Asian Paints Ltd. Vs Assistant Commissioner of Income Tax LTU-2 and 2 Ors.

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Digitally signed by GAURI GAURI AMIT GAEKWAD AMIT Date: GAEKWAD 2021.11.15 10:37:46 +0530

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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WRIT PETITION NO.3284 OF 2019

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Asian Paints Limited ….Petitioner

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 V/s.

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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.

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 ----
 CORAM : K.R. SHRIRAM &
AMIT B. BORKAR, JJ.
 DATED : 29th OCTOBER 2021

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P.C. :

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1At the outset, we have to note that no reply is filed by
respondents though on 6th December 2019 (almost two years ago) time was
granted upto 11th February 2020 to file reply. We were not inclined to grant
any further time.

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2Petitioner is impugning a notice dated 13th March 2019 and
order dated 5th November 2019 on the ground that the notice issued under
Section 148 of the Income Tax Act (the said Act) itself was without
jurisdiction.

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3Admittedly, respondents have decided to reopen the assessment
four years after the assessment order and therefore, the proviso under
Section 147 (2) will be applicable. Section 147 reads as under :

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Section 147 : Income escaping assessment.

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If the Assessing Officer has reason to believe that any income

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Gauri Gaekwad

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chargeable to tax has escaped assessment for any assessment
year, he may, subject to the provisions of sections 148 to 153,
assess or reassess such income and also any other income
chargeable to tax which has escaped assessment and which
comes to his notice subsequently in the course of the
proceedings under this section, or recompute the loss or the
depreciation allowance or any other allowance, as the case
may be, for the assessment year concerned (hereinafter in
this section and in sections 148 to 153 referred to as the
relevant assessment year ) :

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Provided that where an assessment under sub-section (3) of
section 143 or this section has been made for the relevant
assessment year, no action shall be taken under this section
after the expiry of four years from the end of the relevant
assessment year, unless any income chargeable to tax has
escaped assessment for such assessment year by reason of the
failure on the part of the assessee to make a return under
section 139 or in response to a notice issued under sub-
section (1) of section 142 or section 148 or to disclose fully
and truly all material facts necessary for his assessment, for
that assessment year.

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4 The reasons recorded for reopening for Assessment Year 2012-

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2013 are as under :

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Gauri Gaekwad

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5According to respondents, petitioner had incurred expenses
of Rs.8,15,48,504/- under the head “colour idea concept” in
Assessment Year 2012-2013 and debited it to P&L account
Rs.3,38,59,00,000/- under the head “advertisement and sales
promotion expenses” which includes “colour idea concept” expenses of

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Gauri Gaekwad

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Rs.8,15,48,504/-. According to respondents, during the assessment
proceedings petitioner had not submitted the bifurcated details of
expenses debited to P&L accounts for Rs.3,38,59,00,000/- under the
head “advertisement and sales promotion expenses” which includes
“colour idea concept” expenses of Rs.8,15,48,504/-. Hence, petitioner
had not disclosed all fully and truly material facts necessary for the
assessment. Admittedly, the assessment was completed under Section
143 (3) read with Section 144C (3) of the said Act, 1961 on 25th April 2016.

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6On the allegation that petitioner had not fully and truly
disclosed material facts, this allegation according to us is far from truth.
Respondents, by a notice dated 17th 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 as

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under :

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11. Party wise details with complete address of all persons to
whom advertisement and sales promotion expenses paid and
purpose of its payment. Also furnish details of TDS deducted
on these payments.

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7By its letter dated 11th May 2015, petitioner submitted an
exhaustive response with 51 annexures. In the response, petitioner has
provided details of advertisement and sales promotion expenses including
documents and break up to respondents. Therefore, to allege that petitioner

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Gauri Gaekwad

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had failed to disclose all fully and truly material facts necessary for the
assessment, not having submitted a bifurcated details of expenses, debited it
to P&L accounts for Rs.3,38,59,00,000/- under the head “advertisement and
sales promotion expenses” is incorrect.

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8To confer jurisdiction under Section 147 where assessment is
sought to be reopened after four years from the end of the relevant
assessment year, two conditions were required to be satisfied, firstly the
Assessing Officer must have reasons to believe that income, profits or gains
chargeable to income tax has escaped assessment, and secondly he must
also have reason to believe that such escapement has occurred by reason of
either omission or failure on the part of the assessee to disclose fully or truly
all material facts necessary for his assessment of that year. Both these
conditions have to be satisfied before the Assessing Officer could assume
jurisdiction for issue of notice under Section 148 read with Section 147,
where the assessment is being reopened after the expiry of a period of four
years from the end of the relevant year. In this case, as we have held that the
allegation in the reasons recorded for reopening that petitioner has not
disclosed all fully and truly material facts necessary for the assessment is
incorrect, one of the condition for reopening the assessment before the
Assessing Officer could assume jurisdiction for issuing notice under Section
148 has not been satisfied. On this ground alone, it can be concluded that

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Gauri Gaekwad

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the notice is issued without jurisdiction.

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9The tangible material to initiate assessment proceedings, as
stated in the reasons for reopening, is an agreement dated 6th March 2014
post the period with which the impugned notice is concerned. When the
reopening for the Assessment year 2011-2012 was challenged in this Court,
this Court, on identical facts, in its order dated 17th January 2019 in Writ
Petition No.3338 of 2018, while setting aside the notice issued under
Section 148, held that an agreement post the period with which the
impugned notice is concerned by itself could not form the basis for the
Assessing Officer to have come to a reasonable belief that income chargeable
to tax has escaped assessment for the subject assessment year 2011-2012.
Paragraph 12 of the said order reads as under :

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12. Besides, we do note that the Assessing Officer is entitled
to rely upon the order passed in assessment proceedings for
the subsequent year, as tangible material to initiate
reassessment proceedings. However, the tangible material so
obtained must be processed i.e. its applicability to the
assessee for the subject assessment year is to be examined so
as to form a reasonable belief that income chargeable to tax
has escaped assessment. The tangible material in the
assessment order for A.Y. 201516 was the agreement dated
6th March, 2014. This is an agreement post the period with
which the impugned notice is concerned. This, by itself could
not form the basis for the Assessing Officer to have come to a
reasonable belief that income chargeable to tax has escaped
assessment for the subject assessment year 201112. Thus, in
these facts, the Assessing Officer has not himself come to the
reasonable belief that income chargeable to tax has escaped
assessment Therefore, on this ground also the impugned
notice is unsustainable.

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Gauri Gaekwad

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We are in respectful agreement with the view expressed by the
Court in Writ Petition No.3338 of 2018 and apply the same principle in the
case at hand.

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10Even in that case, the Court observed that the allegation of
failure to disclose all fully and truly material facts necessary for assessment
also 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 :

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10. As noted above, the impugned notice dated 28th March,
2018 for reopening of assessment has been issued beyond the
period of 4 years from the end of the relevant assessment
year i.e. AY 201112 in respect of assessment completed under
Section 143(3) of the Act. Thus, the first proviso to Section
147 of the Act would clearly arise for consideration and
application, if there has been no failure on the part of the
petitioner assessee to disclose fully and truly all material facts
necessary for assessment. In the present facts, we note that in
its return of income the petitioner had claimed the
expenditure incurred on “Colour Idea Stores” as a part of its
Advertisement and Sales Promotion expenses. During the
regular assessment proceedings under Section 143(3) of the
Act, the Assessing Officer had occasion to examine the
petitioner's claim for expenses in respect of “Colour Idea
Store” as a part of its advertisement and sales promotion
expenses. Thus, there was a complete disclosure of all
primary material facts on the part of the petitioner. (See
Calcutta Discount Co. Vs. ITO, 41 ITR 191). Therefore, no
failure to disclose all fully and truly material facts necessary
for assessment. Thus, on the above ground itself the
impugned notice is hit by the proviso to Section 147 of the
Act and is without jurisdiction.

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11. In any case, the application of mind to these facts on the
part of the Assessing Officer can be inferred from the fact that
the statement constituting the breakup of the total
expenditure incurred on sales and promotions was considered
in the assessment order as some of the expenses forming part
of the breakup of sales and promotions expenses had been
disallowed in the assessment order dated 18th March, 2015

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Gauri Gaekwad

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passed under Section 143(3) of the Act. This would clearly
indicate that the impugned notice has been issued on account
of change of opinion and it is an attempt to review the
Assessment Order dated 18th March, 2015 passed under
Section 143(3) of the Act.

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11In the circumstances, the impugned notice is quashed as being

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without jurisdiction.

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12 Petition disposed.

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(AMIT B. BORKAR, J.)

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(K.R. SHRIRAM, J.)

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Gauri Gaekwad

Asian Paints Ltd. v. Assistant Commissioner of Income Tax LTU-2 and 2 Ors.

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Asian Paints Ltd. v. Assistant Commissioner of Income Tax LTU-2 and 2 Ors.

Case brief

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