AO Can't Take Recourse To Re-open Assessment To Remedy Error Resulting From His Oversight In Assessment Proceeding: Bombay High Court

The Bombay High Court has held that the assessing officer cannot take recourse to reopen the assessment to remedy the error resulting from his oversight in the assessment proceeding.

The bench of Justice K. R. Shriram and Kamal Khata have observed that the assessment cannot be reopened by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts, as the Income Tax Officer had material facts before him when he made the original assessment.

The petitioner/assessee is in the business of trading shares and stock. The petitioner has challenged the action of the respondent department for issuing notice under Section 148 of the Income Tax Act, 1961, seeking to reassess the petitioner's income for Assessment Year 2015-16.

The assessee contended that notice under Section 148 has been issued after the expiry of more than four years from the end of the relevant assessment year, and an assessment under Section 143(3) of the Act has been made. The proviso to Section 147 of the Act shall apply. As per the proviso, reassessment is impermissible after the expiry of four years from the end of the relevant assessment year, where assessment under Section 143(3) has been made, unless there has been a failure on the part of the assessee to truly and fully disclose material facts during the assessment. A bare perusal of the reasons recorded would show that there has been no failure on the part of the petitioner to truly and fully disclose material facts. Though the words 'failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment' have been used in the reasons recorded, those have been used only to get over the fetters placed by the proviso to Section 147.

The court held that the entire basis for forming a reason to believe there was an escape of income is from the records filed by the petitioner with the return of income. There has been no failure on the part of the assessee to truly and fully disclose the primary facts.

Counsel For Petitioner: Dr. K. Shivaram

Counsel For Respondent: Suresh Kumar

Case Title: Emkay Global Financial Services Limited Versus Assistant Commissioner of Income Tax

Case No.: Writ Petition No.2770 Of 2022

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