Calcutta High Court Rules Against Reassessment of Himadri Speciality Chemical Ltd, Citing "Change of Opinion"

The Court sets aside reassessment proceedings initiated by the Income Tax Department for AY 2019-20, highlighting the impermissibility of reopening cases based on the same material and issues previously addressed.

The Calcutta High Court, in a significant ruling, has quashed the reassessment proceedings initiated against Himadri Speciality Chemical Limited for the assessment year 2019-20. The Court, presided by Justice Om Narayan Rai, concluded that the proceedings were based on a "change of opinion," which is impermissible under the Income Tax Act, 1961.

The legal battle arose when the Assistant/Deputy Commissioner of Income Tax issued a reassessment notice to Himadri Speciality Chemical Limited, alleging undisclosed cash transactions amounting to Rs. 80,62,000/- with their transporter, Liquid Gold Carriers Private Limited. This notice came despite prior assessments where the same issue was addressed without any additions made to the petitioner's income.

The Court examined the sequence of events and found that the Income Tax Department had previously scrutinized the transactions between Himadri Speciality Chemical Ltd and Liquid Gold Carriers Pvt. Ltd during assessments for earlier years. The department had already determined that the transactions were genuine, as evidenced by the assessment orders dated August 26, 2022, for both entities.

The petitioner's legal counsel, Mr. J.P. Khaitan, argued that the reassessment was not only a duplication of prior proceedings but also violated the legal principle against reviewing assessments based on unchanged facts. The Court agreed, stating that the proceedings were a clear case of revisiting a settled matter, which amounted to a "change of opinion."

Further, the Court emphasized that the reassessment notice was flawed as it was issued by the jurisdictional Assessing Officer instead of following the faceless assessment scheme under Section 151A. However, the judgment primarily rested on the "change of opinion" doctrine, leaving the latter issue unaddressed.

The Court's decision underscores the judicial stance that reassessment must be founded on fresh material and not merely a reconsideration of previous conclusions. This ruling sets a precedent, reinforcing the protection of taxpayers from arbitrary reassessment actions by tax authorities.

The quashing of the reassessment notice provides significant relief to Himadri Speciality Chemical Limited, ensuring that their financial transactions for the said assessment year remain undisturbed by further tax demands.

Bottom Line:

Income Tax - Reassessment proceedings initiated on the same material and for the same issue already addressed in prior assessments constitute "change of opinion" - Such reassessment proceedings are impermissible under the law.

Statutory provision(s): Sections 147, 148, 148A of the Income Tax Act, 1961

Himadri Speciality Chemical Limited v. Assistant/Deputy Commissioner of Income Tax, (Calcutta) : Law Finder Doc Id # 2819419