Mumbai ITAT: Fresh Investigation Info Cannot Justify Reassessment After 4 Years

By CA Vijayakumar Shetty Income Tax Judiciary August 22, 2026

TaxGuru Citation: 2026 taxguru.in 11487
Case Name: Thirumalai Marketing & Invetments Limited Vs ACIT (ITAT Mumbai)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2014-15
Courts: All ITAT, ITAT Mumbai

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Thirumalai Marketing & Invetments Limited Vs ACIT (ITAT Mumbai)

Fresh Investigation-Wing Information Cannot Substitute Failure of Disclosure: Mumbai ITAT Quashes Reassessment Beyond Four Years

The assessee, an NBFC engaged in money lending and investments, originally declared income of ₹2.37 crore. After detailed scrutiny, the assessment was completed under Section 143(3) accepting the returned income. The AO subsequently reopened the assessment on 31 March 2021, beyond four years from the end of AY 2014-15, based on Investigation Wing/Insight Portal information regarding alleged accommodation entries and fictitious share losses. Various additions exceeding ₹3 crore were consequently made.

The Mumbai ITAT held that, for reopening a scrutiny assessment beyond four years under the erstwhile first proviso to Section 147, the AO must specifically establish that income escaped assessment because of the assessee’s failure to disclose fully and truly all material facts.

Although the recorded reasons reproduced the statutory expression regarding failure of disclosure, they did not identify:

the particular material fact allegedly withheld;
how the assessee failed to disclose it; or
the nexus between such failure and the alleged escapement of income.

The Tribunal emphasised that subsequent information may constitute tangible material suggesting escapement of income, but it cannot by itself prove failure of disclosure. These are separate jurisdictional requirements. The relevant transactions had also been disclosed and supported by documents during the original scrutiny proceedings. A later change in the Revenue’s understanding or characterisation of disclosed transactions cannot be converted into an assessee’s failure to disclose material facts.

Accordingly, the ITAT held that the additional jurisdictional condition under the first proviso to Section 147 was not satisfied and quashed the entire reassessment proceedings. All additions on merits consequently became academic and were left unadjudicated.

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