The court ruled that the Assessing Officer's notice under Section 148 was invalid as it ignored prior ITAT rulings, establishing no escapement of income for the assessment year in question.

ORDER

Bhargav D. Karia, J.

1. Heard learned advocate Mr.Shreyansh Ranka appearing for learned advocate Mr.Dhinal Shah for the petitioner and learned Senior Standing Counsel Ms.Maithili Mehta for the respondent .

2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following main reliefs :-

“(b) Pass appropriate order issuing writ of certiorari and/or any other appropriate writ and/or pass appropriate order quashing and setting aside the Notice under Section 148 and Order under Section 148A(d) of the Income Tax Act dated 26.03.2024 passed by the Respondent -Authority.”

3. The brief facts of the case are that the petitioner received a notice under Section 148A(b) of the Income Tax Act, 1961 (for short "the Act”) dated 06.03.2024 calling upon the petitioner to show cause as to why the notice under Section 148 of the Act should not be issued for the Assessment Year 2018-19 along with the reasons for issuing the notice.

4. The reasons recorded in the notice under Section 148A(b) of the Act reads as under:-

“In this case, the assessee company had filed its Return of Income for A.Y.2018-19 on 30.11.2018 declaring total Income of Rs.55,65,96,580/-. The case was selected for complete scrutiny through CASS. The assessment order was passed u/s 143(3) read with section 143(3A) & 143(3B) of the I.T. Act on 13.03.2021 determining total assessed income of Rs.58,23,80,090/- after making addition of Rs.2,41,03,000/- on account of disallowance of 'royalty expenses' u/s.37 and 'donation' u/s. 35(1)(ii) of IT Act.

On perusal of the financial statements and tax audit report of the assessee, it was seen that assessee had shown intangible asset worth Rs.53,17,57,633/- on which 25% depreciation i.e. Rs. 13,29,39,408/- had been claimed while computing the total income. On perusing case records of the assessee, it was observed that the said intangible asset had been created by the assessee company during F.Y. 2013-14 on acquired of Gujarat Apollo Industries Ltd. On verification of the case record in the case of the assessee company, it is seen that the TPO had made upward adjustment of Rs.116.32 Cr. In A.Y. 2014-15. Thereupon, the assessee objected before the Dispute Resolution Penal (DRP) and DRP-2, Mumbal issued direction u/s. 144C(5) of I.T. Act in the favour of Revenue to make disallowance of Rs.29,08,15,170/- being depreciation claimed on the goodwill (@25% of Rs.1,16,32,60,681/-).

It is clear that the amount of goodwill if any allowable to be recorded in the books of the assessee company is only to the extent it is recorded in the books of M/s Gujarat Apollo Industries Ltd (GAIL) before acquisition which is in complete contradiction with the recording of goodwill worth Rs.1,16,32,60,681/- by the assessee company. Hence the claim of depreciation by the assessee is clearly in violation of the explicit provisions of I.T Act.

It was observed that the said intangible asset worth Rs.53,17,57,633/- on which 25% depreciation i.e. Rs.13,29,39,408/- had been claimed by the assessee was created by the assessee company during F.Y. 2013-14 on acquire of Gujarat Apollo Industries Ltd. The TPO had made upward adjustment of Rs.116.32 Cr. in A.Y.2014-15. Thereupon, the assessee objected before the Dispute Resolution Penal (DRP) and DRP-2, Mumbai issued direction u/s. 144C(5) of IT Act in the favour of Revenue to make disallowance of Rs.29,08,15,170/- being depreciation claimed on the goodwill (@25% of Rs. 1,16,32,60,681/-). It is clear that the amount of goodwill if any allowable to be recorded in the books of the assessee company is only to the extent it is recorded in the books of M/s Gujarat Apollo Industries Ltd (GAIL) before acquisition which is in complete contradiction with the recording of goodwill worth Rs.1,16,32,60,681/- by the assessee company. Hence the claim of depreciation by the assessee is clearly in violation of the explicit provisions of I.T.Act.

Please justify/explain the above transactions/Investment/inco