2016 (10) TMI 328 - HC - Income Tax

Reopening of assessment - Eligibility of deduction u/s 80IB(10) - Held that - Assessing Officer had minutely examined the petitioner s claim for deduction u/s. 80IB(10) of the Act. The question that such deduction would be available for development of a housing project was very much in mind of the Assessing Officer. In this context we may peruse the reasons recorded by the Assessing Officer for reopening the assessment more closely. He sought to revisit the assessee s claim of deduction u/s. 80IB(10) of the Act on the grounds that the assessee was not a constructive owner of the land and that the permission from AUDA was also not obtained by the assessee. On the basis of documents on record the Assessing Officer was of the opinion that the assessee was merely a contractor and not a developer of a housing scheme. First and foremost only on the ground of change of opinion the notice would be rendered invalid. Once the Assessing Officer examined the claim of deduction u/s. 80IB(10) of the Act in the original scrutiny assessment without there being anything further it would not be open for him to contend that since a particular aspect of the deduction was not examined he should be permitted to reopen the assessment. It is not even the case of the Revenue that during the scrutiny assessment the assessee did not furnish true and full details in response to the queries raised by the Assessing Officer. If the element of the explanation below sub section (10) of section 80IB as suggested by the counsel for the Revenue was in the mind of the Assessing Officer the same is not reflected in the reasons recorded by him. It is well settled that the notice for reopening can be supported on the strength of the reasons recorded by the Assessing Officer. It is even otherwise questionable whether with the aid of a statutory change made later on assessment can be reopened a question we need not finally decide in this petition. In any case the Assessing Officer has not even relied on such explanation in the reasons recorded.- Decided in favour of assessee.

Issues Involved:
1. Legitimacy of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Validity of the claim for deduction under Section 80IB(10) of the Income Tax Act, 1961.
3. Examination of the petitioner’s role as a developer versus a contractor.
4. Impact of statutory changes made by the Finance Act, 2009 on the assessment.

Issue-wise Detailed Analysis:

1. Legitimacy of Reopening the Assessment:
The petitioner challenged the notice dated 30.06.2009 issued by the respondent-Assessing Officer for reopening the assessment for the assessment year 2005-06. The petitioner argued that the entire claim of deduction under section 80IB(10) was examined during the original assessment, and any attempt to re-examine the claim would amount to a change of opinion. The court observed that the Assessing Officer had minutely examined the petitioner’s claim for deduction under section 80IB(10) during the original assessment and allowed the deduction. The court held that reopening the assessment on the same grounds would be invalid due to the change of opinion.

2. Validity of the Claim for Deduction under Section 80IB(10):
The petitioner claimed a deduction of ?45.73 lacs under section 80IB(10) for the assessment year 2005-06. The Assessing Officer initially accepted this claim without modification. However, the reopening notice questioned the petitioner’s eligibility for this deduction, arguing that the petitioner was not the constructive owner of the land and had not obtained the necessary permissions from AUDA. The court noted that the Assessing Officer had already scrutinized and accepted the claim in the original assessment, and the grounds for reopening were not valid.

3. Examination of the Petitioner’s Role as a Developer versus a Contractor:
The reopening notice alleged that the petitioner was merely a contractor and not a developer, which would disqualify them from claiming the deduction under section 80IB(10). The court referred to the original assessment where the Assessing Officer had scrutinized the petitioner’s role and concluded that the petitioner was engaged in the business of building construction and developing a housing project. The court emphasized that the Assessing Officer had examined all relevant details, including project approval and development agreements, and had allowed the deduction. Therefore, revisiting this aspect would constitute a change of opinion.

4. Impact of Statutory Changes Made by the Finance Act, 2009:
The respondent argued that an explanation added below section 80IB(10) by the Finance Act, 2009, effective from 01.04.2001, disallowed deductions for undertakings executing housing projects as works contractors. The court noted that the Assessing Officer did not rely on this statutory change in the reasons recorded for reopening the assessment. The court held that reopening could not be justified based on a statutory change made later on, especially when the original assessment did not reflect any reliance on such an explanation.

Conclusion:
The court quashed the impugned notice dated 30.06.2009, allowing the petitions and making the rule absolute. The court emphasized that the reopening of the assessment was invalid due to the change of opinion and that the original assessment had already scrutinized and accepted the petitioner’s claim for deduction under section 80IB(10).

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