Relief to Castrol India: Bombay HC quashes Reassessment Proceedings Initiated on change of Opinion [Read Order]

In a major relief to Castrol India, the Bombay High Court quashed re-assessment proceedings initiated on change of opinion.

The petitioner assailed notice issued under Section 148 of the Income Tax Act and order passed by the Income Tax Department rejecting the objections of Petitioner in the present petition. Petitioner is a company incorporated under the Companies Act, 1956 engaged in the business of manufacture and distribution of lubricating oils, greases, brake fluids and specialty products.

The Petitioner’s return of income was selected for scrutiny. Pursuant to initiation of assessment proceedings, a notice was issued under Section 142(1) of the Income Tax Act seeking details along with supporting evidence in respect of the claim of deduction. Petitioner replied by letter inviting another notice under Section 142(1) of the Income Tax Act requesting proof of donation justifying claim for deduction, which was also replied. Assessment order was passed under Section 143(3) of the Income Tax Act, which fully allowed the deduction claimed.

Senior Advocate appearing for Petitioner challenged the reopening of assessment contending that the jurisdictional pre-conditions have not been fulfilled in the present case as the belief formed by the AO is based on an audit objection without fulfilling an objective criteria. He also submitted that the assessment cannot be reopened on the basis of a change of opinion and the belief so formed must be based on fresh and tangible material having a rational and a live nexus with the belief.

The counsel or the Revenue has tried to unveil an alleged strategy by which Petitioner firstly incurs CSR expenses, without claiming any deduction since the same are disallowed as business expenditure, but thereafter adding back the expenditure in the computation of income. Thus, the CSR expenses are treated by Petitioner under two different heads, defeating the very public welfare purpose by converting the same as a tax saving tool.

A Division Bench of Justices Dr Neela Gokhale and KR Shriram observed that “The finding of the Apex Court in Rajesh Jhaveri must not be used by AO to reopen assessments to review the original assessment order on the basis of a change of opinion of the AO, as done in the present case. Further, the reasons to believe notice itself indicates that the AO was already seized with information prior to passing of the original assessment order and as such, there is no tangible information on the basis of which he has allegedly formed the requisite belief.”

“Furthermore, while conclusive proof of escapement of income may not be necessary to reopen an assessment, the least that is required is a requisite belief based on fresh and tangible material which was not accessible to the AO or that which was deliberately withheld by Assessee, which then would amount to non-disclosure of relevant information” the Court concluded.

To Read the full text of the Order CLICK HERE

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