The main legal point established is that a notice for reassessment cannot be based on a change of opinion but must be grounded on the grounds of income escaping assessment.

JUDGMENT :

KAMAL KHATA, J.

1. This Petition under Article 226 of the Constitution filed on 2nd March 2022 impugns notice dated 30th March 2021 issued under section (u/s) 148 of the Income Tax Act, 1961 (Act) for Assessment Year (AY) 2014-15 and the order dated 14th February 2022 disposing of the objections raised for reassessment.

2. The record indicates that the notice dated 30th March 2021 u/s 148 of the Act is issued after expiry of four years and the proviso to section 147 of the Act applies. Respondents have to show there was failure to truly and fully disclose material facts as decided by this Court in Ananta Landmark (P) Ltd. vs. DCIT CC 5(3) Mumbai, (2021) 131 Taxmann.com 52.

3. We have examined the reasons for initiation of proceedings u/s 147 of the Act annexed to the Petition that are evidently premised on the statement ‘It is seen from the case records.” The Assessment Officer (AO) recorded that:

“2..... the assessee had claimed set off of brought forward loss of 5,63,29,331 (to the extent of income) Rs. 5,63,29,31 (to the extent of income) and claimed ‘carry forward’ of remaining loss of AY 2011-12 of 72,15,93,165 (77,79,22,496 less Rs. 5,63,29,31 (to the extent of income) Rs. 5,63,29,331 (to the extent of income) 5,63,29,331) which was accepted during scrutiny Rs. 5,63,29,31 (to the extent of income) assessment.

It is seen from the case records of AY-2011-12 that, the total ‘carry forward’, claimed by the assessee during AY 2011-12 was of 88,20,53,360, which was Rs. 5,63,29,331 (to the extent of income) claimed after ‘set off’ of ‘brought forward’ losses of 95,39, Rs. 5,63,29,331 (to the extent of income) 09,867 (incorrectly claimed as 95,39,99,867). This loss included ‘business loss’ of 93,40,99,039 i.e. Rs. 5,63,29,331 (to the extent of income) total of (55,82,30,163 for AY 2003-04 and Rs. 5,63,29,331 (to the extent of income) 37,58,68,876 for AY 2004-05) pertaining to the Rs. 5,63,29,331 (to the extent of income) amalgamated unit M/s. The Hindoostan Spinning and Weaving Mills Ltd.

(a) Further it is seen from the order u/s 263 dated 21st March 2016, the Pr. CIT had directed the Assessing Officer to verify the fact existing in the case of ‘amalgamating’ as well as ‘amalgamated company’ with reference to the conditions laid down in Section 72A(2)(a).

(b) of the Act and decide about the allowable ‘carry forward’ and ‘set off’ of accumulated loss and unabsorbed depreciation allowance of Hindoostan Spinning and Weaving Mills Ltd. in the amalgamated company. On the basis of this order, case was reopened for AY 2011-12 and order u/s 143(3) r.w.s. 263 of the Act was passed on 27th December 2016 wherein vide para 6.3 the assessing officer has concluded that as per section 72A(2) of the Act, the losses on amalgamation get fresh life for further 8 years from the date of amalgamation.

Thus, it is simply clear from the reading of 72A(2) of the Act that, though the ‘carried forward’ losses of amalgamated company will become the loss of amalgamated company in the year of amalgamation, but other provisions of the Act (viz. ‘carry forward’ of a maximum period of 8 years) will apply accordingly. Hence the amalgamated company will be entitled for the claim for only the unexpired period and not full 8 years afresh. Hence the assessee is not entitled for set off of losses of M/s The Hindoostan Spinning and Weaving Mills for AY 2003-04 and AY 2004-05 as it has exceeded the period of carry forward of 8 years as prescribed in Section 72(3) of the Act....”

4. Upon examination of the recorded reasons, we find nothing to indicate failure to disclose any material fact. Upon examining the order u/s 143(3) r.w.s 263 of the Act, we find that the AO has considered all submissions and documents and accepted the Loss of 88,07,62,670/- to be carried Rs. 5,63,29,331 (to the extent of income) forward. Furthermore, with regard to section 72A(2) of the Act, he held that the losses on the amalgamated assessee company are carried forward and on amalgamation ge