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Facts
The assessee initially filed a return declaring loss, then a revised return claiming deduction under Section 80-IB. The Assessing Officer reopened the assessment under Section 147, denying the Section 80-IB deduction on grounds of project completion issues and non-compliance with Section 80AC. The CIT(A) subsequently allowed the deduction, leading to the revenue's appeal before the tribunal.
Held
The tribunal held that the reopening of the assessment under Section 147 was invalid as it was based on a mere change of opinion without any fresh tangible material, making it bad in law. Consequently, the assessee's appeal on the legal ground regarding the invalid reopening was allowed, rendering other grounds infructuous.
Key Issues
The key legal issues were the validity of reopening assessment under Section 147 based on a change of opinion and the admissibility of deduction under Section 80-IB claimed in a revised return of income, specifically regarding compliance with Section 80AC.
Sections Cited
143(3), 147, 143(1), 80-IB, 148, 80AC, 139(1), 142(1), 144
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Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रण वष� / Assessment Year: 2011-12) DCIT M/s Bee Gee Construction Co Circle 3 (1) बनाम/ SCO-1 Neelkanth Shopping Plaza Aaykar Bhawan Chandigarh Road Vs. Chandigarh NAC Zirakpur-140603 �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAHFB-1882-C (अपीलाथ�/Appellant) (��थ� / Respondent) : अपीलाथ�कीओरसे/ Appellant by : Shri Parikshit Aggarwal (CA) – Ld. AR ��थ�कीओरसे/Respondent by : Sh. Vivek Vardhan (Addl.CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 26-05-2025 घोषणाकीतारीख /Date of Pronouncement : 16-06-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. The aforesaid cross-appeals for Assessment Year (AY) 2011- 12arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 18-03-2024 in the matter of an assessment framed by Ld. AO u/s 143(3) r.w.s.147 of the Act on 27-12-2018.
The Ld. AR advanced arguments on legal grounds as well as on merits. The Ld. Sr. DR also advanced arguments by referring to the findings of Ld. AO in the assessment order. Having heardrival submissions and upon perusal of case records, the appeals are disposed-off as under. The assessee being residentpartnership firm is stated to be engaged in construction of residential flats. Assessment Proceedings 3.1 The assessee filed regular return of income on 30-09-2011 declaring loss of Rs.0.54 Lacs. However, the return was revised on 14- 03-2012 declaring income of Rs.2.03 Lacs which was processed u/s 143(1). Subsequently, the return was scrutinized u/s 143(3) on 24-01- 2014 at Rs.8.14 Lacs. However, the case was reopened u/s 147 on the ground that no claim for deduction u/s 80-IB was made in the original return of income. The assessee claimed deduction u/s 80-IB for Rs.242.20 Lacs for the first time in its revised return of income filed on 14-03-2012. Further, the project was approved by Municipal Corporation, Kharar on 24-05-2006 and as such the project was required to be completed by 31-03-2012. However, as per Form No.10CCB, the project was yetto be completed. The completion certificate as issued by local authority was not submitted by the assessee. Accordingly, notice u/s 148 was issued on 30-03-2018 against which the assessee offered same revised return of income. The assessee’s objections to reopening were dismissed by Ld. AO vide order dated 22-12-2018. 3.2 During the course of assessment proceedings, the assessee was required to justify it claim of deduction u/s 80-IB. The Ld. AO, in terms of Explanation (ii) to sub-section (10) of Sec. 80-IB, held that date of completion of construction of housing project shall be taken to be the date on which the completion certification was issued by the local authority. This condition was a mandatory requirement which was not fulfilled by the assessee. Secondly, considering the provisions of Sec.80AC, this deduction was to be allowed only if the return of income was furnished within due date as specified u/s 139(1). The same was not the case here since the claim was made in the revised return of income. Therefore, the deduction of Rs.242.20 Lacs was denied to the assessee. Appellate Proceedings 4.1 The assessee assailed the assessment on legal grounds as well as on merits by way of elaborate written submissions. The Ld. CIT(A) rejected various legal grounds raised
by the assessee and upheld the jurisdiction of Ld. AO. Aggrieved, the assessee is in further appeal before us. 4.2 Another pertinent argument on merits was that a valid revised return would relate back to the date of original return. If the original return was filed in time and the claim was made in the revised return, the same would not be hit by the provisions of Sec.80AC as per various judicial decisions. A valid revised return would replace the original return of income and therefore, the assessee would be eligible to lay claim on the impugned deduction. 4.3 The Ld. CIT(A) noted that in terms of requirement of Sec.80AC, the assessee was required to file a return of income u/s 139(1) wherein this deduction was not claimed. However, there was no restrictive condition that the admissible deduction was to be claimed in the said return of income and there was also no condition that the assessee could not revise the said regular return. In absence of any such restriction, the claim of the assessee could not be faulted with. The reasons for revision of the return also could not be overlooked. The assessee did not disclose any details of income/expenditure, asset/liabilities in the original return of income. This was totally contrary to the Audited Balance Sheet and the reason for filing such a return had not been explained by the assessee nor enquired into by the AO. In the absence of any clarification and acceptance of the revised return in three successive scrutiny assessment proceedings lead to the inference that the non-inclusion of income/expenditure and asset/liabilities in the original return was a mistake/omission of the assessee. Considering these facts, the impugned deduction was to be allowed to the assessee. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication
5. From the facts, it emerges that the assessee filed original return of income u/s 139(1) on 30-09-2011, in which deduction u/s 80-IB(10) was not apparently been claimed by the assessee. However, the assessee revised its return of income on 14-03-2012 wherein the assessee claimed impugned deduction for Rs.242.20 Lacs. The case was duly scrutinized u/s 143(3) vide order dated 24-01-2014 wherein Ld. AO made addition of Rs.6.11 Lacs to the revised income as filed by the assessee. The first appeal against this order stood disposed-off vide order dated 24-07-2018 allowing the appeal of the assessee. During the course of regular assessment proceedings, one of the issues as identified by Ld. AO was deduction u/s 80-IB(10). Notices were issued u/s 142(1). In notice dated 05-09-2013, the assessee was required to substantiate the claim of deduction u/s 80-IB(10) for Rs.242.20 Lacs along with its nature and details. The assessee duly responded to these notices and finally, Ld. AO accepted the claim of the assessee and chose to accept this claim of the assessee.
In the meanwhile, the assessee’s case was reopened and another assessment was framed u/s 144 r.w.s. 147 on 26-06-2015 wherein Ld. AO disallowed partner’s salary. The first appeal against the same stood dismissed vide order dated 24-05-2019.
However, the regular assessment has again been reopened on the allegation that impugned deduction u/s 80-IB(10) would not be available to the assessee considering the fact that the project was not completed by 31-03-2012 and the provisions of Sec.80AC debar the assessee to lay claim on this deduction. It was also alleged that the assessee did not make full and true disclosure of all material facts necessary for the assessment. A notice u/s 148 was issued on 30-03- 2018 which is clearly beyond 4 years from the end of relevant assessment year.After perusal of reasons recorded by Ld. AO to reopen the case of the assessee, it could very well be seen that formation of belief of escapement of income is on same set of material and financial documents which were already available before Ld. AO during the course of original assessment proceedings. The reasons do not indicate any event as to the receipt of any fresh tangible material coming to the possession of Ld. AO subsequent to culmination of original assessment proceedings. The formation of belief is on the same set of material as available during assessment proceedings u/s 143(3). This being the case, reopening would be nothing but mere change of opinion on existing material which is impermissible as per the decision of Hon’ble Apex Court in Kelvinator of India Ltd. (187 Taxman 312). It was held therein that the review of order is impermissible. The Hon’ble Court, inter-alia, held that Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. There can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power. In this case, the Ld. AO reached the belief of escapement of income on going through the return of income filed by the assessee after the return was accepted u/s 143(1). The Hon’ble Court held that it was nothing but a review of the earlier proceedings and an abuse of power by AO. The less strict interpretation of the words "reason to believe" vis-à-vis an intimation issued u/s 143(1) cannot be permitted. There was no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the issue of the intimation which reflects an arbitrary exercise of the power conferred under section 147. The ratio of cited decision would squarely apply to the facts of present case. The decision of Hon’ble High Court of Bombay in the case of Marico Ltd. (133 Taxmann.com 121) similarly held that Ld. AO merely acted on information as already available on record. To reopen the case beyond 4 years, it was an essential requirement that the escapement of income chargeable to tax should be due to failure on the part of the assessee to disclose truly and fully all material facts. In the present case, we find that reopening is on the same material as available during regular assessment proceedings and specific queries were already raised therein calling for various explanations from the assessee. The same were duly supplied by the assessee and a view was already taken by Ld. AO during regular assessment proceedings. Respectfully following these decisions, we would hold that reopening was bad-in-law and hence, liable to the quashed. The assessee succeeds on this foremost legal ground alone. Delving into other grounds of assessee’s appeal as well as delving into revenue’s appeal has been rendered infructuous.
The assessee’s appeal stand allowed. The revenue’s appeal stand dismissed. Order pronounced on 16-06-2025. Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 16-06-2025. आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR
ITAT CHANDIGARH