Mere 'reason to believe' do not satisfy the condition for re-opening of the assessment

Last updated: 23 February 2023

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Quick Summary

The Bombay High Court has ruled that the Income Tax Department cannot reopen an assessment beyond four years simply based on a 'reason to believe' that income has escaped assessment. The court clarified that for assessments made under Section 143(3) and reopened after four years, the department must demonstrate a failure by the assessee to fully and truly disclose material facts. Without meeting this specific jurisdictional condition, the reopening notice is invalid.

Court :
Bombay High Court

Brief :
The Hon’ble Bombay High Court in Punia Capital Pvt. Ltd. v. the Assistant Commissioner of Income Tax and Ors. [Writ Petition No.1091 of 2022 dated February 15, 2023] quashed the notice and the consequential order of the Revenue Department for re-opening of assessment. Held that, the Revenue Department could only re-open an assessment beyond four years, if there was a failure on the part of the assessee to disclose material facts fully and truly and not on the basis of "reason to believe" without satisfying the jurisdictional condition required under the provisions of Section 147 of the Income Tax Act, 1961 ("the IT Act").

Citation :
Writ Petition No.1091 of 2022 dated February 15, 2023

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