The Madras High Court has set aside reassessment proceedings initiated beyond the four-year limitation period, observing that there was no failure on the part of the assessee to fully and truly disclose all material facts.
The ruling was given on a writ petition filed by an assessee challenging the reopening notice on capital gains issued by the income tax authorities as well as the consequential order by them rejecting the petitioner’s objections for the reopening.
The assessee filed his return of income for the assessment year 2013-14 disclosing the details of exempt capital gain from the sale of agricultural land.
During the scrutiny, the assessee was asked to furnish details of agricultural income and land holdings wherein he submitted the ledger of property purchase and a copy of the sale deed.
The assessee was subsequently subjected to reassessment and a notice was issued in March 2021.
The assessee challenged the reassessment proceedings initiated beyond the limitation period of four years. He argued that nothing was concealed as he furnished all the details as called for by the officials and hence there was no failure on his part to disclose all the material facts. Hence the reopening beyond four years was barred by limitation. The four-year period expired on Mar 30, 2019.
The court observed that the assessee disclosed the information regarding the sale of agricultural land in his return of income and all the particulars with regard to such sale were also disclosed before the tax officials in full during the course of the scrutiny assessment.
The court remarked that the sale deed is not a book of accounts and opined that the production of sale deed cannot be construed as production of books of accounts or other evidence.
It remarked that the sale deed was specifically called upon during scrutiny proceedings to justify whether the gain from the sale of land would be an exempt income.
The court rejected the officials’ contention that merely producing the sale deed would not amount to providing the entire material facts fully and truly.
Amit Maheshwari, partner at AKM Global, a tax and consulting firm said the court ruling affirmed the established position for the timeline available by the tax department for re-opening of already closed income tax assessments.
The older income tax regime provides a time limit of four years (maximum) for reopening the cases already scrutinised by the tax department with the exception of an extended time limit of six years where there was a failure on part of taxpayers to fully and truly disclose all material facts.
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