SARTHAK DEVELOPERS vs. THE DEPUTY COMMISSIONER OF INCOME TAX

C/SCA/18103/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18103 of 2019 ================================================================ SARTHAK DEVELOPERS Versus THE DEPUTY COMMISSIONER OF INCOME TAX ================================================================ Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA

Date : 23/03/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By this writ application under Article 226 of the Constitution of India,   the   writ   applicant   seeks   to   challenge   the   notice   dated 30.09.2019 issued by the respondent under Section 148 of the Income   Tax   Act,   1961   (for   short,   'the   Act,   1961')   seeking   to reopen   the   writ   applicants'   income   tax   assessment   for   the A.Y.2012­13. 2. The brief facts of case can be summarized as under:­ 2.1 The assessee is engaged in the business of developing and building housing projects and filed its return of Income on 30.09.2012 for the A.Y. 2012­13 declaring total consideration of Rs.NIL after claiming of deduction of Rs. 19,28,66,167/­ under Section 80IB (10) of the Act. Page 1 of 10

C/SCA/18103/2019 ORDER 2.2 The case of the assessee for the year under consideration was selected for scrutiny assessment and the then Assessing Officer after considering the details and information furnished by the assessee had allowed the claim of deduction and framed the assessment under Section 143(3) of the Act vide order dated 13.03.2015.

2.3 The   Assessing   Officer  reopened   the   assessment   under Section   147   of   the   Act   by   issuing   impugned   notice   dated 30.03.2019 under Section 148 of the Act. 2.4 At the request, the reasons recorded have been furnished to the   assessee   on   01.07.2019   &   20.08.2019,   which   read   as under: “Reasons recorded on 01.07.2019: The assessee firm constituted on 01.01.2006 is engaged in the business of Developing and building housing Project, land organizers,   building   contractors   and   has   filed   return   of income for the A. Y. 2012­13 on 30.09.2012 declaring total income   of   Rs.   Nil   after   claiming   the   deduction   of Rs.19,28,66,167/­ u/s 80IB(10). The ITR was processed u/s 143(1) of the Income Tax Act, 1961.The case was selected for scrutiny assessment and assessment u/s.143(3) of the income   Tax   Act,   1967   was   completed   on   13/03/2015 determining the assessed income at Rs. Nil after allowing the deduction of Rs. 19,28,66,167/­ u/s.80IB(10).

The assessee has made application for development permission dated 07.04.2005 which was, made prior to date of   incorporation   of   the   assessee   firm   (01.04.   2006)   and thereafter Shri Gagjibhai D Shetha again in his individual capacity   got   development   permission   on   11.02.2014   for construction of residential low rise building in pursuance of the application dated 01.10.2009. The completion certificates dated   17.11.2011   and   20.03.2012   of   housing   project   in respect of housing project in respect of which the assessee firm   has   claimed   deduction   u/s   80IB(10)   states   date   of application   for   development   permission   and   grant   of development   permission   on   01.10.2009   and   11.02.2010 Page 2 of 10

C/SCA/18103/2019 ORDER respectively. As per the provisions u/s 80IB(10) deduction shall be allowed to an undertaking developing and building housing projects approved before 31st  day of March 2008 by a local: authority. Therefore in view of the above deduction u/s 80IB(10) of the IT Act claimed of Rs.19,28,66,167/­ was required to be disallowed. On verification of the facts, there is income­escaping assessment of Rs.19,28,66,167/­. The assessment was carried out for the relevant period, but the assessee has not disclosed fully and truly all the material facts necessary for assessment.

Reasons recorded on 20.08.2019: 2. The   reasons   for   reopening   of   your   assessment   for A.Y.2012­13 as recorded is as under: The assessee firm constituted on 01.01.2006 is engaged in the business of Developing and building housing Project, land organizers,   building   contractors   and   has   filed   return   of income for the A. Y. 2012­13 on 30.09.2012 declaring total income   of   Rs.   Nil   after   claiming   the   deduction   of Rs.19,28,66,167/­u/s 80IB(10). The ITR was processed u/s 143(1) of the Income Tax Act, 1961.The case was selected for scrutiny assessment and assessment u/s.143(3) of the income   Tax   Act,   1967   was   completed   on   13/03/2015 determining the assessed income at Rs. Nil after allowing the deduction of Rs. 19,28,66,167/­ u/s.80IB(10). The   assessee   has   made   application   for   development permission dated 07.04.2005 which was made prior to date of   incorporation   of   the   assessee   firm   (01.04.2006)   and thereafter Shri Gagjibhai D Shetha again in his individual capacity   got   development   permission   on   11.02.2010   for construction of residential low rise building in pursuance of the application dated 01.10.2009. The completion certificates dated   17.11.2011   and   20.03.2012   of   housing   project   in respect of housing project in respect of which the assessee firm   has   claimed   deduction   u/s   80IB(10)   states   date   of application   for   development   permission   and   grant   of development   permission   on   01.10.2009   and   11.02.2010 respectively. As per the provisions u/s 80IB(10), deduction shall be allowed to an undertaking developing and building housing projects approved before 31st day of March 2008 by a local; authority. Therefore in view of the above deduction u/s 80IB(10) of the IT Act claimed of Rs. 19,28,66, 167/was required to be disallowed. Page 3 of 10

C/SCA/18103/2019 ORDER The regular assessment was carried out in the case of the assessee but deduction u/s 80IB(10) of the IT Act claimed of Rs. 19,28,66,167/­ was not disallowed, which was required to be disallowed. So notice u/s 133(6) of the IT Act was issued to the assessee dated 15/03/2019. Vide above notice, he was asked to furnish the relevant documents to justify the above­referred   deduction   of   Rs.   19,28,   66,167/­   u/s 80IB(10) ) of the Act of Rs. 19,28,66,167/­ for A.Y. 2012­13 along   with   the   supporting   document.   The   assessee   had furnished reply dated 18.03.2019, which is duly considered. On perusal of the details it was noticed that assessment u/s 143(3)   of   the   income   Tax   Act,   1961   was   completed   on 13/03/2015 determining the assessed income at Rs. Nil/­ after   allowing   the   deduction   of   Rs.   19,28,66,167/­   u/s 80IB(10).   Reply   of   the   assessee   leads   to   the   belief   that deduction of Rs.19,28,66,167/­ u/s 80IB(10) required to be disallowed and hence are part of the income of the assessee, which escaped assessment because of the non­disclosure of the full and true material facts necessary for the assessment proceedings. On verification of the  facts, there is income escaping assessment because of the above referred deduction of   Rs.   19,28,66,167/­   u/s   80IB(10)   required   to   be disallowed. On verification of the facts, there is income escaping assessment of Rs.19,28,66,167/­. The assessment was carried out for the relevant period, but the assessee has not disclosed fully and truly all the material facts necessary for assessment. The facts of the case are covered by the explanation 1 to section 147 of the I.T. Act, 1961. As such, in view of the above facts and material, I have reason to believe that the above Income totaling amount to Rs. 19,28,66,167/­ has escaped assessment because of the non­disclosure of full and true all the material facts necessary for assessment. Hence, notice u/s 148 r.w.s 147 of the I.T. Act 1961 is to be issued for the A.Y. 2012­13.” 3. Due to change in incumbent of this office, you are hereby given   a   fresh   Opportunity   of   being   heard   as   per   the provisions laid down in section 129 of the I.T. Act, 1961 to continue with the assessment proceedings.” 2.5 The assessee vide letter dated filed on 31.07.2019, raised objections  against reopening of the assessment, which came to Page 4 of 10

C/SCA/18103/2019 ORDER be rejected by the respondent vide order dated 19.09.2019. 3. Aggrieved  by the impugned notice and order of disposal of the objections by the Assessing Officer, the writ applicant has come up before this Court by filing the present writ application. 4. The case of the assessee is sought to be reopened mainly on the ground that claim of deduction under Section 80IB (10) of the Act is not allowable as the condition precedent for the eligibility of claim   was   not   satisfied   and   therefore,   income   has   escaped assessment. 5. The   assessee   has   challenged   the   reopening   primarily   on   the following grounds:­ (i) Entire exercise of reopening under Section 147 is in violation of settled position of law, since same reflects a mere change of opinion; (ii) Non­satisfaction   of   preconditions   specified   in   the provision read with explanation (1) to 147; (iii)lack/absence of valid sanction under Section 151 of the Act; (iv) there was no false or untrue declaration by the assessee in   filing   of   return   or   during   course   of   assessment proceedings   on   which   reassessment   is   sought   to   be reopened; 4. We have heard Mr. Tushar Hemani, the learned Senior Counsel assisted by Ms. Vaibhavi Parikh, the learned counsel appearing for the writ applicant and  Ms. Kalpana K. Raval, the learned Standing Counsel appearing for the revenue. Page 5 of 10

C/SCA/18103/2019 ORDER 5. Mr. Tushar Hemani, the learned Senior counsel appearing for the writ applicant has raised the following contentions: 5.1 It   was   submitted   that   the   assessee   had   disclosed   all material facts with regard to claim of deduction under Section 80ID(10) of the Act, while filing the return of income as well as during   the   original   assessment   proceedings.   Therefore,   the condition precedent for invoking Section 147 is not satisfied. 5.2 It was pointed out that the impugned notice is liable to be quashed and set aside on the ground that it is issued merely on the basis of change of opinion. In this context, it was submitted that   the   case   of   the   assessee   was   selected   for   scrutiny assessment and issue on hand was examined thoroughly at original   assessment   stage.   Therefore,  reconsideration   of   the same issue without any new and tangible material in the hands of the Assessing Officer is not sustainable in eye of law.

C/SCA/18103/2019 ORDER Therefore, considering  the  facts  of the  present  case, the  local authority of the concerned jurisdictional project had not accorded approval on or before 30.08.2008 and after noticing the facts that the assessee had not disclose true facts at the relevant time, the Assessing   Officer   has   reason   to   believe   that   the   income   has escaped   assessment.   Referring   to   the   assessment   order   dtd 13.03.2015,  she urged that some of the issues were not properly considered by the Assessing Officer and therefore, it could not be said that there was a conscious application of mind applied by the Assessing Officer in the previous proceeding. 8. In view of the above contentions, the learned counsel appearing for the revenue urged that both the writ applications may not be entertained. 9. We have carefully considered the contentions and also perused the materials on record. 10. Having   heard   the   learned   counsel   appearing   for   the respective parties and considering the materials on record, the only question falls for our consideration is whether the revenue is justified in reopening the assessment. 11. Before adverting to the issues raised by the rival parties,  we may refer to the settled law in case of reopening after 4 years from the end of relevant financial year. It is a settled position of law that failure to make full and true disclosure is a pre­condition, which should be satisfied if reopening is after 4 years of the end of assessment year. Thus, in case of reopening after 4 years, as per the provision,  two conditions are required to be fulfilled, (i) Assessing Officer must have reason to believe that the income Page 7 of 10

C/SCA/18103/2019 ORDER chargeable to tax has escaped assessment, and (ii) he must have reason   to   believe   that   such   escapement   was   occasioned   by reason   of   failure   to   disclose   fully   and   truly   material   facts necessary for the assessment.  It is also a settled law that under Section 147 of the Act, mere a change of opinion does not confer jurisdiction on the Assessing Officer to initiate proceedings for reassessment. 12. It is undisputed fact that assessment proceedings under Section 143 of the Act were completed vide order dated 13.03.2015, wherein,   the   Assessing   Officer   had   accepted   the   claim   of deduction   amounting   to   Rs.19,27,66,167/­,   on   the   basis   of evidences and submission made by the assessee and allowed the claim under Section 80IB(10) of the Act. 13. We   take   the   notice   of   the   fact   that   during   the   previous assessment   proceedings,   the   assessee   had   furnished   various details and information called for by the Assessing Officer by issuing notice under Section 142(1) of the Act. The housing project at Surat launched by the assessee was approved by the local   authority   on   13.07.2006   and   accordingly,   as   per   the provisions of Section 80IB(10) of the Act, the claim of deduction was mentioned in the return of income and also reflected in the tax audit report along with Form 10CCB. It also appears that in a previous   assessment   proceedings,   the   assessee   had   furnished necessary approval accorded by local authority along with lay­ out plan of the project and after considering the same, the then Assessing Officer framed the assessment and allowed the claim of deduction. Page 8 of 10

C/SCA/18103/2019 ORDER 14. In the background of the aforesaid facts and close scrutiny of the reasons recorded, we are of the view that the impugned notice is without   authority   of   law   as   the   initiation   of   proceedings   is nothing but a mere change of opinion. After careful examination of the assessment order and materials furnished by the assessee at the stage of previous assessment, would go to show that there was conscious application of mind to the issue of deduction by the then Assessing Officer and after considering the evidences and  materials, he  thought  not  fit  to disallow  the  deduction. Therefore, a mere change of opinion while persuading the same material   by   the   Assessing   Officer,   while   initiation   of   the proceedings, cannot be a reasons to believe that the income has escaped assessment. Thus, once an opinion is formed on the issue   of  deduction  and   assessment  on  the   issue  was   framed under Section 143 of the Act, the reopening on the same set of facts and material, without there being any tangible material would be nothing but a change of opinion. 15. We take the notice of the fact that the assessee had disclosed true   facts   with   regard   to   claim   of   deduction   under   Section 80IB(10) of the Act while filing return of income and same had been mentioned in the audit report as well as Form 10CCB and considering these materials, the then Assessing Officer did not disallow the deduction. Therefore, the condition precedent for reopening of the assessment beyond 4 years having not satisfied and on this ground also, the impugned notice is required to be quashed and set aside. 16. In view of the discussions made hereinabove and considering the facts   and   circumstances   of   the   present   case,   we   have   no Page 9 of 10

C/SCA/18103/2019 ORDER hesitation to hold that there was no basis or jurisdiction for Assessing Officer to form a belief that any income of the assessee chargeable to tax for the year under consideration, had escaped assessment under Section 1477 of the Act and reasons recorded could not have led to formation of any belief that income had escaped   assessment.   Therefore,   the   impugned   notice   dated 30.03.2019 issued under Section 148 of the Act is required to be quashed and set aside and is hereby quashed and set aside. 17. In view of the foregoing reasons, the present writ application is allowed. There shall be no order to costs. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 10 of 10