DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. OASYS CYBERMATICS PVT LTD, CHENNAI

Subsequently, the assessment was reopened u/s. 147 of the Act by issuing notice u/s. 148 dated 26.03.2021. In response, the assessee filed return of income on 15.04.2021 and sought the reasons recorded for reopening. The assessee raised objections to the reopening vide letter dated 31.08.2021 which came to be rejected by (AY: 2016-17) the National Faceless Assessment Centre (NFAC) vide order dated 22.12.2021.

The Assessing Officer observed that the assessee had claimed depreciation on intangible assets including goodwill arising out of amalgamation. According to the Assessing Officer, such claim was not allowable in the facts and circumstances of the case and accordingly a sum of Rs.8.93 crore was disallowed. Further, it was observed that the assessee had remitted employees’ contribution towards Provident Fund and ESI beyond the due date prescribed under the respective Acts. Relying upon the provisions of section 36(1)(va) of the Act, the Assessing Officer disallowed a sum of Rs.0.52 crore. Accordingly, reassessment u/s. 147 of the Act was completed on 31.03.2022 incorporating the above additions.

Aggrieved by the reassessment order, the assessee preferred an appeal before the CIT(A). During the appellate proceedings, the (AY: 2016-17) Authorised Representative (AR) of the assessee produced the order dated 14.11.2024 passed by the Hon’ble High Court of Judicature at Madras in W.P. No.651 of 2022 and W.M.P. Nos.701 & 702 of 2022. The Hon’ble High Court allowed the writ petition and held that the reopening of the assessment was prompted by a mere change of opinion and amounted to review of the earlier assessment which is impermissible in law, following the judgment of the Hon’ble Supreme Court in CIT v. Kelvinator of India Ltd. 320 ITR 561 SC. In view of the said judgment of the Hon’ble High Court, the CIT(A) held that the reassessment proceedings initiated u/s. 147 of the Act stood quashed and consequently the additions made in the reassessment order could not survive. Accordingly, the CIT(A) directed the Assessing Officer to delete all the additions made in the order passed u/s. 147 dated 31.03.2022.

Aggrieved revenue challenged the order of the ld.CIT(A) before this Tribunal. The ld. Departmental Representative (DR) submitted that the CIT(A) erred in deleting the additions solely relying upon the order of the Hon’ble High Court. It was submitted that the Department has preferred a Writ Appeal against the said order and therefore the matter has not attained finality. It was further contended that the issues on the basis of which notice u/s. 148 was issued were not the issues considered in the original assessment and therefore the reopening was valid. The ld. DR further submitted that as per section 5(3) of the Direct Tax Vivad Se Vishwas Act, 2020, the order passed under the scheme is conclusive only in respect of matters covered by the declaration and therefore other issues can be examined in reassessment proceedings. Accordingly, the ld. DR prayed that the (AY: 2016-17) order of the CIT(A) be set aside and the order of the Assessing Officer be restored.

The ld. Authorised Representative (AR) strongly supported the order of the ld.CIT(A). The ld.AR submitted that the reassessment proceedings themselves have been quashed by the Hon’ble High Court of Madras in W.P. No.651 of 2022 holding that the reopening was based on a change of opinion. The ld. AR further submitted that once the very initiation of reassessment proceedings has been held to be invalid, the additions made in such proceedings cannot survive. It was also submitted that the assessee had filed a declaration under the Direct Tax Vivad Se Vishwas Scheme, 2020 and an order u/s. 5(1) of the said Act in Form-3 had been passed on 22.01.2021 which attained finality after payment of tax due.

We have heard the rival submissions and perused the materials available on record. It is an admitted fact that the assessment originally completed u/s. 143(3) on 28.12.2018 was reopened by issuance of notice u/s. 148 dated 26.03.2021. During the appellate proceedings before the ld.CIT(A), the assessee produced the order dated 14.11.2024 passed by the Hon’ble High Court of Madras in W.P. No.651 of 2022 wherein the Hon’ble High Court quashed the reassessment proceedings holding that the reopening was based on a mere change of opinion. The ld.CIT(A), after considering the said order of the Hon’ble High Court, held that once the reassessment proceedings have been quashed, the additions made pursuant thereto cannot survive. Before us, the Revenue has submitted that a Writ Appeal has been filed against the said order of the Hon’ble High Court. However, no material has been placed before us to demonstrate that (AY: 2016-17) the operation of the judgment of the Hon’ble High Court has been stayed by the Hon’ble High Court. In the absence of any stay of the judgment of the Hon’ble High Court, the said judgment continues to operate and is binding on the authorities subordinate to it. Therefore, we do not find any infirmity in the order of the ld.CIT(A) in deleting the additions made pursuant to the reassessment proceedings which themselves have been quashed by the Hon’ble High Court. Accordingly, the grounds raised by the Revenue are dismissed.

In the result, the appeal filed by the Revenue is dismissed.