POOJA DEVELOPERS,MUMBAI vs. ITO WD 12(1)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "C" MUMBAI Before Shri Saktijit Dey , JM & Shri G Manjunatha, AM ITA Nos.7763 & 7752/Mum/2014 Assessment Years 2008-09 & 2007-08 Pooja Developers 513 Samaratha Plaza, RRT Road_ Mulund (W) Mumbai 400 081 ITO Ward 12(1)(2) Mumbai. Vs. PAN AAIFP559SM (Appellant) Respondent) Appellant By Respondent By Shri M Subramaniam Shri Rajat Mittal Date of Hearing 07.11.2017 Date of Pronouncement 02 92 2213 ORDER Per Saktijit Dex__Judicial Member The captioned appeals by the same assessee are against two separate orders of the learned CIT(A) -23, Mumbai , for assessment years 2007-08 and 2008-09. 2 ITANoZ752[MumL2014forAX 2007-08 In the Memorandum of appeal; the assessee has raised five effective grounds on the common issue of disallowance of deduction claimed u/s. 80IB(10) of the Income Tax Act, 1961. In addition to the aforesaid grounds raised in the Memorandum of appeal, the assessee, vide letter dated 21.06.2016, has raised two additional grounds challenging the validity of proceedings initiated u/s. 147 of the Act and the validity of assessment order passed there under. Since the additional ITA No7763 & 7752/Mum/2014 Pooja Developers grounds raised are purely on legal and jurisdictional issues, going to the root of the matter, we propose to deal with the additional ground at the very outset: As far as the admissibility of additional grounds are concerned, being of the view that the issue raised in the additional grounds, can be decided on the basis of facts and materials available on record and do not require investigation into fresh facts, we admit the additional grounds for adjudication. 3_ Brief facts necessary and relevant for deciding the additional ground are that the assessee is a partnership firm engaged in the business of builders and developers of housing projects. For the assessment year under dispute, the assessee filed its return of income on 31.10.2007 declaring 'nil' income after claiming deduction u/s. 80IB( 10) Assessment in the case of the assessee was originally completed u/s_ 143(3) of the Act vide order dated 23.12.2009 accepting the income returned by the assessee. Subsequently, the Assessing Officer re-opened the assessment u/s. 147 of the Act on the reasoning that the assessee was not eligible to claim deduction u/s 80IB( 10) as its housing project on which the said deduction was claimed was not completed on or before 31.03.2009_ Accordingly, the Assessing Officer issued notice u/s. 148 of the Act to the assessee_ In response to the notice issued u/s_ 148 of the Act, the assessee submitted its reply adopting the income declared in the original return of income. Ultimately , the Assessing Officer completed the assessment vide order dated 31.12.2013 disallowing the deduction ITA No7763 & 7752/Mum/2014 Pooja Developers u/s. 80IB(10) of the Act. Against the assessment order SO passed; the assessee preferred appeal before the first appellate authority. However , the learned CIT(A) upheld the disallowance made by the Assessing Officer. 4 The learned Authorised Representative submitted that the notice u/s_ 148 was issued on 17.09.2012, which is beyond four years from the end of the relevant financial year. The learned AR submitted as per the provisions f section 151(1) of the Act in a case where the assessment has already been made u/s_ 143(3) of the Act no notice u/s. 148 can be issued after the expiry of four years from the end of the relevant assessment year unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner approves the reasons recorded by the Assessing Officer. The learned AR submitted,in the case of the assessee though the notice u/s_ 148 was issued after expiry of four years from the end of the relevant assessment year, however , the satisfaction for issuance of notice was not from the prescribed authority but by the Additional Commissioner of Income Tax. The learned AR submitted, since there is no satisfaction recorded by the authority prescribed u/s. 151(1) of the Act, the notice issued u/s. 148 is invalid Accordingly, the assessment order passed u/s. 143(3) rW.S 147 of the Act is also equally invalid. The learned AR further submitted, on identical facts, the Tribunal has quashed the assessment order passed u/s. 143(3) rW.S 147 in its own case for A.Y. 2006-07 in ITA No_ ITA No7763 & 7752/Mum/2014 Pooja Developers 7751/Mum/2014 dated 15.06.2016 He also relied upon the decision of the Hon'ble Bombay High Court in the case of Ghanshyam K Khabrani VS_ ACIT (supra), 5 The learned Departmental Representative submitted since the issue was raised by the assessee for the first time before the Tribunal, it requires factual verification as to whether satisfaction in accordance with section 151(1) is recorded by the prescribed authority or not: 6_ We have considered the rival submissions and perused the material on record in the light of the decisions relied upon. As far as the factual aspect of the issue is concerned, undisputedly assessment in case of the assessee for the impugned assessment year was originally completed u/s. 143(3) of the Act on 23.12.2009_ It is also a fact on record that the notice uls_ 148 of the Act was issued by the Assessing Officer on 17.09.2012. Therefore, there is no doubt that the notice u/s. 148 of the Act was issued after the expiry of four years from the end of the relevant assessment year. Section 151(1) of the Act postulates sanction by prescribed authority for issuance of notice u/s. 148 of the Act by the Assessing Officer . As per the proviso to section 151(1) of the Act as existed during the relevant assessment year, in case of an assessee where assessment uls_ 143(3) has already been completed, no notice u/s_ 148 can be issued after expiry of four years from the end of the relevant assessment year, unless, the Principal Chief Commissioner or the Chief Commissioner or Principal Commissioner or Commissioner is ITA No7763 & 7752/Mum/2014 Pooja Developers satisfied on the reasons record by the Assessing Officer that it is a fit case for issue of such notice From perusal of the notice issued u/s. 148 of the Act dated 17.09.2012 , a copy of which is placed at page 37 of the paper-book, it is very much evident that the Assessing Officer has mentioned that such notice is being issued after obtaining necessary satisfaction of the Additional CIT Range 12(1). Further, at the time of hearing, learned AR has submitted before uS a copy of the form for recording the reasons for initiating proceedings u/s. 148 of the Act, which reveals that the satisfaction for issuance of notice u/s. 148 of the Act was recorded by the Additional CIT, Range 12(1), Mumbai. Thus, the aforesaid facts brought on record demonstrate that the recording of satisfaction for issuance of notice uls. 148 of the Act was not by any of the authorities prescribed under the proviso to section 151(1) of the Act. The learned DR has not brought any material before uS to controvert the aforesaid factual position. That being the case, the notice issued u/s. 148 of the Act being not in accordance with the provisions of section 151 of the Act is invalid. Consequently, the proceedings conducted in pursuance of such notice as well as the assessment order passed u/s. 143(3) rW.S 147 of the Act in pursuance thereto is rendered invalid. It is relevant to observe, in assessee's own case for A.Y. 2006-07, the assessment order was quashed by the Tribunal under identical facts due to lack of satisfaction by the prescribed authority in terms of proviso to section 151(1) of the Act. The Hon'ble Bombay High Court has expressed similar view in the case of Ghanshyam K Khabrani yS.ZACIT (2012) 346 ITR 443_ ITA No7763 & 7752/Mum/2014 Pooja Developers In view of the aforesaid, we have no hesitation in quashing the impugned assessment order. The grounds raised are allowed 7 As we have decided the appeal on legal issue, the grounds raised on merits by the assessee are of mere academic nature and, hence, require no adjudication_ Resultantly, the assessee's appeal is allowed to the extent indicated above 8_ IANo 7763 MumL2014forAX 2008-09 In this appeal, the grounds raised in the Memorandum of appeal are on the merits of disallowance made uls. 80IB(10) of the Act. However , the assessee vide letter dated 21.06.2016, has raised additional ground challenging the validity of the notice issued u/s. 148 of the Act as well as the assessment order passed u/s. 143(3) r.W.S 147 of the Act. Though, the additional grounds have been raised for the first time before US, however, following our reasoning while admitting similar grounds in ITA 7752/Mum/2014, we admit the additional grounds for adjudication_ 9 Briefly , the facts are, in the impugned assessment year, the assessee filed its return of income on 08.09.2008 declaring nil income after claiming deduction u/s. 80IB(10) _ The assessment in the case of the assessee was completed originally on 30.12.2010 uls_ 143(3) of the Act accepting the income returned. Subsequently, the Assessing Officer being of the view that the housing project for which the assessee claimed ITA No7763 & 7752/Mum/2014 Pooja Developers deduction u/s. 80IB(10) was not completed within the cut-off date i.e., 31.03.2009 , is not eligible to avail deduction u/s. 80IB(10) Since , according to the Assessing Officer , allowance of assessee's claim of deduction u/s. 80IB( 10) has resulted in escapement of income, he re- opened the assessment u/s. 147 of the Act by issuing notice u/s. 148 on 17.09.2012 Ultimately, the Assessing Officer completed the assessment, vide order dated 31.12.2013 u/s. 143(3) rW.S. 147 of the Act , disallowing the deduction claimed u/s. 801B(10). 10_ The learned CIT(A) also upheld the disallowance while deciding the appeal filed by the assessee_ 11_ Challenging the validity of the re-opening of assessment, the learned AR submitted that after completion of the original assessment no fresh material has come to the possession of the Assessing Officer to form the belief that income has escaped assessment. He submitted, merely on a change of opinion the Assessing Officer has re-opened the assessment u/s. 147 of the Act. The learned AR submitted, during the 6 original assessment proceedings, the Assessing Officer has enquired into and examined the issue relating to claim of deduction u/s. 80IB(10) of the Act . He submitted, since the Assessing Officer while completing the original assessment has examined and enquired into the assessee's claim of deduction u/s. 80IB(10) and has thereafter completed the assessment, the re-opening of assessment on the issue of deduction claimed u/s 80IB(10) amounts to review of the original assessment order on a mere ITA No7763 7752/Mum/2014 Pooja Developers change of opinion. The learned AR submitted, even before filing of the return of income in pursuance of notice u/s. 148 of the Act, the Assessing Officer has issued notice u/s. 143(2) of the Act, which is invalid_ Thus, it was submitted, the assessment order has to be declared invalid because of the aforesaid deficiencies and lapses_ In support of his contention, the learned AR has relied upon the following decisions: 1) DCIT v/s Shailendra Kumar Yadav, [2012] 138 ITD 278 (Pune); ii) PCIT vs Shri Jai Shiv Shankar Traders Pvt: Ltd, [2016] 129 DTR 63 (Del ); iii) Lalitha Chem Industries Pvt: Ltd. v/s DCIT , [2014] 364 ITR 213 (Bom:); iv) Sarla Rajkumar Verma v/s ACIT , [2014] 43 taxmann.com 372 (Guj ). 12 _ The learned DR justifying the reopening of assessment submitted that the Assessing Officer having found that assessee's claim f deduction u/s_ 80IB( 10) was allowed in the original assessment without examining the fact whether the conditions of section 80IB(10) regarding the completion of project has been fulfilled or not, there was escapement of income requiring re-opening of assessment u/s 147 of the Act. It was submitted, since the aforesaid issue was not at all examined in the original assessment and, on the basis of material on record, it was found that the assessee has not fulfilled the conditions of section 80IB(10) by completing the project within the stipulated period, the Assessing Officer having reason to believe that income has escaped assessment due to wrong allowance of deduction u/s_ 80IB( 10) has re-opened the ITA No7763 7752/Mum/2014 Pooja Developers assessment. The learned DR submitted,sufficiency of reasons recorded by & the AO for re-opening of assessment cannot be challenged. 13_ We have considered rival submissions and perused materials on record. We have also examined the case laws cited before uS. Undisputedly, in the present case, assessment in case of the assessee was originally completed after scrutiny under section 143(3) of the Act vide order dated 30th December 2010_ Though, the re-opening of assessment under section 147 of the Act for the impugned assessment year is before the expiry of four years from the relevant assessment year, however, the validity of the reopening of assessment has to be tested keeping in view the following factors. Firstly, whether the issue on which the assessment was re-opened as per the reasons recorded was examined at the time of original assessment; secondly , whether the formation of belief that income has escaped assessment has a live link with the materials on record and thirdly , whether the re-opening of assessment under section 147 of the Act is on the basis of some tangible material. Before proceeding further on the issue, it is necessary to look into the reasons for re-opening of assessment as reproduced by the Assessing Officer in Para-2 of the impugned assessment order. "On verification Of records, it is seen that the assessee was developing housing project within the limits of Pimpri Chinch wad Municipal Corporation on plot bearing survey Nc 185 Hissa No 185148, 18515, 185168. During the year the project was under construction: The assessee follows WIP method of accounting and has declared estimated profit every year: The assessee has shown net profit of Rs.47,73,163/- and the same has been claimed 10 ITA No7763 7752/Mum/2014 Pooja Developers as deduction u/s 8018(10) of the Act: On going through the records it is observed that the first commencement certificate for this project was granted by Pimpri Chinch wad Municipal Corporation on 21.05.2004. The explanation to the provisions of section 801B(10) of the IT Act, read as under:- (ii) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (iii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. Considering the facts of the case it is seen that the project under consideration was commenced on the basis of first commencement certificate, which was granted on 21.05.2004. Therefore following the dictum of statutory provisions for availing deduction u/s 801B(10) it ought to have been completed on Or before 31/03/2009, within the stipulated time provided in the statute, but it is evident from the part completion certificate dated 31.03.2009 and revised commencement certificate issued again on 31.3.2009 by the local authority that the project has not been completed within the stipulated time: Hence there was & belief that the assessee has been allowed excess deduction u/s 8016(10) of the IT Act: 14_ As could be seen from the reasons recorded, the Assessing Officer re-opened the assessment on the basis that the assessee is not eligible to claim deduction under section 80IB(10) for the housing project as it was not completed on or before 31st March 2009. Thus, in the context of the reasons recorded, it has to be seen whether the Assessing Officer while completing the original assessment under section 143(3) of the Act has examined the issue relating to assessee's claim of deduction under section 80IB( 10) of the Act relating to housing project; Notably, the assessee in the return of income filed for the-impugned assessment year ITA No7763 & 7752/Mum/2014 Pooja Developers has claimed deduction under section 80IB(10) of the Act and as required under the statute has also furnished an audit report in form no.1OCCB in of the ? agsessment support deduction claimed_ In course of the & proceedings, the Assessing Officer when wanted to examine the eligibility of the assessee's claim under section 80IB( 10) of the Act, the assessee vide letter dated 25th November 2010, has submitted its reply not only answering the queries raised by the Assessing Officer but has also furnished all supporting documentary evidences in support of the claim of deduction _ The Assessing Officer while completing the assessment under section 143(3) of the Act on 30th December 2010, allowed assessee's claim of deduction under section 80IB(10) in respect of the housing project after exam ining the documentary evidences as well as being satisfied with the fact that the assessee has fulfilled the conditions for claiming deduction under section 80IB( 10). This fact is evident from the following observations of the Assessing Officer in the original assessment order passed under section 143(3) of the Act:

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