Wp/14302/2018 Of Akshar Anshul Construction Llp v. Asstt. Commissioner Of Income Tax- 28(1)

IN THE HIGH COURT OF JUDICATURE AT BOMBAYAPPELLATE SIDE CIVIL JURISDICTION WRIT PETITION NO. 14302 OF 2018 Akshar Anshul Construction LLP Akshar Anshul Construction LLP..Petitioner.v/s.Asst. Commissioner of Income Tax 28(1) ..Respondent. Ms. Ritika Agarwal, for the Petitioner.Mr. N. C. Mohanty, for the Respondent. P.C:- CORAM: AKIL KURESHI & M.S.SANKLECHA, JJ.DATE : 1[st] MARCH, 2019. At the request of the parties, Petition is taken up for finaldisposal. 2This Petition under Article 226 of the Constitution of India,challenges a notice dated 27[th] March, 2018 issued under Section 148 ofthe Income Tax Act, 1961 (the Act) by the Respondent-Assessing Officer.The impugned notice seeks to re-open the assessment for Assessment Year2011-12. 3Brief facts leading to this Petition are as under:- (a)The Petitioner is a Limited Liability Partnership and is engaged inconstruction activity. For the Assessment Year 2011-12, thePetitioner filed its return of income on 15[th] September, 2011. In its return of income, the Petitioner declared an income of Rs.29.58lakhs from its project “Akshar Valencie” (project). However, thePetitioner claimed deduction of 100% of its income underSection 80IB of the Act. Thus, declaring its taxable income as “Nil”.(b)The Assessing Officer selected the return for scrutiny. During thescrutiny proceedings, the Assessing Officer called for details inrespect of bookings advance/ deposit as per the format, includingthe date of agreement and payment received till 31[st] March,2011.The Petitioner responded to the same, furnishing details as soughtfor by the Assessing Officer. Thereafter, the Assessing Officerverified the details as provided and passed an Assessment Order on26[th] March, 2014 under Section 143(3) of the Act, allowing 100%deduction under Section 80IB (10) of the Act, as claimed.(c)Thereafter, in support of the impugned re-opening notice, dated27[th] March, 2014, reasons as recorded were communicated to thePetitioner. The reasons read as under:- “The assessee firm has filed its return of income for A.Y.2011-12 on 30.09.2011 declared total income at Rs. Nil afterclaiming deduction u/s. 80IB at Rs.29,58,133/-. Subsequently,assessment order u/s. 143(3) of the I.T. Act, 1961 was passed on26.03.2014 accepted return of income declared by the assessee. Further, the case of assessee for A.Y. 2015-16 was selectedfor scrutiny. During the scrutiny assessment it is observed by theAO that the assessee firm has filed its return of income for the A.Y.2015-16 on 31.10.2015 declaring total income at Rs. Nil, afterclaiming deduction u/s. 80IB of the I.T. Act, 1961 atRs.103,83,468/-. During the course of assessment proceedings, it is evidentthat the project 'Valencia' is in violation of conditions stipulated inSection 80IB (10) (f) of the I.T. Act, 1961 wherein no individualor his/her spouse may own more than one residential unit in aproject claiming deduction under the aforementioned section. Since multiple flats have been registered/ allotted in the name ofsame individuals, it is amply clear that the assessee has been inviolation of express provisions of the act right from thecommencement of the project Valencia in year 2010. Attentionalso needs to be drawn to the fact that the violation of section80IB is not a one time event, rather the assessee has been floutingthe norms right from the commencement of the project in 2010 tothe year 2015. Also, it is worth noting that as many as 25 flatshave been registered and advances received from against four flatsin the said project 2010 to 2016 flouting the conditions stipulatedin section 80IB(10)(f). In view of the above facts and circumstances the deductionclaimed by the assessee firm under section 80IB of the I.T. Act,1961 to the tune of Rs.1,03,83,468/- for the year underconsideration was rejected and accordingly, an amount ofRs.1,03,83,468/- was considered as assessee's income frombusiness and added to the total income of the assessee. In view of the above facts and circumstances the deductionclaimed by the assessee firm under section 80IB of the I.T. Act,1961 to the tune of Rs.1,03,83,468/- for the year underconsideration was rejected and accordingly, an amount ofRs.1,03,83,468/- was considered as assessee's income frombusiness and added to the total income of the assessee. From the Index II of the flats registered by the assessee withsub-registrar, Uran, Panvel and on perusal of flat allotmentdetails submitted in this office on 16.11.2017, the following havebeen observed with regards to Project Valencia, Plot Number 9,Sector 16E Road Pali, Kalamboli, Navi Mumbai. The registration of the above flats was done in F. Y. 2010-11 in ther name of the same person in violation of the expressprovisions of section 80 IB (10)(f) of the I.T. Act, 1961. Further, it is evident from the case record for the A. Y.2011-12 that the assessee had claimed deduction u/s. 80IB of theI.T. Act, 1961 at Rs. 29,58,133/- which was allowed by the AOduring the scrutiny assessment for the A.Y. 2011-12 videassessment order u/s. 143(3) of the I. T. Act, 1961 dated26.03.2014. In view of the above, I have reason to believe that incomechargeable to tax which has escaped assessment to the tune ofRs.29,58,133/- (Rs. Twenty nine lakh fifty eight thousand onehundred thirty three only) chargeable to tax within the meaningof Explanation 2(c) of section 147 of the I. T. Act, 1961. As suchit is a fit case for issuance of notice u/s. 148 of the Income TaxAct, 1961. In this case, since more than four years have lapsed fromthe end of assessment year under consideration, hence necessarysanction to initiate proceedings u/s. 147 and to issue notice u/s.148 of the I. T. Act may be accorded as per provisions of section151 of the Income Tax Act.” (d)On 4[th] September, 2018, the Petitioner filed its objections to theabove reasons in support of the impugned notice dated 27[th] March, 2018.The Assessing Officer by an order dated 24[th] October, 2018, rejected thePetitioner's objection. 4This Petition has been filed, challenging the rejection of itsobjections by order dated 24[th] October, 2018 that the impugned noticedated 27[th] March, 2017 is without jurisdiction. 5Ms. Agarwal, learned Counsel appearing in support of thePetition, submits that the impugned notice is completely withoutjurisdiction as the same has been issued beyond a period of four yearsfrom the end of the relevant Assessment Year without having alleged anyfailure on the part of the Petitioner to disclose fully and truly all materialfacts necessary for assessment. It is further submitted that, in any case,the Assessing Officer had completely examined the Petitioner's case beforeextending the benefit of Section 80IB of the Act. The reasons in support ofthe impugned notice seek to deny the benefit on the ground that thePetition had not satisfied the conditions in Section 80IB (10)(f) of the Act. This issue had been examined during the Assessment Proceedings as isevident from the queries raised. Thus, the impugned notice is completelywithout jurisdiction and needs to be quashed and set aside. This issue had been examined during the Assessment Proceedings as isevident from the queries raised. Thus, the impugned notice is completelywithout jurisdiction and needs to be quashed and set aside. 6On the other hand, Mr. Mohanty, learned Counsel for theRevenue submits that the re-opening notice has been issued consequentto assessment order dated 26[th] December, 2017 passed for AssessmentYear 2015-16. It was submitted that during the assessment proceedingsfor Assessment Year 2015-16, the Assessing Officer found that thecommencement certificate in respect of the project was given only on 21[st]September, 2010. Thus, the allotment of the flat and receipt ofconsideration prior to 1[st] April, 2010 could not have been taken place.Consequently, the Petitioner could not have claimed the benefit of Section80IB (10)(f) of the Act, as the allotment and payments would have beenmade subsequent to the amendment w.e.f. 1[st] April, 2010 by which clause(f) to Section 80 IB (10) of the Act, was introduced. In the abovecircumstances, it is submitted that, there is no need to interfere with theimpugned notice and Petitioner be directed to respond to the notice andparticipate in the re-assessment proceedings. 7It is a settled position in law that where assessment has beencompleted by scrutiny under Section 143(3) of the Act, an assessmentcannot be reopened beyond a period of four years from the end of therelevant assessment year in the absence of any failure on the part of theassessee to disclose truly and fully all material facts necessary forassessment. This is the mandate of the first proviso to Section 147 of theAct. In the present case, it is undisputed position that the regularassessment for Assessment Year 2010-11was completed under Section wp-14302-2018 143(3) of the Act. The impugned notice has been issued on 27[th] March,2018 i.e. admittedly, beyond a period of four years from the end of therelevant Assessment Year 2010-11. Thus, the reasons in support of theimpugned notice in cases where assessments sought to be re-opened isbeyond a period of four years from the end of the relevant assessmentyear where assessment is completed u/s. 143(3) of the Act, must spell outthe exact failure on the part of the assessee which resulted in escapementof income. The reasons recorded in support of the impugned notice,alleges that the Petitioner is not entitled to the benefit of exemption underSection 80 IB (10) of the Act as from index II of the flats sold registeredwith the Registrar show that three flats have been sold to the same family.It is on the basis that, this sale was post insertion of section 80IB(10)(f)of the Act w.e.f. 1[st] April, 2010. However, we find that during regularassessment proceedings, for the subject Assessment Year 2011-12, thePetitioner had at the instance of the Assessing Officer given completedetails with regard to the purchase of the flat, the date of agreementof purchase of the flats and also date of possession to the AssessingOfficer. The same was examined by the Assessing Officer. At that time, theAssessing Officer was satisfied that the flats were sold prior to theamendment of 2010. It is consequent to the above that the AssessingOfficer passed an order dated 26[th] March, 2014 under Section 143 (3) ofthe Act and accepted Petitioner's claim for deduction under Section 80 IB(10) of the Act. Thus, in view of the above, the full and true disclosure atthe time of regular assessment, the impugned notice is withoutjurisdiction. 8It may be pointed out that at the hearing, the Respondentcontended that the assessment was re-opened on the basis of the 8It may be pointed out that at the hearing, the Respondentcontended that the assessment was re-opened on the basis of the assessment order for Assessment Year 2015-16 where it was found thatthe commencement certificate for the project was received only on 21[st]September, 2010 in the name of the Petitioner. Therefore, there was afailure on the part of the Petitioner to disclose fully and truly all materialfacts necessary for amendments. We find that, the reasons in support ofthe impugned notice, merely mentions about the Assessment forAssessment Year 2015-16. However, it does not mention of any failure todisclose the correct date of commencement being a fact which came to theknowledge of the Revenue while passing the Assessment Order forAssessment Year 2015-16. This fact, according to Mr. Mohanty is evidentfrom the Assessment Order for Assessment Year 2015-16 and it has to beread into the reasons given in support of the impugned notice. This,submission is contrary to the decision of this Court in Hindustan Leverv/s. R. B. Wadkar 268 ITR 332 – wherein this Court has held as under:- “The reasons recorded by the Assessing Officer nowherestate that there was failure on the part of the assesssee todisclose fully and truly all material facts necessary for theassessment of that assessment year. It is needless to mentionthat the reasons are required to be read as they were recordedby the Assessing Officer. No substitution or declaration ispermissible. No additions can be made to those reasons. Noinference can be allowed to be drawn based on reasons notrecorded. It is for the Assessing Officer to disclose and open hismind through reasons recorded by him. He has to speakthrough his reasons. It is for the Assessing Officer to reach theconclusions as to whether there was failure on the part of theassessere to disclose fully and truly all material facts necessaryfor his assessment for the concerned assessment year. It is forthe record in black and white. The reasons recorded should beclear and unambiguous and should not suffer from anyvagueness. The reasons recorded must disclose his mind. Thereasons are the manifestation of the mind of the AssessingOfficer. The reasons recorded should be self-explanatory andshould not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasonsrecorded must be based on evidence. The Assessing Officer, inthe event of challenge to the reasons, must be able to justify thesame based on material available on record. He must disclosein the reasons as to which fact or material was not disclosed bythe assessee fully and truly necessary for assessment of thatassessment year, so as to establish the vital link between thereasons and evidence. That vital link is the safe-guard againstarbitrary reopening of the concluded assessment. The reasonsrecorded by the Assessing Officer cannot be supplemented byfiling an affidavit or making an oral submission, otherwise, thereasons which were lacking in the material particulars wouldget supplemented, by the time the matter reaches the court, onthe strength of the affidavit or oral submissions advanced.” Thus, the submission of Mr. Mohanty not being a part of thereasons recorded, cannot be read into them, in the facts of this case. 9Therefore, in facts of this case, the reasons in support of theimpugned notice not having alleged/ particularized any failure on the partof the Petitioner to disclose fully and truly all material facts necessary forthe assessment, the impugned notice is without jurisdiction. 10Accordingly impugned notice is quashed and set aside.Petition allowed in the above terms. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)