Relief for Hyundai Motors: Madras HC Rules Reopening Income Tax Assessment on Same Issue After Prior Query and Reply Invalid [Read Order]

The case was filed by Hyundai Motor India Ltd., which challenged the reopening of its assessment for the assessment year 2004-2005. The company argued that the reassessment was based on the same issues already examined during the original proceedings under Section 143(3) of the Income Tax Act.

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The petitioner’s counsel argued that detailed queries were raised by the Assessing Officer during the original assessment, and complete replies were submitted, especially on topics like foreign exchange gains, technical know-how payments, and DEPB claims.

The income tax department argued that the reassessment was valid because it was initiated within four years and the Assessing Officer had reasons to believe that income had escaped assessment. They argued that certain deductions and claims needed further scrutiny and that reopening the assessment was justified under Section 147.

The petitioner’s counsel argued in response that there was no new material or fresh evidence to support the reopening and that reassessing the same issues already verified during the original proceedings was not legally allowed. They further argued that reopening based only on a change in opinion went against the settled legal principle that reassessment must be based on new information.

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The division bench comprising Chief Justice K.R. Shriram and Justice Sunder Mohan observed that once a query is raised and answered during assessment, reopening the same issue later is a change of opinion.

The court observed that even if the original assessment order did not mention every detail, it was clear that the issues had been considered. They relied on the principle laid down in earlier cases that an assessment cannot be reopened merely because a different view is taken later without any fresh evidence.

The court found that the reassessment was done without any new material and that the reasons recorded by the Assessing Officer were directly related to matters already examined. The court held that such a reopening was not valid under Section 147 and upheld the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.

The court dismissed the revenue’s appeal and confirmed that reopening an assessment on a previously addressed issue without new facts is not permitted. The writ petition was allowed.

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