AO Can't Reopen Assessment Beyond Period Of Four Years When There Was Full Disclosure By Assessee: Mumbai ITAT

The Bench of Amit Shukla (Judicial Member) and S Rifaur Rahman (Accountant Member) observed that “The permissible condition for reopening the assessment beyond the period of four years is that there should be a failure on the part of the assessee to file the return of income or failure to disclose fully and truly all material facts necessary for assessment. There is neither failure on part of the assessee to file return of income nor failure to disclose wholly and truly all material facts, nor there is any material or information on record to show that there is failure on the part of the assessee.” (Para 7)

As per the brief facts of the case, the assessee's case was reopened u/s.147for which assessee raised objections by stating that during the course of assessment proceedings, AO called for the details of capital gains declared during the year wherein all the details were furnished regarding computation of capital gain and the claim for deduction made alongwith evidence. The assessee also produced the details of loan taken for the acquisition of the property alongwith interest. It was only after verification of all these documents, AO has accepted the computation of capital gain in his order.

Subsequently, notice u/s. 154 was issued by the AO to rectify the claim of short-term capital loss by proposing to disallow the claim of interest and loan processing charges. The assessee objected to said rectification and thereafter, AO did not pass any rectification. Further, assessee submitted that once this issue has been examined during the course of original assessment proceedings and there is no failure on the part of the assessee to disclose fully and truly all material facts declared in the return of income and documents submitted at the time of assessment, no reopening can be done after the expiry of four years from the end of the assessment year as here in this case reopening has been done beyond the period of four years. In support, various decisions were also referred and relied upon. Assessee also challenged reopening on the ground of 'change of opinion' and in support various decisions were relied upon.

However, the AO rejected objections stating that taxes should not escape due to oversight or mistake committed by taxing authority and sufficiency of the reasons cannot be questioned in the Court of law. Thus, in very summarily manner, assessee's objection was rejected. Thereafter, the AO made disallowance of Rs.8,51,107/- for disallowing the interest paid for the acquisition of the property from the computation of short-term capital gain. The CIT(A) also confirmed the action of the AO.

The Bench noted that the reopening has been done beyond the period of four years from the end of the relevant assessment year and since original assessment was completed u/s. 143(3), therefore, limitation provided in proviso to Section 147 has to be strictly adhered to.

The Bench observed that the assessee has made full disclosure in the return of income and also before the AO during the course of assessment proceedings.

The Bench further observed that once these material facts were there on the record, AO cannot reopen the case beyond the period of four years without fulfilling the conditions laid down in the proviso to Section 147.

Therefore, under the light of justice, ITAT allowed the assessee's appeal on legal ground.

Counsel for Appellant/ Assessee: Prakash Jotwani

Counsel for Respondent/ Revenue: Manoj Kumar Sinha

Case Title: Lalita Troy Caeiro verses ITO

Case Number: ITA No.3692/Mum/2023

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