Itxa/678/2016 Of The Principal Commissioner Of Income Tax-25 v. M/S.vaman Estate

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 678 OF 2016 The Pr. Commissioner of Income Tax .. Appellant v/s. M/s. Vaman Estate .. Respondent Mr. N.C. Mohanty for the appellant Mr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for therespondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 27[th] NOVEMBER, 2018. 1.This appeal filed by the Revenue challenges the judgment dated15.07.2015 of Income Tax Appellate Tribunal (“the Tribunal” for short). 2.Following questions are presented for our consideration :- (i)Whether on the facts and in the circumstances of the caseand in law, the Tribunal is justified in holding that the re-assessment proceedings under Section 147 of the Act is invalid? (ii)Whether on the facts and in the circumstances of the caseand in law, the Tribunal is justified in holding that the re-assessment is based on mere change of opinion? (iii)Whether on the facts and in the circumstances of the caseand in law, the Tribunal is justified in dismissing the appeal ofthe Revenue without going into the merit of the case regardingadmissibility of deduction under Section 80IB(10) in respect ofTans Residency Project? 3.The issue pertains to the Assessment Year 2004-05. The centralquestion is of the validity of re-assessment proceedings initiated by theAssessing Officer in the context of the assessee's claim of deductionunder Section 80IB(10) of the Income Tax Act, 1961 ("the Act" forshort). In the return of income filed by the assessee for the saidassessment year, the principal claim was of deduction under Section80IB(10) of the Act arising out of income from development of ahousing project. In the assessment carried out by the Assessing Officer,he disallowed a part of the claim after detailed scrutiny. Suchassessment was reopened by the Assessing Officer by issuance of notice,which was done beyond the period of four years from the end ofrelevant assessment year. In order to issue such notice, the AssessingOfficer had recorded the detailed reasons. The gist of his reason wasthat a similar claim was lodged by one M/s. Abode Builders for thesame housing project. In the course of examination of such claim ofthe said assessee, the Assessing Officer had detected certain defects. The Assessing Officer had rejected the claim inter alia on the groundthat the development and construction of housing project hadcommenced prior to 01.10.1998 (which was the crucial date forclaiming the benefits under Section 80IB(10) of the Act). TheAssessing Officer of the present assessee, therefore, found that theassessee was not entitled to the deduction since one of the essentialrequirements of the provision was breached. He noted that these factswere not disclosed by the assessee and not brought to the notice of theAssessing Officer during the assessment. Therefore, there was failureon the part of the assessee to disclose truly and fully all material factsnecessary for assessment. 4.During the course of re-assessment proceedings, the assesseestrongly opposed the ground of re-assessment. The Assessing Officerdid not accept such opposition upon which the assessee carried thematter in appeal. The CIT(A) allowed the appeal. He was of theopinion that during the scrutiny assessment, there was no failure on thepart of the assessee to disclose truly and fully all material facts. Evenon merits, he was of the opinion that there was no evidence to suggestthat the development and construction of the housing projectcommenced prior to 01.10.1998. On such grounds, the assessee's appeal was allowed. 4.During the course of re-assessment proceedings, the assesseestrongly opposed the ground of re-assessment. The Assessing Officerdid not accept such opposition upon which the assessee carried thematter in appeal. The CIT(A) allowed the appeal. He was of theopinion that during the scrutiny assessment, there was no failure on thepart of the assessee to disclose truly and fully all material facts. Evenon merits, he was of the opinion that there was no evidence to suggestthat the development and construction of the housing projectcommenced prior to 01.10.1998. On such grounds, the assessee's appeal was allowed. 5.The Revenue carried the matter in further appeal before theTribunal. The Tribunal by giving separate independent reasonsconfirmed the decision of the CIT(Appeals) by the impugned judgment.The Tribunal was of the opinion that in absence of any failure on thepart of the assessee to disclose true facts, the reopening of assessmentbeyond the period of four years was not permissible. This decision ofthe Tribunal is challenged in the present appeal. 6.We have heard the learned Counsel for the parties and perusedthe documents on record. It is undisputed that in the originalassessment, the Assessing Officer had examined the assessee's claim ofdeduction under Section 80IB(10) of the Act at some length. To theextent he was dis-satisfied, the claim was disallowed. Such assessmentwas sought to be reopened only on the ground that in case of M/s.Abode Builders where similar claim was raised in connection with thesame housing project, the Assessing Officer had detected certainbreaches which dis-qualified the assessee from claiming deduction.Essentially, according to the Assessing Officer, the development andconstruction of the housing project had commenced prior to 01.10.1998. 7.The CIT(A) in a detailed consideration of all the relevant aspectsof the matter came to the conclusion that there was no failure on thepart of the assessee to disclose full material facts. He in fact recordedthat there was no material to suggest that the development andconstruction of the housing project had commenced prior to01.10.1998. After referring to the materials on record during theoriginal scrutiny assessment, the CIT(A) observed as under :- “Thus the above facts and circumstances suggest that it was a casewhere all the necessary material required for the computation ofincome and verification of claim of deduction u/s 80IB(10) wasfurnished before the AO during the survey as well as assttproceedings and the deduction was allowed in asstt order u/s143(3) by the AO after due examination of the same at variousstages from survey till completion of last assessment passed on31/12/2010 u/s 143(3) r/w 254. In the asstt order the AO hasmentioned about the joint venture agreement between the assesseeand abode builders in respect of the Trans Residency project andafter going through the documents submitted or facts notedduring survey, the AO found no discrepancy other than thosementioned in the asstt order. …...... “Thus the above facts and circumstances suggest that it was a casewhere all the necessary material required for the computation ofincome and verification of claim of deduction u/s 80IB(10) wasfurnished before the AO during the survey as well as assttproceedings and the deduction was allowed in asstt order u/s143(3) by the AO after due examination of the same at variousstages from survey till completion of last assessment passed on31/12/2010 u/s 143(3) r/w 254. In the asstt order the AO hasmentioned about the joint venture agreement between the assesseeand abode builders in respect of the Trans Residency project andafter going through the documents submitted or facts notedduring survey, the AO found no discrepancy other than thosementioned in the asstt order. …...... The only basis on which the AO formed the belief that the assesseehad commenced the construction before 1998, is the findings ofthe AO of in asstt order of abode builders who in turn has reliedupon the same Joint venture agreement dated 28/8/2001, whichwas already furnished to the AO of appellant during the originalasstt proceedings vide reply dated 15/11/2006 along with copy ofapproved plan, IOD and CC and the deduction was allowed by theAO after examination of the same. The IOD dated 8/1/97 andCC dated 24/7/2002 available before the AO clearly mentionedthat the application for approval of plan was given in 1996. Thecopy of the joint venture agreement dated 28/8/2001 was also onrecord of AO which finds mention in the first page of the assttorder dated 27/12/2006. Further, since the AO had madespecific queries during the asstt proceedings asking for approvalplans, IOD, CC etc. which were provided to AO vide letter dated15/11/2006 and the AO after considering the same has madepart disallowance of deduction u/s 80IB(10) in the asstt order u/s143(3), it cannot be said that the AO did not consider the detailsalready furnished by the assessee while allowing the remainingdeduction u/s 80IB(10) in respect of Trans Residency Project.The case was continuously scrutinized u/s 143(3) in AY 2004-05,2005-06, 2006-07 and 2007-08 and in all the years the differentAOs have after examining the details already on record haveconsistently allowed the deduction u/s 80IB(10) in respect ofTrans Residency project (except for receipts from parking space).” 8.It was in this view of the CIT(A), the Tribunal has confirmed theimpugned judgment observing that the assessee had made fulldisclosure of all relevant facts during the original scrutiny assessment. 9.As noticed by the CIT(A), all necessary facts were before theAssessing Officer while deciding the original assessment. During suchassessment, the assessee's claim of deduction was also minutelyexamined by the Assessing Officer. Reopening of assessment beyondthe period of four years was, therefore, correctly dis-allowed by theCIT(A) and the Tribunal. As noted, the only source available with theAssessing Officer to contend that relevant material was not brought onrecord by the assessee was assessment in case of M/s. Abode Builders.Here also, there is one vital defect in the logic adopted by the AssessingOfficer. We do not find any where any material to suggest that thedevelopment and construction of the housing project commencedbefore 01.10.1998. Even in the reasons recorded, the Assessing Officerhas not linked any material in order to make this observation. He hasmainly relied on the findings of the Assessing Officer of M/s. AbodeBuilders. This conclusion was reversed by the CIT(A) noting that in factall along there was evidence suggesting that the commencement ofconstruction of the housing project was some time in the year 2002. The learned Counsel for the assessee points out that the assessmentorder in case of M/s. Abode Builders was set aside by the CIT(A) andthe same was confirmed by the Tribunal. The learned Counsel for the assessee points out that the assessmentorder in case of M/s. Abode Builders was set aside by the CIT(A) andthe same was confirmed by the Tribunal. 10.Be that as it may, we do not find any failure on the part of theassessee to disclose truly and fully all relevant facts as correctly held bythe CIT(A) and the Tribunal pursuant to the detailed discussion.Therefore, no question of law arises. 11.The appeal is dismissed accordingly. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)