MAX VALUE PROMOTERS,CHENNAI vs. ITO, CHENNAI

Both the appeals of the assessee are directed against the common order passed by the Commissioner of Income Tax (Appeals) -4, Chennai, dated 24.08.2016 and pertain to assessment years 2007-08 and 2008-09. Since common issue arises for consideration in these appeals, we heard both the appeals together and disposing of the same by this common order.

Shri D. Anand, the Ld.counsel for the assessee, submitted that the assessments were completed for both the assessment years under Section 143(3) of the Income-tax Act, 1961 (in short 'the Act'). After expiry of four years, from the end of the relevant assessment year, the Assessing Officer again reopened the assessments as the assessee has laid foundation stone and raised pillars in the area earmarked for commercial space. According to the Ld. counsel, in the original assessment under Section 143(3) of the Act, the Assessing Officer called for all the details and allowed the claim of the assessee under Section 80-IB of the Act.

Placing reliance on the unreported judgment of Madras High Court in TANMAC India v. DCIT in Tax Case (Appeal) No.1426 of 2007 dated 19.12.2016, a copy of which is filed before this Tribunal, the Ld.counsel for the assessee submitted that even in case where intimation was issued under Section 143(1) of the Act, the Assessing Officer cannot resort to reopen the assessment under Section 147 of the Act in the absence of any new or fresh material indicating the escapement of income. In the case before us, according to the Ld. counsel, there was no negligence on the part of the assessee in furnishing the particulars of income at the time of assessment proceeding. The Ld.counsel has also placed his reliance on the judgment of Madras High Court in CIT v. Baer Shoes (India) Pvt. Ltd. in Tax Case (Appeal) No.706 of 2010 dated 03.08.2010, a copy of which is filed by the assessee, and submitted that when the assessee has furnished all the material facts, reopening of assessment is not called for.

On the contrary, Smt. Pavana Sundari, the Ld. Departmental Representative, submitted that the assessment proceedings were originally completed under Section 143(3) of the Act. Subsequently, the Inspector of Income Tax inspected the premises and found that foundation stone was laid and pillars were raised in the area earmarked as commercial space. In the original assessment proceedings, the assessee submitted that no construction activity was carried on in the area earmarked for commercial space. Since there was change in circumstances, the Assessing Officer found that the income otherwise taxable has escaped assessment.

We have considered the rival submissions on either side and perused the relevant material available on record. In the original assessment under Section 143(3) of the Act, the Assessing Officer after considering the layout plan approved by St. Thomas Mount Panchayat Union, found that all the residential units constructed by the assessee are within 1500 sq.ft. and also considering the claim of the assessee that no construction was made in the commercial area, allowed the claim of the assessee. In fact, the Inspector of Income Tax inspected the premises during the course of original assessment proceeding and he filed a report along with photographs. That report clearly indicates that there was no commercial establishment embedded in the project on the date of inspection. Therefore, it is obvious that during the years under consideration, the assessment proceedings were completed and there was no construction activity in the area earmarked for commercial purpose. This fact is not in dispute.

Now the Assessing Officer claims that the Inspector of Income-tax inspected the premises on 17.02.2012 and it was found that foundation was laid and pillars were raised in the area earmarked for commercial space. It is not in dispute that the assessee sold the property by way of sale deed dated 03.10.2010. The question arises for consideration is whether there was any negligence on the part of the assessee in furnishing the required particulars at the time of completing the assessment under Section 143(3) of the Act. The assessee admittedly furnished all the particulars including the approved plan. Therefore, this Tribunal is of the considered opinion that there was no negligence on the part of the assessee in furnishing particulars which were in existence at the relevant point of time. In view of the above, reopening of assessment after expiry of four years is not justified. This Tribunal is of the considered opinion that unless and until the Assessing Officer establishes that there was negligence on the part of the assessee in furnishing particulars required for completing the assessment, the completed assessment cannot be reopened in view of proviso to Section 147 of the Act after expiry of four years. In this case, it is not the case of the Assessing Officer that the assessee has not furnished any particulars or there was any negligence on the part of the assessee. Therefore, reopening of assessment after expiry of four years is not justified. A similar view was taken by Madras High Court in TANMAC India (supra). Hence, this Tribunal is unable to uphold the orders of the lower authorities and therefore, the orders of both the lower authorities are quashed.

In the result, both the appeals filed by the assessee stand allowed.