2018 (6) TMI 214 - AT - Income Tax

Reopening of assessment - Disallowance u/s 80IAB in respect of income earned from house property - validity of reason to believe - reopening before expiry of four years - Held that - Merely because reopening of assessment u/s 147 was before expiry of four years from the end of the relevant assessment year, that by itself will not give licence to the AO to exercise his powers u/s 147 with impunity even in the absence or lack of fresh tangible material coming to his possession - thus we uphold the order of the learned CIT(A) on this issue - appeal filed by Revenue is dismissed

Issues Involved:
1. Validity of the assessment order passed under Section 143(3) read with Section 147 of the Income Tax Act.
2. Eligibility of deduction under Section 80IAB for income earned from house property.
3. Nature of the grant in aid received from the Government of Maharashtra.

Detailed Analysis:

1. Validity of the Assessment Order Passed Under Section 143(3) Read with Section 147 of the Income Tax Act:
The primary issue raised by the Department is the validity of the assessment order passed under Section 143(3) read with Section 147 of the Income Tax Act. The assessee, engaged in infrastructure development, filed its return for the assessment year 2008-09, claiming a deduction under Section 80IAB. The original assessment was completed on 30.11.2010, where the AO reduced the claimed deduction. Subsequently, the AO reopened the assessment under Section 147, believing that the income from house property was incorrectly allowed as a deduction under Section 80IAB.

The CIT(A) held that the reopening of the assessment was invalid, as the AO did not refer to any fresh tangible material. The assessment was reopened on the same issue previously examined, which amounted to a change of opinion. The Tribunal upheld the CIT(A)'s decision, emphasizing that the original assessment deserves sanctity and cannot be reopened without fresh tangible material.

2. Eligibility of Deduction Under Section 80IAB for Income Earned from House Property:
The Department contended that the income derived from house property is not eligible for deduction under Section 80IAB, as it is not derived from the business of infrastructure development. The AO, during the reassessment, added back the income from house property, asserting it was not eligible for the deduction.

The Tribunal noted that during the original assessment, the AO had already examined the assessee's claim under Section 80IAB, including the income from house property. The reopening of the assessment on the same issue without new material was deemed a change of opinion, which is not permissible. Therefore, the Tribunal upheld the CIT(A)'s decision that the reassessment was invalid.

3. Nature of the Grant in Aid Received from the Government of Maharashtra:
The AO also added back the grant in aid of ?40 crores received from the Government of Maharashtra, treating it as a revenue receipt. The assessee challenged this addition before the CIT(A), who found that the AO had not brought any fresh material to justify the reopening of the assessment on this ground.

The Tribunal confirmed that the AO's action of reopening the assessment without fresh tangible material was invalid. The original assessment had already scrutinized the assessee's claims, and any reassessment on the same grounds without new evidence was not justified.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s decision that the reassessment under Section 147 was invalid due to the absence of fresh tangible material. Consequently, the cross-objection by the assessee also became infructuous and was dismissed. The Tribunal's order was pronounced on 30th May 2018.

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