Case : Emkay Global Financial Services Limited Vs. Assistant Commissioner of Income Tax. Writ Petition no. 2770 of 2022.

In the recent case presented before the Bombay High Court, The petitioner, engaged in shares and stock broking, challenges the Assistant Commissioner Income Tax’s (ACIT) issuance of a notice dated 31st March 2021 under Section 148 of the Income Tax Act, 1961, seeking to reassess the petitioner’s income for Assessment Year 2015-16. Additionally, the petitioner contests an order dated 26th February 2022 by The National Faceless Assessment Centre (NFAC), rejecting the petitioner’s objections to the notice.
The petitioner filed its income tax return for Assessment Year 2015-16 on 29th September 2015, declaring a ‘Nil’ income. Subsequently, an assessment was made under Section 143(3) of the Income Tax Act, resulting in a total income determination of Rs. 58,96,900/- on 14th December 2017. The petitioner contends that since the notice under Section 148 of the Act was issued more than four years after the relevant assessment year and after a Section 143(3) assessment had been conducted, the proviso to Section 147 applies. This proviso states that reassessment is impermissible after four years unless there has been a failure on the part of the assessee to fully disclose material facts. The petitioner asserts that there was no such failure, and any mention of it in the notice was merely to bypass the limitations imposed by the proviso.
The Deputy Commissioner of Income Tax (DCIT) filed an affidavit affirming that the issues prompting the reopening of the assessment had been examined during the original assessment. Therefore, the DCIT argued that the reopening was merely a change of opinion, which does not justify the belief that income chargeable to tax has escaped assessment. The DCIT admitted that the issues were previously addressed but claimed that a factual error was later noticed by the Assessing Officer, leading to the belief that income had escaped assessment. The DCIT relied on various judgments of the Supreme Court to support their argument, emphasizing that the assessment cannot be reopened due to the assessee’s failure to disclose material facts when the Income Tax Officer had all relevant information during the original assessment. The Court concurred, holding that the Assessing Officer cannot use reassessment to rectify errors resulting from oversight during the original assessment process.
The High Court concluded that the reason to believe that income had escaped assessment was solely based on the records filed by the petitioner with the return of income. Since there was no failure on the part of the assessee to disclose primary facts fully and truly, the Court allowed the petition.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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