2019 (8) TMI 898 - HC - Income Tax

Reopening of assessment u/s 147 - deduction u/s 80IB(10) denied - Section 80- IB(10) which is substituted w.e.f. 1.4.2005 is not applicable to the project approve before 01.04.2004 - whether any condition that the project in question should be completed and obtained completion certificate with the period of four years? - HELD THAT - In view of the observation in M/S. SARKAR BUILDERS 2015 (5) TMI 555 - SUPREME COURT we are of the opinion that the projects which were approved prior to 1.4.2005 the applicability of Section 80IB(10) (d), of the Act is not permitted. In other words, Section 80(IB)(10)(d) of the Act will be applicable prospectively and not retrospectively. Once it has come on record by fact finding Authority also that there is no such condition to have completion certificate within four years from the local authority granting approval of the projects in question, the reassessment proceedings taken against the assessee are bad and against the settled principle of law. Therefore, the Tribunal has rightly set aside the re-assessment proceeding and directed the assessing authority to grant benefit of Section 80IB(10) to the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Applicability of Section 80IB(10) substituted w.e.f. 1.4.2005 to projects approved before 1.4.2004.
2. Validity of reassessment proceedings under Section 147/148 based on new information regarding completion certificate.

Detailed Analysis:

1. Applicability of Section 80IB(10) substituted w.e.f. 1.4.2005 to projects approved before 1.4.2004:

The core issue was whether the substituted Section 80IB(10) effective from 1.4.2005 applies to projects approved before 1.4.2004. The Tribunal had held that the substituted section does not apply retrospectively to projects approved before 1.4.2004. The Revenue argued that the amendment should apply retrospectively. The Tribunal relied on the Bombay High Court's judgment in CIT vs. Brahma Associates, which was affirmed by the Supreme Court in CIT vs. Sarkar Builders, where it was held that the amendment is prospective and not retrospective. The High Court observed that the projects approved before 1.4.2005 are not subject to the conditions introduced by the amendment effective from 1.4.2005. The Tribunal's decision to allow the deduction under Section 80IB(10) was upheld, as there was no requirement to obtain a completion certificate within four years from the local authority under the pre-amended section.

2. Validity of reassessment proceedings under Section 147/148 based on new information regarding completion certificate:

The second issue was whether the reassessment proceedings under Section 147/148 were valid, given that the information regarding the completion certificate was new. The Revenue contended that the reassessment was justified as it was based on new information that the assessee had not obtained the completion certificate within four years, violating Section 80IB(10)(a)(i). The assessee argued that the reassessment was based on a change of opinion without any tangible fresh material. The Tribunal found that there was no requirement under the Act for obtaining a completion certificate within four years for the relevant assessment years. The High Court agreed with the Tribunal's finding that the reassessment proceedings were invalid as they were based on a change of opinion, and there was no new tangible material justifying the reassessment. The Tribunal's decision to set aside the reassessment proceedings was upheld.

Conclusion:

The High Court concluded that the substituted Section 80IB(10) effective from 1.4.2005 does not apply retrospectively to projects approved before 1.4.2004. The reassessment proceedings were invalid as they were based on a change of opinion without new tangible material. The Tribunal's decision to allow the deduction under Section 80IB(10) and set aside the reassessment proceedings was upheld. The appeals were dismissed, and the questions of law were answered in favor of the assessee and against the Revenue.