My assessment is being reopened after four years, but the recorded reasons never say I failed to disclose anything. Can the Department make that case in its affidavit at the hearing?
No. The Bombay High Court quashed the section 148 notice. Where a scrutiny assessment under section 143(3) has been made, the proviso to section 147 bars action after four years from the end of the assessment year unless income escaped by reason of the assessee's failure to disclose fully and truly all material facts. The reasons here said nothing about any such failure. The Court held that reasons must be read as recorded, with no substitution, deletion, addition or inference, and cannot be supplemented by an affidavit or an oral submission. The officer therefore had no jurisdiction, and the notice fell on that short ground alone.
Decided by the High Court (High Court of Judicature at Bombay; V.C. Daga and J.P. Devadhar, JJ (judgment by V.C. Daga, J)) on 2004-02-25, reported as [2004] 268 ITR 332 (Bom). It bears on section 147, section 148, section 143(3) of the Income Tax Act 1961, in Reassessment & Reopening matters.
This is the judgment practitioners cite for what recorded reasons must contain and how they are to be read, and it is quoted far beyond its own facts. It sets out the discipline in a single passage: the reasons must speak for themselves, be clear, unambiguous and self-explanatory, disclose the officer's mind, be based on evidence he can justify from the record, and identify which material fact was not disclosed. That last requirement is the operative one for a reopening beyond four years, because it establishes what the Court calls the vital link between the reasons and the evidence, and that link is the safeguard against arbitrary reopening of a concluded assessment. The judgment also shuts the door on the Department's usual repair work - an affidavit in reply that fills the gaps - reasoning that otherwise reasons lacking in material particulars would get supplemented by the time the matter reaches the court. On the facts it also illustrates that a note in the computation, the accounts and the tax audit report is disclosure, and that a failed section 263 revision barred by limitation is not to be resurrected through section 148.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 1996-97 the assessee, a manufacturer of consumer products, filed its return on 30 November 1996. The computation carried a note that, following its practice of earlier years, no provision had been made for excise and customs duty on stocks lying at the year end in a bonded warehouse, estimated at Rs.5,85,71,968, and that this amount was accordingly not included in the valuation of inventories, with no effect on the year's profit. The same accounting policy was stated in the accounts and referred to in the tax audit report under section 44AB. The return was revised on 31 March 1998 following an amalgamation, repeating the disclosure. Assessment was completed under section 143(3) on 29 January 1999 at Rs.3,39,29,08,460. The Commissioner then issued a notice under section 263 saying the duty ought to have been included in the inventory valuation, but dropped the revision on 28 March 2002 on the assessee's objection that it was barred by the two year limit in section 263(2). On 7 November 2002 the assessee was served with a notice dated 5 November 2002 under section 148. It asked for the recorded reasons, which were not supplied; a notice under section 142(1) followed, calling on it to show cause why the amount should not be added to closing stock and to explain deductions under sections 80HHC and 80-IA and a leave salary debit. The assessee petitioned under Article 226. The reasons were disclosed only in the Revenue's counter affidavit: they recited the note in the accounts, said the liability to duty arises on manufacture, cited Board Instruction No. 1389 of 24 March 1981, and concluded that income had escaped assessment.
The notice under section 148 was quashed and set aside and the rule made absolute, with no order as to costs. The assessment year being 1996-97, four years from the end of it expired on 31 March 2001, and the notice dated 5 November 2002 was plainly beyond that period. Since an assessment under section 143(3) had been made, the proviso to section 147 barred action unless income had escaped by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for the assessment. The recorded reasons nowhere stated any such failure. The Court rejected the Revenue's contention that the failure could be inferred from the text of the reasons as recorded, holding that no inference may be drawn from reasons not recorded and that the reasons cannot be supplemented by affidavit or oral submission. The Assessing Officer therefore had no jurisdiction to reopen a concluded assessment, and on that short ground alone the notice fell. Having decided the petition on the first contention, the Court expressly declined to record any finding on the merits of the addition.
The Court took the jurisdictional question first and decided the case on it. The proviso to section 147 imposes two conditions where a scrutiny assessment has been made and four years have passed: there must be escapement of income, and it must be by reason of the assessee's failure to make a return or to disclose fully and truly all material facts. The second is not a formality but the source of the officer's power for that extended period, so it must appear in the reasons he recorded before issuing the notice. From that the Court derived its statement of what recorded reasons must be. They are to be read as they were recorded: no substitution, no deletion, no addition, and no inference drawn from reasons not recorded. It is for the officer to reach the conclusion that there was a failure to disclose, to form his opinion and to put it on record in black and white. The reasons must be clear, unambiguous, free of vagueness and self-explanatory, so that the assessee is not left guessing; they are the manifestation of the officer's mind, and he speaks through them. They must rest on evidence which, if challenged, he can justify from the material on record, and they must identify which fact or material was not fully and truly disclosed, so as to establish the vital link between the reasons and the evidence - the safeguard against arbitrary reopening of a concluded assessment. If an affidavit or an argument at the hearing could make good what the reasons omit, reasons lacking material particulars would be cured by the time the matter reached the court, and that safeguard would be worthless. Applying this, the reasons here recited only the note in the accounts, the point that duty liability arises on manufacture and a Board instruction; they alleged no failure to disclose, and none could be supplied by inference.
The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission
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Handle my notice → Ask a CA on WhatsAppNo. The Bombay High Court quashed the section 148 notice. Where a scrutiny assessment under section 143(3) has been made, the proviso to section 147 bars action after four years from the end of the assessment year unless income escaped by reason of the assessee's failure to disclose fully and truly all material facts. The reasons here said nothing about any such failure. The Court held that reasons must be read as recorded, with no substitution, deletion, addition or inference, and cannot be supplemented by an affidavit or an oral submission. The officer therefore had no jurisdiction, and the notice fell on that short ground alone. This was decided by the High Court (High Court of Judicature at Bombay; V.C. Daga and J.P. Devadhar, JJ (judgment by V.C. Daga, J)) and bears on section 147, section 148, section 143(3) of the Income Tax Act 1961. It is reported as [2004] 268 ITR 332 (Bom). This is the judgment practitioners cite for what recorded reasons must contain and how they are to be read, and it is quoted far beyond its own facts. It sets out the discipline in a single passage: the reasons must speak for themselves, be clear, unambiguous and self-explanatory, disclose the officer's mind, be based on evidence he can justify from the record, and identify which material fact was not disclosed. That last requirement is the operative one for a reopening beyond four years, because it establishes what the Court calls the vital link between the reasons and the evidence, and that link is the safeguard against arbitrary reopening of a concluded assessment. The judgment also shuts the door on the Department's usual repair work - an affidavit in reply that fills the gaps - reasoning that otherwise reasons lacking in material particulars would get supplemented by the time the matter reaches the court. On the facts it also illustrates that a note in the computation, the accounts and the tax audit report is disclosure, and that a failed section 263 revision barred by limitation is not to be resurrected through section 148. If it applies to you, the first step is this: Ask for the recorded reasons in writing as soon as the notice arrives, and file the return under protest if you must, before the reassessment gathers momentum.
For assessment year 1996-97 the assessee, a manufacturer of consumer products, filed its return on 30 November 1996. The computation carried a note that, following its practice of earlier years, no provision had been made for excise and customs duty on stocks lying at the year end in a bonded warehouse, estimated at Rs.5,85,71,968, and that this amount was accordingly not included in the valuation of inventories, with no effect on the year's profit. The same accounting policy was stated in the accounts and referred to in the tax audit report under section 44AB. The return was revised on 31 March 1998 following an amalgamation, repeating the disclosure. Assessment was completed under section 143(3) on 29 January 1999 at Rs.3,39,29,08,460. The Commissioner then issued a notice under section 263 saying the duty ought to have been included in the inventory valuation, but dropped the revision on 28 March 2002 on the assessee's objection that it was barred by the two year limit in section 263(2). On 7 November 2002 the assessee was served with a notice dated 5 November 2002 under section 148. It asked for the recorded reasons, which were not supplied; a notice under section 142(1) followed, calling on it to show cause why the amount should not be added to closing stock and to explain deductions under sections 80HHC and 80-IA and a leave salary debit. The assessee petitioned under Article 226. The reasons were disclosed only in the Revenue's counter affidavit: they recited the note in the accounts, said the liability to duty arises on manufacture, cited Board Instruction No. 1389 of 24 March 1981, and concluded that income had escaped assessment. The matter was decided on 2004-02-25 by the High Court (High Court of Judicature at Bombay; V.C. Daga and J.P. Devadhar, JJ (judgment by V.C. Daga, J)). On those facts the High Court held as follows. The notice under section 148 was quashed and set aside and the rule made absolute, with no order as to costs. The assessment year being 1996-97, four years from the end of it expired on 31 March 2001, and the notice dated 5 November 2002 was plainly beyond that period. Since an assessment under section 143(3) had been made, the proviso to section 147 barred action unless income had escaped by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for the assessment. The recorded reasons nowhere stated any such failure. The Court rejected the Revenue's contention that the failure could be inferred from the text of the reasons as recorded, holding that no inference may be drawn from reasons not recorded and that the reasons cannot be supplemented by affidavit or oral submission. The Assessing Officer therefore had no jurisdiction to reopen a concluded assessment, and on that short ground alone the notice fell. Having decided the petition on the first contention, the Court expressly declined to record any finding on the merits of the addition.
The Court took the jurisdictional question first and decided the case on it. The proviso to section 147 imposes two conditions where a scrutiny assessment has been made and four years have passed: there must be escapement of income, and it must be by reason of the assessee's failure to make a return or to disclose fully and truly all material facts. The second is not a formality but the source of the officer's power for that extended period, so it must appear in the reasons he recorded before issuing the notice. From that the Court derived its statement of what recorded reasons must be. They are to be read as they were recorded: no substitution, no deletion, no addition, and no inference drawn from reasons not recorded. It is for the officer to reach the conclusion that there was a failure to disclose, to form his opinion and to put it on record in black and white. The reasons must be clear, unambiguous, free of vagueness and self-explanatory, so that the assessee is not left guessing; they are the manifestation of the officer's mind, and he speaks through them. They must rest on evidence which, if challenged, he can justify from the material on record, and they must identify which fact or material was not fully and truly disclosed, so as to establish the vital link between the reasons and the evidence - the safeguard against arbitrary reopening of a concluded assessment. If an affidavit or an argument at the hearing could make good what the reasons omit, reasons lacking material particulars would be cured by the time the matter reached the court, and that safeguard would be worthless. Applying this, the reasons here recited only the note in the accounts, the point that duty liability arises on manufacture and a Board instruction; they alleged no failure to disclose, and none could be supplied by inference. In the words reproduced by the source cited on this page: "The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission"
It was decided by the High Court on 2004-02-25 and is reported as [2004] 268 ITR 332 (Bom). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The notice under section 148 was quashed and set aside and the rule made absolute, with no order as to costs. The assessment year being 1996-97, four years from the end of it expired on 31 March 2001, and the notice dated 5 November 2002 was plainly beyond that period. Since an assessment under section 143(3) had been made, the proviso to section 147 barred action unless income had escaped by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for the assessment. The recorded reasons nowhere stated any such failure. The Court rejected the Revenue's contention that the failure could be inferred from the text of the reasons as recorded, holding that no inference may be drawn from reasons not recorded and that the reasons cannot be supplemented by affidavit or oral submission. The Assessing Officer therefore had no jurisdiction to reopen a concluded assessment, and on that short ground alone the notice fell. Having decided the petition on the first contention, the Court expressly declined to record any finding on the merits of the addition. It arises in Reassessment & Reopening matters, on section 147, section 148, section 143(3) of the Income Tax Act 1961, and was decided by High Court of Judicature at Bombay; V.C. Daga and J.P. Devadhar, JJ (judgment by V.C. Daga, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a reopening beyond four years after a section 143(3) assessment, check the reasons for an express finding of failure to disclose fully and truly, naming the fact not disclosed; if it is absent, take the jurisdictional point and do not argue merits first. Object to any attempt to read the failure into the reasons by inference, or to add to them through the counter affidavit or at the hearing. Keep the disclosure trail: a note in the computation, the same policy in the audited accounts, and a reference in the section 44AB report is what defeated the Revenue here. Watch for a reopening that follows a revision dropped as time barred; the sequence itself is worth putting before the court.
Still good law. A citedby search returns 524 later citing documents, 85 of them High Court or Supreme Court, and the judgment is still being used to quash reassessments. In Global Earthproperties and Developers v Union of India (Bombay High Court, 12 January 2026) the Division Bench held at para 22 that 'The law, in this regard, has been settled by the decision of the coordinate bench of this Court in the case of Hindustan Lever Ltd. v. R.B. Wadkar, ACIT', applied its requirements - that the Assessing Officer must form and record his opinion in the reasons, and, where the reopening is beyond four years, must say in the reasons themselves that there was a failure to disclose material facts, which cannot be supplied afterwards - and on that ground quashed the s.148 notice, the order disposing of objections and the assessment order. The Bombay High Court used it the same way in Stock Holding Corporation of India v ACIT (18 August 2025) and Bharat Petroleum Corporation Ltd v ACIT (3 July 2025), and it has travelled to the Allahabad, Gujarat and Telangana High Courts. Nothing overruling, doubting or confining it was found. The operative caution is one of scope rather than authority: the judgment construes the pre-2021 reassessment scheme, so for notices issued under the s.148A regime introduced by the Finance Act 2021 its requirements have to be mapped onto the new procedure - the discipline that the recorded reasons must stand on their own and cannot be improved later is what later benches continue to enforce. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Court decided the petition on limitation alone and expressly declined to record any finding on the second question - whether the assessee had in fact disclosed fully and truly, and whether excise and customs duty on stock in a bonded warehouse must be included in inventory. So the judgment is authority on recorded reasons and on the proviso to section 147, and on nothing else. It does not deal with the effect of Board Instruction No. 1389 of 24 March 1981, which the officer had relied on, nor with section 145A. It also does not say what became of the section 142(1) queries on the section 80HHC and section 80-IA deductions and the leave salary debit. The batch line lists sections 147 and 148; section 143(3) is added because the proviso is engaged only where such an assessment has been made. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The notice under section 148 was quashed and set aside and the rule made absolute, with no order as to costs. The assessment year being 1996-97, four years from the end of it expired on 31 March 2001, and the notice dated 5 November 2002 was plainly beyond that period. Since an assessment under section 143(3) had been made, the proviso to section 147 barred action unless income had escaped by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for the assessment. The recorded reasons nowhere stated any such failure. The Court rejected the Revenue's contention that the failure could be inferred from the text of the reasons as recorded, holding that no inference may be drawn from reasons not recorded and that the reasons cannot be supplemented by affidavit or oral submission. The Assessing Officer therefore had no jurisdiction to reopen a concluded assessment, and on that short ground alone the notice fell. Having decided the petition on the first contention, the Court expressly declined to record any finding on the merits of the addition.
TaxSphere, “Hindustan Lever Ltd v R.B. Wadkar”, https://taxnotice.vittsphere.com/caselaw/case/hindustan-lever-ltd-v-r-b-wadkar/ (validity last checked 2026-08-29)
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My return was only processed under 143(1). Does that stop the department reopening it later?
They have a letter from a bank that you have never seen. Can they use it against you?
You filed without books because they were seized. Is that a failure to disclose?
I applied under s.144A and the Additional Commissioner directed the Assessing Officer in my favour. Two years later the department has issued a s.148 notice on exactly the same point. Can it do that?
