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

In sum and substance, the Revenue has raised the following grounds of appeal:

Brief facts of the case are that the assessee, M/s. Oasys Cybernetics Private Limited, is a company engaged in the business of system integration. The assessee filed its return of income for the assessment year 2016-17 on 17.10.2016 declaring NIL income. The return was selected for scrutiny under CASS and notice u/s. 143(2) of the Income Tax Act, 1961 was issued on 28.09.2017. The assessment was completed u/s. 143(3) of the Act on 28.12.2018 wherein the Assessing Officer estimated the income of the assessee at 8% of the gross receipts, which worked out to Rs.23,94,81,675/-.

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

Aggrieved by the rejection of objections, the assessee filed a writ petition before the Hon’ble High Court of Madras in W.P. No.651 of 2022 along with miscellaneous petitions seeking interim relief. In the meanwhile, the case was transferred by the NFAC to the jurisdictional Assessing Officer on 02.02.2022. The Assessing Officer proceeded with the reassessment and completed the reassessment u/s. 147 of the Act on 31.03.2022 by making the following disallowances: Disallowance of depreciation on intangible assets – Rs.8.93 crore  Disallowance on account of delayed remittance of employee  contribution to PF/ESI – Rs.0.52 crore

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

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

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

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