TaxTMI 
TaxTMI 
2025 (7) TMI 258
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....me Tax Act, 1961 (for short "IT Act"). 2. Writ Petition No. 1752 of 2022 challenges the legality and validity of the impugned Notice dated 23rd March 2021 issued under Section 148 of the IT Act for AY 2013-14. Additionally, the Petitioner also challenges the impugned Order dated 17th February 2022 rejecting the objections filed by the Petitioner to the validity of the impugned Notice dated 23rd March 2021. The reasons given in the impugned Notice for reopening the assessment of the Petitioner for the AY 2013-14 was that the Assessee (the Petitioner) had claimed exemption under Section 10(34) of the IT Act of Rs. 179.44 crores on account of dividend income. Out of this total income claimed as exempt, an amount of Rs. 37.10 crores was on account of receipts from an entity called the Bharat Petroleum Corporation Ltd. Trust for Investment in Shares (for short the "BPCL Trust" or "KRL Trust"). It was observed that the said Trust was formed through a merger of Kochi Refineries Ltd. with the Petitioner in the year 2006-07, and the sole beneficiary of the Trust was the Petitioner. Pursuant to this merger, 3,37,28,737 equity shares of the Petitioner were allotted to the said Trust.  ....
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....erial facts necessary for assessment of that year. 4. To put it in a nutshell, for AY 2013-14, according to the Assessing Officer (1st Respondent), income to the extent of Rs. 37.10 crores [received from the BPCL Trust] had escaped assessment, and for AY 2014-15 income of Rs.201.59 crores [consisting of (a) Rs. 74.20 crores received from the BPCL Trust and (b) Rs. 127.39 crores by wrongly claiming a deduction under Section 32AC] had escaped assessment. 5. Since the facts in both the Petitions are almost identical, save and except that one additional ground is taken for reopening the assessment for AY 2014-15 [the subject matter of Writ Petition No. 2966 of 2022], we shall briefly set out the facts from Writ Petition No. 1752 of 2022 (relating to AY 2013-14). WRIT PETITION NO. 1752 OF 2022 6. The Petitioner is a Company engaged in the business of refining of crude oil and marketing of petroleum and petrochemical products and lubricants and is a regular Assessee under the IT Act. Respondent No. 1 is the Assistant Commissioner of Income Tax, who has been vested with the powers under the IT Act to assess the income of the Petitioner and who has issued the impugned Notice [d....
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....Return of Income, the dividend income of Rs. 179.44 crores as well as the payment of dividend distribution tax was disclosed. On 4th September 2014, a Notice under Section 143(2) of the IT Act was issued to the Petitioner. In the said Notice, Respondent No. 1 sought various details from the Petitioner such as the Balance-sheet, Profit and Loss Account with the relevant Annexures in the Schedule, Tax Audit Report, computation of income etc. 9. Pursuant to this Notice, on 23rd September 2014, the Petitioner furnished various details such as the Annual Report for the previous year 2012-13, disclosures with respect to the investment in KRL Trust as well as disclosures with reference to the income received from the said Trust. On 2nd December 2016, the Petitioner also, in connection with dis-allowance under Section 14A of the IT Act, provided details of investments, which yielded exempt income. After considering the details furnished by the Petitioner during the course of assessment proceedings, Respondent No. 1 passed an Assessment Order under Section 143(3) dated 30th January 2017 assessing the total income of the Petitioner at Rs. 3,652.83 crores. In paragraph 5.1 of the Assessmen....
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....ficiary of the KRL Trust. (g) As per provisions of Section 115-O(4) of the Act, after having discharged the liability to pay dividend distribution tax, the same dividend cannot again be subjected to tax. (h) Respondent No. 1 was requested to pass a speaking order in accordance with the decision in GKN Driveshafts (India) Ltd. [259 ITR 19 (SC)] and, thereafter, to wait for a period of four weeks as per the decision of this Hon'ble Court in Asian Paints vs. Dy. CIT [296 ITR 90]. 12. The Petitioner, thereafter, filed a letter dated 29th June 2021 requesting Respondent No. 1 to provide the original copy of the reasons recorded since the same had not been provided along with the letter dated 13th May 2021. According to the Petitioner, the said request has not yet been complied with by Respondent No. 1 till date. 13. By the impugned order dated 17th February 2022, Respondent No. 1 rejected the objections raised by the Petitioner, and a Notice dated 18th February 2022 was issued by Respondent No. 1 under Section 143(2) r/w Section 147 of the IT Act. Being aggrieved by the unlawful reopening of the assessment by the 1st Respondent in issuing the impugned Notice date....
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....stri submitted that this apart, it is clear from the Assessment Order dated 30th January 2017 that the Assessing Officer applied his mind to the fact that Rs. 37.10 crores was received by the Petitioner from the BPCL Trust, and which was claimed by the Petitioner as exempt income. It is on this basis that the Assessing Officer thereafter invoked the provisions of Section 14A r/w Rule 8D and deducted the expenditure incurred in relation to income which was exempted. Once this is the case, it is abundantly clear that all material facts in relation to the income received from the BPCL Trust by the Petitioner were fully and truly disclosed at the time of the earlier assessment proceedings, and which culminated in the Assessment Order dated 30th January 2017 passed under Section 143(3) of the IT Act. Once this was the factual scenario, the 1st Respondent lacked jurisdiction to reopen the assessment for AY 2013-14 and issue a Notice under Section 148, was the submission. 16. In support of the aforesaid submission, Mr. Mistri relied upon the following decisions:- (a) Ananta Landmark (P) Ltd. Vs. DCIT [2021] 439 ITR 168 (Bombay) (b) Hindustan Lever Ltd. Vs. R.B. Wadkar....
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.... this regard, he submitted that the BPCL Trust is entitled to claim exemption under Section 10(34) of the Act, since the dividend received by the BPCL Trust satisfies the criteria (of income by way of dividend referred to in Section 115-O) as provided under the IT Act. The Petitioner, being the sole beneficiary of the BPCL Trust, must be assessed in the like manner and to the same extent as the BPCL Trust, as per the provisions of Section 161(1) of the IT Act. Once this is the case, and it cannot be disputed that the dividend income in the hands of the Trust (for the relevant assessment years) was exempt under Section 10(34), then, by virtue of the provisions of Section 161(1), the same could not be brought to tax in the hands of the Petitioner. In any event, the dividend received by the Trust was exempt under Section 10(34), and the same being passed on by the Trust to its beneficiary (the Petitioner), is simply post tax income of the Trust being transferred to its beneficiary in accordance with the terms of the Trust. This being the case, it can, in any event, never be treated as income in the hands of the Petitioner (the beneficiary). According to Mr. Mistri, this proposition ha....
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.... the impugned Notice issued under Section 148 is also invalid on that count. For all the aforesaid reasons Mr. Mistri submitted that the impugned Notice as well as the impugned Order [for AY 2013-14] are invalid and ought to be quashed and set aside. 21. On the other hand, Mr. Sharma, the learned Counsel appearing on behalf of the Respondent Nos. 1 to 3, supported the issuance of the impugned Notice and the passing of the impugned Order rejecting the objections to the validity of the said Notice. He submitted that the main issue for reopening the assessment in the Petitioner's case was the allowance of inadmissible exemption of dividend income received from the BPCL Trust. The allowance of such inadmissible exemption was pointed out by the Revenue Audit party vide its LAR No. 1644-1647 dated 13th December 2017. In the Revenue Audit, it was pointed out that as per Section 10(34) of the IT Act, in computing the total income of any person, any income by way of dividend referred to in Section 115-O of the IT Act was not required to be included. However, Section 115-O was applicable to domestic companies only. Since the BPCL Trust was not a company, Section 115-O was not applicab....
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.... that income chargeable to tax has escaped assessment. FINDINGS AND CONCLUSIONS: 24. We have heard learned Counsel for the parties at length. We have also perused the papers and proceedings in both the above Writ Petitions. Section 147 of the IT Act inter alia provides that if the Assessing Officer has reason to believe that any income 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. In such a situation, the said section further empowers the Assessing Officer to recompute the loss or the depreciation allowances or any other allowances, as the case may be. The first proviso to Section 147, and which is important for our purposes, reads as under:- "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....
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....aking following additions / disallowances. S.N. Particulars Amount (in Rs.) 1 Transfer Pricing Addition 2,53,20,865 2 Additional disallowance u/s 14A 104,65,91,381 3 Capital expenditure charged to revenue A/c 2,59,74,118 4 Adjustment for scientific research expenditure as per DSIR 40,56,615 5 Disallowance of depreciation on right of way 8,98,15,282 2. On perusal of the records of the relevant assessment year, it is observed that the assessee has claimed exemption u/s 10(34) of the Act of Rs. 179,44,45,078/- on account dividend income. It is seen that out of total income claimed as exempt dividend income by the assessee, an amount of Rs. 37.10 crore is on account of receipt from BPCL Trust. This is treated as exempt dividend income by the assessee. According to the notes to accounts, the said trust is formed through merger of Kochi Refineries Ltd., Kochi (KRL) with BPCL (approved by the Government of India) for the benefit of the corporation in the year 2006-07. It was also stated that on merger, 33728737 equity shares of the BPCL were allotted to the trust in lieu of shares held by the Corporation in the erstwhile KRL. ....
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....t of the Petitioner to disclose fully and truly all material facts necessary for its assessment. However, we find that merely making this bald assertion is not enough. It is now well settled that reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible, and no addition can be made to those reasons. Further, no inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to reach the conclusion as to whether there was a failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment for the concerned assessment year. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on the material on record. What is important is that he must disclose in the reasons as to which fact or material was not disclosed by the Assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and the evidence. That vital link is a safeguard against the arbitrary reopening of a concluded assessment. The aforesaid proposition has been laid down by a....
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..... The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced." (emphasis supplied) 29. In the present case, admittedly there are no details given by the Assessing Officer (the 1st Respondent) as to which fact or material was not disclosed by the Petitioner that led to its income escaping assessment. There is merely a bald assertion in the reasons that there was a failure on the part of the Petitioner to disclose fully and truly all material facts, without giving any details the....
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.... on tax free securities. It is, therefore, clear that the Assessing Officer in the scrutiny proceedings was very much aware that income from KRL Trust was received by the Petitioner and which was claimed as exempt. The Assessing Officer, therefore, proceeded to apply Section 14A r/w Rule 8D and disallowed an amount of Rs.104.65 crores under Section 14A r/w Rule 8D of the Income Tax Act and Rules respectively. What is important to note is that while doing the calculation under Section 14A, the Assessing Officer specifically takes a note of the investment in the BPCL Trust at page 201. Once we look at all these facts, we are clearly of the view that there was no failure to disclose fully and truly all material facts in relation to AY 2013-14, which would invest the 1st Respondent with the jurisdiction to initiate reassessment proceedings under Sections 147 and 148 of the IT Act. Considering this, we do not feel the necessity to burden this judgment with the decisions relied upon by Mr. Mistri on this aspect. It is suffice to state that these decisions clearly lay down that where scrutiny assessments are done [under section 143(3)] and more than 4 years have elapsed from the end of th....
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....those Sections 147 and 148 of the Income Tax Act, 1961, the points of departure from the old law are not material for the purpose of this case. The position is stated in Calcutta Discount Company case (supra) as follows: "In every assessment proceeding the assessing authority will for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences. ......... Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee - to tell the assessing authority what inferences, whether of fa....
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....ns for reopening the assessment for AY 2015-16 in relation to the income received from the BPCL Trust are concerned, it is common ground before us that the facts are almost identical as in relation to AY 2013-14 and which has been dealt with by us earlier. Hence, in this Writ Petition all we have to consider is whether the Assessing Officer was justified in reopening the assessment on the ground that the Petitioner had wrongly claimed a deduction under Section 32AC of the IT Act in the sum of Rs. 127,39,45,494/-. If the answer to this question is in the affirmative, then, naturally the impugned Notice and the impugned order would be sustainable notwithstanding the fact that the reasons for reopening the assessment on the ground of wrongly claiming the exemption for income received from the BPCL Trust is unsustainable. This is because a reopening Notice can be sustained on any ground mentioned in the reasons for issuance of the Notice. We must mention here that for this assessment year also the first proviso to Section 147 of the IT Act would be attracted, namely, that the reassessment proceedings have to be initiated because there has been an escapement of income on account of the ....
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....sed either within or outside India by any other person; • any plant and machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; • any office appliances including computers or computer software; • any vehicle; • ship or aircraft; or • any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profits and gains of business or profession' of any previous year. 3.4 The section 32AC of the Act uses the phrase 'plant and machinery' together. The words 'plant' and 'machinery' are joined together by 'and'. Thus requirement of both these words cannot be seen fulfilled even if either of the two is only fulfilled. The Hon'ble Apex Court had the occasion to lay down the meaning of plant and machinery or more specifically 'plant' in State of Bihar v. Steel City Beverages Ltd. The Hon'ble Court held that, It also appears that the rule-making authority did not intend 'plant' to mean what is not a fixed asset. For all ....
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....to be reopened u/s. 147 of the Act for A.Y. 2014-15." (emphasis supplied) 35. As can be seen from the aforesaid reproduction, the Assessing Officer, in fact, refers to the Submission dated 7th December 2016 which was given by the Petitioner - Assessee to the Assessing Officer in the original proceedings under Section 143(3) of the IT Act. This submission, in fact, categorically draws the attention of the Assessing Officer to investment allowance under Section 32AC of the Act. It is specifically stated by the Assessee that Investment allowance has been claimed on assets acquired and installed during the Finance Year 2013-14 relevant to AY 2014-15. The total value of the eligible assets is mentioned as Rs. 2109.51 crores on which investment allowance @ 15% is claimed of Rs.316.42 crores. The details of the assets acquired and installed [more than Rs. 10 lakhs] was also enclosed with the aforesaid submission as Annexure-4. Annexure 4 can be found starting at page 221 of the paper book, and so far as the LPG Cylinders are concerned, the relevant portion is at page 234. In fact, this is the very Annexure [in the submission], that the 1st Respondent, in the reasons for reopen....