Bombay High Court quashes re-opening of Assessment after 4 years

Bombay High Court quashes re-opening of Assessment after 4 years

In quashing the reopening of the assessment as a precondition to genuinely exercising the right to reopen an assessment, the Bombay High Court set a 4-year legal lapse as a necessary condition

In its business of developing and constructing real estate properties, Macrotech Developers Limited has been registered under the Companies Act, 1956. Lodha Developers Private Limited and Palava Dwellers Private Limited, along with their respective shareholders and creditors. Lodha sanctioned by the National Company Law Tribunal, Mumbai by its order on 9th January 2018.

Palava Dwellers Private Limited and Lodha Developers Private Limited were merged under the said scheme. From 24th May 2019, the name of Lodha Developers Private Limited became Macrotech Developers Limited, i.e., the petitioner.

According to the learned counsel appearing on behalf of the petitioner, the impugned notice under Section 148 does not violate the Act and there is no new tangible material for the reassessment process to be initiated. On top of that, it was argued that the assessment for Assessment Year 2012-13 is being reopened because of a merely subjective change of opinion. The respondents argue that, as the Section 148 notice was not issued within the four year period following the end of the relevant assessment year and the respondents failed to disclose the material facts are, reassessment proceedings which were invalid in law by virtue of the first proviso to Section 147 of the Act.

The Revenue Department has opposed the reopening of the assessment, arguing that the reasons outlined in the communication dated 27 March 2019 are sufficient. According to the assessee, the Assessing Officer discovered that the assessee had calculated goodwill depreciation by using the incorrect method of purchase during the finalising of the assessment for Assessment Year 2012-13.

Apparently, the learned counsel for the respondents holds that the Assessing Officer has a reasonable belief that income liable for tax has escaped assessment in the case at hand and the respondent authority is therefore entitled to reopen it. Judge R.N.Ladha and Justice K.R.Shriram, who sat on the division bench, set aside the impugned notice on 27th March 2019 and the impugned order passed by the Assistant Commissioner of Income Tax under Section 148 of the Act rejecting the petitioners' objection to reopening the assessment for the Assessment Year 2012-13.