Supreme Court Upholds Gujarat High Court Order Quashing Adani Power's Income Tax Reassessment Notice

The Supreme Court has refused to interfere with a 2024 Gujarat High Court ruling that quashed a reassessment notice issued to Adani Power Limited for the 2014–15 assessment year.

A bench led by the Chief Justice of India, Surya Kant, and comprising Justices Joymalya Bagchi and Vipul M. Pancholi said the High Court's view “warrants no interference at all.”

The court declined to condone a delay of 426 days in filing the petition. It said the explanation offered by the tax department was “absolutely vague and unacceptable.”

The bench added that the petition appeared to have been filed “only to get the stamp of this Court.” The Special Leave Petition was dismissed on delay as well as on merits.

The dispute began when the tax department tried to reopen Adani Power's tax assessment for the 2014–15 year. It did so by issuing a notice under Section 148 of the Income-tax Act, the provision that allows completed assessments to be reopened.

But this was not a case where the return had escaped scrutiny. Adani Power's return had already been examined in detail. A full assessment was completed in December 2017 under Section 143(3), which is used when tax officers closely scrutinise a return. During that exercise, the officer went into the company's depreciation claims and disallowed a portion of them.

Adani Power challenged that assessment. The appellate authority later agreed with the company in part and granted it partial relief.

In March 2021, the department sought to reopen the assessment. It alleged that Adani Power had wrongly claimed additional depreciation on foreign exchange fluctuation linked to imported plant and machinery. The company objected, saying the issue had already been examined during scrutiny and that there was no failure to disclose material facts.

In August 2024, the Gujarat High Court quashed the reassessment. It found that the reasons for reopening were based entirely on material already on record. The court said the assessing officer had revisited an issue already examined during the original assessment.

“It is apparent from the perusal of the reasons recorded that the Assessing Officer has formed a reason to believe only on the basis of material available on record in absence of any fresh tangible material having live nexus with the reasons recorded,” the High Court said.

The court had also noted that reopening beyond four years was impermissible, as there was no failure by the assessee to make a full and true disclosure of facts.

For Petitioner: Additional Solicitor General S. Dwarakanath, Advocates Madhulika Upadhyay (Advocate-on-Record), Udai Khanna, Astha Singh, and Chandra Kant Sharma.