2018 (2) TMI 1538 - HC - Income Tax

Reopening of assessment - deduction u/s 80IB(10) allowability - Held that - There is no allegation by the department that during the year under consideration i.e. the assessment year 2010-2011, the petitioner made any allotment of residential units in breach of conditions. AO as per the reasons recorded wishes to reexamine the petitioner s claim of deduction of ₹ 1.10 crores u/s 80IB(10) for the said assessment year on the premise that that in the assessment year 2013-2014, such claim was rejected since the petitioner had breached condition of not allotting two residential units to husband and wife. In absence of allegation of any of the breaches in the year under consideration, AO wishes to reopen the assessment for the current assessment year. On the simple reason that there was no failure on part of the assessee to disclose truly and fully all material facts, a mandatory condition which must be satisfied before reassessment can be permitted, impugned notice must go. It is not necessary to examine the contention of Shri Varun Patel that for breaches committed in later years, deduction claimed and already granted even if after scrutiny, can be withdrawn. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening dated 31.3.2017 issued by the Assessing Officer for the assessment year 2010-2011.

Analysis:
The petitioner, a partnership firm engaged in housing projects, filed a return for the assessment year 2010-2011, declaring income and claiming deduction under section 80IB(10) of the Income Tax Act. The Assessing Officer raised queries, and after compliance, passed the assessment order on 27.11.2012. The notice of reopening was issued based on the sale of specific flats to a husband and wife, breaching the conditions of deduction under section 80IB(10). The Assessing Officer disallowed the deduction and added it back to the total income. The petitioner argued that the notice was issued beyond the prescribed period and no failure to disclose facts existed. The department contended that the breach of conditions in a subsequent year would disentitle the petitioner from claiming deductions in earlier years.

The High Court noted that there was no allegation of breach in the assessment year 2010-2011. The Assessing Officer sought to reexamine the deduction claim based on a breach in a subsequent year. As there was no failure to disclose material facts for the assessment year in question, the notice of reopening was deemed invalid. The court did not delve into the argument that deductions granted in earlier years could be withdrawn due to breaches in later years.

Therefore, the petition was allowed, the notice of reopening was set aside, and the petition was disposed of.