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. By a communication dated 17 February 2021, the petitioner was provided the reasons for reopening, which stated 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 that this had resulted in under-assessment. The petitioner challenged the reassessment notice by way of a writ petition. The legal issues considered were whether the reopening was based on a mere change of opinion and whether the reasons disclosed any fresh tangible material. The petitioner argued that the issue of provision for unascertained liabilities was already examined and allowed in the original assessment, and the reopening was a change of opinion. The respondents contended that the provisions were not allowable and that the reopening was justified. The court analyzed the reasons and found that they merely reproduced the same issue without any new information. The court held that the reassessment notice was based on a mere change of opinion and lacked fresh tangible material, rendering it invalid. The court quashed the notice and allowed the petition.
Headnote
A) Income Tax - Reassessment - Section 148 of Income Tax Act, 1961 - Change of Opinion - The court considered whether reopening of assessment based on the same issue of provision for unascertained liabilities, which was already examined and allowed in the original assessment under Section 143(3), is valid. Held that the reassessment notice was based on a mere change of opinion and lacked fresh tangible material, rendering it invalid. (Paras 1-14) B) Income Tax - Provision for Unascertained Liabilities - Section 37 of Income Tax Act, 1961 - Allowability - The court examined the nature of provisions for advertising and publicity expenses claimed by the assessee. Held that such provisions for unascertained liabilities are allowable as business expenditure under Section 37, and the Assessing Officer had already examined and allowed them in the original assessment. (Paras 2-10) C) Income Tax - Reassessment - Section 147 of Income Tax Act, 1961 - Reasons to Believe - The court analyzed whether the reasons recorded for reopening disclosed any fresh tangible material. Held that the reasons merely reproduced the same issue without any new information, indicating a change of opinion, which is not permissible. (Paras 3-14)
Issue of Consideration
Whether the notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for AY 2016-17 was valid when based on the same issue of provision for unascertained liabilities already considered in the original assessment under Section 143(3).
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 for reopening assessment for AY 2016-17.
Law Points
- Reassessment notice under Section 148 of Income Tax Act
- 1961 cannot be issued based on mere change of opinion
- Reopening requires fresh tangible material
- Provision for unascertained liabilities is not income escaping assessment if already examined in original assessment
