Already Taxed Demerged Income Cannot Trigger Reassessment: Telangana HC

Cyberabad Citizens Health Services Private Limited Vs DCIT (Telangana High Court)

Reassessment for Demerged Income Already Taxed and Beyond Limitation Quashed; Insight Portal Mismatch Alone Cannot Justify Reassessment; Further Verification Cannot Substitute Section 148A Satisfaction; Section 149 Extended Limitation Requires Revelation of Undisclosed Income; Reassessment Based on Income Taxed After Demerger Time-Barred: Telangana HC.

Summary: The Telangana High Court allowed the writ petition filed by Cyberabad Citizens Health Services Private Limited and set aside the order dated 16.04.2024 passed under Section 148A(d) and the consequential notice issued under Section 148 for AY 2019-20. The petitioner, incorporated in 2008 and engaged in operating a multi-speciality hospital, had demerged its healthcare services business into Artmed Healthcare Private Limited under a scheme sanctioned by the NCLT on 08.03.2019 with an appointed date of 01.04.2017. Following the demerger, the healthcare business stood vested in Artmed Healthcare, while the petitioner retained the healthcare infrastructure property. The entire healthcare-services income was accounted for and offered to tax by Artmed Healthcare.

For the year ended 31.03.2019, the petitioner filed its return declaring a loss of Rs.1,13,35,168/-, which was processed under Section 143(1). Since the NCLT sanction order had not been passed until 08.03.2019, customers had deducted TDS in the petitioner’s name during FY 2018-19 even though the underlying healthcare-business income belonged to Artmed Healthcare. The Assessing Officer subsequently issued a notice under Section 148A(b), relying upon Insight Portal information concerning professional receipts of Rs.1,25,85,296/-, professional and technical service receipts of Rs.43,39,64,639/-, interest income of Rs.7,59,595/- and contract receipts of Rs.43,65,774/-. The petitioner explained, with supporting documents, that the relevant healthcare-business receipts had already been accounted for and offered to tax by Artmed Healthcare. Nevertheless, the Assessing Officer passed the Section 148A(d) order on the ground that transactions aggregating to Rs.108,36,46,354/- required further verification and issued the Section 148 notice.