Restricting Reassessment Jurisdiction for Repetitive Lease Rent Payments under Consistent Accounting Methodology
Reference: Section 37(1) of the Income-tax Act, 1961
Assessment Year: 2017-18
Status: In Favor of Assessee (SLP Dismissed)
Legal Issue: Can the Revenue reopen an assessment for lease rent payments if the same methodology was consistently accepted in previous years?
Summary of Facts: The assessee claimed lease rent for CISCO equipment as business expenditure. After scrutiny, the AO attempted to reopen the case, alleging the lease included non-deductible principal components. The assessee proved that these “finance lease” transactions had been accepted by the Revenue in every regular assessment since 2012-13.
Final Holding: YES (Reopening Invalid). The High Court held that the AO must respect the repetitive and consistent nature of transactions accepted over several years. The Supreme Court dismissed the Revenue’s SLP, confirming that reopening without fresh tangible material—merely to change an opinion on a consistent past practice—is a jurisdictional error.
Invalidity of Reassessment for Foreign Currency Hedging Expenses Without Fresh Tangible Material
Reference: Section 37(1) of the Income-tax Act, 1961
Assessment Year: 2017-18
Status: In Favor of Assessee (SLP Dismissed)
Legal Issue: Is the reopening of an assessment for hedging bank charges valid in the absence of new evidence?
Summary of Facts: The assessee incurred bank charges for hedging foreign currency. While unrealized gains and losses were duly reflected in the computation of income but not claimed as deductions, the Revenue sought to reopen the assessment on the suspicion of potential undisclosed gains.
Final Holding: NO. The High Court ruled that since the assessee had only claimed bank charges (revenue expenditure) and the underlying gains/losses were already part of the record, the reopening lacked basis. The Supreme Court upheld this view, dismissing the SLP as there was no “fresh tangible material” to justify a reassessment.
Denying Retrospective Application of 2021 Goodwill Depreciation Amendments to Past Assessment Years
Reference: Section 32 and Section 148 of the Income-tax Act, 1961
Assessment Year: 2017-18
Status: In Favor of Assessee (SLP Dismissed)
Legal Issue: Can the 2021 amendment excluding goodwill from depreciable assets be used to reopen assessments for AY 2017-18?
Summary of Facts: The assessee claimed depreciation on goodwill, which was accepted in scrutiny. Later, the AO issued a reopening notice based on the Finance Act, 2021 amendment (effective 1-4-2021) and Section 43(6)(c), which now denies such depreciation.
Final Holding: NO. The High Court held that the law as of AY 2017-18 allowed depreciation on goodwill. A prospective amendment introduced in 2021 cannot form the “reason to believe” that income escaped assessment in a prior year. The Supreme Court dismissed the SLP, protecting the assessee’s right to the law as it stood during the relevant year.
Summary of Key Jurisdictional Principles
Consistency: The Revenue cannot arbitrarily challenge a repetitive claim (like lease rent) if it has been accepted for multiple prior years without a change in facts.
Tangible Material: Reopening under Section 148 requires “new” evidence. Reviewing existing records for a “better” tax result is an illegal “change of opinion.”
Prospective Amendments: Legislative changes (like the goodwill amendment) do not apply to past years unless the statute explicitly states it is retrospective.