Case Note & Summary
The petitioner, Bajaj Auto Limited, filed its return of income for Assessment Year 2016-17 on 29 November 2016 declaring total income of Rs. 4,860,25,58,663. The assessment was completed under Section 143(3) of the Income Tax Act, 1961, assessing total income at Rs. 5,163,85,46,552. Subsequently, the petitioner received a notice dated 27 March 2021 under Section 148 of the Act, stating that there were reasons to believe that income chargeable to tax had escaped assessment within the meaning of Section 147. The reasons for reopening, provided to the petitioner on 17 February 2021, indicated that the assessee had claimed year-end provisions for unascertained liabilities amounting to Rs. 89,17,26,682 under the head 'Advertisement and Publicity' and 'Export Markets'. The petitioner challenged the notice by way of a writ petition before the Bombay High Court. The main legal issue was whether the reopening of assessment beyond four years from the end of the relevant assessment year was valid, given that the original assessment was completed under Section 143(3) and there was no failure on the part of the assessee to disclose fully and truly all material facts. The petitioner argued that the reopening was based on a mere change of opinion and that all material facts had been disclosed during the original assessment. The Revenue contended that the assessee had not made full and true disclosure. The Court analyzed the proviso to Section 147, which bars reopening after four years unless there is a failure to disclose material facts. The Court noted that the original assessment was under Section 143(3), which involves a thorough scrutiny, and that the Assessing Officer had examined the claim of provisions during the original assessment. The Court found that the reasons to reopen were based on the same material already considered, amounting to a change of opinion. The Court held that the assessee had made full and true disclosure of all material facts, and therefore, the condition precedent for reopening beyond four years was not satisfied. Consequently, the Court quashed the notice under Section 148 and the reassessment proceedings.
Headnote
A) Income Tax - Reassessment - Section 147, 148, 143(3) of Income Tax Act, 1961 - Reopening Beyond Four Years - The assessee, a company, filed its return for AY 2016-17 which was assessed under Section 143(3). Thereafter, a notice under Section 148 was issued beyond four years seeking to reopen the assessment on the ground that the assessee had claimed provisions for unascertained liabilities. The Court held that since the original assessment was under Section 143(3) and there was no allegation of failure to disclose material facts, the proviso to Section 147 barred reopening. The reasons to believe were based on the same material already considered, amounting to a change of opinion. The notice was quashed. (Paras 1-14) B) Income Tax - Full and True Disclosure - Section 147 proviso of Income Tax Act, 1961 - The Court held that the assessee had made full and true disclosure of all material facts in the return and during assessment proceedings. The Assessing Officer had examined the claim of provisions during the original assessment. Therefore, the condition precedent for reopening beyond four years was not satisfied. (Paras 8-12)
Issue of Consideration
Whether the notice under Section 148 of the Income Tax Act, 1961 for reopening assessment beyond four years from the end of the relevant assessment year is valid when the original assessment was completed under Section 143(3) and there was no failure on the part of the assessee to disclose fully and truly all material facts.
Final Decision
The Court allowed the writ petition and quashed the notice dated 27 March 2021 under Section 148 of the Income Tax Act, 1961 and the reassessment proceedings.
Law Points
- Reassessment beyond four years requires failure to disclose material facts
- Section 147 proviso
- Section 148 notice
- Section 143(3) assessment
- full and true disclosure
- reasons to believe
- change of opinion
