Reopening Assessments Beyond Four Years Requires AO to Prove Non-Disclosure of Material Facts by Assessee: ITAT [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that reassessment proceedings initiated after four years under Section 147 of the Income Tax Act, 1961, are not valid unless the Assessing Officer (AO) proves that the assessee failed to disclose all material facts necessary for the assessment.

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The assessee, North Indian Wires Ltd., filed its return for  Annual Year (AY) 2013-14, declaring income of ₹3.04 crore. The assessment was completed under Section 143(3) of the Income Tax, 1961, at ₹3.32 crore.

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After more than four years, on 05.04.2018, the AO reopened the case, citing a ₹19 lakh loan from Tirumala Suppliers Pvt. Ltd. as unexplained, even though the loan had already been disclosed during the original assessment.

Aggrieved by the reopening of the assessment, the assessee approached the tribunal.

Ashish Rustogi, the counsel for the assessee, argued that the reassessment notice was issued beyond the four-year limit and that the assessee had fully disclosed all relevant facts about the loan during the original assessment.

The counsel also pointed out that the lender had also responded to the AO’s notices under Section 133(6) of the Income Tax Act, 1961, thereby disclosing all material evidence regarding the transaction.

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Meanwhile, Abhijit Adhikari, the counsel for the revenue, opposed the claims made by the assessee.

The counsel argued that the reassessment was justified, as the AO deemed the loan unexplained and concluded that income had escaped assessment.

After hearing both sides, the bench led by Sonjo Sarma (Judicial Member) and Rajesh Kumar (Accountant Member) examined the submissions made by the parties in detail.

It noted that the reassessment notice had been issued more than four years after the original assessment. The bench observed that the loan transaction of ₹19 lakh had already been fully disclosed during the original proceedings, along with the lender’s response under Section 133(6) of the Act.

Building on this, the bench pointed out that the  AO had all the relevant information at the time of the original assessment. There was no indication that the assessee had failed to disclose any material facts necessary for completing the assessment.

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In support of its view, the tribunal relied on the Supreme Court ruling in ACIT vs. CEAT Ltd. (2022), which held that reassessment beyond four years is permissible only when there is a failure on the part of the assessee to fully and truly disclose material facts.

The bench, thus concluded that the reassessment was invalid, since the AO failed to prove any non-disclosure or misrepresentation by the assessee. The tribunal quashed the reopening of the assessment and allowed the appeal in favor of the assessee.

To Read the full text of the Order CLICK HERE

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North India Wires Limited vs DCIT , 2025 TAXSCAN (ITAT) 894 , ITA No.1125/KOL/2024 , 04 March 2025 , Ashish Rustogi , Abhi jit Adhikari