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TMI Blog2021 (2) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... what basis the said amounts were eligible for deduction u/s 80IB(10). It can safely or in fact inescapably be gathered that the A.O while framing the original assessment had queried on the issues in question, and only after considering the reply of the assessee, had opined, that the assesee‟s claim for deduction u/s 80IB(10) was in order. Accordingly, we are of a strong conviction that the A.O backed by a mere change of opinion on the same set of facts as were there before his predecessor while framing the original assessment u/s 143(3), dated 27.12.2011, had therein in his attempt to recast the assessee‟s entitlement for deduction u/s 80IB(10) reopened its concluded assessment, which as noticed by us hereinabove in absence of any fresh tangible material is not permitted under law. See M/S. KELVINATOR OF INDIA LIMITED [ 2010 (1) TMI 11 - SUPREME COURT] as held a mere change of opinion cannot per se be a reason to reopen the case Now when the assessee‟s claim for deduction u/s 80-IB(10) was after exhaustive deliberations and specific queries as regards the issues in question accepted by the A.O, then, backed by a mere change of opinion on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disclose fully and truly all material facts relevant to its assessment is required to be established only in a case where the assessment is being reopened after the expiry of four years from the end of the relevant assessment year and the assessment can be reopened on the same set of facts within a period of four years if the issue has not been examined and an opinion formed by the Assessing Officer. The appellant prays that the order of CIT(A)-49, Mumbai on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary. 2. Briefly stated, the assessee company which is engaged in the business of development and construction had filed its return of income for A.Y. 2009- 10 on 30/09/2009, declaring a total income of Rs. Nil (after claiming deduction u/s 80IB(10) of ₹ 21,60,28,130/-). Subsequently, the return of income was revised by the assessee on 24/11/2010 at an income of Rs. Nil (after claiming deduction u/s 80IB(10) of ₹ 22,03,15,987/-). Original assessment u/s 143(3) was completed on 27/12/2011 determining the total income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B the extent of ₹ 22,03,15,987/-. Net profit from business activity is only ₹ 21,59,65,444/- and the same has been increased to a Gross Total Income of ₹ 22,03,15,987/-, ₹ 72,733/- on a/c. of disallowance u/s.40(a), ₹ 3Q.62.220/- on a/c. of disallowance u/s.40(a)ia), and ₹ 1,19,937/- on a/c. of employees contribution to PF ₹ 62,687/- on account of disallowance u/s.43B and ₹ 2,60,767/- on account of donation. These disallowances do not fall in the category of eligible profits derived from the business activity of construction of buildings, hence, these do not qualify for deduction u/s.80lB of the I.T. Act, 1961. The deduction u/s.80IB is a 'profit linked incentive' admissible to only the eligible business of the assesses. Here the assesses is doing a business of building and construction and the profit resulting from the said activity can only be claimed as deduction, which in the instant case is ₹ 21,59,65,444/-. The amount of ₹ 38,62,220/-, ₹ 72,733/- and ₹ 1,19,937/-, ₹ 62,867/- and ₹ 2,60,7677- which has been claimed additionally, is because of violation of provisions of Section 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s predecessor while framing the original assessment u/s 143(3), dated 27/12/2011. However, the reply of the assessee did not find favour with the A.O, who backed by his aforesaid conviction restricted the assessee‟s entitlement for deduction u/s 80IB(10) to an amount of ₹ 21,35,87,528/-. On the basis of his aforesaid deliberations the income of the assessee company was assessed by the A.O vide his order passed u/s 143(3) r.w.s 147, dated 31.03.2015 at an amount of ₹ 67,28,460/-. 6. Aggrieved, the assessee assailed the assessment framed by the AO before the CIT(A). It was inter-alia submitted by the assessee that as its claim of deduction u/s. 80-IB(10) along with the quantification of the same at ₹ 22,03,15,987/- was accepted after exhaustive deliberations while framing the original assessment u/s 143(3), dated 27/12/2011 thus, de hors any tangible material the A.O was divested of his jurisdiction to reopen its concluded assessment. In sum and substance, the assessee assailed the validity of the reopening of its case on the basis of a change of opinion‟ on the part of the A.O. Observing, that the reassessment proceedings were resorted to by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the A.O. in the first assessment proceedings. The A.O., after considering the submissions made, has allowed deduction u/s.80IB of ₹ 22,03, 15,9877- as claimed by the appellant in its return of income. 5.4.4 From the reasons recorded, I find that the view taken by the A.O. that income chargeable to tax has escaped assessment because of a wrong claim u/s.80IB with respect to the increase in income on account of various disallowances and with respect to the other income of ₹ 23,50,1157- is based on the same material which was available before the A.O. in the course of assessment proceedings and no 'tangible material1 has been brought on record. From the reasons recorded, it is noted that the A.O. has not stated the basis or given the details of material for arriving at the belief that excessive deduction u/s.80IB had been claimed by the appellant. Thus, it is a 'clear case of reopening the assessment without any tangible material and amounts to a change of opinion. The assumption of jurisdiction u7s.147 by the A.O. is found to be improper and reopening of the assessment by issue of notice u7s.148 is found to be bad in law. In this regard, reliance is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 dated 31.03.2015 are quashed. On a perusal of the aforesaid observations of the CIT(A), it can safely be gathered that the reassessment was quashed by him, for the reason, that the reopening of the concluded assessment of the assessee company on the basis of a change of opinion‟ as against that arrived at by his predecessor while framing the original assessment u/s 143(3), dated 27.12.2011, was not permissible under law. 7. We have given a thoughtful consideration to the aforesaid observations of the CIT(A) and are persuaded to subscribe to the view taken by him. As observed by us hereinabove, the A.O had initiated the reassessment proceedings for two fold reasons, viz (i) that the assessee‟s claim for deduction u/s 80IB(10) in respect of the Other incomes of ₹ 23,50,115/- was not as per the mandate of law; and (ii) that the assessee‟s claim for deduction u/s 80IB(10) w.r.t the disallowances made in its computation of income i.e u/s 40(a):₹ 72,733/-; u/s 40(a)(ia): ₹ 38,62,220/-; employees contribution to PF :₹ 1,19,937/-; u/s 43B: ₹ 62,687/-; and donations: ₹ 2,60,767/- was not maintainable. On a perusal of the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,44,067 Total 23,50,115 4.1 The above income is eligible for deduction under section 80IB(10) for the reasons mentioned below: a) Bank Charges (Income): ₹ 88,600/- During the financial year 2008-09, the assessee firm has debited cheque returned to the flat customers due to lack of fund in their bank account or any other reason. Hence it is well justified that this income is reimbursement of bank charges. b) Expenses recoverable for recovering dues : ₹ 2,73,860 The amount is recovery of charges incurred by the company for recovering dues from customers. The customer wise list of recovery charges is attached as Annexure 3. Hence it is well justified that this income is part of sales consideration only. c) Cancellation Charges : ₹ 12,43,588 During the period under consideration some of the customers pay token money but after that they may not able to make arrangement of balance fund. Hence, we forfeit this token money. In other cases, some of customer book flats in our project. After some months either d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 is sought to be done within four years from the end of the relevant assessment year, there must be reason to believe that income has escaped assessment and such reason to believe should not be on account of a mere change of opinion. In the case of Cartini India Ltd. Vs. Addl. CIT (2009) 314 ITR 275 (Bom) , it was observed by the Hon‟ble Jurisdictional High Court that once the A.O on consideration of the material on record and the explanation offered, arrives at a final conclusion in the original assessment that the assessee is entitled to the deduction as claimed, on the basis of the very same material, the A.O cannot form a prima facie opinion that the deduction is not allowable and accordingly reopen the assessment on the ground that income chargeable to tax has escaped assessment. 9. In the backdrop of the facts of the present case r.w the settled position of law, we are of the considered view that now when the assessee‟s claim for deduction u/s 80-IB(10) was after exhaustive deliberations and specific queries as regards the issues in question accepted by the A.O, then, backed by a mere change of opinion on the basis of the very same material he could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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