CHETAN SABHARWAL v. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 28(1) NEW DELHI

55. Having said so, we are of the view that the original assessment orders for both AY 2008-09 and 2009-10 respectively under Section 143(3) of the Act do not indicate that the AO formed any opinion on the matters which form the basis of the present reopening. In view of the principles discussed above, a “change of opinion” presupposes a conscious application of mind and the formation of an opinion during the original assessment proceedings, and the court must verify whether the earlier assessment has, either expressly or by necessary implication, expressed an opinion on the matter which is the basis of the alleged escapement of income. The reasons recorded in the present case rest on the value of the shares as against the cost of land and building, the investment of the sale proceeds in the property at Sikandara Road, the adjustment of the gains to future years and the claim under Section 54F of the Act. The assessment order for AY 2008-09 in the present case is a bare acceptance of the returned income as it is. As held in Sanand Properties (supra), in the absence of any inquiry or adjudication on the specific aspect, the plea of change of opinion is legally untenable. Where no opinion was formed in the first instance, the revenue is not precluded from reopening upon the discovery of facts suggesting that income has escaped assessment, and the notice here rests on the report of the Investigation Unit, Noida, which came after the assessment. Consequently, even in the case of Mr. Chetan Sabharwal, in view of the above, it cannot be said that the reason to believe constitutes a change of opinion.

56. In view of the above discussion, we are of the firm view that the impugned notice dated 31.03.2015 issued by the AO under Section 148 of the Act, for initiating reassessment for AY 2008-09 and AY 2009-10, was issued on reasons duly recorded and is valid. The

SLP(C) No. 20045 of 2019 & Connected Matters Page 51 of 53

reasons rest on tangible material, namely the report of the DGIT Investigation Unit, Noida, which inter alia concluded that the shares of company no. 1 and company no. 2 were overvalued when compared with the cost of their land and building, and they have a rational nexus and a live link with the belief formed by the AO. No case of change of opinion is made out either. In the case of Mr. Nitin Sabharwal, the returns were accepted by an intimation under Section 143(1) of the Act, so no opinion was formed. In the case of Mr. Chetan Sabharwal, the assessment orders under Section 143(3) of the Act reflect no opinion, expressly or by necessary implication, on the matters on which the notice rests, which came to light afresh through the investigation report after the assessment.

F. CONCLUSION

57. In view of the foregoing and considering the totality of the circumstances, the question formulated by us for our determination is answered as follows:

(i) The expression “reason to believe” in Section 147 of the Act means cause or justification. The AO must have tangible material having a rational connection or a live link with the formation of the belief that income has escaped assessment, and need not have finally ascertained the fact by legal evidence or conclusion. At the stage of the notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief, and the sufficiency of the reasons is not a justiciable issue. Further, a mere “change of opinion” cannot be a reason to reopen, as the AO has the power to reassess and not the power to review. A

SLP(C) No. 20045 of 2019 & Connected Matters Page 52 of 53

change of opinion presupposes a conscious application of mind and the formation of an opinion in the original assessment, which the court must verify, either expressly or by necessary implication, before interfering with the reopening. The non- exhaustive principles governing “reason to believe” and “change of opinion” are at paragraph nos. 41 and 46 of this judgment, respectively.

(ii) In the facts of the present case, the impugned notice dated 31.03.2015 was issued on reasons duly recorded, based on the tangible material of the report of the Investigation Unit, Noida, prepared after the assessment, and which have a rational nexus and a live link with the belief formed by the AO. The notice is therefore valid. No case of change of opinion is made out either.

58. In view of the above, the appeals fail and are hereby dismissed.

59. Pending applications, if any, shall stand disposed of.

....................................... J. (J.B. Pardiwala)

....................................... J. (K. Vinod Chandran)

New Delhi; 28th October, 2026.

SLP(C) No. 20045 of 2019 & Connected Matters Page 53 of 53