S.C., JOHNSON PVT. LTD.,GURGAON HARYANA vs. DCIT CIRCLE 7(1), NEW DELHI

ITA 1850/DEL/2019Status: DisposedITAT Delhi28 August 2025AY 2006-07107 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal decided the issues as follows: Regarding the reopening of assessment (Grounds 1 to 1.5), the Tribunal found that the reassessment proceedings were initiated based on a change of opinion, as the Assessing Officer (AO) had considered the same set of facts during the original assessment under Section 143(3). The Tribunal noted that the reasons for reopening did not indicate any failure on the part of the assessee to disclose material facts fully and truly. Therefore, the initiation of reassessment proceedings was held to be invalid. The Tribunal did not specifically address the grounds related to limitation, vagueness of reasons, or satisfaction of the CIT under Section 151(2) as the primary issue of change of opinion was decisive. Regarding the disallowance of salary expenditure (Grounds 2 and 2.1), the Tribunal held that the assessee, following the mercantile system of accounting, was entitled to claim expenditure in the year it was incurred, even if the debit notes were received in a subsequent financial year. The Tribunal emphasized the principle of prudence and the matching concept, stating that expenditures should be accounted for in the period to which they relate. Thus, the disallowance was deleted. Regarding the adjustment in book profits under Section 115JB (Grounds 3 to 3.5), the Tribunal held that the AO was not empowered to alter the scheme of amalgamation approved by the High Court. The Tribunal found that the 'Purchase' method for goodwill amortization, as per AS-14 and the scheme, was permissible. The Tribunal concluded that the adjustment made by the AO was incorrect and deleted the addition. The Tribunal did not explicitly decide whether the adjustment fell under Explanation 1 to Section 115JB, as the primary reasoning was the AO's lack of power to alter the scheme. Regarding interest under Section 234D (Ground 4), the Tribunal did not record any specific decision on this ground.

What were the facts?

The assessee, S.C. Johnson Pvt. Ltd., is engaged in manufacturing and trading insect control and air care products. For Assessment Year 2006-07, the assessee filed a return declaring NIL income after claiming deductions under Sections 80IB and 80IC. Original assessment was completed under Section 143(3) on 24.12.2009. Subsequently, reassessment proceedings under Section 147 were initiated by issuing a notice under Section 148 on 17.11.2011, which was followed by another notice on 07.03.2013. The assessee's objections were disposed of, and a reassessment order was passed on 30.03.2014. This order computed the income under the Income Tax Act as NIL but assessed book profit at INR 69,62,80,147/- against a declared book loss of INR 15,58,74,356/-. The assessee appealed to the CIT(A), who dismissed the objections. The assessee is now appealing to the ITAT against the CIT(A)'s order.

What were the issues?

1. Whether the Ld. CIT(A) erred in upholding the initiation of reassessment proceedings under Section 147 of the Act, considering the grounds that there was no escapement of income, the proceedings were barred by limitation under the proviso to Section 147, the reasons to believe were vague and lacked tangible material, and the initiation was based on a change of opinion. 2. Whether the Ld. CIT(A) erred in confirming the disallowance of salary expenditure of expatriates amounting to Rs. 3,45,62,000/-, despite the assessee following the mercantile system of accounting and the principle of prudence. 3. Whether the Ld. CIT(A) erred in upholding the adjustment of Rs. 85,21,54,503/- in the book profits under Section 115JB for the amortization of goodwill, by treating the amalgamation scheme as 'Pooling of Interest' method instead of the 'Purchase' method, and whether the AO could alter a scheme approved by the High Court. Assessee's Contentions: - Reassessment proceedings were wrongly initiated as there was no escapement of income, and the reasons were vague, based on a change of opinion, and barred by limitation. The satisfaction of the CIT under Section 151(2) was also unsatisfactory. - Salary expenditure should be allowed in the year it pertained under the mercantile system, prudence, and matching concepts, irrespective of debit note receipt date. - Amortization of goodwill under the 'Purchase' method, as per AS-14 and the High Court-approved amalgamation scheme, should be allowed, and the AO cannot alter such a scheme. The adjustment did not fall under Explanation 1 to Section 115JB. Revenue's Contentions: - Not recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 80IC,Section 143(3),Section 147,Section 148,Section 139(1),Section 151(2),Section 115JB,Section 234D

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

For Appellant: Shri K. M. Gupta, Adv. &, Ms. Shruti Khimta, AR
For Respondent: Shri Mahesh Kumar, CIT DR
Hearing: 02.06.2025Pronounced: 28.08.2025

Heard together (3 matters)

ITA No.1850/Del/2019
ITA No.1470/Del/2020
ITA No.1122/Del/2020

Read from the judgment's own cause title. This page is filed under one of them.

PER MANISH AGARWAL, AM :

The captioned appeals are filed by assessee against the different orders of Ld. CIT(A) u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders tabulated as under:

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 80IB

All 1,094 judgments and leading authorities on Section 80IB →

Recent GST High Court judgments

Search GST case law →