The Gujarat High Court has held that future amendment denying depreciation on goodwill cannot be the basis for reopening assessment.
The bench of Justice Bhargav D. Karia and Justice D.N.Ray has observed that the provision of section 43(6)(c) of the Income Tax Act was not amended at the relevant point of time for AY 2017-18 and therefore, the amended provision denying the depreciation on goodwill which came into effect from 01.04.2021 could not have formed the basis for re-opening to come to the conclusion that there is escapement of income by claiming of depreciation on goodwill.
The appellant/assessee company has created goodwill of Rs.11,00,000 on slump sale and claimed depreciation on the same in its ITR and Tax Audit Report. The Tax Auditor has reported in tax audit report that the assessee has made addition in block of intangible assets to the tune of Rs.4,29,94,061 which is inclusive of amount of goodwill of Rs.11,02,868/-.
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The Assessing Officer on the basis of the material available on record has prima facie come to the conclusion that there is escapement of income as the issue of foreign profit/loss was not at all considered by the then Assessing Officer. The Assessing Officer in the reasons for re-opening has categorically observed that escapement of income is mainly on wrong claim of depreciation on goodwill.
The petitioner/assessee has challenged the reassessment proceedings on the grounds that thenotice for re-opening was based on mere change of opinion as the case of the petitioner was selected for scrutiny and issues on hand were examined at the original assessment stage by the then Assessing Officer and relied upon the reply filed by the petitioner in response to the notice.
The court held that the Assessing Officer could not have assumed the jurisdiction to re-open the assessment. The notice issued under section 148 of the Income Tax Act, 1961 is quashed and set aside.
Case Details
Case Title: GTPL Hathway Limited Versus Deputy Commissioner Of Income Tax Circle 2(1)(1) & Anr.
Case No.: R/Special Civil Application No. 2437 Of 2022
Date: 03/02/2025
Counsel For Petitioner: Tushar Hemani, Senior Advocate With
Ms Vaibhavi K Parikh
Counsel For Respondent: Varun K.Patel
