Reassessment – An assessment cannot be reopened on the basis of change of opinion.

The petitioner, a limited company, was engaged in the business of carrying on various non-banking financial activities. An assessment order for the assessment year 1999-2000 was passed u/s. 143(3) on 28-3-2002 determining total income at Rs.27.72 crore. A notice u/s. 148 was issued on 27-3-2006 (after expiry of four years from the end of the assessment year) for reopening assessment. In the reasons recorded for reopening the assessment, it was stated that from the accounts it was noted that petitioner had a incurred a loss in trading in share. After discussing the various entries appearing in the opening and closing stocks and purchases and sales of those stocks it was concluded that there was a loss of Rs.19.86 crore and that loss was a speculative one and not allowable as deduction.

Accordingly, it was alleged that income to the extent of Rs.19.86 crore had escaped assessment. On a writ petition filed by the petitioner before the Bombay High Court, it was held that there was nothing new which had come to the notice of the revenue. Under the proviso to section 147, it was not possible to reopen the assessment on merely a relook of the accounts. The High Court quashed the notice dated 27-3-2006 (W.P.No.1919 of 2006 dated 28-2-2006). Being aggrieved, the revenue approached the Supreme Court. The Supreme Court observed that the assessee had disclosed full details in the return in the matter of its dealing in stocks and shares. The Supreme Court noted that according to the assessee, the loss was a business loss, whereas according to the revenue, the loss incurred was a speculative loss. The Supreme Court was of the opinion that reopening of the assessment was clearly based on a change of opinion and in the circumstances, reopening of the assessment was not maintainable.