2017 (3) TMI 1326 - AT - Income Tax

Reopening of assessment - disallowance u/s. 80IB - failure to issue notice - Held that - There is no dispute to the fact that the assessments were reopened after the end of four years from the relevant assessment year. There is also no dispute that the order u/s. 143(3) was passed after duly examining the claim of 80IB(10) as can be seen from the report of the ITI, extracted by the ITO in the assessment orders. Thus, there is no dispute that assessee had placed all the information relevant for completion of assessment before the AO. Provisions of Section 147 do allow the AO to reopen the assessment, if he has reason to believe that income has escaped assessment, but that power is limited by various other provisos. The contention of CIT(A) that assessee has not filed return of income, therefore, there is no need for issuance of notice u/s. 143(2) has no legal basis. Since there is failure on the part of the AO in issuance of notices u/s. 143(2) within the time limits prescribed, subsequent proceedings of assessment becomes bad in law. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessment after four years.
2. Validity of reassessment proceedings without issuing notice under Section 143(2).
3. Inclusion of terrace and portico areas in the built-up area for Section 80IB deduction.
4. Change of opinion by the Assessing Officer (AO).

Detailed Analysis:

Reopening of Assessment after Four Years:
The assessee challenged the reopening of the assessment after four years from the end of the relevant assessment year, arguing that it was done without establishing any failure on their part to furnish necessary details. The Tribunal noted that the original assessment was completed after a thorough examination, including an inspection by the Income Tax Inspector, who confirmed that the assessee met the conditions for deduction under Section 80IB. The Tribunal held that reopening the assessment after four years without any new information or failure on the part of the assessee to disclose material facts is bad in law. This decision was supported by the jurisdictional High Court's ruling in Kohinoor Hatcheries Pvt. Ltd. v. DCIT, which stated that reassessment after four years requires evidence of failure to disclose fully and truly all material facts necessary for assessment.

Validity of Reassessment Proceedings without Issuing Notice under Section 143(2):
The Tribunal found that the reassessment proceedings were invalid due to the failure to issue a notice under Section 143(2). The assessee had informed the AO to treat the original return as a return in response to the notice under Section 148, which the AO acknowledged by communicating the reasons for reopening. The Tribunal cited the Supreme Court's decision in GKN Drive Shafts (India) Ltd. v. ITO, which mandates the issuance of a notice under Section 143(2) following the filing of a return in response to a notice under Section 148. The failure to issue this notice rendered the reassessment proceedings invalid.

Inclusion of Terrace and Portico Areas in the Built-up Area for Section 80IB Deduction:
The AO included the terrace and portico areas in the built-up area, leading to the denial of the Section 80IB deduction. The Tribunal noted that there is a legal precedent for excluding these areas from the built-up area, as seen in the Gujarat High Court's decision in CIT-IV v. Amaltas Associates. The Tribunal emphasized that the issue of whether terrace and portico areas should be included in the built-up area depends on the specific facts of each case and existing legal interpretations. Since the AO had previously allowed the deduction after inspection and the successor AO's differing opinion was not supported by a superior authority's intervention, the Tribunal found the reassessment to be based on a mere change of opinion, which is not permissible.

Change of Opinion by the Assessing Officer (AO):
The Tribunal held that the reassessment was a result of a change of opinion by the successor AO, which is not allowed under the law. The original AO had allowed the deduction after a detailed examination, including an inspection by the Income Tax Inspector. The Tribunal cited the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which prohibits reassessment based on a mere change of opinion. The Tribunal concluded that the reassessment was invalid due to the lack of new information or failure by the assessee to disclose material facts.

Conclusion:
The Tribunal allowed the appeals of the assessee, concluding that the reopening of the assessments was invalid due to the lack of new information or failure by the assessee to disclose material facts, and the reassessment proceedings were invalid due to the failure to issue a notice under Section 143(2). The Tribunal did not express an opinion on the eligibility for the Section 80IB deduction, as the reassessment itself was found to be invalid.