2018 (11) TMI 1925 - AT - Income Tax

Reopening of assessment u/s 147 - change of opinion - assessee is not eligible for deduction u/s 80IB(10) - HELD THAT - We find that the reopening of the assessment is within a period of 4 years from the end of the relevant assessment year and the initial assessment was u/s 143(1) and not u/s 143(3) of the Act. As regards the change of opinion is concerned, we find that the A.O. has perused the assessment record to observe that the built up area of each of the residential units is more than 1500 sq. ft and that the assessee is not eligible for deduction u/s 80IB(10). Therefore, it is clear that the formation of belief is from the material on record only and that no fresh tangible material had come to the knowledge of the A.O. to reopen the assessment. In the case of Orient Craft Ltd 2013 (1) TMI 177 - DELHI HIGH COURT has clearly held that even an assessment done u/s 143(1) of the Act, can be reopened u/s 147 only if the AO had tangible material which has come to his knowledge, subsequent to such an assessment u/s 143(1). We hold that the reopening of the assessment which is completed u/s 143(1) of the Act is not sustainable without there being any tangible material that has come to the knowledge of the A.O. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment proceedings initiated by the Assessing Officer
2. Disallowance of claim of deduction u/s 80IB

Validity of Reassessment Proceedings:
The case involved an appeal for the Assessment Year 2008-09 against the order of the CIT(A)-6, Hyderabad. The Assessing Officer (A.O.) had reopened the assessment under section 147 of the Act, issuing a notice under section 148 to the assessee. The assessee contended that the reassessment was invalid as the A.O. did not have fresh tangible material to justify the reassessment. The A.O. had reopened the assessment based on a revenue audit objection raised by the CAG, and the assessee argued that this was not a valid reason for reassessment. The tribunal observed that the A.O. had not independently formed an opinion that income had escaped assessment, and the reopening of the assessment was not sustainable. Citing a judgment by the Hon’ble Delhi High Court, the tribunal held that even an assessment completed under section 143(1) could only be reopened under section 147 if the A.O. had tangible material that came to his knowledge after the initial assessment.

Disallowance of Deduction u/s 80IB:
The A.O. disallowed the assessee's claim of deduction under section 80IB(10) of the Act, stating that the built-up area of each residential unit exceeded 1500 sq. ft, making the assessee ineligible for the deduction. The CIT(A) upheld this decision. The assessee argued that the portico and open terrace should not be included in the computation of the built-up area, as they were not walls surrounding the area. The tribunal noted that the A.O. had considered the built-up area based on the record and concluded that the units exceeded 1500 sq. ft. The tribunal also highlighted the absence of fresh tangible material to justify the reassessment, leading to the conclusion that the reopening of the assessment was not sustainable. Therefore, the tribunal did not adjudicate on the merits of the deduction claim, as it would be an academic exercise after holding the reassessment as not sustainable.

In conclusion, the tribunal partly allowed the appeal filed by the assessee, emphasizing the lack of tangible material for reassessment and the consequent unsustainability of the reopening of the assessment. The judgment was pronounced on 2nd November 2018 by the Appellate Tribunal ITAT Hyderabad, with Smt. P. Madhavi Devi and Shri S. Rifaur Rahman as the members hearing the case.