JUDGMENT :

R. N. Laddha, J.

The petitioner has sought to question the legality of a Notice dated 27 March 2019 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) seeking to re-open the assessment for the Assessment Year 2012-13. There is also a challenge to the order dated 13 November 2019 passed by the Assistant Commissioner of Income Tax-Respondent No.1 rejecting the objections raised by the petitioner to the validity of the impugned notice.

2. Petitioner 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.

3. During the year under consideration, the petitioner had filed on 30 September 2012 e-return of income tax disclosing total income of Rs.208,86,67,827/- and claimed deduction of interest expense amounting to Rs.74,30,91,206/- in the computation of income under Section 36(1)(iii) of the Act. The petitioner had subsequently revised its income and filed revised return declaring total income of Rs.120,94,29,942/- on 31 March 2014.

4. Thereafter, on 22 December 2014, a notice under Section 143(2) of the Act was issued to the petitioner calling upon the petitioner to attend the office of the Assessing Officer and produce the copies of balance sheet, profit and loss account, computation of income and audit report etc. The petitioner responded by its letters dated 12 February 2015, 23 March 2015, 24 March 2015 and 30 March 2015 and provided requisite information and details with the supporting documents asked for. Subsequently, assessment order dated 31 March 2015 under Section 143(3) of the Act was passed by the Assessing Officer.

5. On 15 October 2015, the petitioner moved an application for rectification under Section 154 of the Act before the then Assessing Officer seeking to rectify certain mistakes in the order dated 31 March 2015. The Assessing Officer vide his order dated 03 November 2015 was pleased to rectify the assessment order dated 31 March 2015.

6. Thereafter, the Assessing Officer issued a notice dated 27 March 2019 under Section 148 of the Act to the petitioner seeking to reopen the assessment for the Assessment Year 2012-13 for the purposes of re-assessment. On receipt of the notice, the petitioner sought the reasons for re-opening of the assessment. In response, the Assessing Officer vide his letter dated 30 August 2019 communicated the following reasons for proposed re-opening of the assessment:-

“The return of income for A.Y.2012-13 was filed by the assessee on 30.09.2012, declaring an income of Rs.208,86,67,827/-. Subsequently, the assessee filed revised return on 31.03.2014 declaring total income of Rs.120,94,29,942/-. Further, the assessment u/s.143(3) was passed on 31.05.2015 and determined the total income 120,94,29,940/-.

In this case, it is observed that the assessee company had, during the year claimed interest expenses of Rs.74,30,91,206 which is also allowed by AO. It was also observed that the assessee has borrowed fund for its construction project on which this interest was paid. Thus borrowing has direct nexus with its project. As per the matching concept of restricting expenses to the income offered during that particular year, expenses relating to future income should be capitalised and allowed in the year in which the income is offered. Accordingly, interest expenses of Rs.74,30,91,206 should have been capitalised.

It was also observed that similar claim of interest for