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Demerged Income Already Taxed: Reassessment Quashed
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Telangana High Courttax

Demerged Income Already Taxed: Reassessment Quashed

September 28, 2026

Telangana HC quashed reassessment for AY 2019-20, ruling that reassessment cannot be based on demerged income already taxed in earlier years.

Demerged Income Already Taxed: Reassessment Quashed

The Telangana High Court quashed a reassessment proceeding for Assessment Year 2019-20, holding that income already taxed in prior years as part of a demerger cannot form the basis for reassessment under Section 147.

The court found no new incriminating material justifying re-opening and noted that the Revenue failed to establish any escapement of income. Further, the extended limitation period under Section 149 cannot be invoked where no undisclosed income is established.

Opening of assessment on grounds of income already taxed and previously scrutinized is legally impermissible.

This decision reinforces settled principles that reassessment cannot be a tool for re-litigating already taxed income. It provides clarity for corporate restructuring cases involving demergers. Taxpayers can rely on finality of prior assessments where demerged income was fully disclosed and taxed.

Citations

  • Section 147, Income Tax Act
  • Section 149, Income Tax Act
Practice Areas:tax

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