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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश/ ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the revenue are directed against the consolidated order passed by the CIT (Appeals)-1, Raipur dated 14.08.2016, which in turn arises from the respective orders passed by the A.O under Sec.143(3)/147 of the Income-tax Act, 1961 (in short ‘the Act’) dated 09.03.2015 for assessment years 2008-09 & 2009-10. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first take up the appeal filed by the revenue for assessment year 2008-09 wherein the impugned order has been assailed on the following grounds of appeal before us:
“1. On the facts and in the circumstances of the case, the Ld. CIT(Appeals) has erred in deleting the addition of Rs.41,93,990/- made by the A.O on account of disallowance of deduction u/s.80IB(10) of the Act without appreciating the facts and evidences brought into light by the AO during assessment proceedings. 2. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal.”
Succinctly stated, the assessee is engaged in the business of construction of flats and land development. Original assessment was framed by the A.O vide his order passed u/s.143(3)/147 of the Act, dated 21.12.2010 and the income of the assessee was assessed at Rs.1,00,38,000/-, i.e., after making an addition of Rs. 2.50 lac.
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Subsequently, on the basis of an audit objection as regards the assessee’s entitlement for claim of deduction u/s. 80IB(10) of the Act, the case of the assessee was reopened by the A.O u/s. 147 of the Act. On a perusal of the records, we find that it was reported by the Sr. Audit Officer, ITRAP-1, Raipur that the assessee for the purpose of quantifying its claim for deduction u/s 80IB(10) of the Act, had instead of as taking his actual gross receipts at Rs.2,97,95,000/-, i.e, the proceeds received on sale of flats of his housing project, had however, wrongly including the receipts of Rs. 41,93,990/- that were generated from car parking, flat maintenance charges, CSEB and gas connection receipts which were received after completion of the contract work and, therein had claimed the aforesaid deduction on the total receipts of Rs.3,39,88,990/-, which therein had resulted to an excessive claim of deduction under the aforesaid statutory provision. Considering the aforesaid facts, the A.O after exhaustive deliberations, concluded, that the assesee’s claim for deduction u/s.80IB(10) of the Act was to be restricted to the sale consideration of the building and was not to be allowed on its other incomes of Rs.41,93,990/-. Accordingly, on the basis of his aforesaid observation, the A.O vide his order u/ss. 143(3)/147, dated 09.03.2015 determined the income of the assessee at Rs.1,42,31,990/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). Before the CIT(Appeals), the assessee assailed the validity of
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jurisdiction that was assumed by the A.O for reopening of its concluded assessment u/s.147 of the Act, as well as challenged the addition qua the merits of the case. After giving a thoughtful consideration, the CIT(Appeals) found favour with the claim of the assessee that the A.O had wrongly assumed jurisdiction by reopening its concluded assessment on the basis of a mere “change of opinion”. It was noticed by the CIT(Appeals) that the reopening of the assessee’s case was not on the basis of any new material coming to the notice of the A.O, but on the basis of the same set of facts that were available on record at the time of framing of assessment by him. It was further observed by the CIT(A) that the genesis of the reopening of the concluded assessment could be traced in an audit objection that was raised by the ITRAP-1, Raipur. Accordingly, the CIT (Appeals) relying on certain judicial pronouncements concluded, that the reopening of the case of the assessee on the basis of a mere “change of opinion” was not justified. Adverting to the merits of the claim of the assessee that the AO had erred in law and the facts of the case in restricting its claim for deduction u/s. 80IB(10) of the Act, it was observed by the CIT(Appeals) that as the charges received by the assessee for the various facilities, viz. pipelines, electricity and stilt parking facilities formed part of the project that was approved by “Nagar Niyojan Avam Vikas” Raipur vide “Anugya” dated 23.01.2004 and were facilities which the assessee as a builder was obligated to provide, therefore, the same being a part of the project was duly
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eligible for deduction u/s. 80IB (10) of the Act. Accordingly, the CIT(Appeals) on the basis of his aforesaid observations allowed the appeal of the assessee.
The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
On a perusal of the orders of the lower authorities, we find that it is a matter of fact borne from record that the case of the assessee was reopened not on the basis of any fresh information coming to the notice of the A.O after conclusion of the original assessment that was framed u/s.143(3) dated 25.03.2014, but was based on the same set of facts as were available on record in the course of original assessment proceedings. Admittedly, the assessee’s claim for deduction u/s. 80IB(10) of the Act had been deliberated upon by the A.O while framing the original assessment vide his order passed u/s. 143(3), dated 21.12.2010. As stated by the Ld. Authorized Representative (for short ‘AR’) for the assessee, and rightly so, as the reopening of the concluded assessment of the assessee is based on an audit objection and not on the basis of any fresh material coming to the notice of the A.O after the culmination of the original assessment,
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therefore, such reopening of his case on the basis of a mere ‘change of opinion’ cannot be sustained and is liable to be vacated. We may herein observe that a substitution of a view as that of a predecessor by a successor A.O cannot form a justifiable basis for reopening the case of an assessee. In fact, we find that the Hon'ble Supreme Court in its landmark judgment in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC) had held, that merely on the basis of a “change of opinion‟ the case of an assessee cannot be reopened, observing as under:- "On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to ITA No.1212/Mum/2019 A.Y. 2012- 13 M/s Medley Pharmaceuticals Ltd. Vs. DCIT-10(2)(2) give a schematic interpretation to the words "reason to believe" failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary
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powers in the AO. We quote hereinbelow the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression „reason to believe‟ in s. 147.--A number of representations were received against the omission of the words „reason to believe‟ from s. 147 and their substitution by the „opinion‟ of the AO. It was pointed out that the meaning of the expression, „reason to believe‟ had been explained in a number of Court rulings in the past and was well settled and its omission from s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 147 to reintroduce the expression „has reason to believe‟ in place of the words „for reasons to be recorded by him in writing, is of the opinion‟. Other provisions of the new s. 147, however, remain the same." Further, following the judgment of the “Full bench‟ of the Hon‟ble High Court of Delhi in the case of Kelvinator of India (supra), which as observed by us hereinabove had been upheld by the Hon’ble Apex Court, the Hon'ble High Court of Bombay in the case of Asteroids Trading & Investment P. Ltd. Vs. DCIT (2009) 308 ITR 190 (Bom), had held, that an A.O is precluded from assuming jurisdiction to initiate reassessment proceedings on the basis of a “change of opinion‟, observing as under: "8. Perusal of the record shows that the petitioner had made full disclosure necessary for claiming deduction under s. 80M. The AO after applying his mind to the relevant records had made a specific order allowing the deduction. A perusal of the record shows that now respondent No. 1 proposes to reopen the assessment because according to him deduction under s. 80M was wrongly allowed, and, therefore, he was of the opinion that the income has ITA No.1212/Mum/2019 A.Y. 2012-13 M/s Medley Pharmaceuticals Ltd. Vs. DCIT-10(2)(2) escaped assessment. Though, in the notice respondent No. 1 has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of forming of opinion by respondent No. 1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It is merely a fresh
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application of mind by the same officer to the same set of facts. Thus, it is a case of mere change of opinion, which, in our opinion, does not provide jurisdiction to respondent No. 1 to initiate proceedings under s. 148 of the Act. It can now be taken as a settled law, because of a series of judgments of various High Courts and the Supreme Court, which have been referred to in the judgment of the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. (supra) referred to above, that under s. 147 assessment cannot be reopened on a mere change of opinion." We further find that the Hon'ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom) had observed, that as no new information/material was received by the A.O, therefore, the fresh application of mind by the A.O to the same set of facts and material which were available on record at the time of framing of the assessment, but had inadvertently remained omitted to be considered would tantamount to review of order, which is not permissible as per law. Observations of the Hon’ble High Court for the aske of clarity are culled out as under : "10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator (supra) referred to above, has taken a clear view that reopening of assessment under s. 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under s. 148".
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Further, the Hon'ble High Court of Bombay in the case of ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT (2010) 325 ITR 471 (Bom), relying on the judgment of the Hon’ble Supreme Court in the case of Kelvinator of India (supra), had held as under: 23. Though the power to reopen an assessment within a period of four years of the expiry of the relevant assessment year is wide, it is still structured by the existence of a reason to believe that income chargeable to tax has escaped assessment. The Supreme Court, in a recent judgment in Kelvinator of India Ltd. (supra) while drawing upon the legislative history of s. 147 held that the expression „reason to believe‟ needs to be given a schematic interpretation in order to ensure against an arbitrary exercise of power by the AO. The judgment of the Supreme Court emphasises that the power to reopen an assessment is not akin to a power to review the order of assessment and a mere change of opinion would not justify a recourse to the power under s. 147. Unless the AO has tangible material to reopen an assessment, the power cannot be held to be validly exercised. The Supreme Court has held thus : "...Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words „reason to believe‟ failing which we are afraid s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of „mere change of opinion‟, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of „change of opinion‟ is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of „change of opinion‟ as an inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is „tangible material‟ to come to the conclusion that there is escapement of income from assessment. Reasons must have a link with the formation of the belief." 24. In the present case, for all the assessment years in question, and a fortiorari for asst. yr. 2004-05, what the AO has purported to do is to reopen the assessment on the basis of a mere change of opinion. That the AO had no tangible material is evident from the circumstance that the reasons which have been disclosed contain a reference to the same basis, namely the existence of a nil surplus/deficit in Form 1 which was drawn to
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the attention of and was present to the mind of the AO during the assessment proceedings under s. 143(3). Consequently, it is evident that there is an absence of tangible material before the AO". Also, the Hon‟ble High Court of jurisdiction in the case of Aventis Pharma Ltd. Vs. Asst. CIT (2010) 323 ITR 570 (Bom), reiterating its aforesaid view that reassessment proceedings cannot be permitted on the basis of a “change of opinion‟, had held as under:- "There is merit in the submission which has been urged on behalf of the assessee that there was no tangible material before the AO on the basis of which the assessment could have been reopened and what is sought to be done is to propose a reassessment on the basis of a mere change of opinion. This, in view of the settled position of law is impermissible. No tangible material is shown on the basis of which the assessment is sought to be ITA No.1212/Mum/2019 A.Y. 2012-13 M/s Medley Pharmaceuticals Ltd. Vs. DCIT-10(2)(2) reopened. In the absence of tangible material, what the AO has done while reopening the assessment is only to change the opinion which was formed earlier on the allowability of the deduction. The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. There is no tangible material in the present case.
At this stage, we may herein observe, that as per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him, that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of NYK Lime (India) Ltd. Vs. DCIT (No.2) [2012] 346
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ITR 361 (Bom) and Purity Tech Textile Pvt. Ltd. Vs. ACIT & Anr. [2010] 325 ITR 459 (Bom).
We, thus, in the backdrop of our aforesaid observations are of the considered view that as the case of the assessee had been reopened by the AO on the basis of a mere change of opinion and not on the basis of any fresh tangible material coming to his notice after culmination of the original assessment, therefore, finding no infirmity in the view taken by the CIT(Appeals) who had rightly observed that the reopening of a concluded assessment of the assessee on the basis of mere ‘change of opinion” is not sustainable in the eyes of law, uphold his order to said extent.
Adverting to the observations of the CIT(Appeals) as regards the merits of the disallowance of the assessee’s claim for deduction u/s. 80IB(10) of the Act, i.e., declining of such claim of deduction qua the charges received by the assessee for provision of various facilities, i.e., pipelines, electricity and stilt parking facilities, we are of the considered view, that as observed by the CIT(Appeals), and rightly so, now when the provision of the aforesaid facilities forms part and parcel of the approval of “Nagar Niyojan Avam Vikas” Raipur vide “Anugya”, dated 23.01.2004, of the housing project in question and, the assessee in terms of the approval of his project was obligated to provide such services, therefore, the same would be
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eligible for deduction u/s. 80IB(10) of the Act. For the sake of clarity the relevant observations of the CIT(Appeals) on the aforesaid issue are reproduced as under: “Coming to the merit of disallowance it is seen that A.O is of the opinion that amount received by the assessee for car parking, flat maintenance charges and CESB and gain connection are part of he project and therefore, not eligible for deduction u/s.80IB(10). The project has been approved by “Nagar Niyojan Avam Vikas” Raipur vide “Anugya” dated 23.01.2004. As per this Anugya the project is subject to various facilities such as pipelines, electricity, stilt parking facility. On considering the submission of the appellant and going through various decisions in this regard I am of the opinion the housing projects does not mean building of a house. In the construction of a housing projects there are various facilities which need to be provided by the builder. The builder is under obligation as per agreement/memorandum entered into with customers or assurance given through advertisements/broachers to provide various kinds of facilities which may be basic facilities of electric supply, substation, maintenance etc. or more modern facilities such as parking lots, recreation areas, centralized air conditions etc. These are part and parcel of the housing project and without which the project would not be complete and would not sell. Builder received not only the cost of the houses but also charge towards these facilities and various other charges such as development charges, legal charges, society formation charges etc. these are all very much related to the project. It may be noted that Section 80Ib910) speaks of a building project and not just buildings. Therefore, the charges received by the builder are very much part of the project and eligible for deduction u/s.80IB(10). Accordingly, ground taken by the appellant are allowed and addition made by the AO are deleted.” After giving a thoughtful consideration to the aforesaid observations of the CIT(Appeal), we concur with the view taken by him, and thus uphold his order to the said extent.
In the result, appeal of the revenue in ITA No.08/RPR/2017 for the assessment year 2008-09 is dismissed in terms of our aforesaid observations.
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ITA No.09/RPR/2017 A.Y.2009-10 12. As the facts and the issues involved in the present appeal of the revenue remains the same as were there before us in its aforementioned appeal in ITA No.08/RPR/2017 for assessment year 2008-09, therefore, our order therein passed while disposing off the said appeal shall apply mutatis-mutandis for disposing off the present appeal in ITA No.09/RPR/2017 for the assessment year 2009-10. Accordingly, in this case also the grounds raised by the revenue are dismissed.
In the result, appeal of the Revenue in ITA No.09/RPR/2017 for the assessment year 2009-10 is dismissed in terms of our aforesaid observations.
Resultantly, both the appeals of the Revenue are dismissed in terms of our aforesaid observations.
Order pronounced in open court on 09th day of May 2022.
Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 09th May, 2022 **SB
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आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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Date 1 Draft dictated on 04.05.2022 Sr.PS/PS 2 Draft placed before author 05.05.2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. Sr.PS/PS PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order