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Relief for Hyundai: Madras HC Rules Income Tax Assessment Cannot Be Reopened Just for AO's Changed Opinion on Forex Gains [Read Order]

Madras High Court quashes the reopening of Hyundai’s tax assessment, ruling that an Assessing Officer’s change of opinion on forex gains and technical know-how payments cannot justify reassessment

Kavi Priya
Relief for Hyundai: Madras HC Rules Income Tax Assessment Cannot Be Reopened Just for AOs Changed Opinion on Forex Gains [Read Order]
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In a recent ruling, the Madras High Court quashed the reopening of Hyundai Motor India Ltd’s income tax assessment, stating that the action was based merely on a change of opinion by the Assessing Officer regarding foreign exchange gains and technical know-how payments.

The dispute arose when the Income Tax Department issued a notice under Section 148 to reopen Hyundai’s assessment for the Assessment Year 2004-2005. The department argued that Hyundai had not properly adjusted foreign exchange gains while claiming depreciation and had incorrectly treated a lump-sum payment for technical know-how as revenue expenditure instead of capital expenditure. They also argued that Hyundai had wrongly claimed export incentives under Section 80HHC without fulfilling certain conditions under the amended law.

The petitioner challenged the reopening, stating that the Assessing Officer had already raised detailed queries on these same issues during the original assessment proceedings and that the company had provided all relevant documents and explanations at that time. The company's counsel argued that the reassessment amounted to a mere change in the officer’s opinion, which could not justify reopening under the Income Tax Act.

The Revenue's counsel argued that the reopening was valid since it was within four years and was based on the officer’s “reason to believe” that income had escaped assessment. They further argued that the original assessment order did not specifically record findings on these issues, allowing for a fresh examination.

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A division bench led by Chief Justice K.R. Shriram and Justice Sunder Mohan observed that the Assessing Officer had issued extensive questionnaires during the original proceedings and had concluded the assessment after considering Hyundai’s detailed responses. The court held that the reassessment notice lacked fresh tangible material and was solely based on a reappraisal of the same facts already examined.

The court further relied on established law that reopening assessments based on a mere change of opinion is invalid. It ruled that the conditions for reassessment under Section 147 were not met and that the reassessment proceedings initiated against Hyundai were not legally sustainable.

The High Court dismissed the department’s appeal and confirmed the relief granted to Hyundai by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals), upholding Hyundai’s original tax assessment for the year in question.

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