No Tangible Material to Justify AO’s Profit Assessment of ₹69 Crores: ITAT Quashes Reassessment Against S.C. Johnson Pvt. Ltd. [Read Order]
The Tribunal clarified that reassessment cannot be sustained in the absence of new tangible evidence, especially when all facts were already disclosed in the original assessment.
![No Tangible Material to Justify AO’s Profit Assessment of ₹69 Crores: ITAT Quashes Reassessment Against S.C. Johnson Pvt. Ltd. [Read Order]](https://images.taxscan.in/h-upload/2025/09/15/2087513-itat-delhi-sc-johnson-case-reassessment-quashed-taxscan.webp "No Tangible Material to Justify AO’s Profit Assessment of ₹69 Crores: ITAT Quashes Reassessment Against S.C. Johnson Pvt. Ltd. [Read Order]")
The Income Tax Appellate Tribunal (ITAT), Delhi, has struck down reassessment proceedings, holding that the Assessing Officer’s (AO) computation of book profits at over ₹69 crores was unsupported by fresh material and amounted to a change of opinion.
The appellant, S.C. Johnson Pvt. Ltd., engaged in the manufacture and sale of insect control and air care products, had filed its return for Assessment Year (AY) 2006-07 declaring nil taxable income after claiming deductions under Section 80IB and Section 80IC of the Income Tax Act, 1961. The original scrutiny assessment under Section 143(3) was completed in December 2009.
Subsequently, reassessment proceedings under Section 147 were initiated twice, ultimately leading the AO to assess book profits at ₹69,62,80,147 against the company’s reported book loss of ₹15,58,74,356.
The Appellant represented by K. M. Gupta and Shruti Khimta, argued that the reassessment proceedings were legally untenable, since no new tangible material had emerged after completion of the original assessment. It was pointed out that the salary expenses questioned by the Revenue had already been disclosed in its audited accounts and notes, and that reopening was therefore based on nothing more than a change of opinion.
It was also highlighted that sanction for reopening under Section 151 was mechanical, as the authority merely wrote “Yes, I am satisfied,” without demonstrating due consideration. The Revenue Authorities represented by Mahesh Kumar, contended that the reassessment was valid because the assessee had failed to disclose truly and fully all material facts. It was argued that salary claims related to prior periods were wrongly booked, thereby justifying recomputation of income and book profits.
The Bench comprising Judicial Member, Anubhav Sharma and Accountant Member, Manish Agarwal held that the reassessment proceedings were invalid in law. The Tribunal found that the AO had raised identical issues in successive reassessment notices and failed to make additions on new points such as depreciation.
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The Tribunal relied on the assessee’s financial statements and notes to accounts, which disclosed the disputed salary expenditure, and on the sanction memo showing mechanical approval. It cited the decision of the Supreme Court in CIT v. Kelvinator of India Ltd. (2010) and of the Delhi High Court in CIT v. N.C. Cables Ltd. (2017) to reaffirm that reassessment requires fresh tangible material and cannot be based on mechanical sanction.
Since all material facts had already been disclosed in the original assessment, the Tribunal concluded that the reopening was a mere review of the same material, constituting a change of opinion.
Accordingly, the ITAT quashed the reassessment and set aside the ₹69 crore profit computation.
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