Deputy Commissioner Of Income Taxcompany Circle – I (1) v. M/S.arun Excello Foundations P Ltdrepresented By Managing Directormr.sureshbattad Towers18 West Cott Roadroyapettah, Chennai – 600 014

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 10.03.2022 CORAM THE HONOURABLE MR. JUSTICE R. MAHADEVANandTHE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASADWrit Appeal Nos. 216, 217 & 232 of 2013andM.P.No.1 of 2013---- W.A.Nos. 216 & 217 of 2013 Assistant Commissioner of Income TaxCompany Circle – I (4)121, M.G. Road, Nungambakkam.. Appellant in bothChennai – 600 034 the appealsVersus M/s.Doshi Housing LimitedRepresented by Managing DirectorMr.Harshad V DoshiDoshi Towers, 9[th] Floor156 Poonamallee High RoadKilpauk, Chennai – 600 034 .. Respondent in both the appeals W.A.No.232 of 2013 Deputy Commissioner of Income TaxCompany Circle – I (1)121, M.G. Road, NungambakkamChennai – 600 034 .. Appellant Versus M/s.Arun Excello Foundations P LtdRepresented by Managing DirectorMr.SureshBattad Towers18 West Cott RoadRoyapettah, Chennai – 600 014 .. Respondent Appeals filed under Clause 15 of Letters Patent against theorders dated 27.04.2012 passed by the learned Judge in W.P. Nos.29069, 29070 & 23899 of 2011 respectively. WP No.29069 of 2011:- Petition filed under Article 226 of Constitution of India,Praying for the issuance a Writ of Certiorari to quash theimpugned notice issued under section 148 of the Act in PanNo.AAACD1187G dated 01.03.2011 and consequentially quash theproceedings in AAACD1187G dated 25.11.2011. WP No.29070 of 2011:- Petition filed under Article 226 of Constitution of India,Praying for the issuance a Writ of Certiorari to quash theimpugned notice issued under section 148 of the Act in Pan No. dated 16.03.2011 and consequentially quash theproceedings in AAACD1187G dated 25.11.2011. WP No.29070 of 2011:- Petition filed under Article 226 of Constitution of India,Praying for the issuance a Writ of Certiorari to to call for therecords on the file of the respondent and issue and quash theimpugned notice issued under section 148 of the Act in Pan No. dated 25.3.2011 and consequentially quash theproceedings in AABCA8168K/AX-6091/168 dated 28.9.2011. (Judgment of the Court was delivered by R. MAHADEVAN, J.) These intra-court appeals are filed by the appellantsquestioning the correctness of the orders dated 27.04.2012passed by the learned Judge in W.P. Nos. 29069, 29070 & 23899 of2011, filed by the respondents herein. 2. The respondents herein have filed the aforesaid writpetitions questioning the notices dated 01.03.2011, 16.03.2011and 25.03.2011 respectively and the consequential orders dated25.11.2011 passed by the appellants herein, rejecting theobjections raised by them against the proceedings initiatedunder Section 147 of the Income Tax Act (in short, the Act) forre-opening the concluded assessment. business of construction and development of housing project. Forthe assessment years 2006-2007, 2004-2005 and 2004-2005respectively, they filed their returns of income declaring totalloss. One of the major claims raised by the respondents in theirreturns was deduction under Section 80-IB(10). Such returns weretaken up for scrutiny and the assessing officer passed orders ofassessment under Section 143(3) granting deduction under Section80IB(10) as claimed by the respondents herein. However, after aperiod of four years, the assessing officer sought to reopen theassessments on the ground that the respondents company are noteligible to claim deduction under Section 80-IB(10) in the lightof the explanation inserted below section 80-IB(10) of the Actby Finance Act, 2 of 2009 with retrospective effect from 1-4-2000 whereunder, it was stated that deduction under section 80-IB(10) of the Act shall not be admissible to a contractor inrespect of works contract awarded by any person. On receipt ofthe notices for re-assessment, the respondents have submittedtheir objections, but they were rejected. 4. Assailing the orders of rejection, the respondentsherein have filed the writ petitions contending that theAssessing Officer was not justified in re-opening the assessmentafter expiry of four years. Further, there was no failure onthe part of the respondents to disclose truly and fully allfacts. The Assessing Officer has no new material evidence toshow that certain income earned by the respondents has escapedfrom the purview of assessment and therefore, the re-assessmentis not warranted. The respondents also placed reliance on thedecision in the case of Commissioner of Income Tax, Delhi vs.Kelvinator of India Limited reported in (2010) 320 ITR 561 (SC)and contended that the re-assessment proceedings initiatedagainst them after lapse of four years is liable to be setaside. They have also placed reliance on the decision of thisCourt in the case of Fenner (India) Limited vs. DeputyCommissioner of Income Tax reported in (2000) 241 ITR (Madras)672 wherein it was held that issuing re-assessment notice afterexpiry of four years on the ground that there is escapement ofincome is not sufficient. It must be shown that the escapementmust be by reason of the failure on the part of the assessee,either to file a return or to disclose, truly and fully, thematerial particulars necessary for concluding the assessment.Accordingly, the respondents herein prayed for setting aside theorders, which were impugned in the writ petitions. 5. The writ petitions were opposed by the appellants-revenue contending that in the orders of assessment, deductionwas allowed in favour of the respondents. However, Section 80IB(10) of the Act was amended which excludes commercial areasexceeding 2000 square feet in extent from the purview ofdeduction under Section 80IB (10) of the Act. Such amendments were brought with retrospective effect from 01.04.2001.Therefore, it was contended on behalf of the appellants that theamendment will have a bearing on the concluded assessment and itwarranted initiation of re-assessment. 6. The learned Judge, on considering the rivalsubmissions, allowed the writ petitions by separate orders dated27.04.2012 on the ground that the respondents herein have placedall the material records at the time of original assessment andit cannot be said that they have suppressed any materialparticulars. It was also held that the initiation of re-assessment after expiry of four years from the date of originalassessment is illegal and invalid. The said orders of thelearned Judge are impugned in these appeals. 7. The learned Senior Standing Counsel appearing for theappellants would contend that the re-assessment proceedings weresought to be initiated not only due to the amendments brought byway of explanation to Section 801B (10) of the Act, withretrospective effect from 01.04.2001 but due to the fact thatafter concluding assessment, it unfolded that the respondentsherein undertook and constructed the building as a contractorand not as a developer and therefore, they are not entitled tothe deduction under Section 801B (10) of the Act. The learnedJudge, without appreciating the above aspect has erroneously setaside the orders of rejection passed by the appellants underSection 147 of the Act. It is also contended that if therespondents are aggrieved against the order dated 25.11.2011passed by the respective appellants, rejecting their objectionsto the re-assessment proceedings, they ought to have filedstatutory appeals before the appellate authority and the learnedJudge ought not to have entertained the writ petitions filedunder Article 226 of The Constitution of India. Therefore, thelearned Senior Standing Counsel prayed for allowing the writappeals by setting aside the orders of the learned Judge. 8. Per contra, the learned counsel for the respondentscontended that in the absence of any tangible material evidence,the initiation of re-assessment proceedings itself is bad. Itis not the case of the appellants that the respondents, at thetime of original assessment, have withheld any documentaryevidence or suppressed material particulars. In the absence ofthe same, the re-assessment proceedings cannot be initiatedagainst the respondents and it was rightly considered by thelearned Judge while allowing the writ petitions filed by them.In support of his contention, the learned counsel for therespondents relied on the decision of the Division Bench of thisCourt rendered on 18.10.2012 in Tax Case (Appeal) Nos. 1348 and1349 of 2007 in the case of Commissioner of Income Tax, Chennaivs. M/s. Arun Excello Foundations Private Limited wherein it was held that when the project undertaken by the assessee fulfilsthe criteria for being approved as a housing project, then,deductions cannot be denied under Section 80IB (10) of the Actmerely because the project is approved as residential pluscommercial project. It was further held that when theconditions specified under Section 80IB of the Act aresatisfied, then deduction is allowable on the entire project andthere is no question of allowing deduction to a part of theproject alone. 9. The learned counsel for the respondents also placedheavy reliance on the decision of the Division Bench of theGujarat High Court in the case of Ganesh Housing CorporationLimited vs. Deputy Commissioner of Income Tax, Circle 4 & 1reported in (2016) 74 Taxmann.com 172 (Gujarat) wherein it washeld that when there is no failure on the part of the assesseeto truly and fully disclose all facts and the assessing officerhas no new material establishing that there was escapement ofincome, the re-opening of the assessment by placing reliance onthe explanation added to the statute with retrospective effectcould not be a ground. Thus, the learned counsel for therespondents prayed for dismissal of the writ appeals. 10. We have heard the learned counsel for both sides andperused the materials placed on record. 11. Admittedly, for the assessment years 2006-2007, 2004-2005 and 2004-2005 respectively, the respondents herein havefiled their returns of income and the assessments were alsoconcluded. However, after expiry of four years, notices underSection 148 of the Act were issued to the respondents herein on01.03.2011, 16.03.2011 and 25.03.2011 respectively. On receiptof such notices, the respondents have submitted their objectionsby stating that they have not suppressed any materialparticulars at the time of original assessment and therefore,the re-assessment proceedings is not warranted. However, suchobjections were rejected by the respective appellant on25.11.2011. Therefore, challenging the show cause noticesissued under Section 148 of the Act as well as the orders ofrejection dated 25.11.2011, the writ petitions were filed. Thewrit petitions were allowed by the learned Judge on the groundthat there is no proof to show that there was escapement ofincome warranting initiation of re-assessment proceedings. 12. In the decision of the Division Bench of the GujaratHigh Court in the case of Ganesh Housing Corporation Limited vs.Deputy Commissioner of Income Tax, Circle 4 & 1 reported in(2016) 74 Taxmann.com 172 (Gujarat) it was held that re-assessment proceedings are not warranted if the assessee did notsuppress any material particulars at the time of assessment or the assessing officer had not collected any new materials toshow that there was escapement of assessment. In Para Nos.10and 11 of the decision, it was held as follows:- 12. In the decision of the Division Bench of the GujaratHigh Court in the case of Ganesh Housing Corporation Limited vs.Deputy Commissioner of Income Tax, Circle 4 & 1 reported in(2016) 74 Taxmann.com 172 (Gujarat) it was held that re-assessment proceedings are not warranted if the assessee did notsuppress any material particulars at the time of assessment or the assessing officer had not collected any new materials toshow that there was escapement of assessment. In Para Nos.10and 11 of the decision, it was held as follows:- "10. Thus, the entire claim of deductioncame up for consideration at the hands of theAssessing Officer in the original assessment. Theclaim was minutely examined and only thereafteraccepted. It would therefore not permissible to theAssessing Officer to disturb such claim in exerciseof powers under Section 147 of the Act by issuingthe notice beyond the period of four years andbeyond the period of relevant assessment year. Hereagain, the Assessing Officer had not recorded, inwhat manner, the assessee failed in its duty todisclose truly and fully all material facts. Infact, the thirst of the contention of the AssessingOfficer appears to be that the assessee had notdeveloped housing projects, but was acting as acontractor. In this respect, the Assessing Officerhas placed reliance on the retrospective explanationadded to section 80IB (10) of the Act. It is wellsettled by the series of judgments of this Courtthat retrospective amendment in statute would notenable the Assessing Officer to reopen an assessmentbeyond a period of four years. 11. The stand of the Assessing Officer that inone of the projects in the development permission,the name of the assessee was not mentioned as adeveloper. The petitoiner has explained this in theobjections raised to the reasons recorded bypointing out that after development of phase-1 ofthe project, when permission was granted for phase-II, the same was done in computerized format, whichdid not contain an entry for showing of the name ofthe developer. Quite apart from this explanation,on this ground, it would not be open for theAssessing Officer to re-examine the claim, which wasoriginally accepted after scrutiny. If there was anerror in view of the Assessing Officer in grantingthe claim, the option of the Revenue lay elsewhere.Likewise, the contention that the societies haddeducted tax at source, indicating that therelationship between the petitioner and the was oneof the contractor and the employer of a contract,also would not permit the Assessing Officer toreopen the assessment. Firstly, in a claim, whichis scrutinized, the objections of this nature wouldbe an additional element, which if at all ought to have been examined by the Assessing Officeroriginally and surely cannot provide a ground forre-opening the assessment beyond a period of fouryears. Secondly, the deduction of tax at sourceprincipally is in the hands of the payer of anaccount. For whatever reason if the tax is deductedat a higher rate or deducted when no such deductionwas warranted, it would be for the payee for takingup the issue before the department and claimadjustment or refund, as the case may be. Merefactum of deduction of tax at source or the rate atwhich it was deducted would not be conclusive proofof the relationship between the parties." have been examined by the Assessing Officeroriginally and surely cannot provide a ground forre-opening the assessment beyond a period of fouryears. Secondly, the deduction of tax at sourceprincipally is in the hands of the payer of anaccount. For whatever reason if the tax is deductedat a higher rate or deducted when no such deductionwas warranted, it would be for the payee for takingup the issue before the department and claimadjustment or refund, as the case may be. Merefactum of deduction of tax at source or the rate atwhich it was deducted would not be conclusive proofof the relationship between the parties." 13. The said decision of the Division Bench of the GujaratHigh Court squarely applies to the facts of this case. Thecontention of the learned Senior Standing Counsel for theappellants that the re-assessment is not solely based on theamendments brought to the statute, but due to the fact that therespondents herein undertook and constructed the building as acontractor and not as a developer, also cannot be sustained inthe light of the decision of the Division Bench of the GujaratHigh Court mentioned supra. The learned Judge alsocategorically held that the Assessing Officer is not inpossession of tangible material evidence to initiate re-assessment proceedings against the respondents herein. Such afinding rendered by the learned Judge, in our opinion, is properand therefore, we are not inclined to interfere with the orders,which are impugned in these writ appeals. 14. In the result, the orders dated 27.04.2012 passed bythe learned Judge in W.P. Nos. 29069, 29070 & 23899 of 2011,filed by the respondents herein are confirmed. All the writappeals are dismissed. No costs. Sd/- Assistant Registrar(Digit) //True Copy// Sub Assistant Registrar av/rsh To 1. The Assistant Commissioner of Income TaxCompany Circle – I (4)121, M.G. Road, NungambakkamChennai – 600 034 2.The Deputy Commissioner of Income TaxCompany Circle – I (1)121, M.G. Road, NungambakkamChennai – 600 034 +2cc to Mrs. Hema Muralikrishnan , Advocate, S.R.No.16503,16505 WA Nos. 216, 217 & 232/2013 GSM(CO)CT 05/04/2022