Relief to Asian Paints: Supreme Court upholds Bombay HC's Decision to Quash Reassessment Proceedings; Dismisses SLPs of Income Tax Dept [Read Order]

The Supreme Court, in favour of Asian Paints, has affirmed the Bombay High Court's ruling, which invalidated the reassessment proceedings initiated against the company. The bench has rejected the Special Leave Petitions (SLPs) filed by the Income Tax Department.

The company-Asian paints (herein the Respondent), a public limited company engaged inter-alia in the business of manufacturing and selling of paints, varnish, primer etc., filed a Writ Petition before the Bombay High Court against the impugned notice initiated under Section 148 of the Income Tax Act, 1961.

The High Court observed that during the scrutiny assessment, the Assessing Officer (AO) had requested information regarding advertising and sales promotion expenses, which the petitioner duly provided on October 17, 2016. In the final assessment order, the AO did disallow certain expenses listed under the "details of advertising and sales promotion expenses."

This clearly demonstrated that the AO had taken into consideration the petitioner's claims during the assessment process under section 143(3) of the Income Tax Act. The reasons provided for initiating the reassessment did not identify any undisclosed material or facts on the part of the assessee. Consequently, it is not justified to conclude that the petitioner failed to fully and honestly disclose the material and essential facts required for the assessment.

The Bombay High Court decided that “Be that as it may, the notice impugned does not satisfy the jurisdictional requirement of section 147 of the Act and, therefore, is held to be unsustainable, and is accordingly quashed.”

Aggrieved by the High Court’s decision, the Income Tax Dept filed the SLP before the Supreme Court.

Considering the decision of the Bombay High Court, bench of Justice Sanjiv Khanna and Justice Bhatti has stated that “There is a categorical finding by the High Court that full material facts with regard to the expenditure in question were placed by the assessee – Asian Paints Ltd. before the Assessing Officer during the course of the regular assessment proceedings. In view of the aforesaid, we do not find any merit in the present special leave petitions and the same are dismissed.”

To Read the full text of the Order CLICK HERE

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