Silver Oak Realty (formerly known as Mehta & Modi Homes), Hyderabad, Secunderabad V. DCIT, Circle-10(1), Hyderabad, Hyderabad

ITA 679/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2257 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J DIVYA
• Assessee Lawyers: S RAMA RAO
• Keywords: Audit objection; Tangible material; Difference of opinion; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 679/ HYD/ 2017 ASSESSMENT YEAR: 20 08 - 09 SILVER OAK REALTY (FORMERLY KNOWN AS MEHTA & MODI HOMES, HYDERABAD. PAN: AAJFM 0647 C VS. DCIT, CIRCLE - 10(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SMT K.J. DIVYA, DR DATE OF HEARING: 06.08 .2018 DATE OF PRONOUNCEMENT: 02 .1 1 .2018 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2008 - 09 AGAINST THE ORDER OF THE CIT(A) - 6, HYDERABAD DATED 24.01.2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM , ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. DURING THE RELEVANT ASSE SSMENT YEAR, THE ASSESSEE WAS CONSTRUCTING INDEPENDENT RESIDENTIAL UNITS. ASSESSEE FILED ITS RETURN OF INCOME ON 27.09.2008 DECLARING TOTAL INCOME OF RS. 76,34,100/ - AFTER CLAIMING DEDUCTION OF RS. 2.69 CRS U/S 80IB(10) OF THE ACT. THE RETURN WAS PROCESS ED U/S 143(1) OF THE ACT ON 02.09.2009 AND SUBSEQUENTLY REOPENED U/S 147 OF THE 2 ACT AFTER RECORDING REASONS. ACCORDINGLY NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE. 3. ASSESSEE FILED ITS REPLY ON 10.04.2013 REQUESTING TO TREAT THE RETURN FILE D ON 27.09.2008 AS HAVING BEEN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT AND SOUGHT FOR THE REASONS RECORDED. ASSESSEE FILED ITS OBJECTIONS TO PROCEEDINGS U/S 147 OF THE ACT WHICH WERE DISPOSED OF BY THE A.O. VIDE A SEPARATE ORDER DATED 11.03.2013. T HEREAFTER, THE A.O. PROCEEDED TO CONSIDER THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. HE OBSERVED THAT THE ASSESSEE HAD CONSTRUCTED INDEPENDENT DUPLEX VILLAS COMPRISING OF GROUND AND 1 ST FLOOR S IN EACH OF THE VILLA S AND THAT THE GROUND FLOOR COMPRISES LIVING ROOM, DINING AREA, ONE BED ROOM AND ATTACHED TOILET, K I TCHEN, A COVERED PORTICO AND A GARDEN WHILE THE 1 ST FLOOR COMPRISES OF TWO BED ROOM S WITH ATTACHED TOILET, STUDY ROOM, STAIR CASE AND A BALCONY. HE OBSERVED THA T THE BUILT UP AREA MEASUREMENT REPORTED BY THE ASSESSEE DID NOT INCLUDE THE COVERED PORTICO OF THE GROUND FLOOR AND THE BALCONY ON THE 1 ST FLOOR. ACCORDING TO THE A.O., THESE TWO ALSO FORM PART OF THE BUILT UP AREA AND IF THESE ARE ADDED, THE AREA OF EAC H VILLA EXCEEDED 1500 SQ. FT AND THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. HE ACCORDINGLY, DISALLOWED. 4 . AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - 6, HYDERBAD ERRED IN DISMISSING THE APPEAL OF THE APPELLANT ON THE QUESTION OF THE VALIDITY OF THE REASSESSMENT PROCEEDINGS IN ITIATED BY THE ASSESSING OFFICER AND THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB. RE - ASSESSMENT U/S 147 IS NOT VALID: 3 2. THE CIT FAILED TO APPRECIATE THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 IS WITHOUT JURISDICTION AS THE LD A.O. HAS NOT BROUGHT ON RECORD ANY FRESH TANGIBLE MATERIAL ON RECORD AND THEREFORE IS INVALID, BAD IN LAW AND IS LIABLE TO BE QUASHED. 3. THE CIT OUGHT TO HAVE APPRECIATED THAT FOR INITIATING REASSESSMENT U/S 147, THE REASON FOR THE ASSESSING OFFICER TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT SHOULD BE BORNE OUT OF MATERIAL AND A MERE CHANGE OF OPINION WILL NOT BE SUFFICIENT TO JUS TIFY THE REASSESSMENT PROCEEDINGS. 4. THE CIT OUGHT TO HAVE APPRECIATED THAT THE ONLY REASON FOR REOPENING THE ASSESSMENT OF THE APPELLANT IS A REVENUE AUDIT OBJECTION RAISED BY THE CAG. THE APPELLANT HAS FILED APPLICATION TO CAG UNDER THE RTI ACT, AND H AS OBTAINED THE COPIES OF THE CORRESPONDENCE BETWEEN THE INCOME TAX DEPT., AND THE CAG. THE CORRESPONDENCE IS CLINCHING EVIDENCE TO SHOW THAT THE ASSESSMENT HAS BEEN REOPENED BECAUSE OF THE REVENUE AUDIT OBJECTION. DEDUCTION U/S 80IB: 5. WITHOUT PREJUDI CE TO GROUNDS RAISED ON REOPENING, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT HAS ERRED IN UPHOLDING THE DECISION OF THE LD. A.O. IN HOLDING THAT THE BUILT UP AREA OF EACH RESIDENTIAL UNIT EXCEEDS 1500 SFT AND THE PROFITS DERIVED FROM THE HOUSING PROJECT DO NOT QUALIFY FOR DEDUCTION U/S 80IB(10) OF THE ACT. 6. THE CIT OUGHT TO HAVE APPRECIATED THAT THERE WERE NO WALLS SURROUNDING THE PORTICO AREA AND THE SAME CANNOT BE INCLUDED FOR COMPUTING THE BUILT UP AREA. 7. THE CIT OUGHT TO HAVE APPRECIATED THAT THE PORTICO AND THE OPEN TO SKY TERRACE CANNOT BE SAID TO BE A BALCONY OR A PROJECTION SO AS TO INCLUDE THOSE AREAS IN THE COMPUTATION OF THE BUILT UP AREA. 8. THE CIT OUGHT TO HAVE APPRECIATED THE FACT THAT BALCONY AND PROJECTIONS HAVE NOT BEEN DEFINED UNDER THE IT ACT AND THEREFORE THE MEANINGS OF THE SAME ARE TO BE ADOPTED AS GENERALLY UNDERSTOOD IN THE LINE OF BUSINESS AND THE RELEVANT RULES AND STANDARDS GOVERNING THE REAL ESTATE BUSINESS. 9. THE CIT OUGHT TO HAVE APPRECIATED THAT THE COMPU TATION OF COVERED AREA (BUILT UP AREA) AS SANCTIONED BY THE CONCERNED AUTHORITIES FOR THE BUILDING PLAN HAVE ALSO EXCLUDED THE PORTICO AND OPEN TERRACE FOR COMPUTING THE BUILT UP AREA. 10. THE CIT OUGHT TO HAVE APPRECIATED THAT THE BUILT UP AREA OF THE RE SIDENTIAL HOUSES EXCEEDED 1500 SFT ONLY IF THE AREA OF 4 THE PROJECTED TERRACE AND PORTICO WERE INCLUDED AND NOT OTHERWISE. 11. THE CIT OUGHT TO HAVE APPRECIATED THE ORDER OF THE HONBLE HIGH COURT IN W.P. NO.27488 OF 213 WHEREIN THE HONBLE COURT HAS HELD THAT ANY ADVERSE ORDER SHALL NOT BE GIVEN EFFECT WITHOUT THE LEAVE OF THE HONBLE COURT. 5 . AS REGARDS GROUNDS NO.2 TO 4 ARE CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH THE INITIAL ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT, THE A.O COULD NOT HAVE REOPENED THE ASSESSMENT UNLESS HE HAD FRESH TANGIBLE MATERIAL BEFORE H IM TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND THAT SUCH A REOPEN ING U/S 147 OF THE ACT WOULD BE ON A MERE CHANGE OF OPINION. HE ALSO DREW OUR ATTENTION TO THE FACT THAT THE REOPENING OF THE ASSESSMENT IS ON ACCOUNT OF AUDIT OBJE CT ION RAISED BY THE CAG AND THEREFORE, ACCORDING TO HIM THE A.O. HAS NOT INDEPENDENTLY FORMED ANY OPINION THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND HENCE, REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT IS NOT SUSTAINABLE. 6 . LEARNED DEPARTMENTAL REPRESENTATIVE , HOWEVER , SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7 . HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE REOPENING OF THE ASSESSMENT IS WITHIN A PERIOD OF 4 YEARS FROM THE END OF T HE RELEVANT ASSESSMENT YEAR AND THE INITIAL ASSESSMENT WAS U/S 143(1) AND NOT U/S 143(3) OF THE ACT. AS REGARDS THE CHANGE OF OPINION IS CONCERNED, WE FIND THAT THE A.O. HAS PERUSED THE ASSESSMENT RECORD TO OBSERVE THAT THE BUILT UP AREA OF EACH OF THE R ESIDENTIAL UNIT S IS MORE THAN 1500 SQ. FT AND THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80I B (10) OF THE ACT. THEREFORE, IT IS CLEAR THAT THE FORMATION 5 OF BELIEF IS FROM THE MATERIAL ON RECORD ONLY AND THAT NO FRESH TANGIBLE MATERIAL HA D COME TO THE KNOWLEDGE OF THE A.O. TO REOPEN THE ASSESSMENT. THE HONBLE DELHI HIGH COURT IN THE CASE OF ORIENT CRAFT LTD REPORTED IN 354 ITR 536 (DELHI) , HAS CLEARLY HELD THAT EVEN AN ASSESSMENT DONE U/S 14 3(1) OF THE ACT, CAN BE REOPENED U/S 147 OF THE ACT, ONLY IF THE ASSESSING OFFICER HA D TANGIBLE MATERIAL WHICH HAS COME TO H IS KNOWLEDGE , SUBSEQUENT TO SUCH AN ASSESSMENT U/S 143(1) OF THE ACT. THE RELEVANT PARAS OF THE SAID JUDGMENT ARE REPRODUCED HEREUNDER FOR READY REFERENCE: - HELD, DISMISSING THE APPEAL, THAT THE REASONS DISCLOSED THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHI NG MORE. THIS WAS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER. THE REASONS RECORDED BY THE ASSESSING OFFICER DID CONFIRM THE APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS RE ASON TO BELIEVE VIS - - VIS AN INTIMATION ISSUED UNDER SECTION 143(1) COULD CAUSE TO THE TAX REGIME. THERE WAS NOTHING IN THE REASONS RECORDED TO SHOW THAT ANY TANGIBLE MATERIAL HAD COME INTO THE POSSESSION OF THE ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. THE NOTICE REFLECTED AN ARBITRARY EXERCISE OF THE POWER CONFERRED UNDER SECTION 147. 8. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE REOPENING OF THE ASSESSMENT WHICH IS COMPLETED U/S 143(1) OF THE ACT IS NOT SUSTAINA BLE WITHOUT THERE BEING ANY TANGIBLE MATERIAL THAT HAS COME TO THE KNOWLEDGE OF THE A.O. SINCE THE ASSESSMENT ITSELF HAS BEEN HELD AS NOT SUSTAINABLE, THE ISSUE ON MERI TS IS NOT ADJUDICATED AT THIS STAGE AS IT WOULD ONLY BE AN ACADEMIC EXERCISE. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 02 ND NOVE MBER , 2018. SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 02 ND NOVEMBER , 2018 6 OKK COPY TO: - 1) M/S. SILVER OAK REALTY, D.NO.5 - 4 - 187/3 & 4, SOHAM MANSION, M.G. ROAD, SECUNDERABAD 500003. 2) DCIT, CIRCLE - 10(1), I.T. TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD - 4. 3) THE CIT(A) - 6, HYDERABAD 4) THE PR. CIT - 6, HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE