Pareshbhai Hasmukhbhai Thakkar v. Assistant Commissioner Of Income Tax

C/SCA/3806/2015 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 3806 of 2015 FOR APPROVAL AND SIGNATURE: =============================================PARESHBHAI HASMUKHBHAI THAKKAR....Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX....Respondent(s) ============================================= Appearance: MR SN DIVATIA, ADVOCATE for the Petitioner(s) No. 1MR KM PARIKH, ADVOCATE for the Respondent(s) No. 1============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH andHONOURABLE MR.JUSTICE S.H.VORA Date : 05/05/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0.By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for an appropriate writ, direction and order to quash and set aside the impugned notices dated 29.03.2014 and 31.03.2014, by which, the reassessment for AY 2009-10 is reopened in exercise of powers under Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). 1.1.The petitioner has also prayed for an appropriate writ, direction and order to quash and set aside the impugned order dated 02.01.2015 passed by the AO rejecting the objections of the petitioner and upholding validity of the reassessment proceeding under Section 147 of the Act for AY 2009-10. 2.0.The facts leading to the present Special Civil Application in nutshell are as under: 2.1.That the assessee filed his return of income for AY 2009-10 declaring total income at Rs. 15,69,994/- after claiming deduction under Section 80IB(10) of the Act of Rs. 77,41,250/-. That the return of income was selected for scrutiny. Detailed questionnaire also asked by the AO more particularly, with respect to deduction under Section 80IB (10) of the Act claimed by the petitioner-assessee. That the petitioner responded to the said questionnaire and provided all the materials with respect to the claim under Section 80IB(10) of the Act. That thereafter, the AO passed the assessment order under Section 143(3) of the Act on 4.11.2011 for AY 2009-10 allowing the deduction under Section 80IB(10) of the Act claim by the petitioner-assessee. That thereafter, however within a period of four weeks from the date of relevant assessment year, the AO has issued impugned notices on 29.03.2014 and 31.03.2014 under Section 148 of the Act for AY 2009-10 proposing to reassess the total income. That in response to the said notice, the petitioner by letter dated 3.4.2014 requesting the AO to treat the return file on 13.08.2009 in response to the impugned notices under Section 148 of the Act and also sought copy of reasons recorded for reopening, vide communication dated 3.4.2014. That after a period of approximately four months, the petitioner has been served with the reasons recorded on 29.03.2014, along with letter dated 18.07.2014 for reopening the concluded assessment. That thereafter, petitioner has raised the detailed objection to the reopening vide communication dated 4.9.2014. The petitioner challenged the reopening of assessment mainly on the ground that while finalizing the original assessment under Section 143(3) of the Act, the AO considered the issue in detail, more particularly, deduction claimed by the assessee under Section 80IB(10) of the Act and only thereafter the AO allowed the said deduction and therefore, to reopen the said issue in exercising the powers under Section 147 of the Act is nothing but change of opinion of the AO and therefore, reopening is not permissible. 2.2.That vide communication dated 2.1.2015 the AO has disposed of the said objection raised by the petitioner assessee to the reopening of the assessment and has overruled the same. Hence, the petitioner has preferred present Special Civil Application under Article 226 of the Constitution of India challenging the impugned reassessment proceedings / impugned notices under Section 148 of the Act for AY 2009-10. 3.0.Shri Divatia, learned advocate for the petitioner has vehemently submitted that impugned notice under Section 148 of the Act to reopen, complete and finalize the assessment for AY 2009-10 in exercise of powers under Section 147 of the Act is absolutely illegal and invalid. 3.1.It is submitted that the finalize and complete assessment for AY 2009-10 has been sought to be reopened on the ground that though the petitioner -assessee was not entitled to the deduction under Section 80IB(10) of the Act of Rs. 77,41,250/-, the AO had allowed the same and therefore, the income of amounting to Rs.77,41,250/- has escaped assessment. It is submitted that as such the deduction claimed by the assessee under Section 80IB(10) of the Act of Rs.77,41,250/- came to be considered by the AO in detailed. It is submitted that as such the case was selected for scrutiny assessment and the petitioner was served with the notice under Section 142(1) of the Act and the AO sent specific questionnaire with respect to the deduction claimed under Section 80IB of the Act. It is submitted that in response to the same the petitioner replied to the same and submitted necessary documents / materials in respect of his claimed under Section 80IB of the Act and only thereafter and having satisfied with the deduction claimed under Section 80IB(10) of the Act of Rs.77,41,250/-. It is submitted that thereafter it not now open for the AO to reopen the complete and finalize the assessment on the very issue. It is submitted that as such in light of the aforesaid fact reopening can be said to be of change of opinion of the AO. It is submitted that as per the catena of decisions mere change of opinion of the AO, the reassessment / reopening of the assessment under Section 147 of the Act is not justified, more particularly, in absence of any other tangible documents available with AO. Making above submission and relying upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd reported in (320)ITR 561 as well as decision of the Division Bench of this Court in the case of Gujarat Power Corporation Ltd vs. ACIT reported in (350) ITR 226, it is requested to allow the present Special Civil Application and to quash and set aside the impugned notice under Section 148 of the Act for AY 2009-10. 4.0.Shri KM Parikh, learned advocate for the revenue has tried to oppose the present petition. He has heavily relied upon the affidavit in reply filed by the AO in support of his request to dismiss present Special Civil Application . 4.1.It is submitted that after forming an opinion that the income amounting to Rs.77,41,250/- has escaped assessment within the meaning of Section 147 of the Act for AY 2009-10, though the deduction under Section 80IB(10) of the Act of Rs. 77,41,250/- was itself allowable, same came to be allowed mechanically and therefore, the impugned re-assessment proceedings is absolutely just and proper and in consonance with the Section 147 of the Act. 4.0.Shri KM Parikh, learned advocate for the revenue has tried to oppose the present petition. He has heavily relied upon the affidavit in reply filed by the AO in support of his request to dismiss present Special Civil Application . 4.1.It is submitted that after forming an opinion that the income amounting to Rs.77,41,250/- has escaped assessment within the meaning of Section 147 of the Act for AY 2009-10, though the deduction under Section 80IB(10) of the Act of Rs. 77,41,250/- was itself allowable, same came to be allowed mechanically and therefore, the impugned re-assessment proceedings is absolutely just and proper and in consonance with the Section 147 of the Act. 4.2.It is vehemently submitted by Shri Parikh, learned advocate for the revenue that from the original assessment order it cannot be said that AO applied its mind with respect deduction claimed by the assessee claim under Section 80IB of the Act. It is submitted that as such there is no discussion at all by the AO with respect to deduction claimed by the assessee, claim under Section 80IB(10) of the Act of Rs. 77,41,250/-. It is submitted that therefore, when it was found that AO allowed the deduction under Section 80IB(10) of the Act of Rs. 77,41,250/- mechanically and without making any discussion with respect to such claim and thereafter having forming an opinion and having reason to believe that the income amounting to Rs.77,41,250/- as escaped assessment, assumption of the jurisdiction by the AO to reopen the assessment for AY 209-10 is absolutely just and proper, which is not required to be interfered with by this Court at this stage in exercise of powers under Article 226 of the Constitution of India. Making above submissions, it is requested to dismiss the present Special Civil Application. length. 6.0.At the outset, it is required to be noted that finalize and complete assessment for AY 2009-10 is sought to be reopened by impugned order on the following reasons recorded. “The assessee is engaged in the building construction business, has filed his return of income for AY 2009-10 on 29.09.2009 declaring income of Rs. 15,69,994/-. The assessment was completed under Section 143(3) and income and returned income was accepted vide order dated 04.11.2011. As per sub-section 10 of the section 80IB, the date of completion of construction of the housing project shall be taken to the date on which the completion certificate in respect of such housing project is issued by the local authority. It was noticed from the permission order granted for first unit by local authority viz. Anand Jilla Panchayat dated 07.01.2007 that as per condition No.2 of the order, the assessee has to complete the project within three years of the date of issuance of this order i.e. assessee has to complete the project by 06.01.2010. As per condition No.3 of the said order, assessee has to intimate the Taluka Development Officer, Anand within one month of completeion of construction project. It was further noticed from the condition no. 25 of the said order that breach of any condition of the order would render the permission liable for cancellation. It was noticed that the project of the assessee was not completed till 14.10.2011 as is evident the fact that assessee in his submission dated 14.10.2011 has mentioned that the project is in progress and did not furnish any completion certificate. Since neither the condition of local authority to complete the project by 06.01.2010, failing which permission was liable to be withdrawn, nor condition of the I.T. Act to complete the project by 31[st] March 2011 & to obtain certificate from the local authority were fulfilled, deduction u/s 80IB(10) of the Act of Rs.77,41,250/- was require to be disallowed. It was noticed that the project of the assessee was not completed till 14.10.2011 as is evident the fact that assessee in his submission dated 14.10.2011 has mentioned that the project is in progress and did not furnish any completion certificate. Since neither the condition of local authority to complete the project by 06.01.2010, failing which permission was liable to be withdrawn, nor condition of the I.T. Act to complete the project by 31[st] March 2011 & to obtain certificate from the local authority were fulfilled, deduction u/s 80IB(10) of the Act of Rs.77,41,250/- was require to be disallowed. In view of the above facts and circumstances, I have reason to believe that the income amounting to Rs.77,41,250/- has escaped the assessment within the meaning of Section 147 of the Income Tax Act, 1961 for the assessment year 2009-10. I therefore, issue notice under section 148 of he Act for AY 2009-10 to the assessee.” However, it is required to be noted that while filing return of income the petitioner assessee claimed deduction under Section 80IB(10) of the Act of Rs.77,41,250/-. That the return of income was selected for scrutiny. The AO issued detail questionnaire with notice under Section 142(1) of the Act on dated 29.07.2011. Question no.7 was with respect to claim of deduction under Section 80IB of the Act, which reads as under: “17. In respect of your claim of deduction u/s 80IB(10) of the Act:a. Justify with cogent & sufficient evidence as to how you are satisfying the various conditions for claiming the deduction u/s. 80IB(10). b. The name and complete address of various housing projects in respect of which the deduction u/s. 80IB(10) is claimed. The copy of purchase deed of land (with original for verification) with reference to the housing projects in respect of which the deduction is claimed. respect of which the deduction u/s. 80IB(10) is claimed. The copy of purchase deed of land (with original for verification) with reference to the housing projects in respect of which the deduction is claimed. c. Copy of Plan & Layout with approval letter of Local Authority for the housing projects under reference with original for verification. Please also furnish the Broacher of the housing projects.the housing projects under reference with original for verification. Please also furnish the Broacher of the housing projects. d. Details of residential unit wise built up area of each residential unit with supporting evidence. Please note that the “built up area” is defined to mean the inner measurements of the residential unit at the floor level including the projection and balconies as increased by the thickness of the wall but not include the common are shared with other residential units.unit with supporting evidence. Please note that the “built up area” is defined to mean the inner measurements of the residential unit at the floor level including the projection and balconies as increased by the thickness of the wall but not include the common are shared with other residential units. e. Date of commencement and completion of the housing project with cogent and sufficient evidences in support thereof. Please also furnish the copy of permission letter of Local Authority for commencement of the construction of project.cogent and sufficient evidences in support thereof. Please also furnish the copy of permission letter of Local Authority for commencement of the construction of project. f. The details is in the following manner in respect of the residential unitssold/booked. 6.3.In response to the same, the petitioner submitted necessary details along with communication / reply dated 14.10.2011, more particularly, with respect to the deduction under Section 80IB(10) of the Act. Para 17 of the said reply reads as under: “17. As regards the Deduction u/s 80IB of the IT Act, the desired details are as follows:- f. The details is in the following manner in respect of the residential unitssold/booked. 6.3.In response to the same, the petitioner submitted necessary details along with communication / reply dated 14.10.2011, more particularly, with respect to the deduction under Section 80IB(10) of the Act. Para 17 of the said reply reads as under: “17. As regards the Deduction u/s 80IB of the IT Act, the desired details are as follows:- a. The Audit Report for claiming deduction u/s. 80IB is enclosed. All the details as regard the deduction are mentioned in the said Report. b. The copy of Purchase Deed of land, in respect of which Deduction is claimed for the Housing Project, is enclosed. c. The copy of Plan and Layout along with the approval letter of prescribed authority is enclosed. d. The details of Residential unit wise Built up Area are enclosed. e. The details, as desired, are mentioned in the 80IB Report and the supporting evidences are enclosed. f. The details, in prescribed format, are enclosed.” 6.4.That thereafter, AO finalized assessment and passed order of assessment under Section 143(3) of the Act allowing deduction claim by the assessee, claimed under Section 80IB(10) of the Act. Therefore, it cannot be said that while finalizing the original assessment, the AO did not apply its mind and / or amicably allowed the deduction under Section 80IB of the Act of Rs.77,41,250/- claimed by the assessee. Merely because, while finalizing the assessment under Section 143(3) of the Act and while allowing the deduction claimed under Section 80IB(10) of the Act, AO has chose not to pass any detailed order by that itself, it cannot be said that AO did not apply its mind with respect to deduction under Section 80IB of the Act and / or AO amicably allowed the deduction under Section 80IB(10) of the Act and therefore, it can be said that reopening of the assessment on the aforesaid ground / reason is passed on mere change of opinion of the AO. As held by the Hon'ble Supreme Court as well as this Court in catena of decision in the case of Kelvinator of India Ltd (supra), reassessment on mere change of opinion of the AO is not permissible. In the case of Gujarat Power Corporation Ltd (supra), the Division Bench of this Court in para 42 and 43 has observed and held as under: C/SCA/3806/2015 JUDGMENT C/SCA/3806/2015 JUDGMENT “42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim. It is not unknown that assessments of larger corporations in the modern day, involve large number of complex claims, voluminous material, numerous exemptions and deductions. If the Assessing Officer is burdened with the responsibility of giving reasons for several claims so made and accepted by him, it would even otherwise cast an unreasonable expectation which within the short frame of time available under law would be too much to expect him to carry. Irrespective of this, in a given case, if the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the revenue that the Assessing Officer can not be seen to have formed any opinion on such a claim. Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition.” Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition.” 6.5.Considering the aforesaid decisions of the Division Bench of this Court and applying the same to the facts and circumstances of the case on hand, more particularly, when while finalizing original assessment under Section 143(3) of the Act, the AO along with notice under Section 142(1) of the Act sent questionnaire to the petitioner, more particularly, with respect to deduction claimed under Section 80IB of the Act by the assessee and to which petitioner assessee supplied necessary details as required by the AO and only thereafter when the AO allowed the deduction under Section 80IB of the Act claimed by the assessee, the impugned reassessment proceedings/ reopening of the assessment for AY 2009-10 is nothing but on mere change of opinion of the AO, which is not permissible. Under the circumstances, impugned notice under Section 148 of the Act, to reopen the complete and finalize the assessment for AY 2009-10 in the impugned reassessment proceedings for the reasons recorded is absolutely illegal and invalid. 7.0.In view of the above and for the reasons stated above, petition succeeds. The impugned notices under Section 148 of the Act dated 29.03.2014 and 31.03.2014to reopen the assessment for AY 2009-10 is hereby quashed and set aside and consequently impugned reassessment proceedings for AY 2009-10 is hereby quashed and set aside on the aforesaid ground alone. Rule is made absolute to the aforesaid extent. No costs. sd/-(M.R.SHAH, J.) Kaushik sd/-(S.H.VORA, J.)