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2015 (6) TMI 808 - AT - Income TaxReopening of assessment - disallowance of assessee s claim of deduction u/s.80IB(10) - Held that - AO appears to have relied exclusively on an audit objection. There was, hence, a total absence of tangible material , to justify the conclusion that income had escaped assessment. All the conditions were fulfilled by the appellant for the claim of the deduction under section 80IB(10) and the Ld. AO verified the same during the original assessment which was completed after conducting a survey operation u/s. 133A of the Act. In view of the foregoing the issue of notice u/s. 148 is bad in law and thus cannot be sustained. Site plan of the project was approved by the BMC in respect of Indian Ocean Project on 8-4-2005 was 6555.83 sq.mtrs. of land. The CIT(A) even after applying the reverse calculation with regard to BMC rules FSI of 1.33 found that the plot size was 4929.19 sq.mtrs., which is equivalent to 1.22 acres. Thus, the contention of the AO that plot size of the Indian Ocean project was below 1 acre is incorrect. The CIT(A) has also recorded a categorical finding to the effect that none of the residential unit was more than 1000 sq.ft. This fact was also verified by the revenue authorities during the survey operation carried out at assessee s project site even before original assessment u/s.143(3) wherein assessee s claim u/s.80IB(10) was allowed. We found that AO has worked out the area on the basis of a hillock whose area has been shown to 1873.27 sq.mtr.s on the entire plot of area and not on the area that relates to site of building Atlantic Ocean. Therefore, if the entire plot area is taken into account i.e. 40803.10 sq.mtrs. the area of the hillock is remarkably reduced in proportion the total area of the hillock and nearly comes to 4.59%. Thus, the computation done by the AO in arriving at the plot area is based on wrong figures adopted by him. - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening under Section 147 of the I.T. Act. 2. Denial of deduction under Section 80IB(10). Detailed Analysis: 1. Validity of Reopening under Section 147: CIT(A) Observations: The CIT(A) quashed the reassessment on the grounds that the AO must have "reason to believe" that income has escaped assessment. The reasons recorded by the AO are the only basis for reopening an assessment and cannot be supplemented by affidavits or new grounds later. This principle is supported by various judicial precedents, including the Supreme Court in Calcutta Discount Co. Ltd. vs. ITO, and the Bombay High Court in N.D. Bhatt, IAC & Anr. vs. LB.M. World Trade Corporation. Legal Precedents: - The Supreme Court in CIT vs. Kelvinator of India Ltd. emphasized that post-1989, the power to reopen is broader but must be based on "tangible material" and not merely a "change of opinion." - The Bombay High Court in Hindustan Lever Ltd. vs. R.B. Wadkar stated that reasons recorded for reopening must be clear, unambiguous, and self-explanatory. CIT(A) Conclusion: The AO did not have any additional material to form a belief that income had escaped assessment. The appellant had provided all necessary details during the original assessment, and the AO's reliance on an audit objection was insufficient for reopening. Therefore, the issue of notice under Section 148 was deemed bad in law. 2. Denial of Deduction under Section 80IB(10): AO's Conclusions: The AO denied the deduction on the grounds that the appellant's project did not meet the conditions under Section 80IB(10). Specifically, the AO argued that: - The project included buildings that commenced before 1998. - The plot size was less than one acre. - The appellant did not furnish separate Audit Reports as required. - The built-up area calculation was incorrect. Appellant's Contentions: The appellant argued that: - Each building is a separate project, and the deduction is for the housing project, not the assessee. - The project commenced after 1st October 1998 and was completed on 26th March 2008, as evidenced by the Occupation Certificate. - The plot size was more than one acre, and the built-up area of each residential unit was less than 1000 sq.ft. - The BMC's approval and the Occupation Certificate were sufficient proof of compliance. CIT(A) Decision: - The CIT(A) found that the project met all conditions under Section 80IB(10). The project commenced after 1st October 1998, was completed on 26th March 2008, and the plot size was more than one acre. - The AO's calculation of the plot size and built-up area was incorrect. The plot area was 40803.10 sq.mtrs, and the hillock area was proportionately reduced. - The project did not include any commercial establishments, and the built-up area was correctly calculated. Appellate Tribunal's Conclusion: - The Tribunal upheld the CIT(A)'s decision, noting that the AO's reopening was based on incorrect calculations and a misinterpretation of the facts. - The project was eligible for deduction under Section 80IB(10), and the AO's disallowance was not sustainable. Final Order: The appeal of the revenue was dismissed, and the order pronounced in the open court on 15.5.2015.
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