2025:BHC-OS:9928-DB

12-1752-2022-WP-C-F-Jud=.docx

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO. 1752 OF 2022

Digitally
WITH
signed by
UDAY UDAY
SHIVAJI
WRIT PETITION NO. 2966 OF 2022
SHIVAJI JAGTAP
Date:
JAGTAP 2025.07.03
13:31:38
+0530 Bharat Petroleum Corporation Ltd.
3rd Floor, Bharat Bhavan
4/6, Currimbhoy Road, Ballard Estate,
Mumbai – 400 001 .. Petitioner

Versus

1. Assistant Commissioner of Income Tax,

Circle 2(1)(1), Mumbai,
Room No. 561, 5th Floor,
Aaykar Bhavan, M.K. Road,
Mumbai – 400 020

2. Principal Commissioner of Income Tax,

Mumbai-2, Mumbai,
Room No. 344, 3rd Floor,
Aaykar Bhavan, M.K. Road,
Mumbai – 400 020

3. Additional / Joint / Deputy / Assistant

Commissioner of Income-Tax, National
Faceless Assessment Centre,
Delhi.

4. Union of India,
Through the Joint Secretary & Legal Adviser,
Branch Secretariat,
Department of Legal Affairs,
Ministry of Law and Justice,
2nd Floor, Aayakar Bhavan, M.K. Marg,
New Marine Lines, Mumbai – 400 020 .. Respondents

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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.

CORAM: B. P. COLABAWALLA &

FIRDOSH P. POONIWALLA, JJ.

RESERVED ON : 19th JUNE, 2025.

PRONOUNCED ON : 3rd JULY, 2025.

JUDGMENT :- [ Per B.P. COLABAWALLA, J. ]

1. In both the above Writ Petitions the issue raised is whether the

1st Respondent had the power to reopen the assessment of the Petitioner

[under Section 147] for AY 2013-14 and AY 2014-15 and issue notices under

Section 148 of the Income Tax Act, 1961 (for short “IT Act”).

2. Writ Petition No. 1752 of 2022 challenges the legality and

validity of the impugned Notice dated 23 rd March 2021 issued under Section

148 of the IT Act for AY 2013-14. Additionally, the Petitioner also challenges

the impugned Order dated 17 th February 2022 rejecting the objections filed

by the Petitioner to the validity of the impugned Notice dated 23 rd 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

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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.

After issue of a 1:1 bonus shares issued in July 2012, the said Trust holds

6,74,57,474 equity shares of the Petitioner and the cost of the original

investment was Rs.659.10 crores. According to the Assessing Officer (1 st

Respondent), it is from this Trust that the Petitioner (BPCL) has received

dividend income to the tune of Rs.37.10 crores. Since the said Trust is not a

Company and is not required to declare dividend as mandated by the

Companies Act, 2013, and nor was the said Trust covered under Section

115-O of the IT Act, the amounts distributed by the said Trust to the

Petitioner did not qualify as exempt income under Section 10(34) of the IT

Act. According to the Assessing Officer, the full and true facts relating to

earning of such income were not disclosed by the Petitioner – Assessee

during the course of assessment proceedings, and hence, he had reason to

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believe that income to the extent of Rs.37.10 crores received by the Petitioner

from the said Trust had escaped assessment for AY 2013-14. This, according

to the Assessing Officer, was due to reasons attributable to the Petitioner for

failure to disclose fully and truly all material facts necessary for AY 2013-14.

It is on this basis that the Assessing Officer reopened the assessment for AY

2013-14 and issued the impugned Notice dated 23rd March 2021.

3. Writ Petition No. 2966 of 2012 challenges the legality and

validity of the impugned Notice dated 26 th March 2021 issued under Section

148 of the IT Act for AY 2014-15. Consequently, the Petitioner also challenges

the impugned orders dated 25th November 2021 and 14th February 2022

rejecting the objections filed by the Petitioner to the validity of the impugned

Notice dated 26th March 2021. So far as the impugned Notice dated 26 th

March 2021 (Relating to AY 2014-15) is concerned, not only was the

assessment proceeding sought to be reopened on the ground that the

Petitioner had incorrectly claimed exemption under Section 10(34) in

relation to the monies received from the BPCL Trust, but also that the

Assessee had wrongly claimed a deduction under Section 32AC. In other

words, for AY 2014-15, the assessment was sought to be reopened on 2

counts. Here also the Assessing Officer was of the opinion that income of the

Assessee (the Petitioner) had escaped assessment because of a failure on the

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part of the Assessee to disclose fully and truly all material 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

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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 [dated 23rd March 2021] under Section 148 and has

passed the impugned order [dated 17 th February 2022] rejecting the

objections raised by the Petitioner challenging the legality and validity of the

impugned Notice. Respondent No.2 is the Principal Commissioner of Income

Tax, who has administrative jurisdiction over Respondent No.1 and who,

according to the Petitioner, has illegally and without application of mind

accorded his approval under Section 151 of the IT Act for issuance of the

impugned Notice. Respondent No.3 is an Officer of the National Faceless

Assessment Centre, Delhi and Respondent No.4 is the Union of India.

Respondent Nos. 1 to 3 are the employees of Respondent No.4.

7. On 18th August 2006, a scheme of amalgamation between the

Petitioner and one Kochi Refineries Ltd. (a wholly owned subsidiary of the

Petitioner) was approved by the Government of India. In pursuance of this

scheme, a Trust was formed vide a Trust Deed dated 9 th October 2006 so that

the shares to be issued by BPCL (the Petitioner) on the merger would be held

by this Trust. This Trust was called the Bharat Petroleum Corporation Ltd.

Trust for investment in shares (for short the “BPCL Trust” or “KRL

Trust”) and the sole beneficiary of this Trust is the Petitioner. In accordance

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with the said scheme, 3,37,28,737 equity shares of the Petitioner were

allotted to the said Trust for the benefit of the Petitioner in the previous year

relevant to the AY 2007-08. After a 1:1 bonus issued in July 2012, the BPCL

Trust now holds 6,74,57,474 equity shares of the Petitioner. As and when the

Petitioner declares a dividend, the same is received by the BPCL Trust, which

is, in turn, distributed to the Petitioner (being its sole beneficiary). According

to the Petitioner, the cost of the original investment was Rs.659.10 crores,

which is shown under the heading “Non-current investment” and the monies

distributed by the Trust to the Petitioner is consistently included in other

income. According to the Petitioner, this income, for the AY 2007-08

onwards, has been consistently offered to tax and claimed as exempt under

Section 10(34). This position has never been disputed by the Income Tax

Department in the past assessment years.

8. For the AY 2013-14, the Petitioner filed its Return of Income on

22nd November 2013 declaring a total income of Rs.3533,35,52,040/- (Rs.

3,533.35 crores). In this 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

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the relevant Annexures in the Schedule, Tax Audit Report, computation of

income etc.

9. Pursuant to this Notice, on 23 rd 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 2 nd

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 30 th January 2017 assessing

the total income of the Petitioner at Rs. 3,652.83 crores. In paragraph 5.1 of

the Assessment Order, the Petitioner's submission regarding the investment

capable of yielding exempt income was set out, which included the

investment held in the BPCL Trust. In paragraph 5.2, in working out the dis-

allowance under Section 14A r/w Rule 8D, the investment of Rs.659.10 crores

in the BPCL Trust was also taken into account. According to the Petitioner,

therefore, not only was there a full and final disclosure of the fact that

investment in the BPCL Trust was capable of yielding exempt income, but the

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said fact was accepted by Respondent No.1 and on that basis a dis-allowance

under Section 14A was made thereon.

10. The Petitioner, thereafter, received the impugned Notice dated

23rd March 2021 issued under Section 148 of the IT Act. In response to the

impugned Notice, the Petitioner furnished a Return of Income [under Section

139] on 12th April 2021, under protest. On 13 th May 2021 a copy of the

approval granted by Respondent No.2, along with a copy of the reasons for

reopening the assessment (for AY 2013-14) were provided by Respondent

No.1 to the Petitioner. As mentioned earlier, the reason recorded in support

of the impugned Notice was that the exemption under Section 10(34) in

respect of the income of Rs.37.10 crores received by the Petitioner from the

BPCL Trust was sought to be withdrawn allegedly on the ground that the

Petitioner had failed to fully and truly disclose all material facts with

reference to the said income.

11. In response to the reasons furnished, the Petitioner furnished

detailed objections vide its letter dated 18 th June 2021. In the said objections,

it was submitted by the Petitioner that:-

(a) The reasons were recorded by the preceding

Assessing Officer whereas the impugned notice
was issued by the subsequent Assessing Officer. It

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was contended that the same Assessing Officer

who records the reasons must issue the notice.

(b) Approval under Section 151 of the Act was granted

by Respondent No.2 without application of mind
and was mechanical and perfunctory.

(c) Reopening was not based on any fresh material.

(d) Reopening was based on a change of opinion.

(e) There was no failure to disclose fully and truly any

material fact.

(f) Income received from the KRL Trust was rightly

claimed as being exempt under Section 10(34) of
the Act since the Petitioner was the sole
beneficiary 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

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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 29 th 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 18 th

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 dated 23 rd

March 2021 under Section 148 of the IT Act [for AY 2013-14], and the passing

of the impugned Order dated 17 th February 2022 rejecting the objections of

the Petitioner, it has approached this Court under Article 226 of the

Constitution of India challenging the impugned Notice as well as the

impugned Order.

14. As mentioned earlier, for the AY 2014-15 (the subject matter of

Writ Petition No. 2966 of 2021), the assessment was sought to be reopened

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not only on the ground that in the said assessment year, the Petitioner had

wrongly claimed exemption under Section 10(34) in relation to the monies

received from the BPCL Trust, but also the fact that the Petitioner had

wrongly claimed certain benefits/deductions under Section 32AC of the IT

Act.

SUBMISSION OF THE PARTIES:

15. In this factual backdrop, Mr. Mistri, the learned Senior Counsel

appearing on behalf of the Petitioner, submitted that in the facts of the

present case, the impugned Notices issued under Section 148 for both the

assessment years were beyond the period of 4 years from the end of the

concerned assessment year. Further, in the facts of the present case, for both

assessment years, an Assessment Order was passed under Section 143(3).

Mr. Mistri submitted that in such a scenario, under the first proviso to

Section 147 (as it stood at the relevant time), where an assessment under

Section 143(3) had been made for the relevant assessment year, no action

could be taken after the expiry of 4 years from the end of the relevant

assessment year, unless any income chargeable to tax had escaped

assessment by reason of the failure on the part of the Assessee to inter alia

disclose fully and truly all material facts necessary for the assessment for that

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assessment year. Mr. Mistri submitted that for the 1st Respondent to be

invested with jurisdiction, it was, therefore, incumbent that there was a

failure to disclose fully and truly all material facts necessary for the purpose

of assessment. If all facts were fully and truly disclosed, the 1 st Respondent

would have no jurisdiction to issue the Notice under Section 148 of the IT

Act. According to Mr. Mistri, all details in relation to the exempt income

received from the BPCL Trust were disclosed during the assessment

proceedings initiated earlier and which culminated in an Assessment Order

dated 30th January 2017 passed under Section 143(3). Mr. Mistri submitted

that this apart, it is clear from the Assessment Order dated 30 th 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 30 th January 2017

passed under Section 143(3) of the IT Act. Once this was the factual scenario,

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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 [2004]

268 ITR 332 (Bombay)

(c) Lupin Ltd. Vs. ACIT [2014] 46 taxmann.com

396 (Bombay)

(d) Idea Cellular Ltd. Vs. DCIT [2008] 301 ITR 407
(Bombay)

(e) First Source Solutions Ltd. Vs. ACIT [2021] 438

ITR 139 (Bombay)

(f) Saraswat Co-operative Bank Ltd. Vs. ACIT

[2024] 166 taxmann.com 360 (Bombay)

(g) Bombay Stock Exchange Ltd. Vs. Deputy

Director of Income tax (Exemption) and Ors.
[2014] 365 ITR 181.

17. Mr. Mistri then submitted that the present reopening is based on

nothing except a “change of opinion” of the 1 st Respondent and which is

impermissible in law. According to Mr. Mistri, the details of the claim of the

income claimed as 'exempt' were disclosed in the original Return of Income

as well as disclosed in the earlier assessment proceedings. The basic

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document for completing an assessment under Section 143(3) is the Return

of Income and the computation of income. Mr. Mistri submitted that it is

undisputed that during the original assessment proceedings, Respondent

No.1 had perused the Return of Income and made a dis-allowance under

Section 14A with respect to the income received from the BPCL Trust. The

Assessing Officer, therefore, applied his mind to the claim of dividend

received from the said Trust under Section 10(34) and thereafter passed an

assessment order dated 30th January 2017 under Section 143(3). In these

facts, the reassessment proceedings initiated by Respondent No.1 to disallow

the exemption under Section 10(34) was nothing but a “change of opinion”.

This is more so when one takes into consideration that there was absolutely

no new tangible material for reopening the assessment. Once this is the case,

reopening the assessment merely on a “change of opinion” was wholly

impermissible, was the submission. In this regard, Mr. Mistri relied upon the

following judgments:-

(a) Aroni Commercials Ltd. Vs. DCIT [2014] 362

ITR 403 (Bombay)

(b) CIT Vs. Kelvinator of India Ltd. [2010] ITR 561

(SC)

(c) Ananta Landmark (P) Ltd. Vs. DCIT [2021] 439

ITR 168 (Bombay)

(d) Saraswat Co-operative Bank Ltd. Vs. ACIT

[2014] 166 taxmann.com 360 (Bombay)

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18. Mr. Mistri next submitted that in any event, as regards the claim

of exemption under Section 10(34), Respondent No.1 could not have any

reason to believe that income chargeable to tax had escaped assessment. In

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 has in fact been

accepted by a bench of the ITAT in the case of the Petitioner itself in ITA No.

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1602 and 1600/M/2020 for AYs 2015-16 and 2017-18. It was Mr. Mistri's

submission that therefore, in any event, the 1 st Respondent could not have

had any reason to believe that income chargeable to tax (insofar as it related

to receipt of Rs.37.10 crores from the Trust) had escaped assessment. Mr.

Mistri submitted that before the reassessment proceedings can be initiated, it

is a sine qua non (under Section 147) that the Assessing Officer must have

reason to believe that any income chargeable to tax has escaped assessment

for any assessment year. It is only once this belief is formed that the

Assessing Officer can thereafter proceed to issue a Notice under Section 148,

and which would ultimately culminate into the reassessment order.

19. Mr. Mistri thereafter submitted that reassessment proceedings

have been initiated purely based on the audit objection and which would be

invalid. Mr. Mistri submitted that the impugned Notice has been issued at

the behest of the audit party, and which is evident from the reply filed by the

Respondent in Writ Petition No. 2966 of 2022 for AY 2014-15. According to

Mr. Mistri, reassessment pursuant to an audit objection is invalid and in any

event the 1st Respondent ought to be directed to furnish a copy of the audit

objection and the reply furnished by Respondent No.1 as well as his superiors

to the said audit objection to enable the determination of validity of the so-

called reasons to believe based on which the impugned Notice was issued. To

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put it in a nutshell, Mr. Mistri submitted that if the reply to the audit

objection by the 1st Respondent was in fact that the exemption under Section

10(34) was correctly allowed, then, clearly, there could be no reason to

believe that any income had escaped assessment. According to Mr. Mistri,

even though this information was specifically sought for, the same has not

been furnished till date. In such a situation, Mr. Mistri submitted that an

adverse inference be drawn against the 1st Respondent.

20. Mr. Mistri lastly submitted that the sanction accorded by

Respondent No.2 for reopening the assessment is invalid because the same is

not signed. Mr. Mistri submitted that the sanction under Section 151 of the

IT Act has been issued by Respondent No.2 without signing the same and

thus 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

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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 13 th 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

applicable and hence, the income from the BPCL Trust, being income from a

Trust, could not qualify for exemption under Section 10(34) of the IT Act. Mr.

Sharma submitted that as per the guidelines issued in handling Revenue

Audit matters, the issue flagged by the Audit was therefore, examined by

referring to the accounts and the applicable provisions under the IT Act. As

income chargeable to tax had escaped assessment, proposal was put to the

higher authorities for reopening the assessment. After getting the approval

under Section 151 of the IT Act, the Petitioner's case was reopened by issuing

Notice under Section 148. Mr. Sharma submitted that the Revenue Audit was

entitled to point out factual errors and based on the same, reopening of the

assessment was valid.

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22. Mr. Sharma then submitted that Mr. Mistri was incorrect in his

submission when he sought to contend that there has been no failure to

disclose fully and truly all material facts. The fact that dividend income from

the BPCL Trust was claimed as exempt under Section 10(34) without even

disclosing that the Trust would not fall within the meaning of a domestic

company under Section 115-O would itself be a non-disclosure of all material

facts. Once this is the case, and which was then flagged by the Audit, the 1 st

Respondent was certainly invested with the jurisdiction to reopen the

assessment proceedings and issue a Section 148 Notice. In these facts, Mr.

Sharma also submitted that therefore, there is no “change of opinion”. The

assessment proceedings have been reopened under Sections 147 and 148

because clearly there was a failure on the part of the Petitioner to fully and

truly disclose all material facts in relation to the concerned assessment year.

Consequently, he submitted that there was no merit in the above Writ

Petition and the same be dismissed.

23. We must mention here that Mr. Sharma pointed out that though

it is true that for the AYs 2015-16 and 2017-18, the ITAT has held in favour of

the Petitioner on the issue of claiming exemption under Section 10(34) and

the monies received from the said Trust, those decisions are pending in

Appeal before this Court and hence, have not attained finality. Hence, no

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reliance can be placed on those decisions to contend that as regards the claim

for exemption under Section 10(34) of the Act, the 1 st Respondent could not

have had any reason to believe 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 chargeable to tax has escaped assessment

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for such assessment year by reason of the failure on the part of the
assessee to make a return under Section 139 or in response to a
notice issued under sub-section (1) of section 142 or section 148 or
to disclose fully and truly all material facts necessary for his
assessment, for that assessment year.”
(emphasis supplied)

25. The said proviso clearly stipulates that where an assessment

under Sections 143(3) or 147 has been carried out for the relevant assessment

year, no action can be taken under Section 147 after the expiry of four years

from the end of the relevant assessment year, unless any income chargeable

to tax has escaped assessment by reason of the failure on the part of the

Assessee to make a Return under Section 139, or in response to a Notice

issued under Section 142(1) or Section 148, or to disclose fully and truly all

material facts necessary for his assessment for that assessment year. In the

present case, admittedly the scrutiny assessment [under Section 143(3)] was

done and an Assessment Order was passed under Section 143(3) of the IT Act

for the AY 2013-14 as well as AY 2015-16. Further, the proposed

reassessment for both these years is sought to be done after the expiry of four

years from the end of the relevant assessment year. In such a situation, the

first proviso to Section 147 of the Act is clearly attracted. Thus, no action for

initiation of reassessment proceedings for both the aforesaid assessment

years could be initiated unless the income chargeable to tax had escaped

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assessment by reason of failure on the part of the Petitioner to disclose fully

and truly all material facts.

26. Having said this, we will now examine the reasons given by the

1st Respondent to reopen the assessment for AY 2013-14. The reasons

furnished to the Petitioner can be found at page 219 of the paper book. For

the sake of convenience, the same read thus :-

“In this case, the assessee company filed its return of income for
A.Y. 2013-14 on 22/11/2013 declaring total income at
Rs.3533,35,52,040/- under normal provisions of the Act and Book
Profit u/s 115JB of the Act of Rs.3444,91,28,460/-. The case was
selected for scrutiny and assessment was completed u/s 143(3) of
the Income Tax Act, 1961 on 30.01.2017 assessing total income at
Rs.3652,83,30,770/- under normal provisions of the Act after
making 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 40,56,615
expenditure as per DSIR
5 Disallowance of depreciation on right of 8,98,15,282
way

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)

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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.
After issue of 1:1 bonus shares in July 2012, the trust holds
67457474 equity shares of the corporation and accordingly, the
cost of the original investment of Rs. 659.10 crores is included in
Non-Current Investments.

3. The BPCL Trust is not a company and is not required to

declare dividends as mandated by Companies Act, 2013 nor is
covered u/s 115O of the Act. Therefore, the amounts distributed by
it do not qualify as exempt dividend income u/s 10(34) of the Act.
The full and true facts related to earning of such an income were
not disclosed by the assessee during the course of assessment
proceedings. Hence, I have reason to believe that income of
Rs.37.10 crore from BPCL Trust has escaped assessment for A.Y.
2013-14 due to reasons attributable to the assessee for failure to
disclose fully and truly all material facts necessary for assessment
for that year. Accordingly, the assessment deserves to be reopened
u/s. 147 of the Act for A.Y. 2013-14.

4. In this case more than four years have lapsed from the end of
assessment year under consideration. Hence, necessary sanction to
issue notice u/s. 148 is obtained separately from Pr. Commissioner
of Income tax-2, Mumbai as per the provisions of section 151 of
the Act.”

27. As can be seen from the above reproduction, paragraphs 1 and 2

of the aforesaid reasons only set out the factual situation, and which factual

situation was also disclosed during the original assessment proceedings. The

reason for reopening the assessment is found in paragraph 3. Paragraph 3

inter alia states that the BPCL Trust is not a company and is not required to

declare dividend as mandated by the Companies Act, 2013 nor covered under

Section 115-O of the IT Act. Therefore, the amounts distributed by it do not

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qualify as exempt dividend income under Section 10(34) of the Act. It is

thereafter stated that full and true facts related to earning of such income

were not disclosed by the Assessee during the course of the assessment

proceedings. Hence, the Assessing Officer had reason to believe that income

of Rs.37.10 crores from the BPCL Trust had escaped assessment for the AY

2013-14 due to the Assessee failing to disclose fully and truly all material facts

necessary for assessment for that year.

28. It is true that the reasons for initiating reassessment

proceedings, in fact, state that there is a failure on the part 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

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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 Division Bench of this Court [to which

one of us (B.P. Colabawalla, J.) was a party] in the case of Bombay Stock

Exchange Ltd. (supra). The Division Bench, after relying upon a decision

of another Division Bench in the case of Hindustan Lever Ltd. Vs. R.B.

Wadkar, reported in [2004] 268 ITR 332 (Bombay) culled out the

aforesaid proposition. The relevant portion of this decision reads thus :-

“9. It is true that the reasons for initiating reassessment

proceedings do in fact state that there was a failure on the part of
the petitioner to disclose fully and truly all material facts
necessary for its assessment. However, as correctly submitted
by Mr. Dastoor, merely making this bald assertion was not
enough. In this regard, the reliance placed by Mr. Dastoor on a
Division Bench judgment of this court in the case of Hindustan
Lever Ltd. Vs. R.B. Wadkar, Assistant CIT reported in [2004]
268 ITR 332 (Bom) is well founded. The relevant portion of the
said judgment reads as under (page 337) :
“The reasons recorded by the Assessing Officer
nowhere state that there was failure on the part of
the assessee to disclose fully and truly all material
facts necessary for the assessment of that
assessment year. It is needless to mention that the
reasons are required to be read as they were
recorded by the Assessing Officer. No substitution
or deletion is permissible. No additions can be
made to those reasons. No inference can be
allowed to be drawn based on reasons not
recorded. It is for the Assessing Officer to disclose
and open his mind through reasons recorded by

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him. He has to speak through his reasons. It is for

the Assessing Officer to reach to the conclusion as
to whether there was failure on the part of the
assessee to disclose fully and truly all material
facts necessary for his assessment for the
concerned assessment year. It is for the Assessing
Officer to form his opinion. It is for him to put his
opinion on record in black and white. The reasons
record should be clear and unambiguous and
should not suffer from any vagueness. The reasons
recorded must disclose his mind. Reasons are the
manifestation of mind of the Assessing Officer.
The reasons recorded should be self-explanatory
and should not keep the assessee guessing for the
reasons, Reasons provide link between conclusion
and evidence. The reasons recorded, must be based
on evidence. 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

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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 thereto. This being the case, the impugned Notice is bad in law on

this ground alone and the Petitioner would be entitled to succeed in this Writ

Petition.

30. Despite this, we examined the facts of the present case and on

doing so, we find that in fact, there was no failure on the part of the Petitioner

in disclosing fully and truly all material facts for the AY 2013-14. In response

to the Notice issued by Respondent No.1, in the original assessment

proceedings, the Petitioner furnished details with respect to the claim of

exempted income from the BPCL Trust. Firstly, the claim of dividend income

was very much in the Return of income as well as the details of the dividend

distribution tax paid. Pursuant to this, the Annual Report was filed which

also at Note No.35 (in the report referred to as the KRL Trust) disclosed

investment in the KRL Trust under the heading 'Non-current Investment' as

Rs. 659.10 crores. Even in the response furnished by the Petitioner in respect

of the disallowance under Section 14A of the Act, the Petitioner disclosed the

details of the exemption claimed under Section 10(34) of the Act, which

included the income received from the BPCL Trust (Page Nos. 182 and 183 of

the paper book). In fact, at page 183, it is specifically mentioned that “the

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above pattern of investment makes it amply clear that Corporation has

over the period of time made investments in equity shares of subsidiaries,

joint ventures and associates, the dividend income declared by them is

exempt from tax.” The pattern of investment referred to in this paragraph

also refers to the pattern of investment in the BPCL Trust (on the Kochi

Refineries Merger). Further, the details furnished by the Petitioner were

considered by Respondent No.1 in the original assessment proceedings

[under Section 143(3)] and also specifically noted that income from the BPCL

Trust had been claimed as exempted. Respondent No.1 thereafter proceeded

to disallow expenses under Section 14A of the Act. The scrutiny assessment

order passed under Section 143(3) can be found at page 193 of the paper

book. In paragraph 5.1 of this order, the Assessing Officer categorically states

that for the AY 2013-14 the Assessee has received a sum of Rs.185.75 crores

as income exempted from tax by way of dividend from Indian Companies,

Income from the KRL Trust, shares of income from AOP (PII) and interest 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 dis-

allowed 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

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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 the relevant assessment year, then no reassessment proceedings can be

initiated unless there is a failure on the part of the Assessee to fully and truly

disclose all material facts for that assessment year.

31. We also find considerable force in the argument of Mr. Mistri

that the reopening in the present case is merely based on a “change of

opinion”, which is impermissible. As can be seen from the reasons for

reopening, the only real reason given is that the BPCL Trust is not a company

and hence not covered under Section 115-O of the Act. Therefore, the amount

distributed by it to the Petitioner would not qualify as exempt dividend

income under Section 10(34) of the Act. This to our mind would be merely a

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“change of opinion”. We say this for the simple reason that even if we

assume for the sake of argument that this exemption was wrongly allowed by

the Assessing Officer in the scrutiny assessment proceedings, the same

cannot be the sole ground for reopening the assessment and invoking the

provisions of Section 147 r/w Section 148 of the IT Act. Merely because the

Assessing Officer is now of the opinion that the deduction is wrongly granted,

cannot invest him with the jurisdiction to reopen the assessment, especially

in a case where reassessment proceedings are initiated when there is already

a scrutiny assessment under Section 143(3) and which is after a period of 4

years from the date of the relevant assessment year and there has been no

failure to disclose fully and truly all material facts in relation to the concerned

assessment year. This has been so held by the Hon'ble Supreme Court in the

case of Gemini Leather Stores Vs. Income Tax Officer, (1975) 4 SCC

375. The relevant portion of this decision reads thus :-

“3. ….…...
It is not disputed that the case falls under Clause (a) of section 147.
The question is whether the Income-tax Officer had reason to
believe that income chargeable to tax had escaped assessment for
the assessment year in question by reason of the omission or failure
on the part of the assessee to disclose fully and truly all material
facts. The law on the point has been settled by this Court in
Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR
191 (SC). The decision in Calcutta Discount Company case (supra)
is based on Section 34 of the Income Tax Act, 1922, the provisions
of which correspond to those Sections 147 and 148 of the Income
Tax Act, 1961, the points of departure from the old law are not

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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 facts or law, should be drawn.”
The law laid down in Calcutta Discount Company case (supra) has
been restated in several subsequent decisions of this Court:
Commissioner of Income Tax v. Hemchandra Kar [1970] 77 ITR 1
(SC), Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR
582 (SC) and Commissioner of Income-tax v. Burlop Dealers Ltd.
[1971] 79 ITR 609 (SC), to name only a few. In the case before us
the assessee did not disclose the transactions evidenced by the
drafts which the Income-Tax Officer discovered. After this
discovery the Income-tax Officer had in his possession all the
primary facts, and it was for him to make necessary enquiries and
draw proper inferences as to whether the amounts invested in the
purchase of the drafts could be treated as part of the total income of
the assessee during the relevant year. This the Income-tax officer
did not do. It was plainly a case of oversight, and it cannot be said
that the income chargeable to tax for the relevant assessment year
had escaped assessment by reason of the omission or failure on the
part of the assessee to disclose fully and truly all material facts.
The Income-tax Officer had all the material facts before him when
he made the original assessment. He cannot now take recourse to
section 147(a) to remedy the error resulting from his own
oversight.

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4. For these reasons we allow the appeal and quash the

impugned notice dated March 31, 1965 and the proceedings in
consequence thereof. Considering all the circumstances of the case
we make no order as to costs.”
(emphasis supplied)

32. For all the aforesaid reasons, we find that the impugned Notice

dated 23rd March 2021 and the impugned order dated 17 th February 2022 are

unsustainable and hence, deserve to be quashed and set aside.

WRIT PETITION NO. 2966 OF 2022

33. As mentioned earlier, so far as this Writ Petition is concerned,

the reasons for reopening the assessment for AY 2014-15 were not only with

relation to the exemption claimed for the income received from the BPCL

Trust but also that the Assessee had claimed a deduction of

Rs.316,42,70,532/- under Section 32AC of the IT Act, out of which

Rs.127,39,45,494/- was incorrectly availed. This is an additional ground, on

which the assessment proceedings for AY 2014-15 were sought to be

reopened by the impugned Notice dated 26 th March 2021. So far as the

reasons 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

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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 failure on the part of the Petitioner to fully and

truly disclose all material facts in relation to this assessment year.

34. We will now, therefore, examine the reasons given for reopening

the assessment of the Petitioner for wrongly claiming a deduction under

Section 32AC, and whether in fact there has been any failure to disclose fully

and truly all material facts in relation to the aforesaid so-called wrongful

deduction. The reason for reopening the assessment for AY 2014-15 can be

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found from paragraph 3.1 to paragraph 5 of the reasons furnished to the

Assessee on 13th May 2021. They read thus :-

“3.1 From the accounts of the assessee it is seen that the assessee
has claimed deduction u/s 35AC of the Act of Rs.316,42,70,532/-.
In this regard it is to state that the Investment Allowance was
introduced for manufacturing sector by the Finance Act, 2013 by
inserting section 32AC of the Act which allowed investment
allowance of 15% for investment of more than 100 crores in plant
and machinery during the period from 01-04-2013 to 31-03-2015.
Conditions to be fulfilled for availing the benefit are specified in
sub-section (1) of section 32AC of the Act. The tax benefits under
this scheme can be availed by an assessee, being a company,
engaged in the business of manufacture or production of any article
or thing. Deduction under section 32AC (1) of the Act, available
under this scheme, if actual cost of new assets acquired and
installed during financial year 2014-15 exceeds Rs.25 crores and
actual cost of new assets acquired and installed during the period
01-04-2013 to 31-03-2015 exceeds Rs. 100 crores.

3.2 To avail benefit of the investment allowance deduction under

32AC (1) of the Act, following conditions needs to be satisfied by
the assessee :
 Assessee is a company.
 Assessee - company is engaged in the business of
manufacture or production of any article or thing.
 Assessee acquires and installs a new plant and machinery
after 31-03-2013 but before 01-04-2015.
 Aggregate amount of cost of such new assets acquired and
installed after 31-03-2013 but before 01-04-2015 should
exceed Rs.100 crores.

3.3 The phrase ‘new asset’ has been defined as new plant or
machinery but does not include-
 any plant or machinery which before its installation by the
assessee was used 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;

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 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 these reasons,
we are of the view that by ‘plant’ what is intended by the rule-
making authority is that apparatus which is used by the
industry for carrying on its industrial process of manufacture.
In respect of an industry manufacturing soft-drinks and
beverages, it can be said that plant would mean that apparatus
which is used for manufacturing soft-drinks or beverages and
not articles like crates and bottles used for storing the
manufactured product.

3.5 On perusal of the details of assets acquired suggests (page

No. 18 of submission dated 07-12-2016) that the investment made
of Rs. 849,29,69,963/- in assets under the head ‘LPG cylinders –
14.2 KGS, 19 KG and LPG pressure regulator against which
investment allowance u/s. 35AC of the Act being 15% of such
investment amounting to Rs. 127,39,45,494/- has been claimed. In
this regard it is worth to mention here that the investments made in
the aforesaid assets i.e., LPG cylinders – 14.2 Kgs, 19 KG and
LPG Pressure regulator does not qualify as plant and machinery
eligible to claim deduction u/s. 32AC of the Act. Therefore, the
deduction claimed u/s. 35AC of Rs. 127,39,45,494/- on the
investment made in aforesaid assets of Rs. 849,29,69,963/- is not

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correct, which has resulted into excess claim of deduction and

escapement of income to that extent.

4. Taking into consideration of the above and the data in the

Return of Income, the data from the assessment records and having
duly applied my mind to it, I am of the considered view that total
income of Rs.201.59 crores consisting income from BPCL Trust of
Rs.74.20 crore and Rs.127.39 crore has escaped assessment for
A.Y. .2014-15 due to reasons attributable to the assessee for failure
to disclose fully and truly all material facts necessary for
assessment for that year.

5. On the basis of material available on record and on perusal

and careful consideration of the same, I have prima facie reason to
believe that income chargeable to tax to the tune of Rs.201.59
crores or any other income chargeable to tax, which comes to my
notice subsequently in the course of proceedings for re-assessment,
has escaped assessment within the meaning of section 147 of the
income tax Act, 1961. The assessee has therefore, failed to disclose
true and complete particulars of income for the year under
consideration. Accordingly, the case is proposed 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 7 th 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

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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 reopening the

assessment, has referred to for denying the claim under Section 32AC to the

extent of Rs.127.39 crores, on the basis that LPG Cylinders and LPG Pressure

Regulators did not qualify as ‘plant and machinery’ eligible to claim a

deduction under Section 32AC of the Act. In fact, in paragraph 4 of the

reasons, the Assessing Officer states that taking into consideration “……. the

data in the Return of Income, the data from the assessment records……” and

having applied his mind to it, he was of the view that total income of

Rs.201.59 crores consisting of the income from the BPCL Trust of Rs.74.20

crores and 127.39 crores (originally claimed as deduction under Section

32AC) had escaped assessment for the AY 2014-15 due to the Assessee failing

to disclose fully and truly all material facts necessary for the assessment for

that year. Apart from this bald assertion, nothing else is mentioned in the

reasons. What fact has not been disclosed is also not mentioned. In fact,

from seeing the reasons, we find that the Assessing Officer, after relying upon

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the data already furnished by the Assessee during the original scrutiny

proceedings under Section 143(3), comes to the conclusion that income has

escaped assessment. Once this is the case, we are clearly of the view that even

so far as the reasons for reopening the assessment for AY 2014-15 on the

ground of the Assessee allegedly claiming a wrong deduction under Section

32AC, is without jurisdiction as there is no failure on the part of the Assessee

to disclose fully and truly all material facts in relation to the deduction

claimed under Section 32AC for AY 2014-15. In fact, on perusing the reasons,

it is clear that this is nothing but a “change of opinion” of a subsequent

Assessing Officer, who now seeks to reopen the assessment for AY 2014-15.

This is wholly impermissible in law. In these circumstances, we find that

even so far as Writ Petition No. 2966 of 2022 is concerned, the same deserves

to be allowed.

36. In light of what we have held above we are not burdening this

judgment with the other arguments canvassed by Mr. Mistri, namely, that the

notice is bad because (i) reassessment proceedings have been initiated purely

based on the audit objection and which is impermissible; (ii) the sanction

accorded by Respondent No.2 for reopening the assessment is invalid

because the same is not signed; and (iii) Respondent No.1 could never have

any reason to believe that income chargeable to tax [by claiming a wrong

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exemption under section 10(34)] had escaped assessment because for

subsequent Assessment Years the ITAT has allowed the said exemption on

merits. These contentions are kept open to be decided in an appropriate case.

37. In view of the forgoing discussion, we pass the following order :-

ORDER

(a) For the reasons stated hereinabove, Writ Petition No.

1752 of 2022 is allowed and the Notice dated 23 rd March

2021 issued under Section 148 for the AY 2013-14 and

the impugned Order dated 17th February 2022 rejecting

the Objections to the validity of the said impugned

Notice are hereby quashed and set aside.

(b) For the reasons stated hereinabove, Writ Petition

No.2966 of 2022 is allowed and the Notice dated 26 th

March 2021 issued under Section 148 for the AY 2014-

15 and the impugned Orders dated 25th November 2021

and 14th February 2022 rejecting the Objections to the

validity of the said impugned Notice are hereby quashed

and set aside.

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38. Rule is made absolute in the both the above Writ Petitions in the

aforesaid terms and both the Writ Petitions are disposed of in terms thereof.

However, in the facts and circumstances of the case, there shall be no order

as to costs.

39. This order will be digitally signed by the Private Secretary/

Personal Assistant of this Court. All concerned will act on production by fax

or email of a digitally signed copy of this order.

[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]

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