THE DCIT, CENTRAL CIRCLE-1(1),, AHMEDABAD vs. M/S. VENUS INFRASTRUCTURE & DEVELOPERS PVT. LTD.,, AHMEDABAD

आयकरअपीलीयअधिकरण, अहमदाबादनयायपीी IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’A’’ BENCH, AHMEDABAD BEFORE Ms SUCHITRA KAMBLE, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकरअपीलसं./ITA Nos. 37 & 38/AHD/2021 धििाधरणणवध/Asstt. Years: 2008-09 & 2017-18 D.C.I.T, M/s Venus Infrastructure and Central Circle-1(1), Vs. Developers Pvt. Ltd., Ahmedabad 1101 Venus Amadeus, Jodhpur Cross Road, Ahmedabad-380015. PAN: AAHCS6254J (Applicant) (Respondent) Revenue by : Shri Akhilendra Pratap Yadaw Assessee by : Shri Tushar Hemani, Sr. Advocate with Shri Parimalsinh B. Parmar, & Shri Vijay Govani A.Rs सुिणाईकीतारीख/Date of Hearing : 08/02/2024 घोवणाकीतारीख/Date of Pronouncement: 14/02/2024 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeal have been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, of even dated 20/01/2021 arising in the matter of assessment order passed under s. 147 r.w.s. 143(3) and 143(3) of the Income Tax Act 1961 (here- in-after referred to as "the Act") relevant to the Assessment Years 2008-09 & 2017-18. First, we take up ITA No. 38/Ahd/2021, an appeal by the Revenue for AY 2017-18

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 2 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.9,76,38,299/- made on account of disallowance of deduction u/s 80-16(10) of the I.T. Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that Inspecting Officer of AUDA submitted repot that the residential projects was not completed till 31/03/2012 and that for claiming the deduction u/s 80-IB of the Act, the residential projects should have been completed within 5 years from the end of financial year on which it was approved by the local authority i.e. on or before 31/03/2012. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that since Shri Narsingh T. Khanchandani made a block booking of 5 flats in "Venus Parkland", the assessee company is not eligible for any kind of deduction within the purview of 80-IB of the Act as per clause(f) of Section 80IB(10). 4. On the facts and in the circumstances of the case law, the Ld. CIT{A) has erred in not appreciating the fact that no separate Profit & Less Account for F.Y.2016-17 have been maintained for residential housing projects "Venus Parkland" which is a mandatory requirement for claiming of deduction U/s 80IB(10)of the Act. 5. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,57,43,977/- on account of income from House property. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. The first issue raised by the Revenue in ground Nos. 1 to 4 of its appeal is that the learned CIT(A) erred in allowing the deduction claimed by the assessee under section 80-IB (10) of the Act for an amount of ₹ 9,76,38,229/- though the conditions specified therein were not fulfilled.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 3 i. The impugned project was not completed within the period of 5 years from the end of the year in which the approval was granted by the local authority as required under section 80-IB(10)(a)(iii) of the Act. ii. The allotment of more than one residential unit to a person other than individual is in contravention of the provision of section 80-IB(10)(e) of the Act. iii. Separate books of accounts were not maintained with respect to the eligible business as required under the provisions of section 80-IB(13) r.w.s. 80-IA(5) of the Act. 5. In view of the above, the AO disallowed the deduction claimed under section 80-IB(10) of the Act by the assessee. The AO while making the disallowance of the deduction claimed under section 80-IB(10) of the Act made reference to the AY 2012-13 where his predecessor has made such disallowance. Thus, the AO added such disallowance of the deduction to the total income of the assessee.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 4 for AY 2012-13. The Ld. AR before us reiterated the findings of the ld. CIT-A contained in the appellate order.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 5 11. The next issue raised by the Revenue in ground No. 5 is that the Ld. CIT(A) erred in deleting the addition of Rs. 1,57,43,977/- made by the AO on account of income from house property.

12.2 The Assessee in response to SCN submitted that the estimation of rental income @ 6% of the inventory is very high. According to the assessee, it should be 4% of the value of the inventory considering the market condition of the project. The Assessee also contended that vacancy allowance should be allowed against the rental income while calculating the income under the head house property.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 6 13. However, the AO rejected the contention of the assessee by observing that both the projects namely Venus IVY and Venus Parkland are residential projects located in posh area of the city whereas project namely Venus Amadeus and Benecia are commercial project which are also located at prime location of the city. Therefore, the AO after placing reliance on the judgment of Delhi High court in the case of Ansal Housing Finance & Leasing Co Ltd. reported in 29 taxmann.com 303 computed the annual lettable value in respect of Venus IVY project at 5% and for remaining project at 6%. Therefore, the aggregate sum amounting to Rs. 1,57,43,977/- was treated as income from house property and added to the total income of the assessee.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 7

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 8 Private Limited (supra) has decided the issue in favour of the assessee by observing as under: 6. We have heard the rival contentions of both the parties in the light of the materials available on record. The issue in the instant case relates whether the properties held as stock in trade will be subject to the deemed rental ; income under the provisions of section 23 of the Act. In this regard, we are inclined to refer to the judgment of Honffcle Gujarat High Court in the case of NEHA builders private Ltd (supra) wherein it was held that the income from the property held as stock in trade should be treated as business income. The relevant extract of the order is reproduced as under: “True it is, that income derived from the properly would always be termed as 'income from the property is used as 'stock-in-trade', then the said property would become or partake the character of I he stock, and any income derived from the stock would be Income' from the business, and not income from the property. If the budiness of the assesee is to construct the property and sell it or to construct and let out the same, then would be the 'business' and the business stocks, which may include that movable and immovable, would be taken to be 'stock-in-trade', and any income derived cannot be termed as 'income from property'" 6.1 From the above judgment, it is inferred that the income with respect to the properties held as stock in trade can be taxed under the head business and profession. Thus there is no question of computing the income qua the properties held as stock in trade under the head income from house property. We further hold that there is no provision under the head of income, namely Encome from the business and professions for computing the deemed rental income qua the properties held as stock in trade. Therefore, we are of the view that there cannot be any income under the head house property on account of deemed rent with respect to such properties held as stock in trade. 6.2 We also note that the Mumbai Tribunal in the case of Saranga Estate Private Limited VS DCIT in ITA No. 4420/Mum/2017 after considering the judgment in the case of Ansal housing finance and leasing company Ltd(supra) has decided the issue in favor of the assessee. The relevant extract of the order is reproduced as under: "In any case, this issue had been duly adjudicated by the Co-ordinate Bench of this Tribunal in the case of Chamber Con si ruction Pvt. Ltd., vs. DCIT in ITA No. 4418/Mum/2Ql7 for A. Y.2012-13 dated 30/11/2018 wherein it has been held as under:- "7. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence has been sought by the assessee by preferring the present appeal, for adjudicating as to whether the C1T(A) is right in law and facts of the case in concluding that the deemed notional lettable value of the completed unsold flats held by the assessee company as stock-in-trade was liable to be determined and brought to tax under the head „Income from house property". We find from a perusal of Sec. 22 of the Act that the ,,annual value" of any property consisting of any building or land appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income tax, shall be chargeable to income tax under the head „ Income from house property". Further, the determination of the ,,annual value" of the property is envisaged in Sec. 23 of the Act. Sec. 23(l)(a) contemplates that the sum for which the property might reasonably be expected to let from year to year is to be deemed as the „ annual value" of the property which though might not have been let out by the assessee.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 9 8. We have deliberated at length on the issue under consideration in the backdrop of the aforesaid statutory provisions, and are of the considered view that though the „ annual value " of a property simpliciter owned by an ITA No.4420/Mum/20I7 M/s. Saranga Estates Pvt. Ltd., assessee would be liable to be assessed under the head „ Income from house property", however a similar treatment cannot be accorded to a property which is held by the assessee as stock-in-trade of his business. In our considered view a property which is held by an assessee as stock-in- trade of his business as that of a developer would loose Us color and character as that of a property simpliciter owned by him. Our aforesaid view is fortified by the judgment of the Hon"ble High Court of Gujarat in the case of CIT Vs. Neha Builders (?) Ltd. (2008) 296 ITR 661 (Guj). The Hon"ble High Court while disposing off the appeal filed by the revenue in the case of an assessee company which was engaged in the business of construction of property, had observed that where a property is held as stock-in-trade, then the same would become or partake the character of the stock, and any income derived therefrom would be income from business and cannot be held as income from property. The Hon "ble High Court while concluding as hereinabove had observed as under: "7. From the order passed by the learned CIT(A), it would clearly appear that the case oj the assessee was that the company was incorporated with the main object of purchase, take on lease, or acquire by sale, or let out the buildings constructed by the assessee. Development of land or property would also be one of the businesses for which the company was incorporated. 8. True it is, that income derived from the property would always be termed as ,,income" from the property, but is the property is used as „stock-in-trade", then the said property would become or partake the character of the stock, and any income derived from the stock, would be „income from business", and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business " and the ~iairtess stocks, which may include movable and immovable, would be taken to be ..stock-in-trade", and any income derived from such stocks cannot be termed as ..income from properly". Even otherwise, it is to be seal that there was distinction between the „ income from business " and -income from property" on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy." 9. Admittedly, the lower authorities had relied on the judgement of the Hon"ble High Court of Delhi in the case of CIT Vs. Ansa! Housing Finance & Leasing Company Ltd. (2013) 354 ITR 180 (Delhi) and had therein concluded that the notional lettable value of the unsold flats held by the assessee was liable to be determined and brought to tax under the/TA No.4420/Mum/2017 Mis. Saranga Estates Pvl. Ltd., head ..Income from house property". We find that the issue under consideration before us i.e whether the notional lettable value of the property held by an assessee as stock-in-trade in its business as that of a developer is liable to be assessed under the head „ income from house property", has been differently answered by /he Hon"ble High Court of Gvjarat in CIT Vs. Neha Builders Pvl. Ltd. (2008) 296 ITR 661 (Guj) and the Hon "ble High Court of Delhi in CIT Vs. Ansal Housing Finance and Leasing Ltd. (2013) 354 ITR 186 (Del). We are of the considered view that in the backdrop of the aforesaid conflicting views of the aforesaid non- jurisdictional High Courts, the view in favour of the assessee as had been arrived at by the Hon "ble High Court of Gujarat is to be preferred. Our aforesaid view is fortified by the judgment of the Hon"ble Supreme Court in the case of CIT Vs. Vegetable Products 11973) 88 ITR 192 (SC). wherein the Hon "ble Apex Court had observed that if two reasonable constructions of a taxing provision is possible, then that construction which favours tin' tax payer must be adopted. Further, we find that ITAT. Mumbai in the case ofAC!T-15(2)(l) Vs.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 10 M/s Haware Construction Pvt. Lid. [1TA no. 3321 & 3172/Mum/2016: dated 31.08.2018] had after deliberating on the aforesaid judgments of the Hon"ble High Court of Gujarat in Neha Builders (P) Ltd.(supra) and that of the Hon"bla High Conn of Delhi in Ansal Housing Finance & Leasing Company Ltd.(supra), had by taking support of Ihe judgment of the Hon"ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). had Jollowed the decision of the Hon "ble High Court of Gujarat in Neha Builders (P) Ltd. (supra), and had concluded that the notional leltable value of the unsold flats held by the assessee cannot be determined and brought to tax under the head, Income from house properly". Still further, a similar view had also been taken by the Tribunal in the case of M/s C.R Development Pvt. Ltd. Vs. JCIT-8(1)(OSD), Mumbai [ITA No. 42771 Mum/2012; dated 13.05.2015]. It was observed by the Tribunal that estimating of the rental income of the flats held by the assesses as stock-in- trade was not justified, as the said flats were neither given on rent nor the assessee had any intention to earn rent by letting out the same. We further find that another coordinate bench of the Tribunal i.e. ITAT, Mumbai Bench "G", Mumbai in 1TO-2(1)(1). Mumbai Vs. M/s Arihant Estates Pvt, Ltd. [ITA No. 6037/Mum/20I6: dated 27.06,2018] had relied on an earlier view taken by the Tribunal in the case of M/s Runwal Constructions Vs. ACIT in [ITA No. 5408 & 54Q9/Mitm/2016; dated 22.02.2018]. and after deliberating on the judgment of the Hon"ble High Court of Gujarat in CIT Vs. Neha Builders Pvt. Ltd. (2008) 296ITR 661 (Guj) and that of the Hon "ble High Court of Delhi in Ansal Housing Finance & Leasing Company Ltd. (2013) 354 JTR 186 (Del), has held that the assessing officer was not correct in bringing to tax the notional annual lettable value of the unsold flats which were held by the assessee as stock-in-trade. On a similar footing a similar view had also been taken by the ITAT, Mumbai Bench "G", Mumbai in the case of Progressive Homes, Mumbai Vs. ACIT-Cirde 4(4), Mumbai [ITA No. 5082/Mum/2016; dated 16.05.2018) ITA No.4420/Mum/2Q17M/s. Saranga Estates Pvt. Ltd., and ITAT "H"Bench, Mumbai in Haware Engineers & Builders Pvt. Ltd. Vs. DCIT, Central Cirde-4(2), Mumbai [ITA No. 7I55/Mum/2016: dated 10.10.2018]. 10. In the backdrop of our aforesaid observations, respectfully following the judgment of the Hon "ble High Court ofGujaral in the case of CIT Vs. Neha Builders (P) Ltd. (2008) 296 ITR 661 (Guj) and the aforesaid orders of the coordinate benches of the Tribunal, we are of the considered view that the lower authorities had erred in determining the notional lettable value of the unsold flats held by the assessee company as stock-in-trade of its business of builders and property developers, and bringing the same to lax in the hands of the assessee under ihe head ,,Income from house property". We thus in terms of our aforesaid observations set aside the order of the CIT(A). 11. The appeal of the assessee is allowed. 7.2. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove. we direct the Ld. AO to delete the addition made towards annual letting value of'Rs.23.71.200/-in respect of two unsold flats. Accordingly, grounds raised by the assessee are allowed 6.3 In view of the above, we hold that there cannot be any income under the head house property qua the properties held as stock in trade on account of deemed rental income. 6.4 As the assessee succeeds on the reasoning as elaborated in the preceding paragraph, therefore we are not inclined to adjudicate the other contentions raised by the Ld.AR for the assessee. Hence the ground of appeal of the assessee is allowed.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 11 20.2 Thus, respectfully following the order of this Tribunal and the Hon’ble jurisdictional High Court as discussed above, we uphold the finding of the Ld. CIT(A). Hence the ground of appeal of Revenue hereby dismissed.

20.3 In the result, the appeal of the Revenue is hereby dismissed.

Coming to ITA No. 37/Ahd/2021 by the Revenue for A.Y. 2008-09

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 12 Vaswani who are promoters/ directors of various concern of assessee group. Accordingly, assessments under section 143(3) r.w.s. 147 of the Act were completed in the case of abovementioned individuals after making various addition to the total income including addition under section 69C of the Act representing unaccounted expenses for “Vejalpur-503 site expenses” and “Golden Park Society & Golden Society”. These respective individuals preferred an appeal before the ld. Appellate Commissioner. The learned CIT(A) vide common order dated 12th February 2019 deleted the addition made under section 69C of the Act representing alleged unaccounted expenses for “Vejalpur-503 site expenses” and “Golden Park Society & Golden Society by holding that such transactions belong to present assessee i.e. Venus Infrastructure & Developers Pvt. Ltd. The learned CIT(A) also directed the AO to consider the addition representing the impugned unaccounted expenses in the hands of present assessee and also directed the AO to consider such finding as direction under section 150 of the Act.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 13 finding that there was failure on the part of the assessee to disclose material facts fully and truly relating to the income.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 14 5.2.7 Even it has been brought to the notice by the assessee in the present appellate proceedings that the sanctioning authority i.e. PCIT, Central, Ahmedabad for reopening the assessment has given the sanction only on the basis of directions given by the CIT(A)- 2, Ahmedabad without any independent application of mind. For ready reference the satisfaction drawn by the sanctioning authority is reproduced as under: "Yes, The CIT(A)-2, AM has given a specific direction in para 14 of his appellate order dated 21.02.2019 in the case of M/s. Venus Infra & Dev. Pvt. Ltd. (LLP). Hence, I am satisfied based on various reasons byAO that this is fit case for issue of notice u/s.148 of the Act." 5.2.8 The appellant further brought to the notice of the undersigned that the reasons recorded are also factually incorrect on two accounts i.e. appellate order of CIT(A)-2, Ahmedabad was dated 12.02.2019 and not 21.02.2019 and further the case of the name mentioned in the satisfaction of PCIT was Venus Infra & Developers Pvt. Ltd. LLP while it ought to have been Shri Deepak Vaswani and Shri Ashok Vaswani. From the above it is clear that the case of the appellant was reopened solely in view of specific direction given by the CIT{A) i.e. without any application of mind by the sanctioning authority which amounts to change of opinion. The sanction has been given by the PCIT without any application of mind is also visible from the facts noted by him where he has referred to the order of CIT(A) in the case of M/s Venus Infra & Dev. Pvt. Ltd (LLP) whereas the AO referred to the order of CIT(A) in the cases of Deepak Vaswani and Ashok Vaswani. 5.2.9 Having gone through the above submission of the appellant, it is found that on the basis of incriminating documents found during the course of search the AO has reopened the cases u/s.147 of IT Act of Shri Deepak Vaswani and Shri Ashok Vaswani and issued the notice u/s.148 of IT Act on 30.03.2015 which ought to have been for issue of notice in the case of assessee company and not in the case of individuals. Even after pointed out by the assessee to the AO in the assessment proceedings, the AO did not accept the submission of the appellant and proceeded for completion of the assessment in the case of individuals only. Now when the CIT(A) has taken the view in favour of both the individuals then only on the directions reopening proceedings have been initiated in the case of assessee company without much application of mind by the AO. 5.2.10 It is also argued that on the one hand, the decision of Id. CIT(A) deleting the addition in the hands of individuals as referred above has not been accepted by the department and the same has been challenged before the Hon'ble ITAT which also proves the fact that still the unaccounted income pertaining to the seized documents is to be taxed in the hands of both the individuals and not in the hands of the assessee company. If it was the stand of the AO then-the contradictory view taken by reopening the assessment of assessee company is not sustainable as it shows the dual mind of AO or unstable state about the hands in which the unaccounted income on the incriminating documents has to be taxed? Therefore, on this account also the assessee's case is on sound footings. (iv) Finding to the effect that there is failure on the part of assessee to disclose all material facts From the aforesaid facts, it is undisputedly clear that the assessment which was sought to be reopened was passed u/s.143(3) of the Act and more than four years had elapsed from the end of the assessment year. The AO has not mentioned anything to the effect that income escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Hence the proceedings cannot be initiated in view of proviso to section 147 of the Act.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 15 the provisions of section 150 of the Act and therefore the assessment framed under section 143(3) read with section 147 of the Act cannot be held as invalid.

28.1 It was also contended by the ld. DR that the return was filed in response to the notice vide letter dated 28-05-2019 and therefore, it cannot be alleged that the notice under section 143(2) of the ACT dated 3rd June 2019 was issued without having filed the return of income in response to the notice issued under section 148 of the Act dated 30th March 2019.

31.1 The learned AR also contended that the original assessment was framed under section 143(3) of the Act vide order dated 30 of December 2010. The assessment for the present case was reopened beyond the period of 4 years and therefore it was necessary to allege by the revenue that there was a failure on the part of the assessee for full and true disclosure of the income. But no such allegation has been made against the assessee in the reason recorded.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 16 31.2 It was also alleged by the learned AR that the proceedings initiated against the assessee are merely based on change of opinion. In-fact the Revenue Department against the finding of the learned CIT(A) in the case of Shri Deepak Vashwani and Asoka vashwani has challenged the matter before the ITAT. As such, it transpired that the decision of the ld. CIT-A was not accepted by the Department. The ITAT has quashed the proceedings of the reopening assessment in the hands of the Shri Deepak Vashwani and Asoka Vaswani. Against the finding of the ITAT, the Revenue Department has gone before the Hon’ble Gujarat High Court which is pending as on date.

31.3 The learned AR also contended that the sanctioned was given by the authority for initiating the proceedings under section 147 of the Act without the application of mind. As such the reopening was initiated merely based on the direction issued by the learned CIT-A. Therefore, there was no application of mind of the AO for initiating the proceedings under section 147 of the Act after recording the reasons.

31.4 The learned AR also contended that the assessee vide letter dated 3 October 2019 requested to treat the original return filed under section 139 of the Act as the return filed under section 148 of the Act. But the notice under section 143(2) was issued much before the said letter. As such, the notice under section 143(2) was issued dated 3 June 2019 which is invalid in the eyes of law.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 17 barred by time in the given facts and circumstances. The provisions of section 150 of the Act have direct bearing on the issue on hand which read as under: 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to 29any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision 30[or by a Court in any proceeding under any other law]. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 33.1 The provisions of subsection (1) of section 150 of the Act overrides the time limit provided under subsection 149 of the Act for issuing the notice under section 148 of the Act, for making assessment or assessment in consequence to any finding given by the appellate authority under the Act or by the Court. Admittedly, the learned CIT-A has given directions in the present case under section 150 of the Act for making the addition in the hands of the assessee. Thus, it appears that such reopening of the assessment can be done at any time in pursuance of the provisions of subsection (1) of section 150 of the Act. But on perusal of the provisions of subsection (2) of section 150 of the Act it is inferred that there is limitation to issue reopening notice under section 148 of the Act. The provision of subsection (2) of section 150 of the Act puts an embargo on the applicability of subsection (1) of section 150 Act. As such, it has been provided that the assessment year which was sought to be reopened in consequence to the finding of appellate authority cannot be reopened if time prescribed under section 149 of the Act has expired on the date of order which was subject matter of appeal before the appellate authority. In other words, sub-section (2) of section 150 intends to put restriction on reopening of assessments, which have attained finality on expiry of prescribed period of limitation. In the present case, the time limit for issuance of notice under section 148 of the Act has expired as on 31st March 2015 whereas the order which was subject matter of appeal before the

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 18 learned CIT(A) was passed on 11th August 2016. Thus, the same cannot be reopened by virtue of the provisions of sub section (2) of section 150 of the Act. In holding so, we draw support and guidance from the judgement of Hon’ble Supreme Court in case of K.M. Sharma vs. ITO reported in 254 ITR 772. The relevant observation of Hon’ble SC bench is extracted as under: On a combined reading of sub-section (1) as amended with effect from 1-4-1989 and sub- section (2) of section150, a fair and just interpretation would be that the authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149." 33.2 Without prejudice to the above, it is also pertinent to note that the proceedings in the case on hand were initiated under section 147 of the Act in pursuance to the direction of the learned CIT(A) in the case of the assessment framed under section 147 read with section 143(3) of the Act in the hands of Shri Deepak Vashwani and Shri Ashok Vashwani. It is the admitted position that the initiation of the proceedings in the hands of Shri Deepak Vashwani and Shri Ashok Vashwani have been held invalid by the order of the ITAT in ITA No. 461/AHD/2019 & Others. The relevant finding of the ITAT reads as under: 103. However, on comparison of the additions proposed in the reason to believe recorded for the assessment under Section 147 of the Act with the actual addition made by the AO as contended by the learned DR hereinabove, we find that the additions which were proposed in the reasons recorded were not matching with the actual additions made by the AO in the assessment order under Section 147/143(3) of the Act. As such the amount of addition viz a viz the basis of re-opening as proposed in the reasons recorded were not matching with the addition made by the AO in the assessment framed under Section 147/143(3) of the Act. Accordingly, we hold that there cannot be any addition in the assessment framed under Section 147/143(3) of the Act in the given facts and circumstances. In view of the above we quash the assessment framed under 147 of the Act. Hence, the grounds of appeal of the assessee are allowed. 33.3 Once the order framed under section 147 of the Act has been held as invalid in the hands of Shri Deepak Vashwani and Ashok Vashwani, the consequential proceedings in the case on the assessee are not sustainable. It is because the basis on which the proceedings were initiated has been held invalid by the ITAT in the manner as discussed above. On this score as well, we hold that the proceedings against the assessee are not sustainable in the eyes of law.

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 19 33.4 Without prejudice to the above, we find that for the year under consideration, the regular assessment under section 143(3) of the Act was completed vide order dated 30th December 2010. In this regard, the proviso to section 147 of the Act puts embargo on reopening of the assessment under section 147 after the expiry of 4 years from the end of relevant assessment year if the assessment under section 143(3) of the Act was already made unless income escaped due to the reason that the assessee failed to disclose fully and truly all material facts necessary for assessment. In the present case, notice for reopening assessment was issued well beyond the period of 4 years from the end of relevant assessment year i.e. 2008-09. We have perused the reasons recorded for reopening where there is no allegation that the assessee failed to disclose all material facts fully and truly necessary for assessment.

33.5 At this stage, we are also conscious to fact that in the present case, notice for reopening the assessment was issued under section 148 r.w.s. 150 of the Act but it is pertinent to highlight that the provision of section 150 of the does not have overriding effect over the proviso to section 147 of the Act. Thus, the limitation of 4 years and the conditions prescribed under first proviso to section 147 of the Act have to be complied with, otherwise no action under section 147(1) of the Act can be taken. In holding so, we draw support and guidance from the judgment of Hon’ble Gujarat High Court in the case of M/s Ferromatik Milacron India Ltd vs. ITO reported in 45 taxmann.com 474 wherein it was held as under: 12. Having thus heard learned counsel for the parties, we may remind ourselves that in the present case, reopening is sought to be done beyond the period of 4 years from the end of the relevant assessment year. In that view of the matter, additional requirement flowing from the proviso to Section 147 of the Act, namely, that the income chargeable to tax has escaped assessment for the failure of the assessee to disclosetruly and fullyallmaterialfacts necessary for the assessment must be satisfied. In the present case, for the reasons recorded, the Assessing Officer did not even allege that any income chargeable to tax had escaped assessment for the reasons noted above. Even otherwise, we do not see how the Revenue can contend that there was any failure on the part of the assessee to disclose truly and fully all material facts. 33.6 In view of the above, we hold that the notice issued for reopening of the assessment under section 148 of the Act is not sustainable on this ground also.

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33.7 Without prejudice to the above, it is settled position of law that the once notice for reopening assessment under section 148 of the Act was issued, the assessee is required to furnish return of income in response to such notice. It is further provided that the return filed under section 148 of the Act is deemed to have been filed under section 139 of the Act. Therefore, all the provisions specified under section 139 of the Act come into play to a return filed under section 148 of the Act. The relevant provisions of section 148 of the Act read as under: [Issue of notice where income has escaped assessment. 148. [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve49 on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :]

33.8 We further note that the expression used under section 148 of the Act i.e. “so for as may be” has been interpreted by the Hon’ble Apex Court in the case of R Dalmia Vs. CIT reported in 236 ITR 480, that once the return filed under section 148 of the Act then in making the assessment and the reassessment under section 147 of the Act, the provisions subsequent to the provision of section 139 of the Act have to be followed. The relevant extract of the judgment is reproduced as under: “It is no doubt that assessments under section 143 and assessments and reassessments under section 147 are different, but in making assessments and reassessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B, has to be followed” 33.9 From the above judgment, there remains no ambiguity that the procedural provisions for making the assessment under section 143(3) of the Act has to be followed. Therefore, it is mandatory upon the Revenue to ensure the issuance and service of valid notice under section 143(2) of the Act even in the assessment framed under section 147 of the Act. In this regards we also find support and

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 21 guidance from the order of Special Bench of Delhi Tribunal in the case of Raj Kumar Chawla v/s ITO reported in 145 Taxman 12 wherein it was held as under: “Section 148 does not provide any methodology for computing the income on reassessment or assessment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. Clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) of section 143. This Chapter clearly prescribes its own return, form of own methodology for computation of income but falls back on the provisions of sections 142, 143 and 144 etc., only for procedural aspect. If the proviso is made applicable, then a clash erupts between the provisions of Chapter XIV-B with section 143(2) as the assessment is mandatory under this Chapter. [Para 31” 33.10 We also find support and guidance from the judgment of Hon’ble Kerala High Court in the case of Lally Jacob v/s ITO reported in 197 ITR 439 wherein it was held as under: “A reading of sections 147 and 148 makes it clear that, at any rate, an assessment for the first time made by resort to section 147 is a regular assessment. Section 148 enjoins the Income-tax Officer before making an assessment under section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under section 148 has to be deemed to be a notice under section 139(2) and, if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under section 143 or section 144. We were not shown any other provision by which the Income- tax Officer is authorised to make an order of assessment under the Act. The provisions contained in section 140A also give an indication that an assessment made in pursuance of a notice under section 148 is a regular assessment under section 143 or section 144, for section 140A(2) provides that any admitted tax paid in pursuance of section 140A(1) shall be deemed to have been paid towards the regular assessment under section 143 or section 144. It is pertinent to note that section 140A(1) deals with a return required to be furnished under section 139 or section 148. That makes the provision clear that an assessment made under section 147 also will be a regular assessment under section 143 or section 144. Accordingly, we hold that any assessment made for the first time by resort to section 147 will also be a regular assessment for the purpose of invoking section 217 of the Act. With great respect, we dissent from the view expressed in certain decisions referred to earlier in this judgment which take a contrary view." (p. 452)”

33.11 Thus, in view of the above, we conclude that the AO to acquire valid jurisdiction to assess or reassess income under section 147 of the Act is under the obligation to issue a valid notice under section 143(2) of the Act. In case the AO

ITA Nos.37-38/AHD/2021 A.Y.s 2008-09 & 2017-18 22 has not done so, the order framed under section 143(3) read with section 147 of the Act becomes invalid. In the present case, the notice under section 148 of the Act was issued on 30th March 2019. Accordingly, the assessee was required to furnish return of income in response to such notice. The assessee vide letter dated 28th May 2019 informed the AO that they tried to file return of income u/s 148 of the Act but found no option on the income tax portal. The assessee vide said letter furnished copy of ITR and computation of income manually and accordingly request was made to the AO to provide certified copy of reason recorded. Thereafter, the AO after providing the copy of reason recorded issued notice under section 143(2) of the Act on the assessee dated 3rd June 2019. However, the assessee subsequently vide letter dated 3rd October 2019 requested the AO to treat the original return filed under section 139 of the Act as return filed in response to notice under section 148 of the Act. Thereafter the AO framed the assessment vide order dated 23-12-2019. The assessee before the learned CIT(A) contended that it filed return in response to notice under section 148 of the Act dated 3rd October 2019, the AO after filing of return was required to issue notice under section 143(2) of the Act but failed to do so and proceeded to frame assessment on the basis of earlier notice under section 143(2) of the Act, issued before filing of return of income, hence the assessment not valid. The learned CIT(A) concurred with contention of the assessee.

33.12 In our considered opinion, the learned CIT(A) erred in considering the fact that the assessee vide letter dated 28th May 2019 furnished copy of ITR and Computation manually only thereafter the AO issued notice under section 143(2) of the Act. The relevant submission of the assessee reads as under: Sir, With reference to the above caption subject and in continuation of our earlier letter and also in reference to your letter dated 25.04.2019 regarding e-filling of return for A.Y. 2008-09 in response to your notice, we have to say that we have tried to e-file the return, but the option to file u/s.148 is not available on portal and the relevant screenshot is enclosed herewith for your ready reference. Further for your ready reference we are enclosing herewith the copy of return of income along with computation of total income, so we request your honour to provide us duly certified copy of reason recorded and also provide us the approval granted by the hire authority.

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33.13 Thus, considering the above fact that the assessee vide letter dated 28th May 2019 furnished copy of ITR and Computation of income on the basis of which the AO issued notice under section 143(2) of the Act. Hence, the contention of the assessee that the return was filed dated 3rd October 2019 is not tenable. Therefore, the finding of the learned CIT-A to this extent is not found on correct footing. Hence, the ground of appeal of the Revenue is hereby dismissed.

Order pronounced in the Court on 14/02/2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 14/02/2024 TRUE COPY Manish, Sr. PS