Court Rules on Competence of Assessing Officer to Reopen Assessment Based on New Evidence
The Calcutta High Court, presided over by Justice Raja Basu Chowdhury, has delivered a significant judgment in the case of "Mark Steels Limited v. Assistant Commissioner of Income Tax," addressing the issue of reopening tax assessments under the Income Tax Act, 1961. The judgment, dated 24th December 2025, emphasizes the jurisdictional assessing officer's competence to reopen assessment proceedings based on new and tangible material.
The case arose from Mark Steels Limited's challenge against the reopening of its assessment for the financial year 2021-22. The reopening was initiated under Section 148 of the Income Tax Act, following the discovery of financial transactions involving substantial cash payments to the Majee Group for coal purchases, which were not initially substantiated.
Justice Chowdhury, in his judgment, clarified that reopening an assessment does not constitute a mere change of opinion when it is based on new evidence. The court noted that for an assessing officer to reopen an assessment, they must have a reason to believe that income chargeable to tax has been under-assessed, and there must be an omission or failure by the assessee to disclose material facts.
The court further observed that in the original assessment, the transactions with the Majee Group were scrutinized but dropped due to a lack of evidence. However, new information obtained by the tax authorities justified the reopening of the assessment. The judgment highlights the importance of new and tangible material in distinguishing a legitimate reopening from a mere change of opinion.
While allowing the proceedings to continue, the court imposed a condition that any decisions made by the assessing officer should not be implemented without the express leave of the court, indicating a cautious approach towards jurisdictional issues.
This ruling provides clarity on the conditions under which tax assessments can be reopened, emphasizing the necessity for new evidence and the jurisdictional competence of assessing officers. It also serves as a reminder to taxpayers about the importance of full and true disclosure of material facts during assessments.
Bottom Line:
Income Tax Law - Jurisdictional assessing officer's competence to reopen assessment proceedings under Section 148 of the Income Tax Act, 1961, based on new and tangible material, does not constitute a mere change of opinion.
Statutory provision(s): Income Tax Act, 1961 Sections 143(3), 147, 148, 148A, 151A.
