The reassessment notice stemmed from four issues identified during MSIL’s assessment for AY 2010-11: the DCIT alleged MSIL was a Permanent Establishment (PE) of Suzuki Motor Corporation (SMC) and failed to deduct Tax Deducted at Source (TDS) on payments to SMC; share transactions should be treated as business income, not capital gains; deductions under Section 35(2AB) for research and development expenses should be disallowed; and warranty provisions should be treated as contingent liabilities and disallowed.
MSIL challenged the notice, arguing it was issued after the March 31, 2016 deadline for AY 2009-10 reassessments and that all facts were fully disclosed in the original assessment. The Court agreed, ruling the notice was time-barred as it was dispatched on April 1, 2016, missing the statutory deadline.
“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 Court said, citing its earlier ruling in Suman Jeet Agarwal v. ITO.
The Court also found MSIL had made “full and true disclosures” during the original assessment. “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 February 21 judgement noted. It ruled the issues raised were already examined, and no new material justified reopening the case.
Further, the Court held the reassessment reflected a “change of opinion” rather than new evidence, invalid under the Full Bench decision in CIT v. Usha International Ltd. “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,” the Court said.
The Court criticised the Assessing Officer (AO) for not independently reviewing AY 2009-10 facts, relying instead on AY 2010-11 findings. “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 ruling stated.
MSIL’s plea was allowed, with Senior Advocate Ajay Vohra, alongside Advocates Vaibhav Kulkarni and Udit Naresh from Vaish Associates, representing the company. The Income Tax department was represented by Shlok Chandra, Senior Standing Counsel, with Advocates Naincy Jain, Madhavi Shukla, JSCs, and Sushant Pandey.
