The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has set aside the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961 when they were commenced beyond the statutory period of four years from the end of the relevant assessment year. The counsel for the appellant Saumya Pandey Jain argued that the reassessment in this case amounts to a mere change of opinion, as all relevant facts were already on record during the original assessment completed on 24.12.2007. During that assessment, the Assessing Officer categorized the assessee as a registered firm, not an Association of Persons ( AOP ), and specifically allowed remuneration and interest to partners. It was emphasized that the reassessment was initiated beyond the four-year period from the end of the relevant assessment year, and there was no new material to warrant such proceedings.
The counsel asserted that according to established legal principles, reassessment cannot be based solely on a change in opinion. Furthermore, it was argued that for reassessment beyond the four-year limit, it is essential to demonstrate that income escaped assessment due to the assessee’s failure to disclose accurate facts during the original assessment. However, in this case, it was acknowledged that there was no new material prompting the reassessment. Additionally, the Department failed to prove any failure on the part of the assessee to disclose all relevant facts accurately.
The reasons provided to the assessee for the reassessment did not allege that income had escaped assessment due to the assessee’s failure to fully disclose material facts necessary for assessment. Therefore, the counsel contended that there was no valid basis for initiating reassessment proceedings. The bench found that it was a well-established principle that reassessment proceedings could not be initiated beyond a period of four years unless the Department could demonstrate that such proceedings were initiated due to a failure on the part of the assessee to fully disclose all material facts during the original assessment. The bench observed that reassessment proceedings were initiated beyond the four-year limit without any new material suggesting income escapement. The Assessing Officer sought to make a disallowance based on a reevaluation of the law concerning the same set of facts available during the original assessment. However, considering the established legal principles and judicial precedents, The two member bench of the tribunal comprising Annapurna Gupta ( Accountant member ) and Siddhartha Nautiyal (Judicial member ) concluded that the 147 of the Income Tax Act, 1961, proceedings are liable to be set-aside, in the result, the appeal of the revenue was dismissed.