The Bombay High Court has quashed reassessment notices issued under Section 148 of the Income Tax Act, 1961 to Bharat Petroleum Corporation Limited (BPCL) for Assessment Years (AY) 2013–14 and 2014–15, holding that the reopening of assessments was not based on any failure to disclose material facts but rather constituted a mere change of opinion by the Assessing Officer.
A Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla held that once a scrutiny assessment under Section 143(3) is completed and more than four years have elapsed, reassessment under Section 147 can only be initiated if there is a failure on the part of the assessee to fully and truly disclose all material facts. In BPCL’s case, all relevant disclosures regarding exempt dividend income received from the BPCL Trust were made during the original assessment proceedings and were accepted by the department.
The Court noted that the income received from the BPCL Trust, amounting to ₹37.10 crore for AY 2013–14 and ₹74.20 crore for AY 2014–15, had been claimed as exempt under Section 10(34) of the IT Act, and this position had never previously been questioned. The AO had also made Section 14A disallowances after considering the trust’s investment structure during the original assessments, which reflected clear application of mind.
The reassessment notice also challenged a deduction of ₹127.39 crore under Section 32AC claimed in AY 2014–15, but the Court held that this too was not based on fresh material, and thus invalid.
The Bench emphasized that the bald assertion of non-disclosure made in the reasons for reopening was unsupported by facts or specifics, which is insufficient to reopen assessments beyond the statutory four-year limit. Additionally, the Court rejected reliance on a Revenue Audit objection, stating that audit observations cannot substitute the AO’s independent application of mind.
Accordingly, the Court quashed the reassessment notices and subsequent orders for both years, reinforcing that statutory reassessment powers cannot be used to revisit settled issues without cogent and demonstrable new material.
Mr. J.D. Mistri, Senior Advocate a/w Niraj Sheth, Ms. Gunjan Kakad i/b Atul K. Jasani, Advocates for the Petitioner.
Mr. Akhileshwar Sharma, Advocate for the Respondents.
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