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TMI Blog2024 (12) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... ves service of notice of rule on behalf of the respondents. 4. Both these petitions are filed under Article 226 of the Constitution of India with a prayer to quash and set aside the notice issued under Section 148A (b) of the Act dated 10th February, 2024 for the Assessment Years 2017-18 and 2018-2019 and the order dated 30th March, 2024 passed under Section 148A(d) of the Act and the consequent notice issued under Section 148 of the Act of the even date. 5. The brief facts of the case are that the respondent-Assessing Officer issued notice under Section 148A (b) of the Act on the basis of the audit objections which reads as under :- In your case, assessment 143 (3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred as "Act") for the AY 2018-19 was finalized on 15.06.2021 by accepting return income as total assessed income of Rs. Nil-. Subsequently, in your case the following audit objection which forms information as per Explanation 1 (ii) to section 148 of the Act and which suggests that income of Rs. 6,17,70,240/- chargeable to tax has escaped assessment; was raised:- "On perusal of the financial statements and tax audit report of the assessee, it was seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of its own business. Explanation 2[to section 43 (2)). Where in any previous year, any block of assets is transferred,- (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. In view of the above provisions of the Income-tax Act, 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 Songwon International India Pvt. Ltd before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show cause notice dated 10.2.2024, the assessee made a written submission on 20.02.2024 and in the said submission the assessee averred that the audit objection, based on which notice u/s. 148A (b) was issued, is incorrect. The assessee also claimed that the provisions of Explanation 7 to section 43 (1) and Explanation 2 to section 43 (6) are not applicable in its case. But in its reply dated 20.02.2024, the assessee has clarified that its claim of depreciation on goodwill was on account of its acquisition of one Sequent Scientific Limited, Gujarat during the financial year 2014-15 on a going concern basis. The assessee has itself admitted that a lumpsum consideration of Rs. 1,17,10,12,297 was paid for the purchase of speciality chemical business of Sequent Scientific Limited, Gujarat whose assets and liabilities were taken over. Finally, the assessee itself admitted that the excess of purchase consideration paid over and above the value of assets and liabilities as determined, was quantified at Rs.18,02,60,252 and the same was treated as Goodwill. Thus, the assessee itself has proved that it had created goodwill of Rs. 18,02,60,252 in its books and the same was a mere book entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to section 43 (6) are found to be applicable in its case in relation to creation of goodwill in its books at the time of acquisition of Sequent Scientific Limited, Gujarat during the FY 2014-15. In the last para of its submission dated 20.02.2024, the assessee has requested for personal hearing before issuance of notice u/s. 148 of the Act. As per the following provisions of section 148A of the Act, which relate to conducting enquiry, providing opportunity before issue of notice u/s. 148, personal hearing is not possible in the case of the assessee as a notice u/s. 148A (b) is sufficient enough before issuance of notice u/s. 148 of the Act. *b) provide an opportunity of being heard to the assessee, 23[***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act cannot be sustained as it can not be said to be a fit case to reopen the assessment by any stretch of imagination. 12. It is pertinent to note that merely producing of audit objection in the order under Section 148A(d) of the Act ignoring the reply filed by the assessee is nothing but non application of mind on the part of the respondent-Assessing Officer. The Assessing Officer merely reproduced the contents of the reply filed by the assessee without dealing with the same, which is apparent from the extract of the order reproduced hereinabove without considering the facts that the audit objection contained various factual mistake which is pointed out by the petitioner to the effect that the depreciation on the goodwill was being granted from the Assessment Year 2015-16 onwards to the petitioner and therefore, there is no question of escapement of income for the year under consideration by holding that the petitioner wrongly claimed the depreciation for the Assessment Year 2018-2019. The impugned order is therefore, contrary to the record and liable to be quashed and set aside. 13. In view of the foregoing reasons, both these petitions succeed and impugned notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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