ACIT Vs Adani Wilmar Limited (Supreme Court of India)
The dispute concerned the validity of a notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment of a company engaged in the import and refining of edible oil for Assessment Year 2013-14. The assessee had originally filed its return declaring nil income under the normal provisions and paid tax under Section 115JB (Minimum Alternate Tax or MAT) on book profits. The assessment was completed under Section 143(3) of the Act. Subsequently, the Assessing Officer issued a notice dated 24.03.2020 under Section 148 seeking to reopen the completed assessment. The assessee challenged both the reopening notice and the order rejecting its objections.
The reasons recorded for reopening were based on information received from the Deputy Director of Income Tax (Investigation), Panipat. According to that information, a search conducted at the premises of one individual revealed 39 alleged dummy concerns operating from non-existent addresses. During scrutiny of the bank accounts of those concerns, it was found that the assessee had transactions with three entities allegedly controlled by the searched person. Based on this information, the Assessing Officer concluded that the assessee had benefited from accommodation entries amounting to ₹1.92 crore and that income chargeable to tax had escaped assessment.
The assessee contended that the reopening was invalid because the Assessing Officer had merely reproduced information received from the investigation wing without independently applying his mind. It was argued that the reasons recorded reflected borrowed satisfaction rather than an independent belief regarding escapement of income. The assessee further contended that reopening beyond four years from the end of the relevant assessment year was not permissible in the absence of any failure on its part to fully and truly disclose material facts. According to the assessee, all transactions were carried out through banking channels and all relevant details had already been disclosed during the original assessment proceedings.
The assessee also argued that the reassessment proceedings were initiated merely for a fishing and roving inquiry. During the original scrutiny assessment, the Assessing Officer had specifically sought details regarding cash credits, sundry creditors, names, PAN details, addresses, income tax returns and confirmations. The assessee had furnished all the requested information through replies dated 15.12.2016 and 20.12.2016, following which the assessment was completed under Section 143(3). It was therefore submitted that there was no basis for reopening the assessment on the same material.
Another important contention raised by the assessee related to the MAT provisions under Section 115JB. The assessee pointed out that it had paid tax on book profits under Section 115JB and that even if the proposed addition of ₹1.92 crore was made, the tax liability would still continue to be governed by Section 115JB. Consequently, there would be no additional tax liability and therefore no income could be said to have escaped assessment.
The Revenue opposed the petition and argued that information obtained during search and post-search investigations revealed that the assessee had entered into transactions with concerns allegedly controlled by a person engaged in providing accommodation entries through bogus entities. According to the Revenue, the information constituted new tangible material demonstrating escapement of income. It was also contended that these facts came to light only after the search and seizure action and were not available during the original assessment proceedings. The Revenue further maintained that the assessee had failed to disclose the true nature of the transactions and therefore the reopening was valid even beyond four years.
The Gujarat High Court examined the material on record and noted that the assessee had paid tax under Section 115JB and had disclosed book profits. The Court also observed that during the original assessment proceedings the Assessing Officer had raised specific queries regarding cash credits and sundry creditors, and the assessee had furnished all relevant details sought by the department. After considering those details, the assessment was completed under Section 143(3).
The High Court held that, in these circumstances, the Assessing Officer could not validly assume jurisdiction to reopen the assessment. The Court also relied upon its earlier decision involving the same assessee for Assessment Years 2014-15 to 2016-17, where similar reopening notices had been quashed. In that earlier decision, the Court had held that when the assessee was assessed under Section 115JB and the alleged escaped income, even after being added under normal provisions, did not exceed the income already assessed under MAT, the question of escapement of income did not arise. As a result, the statutory condition requiring the Assessing Officer to have “reason to believe” that income had escaped assessment was not satisfied.
Applying the same reasoning to the present case, the High Court concluded that the Assessing Officer lacked jurisdiction to issue the notice under Section 148. The Court therefore quashed the reopening notice dated 24.03.2020 and also set aside the order dated 30.12.2020 rejecting the assessee’s objections. The petition was allowed.
The Revenue challenged the High Court’s judgment before the Supreme Court by filing a Special Leave Petition. After hearing the Additional Solicitor General appearing for the Revenue, the Supreme Court declined to interfere with the High Court’s decision. The Special Leave Petition was dismissed. However, the Supreme Court clarified that the question of law, if any, was kept open. Pending applications were also disposed of.
Thus, the High Court’s order quashing the reopening notice and reassessment proceedings remained undisturbed, while the Supreme Court expressly left the underlying legal question open for consideration in an appropriate future case.
Read HC judgment in this case: Reassessment u/s. 148 quashed as all necessary information already supplied: Gujarat HC
