2020 (10) TMI 996 - HC - Income Tax

Court deems re-assessment a change of opinion, lacked new material, quashes orders.

Maya Appliances Private Limited Versus Assistant Commissioner of Income Tax, Deputy Commissioner of Income Tax, Principal Commissioner of Income Tax-4, Union of India, Represented by Revenue Secretary

Maya Appliances Private Limited Versus Assistant Commissioner of Income Tax, Deputy Commissioner of Income Tax, Principal Commissioner of Income Tax-4, ... Issues Involved:1. Jurisdiction for re-assessment under Section 147 of the Income Tax Act, 1961.2. Disallowance under Section 14A.3. Non-deduction of tax at source under Section 194J.4. Provident Fund contributions not paid before due dates.5. Classification of legal and professional fees as capital expenditure.6. Deduction of CSR expenses.7. Employee benefit expenses related to ex-employees.8. Long-term capital gains on slump sale.Issue-wise Detailed Analysis:1. Jurisdiction for Re-assessment under Section 147:The petitioner challenged the jurisdiction assumed by the respondent for re-assessment for Assessment Year 2012-13. The proceedings were initiated after four years, invoking the proviso to Section 147 of the Income Tax Act, 1961. The court noted that the petitioner had filed the return of income in time, and the only issue was whether the alleged income escapement was due to the petitioner’s failure to fully and truly disclose all material facts. The court examined the reasons for re-assessment and found that all issues were based on materials already available on record during the original assessment. There was no new tangible material, and the conditions precedent in the proviso to Section 147 were not met.2. Disallowance under Section 14A:The re-assessment order disallowed Rs. 40,70,957 under Section 14A as per Rule 8D. However, the petitioner had already disallowed Rs. 81,43,316 as management expenses related to exempted assets. The court noted that the Assessing Officer had raised this issue during the original assessment, and the petitioner had responded appropriately. The court found that the excess addition of Rs. 34,33,371 should be deleted.3. Non-deduction of Tax at Source under Section 194J:The re-assessment order disallowed Rs. 3,30,900 for non-deduction of TDS under Section 194J. The court noted that this issue was raised and addressed during the original assessment. The petitioner had provided the necessary details and explanations in response to the Assessing Officer's queries. The court found no new material to justify the re-assessment.4. Provident Fund Contributions Not Paid Before Due Dates:The re-assessment order disallowed Rs. 49,412 for late payment of employees' PF contributions. The court noted that details of PF contributions were sought and provided during the original assessment. The court found that the petitioner had disclosed all relevant information, and there was no failure to disclose material facts.5. Classification of Legal and Professional Fees as Capital Expenditure:The re-assessment order disallowed certain legal and professional fees, classifying them as capital expenditure. The court noted that details of these fees were sought and provided during the original assessment. The court found that the petitioner had disclosed all relevant information, and there was no failure to disclose material facts.6. Deduction of CSR Expenses:The re-assessment order disallowed Rs. 1,09,51,936 claimed as 'Bike event expenses,' considering them as CSR expenses. The court noted that details of these expenses were sought and provided during the original assessment. The court found that the petitioner had disclosed all relevant information, and there was no failure to disclose material facts.7. Employee Benefit Expenses Related to Ex-employees:The re-assessment order disallowed Rs. 2,84,73,639 claimed as employee benefit expenses related to ex-employees. The court noted that details of these expenses were sought and provided during the original assessment. The court found that the petitioner had disclosed all relevant information, and there was no failure to disclose material facts.8. Long-term Capital Gains on Slump Sale:The re-assessment order included Rs. 27,77,75,000 as long-term capital gains from a slump sale. The court noted that details of the slump sale were sought and provided during the original assessment. The court found that the petitioner had disclosed all relevant information, and there was no failure to disclose material facts.Conclusion:The court found that all issues raised in the re-assessment were based on materials already available during the original assessment. There was no new tangible material, and the conditions precedent in the proviso to Section 147 were not met. The re-assessment was deemed a change of opinion, which is not permissible. The writ petitions were allowed, and both the impugned order dated 23.12.2019 and the re-assessment order dated 27.12.2019 were quashed.