2018 (6) TMI 358 - AT - Income Tax

Validity of re opening of assessment u/s 147 - Held that - Materials on record clearly indicate that during the original assessment proceedings the Assessing Officer did raise queries with regard to the assessee s claim of deduction under section 80IAB - Re opening of assessment u/s 147 in both the assessment years under appeal having been made on a mere change of opinion in the absence of tangible material is legally invalid - assessment orders passed in pursuance thereto have to be declared as invalid. Disallowance made u/s 80IAB - Held that - Assessee has been approved as a co developer from the date of co development agreement i.e., 28th February 2006 - in assessment year 2010 11 and 2011 12 assessing officer has allowed assessee s claim of deduction under section 80IAB of the Act in scrutiny assessments. On perusal of material placed on record we find the aforesaid submissions of the assessee to be correct. Therefore, when under similar facts and circumstances assessee s claim of deduction under section 80IAB have been allowed in subsequent years, there is no justifiable reason to reject assessee s claim in the impugned assessment years. Thus, in our considered opinion, the assessee is entitled to avail deduction under section 80IAB of the Act

Issues Involved:
1. Validity of re-opening of assessment under section 147 of the Income Tax Act, 1961.
2. Disallowance of deduction claimed under section 80IAB of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Re-opening of Assessment under Section 147:

The first common ground in both appeals concerns the validity of re-opening assessments under section 147 of the Income Tax Act, 1961. The assessee, engaged in real estate development, filed returns for the assessment years 2006-07 and 2007-08, declaring nil income under normal provisions and book profits under section 115JB. The assessments were originally completed under section 143(3). However, the Assessing Officer (AO) re-opened the assessments on the grounds that the assessee was not eligible for deduction under section 80IAB, as the SEZ was established before 1st April 2005. The AO issued notices under section 148 for both assessment years.

The Commissioner (Appeals) upheld the re-opening, stating there was no change of opinion as the original assessment did not examine the eligibility for the deduction. The assessee argued that the AO had already examined the issue during the original assessment, and re-opening was based on a mere change of opinion without any fresh tangible material. The assessee relied on the decisions in CIT v/s Kelvinator of India Ltd. and Aroni Commercials Ltd. v/s DCIT.

The Department contended that the AO had not examined the claim during the original assessment and thus, no opinion was formed. The Department cited the decision in Eleganza Jewellery Ltd. v/s CIT to support their argument.

The Tribunal observed that the AO had indeed enquired into the assessee’s claim during the original assessment, as evidenced by letters from the assessee responding to the AO's queries. The Tribunal concluded that the re-opening was based on a re-appreciation of existing material, amounting to a change of opinion without fresh tangible material. Thus, the re-opening was deemed invalid, and the assessment orders were quashed.

2. Disallowance of Deduction Claimed under Section 80IAB:

Despite the decision on the first issue, the Tribunal also addressed the merits of the disallowance of the deduction under section 80IAB. The AO disallowed the deduction, arguing that the SEZ was approved before 1st April 2005, and thus, ineligible for the deduction. The Commissioner (Appeals) upheld this view, stating that the approval granted to the assessee as a co-developer in 2006 was a continuation of the original approval in 2004.

The assessee contended that under section 4 of the SEZ Act, an existing SEZ is deemed to be notified under the SEZ Act, making it eligible for all benefits, including the deduction under section 80IAB. The assessee further argued that the approval as a co-developer in 2006 was independent and should be considered for the deduction.

The Tribunal examined the statutory provisions and concluded that the assessee, as a co-developer, was to be treated as a developer under the SEZ Act. The approval granted to the assessee on 19th April 2006 was after 1st April 2005, satisfying the conditions of section 80IAB. The Tribunal disagreed with the Commissioner (Appeals), stating that the approval was not a continuation but an independent approval for developing infrastructure facilities. The Tribunal noted that the assessee’s claim for deduction under section 80IAB was allowed in subsequent years, reinforcing their eligibility.

The Tribunal directed the AO to allow the deduction under section 80IAB from the date of the co-developer agreement, 28th February 2006, for profits derived from the SEZ business on or after this date.

Conclusion:

The Tribunal allowed the assessee’s appeals, quashing the re-opened assessments and directing the AO to allow the deduction under section 80IAB from 28th February 2006. The order was pronounced on 31.05.2018.

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