MANDORA N DEVELOPERS, MUMBAI V. ITO WD 14(2)(4), MUMBAI

ITA 4444/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4973 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: A K SHARMA
• Keywords: Reopening of assessment; Depreciation; Audit objection; Retrospective amendment; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 80IB; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4444/MUM/2016 ASSESSMENT YEAR: 2007 - 08 M/S MANDORA N DEVELOPER B/602, ROYAL AMBER BLDG. MAMLEDAR WADI, MALAD (WEST), MUMBAI - 400064. VS. ITO WARD 14(2)(4), EARNEST HOUSE NARIMAN POINT, MUMBAI. PAN NO. AAAAM77832K APPELLANT RESPONDENT ASSESSEE BY : MR. A.K. SHARMA , AR REVENUE BY : MR. SATISH CHANDRA RAJORE , DR DATE OF HEARING : 14 /1 2 /2018 DATE OF PRONOUNCEMENT : 21/01/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2007 - 08. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 29 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE 1 ST GROUND RAISED IN THIS APPEAL IS GENERAL IN NATURE AND DOES NOT R EQUIRE ADJUDICATION. THE 2 ND GROUND IS AGAINST THE ORDER OF THE LD. CIT(A) UPHOLDING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT BY THE AO. IT IS TO THIS 2 ND GROUND OF APPEAL THAT WE ADVERT BELOW. M/S MANDORA N ITA NO. 4444/MUM/2016 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2007 - 08 ON 30.10.2007 DECLARING TOTAL INCOME AT RS. NIL, AFTER CLAIMING DEDUCTION U/S 80IB(10) OF RS.85,10,960/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 23.12.2009 ACCEPTING THE RETURNED INCOME AS NIL. THEREAFTER, THE AO REOPENED THE ASSESSMENT U/S 147 OF THE ACT AFTER RECORDING THE REASONS . THE SAME HAS BEEN SUMMARIZED BY THE AO AT PARA 4 AND 5 OF HIS REASSESSMENT O RDER DATED 14.11.2014, WHICH ARE AS UNDER: 4. WHILE GOING THROUGH THE DOCUMENTS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT ASSESSEE DID NOT FULFIL CRITERIA/CONDITION FOR AVAILING OF DEDUCTION U/S 80IB OF THE I.T. ACT, 1961 ON THE POINTS MENTIONED HEREUNDER: (I) THE ASSESSEE DID NOT ENGAGE HIMSELF IN THE DEVELOPING AND BUILDING OF THE PROJECT SHIV DARSHAN AT SITE BUT MERELY MADE CONTRACT WITH A DEVELOPER/CONSTRUCTOR I.E. M/S AASHIYANA CONSTRUCTION, PRABHADEVI, MUMBAI - 25 TO EXECUTE THE DEVELOPING AND BUILDING ACTIVITIES OF THE HOUSING PROJECT. (II) THE TOTAL AREA OF THE PLOT NO. 2225 & 2226 OF THE HOUSING PROJECT SHIV DARSHAN IS 467.39 SQ. M TS. WHICH IS LESS THAN 1 A CRE (1 A CRE=4000 SQ. M TS.). (III) IT IS NOTICED THAT THE BUIL T UP AREA OF A RESIDENTIAL UNIT ALLOTTED TO A PURCHASER I.E. SHRI GANDHI, IS 1020 SQ. F TS. IN THE PROJECT SHIV DARSHAN AT GIRGAON, MUMBAI - 2. (IV) THE HOUSING PROJECT SHIV DARSHAN AT PLOT NO. 2225 & 2226 IS PERMITTED FOR DEVELOPMENT AND RECONSTRUC TION BY MUMBAI BUILDING REPAIR & RECONSTRUCTION BOARD AND NOT BY THE SLUM REDEVELOPMENT AUTHORITY, B.K.C., MUMBAI - 51. ALSO THERE IS NO EVIDENCE ON RECORD IF THE AREA IS THE PROJECT SHIV DARSHAN AT GIRGAON, MUMBAI - 2 WAS DECLARED AS SLUM AREA UNDER ANY LAW AND WHETHER THERE EXISTS ANY SCHEME NOTIFIED BY THE BOARD IN THIS BEHALF. M/S MANDORA N ITA NO. 4444/MUM/2016 3 5. HENCE, KEEPING IN VIEW OF THE ABOVEMENTIONED POINTS, THE AO HAS REASON TO BELIEVE THAT THE ASSESSEES CLAIM OF DEDUCTION OF INCOME OF RS.85,10,960/ - FOR AY 2007 - 08 UNDER SECTION 80IB(10) WAS WRONGLY ALLOWED. THEREFORE, THE CASE WAS REOPENED U/S 147 OF THE I.T. ACT, 1961 AFTER RECORDING THE REASONS AND AFTER TAKING PRIOR APPROVAL FROM CIT - 14, MUMBAI. 4. IN APPEAL, THE LD. CIT(A) UPHELD THE REOPENING MADE BY THE AO ON THE REASON TH AT IN THE ASSESSMENT U/S 143(3), NONE OF THE FACTS MATERIAL FOR COMPLETION OF ASSESSMENT HAVE BEEN DISCLOSED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME , COPY OF NOTICE U/S 143(2), 142(1) WITH QUERY SHEET FOR ASSESSMENT YEAR 2006 - 07, (II) COPIES OF LETTER DATED 21.01.2008, 31.01.2008 AND 12.02.2008 ADDRESSED TO ASSESSING OFFICER SUBMITTED DURING ASSESSMENT PROCEEDINGS FOR AY 2006 - 07, (III) COPY OF NOTICE OF DEMAND, ASSESSMENT ORDER AND TAX CALCULATIONS FOR ASSESSMENT YEAR 2007 - 08, (IV) COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME, COPY OF NOTICE U/S 143(2), 142(1) WITH QUERY SHEET FOR ASSESSMENT YEAR 2007 - 08, (V) COPIES OF LETTER DATED 21.08.2008 AND 03.11. 2009 ADDRESSED TO ASSESSING OFFICER SUBMITTED DURING ASSESSMENT PROCEEDINGS FOR AY 200 7 - 0 8 , (VI) ) COPY OF NOTICE OF DEMAND, ASSESSMENT ORDER AND TAX CALCULATIONS FOR ASSESSMENT YEAR 2007 - 08, (VII) COPY OF LETTER DATED 07.08.2012 (AUDIT OBJECTION), (VIII) COPY OF REPLY TO AUDIT OBJECTION, (IX) COPY OF SHOW CAUSE NOTICE DATED 16.12.2013, (X) COP IES OF VARIOUS CORRESPONDENCE UNDER RTI WITH DOCUMENTS, (XI) COPY OF NOTICE U/S 148, (XII) COPY OF LETTER DATED 18.04.2013 WITH ALLEGED SANCTION FROM CIT, (XIII) COPY OF LETTER DATED 17.01.2014 WITH COPY OF REASONS RECORDED FOR REOPENING (XIV) COPIES OF M/S MANDORA N ITA NO. 4444/MUM/2016 4 VA RIOUS CORRESPONDENCES, (XV) COPY OF MAHARASHTRA SLUM AREA ACT 1971 WITH RULES, (XVI) COPY OF SCHEDULE GIVING DETAILS OF SERVICE OF VARIOUS NOTICES AND (XVII) COPY OF WRITTEN SUBMISSION FILED BEFORE CIT(A). THE LD. COUNSEL FILES A CERTIFICATE STATING THAT THE ABOVE DOCUMENTS WERE FILED BEFORE THE LOWER AUTHORITIES. RELIANCE IS ALSO PLACED BY HIM ON THE DECISION IN CIT V. PRIMA PAPER & ENGINEERING INDUSTRY (2014) 364 ITR (BOM), INDIAN & EASTERN NEWSPAPER V. CIT 1979 AIR 1960, CIT V. CHETAN GUPTA (2015) 62 TAXMANN.COM 249 (DELHI). 6. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE CIT(A) STATING THAT IN THE INSTANT CASE NONE OF THE FACTS MATERIAL FOR COMPLETION OF THE ASSESSMENT HAVE BEEN DISCL OSED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT U/S 143(3) OF THE ACT. IT IS FURTHER SUBMITTED THAT EVEN DURING THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) THE ASSESSEE WAS RELUCTANT TO FURNISH ANY KIND OF EVIDENCE ON MERITS. THUS THE LD. DR SUBMI TS THAT THE ORDER PASSED BY THE LD. CIT(A) BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORDS. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE HAVE EXTRACTED AT PARA 3 HEREINBEFORE, THE REASONS RECORDED BY THE AO AND SUMMARIZED BY IN PARA 4 OF THE ASSESSMENT ORDER DATED 14.11.2014. THE AO HAS STARTED WITH THE SENTENCE WHILE GOING THROUGH THE DOCUMENTS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE DID NOT FULFIL CRIT ERIA/CONDITION FOR M/S MANDORA N ITA NO. 4444/MUM/2016 5 AVAILING OF DEDUCTION U/S 80IB OF THE I.T. ACT, 1961 ON THE POINTS MENTIONED HEREUNDER. THE ASSESSMENT YEAR HERE IS 2007 - 08. THE AO HAS ISSUED NOTICE U/S 148 ON 08.05.2013, WHICH IS BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSES SMENT YEAR. AT THIS JUNCTURE WE MAY REFER TO THE LEGAL POSITION IN THE FACTUAL SCENARIO OF THE CASE. IN THE CASE OF PRIMA PAPER & ENGINEERING INDUSTRY (SUPRA), IN THE ORIGINAL ASSESSMENT FOR THE AY 2001 - 02, THE ASSESSEE WAS ALLOWED A DEDUCTION U/S 80 - IA IN COMPUTING THE INCOME ON ACCOUNT OF ITS WIND MILL PROJECT. THEREAFTER, U/S 147/148, THE AO REOPENED THE ASSESSMENT ON THE GROUND THAT THE DEDUCTION U/S 80 - IA WAS WRONGLY ALLOWED AND REDUCED THE DEDUCTION U/S 80 - IA AND CONSEQUENTLY, RE - DETERMINED THE TOTA L INCOME. THE CIT(A) UPHELD THE ORDER OF THE AO. THE TRIBUNAL HELD THAT THE RE - OPENING OF THE ASSESSMENT FOR THE AY 2001 - 02 WAS BAD IN LAW. THIS WAS ON ACCOUNT OF THE FACT THAT THE RE - OPENING OF ASSESSMENT WAS A MERE CHANGE OF OPINION. THE AO DURING THE CO URSE OF ORIGINAL ASSESSMENT PROCEEDING HAD SPECIFICALLY INQUIRED INTO THE CLAIM OF ASSESSMENT FOR DEDUCTION ON ACCOUNT OF THE WIND MILL PROJECT MADE U/S 80 - IA(4) OF THE ACT. ON APPEAL, THE HONBLE HIGH COURT HELD, DISMISSING THE APPEAL THAT THE REVENUE DID NOT DISPUTE THE FACT THAT THE ISSUE WITH REGARD TO WHICH THE REOPENING WAS SOUGHT TO BE DONE WAS THE SUBJECT MATTER OF DISCUSSION AND DELIBERATION BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL PROCEEDINGS. THUS, THE ASSESSING OFFICER DID HAVE OCCASI ON TO APPLY HIS MIND TO THE DEDUCTION CLAIMED BY THE ASSESSEE BEFORE ALLOWING THE DEDUCTION. THE OBJECTION OF THE REVENUE THAT THERE WAS NO OPINION FORMED DURING THE M/S MANDORA N ITA NO. 4444/MUM/2016 6 ORIGINAL ASSESSMENT PROCEEDINGS AND IT DID NOT DEAL WITH THE DEDUCTION WAS UNSUSTAINABLE. THE MERE FACT THAT THE ASSESSMENT ORDER DID NOT DISCUSS THE ISSUE OF DEDUCTION UNDER SECTION 80 - IA(4) WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSING OFFICER HAD MADE NO OPINION WITH REGARD TO THE ISSUE. THE TRIBUNAL HAD REACHED A FINDING OF FACT THAT THE QUESTION WITH REGARD TO THE CLAIM FOR DEDUCTION U/S 80 - IA WAS RAISED BY THE ASSESSING OFFICER AND RESPONDED TO BY THE ASSESSEE. THIS POSITION WAS ALSO NOT DISPUTED BY THE REVENUE. MERELY BECAUSE THE ISSUE WAS NOT DISCUSSED IN THE ASSESSMENT ORDER WOULD NOT LEAD TO A CONCLUSION THAT NO OPINION WAS FORMED AS TO THE SUBJECT OF THE QUERY. THEREFORE, THE REASSESSMENT WAS INVALID. TO SUMMARIZE, THE HONBLE HIGH COURT HELD THAT THE POWER TO REOPEN AN ASSESSMENT IS NOT A POWER OF REVIEW AND A MERE CHANGE OF OPINION WOULD NOT JUSTIFY THE REOPENING OF AN ASSESSMENT. THIS WOULD APPLY EVEN WHEN THE ASSESSMENT IS SOUGHT TO BE REOPENED WIT HIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. 7.1 NOW WE TURN TO THE FATE OF NOTICE U/S 148 ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. AS PER PROVISO TO SECTION 147, WHERE AN ASSESSMENT U/S 143(3) OR 147 HAS ALREADY BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION U/S 147 IS POSSIBLE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E TO: (A) MAKE A RETURN U/S 139 OR IN RESPONSE TO A NOTICE U/S 142(1)/148; OR (B) DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. M/S MANDORA N ITA NO. 4444/MUM/2016 7 7.2 IN THE CASE OF DIL LTD. V. ACIT (2012) 343 ITR 296 (BOM), IT HAS BEE N HELD BY THE HONBLE BOMBAY HIGH COURT THAT NOTWITHSTANDING THE RETROSPECTIVE AMENDMENT OF LAW, WHERE THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL FACTS NECESSARY FOR ASSESSMENT, NOTICE CANNOT BE ISSUED AFTER FOUR YEARS . ONCE THE CASE IS EARLIER SCRUTINIZED AND ASSESSED U/S 143(3) AND FOUR YEARS HAVE PASSED SINCE THE END OF THE RELEVANT ASSESSMENT YEAR, THE CASE WILL BE COVERED BY THE CONDITION STIPULATED IN THE PROVISO TO SECTION 147 AND THE AO HAS TO ADDITIONALLY RECO RD THE FINDING NOT ONLY THE REASON TO BELIEVE ABOUT THE ESCAPEMENT OF CHARGEABLE INCOME BUT ALSO THE FACT THAT SUCH ESCAPEMENT IS ON ACCOUNT OF OMISSION OR COMMISSIONS ATTRIBUTABLE TO THE ASSESSEE CONCERNED. ALSO IN I.C.I.C.I. BANK LTD. V. K.J. RAO (2004 ) 268 ITR 203 (BOM), IT IS HELD THAT HAVING FURNISHED ALL MATERIAL FACTS, EVEN IF AN ASSESSEE ERRONEOUSLY CLAIMS HIGHER DEPRECIATION AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER, IT WILL NOT BE A CASE OF FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS. HENCE, ASSESSMENT CANNOT BE REOPENED BEYOND FOUR YEARS. FURTHER, IN HINDUSTAN PETROLEUM CORPORATION LTD. V. DEPUTY CIT (2011) 238 CTR 28 (BOM), IT IS HELD THAT THE ASSESSEE HAVING CLAIMED DEDUCTION U/S 80IA, IN RESPECT OF THE PROFITS MADE BY ITS CAPTIVE POWER PLANT DISCLOSING COMPUTATION OF PROFITS AND EXPLAINING THE BREAK UP THEREOF AND DISCLOSED THE BASIS ON WHICH IT WAS CLAIMED DEDUCTION U/S 80IB, IN RESPECT OF THE REFINERY EXPANSION PROJECT AND LUBE UNIT, IT CANNOT BE SAID THAT THERE WAS A FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE M/S MANDORA N ITA NO. 4444/MUM/2016 8 FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND THEREFORE, REOPENING OF ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT YEAR WAS NOT JUSTIFIED. IN CIT V. INDIAN FARMERS FERTILIZ ER CO - OP LTD . (2008) 171 TAXMAN 379 (DEL), IT IS HELD THAT WHERE THE REASONS RECORDED FOR REOPENING OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, DO NOT CONTAIN AN ALLEGATION THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THE NOTICE U/S 148 IS NOT VALID. EXAMINED ON THE TOUCHSTONE OF THE RATIO LAID DOWN IN THE CASES DELINEATED HEREINBEFORE, WE FIND THAT IN THE INSTANT CASE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL FACTS NECESSARY FOR ASSESSMENT. T HEREFORE NO ACTION CAN BE TAKEN BY THE AO U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THEREFORE, WE HOLD THE REASSESSMENT TO BE INVALID. AS THE REASSESSMENT IS HELD BY US TO BE INVALID, THERE IS NO NEED OF ADJUDICATING ON MERIT THE OTHER GROUNDS OF APPEAL FILED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/01/2019. SD/ - SD/ - (C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 21/01/2019 RAHUL SHARMA, SR. P.S. M/S MANDORA N ITA NO. 4444/MUM/2016 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI