Background of the Case
The judgment in CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC) is one of the most important rulings for understanding the scope of reassessment under Section 147 and the meaning of “intimation” under Section 143(1) of the Income Tax Act, 1961.
This case clarified the distinction between assessment and intimation, and explained the conditions under which the Assessing Officer (AO) can reopen an assessment. For tax law students and aspirants, this case is a foundational authority on reassessment procedures.
Tip
“Reassessment is valid only when there is ‘reason to believe’—not merely suspicion.”
Facts of the Case
The assessee, a stock broker, filed its return of income. The return was processed under Section 143(1), meaning only an intimation was issued—no scrutiny assessment took place. Later, the AO received material suggesting that the assessee had escaped income chargeable to tax. Acting on this information, the AO issued a notice under Section 148 for reopening the assessment.
The assessee challenged the reopening, arguing that the AO had no jurisdiction to reopen an assessment when only an intimation under Section 143(1) existed and no “reason to believe” had been established.
The dispute finally reached the Supreme Court.
Also Read: CIT v. G.M. Knitting Industries (2015)
Issues Before the Court
H3: Whether processing of a return under Section 143(1) amounts to an “assessment”?
The Court examined whether an intimation issued without scrutiny could be considered a completed assessment.
H3: Whether the AO is empowered to reopen a return processed under Section 143(1)?
The key question was whether the AO needed stronger justification when reopening a case where no full assessment had occurred.
H3: What constitutes “reason to believe” under Section 147?
The Court clarified that reopening requires tangible material, not mere conjecture.
Tip
“Intimation ≠ Assessment — and this difference decides the validity of reopening.”
Judgment of the Supreme Court
The Supreme Court delivered a landmark ruling that reshaped reassessment law.
H2: Intimation under Section 143(1) is NOT an Assessment
The Court held that issuing an intimation under Section 143(1) is not an assessment. It merely acknowledges the return and applies arithmetic checks. No application of mind occurs at this stage. Therefore, unlike an assessment under Section 143(3), it does not conclude judicial scrutiny.
This distinction is crucial: since no assessment took place, the AO can reopen under Section 147 without satisfying the stricter conditions required for reopening a completed assessment.
H2: AO Has the Power to Reopen a Return Processed under Section 143(1)
The Supreme Court clarified that the AO may issue a Section 148 notice if he has reason to believe that income has escaped assessment. No higher threshold applies merely because the return was not scrutinized earlier.
The Court emphasized that the absence of scrutiny does not give immunity to the assessee.
Tip
“Once there is information leading to ‘reason to believe,’ reopening after a 143(1) intimation is legally permissible.”
H2: “Reason to Believe” Must Be Based on Tangible Material
The Court held that although the threshold for reopening after a 143(1) intimation is lower compared to reopening a completed 143(3) assessment, the AO must still legally justify reopening with objective material.
This prevents abuse of reassessment powers.
H2: No Change of Opinion Doctrine Applicable
The Court clarified that the “change of opinion” limitation applies only when the AO has previously formed an opinion in a regular assessment.
Since intimation involves no formation of opinion, the doctrine does not apply.
Significance of the Ruling
This case is now one of the leading authorities on reassessment law.
H3: Clarified Difference Between Intimation and Assessment
The judgment drew a clear line between mechanical processing (143(1)) and discretionary judicial decision-making (143(3)).
H3: Expanded AO’s Power to Reopen Returns
The ruling allowed the AO to reopen cases processed under 143(1) more freely, provided “reason to believe” is established.
H3: Prevented Misuse by Taxpayers
Before this ruling, many taxpayers argued that reopening 143(1) cases was unjustified.
The judgment prevented misuse of the system to escape tax liability.
H3: Became the Foundation for Several Later Cases
Courts frequently cite this decision when interpreting reassessment provisions, including in post-2021 reassessment framework cases.
Tip
“CIT v. Rajesh Jhaveri is the backbone of reassessment jurisprudence—master it for exams.”
Conclusion
CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) is a pivotal decision that clarified the scope of Sections 143(1), 147, and 148. By distinguishing between intimation and assessment, the Supreme Court strengthened the reassessment framework and ensured that escaped income could still be taxed legitimately. For law students, this ruling is essential for understanding how reassessment powers work, the meaning of “reason to believe,” and the limits of the assessee’s protection under the Income Tax Act.
Also Read: Essential Skills Every Law Student Needs