Bombay High Court Quashes Reopening Of Assessment After 4 Years In The Absence Of Concealment By Assessee

The Bombay High Court has quashed the reopening of the assessment after 4 years in the absence of concealment by the assessee.

The bench of Justice K. R. Shriram and Justice Firdosh P. Pooniwalla observed that where the assessee has fully disclosed all the material facts, it is not open for the Assessing Officer to reopen the assessment on the ground that there is a mistake in the assessment. What is recorded is that the petitioner wrongly claimed certain deductions to which he was not entitled. There is a well-known difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the Assessing Officer would be entitled to proceed under Section 147 of the Income Tax Act.

The petitioner/assessee is in the business of manufacturing and trading agrochemicals and pharmaceutical intermediates. With effect from November 6, 2015, the petitioner was acquired by Godrej Group. The matter pertains to Assessment Year 2013–2014.

The department passed an assessment order dated February 25, 2016, under Section 143(3), assessing the petitioner’s income at Rs. 8,74,57,101/- under Section 115JB of the Act.

On March 23, 2021, the petitioner was served with a notice under Section 148 of the Act alleging that there are reasons to believe that income for Assessment Year 2013–2014 has escaped assessment within the meaning of Section 147 of the Act.

The assessee has challenged the notice issued by the respondent under Section 148 of the Income Tax Act, 1961, for reopening the assessment for Assessment Year 2013-2014 and the order dated January 18, 2022, disposing of the petitioner’s objections.

The assessee contended that the assessment made under Section 143(3) can be reopened after four years from the end of the assessment year only if there is a failure to disclose primary facts that are necessary for the assessment. The jurisdictional condition is not satisfied as the reassessment proceedings are based on details furnished during the course of the regular assessment proceedings, and this fact has not been rebutted in the order rejecting the objections. There is no tangible material, having come into existence post-regular assessment proceedings, so as to confer jurisdiction on respondents for initiating the reassessment proceedings.

The court held that if the assessment is sought to be reopened after a period of four years, the proviso to Section 147 of the Act is applicable. It is also settled law that the assessing officer has no power to review an assessment that has been concluded. If a period of four years has lapsed since the end of the relevant year, the Assessing Officer has to mention what the tangible material was to come to the conclusion that there is an escapement of income from assessment and that there has been a failure to fully and truly disclose material facts.

Case Title: Astec LifeSciences Ltd. Versus The Assistant Commissioner of Income Tax

Case No.: Writ Petition No.1790 Of 2022

Date: 07/08/2023

Counsel For Petitioner: P.J. Pardiwalla

Counsel For Respondent: N.C. Mohanty

Click Here To Read The Order