DCIT Vs Lupin Limited (Supreme Court of India)
The dispute arose from reassessment proceedings initiated for Assessment Year (AY) 2016–17 under the Income Tax Act, 1961. The taxpayer had filed its return of income on 26 November 2016 declaring total income of ₹26,36,01,64,390. The case was selected for scrutiny, during which the Assessing Officer issued multiple notices seeking detailed information, including specific queries on amounts considered disallowable or allowable and on exemptions and deductions claimed under Chapter III and Chapter VI-A.
In particular, through queries dated 18 September 2018, the Assessing Officer sought detailed workings and documentary evidence for disallowable and allowable amounts, as well as details and evidence supporting deductions claimed under Section 80G and other provisions. The taxpayer responded to these queries, furnishing explanations and documents. It specifically disclosed details of deductions claimed under Section 80G in respect of donations and deductions claimed under Section 35AC for payments made to specified entities. After considering the responses, the Assessing Officer passed an assessment order under Section 143(3) on 28 December 2018, accepting, inter alia, the deductions claimed under Sections 35AC and 80G.
Subsequently, on 31 March 2021, a notice under Section 148 was issued seeking to reopen the completed assessment. The reasons supplied for reopening stated that, on perusal of records, it was noticed that certain corporate social responsibility (CSR) expenditure, which had originally been disallowed, was again claimed as deductions under Section 35AC and partly under Section 80G. According to the Assessing Officer, allowing the same expenditure under different heads defeated the legislative intent behind CSR provisions introduced by the Finance (No. 2) Act, 2014, and resulted in underassessment of income to the extent of ₹18,00,06,832. It was asserted that income had escaped assessment and that there was failure on the part of the taxpayer to fully and truly disclose material facts.
The taxpayer objected to the reopening, but the objections were rejected by an order dated 30 November 2021, leading to a writ petition before the Bombay High Court.
The High Court examined the record and noted that the original assessment was a scrutiny assessment in which several queries had been raised, including specific queries relating to deductions under Sections 35AC and 80G. These queries had been answered, and the claims were allowed after due consideration. The Court held that no fresh tangible material had come to the knowledge of the Assessing Officer after completion of the assessment. Even though the reopening was within four years, reassessment could not be justified merely on re-examination of the same material and on a change of opinion.
The High Court relied on earlier precedents holding that reopening based solely on change of opinion is impermissible. While the Revenue argued that CSR expenditure was not allowable after amendments introduced with effect from 1 April 2015 and that allowing deductions under Sections 35AC or 80G defeated legislative intent, the Court noted that the taxpayer had not claimed deduction under Section 37. The Court also referred to the statement of objects and reasons of the Finance (No. 2) Bill, 2014, which clarified that CSR expenditure of the nature described in Sections 30 to 36 could still be allowed subject to conditions. The Court further noted that this position was echoed in a CBDT circular dated 21 January 2015, which clarified that such circulars are binding on the Revenue.
However, the High Court expressly stated that it did not propose to go into the merits of allowability of CSR-related deductions. The decisive factor was the absence of any new tangible material. Since the Assessing Officer had already formed an opinion during the original scrutiny assessment, reopening on the basis that another view was possible amounted to a change of opinion. Accordingly, the notice under Section 148 and all consequential proceedings were quashed. No costs were awarded.
The Revenue carried the matter to the Supreme Court by way of a Special Leave Petition. The Supreme Court noted that the petition was filed with a delay of 142 days and that the delay was not satisfactorily explained. The Court examined the impugned High Court order to see whether there was any palpable error warranting a lenient view on limitation. Finding no such error and no merit in the challenge, the Supreme Court dismissed the Special Leave Petition both on the ground of delay and on merits. Pending applications were also disposed of.
As a result, the Bombay High Court’s decision quashing the reassessment proceedings attained finality, reaffirming that reassessment cannot be initiated merely on a change of opinion in the absence of fresh tangible material, even where the reopening is within four years.
Read HC Judgment: Lupin Limited Vs DCIT (Bombay High Court); Writ Petition No. 1530 of 2022; 18/02/2025; 2016-17
