Full Disclosure Bars Reassessment Beyond Four Years on Change of Opinion: Bombay HC

Saraswat Co-operative Bank Ltd Vs ACIT (Bombay High Court)

Summary: Bombay High Court allowed the writ petition filed by Saraswat Co-operative Bank Ltd. challenging reassessment for AY 2015-16 initiated through notice dated 30.03.2021 under Sections 147 and 148 of the Income Tax Act, 1961. The original scrutiny assessment, completed on 22.12.2017, had enhanced the Bank’s returned income of Rs.95.14 crore to Rs.105.14 crore. Reassessment was initiated five years after the end of the relevant assessment year on four issues:

leasehold improvement expenditure of Rs.49.78 lakh, donation expenditure, amortisation of investments of Rs.23.63 crore and interest identified in the tax audit report. The Revenue alleged failure to disclose fully and truly all material facts. The Bank contended that every relevant fact had already been disclosed in its computation, financial statements, annual report, audit report and detailed responses during scrutiny, and that reopening represented only a change of opinion. Examining the record, the High Court found that each of the four matters relied upon for reopening arose from information already disclosed and examined during the original assessment.

Since reassessment was initiated beyond four years, failure by the assessee to fully and truly disclose material facts was a jurisdictional requirement under the then applicable Section 147; that requirement was absent. The Court further found from the Revenue’s reply that the change of opinion originated from an internal audit.