2014 (5) TMI 938 - AT - Income Tax

Validity of reassessment u/s 144 r.w.s. 147 of the Act Denial of deduction u/s 80IB(10) of the Act Held that - The CIT(A) was of the view that as per the proviso to section 151(1), the AO ought to have obtained the approval of the CCIT or the CIT before issue of notice u/s 148 of the Act - the notice was issued after obtaining the approval of Jt CIT Range 25(2), Mumbai, the AO did not follow the procedure laid down in proviso to section 151(1) of the Act while reopening the assessment - the entire reassessment proceedings are ab initio void and invalid - the reassessment proceedings are cancelled - the reopening proceedings u/s 148 was not justified and there was no failure on the part of the assessee to disclose the material facts fully and truly revenue could not bring any evidence in support of the grievance of the revenue to show that the approval was taken from the CCIT/CIT before issue of notice u/s 148 of the Act - the assessment was re-opened after four years from the end of the relevant assessment year, which means that the AO ought to have taken the approval of the CCIT/CIT- there was no reason to interfere in the order of the CIT(A) - Decided against Revenue.

Issues:
Challenge to correctness of order by revenue, validity of reassessment proceedings, disallowance of deduction under section 80IB(10), approval for issue of notice u/s 148, fulfillment of mandatory conditions for deduction u/s 80IB(10), approval requirements under section 151(1).

Analysis:

1. Challenge to Correctness of Order:
The revenue challenged the correctness of the order of the CIT(A) regarding the reassessment proceedings and disallowance of deduction under section 80IB(10) for A.Y. 2003-04. The revenue contended that the reassessment proceedings were invalid and the order passed by the Assessing Officer under section 144 r.w.s. 147 was canceled. The CIT(A) observed that the AO did not follow the procedure laid down in proviso to section 151(1) of the Act while reopening the assessment, leading to the cancellation of the reassessment proceedings.

2. Validity of Reassessment Proceedings:
The original return of income was filed declaring total income at "nil" with a deduction claimed under section 80IB(10). The assessment was completed under section 143(3) determining the total income. The assessment was reopened after obtaining prior approval, and notices were issued to the assessee. The AO disallowed the deduction under section 80IB(10) based on non-fulfillment of mandatory conditions. The CIT(A) held that the reassessment proceedings were ab initio void and invalid due to the failure to obtain approval from the CCIT or CIT before issuing the notice under section 148.

3. Disallowance of Deduction under Section 80IB(10):
The AO withdrew the deduction allowed in the original return after finding that the mandatory condition of section 80IB(10) was not fulfilled by the assessee. The CIT(A) noted that there was no failure on the part of the assessee to disclose material facts fully and truly. The revenue challenged this decision, but the ITAT upheld the CIT(A)'s findings, leading to the dismissal of the appeal.

4. Approval for Issue of Notice u/s 148:
The AO reopened the assessment after obtaining approval from the Joint CIT Range 25(2), Mumbai. However, the CIT(A) held that the AO should have obtained approval from the CCIT or CIT as per the proviso to section 151(1) before issuing the notice under section 148. As the approval was not obtained from the required authority, the reassessment proceedings were deemed invalid.

5. Fulfillment of Mandatory Conditions for Deduction u/s 80IB(10):
The AO found that the size of the plot of land for the project was less than one acre, leading to the belief that the mandatory condition of section 80IB(10) was not fulfilled by the assessee. The CIT(A) analyzed the facts and submissions, concluding that the reassessment proceedings were not justified and the assessee had not failed to disclose material facts. The ITAT upheld this decision based on the provisions of section 151(1) and the failure to obtain necessary approvals.

In conclusion, the ITAT dismissed the appeal filed by the revenue, upholding the CIT(A)'s decision to cancel the reassessment proceedings due to the failure to follow the required procedure for obtaining approval before issuing the notice under section 148.

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