2019 (6) TMI 1641 - HC - Income Tax

High Court dismisses petition challenging show-cause notice under Income Tax Act

M/s. Cognizant Technology Solutions India Pvt. Ltd., Versus  The Commissioner of Income Tax, Larger Taxpayer Unit,

The Madras High Court dismissed the writ petition challenging a show-cause notice issued to a company regarding the Assessment Year 2014-2015 under ... Revision u/s 263 - petitioner purchased its own shares as buy-back under Section 77 A of the Companies Act - Whether shares purchased under Section 77 A of the Companies Act cannot be regarded as dividend and the impugned notice has been issued in a hurried manner without providing sufficient time to the petitioner to send a reply and hence, it is liable to be set-aside? - HELD THAT:- In view of the elaborate orders passed [2019 (7) TMI 136 - MADRAS HIGH COURT] touching all the issues, this Writ Petition stands dismissed, directing the petitioner to file necessary objections to the show-cause notice within a period of 15 days and on such receipt, the same shall be considered by meeting out each and every objections raised, on merits and in accordance with law. Issues involved:Challenge to show-cause notice seeking explanation for Assessment Year 2014-2015 under Section 263 of the Income Tax Act.Analysis:The judgment by the Madras High Court involved a challenge to a show-cause notice issued to a company regarding the Assessment Year 2014-2015 under Section 263 of the Income Tax Act. The company, engaged in software development and export, had purchased its own shares through buy-back under Section 77 A of the Companies Act in 2013. The Income Tax Return for the relevant year was filed in 2014 and accepted by the Deputy Commissioner of Income Tax in 2016. Subsequently, in 2017, notices were issued to the company's shareholders on the grounds of overvaluation of shares, leading to challenges in separate writ petitions. The company contended that the reopening of its Income Tax Return under Section 263 was an attempt to counter the arguments raised by its shareholders in the writ petitions. The company argued that the bifurcation of share price into two parts lacked legal authority, and the shares purchased under Section 77 A of the Companies Act should not be treated as dividends. The company also criticized the haste in issuing the show-cause notice without allowing sufficient time for a response.The Revenue, represented by the Additional Solicitor General, defended the show-cause notice, stating that it was merely a preliminary step and that the company had not presented valid grounds for setting it aside. The court, considering the detailed orders passed in the related writ petitions, dismissed the current writ petition. The company was directed to file objections to the show-cause notice within 15 days, with an assurance that each objection would be duly considered on its merits and in accordance with the law. No costs were awarded in the judgment, and the connected miscellaneous petition was closed as a result.