Bombay High Court
Bharat Petroleum Corporation Limited vs Assistant Commissioner Of Income Tax … on 3 July, 2025
Author: B.P. Colabawalla
Bench: B. P. Colabawalla
2025:BHC-OS:9928-DB
12-1752-2022-WP-C-F-Jud=.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1752 OF 2022
Digitally
WITH
signed by
UDAY UDAY
SHIVAJI
WRIT PETITION NO. 2966 OF 2022
SHIVAJI JAGTAP
Date:
JAGTAP 2025.07.03
13:31:38
+0530 Bharat Petroleum Corporation Ltd.
3rd Floor, Bharat Bhavan
4/6, Currimbhoy Road, Ballard Estate,
Mumbai - 400 001 .. Petitioner
Versus
1. Assistant Commissioner of Income Tax,
Circle 2(1)(1), Mumbai,
Room No. 561, 5th Floor,
Aaykar Bhavan, M.K. Road,
Mumbai - 400 020
2. Principal Commissioner of Income Tax,
Mumbai-2, Mumbai,
Room No. 344, 3rd Floor,
Aaykar Bhavan, M.K. Road,
Mumbai - 400 020
3. Additional / Joint / Deputy / Assistant
Commissioner of Income-Tax, National
Faceless Assessment Centre,
Delhi.
4. Union of India,
Through the Joint Secretary & Legal Adviser,
Branch Secretariat,
Department of Legal Affairs,
Ministry of Law and Justice,
2nd Floor, Aayakar Bhavan, M.K. Marg,
New Marine Lines, Mumbai - 400 020 .. Respondents
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Mr. J.D. Mistri, Senior Advocate a/w Niraj Sheth, Ms. Gunjan
Kakad i/b Atul K. Jasani, Advocates for the Petitioner.
Mr. Akhileshwar Sharma, Advocate for the Respondents.
CORAM: B. P. COLABAWALLA &
FIRDOSH P. POONIWALLA, JJ.
RESERVED ON : 19th JUNE, 2025.
PRONOUNCED ON : 3rd JULY, 2025.
JUDGMENT :
– [ Per B.P. COLABAWALLA, J. ]
1. In both the above Writ Petitions the issue raised is whether the
1st Respondent had the power to reopen the assessment of the Petitioner
[under Section 147] for AY 2013-14 and AY 2014-15 and issue notices under
Section 148 of the Income Tax Act, 1961 (for short “IT Act“).
2. Writ Petition No. 1752 of 2022 challenges the legality and
validity of the impugned Notice dated 23 rd March 2021 issued under Section
148 of the IT Act for AY 2013-14. Additionally, the Petitioner also challenges
the impugned Order dated 17 th February 2022 rejecting the objections filed
by the Petitioner to the validity of the impugned Notice dated 23 rd March
2021. The reasons given in the impugned Notice for reopening the
assessment of the Petitioner for the AY 2013-14 was that the Assessee (the
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Petitioner) had claimed exemption under Section 10(34) of the IT Act of
Rs.179.44 crores on account of dividend income. Out of this total income
claimed as exempt, an amount of Rs.37.10 crores was on account of receipts
from an entity called the Bharat Petroleum Corporation Ltd. Trust for
Investment in Shares (for short the “BPCL Trust” or “KRL Trust”). It
was observed that the said Trust was formed through a merger of Kochi
Refineries Ltd. with the Petitioner in the year 2006-07, and the sole
beneficiary of the Trust was the Petitioner. Pursuant to this merger,
3,37,28,737 equity shares of the Petitioner were allotted to the said Trust.
After issue of a 1:1 bonus shares issued in July 2012, the said Trust holds
6,74,57,474 equity shares of the Petitioner and the cost of the original
investment was Rs.659.10 crores. According to the Assessing Officer (1 st
Respondent), it is from this Trust that the Petitioner (BPCL) has received
dividend income to the tune of Rs.37.10 crores. Since the said Trust is not a
Company and is not required to declare dividend as mandated by the
Companies Act, 2013, and nor was the said Trust covered under Section
115-O of the IT Act, the amounts distributed by the said Trust to the
Petitioner did not qualify as exempt income under Section 10(34) of the IT
Act. According to the Assessing Officer, the full and true facts relating to
earning of such income were not disclosed by the Petitioner – Assessee
during the course of assessment proceedings, and hence, he had reason to
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believe that income to the extent of Rs.37.10 crores received by the Petitioner
from the said Trust had escaped assessment for AY 2013-14. This, according
to the Assessing Officer, was due to reasons attributable to the Petitioner for
failure to disclose fully and truly all material facts necessary for AY 2013-14.
It is on this basis that the Assessing Officer reopened the assessment for AY
2013-14 and issued the impugned Notice dated 23rd March 2021.
3. Writ Petition No. 2966 of 2012 challenges the legality and
validity of the impugned Notice dated 26 th March 2021 issued under Section
148 of the IT Act for AY 2014-15. Consequently, the Petitioner also challenges
the impugned orders dated 25th November 2021 and 14th February 2022
rejecting the objections filed by the Petitioner to the validity of the impugned
Notice dated 26th March 2021. So far as the impugned Notice dated 26 th
March 2021 (Relating to AY 2014-15) is concerned, not only was the
assessment proceeding sought to be reopened on the ground that the
Petitioner had incorrectly claimed exemption under Section 10(34) in
relation to the monies received from the BPCL Trust, but also that the
Assessee had wrongly claimed a deduction under Section 32AC. In other
words, for AY 2014-15, the assessment was sought to be reopened on 2
counts. Here also the Assessing Officer was of the opinion that income of the
Assessee (the Petitioner) had escaped assessment because of a failure on the
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part of the Assessee to disclose fully and truly all material facts necessary for
assessment of that year.
4. To put it in a nutshell, for AY 2013-14, according to the Assessing
Officer (1st Respondent), income to the extent of Rs.37.10 crores [received
from the BPCL Trust] had escaped assessment, and for AY 2014-15 income of
Rs.201.59 crores [consisting of (a) Rs.74.20 crores received from the BPCL
Trust and (b) Rs. 127.39 crores by wrongly claiming a deduction under
Section 32AC] had escaped assessment.
5. Since the facts in both the Petitions are almost identical, save
and except that one additional ground is taken for reopening the assessment
for AY 2014-15 [the subject matter of Writ Petition No. 2966 of 2022], we
shall briefly set out the facts from Writ Petition No. 1752 of 2022 (relating to
AY 2013-14).
WRIT PETITION NO.1752 OF 2022
6. The Petitioner is a Company engaged in the business of refining
of crude oil and marketing of petroleum and petrochemical products and
lubricants and is a regular Assessee under the IT Act. Respondent No.1 is the
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Assistant Commissioner of Income Tax, who has been vested with the powers
under the IT Act to assess the income of the Petitioner and who has issued
the impugned Notice [dated 23rd March 2021] under Section 148 and has
passed the impugned order [dated 17 th February 2022] rejecting the
objections raised by the Petitioner challenging the legality and validity of the
impugned Notice. Respondent No.2 is the Principal Commissioner of Income
Tax, who has administrative jurisdiction over Respondent No.1 and who,
according to the Petitioner, has illegally and without application of mind
accorded his approval under Section 151 of the IT Act for issuance of the
impugned Notice. Respondent No.3 is an Officer of the National Faceless
Assessment Centre, Delhi and Respondent No.4 is the Union of India.
Respondent Nos. 1 to 3 are the employees of Respondent No.4.
7. On 18th August 2006, a scheme of amalgamation between the
Petitioner and one Kochi Refineries Ltd. (a wholly owned subsidiary of the
Petitioner) was approved by the Government of India. In pursuance of this
scheme, a Trust was formed vide a Trust Deed dated 9 th October 2006 so that
the shares to be issued by BPCL (the Petitioner) on the merger would be held
by this Trust. This Trust was called the Bharat Petroleum Corporation Ltd.
Trust for investment in shares (for short the “BPCL Trust” or “KRL
Trust”) and the sole beneficiary of this Trust is the Petitioner. In accordance
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with the said scheme, 3,37,28,737 equity shares of the Petitioner were
allotted to the said Trust for the benefit of the Petitioner in the previous year
relevant to the AY 2007-08. After a 1:1 bonus issued in July 2012, the BPCL
Trust now holds 6,74,57,474 equity shares of the Petitioner. As and when the
Petitioner declares a dividend, the same is received by the BPCL Trust, which
is, in turn, distributed to the Petitioner (being its sole beneficiary). According
to the Petitioner, the cost of the original investment was Rs.659.10 crores,
which is shown under the heading “Non-current investment” and the monies
distributed by the Trust to the Petitioner is consistently included in other
income. According to the Petitioner, this income, for the AY 2007-08
onwards, has been consistently offered to tax and claimed as exempt under
Section 10(34). This position has never been disputed by the Income Tax
Department in the past assessment years.
8. For the AY 2013-14, the Petitioner filed its Return of Income on
22nd November 2013 declaring a total income of Rs.3533,35,52,040/- (Rs.
3,533.35 crores). In this Return of Income, the dividend income of Rs.179.44
crores as well as the payment of dividend distribution tax was disclosed. On
4th September 2014, a Notice under Section 143(2) of the IT Act was issued to
the Petitioner. In the said Notice, Respondent No.1 sought various details
from the Petitioner such as the Balance-sheet, Profit and Loss Account with
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the relevant Annexures in the Schedule, Tax Audit Report, computation of
income etc.
9. Pursuant to this Notice, on 23 rd September 2014, the Petitioner
furnished various details such as the Annual Report for the previous year
2012-13, disclosures with respect to the investment in KRL Trust as well as
disclosures with reference to the income received from the said Trust. On 2 nd
December 2016, the Petitioner also, in connection with dis-allowance under
Section 14A of the IT Act, provided details of investments, which yielded
exempt income. After considering the details furnished by the Petitioner
during the course of assessment proceedings, Respondent No.1 passed an
Assessment Order under Section 143(3) dated 30 th January 2017 assessing
the total income of the Petitioner at Rs. 3,652.83 crores. In paragraph 5.1 of
the Assessment Order, the Petitioner’s submission regarding the investment
capable of yielding exempt income was set out, which included the
investment held in the BPCL Trust. In paragraph 5.2, in working out the dis-
allowance under Section 14A r/w Rule 8D, the investment of Rs.659.10 crores
in the BPCL Trust was also taken into account. According to the Petitioner,
therefore, not only was there a full and final disclosure of the fact that
investment in the BPCL Trust was capable of yielding exempt income, but the
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said fact was accepted by Respondent No.1 and on that basis a dis-allowance
under Section 14A was made thereon.
10. The Petitioner, thereafter, received the impugned Notice dated
23rd March 2021 issued under Section 148 of the IT Act. In response to the
impugned Notice, the Petitioner furnished a Return of Income [under Section
139] on 12th April 2021, under protest. On 13 th May 2021 a copy of the
approval granted by Respondent No.2, along with a copy of the reasons for
reopening the assessment (for AY 2013-14) were provided by Respondent
No.1 to the Petitioner. As mentioned earlier, the reason recorded in support
of the impugned Notice was that the exemption under Section 10(34) in
respect of the income of Rs.37.10 crores received by the Petitioner from the
BPCL Trust was sought to be withdrawn allegedly on the ground that the
Petitioner had failed to fully and truly disclose all material facts with
reference to the said income.
11. In response to the reasons furnished, the Petitioner furnished
detailed objections vide its letter dated 18 th June 2021. In the said objections,
it was submitted by the Petitioner that:-
(a) The reasons were recorded by the preceding
Assessing Officer whereas the impugned notice
was issued by the subsequent Assessing Officer. It
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was contended that the same Assessing Officer
who records the reasons must issue the notice.
(b) Approval under Section 151 of the Act was granted
by Respondent No.2 without application of mind
and was mechanical and perfunctory.
(c) Reopening was not based on any fresh material.
(d) Reopening was based on a change of opinion.
(e) There was no failure to disclose fully and truly any
material fact.
(f) Income received from the KRL Trust was rightly
claimed as being exempt under Section 10(34) of
the Act since the Petitioner was the sole
beneficiary of the KRL Trust.
(g) As per provisions of Section 115-O(4) of the Act,
after having discharged the liability to pay
dividend distribution tax, the same dividend
cannot again be subjected to tax.
(h) Respondent No.1 was requested to pass a
speaking order in accordance with the decision in
GKN Driveshafts (India) Ltd. [259 ITR 19 (SC)]
and, thereafter, to wait for a period of four weeks
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as per the decision of this Hon’ble Court in Asian
Paints vs. Dy. CIT [296 ITR 90].
12. The Petitioner, thereafter, filed a letter dated 29 th June 2021
requesting Respondent No.1 to provide the original copy of the reasons
recorded since the same had not been provided along with the letter dated
13th May 2021. According to the Petitioner, the said request has not yet been
complied with by Respondent No.1 till date.
13. By the impugned order dated 17th February 2022, Respondent
No.1 rejected the objections raised by the Petitioner, and a Notice dated 18 th
February 2022 was issued by Respondent No.1 under Section 143(2) r/w
Section 147 of the IT Act. Being aggrieved by the unlawful reopening of the
assessment by the 1st Respondent in issuing the impugned Notice dated 23 rd
March 2021 under Section 148 of the IT Act [for AY 2013-14], and the passing
of the impugned Order dated 17 th February 2022 rejecting the objections of
the Petitioner, it has approached this Court under Article 226 of the
Constitution of India challenging the impugned Notice as well as the
impugned Order.
14. As mentioned earlier, for the AY 2014-15 (the subject matter of
Writ Petition No. 2966 of 2021), the assessment was sought to be reopened
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not only on the ground that in the said assessment year, the Petitioner had
wrongly claimed exemption under Section 10(34) in relation to the monies
received from the BPCL Trust, but also the fact that the Petitioner had
wrongly claimed certain benefits/deductions under Section 32AC of the IT
Act.
SUBMISSION OF THE PARTIES:
15. In this factual backdrop, Mr. Mistri, the learned Senior Counsel
appearing on behalf of the Petitioner, submitted that in the facts of the
present case, the impugned Notices issued under Section 148 for both the
assessment years were beyond the period of 4 years from the end of the
concerned assessment year. Further, in the facts of the present case, for both
assessment years, an Assessment Order was passed under Section 143(3).
Mr. Mistri submitted that in such a scenario, under the first proviso to
Section 147 (as it stood at the relevant time), where an assessment under
Section 143(3) had been made for the relevant assessment year, no action
could be taken after the expiry of 4 years from the end of the relevant
assessment year, unless any income chargeable to tax had escaped
assessment by reason of the failure on the part of the Assessee to inter alia
disclose fully and truly all material facts necessary for the assessment for that
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assessment year. Mr. Mistri submitted that for the 1st Respondent to be
invested with jurisdiction, it was, therefore, incumbent that there was a
failure to disclose fully and truly all material facts necessary for the purpose
of assessment. If all facts were fully and truly disclosed, the 1 st Respondent
would have no jurisdiction to issue the Notice under Section 148 of the IT
Act. According to Mr. Mistri, all details in relation to the exempt income
received from the BPCL Trust were disclosed during the assessment
proceedings initiated earlier and which culminated in an Assessment Order
dated 30th January 2017 passed under Section 143(3). Mr. Mistri submitted
that this apart, it is clear from the Assessment Order dated 30 th January 2017
that the Assessing Officer applied his mind to the fact that Rs.37.10 crores
was received by the Petitioner from the BPCL Trust, and which was claimed
by the Petitioner as exempt income. It is on this basis that the Assessing
Officer thereafter invoked the provisions of Section 14A r/w Rule 8D and
deducted the expenditure incurred in relation to income which was
exempted. Once this is the case, it is abundantly clear that all material facts
in relation to the income received from the BPCL Trust by the Petitioner were
fully and truly disclosed at the time of the earlier assessment proceedings,
and which culminated in the Assessment Order dated 30 th January 2017
passed under Section 143(3) of the IT Act. Once this was the factual scenario,
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the 1st Respondent lacked jurisdiction to reopen the assessment for AY 2013-
14 and issue a Notice under Section 148, was the submission.
16. In support of the aforesaid submission, Mr. Mistri relied upon
the following decisions:-
(a) Ananta Landmark (P) Ltd. Vs. DCIT [2021] 439
ITR 168 (Bombay)
(b) Hindustan Lever Ltd. Vs. R.B. Wadkar [2004]
268 ITR 332 (Bombay)
(c) Lupin Ltd. Vs. ACIT [2014] 46 taxmann.com
396 (Bombay)
(d) Idea Cellular Ltd. Vs. DCIT [2008] 301 ITR 407
(Bombay)
(e) First Source Solutions Ltd. Vs. ACIT [2021] 438
ITR 139 (Bombay)
(f) Saraswat Co-operative Bank Ltd. Vs. ACIT
[2024] 166 taxmann.com 360 (Bombay)
(g) Bombay Stock Exchange Ltd. Vs. Deputy
Director of Income tax (Exemption) and Ors.
[2014] 365 ITR 181.
17. Mr. Mistri then submitted that the present reopening is based on
nothing except a “change of opinion” of the 1 st Respondent and which is
impermissible in law. According to Mr. Mistri, the details of the claim of the
income claimed as ‘exempt’ were disclosed in the original Return of Income
as well as disclosed in the earlier assessment proceedings. The basic
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of Income and the computation of income. Mr. Mistri submitted that it is
undisputed that during the original assessment proceedings, Respondent
No.1 had perused the Return of Income and made a dis-allowance under
Section 14A with respect to the income received from the BPCL Trust. The
Assessing Officer, therefore, applied his mind to the claim of dividend
received from the said Trust under Section 10(34) and thereafter passed an
assessment order dated 30th January 2017 under Section 143(3). In these
facts, the reassessment proceedings initiated by Respondent No.1 to disallow
the exemption under Section 10(34) was nothing but a “change of opinion”.
This is more so when one takes into consideration that there was absolutely
no new tangible material for reopening the assessment. Once this is the case,
reopening the assessment merely on a “change of opinion” was wholly
impermissible, was the submission. In this regard, Mr. Mistri relied upon the
following judgments:-
(a) Aroni Commercials Ltd. Vs. DCIT [2014] 362
ITR 403 (Bombay)
(b) CIT Vs. Kelvinator of India Ltd. [2010] ITR 561
(SC)
(c) Ananta Landmark (P) Ltd. Vs. DCIT [2021] 439
ITR 168 (Bombay)
(d) Saraswat Co-operative Bank Ltd. Vs. ACIT
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18. Mr. Mistri next submitted that in any event, as regards the claim
of exemption under Section 10(34), Respondent No.1 could not have any
reason to believe that income chargeable to tax had escaped assessment. In
this regard, he submitted that the BPCL Trust is entitled to claim exemption
under Section 10(34) of the Act, since the dividend received by the BPCL
Trust satisfies the criteria (of income by way of dividend referred to in
Section 115-O) as provided under the IT Act. The Petitioner, being the sole
beneficiary of the BPCL Trust, must be assessed in the like manner and to the
same extent as the BPCL Trust, as per the provisions of Section 161(1) of the
IT Act. Once this is the case, and it cannot be disputed that the dividend
income in the hands of the Trust (for the relevant assessment years) was
exempt under Section 10(34), then, by virtue of the provisions of Section
161(1), the same could not be brought to tax in the hands of the Petitioner. In
any event, the dividend received by the Trust was exempt under Section
10(34), and the same being passed on by the Trust to its beneficiary (the
Petitioner), is simply post tax income of the Trust being transferred to its
beneficiary in accordance with the terms of the Trust. This being the case, it
can, in any event, never be treated as income in the hands of the Petitioner
(the beneficiary). According to Mr. Mistri, this proposition has in fact been
accepted by a bench of the ITAT in the case of the Petitioner itself in ITA No.
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submission that therefore, in any event, the 1 st Respondent could not have
had any reason to believe that income chargeable to tax (insofar as it related
to receipt of Rs.37.10 crores from the Trust) had escaped assessment. Mr.
Mistri submitted that before the reassessment proceedings can be initiated, it
is a sine qua non (under Section 147) that the Assessing Officer must have
reason to believe that any income chargeable to tax has escaped assessment
for any assessment year. It is only once this belief is formed that the
Assessing Officer can thereafter proceed to issue a Notice under Section 148,
and which would ultimately culminate into the reassessment order.
19. Mr. Mistri thereafter submitted that reassessment proceedings
have been initiated purely based on the audit objection and which would be
invalid. Mr. Mistri submitted that the impugned Notice has been issued at
the behest of the audit party, and which is evident from the reply filed by the
Respondent in Writ Petition No. 2966 of 2022 for AY 2014-15. According to
Mr. Mistri, reassessment pursuant to an audit objection is invalid and in any
event the 1st Respondent ought to be directed to furnish a copy of the audit
objection and the reply furnished by Respondent No.1 as well as his superiors
to the said audit objection to enable the determination of validity of the so-
called reasons to believe based on which the impugned Notice was issued. To
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put it in a nutshell, Mr. Mistri submitted that if the reply to the audit
objection by the 1st Respondent was in fact that the exemption under Section
10(34) was correctly allowed, then, clearly, there could be no reason to
believe that any income had escaped assessment. According to Mr. Mistri,
even though this information was specifically sought for, the same has not
been furnished till date. In such a situation, Mr. Mistri submitted that an
adverse inference be drawn against the 1st Respondent.
20. Mr. Mistri lastly submitted that the sanction accorded by
Respondent No.2 for reopening the assessment is invalid because the same is
not signed. Mr. Mistri submitted that the sanction under Section 151 of the
IT Act has been issued by Respondent No.2 without signing the same and
thus the impugned Notice issued under Section 148 is also invalid on that
count. For all the aforesaid reasons Mr. Mistri submitted that the impugned
Notice as well as the impugned Order [for AY 2013-14] are invalid and ought
to be quashed and set aside.
21. On the other hand, Mr. Sharma, the learned Counsel appearing
on behalf of the Respondent Nos. 1 to 3, supported the issuance of the
impugned Notice and the passing of the impugned Order rejecting the
objections to the validity of the said Notice. He submitted that the main issue
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for reopening the assessment in the Petitioner’s case was the allowance of
inadmissible exemption of dividend income received from the BPCL Trust.
The allowance of such inadmissible exemption was pointed out by the
Revenue Audit party vide its LAR No. 1644-1647 dated 13 th December 2017.
In the Revenue Audit, it was pointed out that as per Section 10(34) of the IT
Act, in computing the total income of any person, any income by way of
dividend referred to in Section 115-O of the IT Act was not required to be
included. However, Section 115-O was applicable to domestic companies
only. Since the BPCL Trust was not a company, Section 115-O was not
applicable and hence, the income from the BPCL Trust, being income from a
Trust, could not qualify for exemption under Section 10(34) of the IT Act. Mr.
Sharma submitted that as per the guidelines issued in handling Revenue
Audit matters, the issue flagged by the Audit was therefore, examined by
referring to the accounts and the applicable provisions under the IT Act. As
income chargeable to tax had escaped assessment, proposal was put to the
higher authorities for reopening the assessment. After getting the approval
under Section 151 of the IT Act, the Petitioner’s case was reopened by issuing
Notice under Section 148. Mr. Sharma submitted that the Revenue Audit was
entitled to point out factual errors and based on the same, reopening of the
assessment was valid.
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22. Mr. Sharma then submitted that Mr. Mistri was incorrect in his
submission when he sought to contend that there has been no failure to
disclose fully and truly all material facts. The fact that dividend income from
the BPCL Trust was claimed as exempt under Section 10(34) without even
disclosing that the Trust would not fall within the meaning of a domestic
company under Section 115-O would itself be a non-disclosure of all material
facts. Once this is the case, and which was then flagged by the Audit, the 1 st
Respondent was certainly invested with the jurisdiction to reopen the
assessment proceedings and issue a Section 148 Notice. In these facts, Mr.
Sharma also submitted that therefore, there is no “change of opinion”. The
assessment proceedings have been reopened under Sections 147 and 148
because clearly there was a failure on the part of the Petitioner to fully and
truly disclose all material facts in relation to the concerned assessment year.
Consequently, he submitted that there was no merit in the above Writ
Petition and the same be dismissed.
23. We must mention here that Mr. Sharma pointed out that though
it is true that for the AYs 2015-16 and 2017-18, the ITAT has held in favour of
the Petitioner on the issue of claiming exemption under Section 10(34) and
the monies received from the said Trust, those decisions are pending in
Appeal before this Court and hence, have not attained finality. Hence, no
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reliance can be placed on those decisions to contend that as regards the claim
for exemption under Section 10(34) of the Act, the 1 st Respondent could not
have had any reason to believe that income chargeable to tax has escaped
assessment.
FINDINGS AND CONCLUSIONS:
24. We have heard learned Counsel for the parties at length. We
have also perused the papers and proceedings in both the above Writ
Petitions. Section 147 of the IT Act inter alia provides that if the Assessing
Officer has reason to believe that any income chargeable to tax has escaped
assessment for any assessment year, he may, subject to the provisions of
Sections 148 to 153, assess or reassess such income and also any other
income chargeable to tax which has escaped assessment, and which comes to
his notice subsequently in the course of the proceedings. In such a situation,
the said section further empowers the Assessing Officer to recompute the loss
or the depreciation allowances or any other allowances, as the case may be.
The first proviso to Section 147, and which is important for our purposes,
reads as under :-
“Provided that where an assessment under sub-section (3) of
section 143 or this section has been made for the relevant
assessment year, no action shall be taken under this section after
the expiry of four years from the end of the relevant assessment
year, unless any income chargeable to tax has escaped assessmentPage 21 of 41
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assessee to make a return under Section 139 or in response to a
notice issued under sub-section (1) of section 142 or section 148 or
to disclose fully and truly all material facts necessary for his
assessment, for that assessment year.”
(emphasis supplied)
25. The said proviso clearly stipulates that where an assessment
under Sections 143(3) or 147 has been carried out for the relevant assessment
year, no action can be taken under Section 147 after the expiry of four years
from the end of the relevant assessment year, unless any income chargeable
to tax has escaped assessment by reason of the failure on the part of the
Assessee to make a Return under Section 139, or in response to a Notice
issued under Section 142(1) or Section 148, or to disclose fully and truly all
material facts necessary for his assessment for that assessment year. In the
present case, admittedly the scrutiny assessment [under Section 143(3)] was
done and an Assessment Order was passed under Section 143(3) of the IT Act
for the AY 2013-14 as well as AY 2015-16. Further, the proposed
reassessment for both these years is sought to be done after the expiry of four
years from the end of the relevant assessment year. In such a situation, the
first proviso to Section 147 of the Act is clearly attracted. Thus, no action for
initiation of reassessment proceedings for both the aforesaid assessment
years could be initiated unless the income chargeable to tax had escaped
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assessment by reason of failure on the part of the Petitioner to disclose fully
and truly all material facts.
26. Having said this, we will now examine the reasons given by the
1st Respondent to reopen the assessment for AY 2013-14. The reasons
furnished to the Petitioner can be found at page 219 of the paper book. For
the sake of convenience, the same read thus :-
“In this case, the assessee company filed its return of income for
A.Y. 2013-14 on 22/11/2013 declaring total income at
Rs.3533,35,52,040/- under normal provisions of the Act and Book
Profit u/s 115JB of the Act of Rs.3444,91,28,460/-. The case was
selected for scrutiny and assessment was completed u/s 143(3) of
the Income Tax Act, 1961 on 30.01.2017 assessing total income at
Rs.3652,83,30,770/- under normal provisions of the Act after
making following additions / disallowances.
S.N. Particulars Amount (in Rs.)
1 Transfer Pricing Addition 2,53,20,865
2 Additional disallowance u/s 14A 104,65,91,381
3 Capital expenditure charged to revenue A/c 2,59,74,118
4 Adjustment for scientific research 40,56,615
expenditure as per DSIR
5 Disallowance of depreciation on right of 8,98,15,282
way
2. On perusal of the records of the relevant assessment year, it is
observed that the assessee has claimed exemption u/s 10(34) of the
Act of Rs.179,44,45,078/- on account dividend income. It is seen
that out of total income claimed as exempt dividend income by the
assessee, an amount of Rs.37.10 crore is on account of receipt from
BPCL Trust. This is treated as exempt dividend income by the
assessee. According to the notes to accounts, the said trust is
formed through merger of Kochi Refineries Ltd., Kochi (KRL)Page 23 of 41
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of the corporation in the year 2006-07. It was also stated that on
merger, 33728737 equity shares of the BPCL were allotted to the
trust in lieu of shares held by the Corporation in the erstwhile KRL.
After issue of 1:1 bonus shares in July 2012, the trust holds
67457474 equity shares of the corporation and accordingly, the
cost of the original investment of Rs. 659.10 crores is included in
Non-Current Investments.
3. The BPCL Trust is not a company and is not required to
declare dividends as mandated by Companies Act, 2013 nor is
covered u/s 115O of the Act. Therefore, the amounts distributed by
it do not qualify as exempt dividend income u/s 10(34) of the Act.
The full and true facts related to earning of such an income were
not disclosed by the assessee during the course of assessment
proceedings. Hence, I have reason to believe that income of
Rs.37.10 crore from BPCL Trust has escaped assessment for A.Y.
2013-14 due to reasons attributable to the assessee for failure to
disclose fully and truly all material facts necessary for assessment
for that year. Accordingly, the assessment deserves to be reopened
u/s. 147 of the Act for A.Y. 2013-14.
4. In this case more than four years have lapsed from the end of
assessment year under consideration. Hence, necessary sanction to
issue notice u/s. 148 is obtained separately from Pr. Commissioner
of Income tax-2, Mumbai as per the provisions of section 151 of
the Act.”
27. As can be seen from the above reproduction, paragraphs 1 and 2
of the aforesaid reasons only set out the factual situation, and which factual
situation was also disclosed during the original assessment proceedings. The
reason for reopening the assessment is found in paragraph 3. Paragraph 3
inter alia states that the BPCL Trust is not a company and is not required to
declare dividend as mandated by the Companies Act, 2013 nor covered under
Section 115-O of the IT Act. Therefore, the amounts distributed by it do not
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qualify as exempt dividend income under Section 10(34) of the Act. It is
thereafter stated that full and true facts related to earning of such income
were not disclosed by the Assessee during the course of the assessment
proceedings. Hence, the Assessing Officer had reason to believe that income
of Rs.37.10 crores from the BPCL Trust had escaped assessment for the AY
2013-14 due to the Assessee failing to disclose fully and truly all material facts
necessary for assessment for that year.
28. It is true that the reasons for initiating reassessment
proceedings, in fact, state that there is a failure on the part of the Petitioner
to disclose fully and truly all material facts necessary for its assessment.
However, we find that merely making this bald assertion is not enough. It is
now well settled that reasons are required to be read as they were recorded by
the Assessing Officer. No substitution or deletion is permissible, and no
addition can be made to those reasons. Further, no inference can be allowed
to be drawn based on reasons not recorded. It is for the Assessing Officer to
reach the conclusion as to whether there was a failure on the part of the
Assessee to disclose fully and truly all material facts necessary for assessment
for the concerned assessment year. The Assessing Officer, in the event of
challenge to the reasons, must be able to justify the same based on the
material on record. What is important is that he must disclose in the reasons
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as to which fact or material was not disclosed by the Assessee fully and truly
necessary for assessment of that assessment year, so as to establish the vital
link between the reasons and the evidence. That vital link is a safeguard
against the arbitrary reopening of a concluded assessment. The aforesaid
proposition has been laid down by a Division Bench of this Court [to which
one of us (B.P. Colabawalla, J.) was a party] in the case of Bombay Stock
Exchange Ltd. (supra). The Division Bench, after relying upon a decision
of another Division Bench in the case of Hindustan Lever Ltd. Vs. R.B.
Wadkar, reported in [2004] 268 ITR 332 (Bombay) culled out the
aforesaid proposition. The relevant portion of this decision reads thus :-
“9. It is true that the reasons for initiating reassessment
proceedings do in fact state that there was a failure on the part of
the petitioner to disclose fully and truly all material facts
necessary for its assessment. However, as correctly submitted
by Mr. Dastoor, merely making this bald assertion was not
enough. In this regard, the reliance placed by Mr. Dastoor on a
Division Bench judgment of this court in the case of Hindustan
Lever Ltd. Vs. R.B. Wadkar, Assistant CIT reported in [2004]
268 ITR 332 (Bom) is well founded. The relevant portion of the
said judgment reads as under (page 337) :
“The reasons recorded by the Assessing Officer
nowhere state that there was failure on the part of
the assessee to disclose fully and truly all material
facts necessary for the assessment of that
assessment year. It is needless to mention that the
reasons are required to be read as they were
recorded by the Assessing Officer. No substitution
or deletion is permissible. No additions can be
made to those reasons. No inference can be
allowed to be drawn based on reasons not
recorded. It is for the Assessing Officer to disclose
and open his mind through reasons recorded byPage 26 of 41
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the Assessing Officer to reach to the conclusion as
to whether there was failure on the part of the
assessee to disclose fully and truly all material
facts necessary for his assessment for the
concerned assessment year. It is for the Assessing
Officer to form his opinion. It is for him to put his
opinion on record in black and white. The reasons
record should be clear and unambiguous and
should not suffer from any vagueness. The reasons
recorded must disclose his mind. Reasons are the
manifestation of mind of the Assessing Officer.
The reasons recorded should be self-explanatory
and should not keep the assessee guessing for the
reasons, Reasons provide link between conclusion
and evidence. The reasons recorded, must be based
on evidence. The Assessing Officer, in the event of
challenge to the reasons, must be able to justify the
same based on material available on record. He
must disclose in the reasons as to which fact or
material was not disclosed by the assessee fully
and truly necessary for assessment of that
assessment year, so as to establish vital link
between the reasons and evidence. That vital link
is the safeguard against arbitrary reopening of the
concluded assessment. The reasons recorded by the
Assessing Officer cannot be supplemented by
filing affidavit or making oral submission,
otherwise, the reasons which were lacking in the
material particulars would get supplemented, by
the time the matter reaches to the Court, on the
strength of affidavit or oral submissions
advanced.”
(emphasis supplied)
29. In the present case, admittedly there are no details given by the
Assessing Officer (the 1st Respondent) as to which fact or material was not
disclosed by the Petitioner that led to its income escaping assessment. There
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is merely a bald assertion in the reasons that there was a failure on the part of
the Petitioner to disclose fully and truly all material facts, without giving any
details thereto. This being the case, the impugned Notice is bad in law on
this ground alone and the Petitioner would be entitled to succeed in this Writ
Petition.
30. Despite this, we examined the facts of the present case and on
doing so, we find that in fact, there was no failure on the part of the Petitioner
in disclosing fully and truly all material facts for the AY 2013-14. In response
to the Notice issued by Respondent No.1, in the original assessment
proceedings, the Petitioner furnished details with respect to the claim of
exempted income from the BPCL Trust. Firstly, the claim of dividend income
was very much in the Return of income as well as the details of the dividend
distribution tax paid. Pursuant to this, the Annual Report was filed which
also at Note No.35 (in the report referred to as the KRL Trust) disclosed
investment in the KRL Trust under the heading ‘Non-current Investment’ as
Rs. 659.10 crores. Even in the response furnished by the Petitioner in respect
of the disallowance under Section 14A of the Act, the Petitioner disclosed the
details of the exemption claimed under Section 10(34) of the Act, which
included the income received from the BPCL Trust (Page Nos. 182 and 183 of
the paper book). In fact, at page 183, it is specifically mentioned that “the
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above pattern of investment makes it amply clear that Corporation has
over the period of time made investments in equity shares of subsidiaries,
joint ventures and associates, the dividend income declared by them is
exempt from tax.” The pattern of investment referred to in this paragraph
also refers to the pattern of investment in the BPCL Trust (on the Kochi
Refineries Merger). Further, the details furnished by the Petitioner were
considered by Respondent No.1 in the original assessment proceedings
[under Section 143(3)] and also specifically noted that income from the BPCL
Trust had been claimed as exempted. Respondent No.1 thereafter proceeded
to disallow expenses under Section 14A of the Act. The scrutiny assessment
order passed under Section 143(3) can be found at page 193 of the paper
book. In paragraph 5.1 of this order, the Assessing Officer categorically states
that for the AY 2013-14 the Assessee has received a sum of Rs.185.75 crores
as income exempted from tax by way of dividend from Indian Companies,
Income from the KRL Trust, shares of income from AOP (PII) and interest on
tax free securities. It is, therefore, clear that the Assessing Officer in the
scrutiny proceedings was very much aware that income from KRL Trust was
received by the Petitioner and which was claimed as exempt. The Assessing
Officer, therefore, proceeded to apply Section 14A r/w Rule 8D and dis-
allowed an amount of Rs.104.65 crores under Section 14A r/w Rule 8D of the
Income Tax Act and Rules respectively. What is important to note is that
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while doing the calculation under Section 14A, the Assessing Officer
specifically takes a note of the investment in the BPCL Trust at page 201.
Once we look at all these facts, we are clearly of the view that there was no
failure to disclose fully and truly all material facts in relation to AY 2013-14,
which would invest the 1st Respondent with the jurisdiction to initiate
reassessment proceedings under Sections 147 and 148 of the IT Act.
Considering this, we do not feel the necessity to burden this judgment with
the decisions relied upon by Mr. Mistri on this aspect. It is suffice to state
that these decisions clearly lay down that where scrutiny assessments are
done [under section 143(3)] and more than 4 years have elapsed from the end
of the relevant assessment year, then no reassessment proceedings can be
initiated unless there is a failure on the part of the Assessee to fully and truly
disclose all material facts for that assessment year.
31. We also find considerable force in the argument of Mr. Mistri
that the reopening in the present case is merely based on a “change of
opinion”, which is impermissible. As can be seen from the reasons for
reopening, the only real reason given is that the BPCL Trust is not a company
and hence not covered under Section 115-O of the Act. Therefore, the amount
distributed by it to the Petitioner would not qualify as exempt dividend
income under Section 10(34) of the Act. This to our mind would be merely a
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“change of opinion”. We say this for the simple reason that even if we
assume for the sake of argument that this exemption was wrongly allowed by
the Assessing Officer in the scrutiny assessment proceedings, the same
cannot be the sole ground for reopening the assessment and invoking the
provisions of Section 147 r/w Section 148 of the IT Act. Merely because the
Assessing Officer is now of the opinion that the deduction is wrongly granted,
cannot invest him with the jurisdiction to reopen the assessment, especially
in a case where reassessment proceedings are initiated when there is already
a scrutiny assessment under Section 143(3) and which is after a period of 4
years from the date of the relevant assessment year and there has been no
failure to disclose fully and truly all material facts in relation to the concerned
assessment year. This has been so held by the Hon’ble Supreme Court in the
case of Gemini Leather Stores Vs. Income Tax Officer, (1975) 4 SCC
375. The relevant portion of this decision reads thus :-
“3. ……….
It is not disputed that the case falls under Clause (a) of section 147.
The question is whether the Income-tax Officer had reason to
believe that income chargeable to tax had escaped assessment for
the assessment year in question by reason of the omission or failure
on the part of the assessee to disclose fully and truly all material
facts. The law on the point has been settled by this Court in
Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR
191 (SC). The decision in Calcutta Discount Company case (supra)
is based on Section 34 of the Income Tax Act, 1922, the provisions
of which correspond to those Sections 147 and 148 of the Income
Tax Act, 1961, the points of departure from the old law are notPage 31 of 41
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Calcutta Discount Company case (supra) as follows:
“In every assessment proceeding the assessing authority will
for the purpose of computing or determining the proper tax
due from an assessee, require to know all the facts which help
him in coming to the correct conclusion. From the primary
facts in his possession, whether on disclosure by the assessee,
or discovered by him on the basis of the facts disclosed, or
otherwise, the assessing authority has to draw inference as
regards certain other facts; and ultimately from the primary
facts and the further facts inferred from them, the authority
has to draw the proper legal inferences.
……… Once all the primary facts are before the assessing
authority, he requires no further assistance by way of
disclosure. It is for him to decide what inferences of facts can
be reasonably drawn and what legal inferences have
ultimately to be drawn. It is not for somebody else far less the
assessee – to tell the assessing authority what inferences,
whether of facts or law, should be drawn.”
The law laid down in Calcutta Discount Company case (supra) has
been restated in several subsequent decisions of this Court:
Commissioner of Income Tax v. Hemchandra Kar [1970] 77 ITR 1
(SC), Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR
582 (SC) and Commissioner of Income-tax v. Burlop Dealers Ltd.
[1971] 79 ITR 609 (SC), to name only a few. In the case before us
the assessee did not disclose the transactions evidenced by the
drafts which the Income-Tax Officer discovered. After this
discovery the Income-tax Officer had in his possession all the
primary facts, and it was for him to make necessary enquiries and
draw proper inferences as to whether the amounts invested in the
purchase of the drafts could be treated as part of the total income of
the assessee during the relevant year. This the Income-tax officer
did not do. It was plainly a case of oversight, and it cannot be said
that the income chargeable to tax for the relevant assessment year
had escaped assessment by reason of the omission or failure on the
part of the assessee to disclose fully and truly all material facts.
The Income-tax Officer had all the material facts before him when
he made the original assessment. He cannot now take recourse to
section 147(a) to remedy the error resulting from his own
oversight.
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4. For these reasons we allow the appeal and quash the
impugned notice dated March 31, 1965 and the proceedings in
consequence thereof. Considering all the circumstances of the case
we make no order as to costs.”
(emphasis supplied)
32. For all the aforesaid reasons, we find that the impugned Notice
dated 23rd March 2021 and the impugned order dated 17 th February 2022 are
unsustainable and hence, deserve to be quashed and set aside.
WRIT PETITION NO. 2966 OF 2022
33. As mentioned earlier, so far as this Writ Petition is concerned,
the reasons for reopening the assessment for AY 2014-15 were not only with
relation to the exemption claimed for the income received from the BPCL
Trust but also that the Assessee had claimed a deduction of
Rs.316,42,70,532/- under Section 32AC of the IT Act, out of which
Rs.127,39,45,494/- was incorrectly availed. This is an additional ground, on
which the assessment proceedings for AY 2014-15 were sought to be
reopened by the impugned Notice dated 26 th March 2021. So far as the
reasons for reopening the assessment for AY 2015-16 in relation to the
income received from the BPCL Trust are concerned, it is common ground
before us that the facts are almost identical as in relation to AY 2013-14 and
which has been dealt with by us earlier. Hence, in this Writ Petition all we
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have to consider is whether the Assessing Officer was justified in reopening
the assessment on the ground that the Petitioner had wrongly claimed a
deduction under Section 32AC of the IT Act in the sum of Rs.
127,39,45,494/-. If the answer to this question is in the affirmative, then,
naturally the impugned Notice and the impugned order would be sustainable
notwithstanding the fact that the reasons for reopening the assessment on
the ground of wrongly claiming the exemption for income received from the
BPCL Trust is unsustainable. This is because a reopening Notice can be
sustained on any ground mentioned in the reasons for issuance of the Notice.
We must mention here that for this assessment year also the first proviso to
Section 147 of the IT Act would be attracted, namely, that the reassessment
proceedings have to be initiated because there has been an escapement of
income on account of the failure on the part of the Petitioner to fully and
truly disclose all material facts in relation to this assessment year.
34. We will now, therefore, examine the reasons given for reopening
the assessment of the Petitioner for wrongly claiming a deduction under
Section 32AC, and whether in fact there has been any failure to disclose fully
and truly all material facts in relation to the aforesaid so-called wrongful
deduction. The reason for reopening the assessment for AY 2014-15 can be
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found from paragraph 3.1 to paragraph 5 of the reasons furnished to the
Assessee on 13th May 2021. They read thus :-
“3.1 From the accounts of the assessee it is seen that the assessee
has claimed deduction u/s 35AC of the Act of Rs.316,42,70,532/-.
In this regard it is to state that the Investment Allowance was
introduced for manufacturing sector by the Finance Act, 2013 by
inserting section 32AC of the Act which allowed investment
allowance of 15% for investment of more than 100 crores in plant
and machinery during the period from 01-04-2013 to 31-03-2015.
Conditions to be fulfilled for availing the benefit are specified in
sub-section (1) of section 32AC of the Act. The tax benefits under
this scheme can be availed by an assessee, being a company,
engaged in the business of manufacture or production of any article
or thing. Deduction under section 32AC (1) of the Act, available
under this scheme, if actual cost of new assets acquired and
installed during financial year 2014-15 exceeds Rs.25 crores and
actual cost of new assets acquired and installed during the period
01-04-2013 to 31-03-2015 exceeds Rs. 100 crores.
3.2 To avail benefit of the investment allowance deduction under
32AC (1) of the Act, following conditions needs to be satisfied by
the assessee :
Assessee is a company.
Assessee – company is engaged in the business of
manufacture or production of any article or thing.
Assessee acquires and installs a new plant and machinery
after 31-03-2013 but before 01-04-2015.
Aggregate amount of cost of such new assets acquired and
installed after 31-03-2013 but before 01-04-2015 should
exceed Rs.100 crores.
3.3 The phrase ‘new asset’ has been defined as new plant or
machinery but does not include-
any plant or machinery which before its installation by the
assessee was used either within or outside India by any
other person;
any plant and machinery installed in any office premises or
any residential accommodation, including accommodation
in the nature of a guest house;
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any office appliances including computers or computer
software;
any vehicle;
ship or aircraft; or
any plant or machinery, the whole of the actual cost of
which is allowed as deduction (whether by way of
depreciation or otherwise) in computing the income
chargeable under the head ‘Profits and gains of business or
profession’ of any previous year.
3.4 The section 32AC of the Act uses the phrase ‘plant and
machinery’ together. The words ‘plant’ and ‘machinery’ are joined
together by ‘and’. Thus requirement of both these words cannot be
seen fulfilled even if either of the two is only fulfilled. The
Hon’ble Apex Court had the occasion to lay down the meaning of
plant and machinery or more specifically ‘plant’ in State of Bihar v.
Steel City Beverages Ltd. The Hon’ble Court held that,
It also appears that the rule-making authority did not intend
‘plant’ to mean what is not a fixed asset. For all these reasons,
we are of the view that by ‘plant’ what is intended by the rule-
making authority is that apparatus which is used by the
industry for carrying on its industrial process of manufacture.
In respect of an industry manufacturing soft-drinks and
beverages, it can be said that plant would mean that apparatus
which is used for manufacturing soft-drinks or beverages and
not articles like crates and bottles used for storing the
manufactured product.
3.5 On perusal of the details of assets acquired suggests (page
No. 18 of submission dated 07-12-2016) that the investment made
of Rs. 849,29,69,963/- in assets under the head ‘LPG cylinders –
14.2 KGS, 19 KG and LPG pressure regulator against which
investment allowance u/s. 35AC of the Act being 15% of such
investment amounting to Rs. 127,39,45,494/- has been claimed. In
this regard it is worth to mention here that the investments made in
the aforesaid assets i.e., LPG cylinders – 14.2 Kgs, 19 KG and
LPG Pressure regulator does not qualify as plant and machinery
eligible to claim deduction u/s. 32AC of the Act. Therefore, the
deduction claimed u/s. 35AC of Rs. 127,39,45,494/- on the
investment made in aforesaid assets of Rs. 849,29,69,963/- is not
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correct, which has resulted into excess claim of deduction and
escapement of income to that extent.
4. Taking into consideration of the above and the data in the
Return of Income, the data from the assessment records and having
duly applied my mind to it, I am of the considered view that total
income of Rs.201.59 crores consisting income from BPCL Trust of
Rs.74.20 crore and Rs.127.39 crore has escaped assessment for
A.Y. .2014-15 due to reasons attributable to the assessee for failure
to disclose fully and truly all material facts necessary for
assessment for that year.
5. On the basis of material available on record and on perusal
and careful consideration of the same, I have prima facie reason to
believe that income chargeable to tax to the tune of Rs.201.59
crores or any other income chargeable to tax, which comes to my
notice subsequently in the course of proceedings for re-assessment,
has escaped assessment within the meaning of section 147 of the
income tax Act, 1961. The assessee has therefore, failed to disclose
true and complete particulars of income for the year under
consideration. Accordingly, the case is proposed to be reopened
u/s. 147 of the Act for A.Y. 2014-15.”
(emphasis supplied)
35. As can be seen from the aforesaid reproduction, the Assessing
Officer, in fact, refers to the Submission dated 7 th December 2016 which was
given by the Petitioner – Assessee to the Assessing Officer in the original
proceedings under Section 143(3) of the IT Act. This submission, in fact,
categorically draws the attention of the Assessing Officer to investment
allowance under Section 32AC of the Act. It is specifically stated by the
Assessee that Investment allowance has been claimed on assets acquired and
installed during the Finance Year 2013-14 relevant to AY 2014-15. The total
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value of the eligible assets is mentioned as Rs. 2109.51 crores on which
investment allowance @ 15% is claimed of Rs.316.42 crores. The details of the
assets acquired and installed [more than Rs. 10 lakhs] was also enclosed with
the aforesaid submission as Annexure-4. Annexure 4 can be found starting at
page 221 of the paper book, and so far as the LPG Cylinders are concerned,
the relevant portion is at page 234. In fact, this is the very Annexure [in the
submission], that the 1st Respondent, in the reasons for reopening the
assessment, has referred to for denying the claim under Section 32AC to the
extent of Rs.127.39 crores, on the basis that LPG Cylinders and LPG Pressure
Regulators did not qualify as ‘plant and machinery’ eligible to claim a
deduction under Section 32AC of the Act. In fact, in paragraph 4 of the
reasons, the Assessing Officer states that taking into consideration “……. the
data in the Return of Income, the data from the assessment records……” and
having applied his mind to it, he was of the view that total income of
Rs.201.59 crores consisting of the income from the BPCL Trust of Rs.74.20
crores and 127.39 crores (originally claimed as deduction under Section
32AC) had escaped assessment for the AY 2014-15 due to the Assessee failing
to disclose fully and truly all material facts necessary for the assessment for
that year. Apart from this bald assertion, nothing else is mentioned in the
reasons. What fact has not been disclosed is also not mentioned. In fact,
from seeing the reasons, we find that the Assessing Officer, after relying upon
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the data already furnished by the Assessee during the original scrutiny
proceedings under Section 143(3), comes to the conclusion that income has
escaped assessment. Once this is the case, we are clearly of the view that even
so far as the reasons for reopening the assessment for AY 2014-15 on the
ground of the Assessee allegedly claiming a wrong deduction under Section
32AC, is without jurisdiction as there is no failure on the part of the Assessee
to disclose fully and truly all material facts in relation to the deduction
claimed under Section 32AC for AY 2014-15. In fact, on perusing the reasons,
it is clear that this is nothing but a “change of opinion” of a subsequent
Assessing Officer, who now seeks to reopen the assessment for AY 2014-15.
This is wholly impermissible in law. In these circumstances, we find that
even so far as Writ Petition No. 2966 of 2022 is concerned, the same deserves
to be allowed.
36. In light of what we have held above we are not burdening this
judgment with the other arguments canvassed by Mr. Mistri, namely, that the
notice is bad because (i) reassessment proceedings have been initiated purely
based on the audit objection and which is impermissible; (ii) the sanction
accorded by Respondent No.2 for reopening the assessment is invalid
because the same is not signed; and (iii) Respondent No.1 could never have
any reason to believe that income chargeable to tax [by claiming a wrong
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exemption under section 10(34)] had escaped assessment because for
subsequent Assessment Years the ITAT has allowed the said exemption on
merits. These contentions are kept open to be decided in an appropriate case.
37. In view of the forgoing discussion, we pass the following order :-
ORDER
(a) For the reasons stated hereinabove, Writ Petition No.
1752 of 2022 is allowed and the Notice dated 23 rd March
2021 issued under Section 148 for the AY 2013-14 and
the impugned Order dated 17th February 2022 rejecting
the Objections to the validity of the said impugned
Notice are hereby quashed and set aside.
(b) For the reasons stated hereinabove, Writ Petition
No.2966 of 2022 is allowed and the Notice dated 26 th
March 2021 issued under Section 148 for the AY 2014-
15 and the impugned Orders dated 25th November 2021
and 14th February 2022 rejecting the Objections to the
validity of the said impugned Notice are hereby quashed
and set aside.
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38. Rule is made absolute in the both the above Writ Petitions in the
aforesaid terms and both the Writ Petitions are disposed of in terms thereof.
However, in the facts and circumstances of the case, there shall be no order
as to costs.
39. This order will be digitally signed by the Private Secretary/
Personal Assistant of this Court. All concerned will act on production by fax
or email of a digitally signed copy of this order.
[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]
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