'Classic Case Of Change Of Opinion': Delhi High Court Rejects Reassessment Of NTPC's ₹17.59 Crore Income

The Delhi High Court has rejected the Income Tax Department's appeal challenging the annulment of reassessment proceedings against NTPC Limited, holding that the subsequent Assessing Officer (AO) had initiated the proceedings merely because he disagreed with the view taken by his predecessor.

The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta observed that the reassessment was a "classic case of change of opinion", particularly since the issues forming the basis of reassessment had already been examined during the original scrutiny assessment.

The appeal arose from an order of the Income Tax Appellate Tribunal (ITAT), which had upheld the order of the Commissioner of Income Tax (Appeals) setting aside the reassessment proceedings.

NTPC's assessment for the Assessment Year 2007-08 was initially completed under Section 143(3) of the Income Tax Act. Subsequently, a notice under Section 148 was issued on March 23, 2012, culminating in a reassessment order dated March 28, 2013.

The reassessment resulted in additions on two counts—₹7.70 crore towards Oil and Gas Exploration expenses and ₹9.89 crore towards preliminary expenses, together amounting to ₹17.59 crore.

NTPC challenged the reassessment before the CIT(A), which held that the reopening of the assessment amounted to a mere change of opinion. The Revenue then approached the ITAT, which rejected its appeal.

Before the High Court, the Revenue argued that the AO was justified in reopening the assessment since the predecessor AO's order suffered from legal infirmity. It was also contended that merely because an assessment had earlier been completed under Section 143(3), the AO was not precluded from initiating reassessment proceedings.

NTPC however submitted that the relevant issues had already been specifically examined during the scrutiny proceedings. It pointed out that the AO had issued a questionnaire concerning the Oil and Gas Exploration expenses and preliminary expenses and, after considering the assessee's response, had chosen not to make any addition.

The Court examined the reasons recorded for reopening and found that the AO had proceeded on the basis that certain expenses had been wrongly allowed in the original assessment. It noted that the reasons themselves demonstrated that the subsequent AO was seeking to take a different view from the one adopted earlier.

Rejecting the Revenue's contention that the relevant questions had not been raised during scrutiny, the Court observed that the mere fact that the CIT(A) had not reproduced the corresponding questions in its order did not mean that no such queries had been raised.

"Had no question in this regard been put, the respondent-assessee had no occasion or requirement of giving or filing such reply before the Assessing Officer," the Court observed.

It concluded that both the CIT(A) and the ITAT were justified in annulling the reassessment proceedings and dismissed Revenue's appeal.

For Appellant: Advocates Shlok Chandra, SSC with Ms. Naincy Jain, Ms. Madhavi Shukla, JSCs.

For Respondent: Advocate Ved Jain, Mr. Ishan Khandelwal & Mr. Nischay Kantoor, Advocates.