High Court quashes assessment reopening notice due to time lapse & lack of evidence

The High Court quashed the notice of reopening of assessment as it was issued beyond the statutory period and lacked evidence of the petitioner's failure to disclose material facts. The Court highlighted that the Assessing Officer had thoroughly examined the transaction during scrutiny assessment and the limited disallowance indicated no failure in disclosure. Emphasizing the duty of the assessee to disclose primary facts, the Court ruled in favor of the petitioner, stating that it is the Assessing Officer's role to draw inferences in law.

---

---

Issues:
Challenge to notice of reopening of assessment based on failure to disclose material facts and change of opinion.

Analysis:
1. The petitioner challenged a notice of reopening of assessment dated 15.3.2018, questioning the disallowance of expenses under Section 40(a)(i) of the Income Tax Act for the assessment year 2011-12.

2. The Assessing Officer issued the impugned notice based on the petitioner's failure to deduct tax at source on certain expenses. The petitioner argued that tax had been deducted on a portion of the expenses, and reversals were made in subsequent years, which the Assessing Officer failed to consider adequately.

3. The High Court noted that the notice was issued beyond the statutory period of four years and found that the reasons provided did not demonstrate any failure on the part of the petitioner to disclose material facts fully and truly.

4. Additionally, the Court observed that the Assessing Officer had thoroughly examined the transaction during the scrutiny assessment, raising queries and receiving detailed responses from the petitioner. The limited disallowance made by the Assessing Officer further indicated that there was no failure to disclose material facts or a change in opinion.

5. The Court emphasized that the duty of the assessee is to disclose primary facts, and it is the Assessing Officer's responsibility to draw further inferences or consequences in law. The Court ultimately quashed the impugned notice and allowed the petition in favor of the petitioner.

---