Change of Opinion: Why Reassessment Fails

Introduction: Doctrine of Change of Opinion as a Jurisdictional Limitation

Change of opinion reassessment operates as a well-settled jurisdictional limitation on reassessment proceedings under the Income-tax Act. Courts have consistently held that a reassessment notice cannot be issued merely because the Assessing Officer seeks to revisit or re-evaluate material that was already available on record and examined during the original assessment. Such reopening is treated as an impermissible exercise of review, which lies outside the scope of statutory reassessment powers.

Notwithstanding amendments to the reassessment regime, including the introduction of section 148A, the doctrine of change of opinion continues to govern the very assumption of jurisdiction. Procedural compliance cannot legitimise a reopening that is substantively without authority of law or unsupported by fresh tangible material. As per our experience, High Courts consistently quash reassessment notices where the so-called reopening is founded on re-analysis or re-appreciation of the same material already scrutinised earlier.

This article confines itself strictly to the jurisdictional infirmity arising from change of opinion reassessment. It does not examine procedural lapses, limitation under section 149, sanction under section 151, or adequacy of information. The focus is limited to a single legal issue—whether reassessment can survive in law where it is founded on nothing more than a re-appreciation of material already considered in the original assessment proceedings.

Reassessment Proceedings as Impermissible Review of Concluded Assessment

Reassessment proceedings are intended to bring to tax income that has genuinely escaped assessment. They are not a statutory mechanism for review of a concluded assessment. The distinction between reassessment and review has been repeatedly emphasised by courts, which have held that the power to reassess cannot be exercised to correct perceived errors of judgment or to adopt a different interpretation of the same set of facts.

Where the original assessment has been completed after examination of the relevant material, any subsequent reopening on the same material amounts to an impermissible review. Such exercise falls outside the jurisdiction conferred upon the Assessing Officer. As per our experience, courts view this excess of power seriously, treating it as a foundational defect rather than a procedural irregularity.

A reassessment founded on change of opinion reflects a substitution of subjective satisfaction rather than the discovery of new facts. This is precisely what the doctrine seeks to prevent. The law does not permit successive Assessing Officers to reopen assessments merely because a different view is now considered preferable. Once an issue has been examined and an opinion has been formed, the matter attains finality unless fresh tangible material comes to light.

Judicial Meaning and Scope of the Doctrine of Change of Opinion

The doctrine of change of opinion is a judicially evolved limitation on the reassessment power, developed to prevent arbitrary reopening of completed assessments. Courts have consistently held that where an Assessing Officer has applied his mind to a particular issue during the original assessment, he cannot subsequently initiate reassessment proceedings merely because he now holds a different view on the same material. Such an exercise is beyond the scope of reassessment and amounts to an impermissible review.

In simple terms, the law does not allow the tax authority to “rethink” a concluded issue without any new factual basis. The reassessment power is triggered by discovery of fresh material suggesting escapement of income, not by a change in interpretation or reasoning. As per our experience, reopening notices often fail because they are based on re-analysis of the same balance sheet, audit report, or computation already examined earlier.

The doctrine applies irrespective of whether the Assessing Officer expressly recorded his opinion in the assessment order. What is relevant is whether the issue was open for examination and was in fact examined. Reassessment based on the same record undermines certainty and finality, which are essential to the administration of tax law.

Formation of Opinion in Original Assessment Proceedings

An opinion is deemed to have been formed when the Assessing Officer examines a particular issue during the course of original assessment proceedings and arrives at a conclusion, either expressly or impliedly. Courts have clarified that formation of opinion does not require a detailed discussion in the assessment order. The absence of elaborate reasoning does not imply absence of application of mind.

In practical terms, if a query is raised by the Assessing Officer and a reply is furnished by the assessee, the issue stands examined. Once this process is completed, the Assessing Officer is deemed to have formed an opinion on that issue. As per our experience, this principle becomes critical in reassessment cases where the reasons recorded attempt to reopen matters already covered by questionnaires and replies on record.

The law recognises that assessment orders are often concise. Therefore, courts permit reference to the assessment records, including notices issued, replies filed, and documents furnished, to determine whether an opinion was formed. Reassessment based on the same material, merely because the assessment order is silent, is legally unsustainable. The doctrine protects the taxpayer from repeated scrutiny on the same facts without any fresh tangible material.

Absence of Fresh Tangible Material: Inherent Lack of Jurisdiction

The existence of fresh tangible material is a condition precedent for valid assumption of jurisdiction under reassessment provisions. Courts have consistently held that where reopening is founded on material that was already available on record during the original assessment, the jurisdictional requirement fails at inception. Reassessment cannot be sustained on the basis of a mere reinterpretation, reappraisal, or re-examination of the same facts.

In simple terms, the law requires something new and external to the original assessment record. A different inference drawn from the same balance sheet, tax audit report, or financial statements does not constitute fresh tangible material. As per our experience, many reassessment notices collapse because the reasons recorded merely reproduce facts already disclosed and examined earlier.

Audit objections, internal communications, or change in legal understanding do not qualify as tangible material. Courts have categorically held that such inputs may prompt further inquiry, but they cannot by themselves confer jurisdiction to reopen a completed assessment. Where the foundation itself is defective, the entire reassessment proceeding becomes void. The requirement of fresh tangible material is therefore not a procedural formality, but a substantive safeguard against arbitrary exercise of power.

Persistence of Jurisdictional Defect Post Section 148A Proceedings

The introduction of section 148A has added procedural safeguards prior to issuance of reassessment notice. However, courts have clarified that compliance with section 148A does not cure a substantive lack of jurisdiction. Where the reopening is based on a change of opinion, the defect goes to the root of the matter and survives irrespective of procedural adherence.

In practical terms, even if a show cause notice is issued, reply is considered, and an order is passed under section 148A(d), reassessment cannot proceed if it is founded on the same material already examined earlier. As per our experience, High Courts routinely examine the reasons recorded alongside the original assessment records to determine whether the reopening is merely a review in disguise.

Courts look beyond the form and examine the substance. Mere nomenclature cannot determine jurisdiction. If the so-called “information” relied upon is nothing but a re-analysis or re-appreciation of existing material, the reassessment is struck down as without authority of law. The mere labelling of such material as “information” does not alter its legal character where it already formed part of the assessment record and was available for examination during the original assessment proceedings. What is relevant is the source, novelty, and substance of the material, and not the terminology used in the reasons recorded. Section 148A is procedural in nature; it does not dilute or override the doctrine of change of opinion. Jurisdiction must exist independently before procedure can operate.

Points to Remember

• The doctrine of change of opinion operates as a jurisdictional bar to reassessment proceedings.
• Reassessment cannot be used as a mechanism to review or re-examine a concluded assessment.
• Where an issue has been examined during the original assessment, reopening on the same material is impermissible.
• Formation of opinion does not require elaborate discussion in the assessment order; examination of records is sufficient.
• Fresh tangible material is a mandatory condition precedent for valid reopening.
• A fresh inference drawn from existing material does not constitute new material.
• Audit objections, internal notes, or change of interpretation do not confer jurisdiction.
• Compliance with section 148A is procedural and cannot cure an inherent lack of jurisdiction.
• Change of Assessing Officer does not justify reopening of a completed assessment.
• As per our experience, this ground continues to succeed consistently before High Courts.

Conclusion

The doctrine of change of opinion remains a substantive restraint on the reassessment powers of the Revenue. It safeguards the finality of completed assessments and prevents arbitrary reopening based on second thoughts or altered perceptions. Courts have repeatedly emphasised that reassessment is not a tool for review, nor a mechanism to correct perceived errors of judgment in the absence of fresh tangible material.

Even under the post-2021 reassessment framework, the doctrine retains full force. Procedural compliance under section 148A cannot legitimise reassessment proceedings that are inherently without jurisdiction. As per our experience, where reopening is founded on re-appreciation of the same material, courts have little hesitation in striking down such notices at the threshold. The doctrine thus continues to serve as a critical check on the exercise of reassessment powers under the Income-tax law.