Reassessment validity and site restoration deduction fail on time-bar, procedural defects, and ascertained contractual liability principles.

Reassessment under section 147 for the assessment year 1999-2000 was invalid because it was initiated after expiry of time and the record did not disclose a valid basis or proper reassessment compliance, including service of reasons and notice; the reassessment was therefore quashed. Provision for site restoration expenditure was allowable as an ascertainable liability under section 37(1) because the obligation arose from the production sharing contract and formed part of petroleum operations; the corresponding profit and loss account could not be disturbed beyond the limited adjustments permitted under section 115JA, so the Revenue's challenge on MAT treatment also failed. The assessee succeeded on both issues.

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Issues: (i) Whether the reassessment for the assessment year 1999-2000 was valid under section 147 of the Income-tax Act, 1961. (ii) Whether provision for site restoration expenditure was allowable as a deduction under section 37(1) of the Income-tax Act, 1961 and whether it could be excluded from adjustment while computing book profits under section 115JA of the Income-tax Act, 1961.

Issue (i): Whether the reassessment for the assessment year 1999-2000 was valid under section 147 of the Income-tax Act, 1961.

Analysis: The reassessment was initiated after the expiry of time, and the record did not show a valid basis to sustain reopening. The proceedings were also linked to the absence of proper compliance with the reassessment procedure, including service of reasons and notice. In the absence of a valid justification for reopening, the reassessment could not be sustained.

Conclusion: The reassessment was invalid and the issue was decided in favour of the assessee.

Issue (ii): Whether provision for site restoration expenditure was allowable as a deduction under section 37(1) of the Income-tax Act, 1961 and whether it could be excluded from adjustment while computing book profits under section 115JA of the Income-tax Act, 1961.

Analysis: The site restoration obligation arose from the production sharing contract and formed part of petroleum operations. The liability was treated as an ascertained liability, and the profit and loss account prepared in accordance with the Companies Act could not be disturbed except to the extent permitted by the Explanation to the MAT provision. The Tribunal's view that the expenditure could be considered only under section 115JA was held to be incorrect, and the assessee's claim for deduction under the normal business provision was upheld.

Conclusion: The provision for site restoration expenditure was allowable in favour of the assessee, and the Revenue's challenge to the MAT treatment also failed.

Final Conclusion: The Revenue's appeals failed in entirety, the reassessment for the earlier year was quashed, and the assessee's entitlement to deduction for site restoration expenditure was upheld.

Ratio Decidendi: A reopening under section 147 cannot stand without a valid and timely basis, and a contractual site-restoration liability that is ascertained and reflected in the accounts cannot be denied merely by treating it as outside the ordinary business deduction framework or by disturbing the profit and loss account beyond the limited MAT adjustments permitted by law.

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