Bombay HC quashes Re-opening of Assessment as condition precedent to Valid Exercise of Power to Re-open Assessment, after a lapse of 4 years [Read Order]

The Bombay High Court has quashed the reopening of Assessment as a condition precedent to valid exercise of power to reopen assessment, after lapse of 4 years.

The Petitioner, Macrotech Developers Limited is a company registered under the Companies Act, 1956 and is engaged in the business of developing and construction of real estate properties. The National Company Law Tribunal, Mumbai by its order dated 09 January 2018 has sanctioned the Scheme of Arrangement between the Lodha Developers Private Limited and Palava Dwellers Private Limited and their respective shareholders and creditors.

By the said Scheme, Palava Dwellers Private Limited was merged with Lodha Developers Private Limited. Subsequently, the name of Lodha Developers Private Limited was changed to Macrotech Developers Limited i.e., the petitioner with effect from 24 May 2019.

In assailing the impugned notice under Section 148, the learned counsel appearing on behalf of the petitioner submitted that there was no failure to truly and fully disclose material and there was no fresh tangible material for initiating re-assessment proceedings. It was further contended that the assessment for Assessment Year 2012-13 is sought to be re-opened on the basis of a mere change of opinion. It is argued that since the notice under Section 148 was issued beyond the period of four years from the end of the relevant assessment year and since there was failure on the part of the respondents to disclose which are the material facts not disclosed, the initiation of reassessment proceedings was bad in law by virtue of the first proviso to Section 147 of the Act.

On the other hand, it has been urged on behalf of the Revenue that the reasons which have been indicated in the communication dated 27 March 2019 are sufficient to re-open the assessment. It was submitted that while finalising the assessment for Assessment Year 2012-13, the Assessing Officer found that the assessee had calculated depreciation on goodwill by adopting the wrong method of purchase. According to the learned counsel for the respondents, in the present case, the Assessing Officer has reasonable belief that income chargeable to tax has escaped assessment and on the basis of such belief the respondent authority is entitled to re-open the assessment.

The division bench of Justice R.N.Ladha and Justice K.R.Shriram has set aside the impugned notice dated 27 March 2019 issued under Section 148 of the Act as well as the impugned order passed by the Assistant Commissioner of Income Tax - Respondent rejecting the petitioners objections to reopen the assessment for the Assessment Year 2012-13.

To Read the full text of the Order CLICK HERE

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