Wp/3284/2019 Of Asian Paints Ltd v. Assistant Commissioner Of Income Tax Ltu-2 And 2 Ors

GAURIAMITGAEKWAD Digitally signedby GAURIAMITGAEKWADDate:2021.11.1510:37:46+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3284 OF 2019 Asian Paints Limited ….Petitioner V/s. Assistant Commissioner of Income Tax LTU-2 and Ors. ….Respondents ---- Mr. Madhur Agrawal i/b. Mr. Atul K. Jasani for petitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM &AMIT B. BORKAR, JJ. DATED : 29[th] OCTOBER 2021 AMIT B. BORKAR, JJ. P.C. : 1At the outset, we have to note that no reply is filed byrespondents though on 6[th] December 2019 (almost two years ago) time wasgranted upto 11[th] February 2020 to file reply. We were not inclined to grantany further time. 2Petitioner is impugning a notice dated 13[th] March 2019 andorder dated 5[th] November 2019 on the ground that the notice issued underSection 148 of the Income Tax Act (the said Act) itself was withoutjurisdiction. 3Admittedly, respondents have decided to reopen the assessment four years after the assessment order and therefore, the proviso underSection 147 (2) will be applicable. Section 147 reads as under : Section 147 : Income escaping assessment. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessmentyear, he may, subject to the provisions of sections 148 to 153,assess or reassess such income and also any other incomechargeable to tax which has escaped assessment and whichcomes to his notice subsequently in the course of theproceedings under this section, or recompute the loss or thedepreciation allowance or any other allowance, as the casemay be, for the assessment year concerned (hereinafter inthis section and in sections 148 to 153 referred to as therelevant assessment year ) : Provided that where an assessment under sub-section (3) ofsection 143 or this section has been made for the relevantassessment year, no action shall be taken under this sectionafter the expiry of four years from the end of the relevantassessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure on the part of the assessee to make a return undersection 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fullyand truly all material facts necessary for his assessment, forthat assessment year. 4The reasons recorded for reopening for Assessment Year 2012- 2013 are as under : 5According to respondents, petitioner had incurred expensesof Rs.8,15,48,504/- under the head “colour idea concept” inAssessment Year 2012-2013 and debited it to P&L accountRs.3,38,59,00,000/- under the head “advertisement and salespromotion expenses” which includes “colour idea concept” expenses of Rs.8,15,48,504/-. According to respondents, during the assessmentproceedings petitioner had not submitted the bifurcated details ofexpenses debited to P&L accounts for Rs.3,38,59,00,000/- under thehead “advertisement and sales promotion expenses” which includes“colour idea concept” expenses of Rs.8,15,48,504/-. Hence, petitionerhad not disclosed all fully and truly material facts necessary for theassessment. Admittedly, the assessment was completed under Section143 (3) read with Section 144C (3) of the said Act, 1961 on 25[th] April 2016. 6On the allegation that petitioner had not fully and trulydisclosed material facts, this allegation according to us is far from truth.Respondents, by a notice dated 17[th] April 2015 issued under Section 142(1)of the said Act had called upon petitioner to furnish details, explanation and documents for 53 items mentioned in the annexure. Item 11 reads asunder : 11. Party wise details with complete address of all persons towhom advertisement and sales promotion expenses paid andpurpose of its payment. Also furnish details of TDS deductedon these payments. 6On the allegation that petitioner had not fully and trulydisclosed material facts, this allegation according to us is far from truth.Respondents, by a notice dated 17[th] April 2015 issued under Section 142(1)of the said Act had called upon petitioner to furnish details, explanation and documents for 53 items mentioned in the annexure. Item 11 reads asunder : 11. Party wise details with complete address of all persons towhom advertisement and sales promotion expenses paid andpurpose of its payment. Also furnish details of TDS deductedon these payments. 7By its letter dated 11[th] May 2015, petitioner submitted anexhaustive response with 51 annexures. In the response, petitioner hasprovided details of advertisement and sales promotion expenses includingdocuments and break up to respondents. Therefore, to allege that petitioner had failed to disclose all fully and truly material facts necessary for theassessment, not having submitted a bifurcated details of expenses, debited itto P&L accounts for Rs.3,38,59,00,000/- under the head “advertisement andsales promotion expenses” is incorrect. 8To confer jurisdiction under Section 147 where assessment issought to be reopened after four years from the end of the relevantassessment year, two conditions were required to be satisfied, firstly theAssessing Officer must have reasons to believe that income, profits or gainschargeable to income tax has escaped assessment, and secondly he mustalso have reason to believe that such escapement has occurred by reason ofeither omission or failure on the part of the assessee to disclose fully or trulyall material facts necessary for his assessment of that year. Both theseconditions have to be satisfied before the Assessing Officer could assumejurisdiction for issue of notice under Section 148 read with Section 147,where the assessment is being reopened after the expiry of a period of fouryears from the end of the relevant year. In this case, as we have held that theallegation in the reasons recorded for reopening that petitioner has notdisclosed all fully and truly material facts necessary for the assessment isincorrect, one of the condition for reopening the assessment before theAssessing Officer could assume jurisdiction for issuing notice under Section148 has not been satisfied. On this ground alone, it can be concluded that the notice is issued without jurisdiction. 9The tangible material to initiate assessment proceedings, asstated in the reasons for reopening, is an agreement dated 6[th] March 2014post the period with which the impugned notice is concerned. When thereopening for the Assessment year 2011-2012 was challenged in this Court,this Court, on identical facts, in its order dated 17[th] January 2019 in WritPetition No.3338 of 2018, while setting aside the notice issued underSection 148, held that an agreement post the period with which theimpugned notice is concerned by itself could not form the basis for theAssessing Officer to have come to a reasonable belief that income chargeableto tax has escaped assessment for the subject assessment year 2011-2012. Paragraph 12 of the said order reads as under : the notice is issued without jurisdiction. 9The tangible material to initiate assessment proceedings, asstated in the reasons for reopening, is an agreement dated 6[th] March 2014post the period with which the impugned notice is concerned. When thereopening for the Assessment year 2011-2012 was challenged in this Court,this Court, on identical facts, in its order dated 17[th] January 2019 in WritPetition No.3338 of 2018, while setting aside the notice issued underSection 148, held that an agreement post the period with which theimpugned notice is concerned by itself could not form the basis for theAssessing Officer to have come to a reasonable belief that income chargeableto tax has escaped assessment for the subject assessment year 2011-2012. Paragraph 12 of the said order reads as under : 12. Besides, we do note that the Assessing Officer is entitledto rely upon the order passed in assessment proceedings forthe subsequent year, as tangible material to initiatereassessment proceedings. However, the tangible material soobtained must be processed i.e. its applicability to theassessee for the subject assessment year is to be examined soas to form a reasonable belief that income chargeable to taxhas escaped assessment. The tangible material in theassessment order for A.Y. 201516 was the agreement dated6th March, 2014. This is an agreement post the period withwhich the impugned notice is concerned. This, by itself couldnot form the basis for the Assessing Officer to have come to areasonable belief that income chargeable to tax has escapedassessment for the subject assessment year 201112. Thus, inthese facts, the Assessing Officer has not himself come to thereasonable belief that income chargeable to tax has escapedassessment Therefore, on this ground also the impugnednotice is unsustainable. We are in respectful agreement with the view expressed by theCourt in Writ Petition No.3338 of 2018 and apply the same principle in thecase at hand. 10Even in that case, the Court observed that the allegation offailure to disclose all fully and truly material facts necessary for assessmentalso was not correct and even in that case and we add, in the case at hand,there is a change of opinion and an attempt to review the assessment order. Paragraphs 10 and 11 of the said order read as under : 10. As noted above, the impugned notice dated 28th March,2018 for reopening of assessment has been issued beyond theperiod of 4 years from the end of the relevant assessmentyear i.e. AY 201112 in respect of assessment completed underSection 143(3) of the Act. Thus, the first proviso to Section147 of the Act would clearly arise for consideration andapplication, if there has been no failure on the part of thepetitioner assessee to disclose fully and truly all material factsnecessary for assessment. In the present facts, we note that inits return of income the petitioner had claimed theexpenditure incurred on “Colour Idea Stores” as a part of itsAdvertisement and Sales Promotion expenses. During theregular assessment proceedings under Section 143(3) of theAct, the Assessing Officer had occasion to examine thepetitioner's claim for expenses in respect of “Colour IdeaStore” as a part of its advertisement and sales promotionexpenses. Thus, there was a complete disclosure of allprimary material facts on the part of the petitioner. (SeeCalcutta Discount Co. Vs. ITO, 41 ITR 191). Therefore, nofailure to disclose all fully and truly material facts necessaryfor assessment. Thus, on the above ground itself theimpugned notice is hit by the proviso to Section 147 of theAct and is without jurisdiction. 11. In any case, the application of mind to these facts on thepart of the Assessing Officer can be inferred from the fact thatthe statement constituting the breakup of the totalexpenditure incurred on sales and promotions was consideredin the assessment order as some of the expenses forming partof the breakup of sales and promotions expenses had beendisallowed in the assessment order dated 18th March, 2015 11. In any case, the application of mind to these facts on thepart of the Assessing Officer can be inferred from the fact thatthe statement constituting the breakup of the totalexpenditure incurred on sales and promotions was consideredin the assessment order as some of the expenses forming partof the breakup of sales and promotions expenses had beendisallowed in the assessment order dated 18th March, 2015 passed under Section 143(3) of the Act. This would clearlyindicate that the impugned notice has been issued on accountof change of opinion and it is an attempt to review theAssessment Order dated 18[th] March, 2015 passed underSection 143(3) of the Act. 11In the circumstances, the impugned notice is quashed as being without jurisdiction. 12Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)