In Writ Petition No. 783 Of 2016-BOM HC- Bombay High Court rules Assessing Officer exceeded jurisdiction in reopening assessment for petitioner under section 147 read with section 148 of Income Tax Act
Justice Dhiraj Singh Thakur & Justice Kamal Khata [04-05-2023]

Read Order: M/s. Aditi Constructions v. Deputy Commissioner of Income Tax and Ors

LE Correspondent

Mumbai, May 6, 2023: A division bench of the Bombay High Court has recently ruled that the Assessing Officer (AO) had exceeded the jurisdictional limit in reopening the assessment under section 147 read with section 148 of the Income Tax Act, noting that there was no failure by M/s. Aditi Constructions (petitioner) to disclose the material facts fully and truly.

The bench observed that the "reasons recorded" did not mention the primary facts that had not been disclosed. This observation was made with reference to the precedent set by the case of Gemini Leather Stores v. Income Tax Officer, B-Ward, Agra & Others [LQ/SC/1975/191].

The bench also observed that the criteria for reopening an assessment after a period of four years is no longer res integra in view of the judgement of this Court in the case of Ananta Landmark P. Ltd v Dy. CIT [LQ/BomHC/2021/3155], wherein it has been held that an assessment can only be reopened if there is a reasonable belief that income has escaped assessment due to the assessee's failure to disclose all material facts necessary for the computation of income and the assessment cannot be reopened based on a mere change of opinion by the AO. If the primary facts necessary for assessment were fully and truly disclosed by the assessee, the AO is not entitled to reopen the assessment solely on the basis of a change of opinion.

“In our view, the Petitioner has by production of bank statements and supporting documents shown that the reasonable belief of the AO was unfounded and consequently the presumption that the Petitioner was one of the beneficiary of the accommodation entries based on the statement of the third party was disproved. Consequently, the onus would be on the AO to provide reasons to disbelieve the bank statements and supporting documents for reopening the assessment. That in our view has not been spelled out and therefore, the reassessment sought to be initiated deserves to be stalled,” noted the bench.