2022 (3) TMI 1353 - HC - Income Tax

Reopening of assessment u/s 147 - Notice after four years - Deduction u/s 80IB - HELD THAT - Admittedly, for the assessment years 2006-2007, 2004-2005 and 2004-2005 respectively, the respondents herein have filed their returns of income and the assessments were also concluded. After expiry of four years, notices under Section 148 of the Act were issued to the respondents herein on 01.03.2011, 16.03.2011 and 25.03.2011 respectively. On receipt of such notices, the respondents have submitted their objections by stating that they have not suppressed any material particulars at the time of original assessment and therefore, the re-assessment proceedings is not warranted - such objections were rejected by the respective appellant on 25.11.2011. Therefore, challenging the show cause notices issued under Section 148 of the Act as well as the orders of rejection dated 25.11.2011, the writ petitions were filed. The writ petitions were allowed by the learned Judge on the ground that there is no proof to show that there was escapement of income warranting initiation of re-assessment proceedings. In the decision of the Division Bench of the Gujarat High Court in the case of Ganesh Housing Corporation Limited vs. Deputy Commissioner of Income Tax, Circle 4 1 2016 (9) TMI 764 - GUJARAT HIGH COURT it was held that re-assessment proceedings are not warranted if the assessee did not suppress any material particulars at the time of assessment or the assessing officer had not collected any new materials to show that there was escapement of assessment. The contention of the learned Senior Standing Counsel for the appellants that the re-assessment is not solely based on the amendments brought to the statute, but due to the fact that the respondents herein undertook and constructed the building as a contractor and not as a developer, also cannot be sustained in the light of the decision of the Division Bench of the Gujarat High Court mentioned supra. The learned Judge also categorically held that the Assessing Officer is not in possession of tangible material evidence to initiate re-assessment proceedings against the respondents herein. Such a finding rendered by the learned Judge, in our opinion, is proper and therefore, we are not inclined to interfere with the orders, which are impugned in these writ appeals.

Summary

Issues:
1. Correctness of orders dated 27.04.2012 passed by the learned Judge in W.P. Nos. 29069, 29070 & 23899 of 2011.
2. Validity of re-opening assessments under Section 147 of the Income Tax Act.
3. Justification of re-assessment after the expiry of four years.
4. Suppression of material particulars by the respondents.
5. Impact of amendments to Section 80IB(10) of the Act.
6. Legality of re-assessment based on the contractor-developer distinction.
7. Applicability of case laws Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited and Fenner (India) Limited vs. Deputy Commissioner of Income Tax.
8. Consideration of material evidence for initiating re-assessment proceedings.
9. Interpretation of Section 80IB(10) for deductions in housing projects.

Analysis:

1. The appeals were filed challenging the correctness of orders dated 27.04.2012 passed by the learned Judge in W.P. Nos. 29069, 29070 & 23899 of 2011. The respondents, registered companies in the construction business, questioned notices and orders for re-opening assessments under Section 147 of the Income Tax Act, specifically related to deduction under Section 80-IB(10) for the assessment years 2006-2007, 2004-2005, and 2004-2005. The Assessing Officer sought to reopen assessments after four years based on amendments to Section 80IB(10) with retrospective effect from 01-04-2000.

2. The respondents contended that the re-assessment was unjustified as there was no failure to disclose all facts, citing case laws supporting their position. The appellants argued that amendments to Section 80IB(10) impacted the concluded assessments, justifying re-assessment. The learned Judge allowed the writ petitions, stating that the re-assessment after four years was illegal and invalid.

3. The appellants claimed that re-assessment was warranted due to the contractor-developer distinction and amendments to Section 80IB(10). They argued that the learned Judge erred in setting aside the orders of rejection under Section 147 of the Act. The respondents' counsel argued against re-assessment without tangible evidence of suppression of material particulars.

4. The Division Bench of the Gujarat High Court's decision was cited, emphasizing that re-assessment should not be initiated if there was no suppression of material particulars or new evidence of income escapement. The judgment highlighted that the Assessing Officer lacked tangible evidence to justify re-assessment against the respondents, supporting the learned Judge's decision to allow the writ petitions.

5. The judgment confirmed the learned Judge's decision, citing the Gujarat High Court's ruling and rejecting the appellants' arguments regarding the contractor-developer distinction and lack of material evidence for re-assessment. The orders dated 27.04.2012 in the writ petitions were upheld, dismissing all writ appeals.