[Opinion] Case Analysis: Hexaware Technologies Limited v. Assistant Commissioner of Income Tax & Ors.

CA Piyush Baid – [2024] 163 taxmann.com 396 (Article)

Facts

Hexaware Technologies Limited, a prominent entity in the IT consulting and software development sector, duly submitted its income tax return for the Assessment Year 2015-2016, availing itself of deductions as per Sections 10AA and 80JJAA of the Income Tax Act, 1961. The company’s return was processed and accepted by the Jurisdictional Assessing Officer (JAO) in 2017.

However, in a subsequent turn of events in 20211, the JAO initiated reassessment proceedings under Section 148 of the Act, contending that certain components of Hexaware’s income had not been adequately assessed. Hexaware contested this reassessment notice, leading to its eventual annulment due to procedural irregularities.

Following a Supreme Court decision Ashish Agarwal2, the JAO issued a fresh reassessment notice on 25th May 20223, leading to the present writ petition by Hexaware challenging the JAO’s jurisdiction and the validity of the reassessment proceedings.

Issues

• Applicability of TOLA and the Concept of “Travel Back”4: Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) applies to the assessment year 2015-2016, and whether a notice issued under Section 148 after March 31, 2021, can be considered valid retrospectively.
• Limitation Period for Reassessment: Whether the reassessment notice issued on August 27, 20225, is barred by limitation under the first proviso to Section 149 of the Act.
• Validity of Notice without DIN: Whether the reassessment notice is invalid due to the absence of a Document Identification Number (DIN).
• Jurisdiction of the JAO: Whether the JAO has the authority to issue the reassessment notice under Section 151A of the Act.
• Nature of Escaped Income: Whether the issues raised in the reassessment order constitute “escaped income” as defined under Section 149(1)(b) of the Act.
• Reopening Based on Change of Opinion: Whether the reassessment is permissible if it is based on a mere change of opinion by the JAO.
• Consistent Allowance of Deduction: Whether the JAO can reassess a deduction consistently allowed in previous years.
• Validity of Sanctioning Authority’s Approval: Whether the approval granted by the sanctioning authority for the reassessment is valid.

Arguments

Petitioner (Hexaware)

• TOLA is not applicable to AY 2015-2016, and the reassessment notice is time-barred.
• The notice is invalid due to the absence of a DIN.
• The JAO lacks jurisdiction to issue the notice under the faceless assessment scheme.
• The issues raised do not constitute “escaped income” as defined in the Act.
• The reassessment is based on a change of opinion, which is not permissible.
• The deduction under Section 80JJAA was consistently allowed in earlier years and cannot be reassessed.

Respondents (Revenue)

• TOLA is applicable, and the notice is within the limitation period.
• The absence of DIN does not invalidate the notice.
• Both JAO and FAO have concurrent jurisdiction.
• The issues raised constitute “escaped income.”
• Reassessment based on a change of opinion is permissible.
• The consistent allowance of deduction in earlier years does not bar reassessment.

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