Reassessment

In the absence of failure on the part of the assessee to disclose truly and fully all the material facts, the reopening of assessment after the expiry of four year is unsustainable as held by MumHC in Lok Housing and Construction Limited v Dy CIT — In favour of: The assessee.

The assessee had clearly disclosed in the notes forming part of the account that as a result of the restructuring by the lenders, the finance cost to the tune of Rs 20.58 crores was waived/foregone and that the payment of the balance was to be made in accordance with the settlement terms.

The power of the Assessing Officer to reopen assessment beyond a period of four years is even more restricted than when the reopening takes place within a period of four years of the end of the relevant assessment year. In the present case, the condition precedent to the invocation of the jurisdiction is clearly absent since there is not even an averment to the effect that there was a failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment.

Decided on: 20 October 2011.