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TMI Blog2013 (5) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... ject named as 'Nath Regency' at Solapur. For all the captioned assessment years, assessee claimed deduction under Section 80IB(10) of the Income Tax Act, 1961 (in short "the Act") in relation to the profits earned from the said project. For the assessment year 2004-05 a return of income was filed by the assessee firm on 01.11.2004 declaring total income of Rs.6,08,610/- which inter-alia contained a claim of deduction under Section 80IB(10) of the Act in relation to the profits from the housing project 'Nath Regency' amounting to Rs.40,84,721/-. The return of income was subject to scrutiny assessment under Section 143(3) of the Act dated 13.09.2006 and the income returned at Rs.6,08,610/- was accepted inter-alia implying acceptance of assessee's claim of deduction under Section 80IB(10) of the Act amounting to Rs.40,84,721/-. 4. Subsequently, the Assessing Officer initiated proceedings under Section 147/148 of the Act by issuance of notice on 13.02.2009 intending to reopen the assessment and assess an income chargeable to tax which had escaped assessment. The escapement of income, as per the Assessing was Officer on account of allowance of deduction claimed under Section 80IB(10) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore following the ratio of Hon'ble Supreme Court in the case NTPC Ltd. (supra) the same is admitted for adjudication. The aforesaid decision was pronounced in Court and thereafter the rival counsels have made their submissions. The learned counsel for the assessee also filed a Paper Book which inter-alia contains (i) copies of submissions made before the lower authorities, (ii) chart regarding the details of the housing project, (iii) copies of reasons recorded by the Assessing Officer under Section 147 for reopening of assessment, (iv) copy of statement on oath recorded of assessee's partner Shri Pradip N. Pimparkar during survey action under Section 133A of the Act, (v) copies of Income Tax Returns along with the relevant annexures and (vi) copies of commencement certificate and sanctioned plans of the project, etc.. The learned Departmental Representative also produced the assessment record with reference to the Paper Book filed by the assessee. The rival counsels have made their submissions in the above background and the relevant record and material have been perused. 8. The first and foremost point made out by the assessee is to the effect that the reassessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to form a belief that an income chargeable to tax has escaped assessment for the captioned assessment years within the meaning of Section 147 of the Act inasmuch as in the assessment order dated 13.09.2006 passed under Section 143(3) of the Act, excessive claim of deduction under Section 80IB(10) of the Act was wrongfully allowed. In this manner, initiation of proceedings under Section 147 of the Act is sought to be defended. 10. We have carefully considered the rival submissions. Section 147 of the Act empowers the Assessing Officer to assess or re-assess an income chargeable to tax which has escaped assessment in terms of the prescription contained therein. Section 147 of the Act postulates that where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 of the Act, assess or re-assess such income for the assessment year concerned. A significant expression contained in Section 147 of the Act is "reason to believe". Ostensibly, the power of the Assessing Officer to reopen an assessment is based on his forming a belief that certain income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer 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 Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-conditions 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 Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer 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 a live link with the formation of the belief." 12. As per the Hon'ble Supreme Court, the Assessing Officer has power to reopen an assessment provided there is tangible material to infer an escapement of income and more importantly it has been emphasized that in the guise reopening of an assessment a 'review of assessment' is impermissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. 4. In order to verify the claim of the assessee, survey action u/s 133A of the I.T. Act, 1961 was conducted on 28.05.2008. The following issues emerged as findings of survey action. 5. The assessee firm has taken approval for construction of 47 residential units as per Solapur Municipal Corporation, Solapur's letter No. 89 dated 24.01.2001, No. 304 dated 20.03.2001, No. 1400 dated 04.12.2001, and No. 971 dated 24.12.2002 in respect of project carried out in the Gat No. 52/2, City Survey No.2, Bhavani Peth, Solapur. The project name is "Nath Regency". During the course of survey, it was noticed that the assessee has completed construction of 28 residential units out of 47 units for which sanction was obtained. No construction have been made on balance 19 plots. 6. The assessee also obtained completion certificate for these 28 units vide letters No. 193 dated 26.11.2002, No. 21 dated 23.04.2003, No. 22 dated 23.04.2003, No. 173 dated 15.01.2007 and No. 179 dated 26.03.2007 from Solapur Municipal Corporation. A statement of Shri Pradip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en wrongfully allowed in the assessment order dated 13.09.2006, on the basis of the survey action carried out on 28.05.2008, which revealed that assessee had completed construction of only 28 residential units out of 47 units for which the sanction was obtained and that the balance plots were sold without construction, which made the assessee ineligible for deduction under Section 80IB(10) of the Act. As per the learned Departmental Representative, the non-completion of construction of complete 47 units on account of sale of plots, came to knowledge of the Assessing Officer only during the survey and thus the same constituted a tangible material to conclude that there is an escapement of income qua wrong allowance of deduction under Section 80IB(10) of the Act. 16. At this stage, it would also be appropriate to refer to the assessment made by the Assessing Officer under Section 143(3) of the Act. The return of income filed by the assessee for the assessment year 2004-05 and the accompanying documents have been placed in the Paper Book at pages 52 to 56. In the computation of income placed at page 51, assessee declared a gross total income with reference to the P&L account at Rs.46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act dated 13.09.2006, wherein the following discussion is relevant :- "The fall-in gross profit was attributed by the assessee to the fact that the profit is more in respect of sale of plots as against houses. Since the number of plots sold during the relevant Assessment Year was much less than the earlier year, there was a fall in the gross profit. The claim of the assessee is found true upon verification. As against 10 plots and 2 houses sold during the earlier year, the assessee has sold 20 houses and 6 plots during the relevant year. In view of the above, the book results of the assessee are accepted. The assessee has executed only one housing project during the relevant assessment year and has claimed deduction under section 80IB(10) "on the eligible profits of business". Upon scrutiny it was found that the assessee fulfills all conditions laid down for deduction under section 80IB(10). Thus the same is allowed." [underlined for emphasis by us] 19. Notably, the Assessing Officer allowed the claim of the assessee under Section 80IB(10) of the Act "Upon scrutiny". The Assessing Officer noticed that the assessee sold houses as well as plots in the instant year as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich establishes ineligibility of assessee's claim for deduction under Section 80IB(10) of the Act. The survey action under Section 133A of the Act on 28.05.2008 cannot be said to have revealed a fact situation which was not in the knowledge of the Assessing Officer on the basis of the material before him. In fact, the Assessing Officer specifically noted in the original assessment proceedings that the assessee has executed only one housing project during the year; that assessee had sold open plots as well as houses and was also aware that the assessee had claimed deduction under Section 80IB(10) of the Act only "on the eligible profits of business", which was explained by the assessee in the computation of income to mean profits from sale of residential units sold during the year. 21. In view of the aforesaid factual contours of the controversy, it is clear that the Assessing Officer entertained the belief of escapement of income in the reasons recorded in the absence of any tangible material and merely reviewing the same set of facts, which existed to his knowledge at the time of original assessment. Factually speaking, in this case what is attempted is a bare review without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2003-04 wherein no assessment under Section 143(3) of the Act was made but the return of income was processed under Section 143(1) of the Act. In this year, assessee claimed a deduction under Section 80IB(10) of the Act with respect to the same project i.e. "Nath Regency" of Rs.2,72,375/-. The claim of deduction was made on identical footing as was made by the assessee for other two assessment years i.e. A.Ys. 2004-05 & 2005-06 wherein the assessments were completed under Section 143(3) of the Act. The return of income for assessment year 2003-04, copy of which has been placed in the Paper Book at pages 40 to 49 shows that the claim has been made in an identical manner to that made in the assessment years 2004-05 & 2005-06. In fact, the note annexed to the computation of income explains the manner of claiming of deduction, which is on the same basis as in the other years. Once the claim of the assessee for deduction under Section 80IB(10) of the Act made under similar circumstances for assessment years 2004-05 & 2005-06 have been scrutinized under Section 143(3) of the Act and upheld then the reopening of assessment for assessment year 2003-04 also suffers from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reasons for forming a belief for escapement of income in an identical fashion as was done in the case of "Nath Developers" (supra). Relevant material has been placed in the Paper Book filed. The assessment under Section 143(3) of the Act for assessment year 2003-04 was completed by the Assessing Officer on 29.03.2005, wherein the claim of deduction under Section 80IB(10) of the Act was allowed after scrutinizing the relevant details. In fact, in the assessment order dated 29.03.2005 it is also noticed that the Assessing Officer personally visited the project site of the assessee to verify the genuineness of the claim. After a detailed discussion as per paras 3 to 6 of the assessment order, the claim of the assessee for deduction under Section 80IB(10) of the Act was allowed. Similarly, the return of income filed, the copies of computation of income and the accompanying documents filed reveals that the manner of claiming deduction made under Section 80IB(10) of the Act is similar to that noticed by us in the case of "Nath Developers" (supra) in the earlier paragraphs, and the objections of the Revenue also remain the same. For all the above reasons, the rival parties submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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