2015 (4) TMI 763 - AT - Income Tax

Reopening of assessment - Certain requisite conditions for claiming deduction not examined by the Ao - Held that - In the initial assessment when the matter has gone upto the Tribunal on the issue of claim of deduction under section 80- IB(10) of the Act, it cannot be assumed that the issue of requisite conditions for claiming deduction under section 80-IB(10) of the Act was not examined by the appellate authorities including the Tribunal. Therefore, once the appellate authorities have applied their mind to a particular issue, the order of the Assessing Officer will merge with the orders of the appellate authorities. We have also carefully examined the second proviso to section 147 of the Act, according to which the Assessing Officer cannot assess or re-assess such income which is subject matter of appeal, reference or revision. Since the claim of deduction under section 80-IB(10) of the Act is sub-judice before the Hon'ble High Court in the Revenue s appeal, the reopening of the same issue is not possible. Since the issue of claim of deduction under section 80-IB(10) of the Act was thoroughly examined during the course of initial assessment, the reopening of assessment on the same issue on a plea that certain requisite conditions for claiming deduction under section 80-IB (10) of the Act was not examined by the Assessing Officer, cannot be called to be a valid reopening, as the claim of deduction under section 80-IB(10) of the Act have been thoroughly examined by the Assessing Officer as well as the appellate authorities. We, therefore, find ourselves in agreement with the order of the ld. CIT(A) and we confirm the same. We accordingly confirm the orders of the ld. CIT(A) in both the assessment years i.e. 2005-06 and 2004-05 and dismiss the appeals of the Revenue. - Decided against the revenue.

Issues Involved:
1. Validity of reopening the assessment under section 147/148.
2. Examination of conditions for claiming deduction under section 80-IB(10).
3. Impact of previous appellate decisions on the current reopening.
4. Application of the second proviso to section 147.
5. Merger doctrine and its implications on reassessment.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147/148:
The Revenue contended that the reopening of the assessment was valid as it was initiated after issuing a legal notice under section 148 based on recorded reasons and obtaining approval from the CIT(C), Kanpur. However, the CIT(A) found the reopening invalid and illegal, observing that the assessment was reopened on the same grounds that had already been examined and adjudicated upon in previous proceedings. The Tribunal upheld this view, emphasizing that the reopening was not justified as the issue of deduction under section 80-IB(10) had already been thoroughly examined during the initial assessment and subsequent appeals.

2. Examination of Conditions for Claiming Deduction under Section 80-IB(10):
The Assessing Officer (AO) had reopened the assessment on the grounds that the assessee did not fulfill the requisite conditions for claiming deduction under section 80-IB(10), particularly concerning the approval of the housing project, size of the project, and the completion certificate. However, the CIT(A) and the Tribunal noted that these conditions had already been considered in the initial assessment and subsequent appeals, making the reopening on these grounds redundant and invalid.

3. Impact of Previous Appellate Decisions on the Current Reopening:
The Tribunal highlighted that the initial assessment had been challenged up to the Tribunal level, which had dismissed the Department's appeal, and the matter was still pending before the High Court. The CIT(A) and the Tribunal concluded that once the appellate authorities had applied their mind to a particular issue, the order of the AO merges with the orders of the appellate authorities. Hence, the reopening on the same issue was not permissible.

4. Application of the Second Proviso to Section 147:
The CIT(A) and the Tribunal referred to the second proviso to section 147, which states that the AO cannot reassess income that is the subject matter of an appeal, reference, or revision. Since the issue of deduction under section 80-IB(10) was sub-judice before the High Court, the reopening of the same issue was deemed invalid. The Tribunal agreed with the CIT(A)'s detailed discussion on this proviso and upheld the invalidity of the reopening.

5. Merger Doctrine and Its Implications on Reassessment:
The Tribunal and the CIT(A) relied on the merger doctrine, as elucidated in the Supreme Court's decision in Hindustan Aeronautics Ltd vs CIT, which states that the entire order of the lower authority merges with the order of the appellate authority once an appeal is decided. This doctrine was applied to conclude that the AO's order had merged with the appellate orders, precluding any further reopening on the same issue.

Conclusion:
The Tribunal confirmed the CIT(A)'s orders, holding that the reopening of the assessments for the years 2004-05 and 2005-06 was invalid and illegal. The appeals of the Revenue were dismissed, and the cross objections of the assessee, being in support of the CIT(A)'s orders, were also dismissed as infructuous. The Tribunal's decision was pronounced in the open court.

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