AO can initiate reassessment if excess deduction was allowed based on wrong information supplied to it

Aircel Cellular Limited Vs DCIT (Madras High Court)

Legal provisions involved

As per first proviso to Section 147 where assessment has already been made under Section 143(3) and assessee had disclosed truly and fully all material facts necessary for assessment then AO cannot initiate reassessment proceedings under Section 147 beyond 4 years from end of relevant A.Y. In section 147 the expression ‘true and full disclosure’ is not been defined. Madras High Court in the given judicial precedent has attempted to elaborate the circumstances in which it can be construed that there is no true and full disclosure on the part of assessee.

Principle of law laid down in case law

On account of certain information provided by assessee at the time of original assessment under Section 143(3), wrong assessment has been made and excess deduction was allowed to assessee, so as to cause loss to Revenue, then it is to be construed that assessee has not disclosed fully and truly all material facts. In that case, AO is entitled to initiate reassessment proceedings under section 147 to disallow excess deduction.

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