No Reopening of Income Tax Assessment w/out Failure to Disclose Fully and Truly all Material Facts Necessary: Bombay HC [Read Order]

The Bombay High Court recently laid down the strict nuances of law permitting the reopening of income tax reassessment, clarifying that no income tax assessment can be sustained beyond a period of four years without there being an explicit failure on part of the assessee to fully and truly disclose all material facts necessary for assessment.

The petitioner, Prithvi Apartments Co-operative Housing Society Limited (Prithvi Apartments) had instituted a writ petition against the Income Tax Department, challenging the reopening of its concluded assessment of assessment year 2014 – 15 which had originally been completed under Section 143(3) of the Income Tax Act, 1961 on 07.12.2016

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The impugned notice dated 31.03.2021 was issued more than four years from the end of the relevant assessment year, thereby attracting the bar under the first proviso to Section 147 of the Act.

The reasons recorded for reopening the concluded assessment were submitted in a letter addressed to Prithvi apartments where it was contended that the reassessment was initiated on grounds of new material unearthed during the verification of the profit and loss account and related records.

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The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain at the very outset noted that the first proviso to Section 147 places a bar on an assessment order passed under Section 143(3), mandating that any case may be reopened after four years only upon failure to disclose fully and truly all material facts necessary for the assessment.

The Bombay High Court further noted that the reasons recorded by the Assessing Officer made no allegation that the Petitioner had failed to disclose material facts, instead alluding facts already disclosed and considered earlier and thus ineligible to be entertained.

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The impugned reassessment notice dated 31.03.2021 under section 148 was quashed while the Rule was made absolute in the terms laid down.

Prithvi Apartments were represented by Rohan Deshpande, instructed by Alisha Pinto while Akhileshwar Sharma along with Shraddha Worlikar represented the respondents.

To Read the full text of the Order CLICK HERE

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