Reassessment After 4 Years Quashed as No Failure to Disclose Material Facts: Bombay HC

GSTAAD Hotels Pvt. Ltd. Vs ACIT (Bombay High Court)

High Court quashes reassessment proceedings, holding that the first proviso to Section 147 is not satisfied as there was no failure on the assessee’s part to disclose material facts

Facts:

• The Petitioner, Gstaad Hotels Pvt. Ltd., constructed a hotel of over two-star category and handed it over to JW Marriott for operation. For the purpose of construction of the said hotel, the Petitioner incurred capital expenditure amounting to Rs. 639,73,36,790/-, which was claimed as a deduction under Section 35AD of the Income Tax Act, 1961 in its return of income.
• The case of the Petitioner was selected for scrutiny assessment. During the course of the assessment proceedings, the Assessing Officer issued notices and specifically called for details in respect of the expenditure, particularly the claim made under Section 35AD. In response, the Petitioner furnished detailed submissions, including letters dated 19.09.2016 and 27.12.2016, providing explanations and supporting material in respect of the said claim. Thereafter, the Assessing Officer passed an order under Section 143(3) dated 29.12.2016, wherein the claim of deduction under Section 35AD was specifically examined and allowed, and the returned income was accepted.
• Subsequently, after the expiry of four years but within six years from the end of Assessment Year 2014–15, the Assessing Officer issued a notice dated 30.03.2021 under Section 148 of the Act seeking to reopen the assessment. Upon request by the Petitioner, the reasons for reopening were furnished. As per the reasons recorded, it was stated that the Petitioner had capitalised certain pre-operative expenses amounting to Rs. 293,39,48,980/- and claimed the same under Section 35AD. According to the Assessing Officer, such expenditure was revenue in nature and ought to have been allowed under Section 72 of the Act, which provides for a limited period of carry forward of losses, instead of Section 35AD read with Section 73A, which allows indefinite carry forward. It was therefore alleged that income to the extent of Rs. 293,39,48,980/- had escaped assessment.
• The Petitioner filed objections to the reopening, contending inter alia that there was no escapement of income and that all material facts had been fully and truly disclosed during the original assessment proceedings. The said objections were rejected by the Assessing Officer vide orders dated 09.02.2022 and 18.02.2022. In the second order disposing of objections, it was stated for the first time that the reopening was based on an audit objection raised by the Revenue Audit Party, which had taken a view that the expenditure in question was revenue in nature.
• Aggrieved by the initiation of reassessment proceedings, the issuance of notice under Section 148, and the orders disposing of objections, the Petitioner approached this Court by way of the present writ petition challenging the validity of the reassessment proceedings.

Issues:

• Whether the reopening of assessment under Section 147 of the Act, initiated after the expiry of four years from the end of the relevant assessment year, is valid in law in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, as mandated by the first proviso to Section 147 of the Act.
• Whether the reassessment proceedings, initiated on the basis of a re-appreciation of the same facts and materials that were available and considered during the original scrutiny assessment, are vitiated in law as being based on a mere change of opinion.
• Whether the initiation of reassessment proceedings solely on the basis of an objection raised by the Revenue Audit Party, without independent application of mind and formation of “reason to believe” by the Assessing Officer, is sustainable in law.
• Whether a re-characterization of expenditure, which merely alters the period of carry forward of loss from an indefinite period under Section 73A read with Section 35AD to a restricted period under Section 72, can be said to constitute “income escaping assessment” so as to justify reopening under Section 147 of the Act.
• Whether a bald assertion in the reasons recorded for reopening, alleging failure on the part of the assessee to disclose fully and truly all material facts, without specifying the particular material or fact not disclosed, satisfies the jurisdictional requirement of the first proviso to Section 147 of the Act.

Observations:

• The Court, at the very outset, on a perusal of the reasons for reopening, noted that the reopening is initiated based on the facts already on record of the Assessing Officer and that there is no new fact or any new tangible material, basis which the impugned notice under Section 148 is issued. The Court also noted that the original assessment had been concluded under Section 143(3) vide order dated 29.12.2016 wherein the claim of deduction under Section 35AD was also considered.
• The Court observed that the reassessment proceedings had been initiated beyond a period of four years from the end of the relevant assessment year, and therefore the first proviso to Section 147 was attracted. It was held that such reassessment could be initiated only if there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment.
• In the present case, the Court held that admittedly all the necessary facts were available with the Assessing Officer and certainly, it cannot be stated that there was any failure on the part of the assessee to disclose fully and truly all the primary facts. The Court further emphasized that the very reasons recorded for re-opening show that all the facts based on which the reasons were recorded were available with the Assessing Officer.
• The Court, after referring to settled legal position, held that though the reasons recorded state that there was a failure on the part of the assessee, it is not stated as to what was the said failure and the same is merely a bald assertion.
• In this regard, reliance was placed on Bombay Stock Exchange Ltd. vs DDIT (WP 2468 of 2011), wherein it was held that no reopening beyond four years can be made unless income has escaped assessment by reason of failure to disclose fully and truly all material facts.
• The Court further relied on Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 and reiterated that the reasons must be read as recorded, no substitution or addition is permissible, and the Assessing Officer must disclose which fact or material was not disclosed, establishing a link between the reasons and the evidence.
• Further reliance was placed on Bharat Petroleum Corporation Ltd. vs ACIT (2025) 478 ITR 358 (Bombay), wherein it was held that merely making a bald assertion is not sufficient and the Assessing Officer must clearly disclose the material not disclosed. The Court also noted that the Special Leave Petition against the said judgment has been rejected in ACIT vs Bharat Petroleum Corporation Ltd. (SLP (C) Diary No. 8091 of 2026).
• The Court relied on Transchem Ltd. vs ACIT (WP 1387 of 2010; Order dated 03.02.2022) and reiterated that to reopen the assessment based on the same material with a view to take another view is not permissible, and that an error discovered on reconsideration of the same material does not give power to the Assessing Officer to reopen the assessment.
• The Court concluded that in the absence of any failure on the part of the assessee to disclose necessary facts, the impugned reassessment proceedings are bad in law and void in terms of the first proviso to Section 147.
• Accordingly, the Court quashed and set aside the Notice issued under Section 148 dated 30.03.2021, the orders disposing of objections dated 09.02.2022 and 18.02.2022, and all consequential proceedings thereto.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Rule. Respondent waives service. With the consent of the parties, Rule made returnable forthwith and heard finally.

The present Petition challenges reassessment proceedings for Assessment Year (AY) 2014-15 initiated against the Petitioner by issue of Notice dated 30t^h March 2021 under Section 148 of the Income Tax Act, 1961 [for short “the Act”]. The Petitioner has also challenged the orders dated 9^th February 2022 and 18^th February 2022 disposing objections raised by the Petitioner against the re-opening of the assessment.

FACTS:

2. The brief facts necessary for the purpose of the present Petition are that the Petitioner, Gstaad Hotels P. Ltd., had constructed a hotel of over two star category and handed it over to JW Marriott. For the construction of the said Hotel, the Petitioner incurred capital expenditure amounting to Rs. 639,73,36,790/- as per its return of income. In its return of income, the said amount of capital expenditure was claimed as a deduction under Section 35AD of the Act. Thereafter, the case of the Petitioner was selected for scrutiny assessment. During the course of the said assessment, the Assessing Officer issued Notices and raised certain queries. He specifically called for the details in respect of the expenditure and in particular sought an explanation as regards the claim of deduction under Section 35AD. In response, the Petitioner filed various submissions before the Assessing Officer. In particular, vide submissions dated 19.09.2016 and 27.12.2016 filed before the Assessing Officer, the Petitioner provided explanation and details as regards the deduction claimed under Section 35AD. These letters are annexed as Exhibit C to the present petition [Ref. Pgs. 78 and 79 of the Petition]. Thereafter, the assessing officer went on to pass the assessment order under Section 143(3) of the Act, whereby he specifically mentioned and allowed the claim of deduction under Section 35AD of the Act. A copy of this assessment order dated 29.12.2016 is annexed to the Petition as Exhibit D [Ref. pg. 81 of the Petition]. In the said assessment order, the Assessing Officer categorically observed that:

4. The Assessee has in its ITR claimed loss on account of specified business of operating and maintaining a hotel of 2 star or above category as per sec 35AD and the same was claimed by them under sec 35AD while filing the return of income which is hereby allowed as under:

5. Subject to the above remarks, the total income of the Assessee is accepted as per return of income.”

3. After a period of four years from the end of the relevant assessment year 2014-15 and just before the completion of six years from the end of assessment year 2014-15, the Assessing Officer (the Respondent herein) issued a notice under Section 148 of the Act to the Petitioner seeking to reassess its income for AY 2014-15. In response to the same, the Petitioner filed its return of income and sought a copy of the reasons for reopening. The Respondent provided a copy of the reasons for reopening which are annexed as Exhibit F to the Petition. The reasons for re-opening are as below:

“In this case, assessee filed return on 30.11.2014 declaring total loss of Rs. 40,70,31,665/-. Subsequently the case was selected for scrutiny and order under section 143 (3) of the I.T. Act, was finalised on 29.12.2016 accepting the return of income.

2. In the relevant case Assessee has constructed a five star hotel in Bengaluru and handed it to J. W. Marriott for operation. The assessee has accounted all the receipts and expenditures in the profit and loss account and claimed a loss of Rs.40,70,31,665 under the normal provisions of the Act. At the same time loss of Rs.639,48,45,213 (Rs.639,73,36,790 claimed by the assassee in return) capitalised during the year was separately allowed as loss related to specified business under section 35AD. It is seen from schedule 10.4 of the balance sheet that during the year the assessee computed the claim of loss from specified business in the following manner:

It is seen From the above that during the year the assassee has capitalised pre-operative expenses of Rs.293,39,48,980 in the books of accounts (claimed expenditure u/s 35AD) and accordingly claimed loss of the same under section 73A and not as normal business loss under section 72 of the IT Act. On further verification of schedule 10.2 of the balance sheet it is seen that the various expenditures booked as preoperative expenses pending capitalisation are merely of revenue nature and not of capital nature as prescribed in section 35AD(1) of the IT Act.

“As per section 35AD(8)(f) says any expenditure of Capital nature shall not include expenditure incurred on the acquisition of any land or goodwill or financial instrument”. In the relevant case the assessee has claimed preoperative expenses pending for capitalisation of Rs. 293,39,48,980/- u/s 35AD of the Act. It is very clear to see the books of accounts of the assessee that the preoperative expenses will be separated from the claimed under section 35AD, hence the net claimed under section 35AD will be restricted to Rs.346,33,87,810/- (639,73,36,790­293,39,48,980) and not Rs.639,73,36,790/-. The assassee should have booked such expenses in the profit and loss account and accordingly claim the loss under section 72 which has a maximum limit of set of 8 years only. By classifying such revenue expenditure under section 35AD, the assassee is entitled to carry forward such loss for unlimited period of time without any restriction. If such expenditure is allowed as business loss under section 72 there will be a restriction of eight years for set off of such losses, hence undue advantage of carry forward of losses to the tune of Rs.293,39,48,980 for unlimited period in place of a maximum period of eight years.

Hence the income is under assessment by Rs.293,39,48, 980/- has escaped income.”

4. As per the reasons for re-opening as reproduced above, out of the total claim of deduction under Section 35AD amounting to Rs. 639,48,45,213/- the amount in respect of pre-operative expenses i.e., Rs.293,39,48,980/-, was to be treated as revenue in nature and should have been allowed under Section 72 of the Act for a period of eight years instead of an indefinite period in terms of Section 73A read with Section 35AD of the Act. According to the Respondent this carry forward of loss for an indefinite period, instead of 8 years, led to an escapement of income to the extent of Rs. 293,39,48,980/^–•

5. In response to the said reasons for reopening, the Petitioner raised its objections inter alia stating that the impugned reassessment proceeding is bad in law on various counts, including that there is no income escaping assessment in the present case, and further requested the Respondent to drop the re-assessment proceeding. The Respondent initially rejected the objections raised by the Petitioner vide order dated 09.02.2022. Thereafter, another order disposing objections came to be passed on 18.02.2022, whereby, for the first time, the Petitioner was informed that the reopening was initiated on the basis of the opinion of the revenue audit party whereby an audit objection was raised in respect of a part of the claim (Rs.293,39,48,980/- in respect of pre-operative expenses) under Section 35AD stating that the said expenditure is Revenue in nature and not Capital in nature, and therefore, should have been allowed only for a period of 8 years under Section 72 of the Act.

6. Against the said order disposing of objections and challenging the very initiation of reassessment proceedings by issue of a Notice under Section 148 of the Act, the Petitioner has approached this Court. SUBMISSIONS:

7. Mr. Gandhi, the learned Counsel for the Petitioner, furnished a brief synopsis of his propositions to challenge the impugned Notice under Section 148 and the reasons for reopening, on the following primary counts among others:

i. The reasons for reopening clearly state that the claim for deduction under Section 35AD was considered by the Assessing Officer in the original assessment and out of that said claim a part of the claim is sought to be treated as a revenue expenditure so as to restrict the carry forward of the same to a period of eight years in terms of Section 72 of the Act, instead of an indefinite period in terms of Section 73A, read with Section 35AD, of the Act. Clearly therefore, there is no income escaping assessment in the present case in as much as the reopening is intended to merely reclassify the loss under Section 35AD r.w.s. 73A to that under Section 72. This is clearly impermissible;

ii. The Petitioner had fully and truly disclosed all the material facts necessary for assessment during the course of the original assessment proceedings, and therefore, in terms of the first proviso to Section 147, the impugned notice under Section 148 was bad in law. For this reliance was placed on the letters filed during the course of the original assessment and consequential assessment order dated 29.12.2016 (Exihibits. C & D);

iii. There was no new tangible material available with the Assessing Officer, the Respondent herein, based on which the reassessment was initiated. The reassessment was issued simply on the basis of facts already on record. This fact is evident on a bare perusal of the reasons for re-opening (Exihibit. F). The assessment was initiated simply on the basis of a change of opinion in as much as the claim of deduction under Section 35AD of the Act was considered and then allowed in the original assessment proceeding. The impugned assessment was a mere attempt to rework and reduce the period of allowability of the loss by reclassifying the same under a different Section. This was nothing but a mere change in the opinion of the Assessing Officer vis-à-vis that of the Assessing Officer who framed the Original Assessment;

iv. Even otherwise, the reassessment is initiated simply on the basis of an opinion of the Revenue Audit party, who seems to have a different opinion on the facts already on record. These very facts were considered in the original assessment and therefore the impugned reassessment is bad in law since it is based simply on an audit objection;

v. While passing the second order disposing objections, the Respondent has in fact improved upon his case. It is for the first time in this order disposing objections that the Petitioner was communicated that the re­opening of assessment was based on the objection raised by the Revenue Audit Party. He submitted that reasons could not be improved upon by the Assessing Officer;

Mr. Gandhi has also relied upon certain judgements in support of the propositions raised by him.

8. On the other hand, Mr. Mishra, the learned Counsel for the Revenue, stated that:

i. The Respondent’s action of reopening the assessment was justified based on the reasons for reopening;

ii. He also submitted that as per the second order disposing objections, it is clearly pointed out that the claim of expenditure was to be treated as revenue in nature and not Capital in nature, and therefore, the same had to be allowed only for a period of 8 years in terms of Section 72 instead of an indefinite period as per Section 35AD;

iii. He also fairly admitted that the reopening of assessment is based on the audit objections raised by the revenue audit party.

iv. He further relied on the Affidavit in Reply filed by the Respondent.

Consequently he submitted that the Writ Petition be dismissed.

RULING:

9. We have heard the learned counsel for the parties and have also perused the material on record. At the very outset, on a perusal of the reasons for reopening, we note that the reopening is initiated based on the facts already on record of the Assessing Officer, the Respondent herein. There is no new fact or any new tangible material, basis which the impugned notice under Section 148 is issued. We also note that the original assessment in the case of the Petitioner was concluded under Section 143(3) of the Act vide order dated 29.12.2016 wherein the claim of deduction under Section 35AD was also considered. We also note that the impugned reassessment proceeding is initiated beyond a period of four years from the end of the relevant assessment year. Therefore, in terms of the first proviso to Section 147, such a re-assessment could be initiated only if there was a failure on the part of the Assessee to disclose fully and truly all material facts necessary for the purpose of assessment. In the present case, admittedly all the necessary facts were available with the Assessing Officer. Certainly, it cannot be stated that there was any failure on the part of the assessee, the Petitioner herein, to disclose fully and truly all the primary facts. In fact, the very reasons recorded for re-opening show that all the facts based on which the reasons were recorded were available with the Assessing officer, the Respondent.

10. This Court, in a number of judgements, has held that in the absence of any failure on the part of the Assessee to disclose fully and truly all the material facts for the purpose of assessment, no reopening under Section 147 / 148 can be initiated beyond a period of 4 years if the original assessment is concluded under Section 143(3). In this regard reliance can be placed on the judgement of this Court in the case of Bombay Stock Exchange Ltd. v/s DDIT — WP 2468 of 2011 to which one of us (Justice B. P. Colabawalla) was a party. In the said Judgement it has been held as follows:

” 7. Section 147 of the Act empowers the Assessing Officer to reopen a concluded assessment subject to certain restrictions as set out therein. It provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 assess or reassess such income and also other income chargeable to tax which had escaped assessment and which comes to his notice subsequently in the course of the proceedings. The first proviso to section 147 reads as under :

“Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year ; ” (Emphasis supplied)

A perusal of the said proviso makes it clear that where an assessment under section 143(3) or section 147 has been carried out for the relevant assessment year, no action under section 147 can be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to make a return under section 139, or in response to a notice issued under section 142(1) or section 148, or to disclose fully and truly all material facts necessary for its assessment for that assessment year

8. The present case relates to assessment year 2005-06. The return of income for the assessment year 2005-06 was taken up for scrutiny which culminated in an assessment order dated November 26, 2007, under section 143(3) of the Act. Thereafter, respondent No. 1 issued the impugned notice dated February 28, 2011, under section 148 of the Act which was after the expiry of four years from the end of the relevant assessment year. In such a scenario, the first proviso to section 147 of the Act was attracted and no action for initiation of reassessment proceedings could be initiated unless the income chargeable to tax had escaped assessment by reason of the failure on the part of the petitioner to disclose fully and truly all material facts. Mr. Dastoor, the learned senior counsel appearing on behalf of the petitioner, submitted that apart from making a bald assertion that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, no details whatsoever were given with reference to the same. He, therefore, submitted that the initiation of the reassessment proceedings for the assessment year 2005-06 were bad-in-law and, accordingly, prayed for quashing the impugned notice. On the other hand, Mr. Gupta, the learned senior counsel appearing on behalf of the respondents, submitted that the reasons for initiating the reassessment proceedings under section 147 of the Act clearly stated that there had been a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment and, therefore, respondent No. 1 was fully justified in initiating the reassessment proceedings.

9. It is true that the reasons for initiating reassessment proceedings do in fact state that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. However, as correctly submitted by Mr. Dastoor, merely making this bald assertion was not enough. In this regard, the reliance placed by Mr. Dastoor on a Division Bench judgment of this court in the case of Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 is well founded. The relevant portion of the said judgment reads as under (page 337) :

“The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to juste the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court on the strength of the affidavit or oral submissions advanced.” (Emphasis Supplied)

10. In the present case, admittedly, there are no details given by the Assessing Officer (respondent No. 1) as to which fact or material was not disclosed by the petitioner that led to its income escaping assessment. There is merely a bald assertion in the reasons that there was a failure on the part of the petitioner to disclose fully and truly all material facts without giving any details thereof This being the case, the impugned notice is bad in law and on this ground alone the petitioner is entitled to succeed in this writ petition.”

(emphasis supplied)

11. In the present case, the reasons do record that there was a failure on the part of the Assessee, but it is not stated as to what was the said failure. It is a mere bald assertion. This Court has in the case of Bharat Petroleum Corporation Ltd. v/s ACIT – (2025) 478 ITR 358 (Bombay), authored by this very Bench held that:

“28. It is true that the reasons for initiating reassessment proceedings, in fact, state that there is a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for its assessment. However, we find that merely making this bald assertion is not enough. It is now well settled that reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible, and no addition can be made to those reasons. Further, no inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to reach the conclusion as to whether there was a failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment for the concerned assessment year. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on the material on record. What is important is that he must disclose in the reasons as to which fact or material was not disclosed by  the Assessee fully and truly necessary for assessment of that assessment  year, so as to establish the vital link between the reasons and the  evidence. That vital link is a safeguard against the arbitrary reopening of a concluded assessment….

29. In the present case, admittedly there are no details given by the Assessing Officer (the 1st Respondent) as to which fact or material was not disclosed by the Petitioner that led to its income escaping assessment.  There is merely a bald assertion in the reasons that there was a failure on the part of the Petitioner to disclose fully and truly all material facts, without giving any details thereto. This being the case, the impugned Notice is bad in law on this ground alone and the Petitioner would be entitled to succeed in this Writ Petition.”

(emphasis supplied)

12. The Special Leave Petition against the said Judgement has been rejected by the Hon’ble Supreme Court in ACIT v/s Bharat Petroleum Corporation Ltd. ( SLP (C) Diary No. 8091 of 2o26).

13. Likewise, in the case of Transchem Ltd. v/s ACIT (WP 1387 of2o1o) decided on 3^rd February 2022, this Court has held that:

“3. … Moreover, it is quite clear that the Assessing Officer has passed assessment order considering materials on record and taken a conclusive view. To reopen the assessment based on same material with a view to take another view, is not permissible. Moreover, in this case, there is simply a general statement in the reasons that assessee has failed to disclose fully and truly all material facts necessary for its assessment. In  our view, this statement is clearly made only as an attempt to  take the case out of the restrictions imposed by proviso to  section 147 of the Act.

4. Further according to the reasons recorded, there was an error on the part of Assessing Officer because the qualifring amount for deduction under section 80HHC ought to have been determined after allowing set-off of brought forward losses against the adjusted profit of the business. An error discovered on a reconsideration of the same material does not give power to the Assessing Officer to re-open the assessment.”

(emphasis supplied)

14. In view of the above, it is quite evident that, in the absence of any failure on the part of the Assessee to disclose necessary facts, the impugned reassessment proceeding is bad in law and void in terms of the first proviso to Section 147. In that view of the objections and the consequential reassessment proceedings deserve to be quashed on this ground itself.

15. We hold accordingly and hereby quash and set aside the Notice under Section 148 dated 3oth March, 2021 [Exihibit. E], the orders disposing of objections dated 9^th February 2022 [Exihibit . H] and 18th February 2022 [Exihibit. I] and all consequential proceedings thereto.

16. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, in the facts and circumstances of the case, there shall be no order as to costs.

17. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.