2014 (10) TMI 489 - AT - Income Tax

Reassessment u/s 147 - Deduction u/s 80IB(10) - Area of the commercial tenements occupied in respect of Veena Sur project is 1488 sq.ft. Held that - Once an issue is adjudicated and settled by the higher judicial authority, it is not open to the lower income tax authorities to reopen, make assessment or reassessment on the basis of same facts and circumstances and in the absence any incriminating or new material, information or evidence or of a contrary decision of superior judicial authority in order of hierarchy - If the Revenue officials choose to do so, then it is to be treated as not only the misuse but also abuse of their authority and in such an event defenses like protecting the interest of Revenue, keeping the issue alive etc. will not be sufficient to absolve them of the likely penal consequences against them - the AO observed that since the assessment in the case had been annulled on the legality of notice u/s 143(2) of the Act and the case had not been heard on merits at any of the stage including appellate proceedings, there was a reason to believe that the income assessed in this case had escaped and therefore he reopened the assessment u/s 147 of the Act. If an act of making additions u/s 153A on the ground of maintaining consistency in the stand of the Revenue and for keeping the issue alive, is allowed or not condemned, it may lead continuous harassment of assessee and never ending litigation on the same issue, such as, if the said additions are deleted by the higher judicial authorities even up to the level of Apex Court, the AO still would reopen the assessment and make additions on the same issue and on the basis of same facts u/s 147 of the Act - If the appeals also meet the same fate of setting aside of additions, then the Commissioner would step into to make the same additions on the same issue again, by way of invoking the provisions of section 263 of the Act and so on - there will not be any end to litigation on the same issue in the case and also to the harassment, loss and agony of the assessee. In their zeal to protect the interest of the department, the officers should not cross the Laxman Rekha which we here mean the line of limit of their legal jurisdiction; doing so may not only prove to be detrimental to the interest of the Revenue but also to them personally - there is no infirmity in the order of the CIT(A) in deleting the additions made by the AO u/s 153A - the registry is directed to send a copy of the order to the Chairman of the CBDT so that the necessary instructions may be issued to the Income Tax officers/Commissioners in this regard and in future due care be taken, not to disrespect or disobey the orders of the higher judicial authorities and also not to file frivolous appeals Decided against revenue.

Summary

Issues Involved:
1. Deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Compliance with judicial orders and the concept of judicial discipline.
3. Legitimacy of reassessment under Section 153A in the absence of new material.

Detailed Analysis:

1. Deduction under Section 80IB(10) of the Income Tax Act, 1961:
The primary issue revolves around the deduction claimed under Section 80IB(10) by the assessee for two housing projects, "Veena Sur" and "Veena Sarang." The Revenue contested the deduction on the grounds that the commercial area in these projects exceeded the permissible limit, thus violating the conditions of Section 80IB(10). The Commissioner of Income Tax (Appeals) [CIT(A)] allowed proportionate deductions, which was further upheld by the Income Tax Appellate Tribunal (ITAT) and the Bombay High Court. The Assessing Officer (AO) disallowed the deductions during reassessment under Section 153A, citing the pending appeal before the Supreme Court.

2. Compliance with Judicial Orders and the Concept of Judicial Discipline:
The Tribunal emphasized the importance of following judicial discipline, noting that the AO's disallowance of deductions under Section 153A, despite clear orders from the ITAT and the Bombay High Court, amounted to a gross misuse of power. The Tribunal highlighted that once an issue is settled by higher judicial authorities, it should not be reopened by lower authorities unless there is new material evidence. The Tribunal directed the concerned officials to appear and explain their actions, which they did, submitting written apologies and clarifying that their actions were intended to protect the Revenue's interest and maintain consistency.

3. Legitimacy of Reassessment under Section 153A in the Absence of New Material:
The Tribunal held that the reassessment under Section 153A was not justified as no new material or evidence was found during the search that could warrant the disallowance of the deductions. The Tribunal reiterated that only pending assessments or reassessments abate upon the initiation of a search, not pending appeals or revisions. The Tribunal cited various judicial precedents to support its stance that reassessment should be based on new material evidence and not merely to maintain consistency or keep the issue alive.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s order allowing the deductions under Section 80IB(10). The Tribunal underscored the necessity for Revenue officers to respect and follow the orders of higher judicial authorities and cautioned against filing frivolous appeals. The Tribunal directed that a copy of the order be sent to the Chairman of the Central Board of Direct Taxes (CBDT) to ensure compliance with judicial orders and prevent unnecessary litigation.