Supreme Court to decide if tax reassessment can reopen closed assessments

This case concerns whether the Income Tax Department can reopen the assessment of the appellant for Assessment Years 2008-09 and 2009-10 based on an investigation report alleging share overvaluation, despite the original assessment having been completed and the four-year time limit having expired.

Who it concerns: Appellant: Chetan Sabharwal (and connected matters involving Nitin Sabharwal); Respondent: Assistant Commissioner of Income Tax Circle 28(1), New Delhi; Bench: Justice J.B. Pardiwala.

What the court decided

• The Court granted leave to appeal.
• The Court framed the issue of whether the impugned notice dated 31.03.2015 for reopening assessments satisfies the 'reason to believe' requirement under Sections 147-148 of the Income Tax Act, 1961.
• The Court analyzed the contours of 'reason to believe' and the applicability of the 'change of opinion' test to the facts.
• The provided text ends before the final conclusion or operative order is stated.

Also in the document

• The reassessment notice was issued approximately four years after the end of the relevant Assessment Year.
• The original assessment for AY 2008-09 had been completed under Section 143(3) with the returned income accepted.
• The basis for reopening was an Investigation Unit report concluding that the shares were overvalued compared to the cost of land and buildings.