RUPA INFOTECH AND INFRASTRUCTURE PVT LTD ,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX CIRCLE 14(1)(20, MUMBAI

5. The appellant crave your honour's leave to add, alter or amend any ground of appeal

at the time of hearing or before.”

2. Brief facts of the case are as under:-

Assessee is a private limited company and is engaged in the business of construction and property development. For the year under consideration, the assessee filed its return of income on 29/09/2012 declaring total income at Rs. 1,93,39,494/-. The assessment was thereafter completed u/s 143(3) of the Act on 23/05/2015 assessing total income at Rs. 1,96,62,711/-.

2.1. Subsequently, the case of assessee was reopened u/s 147 of the Act by issuing notice on 28/03/2019 by recording following reasons:-

“It is seen from records that the assessee has claimed deduction u/s.80IA of Rs.4,69,76,429/- in respect of its project Rupa Technopark. As per the Notification, a minimum of 52 units was to be allotted in the premises to become eligible for the allowance of deduction. The assessee has not complied with the said provision, as from the details filed by the assessee it is not clear that minimum 52 units have been allotted in the project Platinum Technopark to become eligible to claim the deduction u/s.80IA of the Act. Since, the assessee has not complied with the necessary condition, the assessee is not eligible to claim the deduction u/s.80IA amounting to Rs.4,69,76,429/-. It is further seen from records that the records that in Profit & Loss account assessee has shown purchase of Rs.2,69,08,750/- and the assessee has claimed deduction u/s.80IA on the value of purchase of stock-in-trade as well. As per the provisions of section 80IA deduction is permissible only of development and not on resale. Accordingly, the assessee is not eligible to claim deduction u/s.80IA on purchase of stock-in-trade. The case is fit to be reopened with reference to the provisions u/s. 147/148 of the Income Tax Act. After due analysis of the above, it is found that the assessee, Rupa Infotech and Infrastructure Private Limited, claimed deduction u/s.80IA of Rs.4,69,76,429/- in respect of its project Rupa Technopark, however, the assessee is not eligible to claim the deduction u/s.80IA, as the assessee has not complied with the necessary condition of minimum 52 units in the said project. / as from the details filed by the assessee it is not clear that minimum 52 units have been allotted in the project Platinum Technopark to become eligible to claim the deduction u/s.801A of the Act. Further, the assessee has claimed deduction u/s.80IA on the value of purchase of stock-in-trade of Rs.2,69,08,750/-, whereas as per the provisions of section 80IA deduction is permissible only of development and not on resale. Accordingly, the assessee is not eligible to claim deduction u/s.80IA on purchase of stock-in-trade. Therefore, I have reasons to believe that the income chargeable to tax to the extent of Rs.4,69,76,429/- has been under assessed On the basis of above analysis/ satisfaction, I am of the firm opinion and have bona fide and valid reason to believe that the case is squarely fit to be reopened with reference to the provisions u/s 147/148 of the IT Act, 1961 so as to bring to tax the under assessed income to the tune of Rs Rs.4,69,76,429/- Applicability of the provisions of section 147/151 of the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment u/s. 143(3) was made on 23/03/2015 determining the total income at Rs.1,96,62,711/- under normal provisions of the Act and book profit u/s. 115JB at Rs. 1,27,36,552/-. Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceedings u/s.147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above. (refer to paragraphs 2 & 3).

I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration: • Income chargeable to tax has been under assessed by an amount of Rs.4,69,76,429/-. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s. 147 of the Act. It is true that the assessee has filed a copy of annual report and audited P&L A/c. and balance sheet along with return of income where various information / material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c. and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1(c) of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment / reassessment. It is important to highlight here that material facts relevant for the assessment on the issues) under consideration were not filed during the course of assessment proceedings and the same may be embedded in annual report, audited P&L a/c., balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For aforestated reasons, it is not a case of change of opinion by the AO. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s.148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.” 2.2. In response to the notice u/s 148 of the Act, assessee filed its return of income on 03/04/2019 declaring total income as declared in the original return of income. Notice u/s 143(2) dated 27/09/2019 and notice u/s 142(1) alongwith questionnaire was issued to the assessee. Thereafter, the assessee requested for the reasons recorded for reopening, which was provided. The assessee then raised objection challenging the reopening of assessment which was disposed off vide order dated 09/11/2019. The Ld.AO during the assessment proceedings noted that, there is nothing on record to show that the assessee had complied with basis requirement of having minimum 52 units, nor submitted any details regarding eligibility for deduction u/s 80IA(4)(iii) of the Act. Assessee in response submitted vide letter dated 12/02/2015 wherein a reference to the assessment order passed for assessment year 2011-12 was made. It was submitted that eligibility of assessee to claim deduction u/s 80IA(4)(iii) of the Act was discussed in detail and necessary proof to support the claim alongwith documents were filed during the relevant assessment year 2011-12. It was submitted that there is no change on facts and no further details to be filed in respect of the same. Assessee submitted that, in support of the claim of deduction during the first year for assessment year 2011-12, assessee placed on record following documents:-

“i) Letter dtd.31.07.2013 sent to CBDT along with certificate dtd.31.07.2013 issued by Architect and approved building plan with area summary.(pg 6-11) ii) Certificate dtd.21.02.2014issued by Architect giving total constructed area as on date of completion of the project.(pg 12-16 ) iii) Details giving list of owners of 87 units of the premises. (pg 23 - 27) iv) Details giving list of occupants 52 of the premises.(pg 17 - 22) certain occupants occupying more than one unit. For the reason 87 units constructed occupied by 52 occupants.” 2.3. It was thus submitted that there is nothing on record to show that assessee has not complied with the basic requirement of having 52 units. Whereas the assessee submitted all details with 80IA(4)(iii) of the Act. The assessee in support had placed reliance on the decision of Hon’ble Bombay High Court in the case of CIT vs. Western Outdoor Interactive (P) Ltd. reported in 349 ITR 309, wherein a similar issue was considered while granting deduction u/s 10A of the Act. The Ld.AO, however, after considering the submissions of assessee in present facts, observed and held as under:-

“3.2. The deduction u/s. 80 IA is available on profits derived from developing, operating, maintaining of techno park. The assessee has admitted that during the year it has purchased some units and resold it during the year and has claimed 80IA on the profits derived thereon of Rs. 98,30,536/-. The assessee’s claim that all profits derived by an eligible undertaking is eligible for deduction u/s. 80IA is incorrect. The profits which are derived from activities directly relatable to developing, operating and maintaining a techno park is only eligible for deduction u/s. 80IA. The profits on resale of units does not fall within the meaning of developing, operating, maintaining. Hence the claim of deduction u/s. 80IA on resale of units amounting to Rs. 98,30,536/- is disallowed and added back to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the I.T. Act is initiated separately for filing inaccurate particulars of income.

4. Subject to the above total income of the assessee company is computed as under:- Total income as per order u/s. 1,96,62,711 143(3) dt. 23/3/2015 Add: on account of disallowance 98,30,536 u/s. 80IA as discussed above Total income 2,94,93,247 Tax as per section 115JB is higher than normal tax. Hence tax to be computed u/s 115JB.” Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A).

3.1. On merits of the addition, the Ld.CIT(A) upheld the disallowance made by Ld.AO by observed as under:-

“9.8 Further, during the course of appellate proceedings, the appellant submitted that it sold unit of eligible software park in earlier years which were returned back during the year. After carrying out certain improvement therein, the appellant sold the said units of eligible software park and earned a profit which will be eligible for deduction u/s 80IA(4) being income from business of eligible software park. The appellant relied on several judgments to justify its claim, however, the case laws given by the appellant were related to rent out property income or lease out income. It is pertinent to note that in the present case the income is earned by purchase and resale which amounts to trading, whereas section 80IA is applicable to profits from business of development, maintaining and operating any infrastructure facility. Hence, the facts of the case laws relied upon by the appellant are different from the facts in the present appeal. Hence, I am of the opinion that the AO has rightly disallowed the deduction u/s 80IA as claimed by the appellant since, the appellant is not eligible for the said deduction.

4.1. The assessee had submitted list of 52 occupants giving name of party with unit no. and area during the assessee proceedings for AY 2011-12. It was also stated that, plan of construction of Software Technology Park is approved by New Mumbai Municipal Corporation and CBDT, New Delhi vide Notification no.14/2014 dtd.13.03.2014 F. No.178/77/1010-ITA-1 granted approval to claim deduction U/s.80IA after verifying the requisite conditions as required to be complied for approval of Software Technology Park. These details were furnished by the assessee during assessment year 2011-12 vide submission dated 21/03/2014 and 24/03/2014.

4.2. The Ld.AR submitted that, in proceedings before CBDT, the said issue was considered and necessary details were submitted vide submission dtd.21.09.2010. He submitted that, after being satisfied, Certificate of Approval was issued by the CBDT. The Ld.AR submitted that, the assessee is having more than 52 units as is apparent from list already filed and available in the records. The details of which are placed at pages 48-62 of the paperbook filed before this Tribunal. On the basis of aforesaid submission claim 4.3. The Ld.AR submitted that, other reason mentioned in the reason recorded to hold assessee to be not eligible for deduction U/s.80IA is that, the assessee purchased stock-in-trade of Rs.2,69,08,750/- that formed part of deduction under section 80IA. The Ld.AO held that, deduction u/s 80IA is permissible only for developing, operating and maintaining software park and not for trading. It was submitted by Ld.AR that, assessment for the year was completed u/s.143(3) vide order dtd.23.03.2015 after due verification and deduction U/s.80IA has been allowed.

4.4. The Ld.AR submitted that, the purchase for stock-in-trade amounting Rs.2,69,08,750/- relates to units in the project Platinum Techno Park which were developed & constructed by the assesse company. It was submitted that, during the A.Y.2012-13, assesse company acquired/bought back units from the original purchaser to whom units were sold and carried out further development. It was submitted that, and after development assessee sold certain units as reflected in P & L Account and profit derived from said units has been disclosed in the profit & loss account. It was submitted that, remaining units were retained back by the assesse, which are reflecting under closing stock. Ld.AR thus submitted that as the units are sold from the eligible undertaking, it qualifies for deduction u/s 80IA.

4.5. Thus, the Ld.AR submitted that, both reasons recorded by Ld.AO to reopen the assessment are based on pre-existing material already disclosed during original assessment proceedings. He submitted that for assessment year 2011-12, the claim of deduction u/s 80(IA)(4)(iii) was allowed based on the CBDT Approval order dated 13/03/2024. The Ld.AR submitted that, during the original assessment proceedings, for year under consideration the deduction allowed was at Rs. 4,69,76,429/- but during the re-assessment proceedings, for the reasons best known to the Ld.AO the deduction was denied to the extent of Rs. 98,30,536/-. It was submitted that, the audit report in Form 10CCB computing the deduction at Rs. 4,69,76,429/-, includes Rs.98,30,536/-. He placed reliance on page 85 and 87 of the paperbook wherein the bifurcation of the claim of assessee u/s 80IA(4)(iii) has been given.

4.6. The Ld.AR thus, placed reliance on the following decisions to submit that there is no new material with the Ld.AO in order to support the reopening of assessment more particularly when the said assessment has been reopened beyond the period of four years:-

• Hon’ble Bombay High Court in the case of Tumukar Minerals Ltd. reported in 456 ITR 286 (Bom.) • Hon’ble Bombay High Court in the case of Rajshree Realtors P Ltd. reported in 334 CTR 866 (Bom.) • Hon’ble Bombay High Court in the case of Smt. Sumita Purshottam Virgincar reported in 466 ITR 238 (Bom.) • Hon’ble Bombay High Court in the case of Patel Engineering Ltd. reported in 446 ITR 728 (Bom.) • Hon’ble Supreme Court in the case of Kelvinator India Ltd. reported in 320 ITR 561 (SC)

Hon’ble Bombay High Court in the case of Capegemini India (P) Ltd. vs. ACIT reported in 232 Taxman 149 (Bombay High Court) • Hon’ble Bombay High Court in the case of Godrej Agrovet Ltd. vs. DCIT reported in 155 DTR 275 (Bombay High Court) • Hon’ble Bombay High Court in the case of Jet Speed Audio (P) Ltd. reported in 117 DTR 82 (Bombay High Court)” 4.7. On the contrary, the Ld.DR relied on the orders passed by the authorities below. He also submitted that documents were not furnished to support the claim of assessee and, therefore, the re- opening of assessment is not justified.

We have perused the submissions advance by both the sides in light of the records placed before us.

5.1. For the year under consideration, the Ld. AO verified all relevant details during the original assessment proceedings based on the submissions called for in respect of the deduction claimed by assessee. It is also noted that, in the reasons record, Ld.AO has not brought any new material on record to establish that, how the assessee has not fully and truly disclosed all material facts necessary for assessment. The Ld.AO has not identified any material according to him, that was not disclosed by assessee which has led to excess claim of deduction u/s 80IA(4)(iii) of the Act. It is further noted that, in reasons recorded to reopen the assessment, Ld.AO is relying on the audited accounts and other relevant documents that is already available on record.

5.2. On perusal of the reasons recorded, it is amply clear that all details were collected by the Ld.AO from the documents already available on record. It is noted that, the Ld.AO is relying only on annual report and audited P&L A/C and balance sheet.

5.3. Most importantly, the notice under s. 148 of the Act was issued after the expiry of 4 years from the end of the relevant assessment year. As per the first proviso in s. 147 of the Act, an assessment can be reopened after a period of 4 years only where income chargeable to tax has escaped assessment by reason of the failure on the part of assessee to make a return or to disclose fully and truly all material necessary for his assessment for that assessment year. In the case at hand, the assessee furnished all the necessary details about claim of deduction u/s 80IA(4)(iii) during the original assessment proceedings. The Ld.AO, however, without even alleging what was the failure on the part of assessee to furnish and what information was to be furnished recorded the reasons and issued notice u/s 148. The Ld.AO has not indicated which material facts were required to be disclosed by petitioner and were not produced during the scrutiny assessment. It is a settled law that the Ld.AO has no power to review concluded assessment in the garb of reopening.

5.4. At this juncture, we refer to the decision of the Hon’ble Bombay High Court in the case of Asian Paints Ltd. v. Deputy Commissioner of Income Tax & Anr., reported in (2009) 308 ITR 195 (Bom) wherein the Hon’ble Court held that when all facts were before Ld.AO at the time of original assessment even assuming that Ld.AO failed to apply his mind in the original assessment, the Ld.AO is precluded to issue notice u/s 148 of the Act. Hon’ble Supreme Court in the case of Kelvinator India Ltd. (supra) held that “there is conceptual difference between power to review and power to reassess. The Assessing officer has not power to review. The Assessing officer has power to re-assess provide there is “tangible material” to come to a conclusion that there is escapement of income from assessment. Reason must have a live lick with the formation of belief”. It is a settled law that, the Ld.AO has no power to review a concluded assessment in the garb of reopening.

5.5. We are, therefore, of the opinion that the re-assessment notice issued without there being fresh tangible material on record, deserves to be quashed. As we have quashed the root cause of the assessment proceedings, the assessment order so passed in consequence becomes void ab initio. Accordingly, the addition that emanates from the assessment order becomes academic at this stage.