Sep 19, 2022

New Reassessment Regime – Is ‘Change of Opinion’ Still a Valid Defence?

Reassessment proceedings can be initiated against the taxpayers in compliance with procedures prescribed under Section 148A / 148 read along with Section 147 of the Income Tax Act, 1961 (‘IT Act’) on the ground that the income chargeable to tax has escaped assessment. With an intent to reduce litigation and providing ease of business, the Legislature through Finance Act, 2021 has radically changed the reassessment regime of the IT Act.[1]

Interestingly, while in the erstwhile regime, reassessment proceedings could be triggered where the Assessing Officer had ‘reason to believe’ that income chargeable to tax has escaped assessment, the trigger for initiating reassessment as per the new regime is ‘information which suggests’ that the income chargeable to tax has escaped assessment. Being a new provision the jurisprudence on the validity to initiate the reassessment proceedings and defences available to taxpayers is still in its nascent stage. However, in our opinion certain safeguards which were read into the erstwhile reassessment regime by the Constitutional Courts will apply with equal force to the new reassessment regime. One such safeguard available with the taxpayer is the defence of ‘change of opinion’.

The safeguard of ‘change of opinion’ was read in the erstwhile reassessment regime while interpreting the term ‘information’ which also finds a mention in the new reassessment regime. The Hon’ble Supreme Court speaking through 3-judge bench in the case of Indian Eastern Newspaper Society v. CIT[2], has categorically held that the reopening of the assessment by the Income Tax Authority on reconsideration of the material available at the time of original assessment proceedings will amount to ‘change of opinion’ and, thus, cannot be permitted. Explaining the reasons for including such safeguard, the Hon’ble Supreme Court observed that an assessment proceeding is a quasi-judicial proceeding which acquires finality on the assessment order being made. Thus, it was clarified that the finality of such an order can only be disturbed in terms of the procedure provided by law viz an appeal, revision and rectification and such exercise could not be undertaken under the garb of reopening under Section 147 of the IT Act.

Further elucidating on this proposition, the Hon’ble Supreme Court in the case of CIT v. Kelvinator India Pvt. Ltd.[3], clarified that ‘change of opinion’ as a safeguard was essential to prevent arbitrary powers being exercised by the Assessing Officer. The Apex Court explained that there was conceptual difference between ‘power to review’ and ‘power to re-assess’ and if the concept of ‘change of opinion’ is removed then, in the garb of re-opening the assessment, review would take place. Thus, it can be reasonably inferred that ‘change of opinion’ is an in-built safeguard which must be read into the new reassessment regime so as not to vest unbridled and unrestricted power of ‘review’ in garb of reassessment.

Recently, the Hon’ble High Court of Delhi in the case of Seema Gupta v. ITO[4], has appreciated the plea of the taxpayer that the reassessment notice was based on ‘change of opinion’ and consequently, has set aside the Order passed under Section 148A(d) of the IT Act and remanded back the matter to the Income Tax Authority for de novo consideration. Though the Hon’ble Court did not specifically deliberate on the question as to whether ‘change of opinion’ can be read into the new regime, but the quashing of the Order passed under Section 148A(d) of the IT Act provides a sliver of hope that the historical safeguard of ‘change of opinion’ still holds fort and reassessment proceedings initiated under the new regime may be susceptible to challenge on this ground.


[1] See Section 147, 148A, 148, 149, 150, 151A and 151 of the Income Tax Act, 1961.

[2] [1979] 119 ITR 996 (Supreme Court); see also: Maharaj Kumar Kamal Singh v. CIT, [1959] 35 ITR 1 (Supreme Court); CIT v. A. Raman & Co., [1968] 67 ITR 11 (Supreme Court); Kalyanji Mavji & Co. v. CIT, [1976] 102 ITR 287 (Supreme Court).

[3] [2010] 320 ITR 561 (Supreme Court).

[4] W.P.(C) 10740/2022 (High Court of Delhi).




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