TaxTMI 
TaxTMI 
2026 (9) TMI 1985
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.... Assessment Year (for short 'A.Y.') 2022-23. 3. The reopening of the assessment is sought by issuance of the Notice dated 29.03.2026 under sub-section (1) of Section 148A of the Act calling upon the petitioner to show cause as to why Notice under Section 148 of the Act should not be issued. From the contents of the Notice, it is reflected that the same is premised on a search and seizure action carried out on 08.12.2021 in the case of CFM Asset Reconstruction Private Limited (for short 'CFM ARC') and related entities. The details of Non-Performing Assets (for short 'NPA') of the petitioner acquired by CFM ARC were tabulated, which mention the acquired debts aggregating to Rs. 9,454.85 lakhs (Principal Rs. 8,102.05 lakhs + interest Rs. 1,352.80 lakhs) at a cost of Rs. 5,050 lakhs. It is mentioned that the petitioner "might have claimed deduction of interest on such loans" which was never paid and now the liability has ceased to exist, and that such cessation of liability of interest may attract the provision of Section 41(1) of the Act and waiver of loan may attract Explanation 1(b) to Section 115JB(2) of the Act to the tune of Rs.1,352.80 lakhs. By assigning this reason, the Not....
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...., the reopening is not permissible. In support, he has placed reliance on the judgment of the Coordinate Bench of this Court in the case of KRBL Limited vs. State of Gujarat, (2023) 154 taxmann.com 489 (Gujarat). 4.1 It is further pointed out that the petitioner never claimed a deduction of the interest in question (i.e. Rs. 13.52 crore payable to Andhra Bank, subsequently named as CFM ARC); that the liability of the bankers had ceased to exist and even a NOC / No Due Certificate is issued in favour of the petitioner; that the said bank had become NPA since financial year 2015-16 and the petitioner had not claimed interest in the profit and loss account since financial year 2015-16; and that the reopening is premised on conjectures and surmises, inasmuch as the Assessing Officer has himself expressed that the petitioner "might have claimed" deduction of interest on such loan, though the profit and loss accounts could have been verified by the Assessing Officer before reopening of the assessment. 4.2 Learned Senior Counsel has, in particular, submitted that the controversy raised in the present petition is squarely covered by the common oral judgment dated 30.06.2026 rendered ....
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.... 6. We have heard the learned advocates for the respective parties at length and have perused the material on record. 7. The established facts from the pleadings and the documents on record are that the petitioner company has undergone a CIRP, which was initiated vide order dated 19.12.2017 passed by the NCLT, Ahmedabad Bench. Since the resolution plan was not approved, the NCLT vide order dated 19.12.2019 ordered liquidation of the petitioner. These liquidation proceedings, initiated by the liquidator, culminated into the sale agreement executed on 03.03.2021 in favour of ATPL, thereby selling the petitioner as a going concern. In terms of Regulation 32(e) of The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the petitioner was acquired as a going concern by ATPL on a 'clean slate' with a clear understanding that all the past liabilities / investigations shall stand extinguished, as per the sale agreement dated 03.03.2021 read with the provisions of the Code, 2016. 8. The Revenue has sought to reopen the assessment of the petitioner for A.Y. 2022-23 on the basis of a search and seizure action which was carried out on 08.12.2021 in the cas....
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.... 2015-16. When the petitioner had clarified this aspect, it was always open for the Assessing Officer to verify the same from the profit and loss account of the petitioner before reopening the assessment. 11. We may also observe that the impugned order suffers from a patent self-contradiction and total non-application of mind. Though the reopening is founded upon an alleged cessation of liability, the impugned order, at paragraph 6, itself records that "the liability of the Assessee has not been ceased". Once it is the Assessing Officer's own finding that there is no cessation of liability, the very substratum for invoking Section 41(1) of the Act and Explanation 1(b) to Section 115JB(2) of the Act disappears, and no case of escapement of income survives. 12. We are further of the view that the impugned order has travelled beyond the show cause notice. The show cause notice dated 29.03.2026 proposed the reopening solely on the ground of the alleged cessation of interest liability. The impugned order, however, at paragraph 7, concludes that the petitioner has "made bogus purchase during the year under consideration" which is neither arising in the facts of the present case nor....