JUDGMENT :

K.R. Shriram, J.

1. With the consent of counsel this petition is taken up for disposal at this stage itself since pleadings are completed.

2. Petitioner is primarily impugning a notice dated 27th March 2021 issued under Section 148 of the Income Tax Act, 1961 (the Act) for Assessment Year 2016-17 where it is alleged that there are reasons to believe that petitioner’s income chargeable to tax for Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Act. The reasons to believe can be found in communication dated 17th November 2021 addressed to petitioner and the same reads as under :

The assessee has filed the e-return on 29.11.2016 declaring total income at Rs.161,79,93,020/- computed under normal provision of the Act and Book Profit of Rs.219,56,07,298/- u/s 115JB of the Act. This case was selected for scrutiny and assessment for A.Y. 2016-17 was completed on 21.12.2018 after scrutiny and assessed income of Rs.176,32,00,710 under normal provision of the Act and Book profit at Rs.225,45,68,489 u/s 115JB of the Act.

2. Subsequently on perusal of the records it was observed that the assessee had purchased 100% shares of M/s ETPL on 22nd September 2015 for a total purchase consideration of Rs.187.35 crore and immediately thereafter on 29th September 2015, M/s ETPL merged with the assessee. Keeping in view the acquisition of all assets and liabilities of M/s ETPL, the amount paid in excess thereof was determined as Rs.148.19 crore and the same was treated as goodwill and depreciation thereon of Rs.38,15,17,889 was claimed by the assessee @25% treating it as intangible asset.

Keeping in view the above mentioned provisions, the depreciation so claimed was not allowable. Further it was relevant to be mentioned that in a similar case of M/s Johnson and Johnson Ltd. for AY 2015-16, the depreciation on Goodwill had been disallowed concluding that purchase consideration paid for buying the shares were high and subsequent amalgamation was towards creating spurious goodwill in the books of the assessee.

Hence from the point of consistency also it was required to be disallowed, which was not done in the assessment. This resulted in under assessment to the same extent.

2.1 Therefore I am of the view that income to the extent of amount of Rs.38,15,17,889/- as explained above, has escaped assessment.

3. Petitioner had during Financial Year 2015-16 acquired the entire paid up share capital of one Elitecore Technologies Pvt. Ltd. (ETPL) from third party seller with discharge of fair value consideration. Thereafter, petitioner applied for amalgamating ETPL with itself vide a scheme of amalgamation which was sanctioned by the Hon’ble Gujarat High Court and High Court Bombay vide order dated 21st March 2016 and 7th April 2016 respectively with effect from 29th September 2015. Pursuant to the amalgamation and in accordance with the scheme of amalgamation as approved by two High Courts, petitioner recognized all the assets and liabilities transferred by ETPL to it on their respective book value and recognized goodwill of Rs.148.19 Crores in its financial statements. It is the claim of petitioner’s depreciation on this goodwill which is the subject matter of the notice impugned in the petition.

4. Petitioner filed its return of income on 29th November 2016 declaring a total income under normal provisions of the Act at Rs.1,61,79,93,020/- and book profit at Rs.2,19,56,07,298/- under Section 115 JB of the Act, inter alia, claiming depreciation of Rs.38,15,17,889/- on the goodwill. Petitioner has disclosed this aspect of claiming depreciation on goodwill pursuant to the amalgamation in the documents filed alongwith the returns.

5. Petitioner’s case was selected for scrutiny and notice dated 19th September 2017 under Section 143(2) of the Act was issued. Petitioner filed its response vide letter dated 26th September 2017 and furnished all the details called for. On 18th September 2018 a detailed questionnaire along with n