IT notice to Infosys quashed

The Karnataka High Court has quashed the notices issued to Infosys by the Commissioner of Income Tax for reopening the assessment of three years from 2004.

The judgment asserted that “there is no iota of material available in the reasons recorded by the assessing officer to believe escapement of tax on any agreement where the company received revenue from foreign companies for deputing the technical members independent of software development work.”

The notice for reopening of the assessment was based on the assessment relating to the assessment year 2007-2008. In that assessment, certain claims for deductions under Section 10-A of the Income Tax Act were disallowed. That finding was applied to the earlier assessments alleging that some incomes had escaped then.

The company argued that the earlier assessment could not be reopened after six years. It also asserted that there was no escapement of income and all facts were disclosed in the original assessments.

The high court observed that “it is presumed that the assessing authority had examined the entitlement of deduction under Section 10-A by the assessee from all angles. Withdrawal of the deduction allowed based on the assessment order relating to the assessment year 2007-08 is without application of mind and nothing but a change of opinion, which tantamount to review and the same is not permissible.”