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by Admin
14 December 2025 5:24 PM
"Reassessment Based On Change Of Opinion And Bald Assertions Is Legally Unsustainable" — In a landmark judgment Bombay High Court decisively quashed two reassessment notices issued to Bharat Petroleum Corporation Limited (BPCL) under Section 148 of the Income Tax Act, 1961, for Assessment Years 2013–14 and 2014–15, ruling that there was no failure on the part of the assessee to disclose fully and truly all material facts during the original scrutiny proceedings.
The Division Bench comprising Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla held that reopening the completed assessments after more than four years — without new tangible material and solely on a change of opinion — was impermissible in law. Referring to the settled legal position, the Court emphasized: “Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure.”
The ruling came in response to Writ Petition filed by BPCL, challenging the reopening of assessments on the grounds of alleged wrongful exemptions under Section 10(34) for dividend income from the BPCL Trust and deductions under Section 32AC for investment in LPG cylinders.
The BPCL Trust Issue: All Facts Were Disclosed, Reassessment Is a Mere Change of Opinion
For AY 2013–14, the Department had claimed that BPCL failed to disclose that ₹37.10 crores received from the BPCL Trust did not qualify for exemption under Section 10(34), arguing that the Trust was not a company and hence not covered by Section 115-O of the Income Tax Act.
Rejecting this contention, the High Court found that the entire Trust structure — including the merger of Kochi Refineries Ltd., the issuance of bonus shares, and the dividend distributions — was fully disclosed in BPCL’s return of income and financial statements during the original scrutiny proceedings. In fact, the Assessing Officer had applied Section 14A read with Rule 8D to disallow a portion of expenses related to exempt income, which included income from the Trust.
The Court observed:
“What is important to note is that while doing the calculation under Section 14A, the Assessing Officer specifically takes a note of the investment in the BPCL Trust… 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 Court underscored that the AO's failure to question the exemption at the time of assessment cannot be rectified through reassessment years later. Quoting from the Supreme Court’s ruling in Gemini Leather Stores v. ITO, it held:
“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.”
AY 2014–15: Claim Under Section 32AC Also Held to Be Fully Disclosed
The second writ petition (WP No. 2966/2022) involved reopening for AY 2014–15 on two grounds — the same BPCL Trust dividend exemption, and an additional claim that BPCL had wrongly availed a deduction of ₹127.39 crores under Section 32AC on investment in LPG cylinders.
The Court noted that BPCL had clearly disclosed all relevant information, including asset-wise details of investments, through its submission dated 7 December 2016 during the original assessment. The very annexure that listed LPG cylinders — which the Department now considered ineligible — was already before the Assessing Officer.
The Court found that the reopening was based not on any new facts but on a mere reappraisal of the same material already considered:
“In fact, from seeing the reasons, we find that the Assessing Officer, after relying upon the data already furnished by the Assessee during the original scrutiny proceedings… comes to the conclusion that income has escaped assessment. Once this is the case, we are clearly of the view that… this is nothing but a ‘change of opinion’ of a subsequent Assessing Officer, who now seeks to reopen the assessment.”
Court’s Strong Words On Jurisdiction And Procedural Safeguards
The Court underscored the importance of the first proviso to Section 147, which bars reopening after four years unless the assessee has failed to disclose fully and truly all material facts. In the absence of such failure, even a mistaken allowance of a deduction does not confer jurisdiction to reopen.
Referring to Hindustan Lever Ltd. v. R. B. Wadkar, the Court emphasized:
“Merely making a bald assertion was not enough. The reasons recorded must disclose the mind of the Assessing Officer. He must disclose in the reasons as to which fact or material was not disclosed… so as to establish vital link between the reasons and evidence.”
Further, the Court found that the Revenue’s reliance on audit objections to trigger reassessment was procedurally and legally unsound, especially when the AO had not identified any new material fact. Although the Court refrained from ruling on this issue, it observed that the Revenue’s silence on BPCL’s request to disclose the audit objection and response warranted adverse inference.
Striking down the reassessment notices and rejection orders for both years, the Bombay High Court ruled:
“The impugned Notice is bad in law on this ground alone… 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.”
The Court held that reassessment based purely on retrospective reinterpretation of facts is not permissible, and emphasized that the sanctity of a completed scrutiny assessment cannot be disturbed lightly, especially after the statutory period of limitation has expired.
Both writ petitions were allowed, reassessment notices and orders quashed, and Rule made absolute — though no costs were imposed.
Date of Decision: 3 July 2025
