Reopening Assessment for CSR (Sec 35AC) disallowed without “New Material”; SLP Dismissed
Issue
Whether an assessment can be reopened under Section 147 to disallow CSR expenditure claimed under Section 35AC (or 80G) based solely on a “change of opinion” regarding the law, without any “fresh tangible material” coming to the Assessing Officer’s knowledge.
Facts
Assessment Year: 2016-17.
The Claim: The assessee claimed a deduction under Section 35AC for expenditure on eligible projects (CSR). The Assessing Officer (AO) accepted this claim in the original assessment order.
The Reopening: Later, the AO issued a notice to reopen the assessment. The reason given was that the CSR expenditure claimed under Section 35AC/80G was inadmissible under the amended law (likely referring to the amendment that CSR is not deductible u/s 37(1), though specific sections like 35AC had different criteria).
High Court’s Ruling: The High Court set aside the reopening notice, holding that:
The AO was merely re-examining the same material available during the original assessment.
No “fresh tangible material” had come to light.
This amounted to a mere “change of opinion,” which is not a valid ground for reassessment.
Supreme Court Appeal: The Revenue filed a Special Leave Petition (SLP) against the High Court’s order, but with a delay of 142 days.
Decision
No Error in HC Order: The Supreme Court found no palpable error in the High Court’s decision. Reopening an assessment without new evidence is legally unsustainable.
Delay Not Explained: The Court noted that the 142-day delay in filing the SLP was not satisfactorily explained by the Revenue.
Ruling: The SLP was dismissed on grounds of delay and merits. The High Court’s order quashing the reassessment stands confirmed.
Key Takeaways
“Change of Opinion” Defense: This is the most common and effective defense against reassessment. If the AO has already examined an issue (like CSR expenses) in the original scrutiny and accepted it, he cannot wake up later and say, “I made a mistake in law.” He needs new facts (like a fake invoice found during a raid) to reopen the case.
CSR Taxability: While CSR expenses are generally not deductible as business expenditure under Section 37(1) (since AY 2015-16), deductions under specific sections like 80G or 35AC (before it was sunset) were often litigated. Courts generally hold that if the conditions of the specific section (80G/35AC) are met, the bar under 37(1) does not apply.