The Bombay High Court quashed the reassessment proceedings initiated against Aashish Niranjan Shah for the assessment year ( AY ) 2013-14 as there was no failure to disclose material facts.
The reassessment was initiated based on a notice issued under Section 148 of the Income-tax Act, 1961, dated 31st March 2021, which alleged that the petitioner’s income had escaped assessment due to modifications in client codes for transactions involving shares worth ₹20,69,450.
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The petitioner had filed his return for AY 2013-14, declaring an income of ₹73,08,942, which was subjected to scrutiny, and an assessment order was passed on 11th March 2016. The Revenue’s claim that the income had escaped assessment relied on client code modifications reported by the stockbroker, but the petitioner contended that all material facts, including transaction details, had been fully disclosed during the original assessment.
The Division Bench of Justices G.S. Kulkarni and Somasekhar Sundaresan, found that the original assessment was indeed subjected to scrutiny, and the reassessment notice issued after the expiry of four years failed to meet the jurisdictional requirement under Section 147 of the Income Tax Act.
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The court observed that reassessment could only be initiated if the income had escaped assessment due to the assessee’s failure to disclose fully and truly all material facts. In this case, the Revenue failed to demonstrate such a failure.
As a result, the court quashed the reassessment notice dated 31st March 2021, along with related notices under Sections 143(2) and 142(1) and the order disposing of the petitioner’s objections, dated 14th February 2022.
The Bombay High Court also directed that reassessment proceedings must adhere to the strict requirements of the law, particularly when initiated after the statutory period.
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