The court emphasized the importance of complying with the statutory pre-conditions for re-opening assessments and the necessity for the Assessing Officer to have an independent 'reason to believe' that income has escaped assessment.

JUDGMENT

(Prayer: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus, calling for the entire records of the Respondent contained in impugned Notice No.ITBA/AST/F/17/2018- 19/1015381247(1) dated 21.03.2019 issued under Section 148 of the Income Tax Act, 1961 [hereinafter referred to as the Act] for PAN:AAACE2125M for Assessment Year 2012-13 along with all consequential orders issued thereto, including the order dated 31.07.2019, dismissing the objections of the petitioner for re-opening the assessment under Section 147 of the Act, and to quash the same, as arbitrary, unjust and illegal, and to consequently forbear the respondent or any of its superiors, subordinates, agents or any other person claiming under or above the respondent, form in any manner re-assessing the petitioner’s income for the assessment year 2012-13 under Section 147 of the Income Tax Act, 1961.)

1. The petitioner is a company assessed to income tax on the file of the sole respondent in terms of the provisions of Income Tax Act, 1961 (in short ‘Act’). In respect of assessment year (AY) 2012-13 a return of income had been filed disclosing income both under the regular provisions as well as under the provisions of Minimum Alternate Tax (in short ‘MAT’).

2. Proceedings for amalgamation had been ongoing at that particular juncture, in Company Petition Nos.190 and 191 of 2012 for amalgamation of the petitioner with one, Island Hotel Maharaj Limited. By order dated 06.02.2013 the scheme of amalgamation had been approved by this Court, merging the aforesaid two entities. The appointed date was fixed as 01.04.2011.

3. The scheme provided for the merging of the assets and liabilities as well as the method of accounting to be followed in respect of the merged assets. The accounting was to be under the pooling of interest method adopting accounting standard (AS 14) that provided for the methodology for accounting for amalgamations, issued by the Institute of Chartered Accountants of India.

4. Post-amalgamation, a revised return had come to be filed by the petitioner, once again computing the income both under regular provisions as well the under the provisions of Minimum Alternate Tax (MAT). The brought forward loss in the hands of the petitioner (amalgamated entity) is as follows:-

5. Thus and admittedly, the amount of brought forward loss is a sum of Rs.30,65,52,091/- and the amount of brought forward depreciation is a sum of Rs.18,05,97,492/-. There is no dispute with regard to the aforesaid two figures.The petitioner, in computing the income under the provisions of MAT, applied the provisions of Section 115JB of the Act and, interalia, the upward and downward adjustments set out under the Explanations thereunder.

6. As per the methodology of computation prescribed, the lower of either book depreciation or loss of the transferor company, was to be set of against the adjusted book profit. Applying the aforesaid methodology, the adjusted book profit arrived at in the present case was ‘nil’. Since the amount of book depreciation constituted the lower of the two figures, the same was taken into the reckoning for arriving at the adjusted book profit. This procedure followed aligns with the prescription and the methodology set out under Section 115JB.

7. An order of assessment came to be passed thereafter on 26.03.2015, the Assessing Authority computing income both under regular provisions as well as under the provisions of MAT. As far as the latter is concerned the computation is as follows:-

Computation of book profit u/s 115JB.