North India Wires Limited Vs DCIT (ITAT Kolkata)
In a significant decision, the Income Tax Appellate Tribunal (ITAT), Kolkata bench, has held that the income tax department cannot reopen assessments beyond the statutory period of four years if the assessee had already disclosed material facts during the original assessment proceedings. The tribunal quashed the reassessment in the case of North India Wires Limited, citing a Supreme Court ruling which emphasizes the onus on the Assessing Officer (AO) to demonstrate the assessee’s failure to fully and truly disclose material facts.
The case involved North India Wires Limited, whose assessment for the Assessment Year 2013-14 was initially completed under Section 143(3) of the Income Tax Act, 1961, on December 23, 2015. The assessee had declared an income of ₹3,04,06,700/-. Subsequently, the case was reopened under Section 147 of the Act with a notice issued on April 5, 2018, more than four years after the end of the relevant assessment year.
The primary reason for the reopening, as per the Assessing Officer, was the alleged escapement of income amounting to ₹19 lacs related to unexplained loan creditors. During the reassessment proceedings, an addition of this amount was made by the AO.
North India Wires Limited challenged the reopening before the ITAT, arguing that it was legally invalid. The company contended that during the original assessment proceedings, the issue of unsecured loans, including the ₹19 lac loan from M/s Tirumala Suppliers Pvt. Ltd., had been duly examined by the AO. They submitted that all relevant information and details regarding this loan were furnished to the AO, who had even issued a notice under Section 133(6) of the Act to the lender seeking clarification and details of the transactions. The lender had also responded to this notice, confirming the unsecured loan. The assessee further highlighted that the said loan was repaid in the subsequent financial year.
