2016 (6) TMI 699 - HC - Income Tax

Reopening of assessment - incorrect /excess deduction under section 80IB which is required to be disallowed - Held that - The petitioner has not made any claim under section 80IB of the I.T. Act which is clear from his income-tax return at page No. 22, paragraph No. 2. As per income tax return of the assessee at page No. 19, the assessee has not claimed any deduction under Chapter VI-A of the I.T. Act. Therefore, the reason for reopening of the assessment is bad in law in view of the decision of this court in the case of Aavkar Infrastructure Company v. Deputy Commissioner of Income-tax 2015 (11) TMI 1313 - GUJARAT HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for assessment year 2006-07 under section 148 of the Income Tax Act based on incorrect claim under section 80IB(10).

Analysis:
The petitioner challenged a notice issued by the respondents seeking to reopen the assessment for the assessment year 2006-07. The notice was based on the comparison of profits declared by the petitioner with other builders not eligible for deduction under section 80IB(10). The petitioner was asked to justify the declared profits with evidence like land cost, construction cost, and other relevant documents. The valuation cell of the department proposed an upward adjustment in the cost of construction for the project. The notice stated that an addition was made for unaccounted investment in the project 'Jalaram Complex' in the assessment year 2007-08, leading to the conclusion that the petitioner had claimed incorrect/excess deduction under section 80IB. The petitioner contended that no claim was made under section 80IB, as evident from the income tax return. The petitioner relied on a previous court decision to argue that the reopening of assessment was not based on valid grounds.

The court considered the arguments presented by both parties. It noted that the petitioner had not claimed any deduction under section 80IB of the Income Tax Act, as supported by the income tax return. The court referred to a previous judgment where it was held that the sole basis for reopening an assessment should not solely rely on a valuation officer's report without independent verification by the Assessing Officer. The court emphasized that tangible material should support the belief that income chargeable to tax has escaped assessment. It was highlighted that the Assessing Officer must apply their mind to the information collected and form a belief based on such information. In this case, the court found that the basis for reopening the assessment was not valid, as there was no tangible material supporting the belief that income had escaped assessment.

Consequently, the court ruled in favor of the petitioner, quashing the notice issued under section 148 of the Income Tax Act and the preliminary order for reassessment proceedings. The court held that since no claim was made under section 80IB and the foundation for reopening the assessment was flawed, the notice was bad in law. The petition was allowed, and the notice and preliminary order were set aside.