The Delhi High Court on Friday quashed an income tax reassessment notice issued against Maruti Suzuki India Ltd. (MSIL) for the Assessment Year (AY) 2009-10..A Bench of Justices Yashwant Varma and Ravinder Dudeja held that the notice was time-barred and based on a mere "change of opinion" rather than fresh evidence. "As is manifest from a reading of the reasons which were assigned in support of invocation of Section 147, the Assessing Officer (AO) has merely referred to the communication received from the ACIT and the obligation to review. The reasons fail to demonstrate the AO having even prima facie examined whether there was any fresh information which had been discovered in the subsequent AY and which may have led it to believe that the information which formed the basis for the original assessment was rendered false, misleading or incorrect," the Court's February 21 ruling said. .The case concerned a reassessment notice issued by the Deputy Commissioner of Income Tax (DCIT) on April 1, 2016, for AY 2009-10. The notice was based on four issues identified during the assessment of MSIL for AY 2010-11:Permanent Establishment (PE) of Suzuki Motor Corporation (SMC): The DCIT alleged that MSIL was a Permanent Establishment (PE) of SMC and failed to deduct Tax Deducted at Source (TDS) on payments made to SMC.Taxation of Share Transactions: The DCIT contended that share transactions should be treated as business income rather than capital gains.Disallowance of Deductions under Section 35(2AB): The DCIT sought to disallow deductions claimed by MSIL for research and development expenses.Warranty Provisions: The DCIT argued that warranty provisions should be treated as contingent liabilities and disallowed such provisions..MSIL challenged the reassessment notice, arguing that it was barred by limitation as the last date for initiating reassessment for AY 2009-10 was March 31, 2016. The company also contended that all relevant facts had been fully disclosed during the original assessment, and that the reassessment amounted to a mere "change of opinion.”.The Court ruled in the company's favour on the following grounds. .Time-Barred Reassessment: The Court held that the reassessment notice, issued on April 1, 2016, was time-barred, as the statutory deadline for initiating such action was March 31, 2016. The Court relied on its earlier decision in Suman Jeet Agarwal v. ITO, which held that a notice is considered "issued" only when it is dispatched, not when it is generated.“The assertion of the writ petitioner that the notice was in fact dispatched on 01 April 2016 would thus have to be accepted. Undisputedly, the last date for commencement of reassessment action for AY 2009-10 was 31 March 2016. The notice impugned before us, as we have found, came to be issued thereafter. The reassessment action is thus liable to be struck down on this short ground alone," the Court said..Full and True Disclosure: The Court found that MSIL had made full and true disclosures during the original assessment for AY 2009-10. The issues raised in the reassessment notice had already been examined by the Assessing Officer (AO) during the original assessment, and no new material had come to light to justify reopening the case.“The details of the material placed for the consideration of the AO, the documentation submitted, the nature of the queries that were addressed and the replies submitted leave us in no doubt that all material germane and relevant to the assessment had been duly presented by the writ petitioner,” the judgement noted. .Change of Opinion: The Court emphasised that reassessment cannot be initiated merely because the AO takes a different view on the same set of facts. The Court cited the Full Bench decision in CIT v. Usha International Ltd., which held that reassessment based on a "change of opinion" is invalid unless fresh material is discovered.“It is these aspects which convince us to hold that the four new issues neither constituted fresh information nor could have validly formed the basis for commencement of action under Section 147 of the Act. In our considered opinion, this was at best a case where the respondents could have perhaps only alleged that the AO had failed to correctly appreciate and apply the appropriate legal provisions or give shape to a liability under the Act despite adequate disclosures having been made," the Court held.Lack of Independent Application of Mind: The Court noted that the AO had relied solely on the findings of the assessment for AY 2010-11 without independently applying its mind to the facts of AY 2009-10. This, the Court held, was insufficient to justify reassessment.“The reasons fail to demonstrate the AO having even prima facie examined whether there was any fresh information which had been discovered in the subsequent AY and which may have led it to believe that the information which formed the basis for the original assessment was rendered false, misleading or incorrect," the judgment said. .The Court thus allowed MSIL's plea and quashed the reassessment notice. .MSIL was represented by Senior Advocate Ajay Vohra with Advocates Vaibhav Kulkarni and Udit Naresh from Vaish Associates. The IT department was represented by Shlok Chandra Senior Standing Counsel with Advocates Naincy Jain, Madhavi Shukla, JSCs and Sushant Pandey..[Read Judgment]
