Income Tax Reassessment Jurisdiction Fails Without Fresh Material: SC Upholds Gujarat HC in GTPL Hathway Case [Read Order]

In a recent ruling SC upheld that the Gujarat HC orders quashing the reopening of assessment against GTPL Hathway Ltd for the assessment year 2017-18, holding that reassessment initiated without any fresh material cannot be sustained.

The asseseee GTPL Hathway Ltd, had filed its return of income, which was selected for scrutiny and assessed under section 143(3) after the assessee furnished its audited financial statements, tax audit report, computation of income, and detailed explanation during the course of assessment proceedings.

The assessee argued that the lease payments were recurring transactions consistently accepted by the department in earlier years, that unrealised foreign exchange gains and losses had no tax impact as they were duly neutralised in the computation of income, and that depreciation on goodwill was claimed in accordance with the law applicable for the assessment year 2017-18, before the statutory amendment effective from 1st April 2021

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The AO initiated reassessment proceedings relying on the balance sheet, audit report and computation of the income that were already on record, without pointing to any new material that had come to light after the original assessment.

The Gujarat HC observed that the AO had no authority to reopen the assessment. Therefore, the petition is allowed. Also noted that the notice dated 27.03.2021 for AY 2017‑18 issued under Section 148 of the Income Tax Act is cancelled.

Also held that the amendment that disallowed depreciation on goodwill only took effectfrom 01.04.2021. For AY 2017‑18, Section 43(6)(c) had not yet been amended. Therefore, this later amendment could not be used as a ground to reopen the assessment or to conclude that income had escaped due to a claim of depreciation on goodwill.

The revenue carried the matter to the SC, aggrieved by the High Court decision, the apex court, after hearing the department and perusing the record, found no reason to interfere with the impugned order and dismissed the Special Leave Petition.

According to the bench, afterhearing the petitioners' counsel and reviewing the record, there is no reason to interfere with the High Court’s order. accordingly The Special Leave Petition is dismissed. Any pending applications are also disposed of.