Reopening of assessment after four years on claimed exempt LTCG found invalid and notice and reassessment set aside

Reopening an assessment more than four years after the relevant year was invalid where the only information before the assessing officer was that the taxpayer had claimed tax exempt long term capital gains and that claim had already been examined in the original scrutiny assessment. The officer failed to identify any specific undisclosed material fact, relied on portal information without correlating it to assessment records, and had no direct incriminating evidence from third party search records. For these reasons the assumption of jurisdiction to reopen was held improper and the notice and reassessment were quashed.

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Issues: Whether the reopening of assessment under Section 147 of the Income-tax Act, 1961 (by notice issued under Section 148) after the lapse of four years was valid or was barred by the first proviso to Section 147 where a regular assessment had already been concluded under Section 143(3) of the Income-tax Act, 1961.

Analysis: The Tribunal examined the reasons recorded by the Assessing Officer and the material on record. The AO relied on general information from investigation/portal records relating to third-party search activity and noted that the assessee had claimed exempt long-term capital gains; the AO did not put forward any specific undisclosed material fact which the assessee had failed to disclose during the original assessment under Section 143(3). The AO also did not independently verify or reconcile the portal information with the assessment records before forming the belief of escapement of income. In these circumstances, the information available was either already on record or was general third-party information that required independent verification; the AO's bald assertion of non-disclosure without identifying specific material facts or conducting requisite enquiries was insufficient to satisfy the first proviso to Section 147.

Conclusion: The reopening of assessment under Section 147/notice under Section 148 was barred by the first proviso to Section 147 as the original assessment had been completed under Section 143(3) and there was no failure by the assessee to disclose fully and truly all material facts. The notice under Section 148 and the consequential reassessment order are quashed. The appeal is allowed in favour of the assessee.

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