Notice issued for Reopening Assessment without Jurisdictional Requirements liable to be set-aside: Bombay HC [Read Judgment]

The division bench of the Bombay High Court has held that the petitioner disclosed all material facts fully and truly and assessment under section 143(3) of the Income Tax Act is made by the AO for the relevant assessment year. The jurisdictional requirements for reopening assessment after four years are absent. So notice issued under section 148 of the I.T. Act, is liable to be set aside.

The Petitioner is a partnership firm carrying on the business of manufacturing and exports of diamonds. The Petitioner filed the return of income for the assessment year 2012-13. The AO sought details from the Petitioner and reopening assessment order was passed under section 143(3) of the Act without making any disallowances of the purchases.

AO then issued the notice under section 148 of the Act seeking to reopen the assessment for the assessment year 2012-13. Reasons observed that all the purchases made by the assessee were bogus and not actually purchased by the assessee, and then all the expenditure belongs to the bogus purchase would have been disallowed. It has reason to believe that income chargeable to tax has escaped, so the case needs to be reopened and the assessment should be finalized u/s 143 (3) r.w.s. 147 of the I.T. Act.

The petitioner submitted that assessment under section 143(3) is made by the AO for the relevant assessment year, then no action shall be taken after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year for the assessee’s failure to disclose fully and truly all material facts necessary for that assessment year.

The court observed that all the material was placed before the AO by the Petitioner. Acting upon this material, the AO had, in fact, made certain additions. Therefore, it cannot be said that there was a failure by the Petitioner to disclose all material facts fully and truly. In the circumstances, the jurisdictional requirement to reopen the assessment proceeding after four years is not present.