Case Note & Summary
The petitioner, Astec LifeSciences Ltd., is engaged in the business of manufacturing and trading of agrochemicals and pharmaceutical intermediates. With effect from 6th November 2015, the petitioner was acquired by the Godrej Group. The matter pertains to Assessment Year 2013-2014. The petitioner filed its return of income on 30th September 2013 declaring nil income under regular provisions of the Income Tax Act, 1961 on account of losses, and paid tax on book profit under Section 115JB. In the computation of income, the petitioner claimed a deduction under Section 35 of the Act amounting to Rs.2,26,96,494/-. In the ITR Form 6, the petitioner disclosed R&D expenses of Rs.47,11,129/- and loss on sale of asset of Rs.8,73,445/- in Part A-P&L, Item 38, and provision for bad and doubtful debts of Rs.15,64,902/- in Item 40. In Part B, Schedule BP, Item 26, the petitioner claimed a sum of Rs.2,26,96,494/- as deduction under Section 35 in excess of the amount debited to P&L account. In Schedule ESR, relating to deduction under Section 35, the petitioner disclosed its claim of deduction under Section 35 amounting to Rs.2,74,07,623/- and disclosed that out of the total claim, Rs.2,26,96,494/- was in excess of the amount debited to P&L account. The assessment was completed under Section 143(3) of the Act on 30th December 2015, accepting the returned income. Subsequently, on 23rd March 2021, the Assessing Officer issued a notice under Section 148 of the Act seeking to reopen the assessment on the ground that the petitioner had claimed deduction under Section 35 in excess of the amount debited to the profit and loss account, and that the petitioner had not disclosed full and true material facts. The petitioner filed objections, which were disposed of by an order dated 18th January 2022. The petitioner challenged the notice and the order disposing of objections before the High Court. The court considered whether the reopening notice was valid. The court held that the petitioner had made full and true disclosure of all material facts in the return of income, including the claim for deduction under Section 35. The court noted that the Assessing Officer had not formed a reasonable belief of escapement of income and that the reopening was based on a change of opinion, as the assessment had been completed after scrutiny. The court quashed the notice and the order disposing of objections.
Headnote
A) Income Tax - Reopening of Assessment - Section 148 of the Income Tax Act, 1961 - Validity of Notice - The court considered whether the reopening notice was valid when the petitioner had disclosed all material facts in its return of income. The court held that the notice was invalid as the Assessing Officer did not form a reasonable belief of escapement of income and the reopening was based on a change of opinion. (Paras 1-21) B) Income Tax - Full and True Disclosure - Section 148 of the Income Tax Act, 1961 - Duty of Assessee - The court examined whether the petitioner had made full and true disclosure of material facts. The court held that the petitioner had disclosed all relevant details in the return of income, including R&D expenses and deduction under Section 35, and therefore the reopening was not justified. (Paras 3-15) C) Income Tax - Change of Opinion - Section 147 of the Income Tax Act, 1961 - Reopening After Scrutiny Assessment - The court considered whether the reopening was based on a change of opinion. The court held that since the assessment had been completed under Section 143(3) after scrutiny, the reopening on the same issue without fresh material amounted to a change of opinion and was impermissible. (Paras 16-21)
Issue of Consideration
Whether the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment for Assessment Year 2013-2014 was valid when the petitioner had disclosed all material facts in its return of income and the Assessing Officer had not formed a reasonable belief of escapement of income.
Final Decision
The court allowed the writ petition and quashed the notice dated 23rd March 2021 under Section 148 of the Income Tax Act, 1961 and the order dated 18th January 2022 disposing of the petitioner's objections.
Law Points
- Reopening of assessment
- Section 148
- Income Tax Act
- 1961
- Full and true disclosure
- Escapement of income
- Change of opinion
- Section 35 deduction
- R&D expenses
