The Bombay High Court allowed the petition challenging the notice issued under section 148 of the Income Tax Act, 1961, and the order by which the objections to the issuance of notice under section 148 of the Act were rejected.
Brief Facts:
The petitioner is a public limited company engaged in the business of manufacturing and selling paints, varnish, primer, etc. A return of income for the assessment year 2014-15 was filed by the petitioner. In respect of this, a show cause notice was issued by the Assessing officer to the petitioner seeking some details from the latter which were duly submitted. Following this, an order was passed.
Subsequently, a notice under Section 148 of the IT Act, 1961 was issued seeking to reopen the assessment for the assessment year 2014-15. The reason provided was escape of income chargeable to tax for A.Y. 2014-15 by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. The petitioner filed its objections to the reopening notice which were rejected.
Contentions of the Petitioner:
The Learned Counsel for the Petitioner argued that there was no failure to disclose fully and truly any material fact necessary for the assessment which was a condition precedent for reopening the assessment in terms of section 148 of the Act. The counsel stated that based upon a similar reasoning, the respondents had sought to reopen assessment relevant to assessment years 2011-12 and 2012-13, which the petitioner had successfully challenged.
Contentions of the Respondent:
The learned Counsel of the Respondent argued that the reassessment proceedings would not be held to be bad as the AO, while passing the order of assessment, had not expressed any specific opinion in regard to the expenditure incurred on “Colour Idea Stores”, and therefore, at this stage, the reassessment proceedings could not be permitted to be scuttled.
Observations of the Court
The Court observed that the AO had disallowed some of the expenses which had been reflected in the break-up under the head “details of advertisement and sales promotion expenses” while passing the final order of assessment, which reflects that the AO had applied its mind to the appellant’s claim while passing the order under section 143(3) of the Act.
The Court observed that the reasons given for the reassessment do not disclose what material or fact was not disclosed by the assessee and therefore it cannot be said that there was any failure on the part of the petitioner to disclose fully and truly facts which were material and necessary for assessment.
The decision of the Court:
The Bombay High Court, allowing the petition, held that there was complete disclosure of all the primary material facts on the part of the petitioner. Further, the court held that the notice impugned does not satisfy the jurisdictional requirement of section 147 of the Act and is, therefore, liable to be quashed.
Case Title: Asian Paints Ltd. vs UOI & Ors.
Coram: Hon’ble Justice Dhiraj Singh Thakur and Hon’ble Justice Valmiki SA Menezes
Case no.: WRIT PETITION NO. 1416 OF 2022
Advocate for the Petitioner: Mr.Madhur Agrawal with Mr.Fenil Bhatt i/b Mr.Atul K. Jasani
Advocate for the Respondent: Mr.Akhileshwar Sharma
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