GTPL Hathway Limited Vs DCIT Circle 2(1)(1) & Anr. (Gujarat High Court)
Conclusion: Since reasons recorded by AO to form prima facie conclusion that there was likelihood of any gain on account of revenue expenses incurred by assessee was also without any basis in the absence of any fresh tangible material available with the respondent AO as the fact remained that assessee had unrealized gain and unrealized loss which was not claimed and duly reflected in the computation income as assessee had claimed only bank charges expenditure for hedging of foreign currency. AO had no reason to believe with regard to the income which had escaped the assessment. With regard to issue of depreciation on goodwill, the provision of section 43(6)(c) of the Act was not amended at the relevant point of time for AY 2017-18 and therefore, the amended provision denying the depreciation on goodwill which came into effect from 01.04.2021 could not have formed the basis for re-opening to come to the conclusion that there was escapement of income by claiming of depreciation on goodwill.
Held: Assessee had originally filed its return of income for the assessment year 2017-18, declaring an income of Rs. 39.69 crores, later revised to Rs. 83.33 crores. The case was scrutinized, and an assessment order was passed under Section 143(3). AO issued a notice under Section 148 to reopen the assessment on the ground that the company had wrongly claimed Rs. 17.37 crores as lease payments under revenue expenditure, had improperly accounted for unrealized foreign exchange gains and losses, and had claimed depreciation on goodwill, which was later disallowed by a 2021 amendment. Assessee challenged the reassessment notice before ITAT, arguing that all the issues raised AO had already been examined during the original scrutiny assessment and no new tangible material justified the reopening and that the amendment disallowing depreciation on goodwill, which became effective in 2021, could not be applied retrospectively to reassess its 2017-18 returns. AO countered that the reassessment was valid since the original scrutiny assessment had not specifically examined the treatment of foreign exchange transactions and goodwill depreciation. It was held that with regard to the issue of claim of lease rent which was stated to be principal plus interest amounting Rs.17,37,80,816/- was concerned, assessee submitted that the same was in form of the financed lease transactions entered into by assessee with CISCO and such transactions were accepted by Revenue as assessee had taken equipment on financial lease since 2012-13. AO ought to have taken into consideration the nature of repetitive nature of transactions in form of the lease rent which was claimed by the assessee from year to year from 2012-13 onwards and no addition was made since then. With regard to the claim of Rs.37,80,000/- on account of the applicable gain / loss on foreign currency transactions, assessee has claimed Rs.46,45,115/-, i.e. Rs.37,78,154 plus Rs.8,86,961 (Rs.6,90,80,060 – Rs.6,81,93,099) by giving effect to the said amount in the computation of income. Thus, it could not be said that there was escapement of income on the part of assessee as assessee had neither claimed profit / gain or loss of unrealized foreign exchange and therefore, the reasons recorded by AO to form prima facie conclusion that there was likelihood of any gain on account of revenue expenses incurred by assessee was also without any basis in the absence of any fresh tangible material available with the respondent AO as the fact remained that assessee had unrealized gain and unrealized loss which was not claimed and duly reflected in the computation income as assessee had claimed only bank charges expenditure for hedging of foreign currency. AO had no reason to believe with regard to the income which had escaped the assessment. With regard to issue of depreciation on goodwill, the provision of section 43(6)(c) of the Act was not amended at the relevant point of time for AY 2017-18 and therefore, the amended provision denying the depreciation on goodwill which came into effect from 01.04.2021 could not have formed the basis for re-opening to come to the conclusion that there was escapement of income by claiming of depreciation on goodwill. AO could not have assumed the jurisdiction to re-open the assessment.
