Songwon Specialty Chemicals India Private Limited Vs DCIT (Gujarat High Court)
The Gujarat High Court heard two connected petitions challenging notices issued under Sections 148A(b), 148A(d), and 148 of the Income Tax Act for Assessment Years 2017-18 and 2018-19. The petitioner sought quashing of the reassessment proceedings initiated on the basis of audit objections regarding depreciation on intangible assets, particularly goodwill. The petitioner argued that the assessment for the relevant years had been completed under Section 143(3), and depreciation on goodwill had been consistently accepted by the department since Assessment Year 2015-16.
Read SC Judgment: Non-Application of Mind Invalidates Section 148A & 148 Notices: SC Upholds HC Decision
The petitioner asserted that these facts had already been disclosed and examined during earlier assessments, and depreciation on goodwill had been allowed since AY 2015-16. Therefore, initiation of reassessment on the same facts solely on the basis of an audit objection was unjustified. The petitioner also highlighted errors in the audit objection, including incorrectly attributing the creation of goodwill to amalgamation instead of acquisition.
In the order passed under Section 148A(d), the Assessing Officer (AO) rejected the petitioner’s reply. The AO held that the petitioner’s own submissions confirmed that goodwill was created as a book entry upon acquisition and that this goodwill was not present in the books of the acquired entity. The AO concluded that depreciation on goodwill was wrongly allowed and that Explanation 7 to Section 43(1) and Explanation 2 to Section 43(6) applied. The AO further held that no personal hearing was required beyond the opportunity already provided under Section 148A(b).
