2018 (3) TMI 670 - HC - Income Tax

Reopening of assessment - Benefit u/s 80(IB) (10) denied - non independent application of mind by AO - Held that - The foundation of reasons in support of the impugned notice is the audit observations which in turn rely upon the valuer s report. We find that the valuer s report itself indicates that if overhead terraces on the ninth floor and on the first floor, if included then the area of some of the flats would be in excess of 1,500 square feet each. Prima facie, the reasons recorded in support of the notice shows that the Assessing Officer has not applied his mind independently to the valuer s report and has merely relied upon the interpretation of law by the audit. This is not permissible as the reasonable belief is to be of the Assessing Officer and not a borrowed satisfaction particularly on interpretation of law. More particularly the audit objections are contrary to AO s own findings in the order for the subsequent Assessment Year 2011-12, which has not yet been disturbed. Therefore, prima facie the impugned notice dated 28 March 2017, is without jurisdiction. - interim relief is granted.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for re-opening assessment for Assessment Year 2010-11 based on valuer's report and audit objections.

Analysis:
The Petition challenges a notice issued by the Assessing Officer under Section 148 of the Income Tax Act, seeking to re-open the assessment for the year 2010-11. The reasons for re-opening the assessment are based on information received for the next assessment year, 2011-12. Specifically, the notice questions the Assessee's entitlement to the benefit under Section 80(IB) (10) of the Act, as per the valuer's report indicating some flats exceed 1,500 square feet. It is noted that during the initial assessment for 2010-11, queries were raised regarding this benefit, and it was found that some flats indeed exceeded the specified size. However, in the subsequent assessment for 2011-12, the Assessing Officer accepted a different interpretation of the law regarding the calculation of built-up area, excluding certain terraces. This interpretation was also supported by a decision of the Tribunal. The foundation of the re-opening notice is the audit observations based on the valuer's report, which highlights that including certain terraces would lead to some flats exceeding the size limit.

The Court observes that the Assessing Officer seems to have relied heavily on the audit's interpretation of the law rather than forming an independent reasonable belief. This approach is deemed impermissible, as the belief should be that of the Assessing Officer, not borrowed from external sources. Moreover, the audit objections contradict the findings of the Assessing Officer in the subsequent assessment year, which have not been challenged. Therefore, the Court finds that the re-opening notice lacks jurisdiction, as it appears the Assessing Officer did not apply his mind independently to the valuer's report. Consequently, interim relief is granted to the Petitioner in light of these observations.