeal has been preferred by the appellant against the order of the learned Commissioner of Income Tax (Appeals) Delhi [“Learned CIT(A)”, for short] dated 21.11.2025 passed u/s 250 of the Income Tax Act, 1961 (for short ‘the Act’) by which the appeal of the appellant was dismissed.

2. Facts of the case may be summarized as that the appellant company filed its return of income for AY 2005-06, on 31.10.2005 showing total income at Rs. 10,25,309/-. Subsequently, the Learned AO noticed that in the Profit & loss a/c for the year under consideration the appellant has debited trade discount of Rs. 1,69,94,870/- and cash discount of Rs. 17,00,110/- whereas in the ledger account of these two expenses, the amount of expenditure shown is of Rs.24,50,901/- and Rs. 12,98,786/- respectively. Accordingly, the appellant booked inflated expenditure amounting to Rs.1,45,43,969/- and Rs.4,01,324/- respectively. The Learned AO further noticed that an amount of Rs.1,66,397/- debited in the Profit & Loss account as bonus paid, has not been actually paid till the date of filing of return. On the basis of information as above, the Learned AO had reasons to believe that income to the extent of 1,51,11,690/- has escaped assessment and accordingly the assessment was reopened u/s 147 of the Act by issuing notice u/s.148 dated 22.3.2012, which was completed on 25.3.2013 assessing total income at Rs. 1,62,27,150/-, by adding of Rs.1,51,11,690/- on account of difference in trade discount, cash discount and of bonus not paid before the filing of return of income.

3. Heard rival submissions and carefully scanned the materials available on record.

4. Reiterating the grounds of appeal, the Learned AR submitted that the assessment order dated 25.03.2013 was passed u/s 147/143(3) of the Act assessing therein the income at Rs.1,62,27,150/- for the assessment year 2005-06 deserved to be quashed only on this logic that the reassessment was initiated solely on the basis of audit party objection being inherently based on review/re-appraisal of same assessment records without their being any fresh tangible material unearthed subsequent to conclusion of original assessment being framed vide order dated 16th Aug., 2011 u/s 143(3)/154 of the Act assessing the income at Rs. 11,15,455/-.

5. Per Contra, the Learned DR relied on the orders passed by both lower authorities.

6. A bare perusal of the assessment order, it is clearly manifested that the case was reopened only on the basis of audit objection raised by the Revenue audit party, on the reasons mentioned in the assessment order itself and Learned AR submitted that it is established principle of law that audit objections being only an information and reassessment notice based on said audit objection only, is not sustainable in the eyes of law and for this purpose, the Learned AR relied upon the judgment passed by the Hon’ble Delhi High Court in the case of FIS Global Business Solutions India (P) Ltd. v. ACIT 408 ITR 75 (Del), of which relevant extract of para 5 & 6 reads as under:

“5. Carlton overseas (P.) Ltd. (supra) emphasizes reliance by the revenue on a subsequent audit report, cannot be considered as tangible material. The relevant extracts of that decision are as follows:

"8. Ms. Prem Lata Bansal, learned counsel appearing for the Revenue has contended that audit party can on factual basis ask for reassessment and which has, therefore, been done in the present case. It is, however, admitted by her that a