Mr.sham v. At The Request Of The Parties The Petition Is Being Taken Upfor Final Disposal At This Stage

1 103 WP 8045-2019.doc Sequeira IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 8045 OF 2019 M/s. S.S.Landmarks .. Petitioner VsThe Income Tax Officer, Ward-2(2),Pune and another.. Respondents Mr.Mihir Naniwadekar a/w Mr.Rohan Deshpande i/b Ms.AlishaPinto, for the Petitioner. Mr.Sham V. Walve a/w Mr.Pritish Chatterjee, for Respondents. CORAM : M.S.SANKLECHA & NITIN JAMDAR, JJ.Date : 17 October 2019. P.C. : At the request of the parties the Petition is being taken upfor final disposal at this stage. 2. This Petition under Article 226 of the Constitution of India seeks to challenges a notice dated 29 March 2019 issued underSection 148 of the Income Tax Act 1961 (Act). The impugned noticeseeks to reopen assessment for the Assessment Year 2012-13. 3. The brief facts leading to this Petition are as under : (a)The Petitioner is engaged in the business of building and 2 103 WP 8045-2019.doc developing housing projects. For the subject Assessment Year thePetitioner filed its return of income claiming benefit of section80IB(10) of the Income Tax Act, 1961, (the Act). This on the groundthat the housing project called “Shagun Phase 1” (said project) wascompleted within the stipulated period on or before 31 March 2012.This as the said project was sanctioned on 20 March 2007. (b)During the course of the assessment proceedings the AssessingOfficer made detailed inquiries by notices under section 142(1) and143(2) of the Act with regard to the Petitioner’s claim for deductionunder section 80IB(10) of the Act in respect of the said project. In itsreply to the above notices, the Petitioner pointed out that the projecthad been completed before 30 March 2012. The application forcompletion certificate was made to the local Authority on 20February 2012 and 27 March 2012 as the project had already beencompleted. However the completion certificate was received inSeptember 2012 and the same would be effective from the date ofapplication for completion certificate. The Assessing Officer acceptedthe stand of the Respondent by placing reliance upon the decision ofthe Tribunal in the case of Hindustan Samuah Awas Ltd. V/s. ITO(ITA No.945/Pn/2010) wherein it has been held that completioncertificate granted by the local authority would relate back to the dateof the application for completion certificate relating to the project. Inthe above view after recording the Petitioner’s claim with itssupporting documentary evidence, deduction under section 80IB(10) 3 103 WP 8045-2019.doc had been considered and verified. Thus the claim of deductionunder section 80IB of the Act was allowed by Assessment Orderdated 23 March 2015 passed under section 143 (3) of the Act. (c)On 29 March 2019, the impugned notice was issued. Thereasons in support of the show cause notice read as under : ‘Reasons for belief to of forming escapementincome: 3 103 WP 8045-2019.doc had been considered and verified. Thus the claim of deductionunder section 80IB of the Act was allowed by Assessment Orderdated 23 March 2015 passed under section 143 (3) of the Act. (c)On 29 March 2019, the impugned notice was issued. Thereasons in support of the show cause notice read as under : ‘Reasons for belief to of forming escapementincome: An information has been received from Asst.CIT Cir-2, Pune, Wherein as per ITR filed byassessee it is seen that the assessee has claimeddeduction u/s 80IB(10) for an amount ofRs.3,38,63,518/- for A.Y. 2012-13. The assesseehas claimed deduction u/s.80IB(10) in respect of itsprojects “Shagun Phase I”. As per records numberof buildings in shagun phase-I are A,B,C,D,E,F,Row houses and Bungalows G1 and G2. The firstsanction for the project was received on20.03.2007 i.e. F.Y.2006-07. After that, theassessee had received completion certificate forbuilding A,B,E,F, Row House 1,2,3,4,17 and 18 on25.03.2011 whereas completion certificate forbuilding C & D, Row House 5 to 11, 11A, 12, 13,14, 15 & 16 and Bungalows G1 and G2 wasreceived on 25.09.2012. As per section 80IB(10),the project as a whole should be completed within5 years after the end of F.Y. in which the firstsanction was received. As the project got sanctionon 20.03.2007, the project should have beencompleted by 31[st] March, 2012. As per the provisions of Section 147 of theI.T.Act, 1961, the undersigned has reason to believethat the income chargeable to tax amounting toRs.3,38,63,518/- has escaped assessment as assessee 4 103 WP 8045-2019.doc has wrongly claimed deduction u/s 80IB(10) inrespect of Profit earned in these buildings and filedITR declaring Income at Rs.8,487/-. Thus there isfailure on the part of the assessee to disclose trulyand fully all material facts. The case is required tobe re-opened u/s 147 to bring the abovementioned quantum of income to taxation. As the period of 4 years have lapsed from theend of the relevant Assessment Year and excapedincome is more than 1 lakh, the necessarypermission of the Pr.CIT-2, Pune for issue of noticeu/s 148 may be accorded’. 4.The Petitioner by letter dated 27 May 2019 objected tothe reasons in support of the impugned notice on the ground thatthere was no failure on its part to disclose truly and fully all materialnecessary for assessment. Thus, the impugned notice is hit by provisoto section 147 of the Act. Besides the Assessing Officer while passingthe regular assessment order under section 143(3) of the Act hadconsidered this very claim and accepted the same. Thus, it was urgedthat the basis of the impugned notice is a change of opinion.Therefore, without jurisdiction. However the Assessing Officer byorder dated 6 June 2019 rejected the objections to the impugnednotice. This has led to the filing of the present Petition. 5.Mr.Naniwadekar, learned counsel appearing in support ofthe Petition points out that impugned notice is without jurisdictionfor the following reasons. (a)The impugned notice has been issued beyond the period of 5 103 WP 8045-2019.doc four years from the end of the relevant Assessment Year when theregular assessment proceedings had been completed under section143(3) of the Act. In such cases it is submitted that unless there hasbeen a failure on the part of the Petitioner to disclose truly and fullyall material facts necessary for assessment the Assessing Officer wouldnot acquire jurisdiction to reopen the assessment. In the present casethe reasons do not indicate any failure on the part of the Petitioner todisclose all material facts necessary for assessment in respect of claimunder section 80IB(10) of the Act. Thus the impugned notice iswithout jurisdiction; and (a)The impugned notice has been issued beyond the period of 5 103 WP 8045-2019.doc four years from the end of the relevant Assessment Year when theregular assessment proceedings had been completed under section143(3) of the Act. In such cases it is submitted that unless there hasbeen a failure on the part of the Petitioner to disclose truly and fullyall material facts necessary for assessment the Assessing Officer wouldnot acquire jurisdiction to reopen the assessment. In the present casethe reasons do not indicate any failure on the part of the Petitioner todisclose all material facts necessary for assessment in respect of claimunder section 80IB(10) of the Act. Thus the impugned notice iswithout jurisdiction; and (b)It is further submitted that the facts which form the basis of theAssessing Officer’s reason to believe that income chargeable to tax hasescaped assessment were itself a subject matter on examination by theAssessing Officer while passing the order under section 143(3) of theAct. Thus, it would amount to a change of opinion and therefore onthis ground also the notice would be without jurisdiction. In view ofthe above it is submitted that the impugned notice be quashed asbeing without jurisdiction. 6.On the other hand Mr.Walve, learned counsel appearingon behalf of Revenue in support of the impugned notice submits asunder : (a)The order disposing objections records the fact that thematerial which led to the belief of the Assessing Officer that incomechargeable to tax has escaped assessment was found / noticed during 6 103 WP 8045-2019.doc the assessment for the subsequent Assessment Year 2014-15. In theAssessment Year 2014-15 it was found that the completion certificatereceived by the Petitioner was only of part completion. Therefore, itwas a case of fresh tangible material leading to the impugned notice toprima facie hold that benefit under section 80IB(10) of the Act couldnot be granted to the Petitioner; and (b)The Petitioner cannot take advantage of having disclosedincorrect and/or incomplete facts in the regular assessmentproceedings for the subject Assessment Year. It is not open to thePetitioner to claim that having accepted the claim in regularassessment proceedings, it is not open to reopen the assessment. Insupport he placed reliance upon the decision of the Supreme Courtin Phool Chand Bajrang Lal and another Vs Income Tax Officer andanother - 203 ITR page 456. On the basis of the above it is submitted, that the Petition bedismissed. 7. It is an undisputed fact before us that the regular assessment proceedings for Assessment Year 2012-13 were completedunder section 143(3) of the Act. Further, during the regularassessment proceedings for the subject Assessment Year specificquestions were raised with regard to the Petitioner’s claim fordeduction under section 80IB(10) of the Act. The Petitioner duringthat inquiry pointed out to the Assessing Officer that the completion 7 103 WP 8045-2019.doc On the basis of the above it is submitted, that the Petition bedismissed. 7. It is an undisputed fact before us that the regular assessment proceedings for Assessment Year 2012-13 were completedunder section 143(3) of the Act. Further, during the regularassessment proceedings for the subject Assessment Year specificquestions were raised with regard to the Petitioner’s claim fordeduction under section 80IB(10) of the Act. The Petitioner duringthat inquiry pointed out to the Assessing Officer that the completion 7 103 WP 8045-2019.doc certificate received on 25 September 2012 from the local Authority inrespect of the project which had been completed before 31 March2012 and the application for completion certificate was made by thePetitioner on 20 February 2012 and 27 March 2012 i.e. prior to31March 2012. These facts were considered by the Assessing Officerwhile granting the benefit of deduction under section 80IB(10) ofthe Act. The reasons in support of the impugned notice itselfproceed on the above facts viz. - completion certificate was receivedon 25 September 2012 while the project had to be completed before31 March 2012 and therefore, this has led to the reason to believe thatthe income chargeable to tax has escaped assessment. Therefore thebasis of the reasons to believe that income chargeable to tax hasescaped assessment was that the completion certificate was notobtained on or before 31 March 2012. This was a subject matter ofconsideration by the Assessing Officer while passing the AssessmentOrder under section 143(3) of the Act for Assessment Year 2012-13.Thus the reason in support would be a clear case of change of opinionand the reopening notice would be without jurisdiction. 8.However, Mr.Walve learned counsel for Revenue invitesour attention to the order dated 6 June 2019 disposing the objectionsand contends that the order disposing all objections in fact records thefact that during the proceedings of Assessment Year 2014-15, theAssessing Officer received tangible material which indicated that inSeptember 2012 only the part completion certificate was issued. 8 103 WP 8045-2019.doc Therefore, it is the above tangible material that led to the reasonablebelief that the benefit of section 80IB(10) of the Act is not availableto the entire project. However, these facts which are being reliedupon by Mr.Walve are only recorded in the order disposing of thePetitioner’s objections and do not form a part of the reasons for theAssessing Officer to come to reason to believe that income chargeableto tax has escaped assessment. This reliance upon an order disposingof objections to the reopening notice cannot be a ground different forthe reasons recorded. The validity of the impugned notice has to betested only on the basis of the reasons recorded for issuing the notice.In fact this issue is no longer res-integra. This Court in HindustanLever Vs R.B.Wadkar – 208 ITR page 332 has held that thereopening notice must stand or fall only on the reasons recorded bythe Assessing Officer while issuing the reopening notice. It is notpermissible for the Assessing Officer to either substitute and/or deleteand/or add to the reason recorded while issuing the notice ofreopening. Thus this reliance by Mr.Walve on the order disposing ofobjections is not justified. 9.Therefore one has only to examine the reasons asrecorded which led the Assessing Officer to believe that incomechargeable to tax has escaped assessment. It is not open to improveupon the reasons recorded. The reasons set out in the order ofdisposing of objections cannot form basis of his reason to believe thatincome chargeable to tax has escaped assessment at the time he issued 9 103 WP 8045-2019.doc 9.Therefore one has only to examine the reasons asrecorded which led the Assessing Officer to believe that incomechargeable to tax has escaped assessment. It is not open to improveupon the reasons recorded. The reasons set out in the order ofdisposing of objections cannot form basis of his reason to believe thatincome chargeable to tax has escaped assessment at the time he issued 9 103 WP 8045-2019.doc the impugned notice. As pointed out above the reasons recordedprior to issue of the impugned notice were on facts which was asubject of consideration in proceedings under section 143(3) of theAct. Thus a clear case of change of opinion and notice withoutjurisdiction. 10.In the above facts and circumstances, the decision of theApex Court in Phool Chand and another (supra) would have noapplication. We are concerned here with the jurisdiction of theAssessing Officer to reopen assessment. The reopening of anassessment is strictly dependent on the Assessing Officer meeting thejurisdictional requirements to issue a reopening notice i.e. reason tobelieve that the income has escaped assessment. This examination isonly for the reason recorded at the time of issuing the impugnednotice. Thus the fact that an assessee in subsequent proceedingsdiscovered facts which were suppressed in the earlier assessmentproceedings by itself could not have led to the reopening of anassessment unless the Assessing Officer forms a reasonable belief onthe above facts that income chargeable to tax has escaped assessment.This satisfaction has to be recorded in his reasons before issuing of thereopening notice. It is not open to reopen an assessment on reasonsfor belief not being recorded. The reasons recorded in support of theimpugned notice are completely silent about assessment done for theAssessment Year 2014-15. Thus the decision in the case of PhoolChand Bajrang (supra) has no application to the present facts. 10 103 WP 8045-2019.doc 11.It is also to be noted merely alleging that there is failureto disclose truly and fully all material facts necessary for assessment,would not satisfy the jurisdictional requirement unless the reasonsindicate what material facts the Petitioner had failed to disclose fullyand truly during the course of the regular assessment. In fact ourCourt in the case of Bombay Stock Exchange Ltd. Vs DeputyDirector of Income-Tax (Exemption) and others – [2014] 365 ITR181 (Bom) has observed as follows : ‘In the present case, admittedly, there are no detailsgiven by the Assessing Officer (respondent no.1) asto which fact or material was not disclosed by thepetitioner that led to its income escapingassessment. There is merely a bald assertion in thereasons that there was a failure on the part of thepetitioner to disclose fully and truly all material factswithout giving any details thereof. This being thecase, the impugned notice is bad in law and on thisground alone the petitioner is entitled to succeed inthis writ petition’. In the above view also the impugned notice is withoutjurisdiction as the proviso to section 147 of the Act will be applicablein these facts. 12.For the above reasons, the impugned notice is set asideand the Petition is allowed. (NITIN JAMDAR, J.) (M.S.SANKLECHA, J.)