2014 (11) TMI 176 - AT - Income Tax

Validity of reopening of assessment Allowability of deduction u/s 80IB(10) - Prorate provision for allowing 80IB claim Held that - CIT(A) has given categorical finding that there was no reason or evidence to believe that the flat in question was exceeding area of 1,000 sq. ft. - The unit No.105 & 106 of B Wing was not the area of flats but it was a prayer hall having area of 1593 sq. ft., which area was treated by the assessee as non-residential area in original assessment proceedings and no deduction u/s 80IB(10) was claimed in respect of that area - Even a survey was conducted on 03.02.06 and the assessee had reduced the deduction in respect of car parking and deposits etc. also - Flat Nos.105 & 106 of A Wing were combined was also wrong - It was established before the Ld. CIT(A) that in A Wing instead of 105 & 106, the office premises was constructed and in all 11 offices were constructed in A Wing upon which no deduction u/s 80IB(10) was claimed - the loose papers upon which the figure was written were not suggestive of the fact that the assessee had received any amount in cash - Even the assessee had properly explained and reconciled the figures before the CIT(A) - there was no reason to believe that the income of the assessee had escaped assessment. Revenue could not draw any document on the file which was found during the second survey action from which it can be said that the AO had reasons to believe that the income of the assessee had escaped assessment - the AY in question being 2004-05, the clause d was inserted to section 80IB(10) from 01.04.05 had prospective effect and the assessee was even entitled to claim deduction on the commercial area as decided in CIT v. Brahma Associates 2011 (2) TMI 373 - BOMBAY HIGH COURT - the deduction u/s 80IB(10) is allowable to a housing project approved by the local authority having residential units with commercial user to the extent permitted under the Development Control rules/regulations framed by the respective local authority and that the clause d was not applicable to the projects approved before the insertion of the said clause i.e. from 01.04.05 - the assessee itself has not claimed any deduction in respect of the commercial area - so far the reopening of the assessment is concerned, there was no infirmity in the order of the CIT(A) while holding that the reopening was bad in law Decided against revenue.

Summary

Issues Involved:
1. Legality of reopening the assessment.
2. Deduction under section 80IB(10) of the Income Tax Act.
3. Addition on account of loose papers impounded during the survey.

Issue-wise Detailed Analysis:

1. Legality of Reopening the Assessment:
The Revenue contended that the reopening of the assessment was justified based on specific information received by the Assessing Officer (AO). However, the assessee argued that the notice under section 148 was not served properly, and the assessment had become time-barred. The CIT(A) held that the reopening was "bad in law" because there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The CIT(A) noted that all relevant details were provided during the original assessment proceedings, and the AO had no new material to justify the reopening. The Tribunal upheld the CIT(A)'s decision, stating that the reopening was not in accordance with law and thus, the reassessment order was void ab initio.

2. Deduction under Section 80IB(10):
The Revenue challenged the CIT(A)'s direction to allow the deduction of Rs. 84,81,101/- under section 80IB(10). The CIT(A) found that the AO's conclusion that the area of the flats exceeded 1,000 sq. ft. was incorrect. It was established that the flats in question were actually office premises and a prayer hall, not residential flats. The CIT(A) observed that the assessee had not claimed any deduction for the non-residential area, including car parking and deposits, and had provided detailed area-wise statements during the original assessment. The Tribunal agreed with the CIT(A)'s findings, confirming that there was no violation of clause (C) of section 80IB(10) and that the deduction was rightly allowed.

3. Addition on Account of Loose Papers:
The AO made an addition of Rs. 10,95,000/- based on loose papers found during the survey, which allegedly indicated cash receipts. The CIT(A) examined the impounded documents and found that the notations did not clearly indicate any cash receipt. The assessee successfully explained that the figures were related to the sale of shops and offices, which were duly accounted for in the books. The Tribunal upheld the CIT(A)'s decision, noting that there was no substantive evidence to support the AO's claim of cash receipts, and the addition was unjustified.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order on all grounds. The reopening of the assessment was deemed illegal, the deduction under section 80IB(10) was correctly allowed, and the addition based on loose papers was found to be without merit. The order pronounced in the open court on 31.10.2014 confirmed the CIT(A)'s findings and provided a detailed rationale for each issue, ensuring that the reassessment order was annulled.