2016 (5) TMI 51 - AT - Income Tax

Reopening of assessment - Disallowance u/s. 80-IB(10) - housing project was approved and commenced prior to 1998, therefore, not eligible for claim of deduction - Held that - After considering the remand report sent by the AO, the CIT(A) has recorded a finding to the effect that on plot CTS No.261, 261/1 & 2, 263 various buildings were to be constructed and that assessee had constructed/developed building No.4 only. Even during the original assessment proceedings and appellate proceedings and also during the second appeal, it has been gathered that the assessee very well informed that he had constructed housing project namely building No.4 only. The copies 01 Municipality letter dtd.12.11.2000 addressed to its Consultants Shri Manoj Paresh, Municipality letter dtd.12.11.2001 addressed to its Consultants, Municipality intimation of disapproval dtd.7.11.2000, commencement certificate dtd.25.01.2001 with reference to assessee s application no. 3501 dtd.29.09.2000 shows that the subject matter was Building No.4 of CTS No. 261, 261/1 & 2, 263. The A.O. received commencement certificate dtd.19.06.1998, occupancy certificate on 29.10.2001 and other documents from the CIB Branch. However, all these documents were pertaining to Building No.3 on the aforesaid plot. The said building no.3 was never constructed by the assessee. Thus, we found that even reopening of assessment was not based on correct reasoning insofar as building No.4 constructed by the assessee was after receipt of approval letter from the municipality dated 25-1-2001 with reference to application No.3501, dated 29-9-2000. Thus, there was no reason to believe that there was any escapement of income with respect to building No.4. As per materials placed on record, we found that assessee was a developer of housing project as a whole and not merely a contractor, insofar as entire development was to be undertaken as per the approval given by municipal authority for development of entire housing project with basic service like sewerage, electricity etc. Thus, assessee is not adversely affected by the explanation inserted by Finance (No.2) Act, 2009, w.e.f.1.4.2001 below section 80IB(10). All the preconditions for availing benefit of section 80IB(10) had been complied with. The detailed finding recorded by the CIT(A) at para 3 of his appellate order are as per material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the CIT(A) for allowing claim of deduction in respect of housing project at building No.4 undertaken by the assessee. Before parting with the matter, it is pertinent to mention that assessee s claim for deduction u/s.80IB(10) in the first round has also been allowed by the CIT(A), ITAT and Hon ble Bombay High Court - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessment under Section 147.
2. Eligibility for deduction under Section 80-IB(10).

Detailed Analysis:

1. Reopening of Assessment under Section 147:

The revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the disallowance made by the Assessing Officer (AO) under Section 80-IB(10) amounting to ?5,00,55,978. The assessee contested the reopening of assessment under Section 147, claiming the AO assumed jurisdiction based on an invalid notice under Section 148, failed to provide a copy of reasons recorded despite a specific request, and that the assessee had fully disclosed all material facts necessary for the assessment.

The CIT(A) upheld the reopening of the assessment, stating that the AO received new information from the CIB Wing indicating that the housing project commenced before 01.10.1998, which was a crucial condition for eligibility under Section 80-IB(10). The CIT(A) concluded that the AO had sufficient reason to form a belief that income had escaped assessment, thus justifying the reopening under Section 147.

2. Eligibility for Deduction under Section 80-IB(10):

The primary issue was whether the assessee's housing project commenced before or after 01.10.1998. The AO disallowed the deduction under Section 80-IB(10) based on information that the project commenced before the stipulated date. However, the CIT(A) found that the AO had relied on documents pertaining to Building No.3, which was not constructed by the assessee. The assessee had constructed Building No.4, and the commencement certificate for this building was dated 25.01.2001, indicating compliance with the conditions under Section 80-IB(10).

The CIT(A) noted that the AO failed to prove that the documents received from the CIB Wing pertained to Building No.4. The CIT(A) also observed that the AO did not conduct further inquiries to verify the commencement date of Building No.4. Consequently, the CIT(A) allowed the assessee's claim for deduction under Section 80-IB(10).

Tribunal's Decision:

The tribunal upheld the CIT(A)'s decision, emphasizing that the AO had incorrectly relied on documents related to Building No.3. The tribunal found that Building No.4, constructed by the assessee, commenced after receiving the approval from the municipal authority on 25.01.2001. The tribunal also noted that the assessee was a developer of the entire housing project, not merely a contractor, and had complied with all preconditions for availing the benefit under Section 80-IB(10).

The tribunal concluded that the reopening of the assessment was not based on correct reasoning and that there was no reason to believe that income had escaped assessment concerning Building No.4. Thus, the tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order allowing the deduction under Section 80-IB(10).

Conclusion:

The tribunal dismissed the revenue's appeal, confirming that the reopening of the assessment was unjustified and that the assessee was entitled to the deduction under Section 80-IB(10) for the housing project on Building No.4. The tribunal's decision was based on the findings that the AO had relied on incorrect documents and that the assessee had complied with all necessary conditions for the deduction.