2016 (7) TMI 972 - HC - Income Tax

Reopening of assessment - scheme of amalgamation questioned - Held that - On question of claim of depreciation and unabsorbed loss of the amalgamating company upon amalgamation was examined by the Assessing Officer thoroughly. In fact the assessee had made as many as three different representations why such claim should be granted. The Assessing Officer accepted such claim in the order of assessment without making any disallowance. The fact that the Assessing Officer did not make any observations with respect to the same in the order of assessment is of no consequence. Coming to the question of validity of the reasons also we are inclined to accept the petitioner s contention. Few relevant dates which are not in dispute are that the appointed date as per the scheme of amalgamation was 1.4.2008 effective date is referred to as the date on which the final sanction have been granted which in the present case would be 12.10.2010. The fact that the High Court has sanctioned the scheme was brought to the notice of the Assessing Officer particularly in above referred letter dated 16.9.2010. When once therefore a scheme has been sanctioned by the High Court which would relate back to the appointed date and such order is passed before the order of assessment is passed it cannot be stated that the assessee should be denied the benefit of such development merely on the ground that during the accounting period and when the return was filed the High Court order sanctioning the scheme was not yet passed. The very effect of the order of High Court sanctioned the scheme relating back to the appointed date would be that for all purposes including for recognising the benefit of unabsorbed depreciation and losses of a merging Company with those of principal company would be available from such date. What would be the effect of the High Court order being passed after assessment is framed is not necessary for us to enter in the present case.- Decided in favour of assessee.

Summary

Issues:
1. Validity of notice seeking to reopen assessment for the assessment year 2009-2010 based on irregular business losses and depreciation claimed by the petitioner.
2. Whether the Assessing Officer's decision to reopen the assessment was based on a change of opinion.
3. The impact of the High Court's approval of the scheme of amalgamation on the petitioner's claim for benefits during the assessment year under consideration.

Analysis:
Issue 1:
The petitioner challenged the notice dated 24.3.2014 issued by the Assessing Officer seeking to reopen the assessment for the assessment year 2009-2010. The Assessing Officer claimed that the petitioner wrongly claimed losses related to the amalgamation of a company. The Assessing Officer alleged that the set off of losses amounting to &8377; 2,38,23,768/- was premature and not in order since the High Court's approval of the scheme of amalgamation was awaited. The Assessing Officer believed that income to the tune of &8377; 2,38,23,768/- had escaped assessment due to the irregular business losses claimed by the petitioner.

Issue 2:
The petitioner contended that during the original assessment, the Assessing Officer thoroughly examined the issue of business losses and depreciation claimed by the petitioner. The petitioner argued that any attempt to reopen the assessment would amount to a change of opinion since the Assessing Officer made no disallowances in the original assessment. The petitioner also highlighted that the High Court's approval of the scheme of amalgamation was brought to the notice of the Assessing Officer during the original assessment.

Issue 3:
The High Court considered the impact of the approval of the scheme of amalgamation on the petitioner's claim for benefits during the assessment year under consideration. The petitioner had disclosed in the returns that the scheme of amalgamation was approved by two companies with effect from 1.4.2008 but was pending before the High Court for sanction. The petitioner relied on the Supreme Court decision regarding the effective date of the scheme. The High Court noted that the scheme's approval by the High Court related back to the appointed date, granting the petitioner the benefit of unabsorbed depreciation and losses from that date. The High Court emphasized that the Assessing Officer was aware of the scheme's approval before finalizing the assessment order.

In conclusion, the High Court allowed the petition, quashing the notice dated 24.3.2014 seeking to reopen the assessment for the assessment year 2009-2010. The court held that the petitioner was entitled to the benefits of the scheme of amalgamation from the appointed date, as approved by the High Court, and that the Assessing Officer's decision to reopen the assessment was not valid.