DCIT CEN CIR 7(3), MUMBAI V. LODHA CONSTRUCTION (DOMBIVALI), MUMBAI

ITA 7041/MUM/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5688 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 02-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BRAJENDRA KUMAR
• Keywords: Business income; Search and seizure; Tangible material; Wrong claim; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 43B; 143(3); 40(a)(ia); 80IB; 43D; 22; 148

Judgement Text

ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI S.RIFAUR RAHMAN (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA NO.7041/MUM/2016 (ASSESSMENT YEAR: 2009 - 10 ) DCIT, CENTRA L CIRCLE - 7(3) ROOM NO. 655, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S LODHA CONTRUCTION (DOMBIVALI) ,216, SHAH AND NAHAR INDUSTRIAL ROAD, OFF. DR.E.MOSES ROAD, WORLI, MUMBAI 400 018 PAN NO. AABFL3409M (ASSESSEE) (REVENUE) ASSESSEE BY : SHRI BRAJENDRA KUMAR, D .R REVENUE BY : MS. AARTI SATHE , A .R DATE OF HEARING : 21/01/2021 DATE OF PRONOUNCEMENT : 28 /01/2021 ORDER PER RAVISH SOOD, J.M: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER P A SSED BY THE CIT(A) - 49, MUMBAI , DATED 02.09.201 6 , WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 31.03.2015 . THE REVENUE HAD ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CTT(A) ERRED IN HOLDING THAT THE REASO N TO BELIEVE RECORDED BY THE AS SESSING OFFICER IS MERELY ON ACCOUNT OF CHANGE OF OPINION SINCE THE CASE HAS BEEN REOPENED ON THE VERY SAME FACTS WHICH HAVE BEEN VIEWED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE ASSESSMENT ORDER HAS BEEN PASSED AFTER CONSIDERING THE SAME, WITHOUT APPRECIATING THE FACT THAT THERE WERE REASONS TO ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 2 BELIEVE AS RECORDED BY THE ASSESSING OFFICER THAT INCOME HAD ESCAPED ASSESSMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE NOTICE U/S 148 DATED 18.02.2014 IS WITHOUT JURISDICTION AND FURTHER ERRED IN QUASHING THE NOTICE U/S 148 & THE ORDER U/S 143(3) READ WITH SECTION 147 DATED 31.03.2015. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE T HAT THE ISSUE AS TO WHETHER THE ASSESSEE IS ENTI TLED TO DEDUCTION U/S 80 - IB(10) ON THE EXPENSES WHICH HAVE BEEN DISALLOWED DUE TO NON COM PLIANCE OF CERTAIN PROVISIONS OF THE INCOME TAX ACT, 1961 WAS NEVER EXAMINED BY THE ASSESSING OFFICER IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS RELEVANT TO ITS ASSESSMENT IS REQUIRED TO BE ESTABLISHED ONLY IN A CASE WHERE THE ASSESSMENT IS BEING REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ASSESSMENT CAN BE REOPENED ON THE SAM E SET OF FACTS WITHIN A PERIOD OF FOUR YEARS IF THE ISSUE HAS NOT BEEN EXAMINED AND AN OPINION FORMED BY THE ASSESSING OFFICER. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) - 49, MUMBAI ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND AND/OR ADD NEW GROUNDS WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION HAD FILED ITS RETURN OF INCOME FO R A.Y. 2009 - 10 ON 30/09/2009, DECLARING A TOTAL INCOME OF RS. NIL ( A FTER CLAIMING DEDUCTION U/S 80IB(10) OF RS. 21,60,28,130/ - ). SUBSEQUENTLY, THE RETURN OF INCOME WAS R E VISED BY THE ASSESSEE ON 24/11/2010 AT AN INCOME OF RS. NIL (AFTER CLAIMING DEDUCTION U/S 80IB( 1 0) OF RS. 22,03,1 5 ,987/ - ) . ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLETED ON 27/12/2011 DETERMINING THE TOTAL INCOME OF THE ASSESSEE OF RS. NIL . 3. THE CASE OF THE ASSESSEE WAS THEREAFTER REOPENED BY TH E A . O U/S 147 OF THE ACT. AFTER THE NOTICE ISSUED U/S 148 OF THE ACT, DATED 18.02.2014 WAS COMPLIED WITH BY THE ASSESSEE, THE COPY OF THE REASONS TO BELIEVE ON THE BASIS OF WHICH ITS CASE WAS REOPENED WERE MADE AVAILABLE TO IT , WHICH READ AS UNDER: : ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 3 'IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ON 27 TH DECEMBER, 2011 AT A TOTAL INCOME OF RS.NIL . ASSESSEE HAS FILED RETURN OF INCOME ON 30.09.2009 AND REVISED RETURN ON 24.11.2010 DECLARING TOTAL INCOME AT RS. NIL IN BOTH THE RETURNS. THE ORIGINAL RETURN WAS FILED DECLARING BUSINESS INCOME AT RS.21,60,28,130/ - WHEREAS REVISED RETURN OF INCOME WAS FI LED DECLARING TOTAL INCOME AT RS.22,03,15,987/ - . IN BOTH THE RETURNS, THE ASSESSEE CLAIMED DEDUCTION U/S. 8013(10). PERUSAL OF THE RECORDS REVEAL THAT FOR THE PERIOD UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TOTAL SALES OF RS.57,93,17,617/ - AND NET PROFIT OF RS.21,59,65,444/ - AS PER P/L ACCOUNT WAS SHOWN. AS PER THE COMPUTATION OF INCOME, NET PROFIT FROM BUSINESS ACTIVITY OF RS.21,59,65,444/ - WAS INCREASED TO RS.22,03,15,987/ - BY WAY OF RS. 72,7337 - ON A/C. OF DISALLOWANCE U/S.40(A), RS. 38, 62,2207 - ON AC COUNT OF DISALLOWANCE U/S.40(A)(IA), AND RS.1,19,937/ - ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF, RS. 62, 6877 - ON ACCOUNT OF DISALLOWANCE U/S.43B AND RS.2,60,767/ - ON ACCOUNT OF DONATION. THE DEDUCTION U/S.80IB HAS BEEN CLAIMED ON GROSS TOTAL INCOME OFRS .22,03, 15,987/ - . IT IS SEEN THAT THE PROFIT AS PER P & L A/C. OF RS.21.59 CRORES IS INCLUSIVE OF INCOME ACCOUNTED FOR AS OTHER INCOME OF RS. 23, 50, 1 15/ - . SECTION 80IB CLEARLY STIPULATES THAT AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPR OVED BEFORE 31.03.01 BY THE LOCAL AUTHORITY SHALL BE ENTITLED TO AVAIL 100% DEDUCTION OF THE PROFITS DERIVED FROM SUCH HOUSING PROJECTS. THE NET PROFIT OF 2009 - 10 IS INCLUSIVE OF OTHER INCOME OF RS.23,50, 1 15/ - VIZ. INCOME NOT RELATED TO THE BUILDING OF H OUSING PROJECTS. THIS INCOME IS NOT ELIGIBLE FOR ANY SUCH DEDUCTION U/S.80IB AND SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE I.T. ACT, 1961. FAILURE TO DO SO HAS RESULTED IN ESCAPEMENT OF INCOME TO THAT EXTENT. FURTHER, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB THE EXTENT OF RS.22,03,15,987/ - . NET PROFIT FROM BUSINESS ACTIVITY IS ONLY RS.21,59,65,444/ - AND THE SAME HAS BEEN INCREASED TO A GROSS TOTAL INCOME OF RS.22,03,15,987/ - , RS.72,733/ - ON A/C. OF DISALLOWANCE U/S.40(A), RS.3Q.62.220/ - ON A/C. OF DISALLOWANCE U/S.40(A)IA), AND RS.1,19,937/ - ON A/C. OF EMPLOYEES CONTRIBUTION TO PF RS.62,687/ - ON ACCOUNT OF DISALLOWANCE U/S.43B AND RS.2,60,767/ - ON ACCOUNT OF DONATION. THESE DISALLOWANCES DO NOT FA LL IN THE CATEGORY OF ELIGIBLE PROFITS DERIVED FROM THE BUSINESS ACTIVITY OF CONSTRUCTION OF BUILDINGS, HENCE, THESE DO NOT QUALIFY FOR DEDUCTION U/S.80LB OF THE I.T. ACT, 1961. THE DEDUCTION U/S.80IB IS A 'PROFIT LINKED INCENTIVE' ADMISSIBLE TO ONLY THE ELIGIBLE BUSINESS OF THE ASSESSES. HERE THE ASSESSES IS DOING A BUSINESS OF BUILDING AND CONSTRUCTION AND THE PROFIT RESULTING FROM THE SAID ACTIVITY CAN ONLY BE CLAIMED AS DEDUCTION, WHICH IN THE INSTANT CASE IS RS.21,59,65,444/ - . THE AMOUNT OF RS.38,62,2 20/ - , RS.72,733/ - AND RS.1,19,937/ - , RS.62,867/ - AND RS. 2,60,7677 - WHICH HAS BEEN CLAIMED ADDITIONALLY, IS BECAUSE OF VIOLATION OF PROVISIONS OF SECTION 40(A)(IA) AND SECTION 4 0 (A), SECT I ON 36(I) AND SECT/ON 43B OF THE I.T. ACT , 1961 AND ON A/C. OF DONATION RESPECTIVELY, WHICH IS NOT A PROFIT DERIVED FROM ACTIVITY OF THE ELIGIBLE UNDERTAKING AND HENCE IS NOT ATTRIBUTABLE TO THE PROFIT OF THE ELIGIBLE UNDERTAKING. ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 4 THE ASSESSES HAS INCLUDED U/S.40(A)(IA) DISALLOWANCE OF RS.38,62,2 20/ - , DISALLOWANCE U/S.40(A) OF RS.72,733/ - AND DISALLOWANCE OF RS.2,60,767A IN GROSS TOTAL INCOME AND SUBSEQUENTLY CLAIMED THE SAME A/SO AS DEDUCTION U/S.80IB, THE DISALLOWANCES UNDER THE ABOVE SECTIONS CANNOT BE CONSTRUED TO NAVE BEEN DERIVED AS OR INCLU DABLE IN THE PROFIT OF THE ELIGIBLE UNDERTAKING AND DO NOT ENHANCE THE REAL INCOME OF THE ASSESSES. FURTHER, DISALLOWANCE OF THESE EXPENSES IS DUE TO NON - COMPLIANCES OF CERTAIN PROVISIONS OF THE ACT, WHICH DOES NOT ENHANCE THE ACTUAL INCOME OF THE ASSESSES . THEREFORE, THE CLAIM OF THE ASSESSE FOR 80/B DEDUCTION ON DISALLOWANCE UNDER THE ABOVE SECTIONS AND DONATION IS NOT A VALID CLAIM AND INCOME TO THAT EXTENT HAS ESCAPED ASSESSMENT. HENCE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED! ASSESSMENT FOR A.Y. 2009 - 10 IN THE CASE OF THE ASSESSEE WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961.' OBJECTIONS FILED BY THE ASSESSEE TO THE VALIDITY OF THE JURI SDICTION ASSUMED FOR REOPENING ITS CASE U/S 147 WERE REJECTED BY THE A.O VIDE HIS LETTER DATED 11.02.2015. 4. AS IS DISCERNIBLE FROM THE AFORESAID REASONS, THE CASE OF THE ASSESSEE WAS REOPENED FOR TWO FOLD REASONS , VIZ (I) THAT THE ASSESSEE S CLAIM FOR DEDUCTION U/S 80IB(10) IN RESPECT OF THE O THER INCOME S OF RS.23 , 50 ,1 15/ - W A S NOT AS PER THE MANDATE OF LAW; AND (II) THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) W.R.T THE DISALLOWANCES MADE IN ITS COMPUTATION OF INCOME I.E U/S 40(A) : RS.72,7 33/ - ; U/S 40(A)(IA) : RS. 38 , 62 , 220/ - ; EMPLOYEES CONTRIBUTION TO PF : RS.1,19,937/ - ; U/S 43B : RS.62 , 687/ - ; AND DONATIONS : RS. 2,60,767/ - WAS NOT MAINTAINABLE . 5 . IN THE BACK DROP OF THE AFORESAID FACTS, THE A . O CALLED UPON THE ASSESSE TO PUT FORTH AN EXPLANATION AS TO WHY ITS CLAIM FOR DEDUCTION U/S 80IB(10) MAY NOT BE RESTRICTED TO AN AMOUNT OF RS. 21 , 59 , 65 , 444/ - . IN REPLY, THE ASSESEE TR IED TO IMPRESS UPON THE A.O THAT ITS CLAIM FOR DEDUCTION U/S 80IB(10) WAS IN ORDER AND THE SAME AFTER THOROUGH VETTING AND DELIBERATIONS WAS ACCEPTED BY HIS PREDECESSOR WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3) , DATED 27/12/2011 . HOWEVER , THE REPLY OF THE ASSESSEE DID NOT FIND FAVO U R WITH THE A . O , WHO BACKED BY HIS AFORESAID CONVICTION RESTRICTED THE ASSESSEE S ENTITLEMENT FOR DEDUCTION U/S 80IB(10) TO AN AMOUNT OF RS. 21 , 35 , 87 , 528 / - . ON ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 5 THE BASIS OF HIS AFORESAID DELIBERATIONS THE INCOME OF THE ASSESSEE COMPANY WAS ASSESSED BY THE A.O VIDE HIS ORDER PASSED U/S 143(3) R.W.S 147, DATED 31.03.2015 AT AN AMOUNT OF RS. 67,28,460/ - . 6 . AGGRIEVED , THE ASSESSEE ASSAILED THE ASSESSMENT FRAMED BY THE AO BEFORE THE CIT(A). IT WAS INTER - ALIA SUBMITTED BY THE ASSESSEE THAT A S ITS CLAIM OF DEDUCTION U/S. 80 - IB(10) ALONG WITH THE QUANTIFICATION OF THE SAME AT R S. 22 , 03 , 15 , 98 7 / - WAS ACCEPTED AFTER EXHAUSTIVE DELIBERATIONS WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3) , DATED 27/12/2011 THUS , DE HORS ANY TANGIBLE MATERIAL THE A . O WAS DIVESTED OF HIS JURISDICTION TO REOPEN ITS CONCLUDED ASSESSMENT. IN SUM AND SUBSTANCE, THE ASSESSEE ASSAILED THE VALIDITY OF THE REOPENING OF ITS CASE ON THE BASIS OF A CHANGE OF OPINION ON THE PART OF THE A.O. OBSERVING, THAT THE REASSESSMENT PROCEEDINGS WERE RESORTED TO BY THE A . O ON THE BASIS OF A MERE CHANGE OF O PINION ON THE SAME SET OF FACTS AS WERE THERE AVAILABLE BEFORE HIS PREDECESSOR W HICH WAS NOT PERMISSIBLE AS PER THE MANDATE OF LAW , T HE CIT(A) QUASHED THE REASSESSMENT ORDER PASSED BY THE A . O U/S 143(3) R.W.S. 147 , DATED 31/03/2015 ON THE COUNT OF WANT OF JURISDICTION . FOR THE SAKE OF CLARITY THE OBSERVATIONS OF THE CIT(A) ARE REPRODUCED AS UNDER: - 5.4.1 I FIND THAT ASSESSMENT ORDER U/S. 143(3) WAS PASSED IN THIS CASE ON 27/12.2011 AFTER CONSIDERING THE DETAILS, CLARIFICATIONS WITH RESPECT T O THE RETURN OF INCOME AND AFTER VERIFICATION OF THE SAME. THE A.O. HAS ALLOWED DEDUCTION U/S.80IB OF RS.22,03,15,987/ - WHICH IS ALSO THE INCOME FROM BUSINESS AND PROFESSION. 5.4.2 IN THE REASONS RECORDED, IT HAS BEEN CONTENDED BY THE A.O. THAT - (I) THE NET PROFIT OF 2009 - 10 IS INCLUSIVE OF OTHER INCOME OF RS. 23,50,115/ - VIZ. INCOME NOT RELATED TO THE BUILDING OF HOUSING PROJECTS. THIS INCOME IS NOT ELIGIBLE FOR ANY SUCH DEDUCTION U/S.80IB AND SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE UNDER THE NO RMAL PROVISIONS OF THE I.T. ACT, 1961. (II) FURTHER, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB TO THE EXTENT OF RS. 22,03,15,987/ - . NET PROFIT FROM BUSINESS ACTIVITY IS ONLY RS.21,59,65,444/ - AND THE SAME HAS BEEN INCREASED TO A GR OSS TOTAL INCOME OF RS.22,03,15,987/ - , RS.72,733/ - ON A/C. OF DISALLOWANCE U/S.40(A), RS.38,62,220/ - ON A/C. OF DISALLOWANCE U/S.40(A)IA), AND RS.1,19,937/ - ON A/C. OF EMPLOYEES CONTRIBUTION TO PF RS.62,687/ - ON ACCOUNT OF DISALLOWANCE ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 6 U/S.43B AND RS.2,60, 767/ - ON ACCOUNT OF DONATION. THESE DISALLOWANCES DO NOT FALL IN THE CATEGORY OF ELIGIBLE PROFITS DERIVED FROM THE BUSINESS ACTIVITY OF CONSTRUCTION OF BUILDINGS, HENCE, THESE DO NOT QUALIFY FOR DEDUCTION U/S. 80IB OF THE I. T. ACT, 1961. 5.4.3 IN THIS REGARD, I FIND THAT THE APPELLANT HAD MADE ITS SUBMISSION REGARDING THE OTHER INCOME AMOUNTING TO RS.23,50,115/ - AND THE REASONS FOR WHICH THE ABOVE SAID INCOME WAS ELIGIBLE FOR DEDUCTION U/S.80IB(10) VIDE LETTER DATED 26.12.2011 BEFORE THE A.O. SIMILARLY , THE APPELLANT HAD MADE DETAILED SUBMISSION ON THE ISSUE OF TREATING THE ADDITIONS OF EXPENSES DISALLOWED IN THE COMPUTATION OF INCOME OF RS.43,78,344/ - AS ADDITION TO ITS BUSINESS INCOME ON WHICH DEDUCTION U/S.80IB WOULD BE ALLOWABLE VIDE LETTER DATED 20 .12.2011 BEFORE THE A.O. IN THE FIRST ASSESSMENT PROCEEDINGS. THE A.O., AFTER CONSIDERING THE SUBMISSIONS MADE, HAS ALLOWED DEDUCTION U/S.80IB OF RS. 22,03, 15,9877 - AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 5.4.4 FROM THE REASONS RECORDED, I FIND THAT THE VIEW TAKEN BY THE A.O. THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE OF A WRONG CLAIM U/S.80IB WITH RESPECT TO THE INCREASE IN INCOME ON ACCOUNT OF VARIOUS DISALLOWANCES AND WITH RESPECT TO THE OTHER INCOME OF RS. 23,50,1157 - IS BASED ON THE SAME MATERIAL WHICH WAS AVAILABLE BEFORE THE A.O. IN THE COURSE OF ASSESSMENT PROCEEDINGS AND NO 'TANGIBLE MATERIAL 1 HAS BEEN BROUGHT ON RECORD. FROM THE REASONS RECORDED, IT IS NOTED THAT THE A.O. HAS NOT STATED THE BASIS OR GIVEN THE DET AILS OF MATERIAL FOR ARRIVING AT THE BELIEF THAT EXCESSIVE DEDUCTION U/S.80IB HAD BEEN CLAIMED BY THE APPELLANT. THUS, IT IS A 'CLEAR CASE OF REOPENING THE ASSESSMENT WITHOUT ANY TANGIBLE MATERIAL AND AMOUNTS TO A CHANGE OF OPINION. THE ASSUMPTION OF JURIS DICTION U7S.147 BY THE A.O. IS FOUND TO BE IMPROPER AND REOPENING OF THE ASSESSMENT BY ISSUE OF NOTICE U7S.148 IS FOUND TO BE BAD IN LAW. IN THIS REGARD, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS : (I) CIT KELVINATOR OF INDIA 187 TAXMAN 312(SC), THE APEX COURT SAYS: 'THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTEND ED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE - OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ON MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT CHECK TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE AFTER 1 - 4 - 1989 ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. ' (II) BOMBAY HIGH COURT DECISION IN THE CASE OF ICICI HOME FINANCE CO. LTD 25 TAXMANN.COM 241 (BOM) SAYS : 'RE - OPENING 'OF ASSESSMENT ON ISSUE ALREADY CONSIDERED DURING ASSESSMENT IS BARRED - WHERE SAME FACTS WERE BEFORE THE ASSESSING OFFICER AND HE HAD CONSIDERED VERY ISSUES, ASSESSMENT COULD NOT BE REOPENED.' ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 7 (IN) CARTINI INDIA LTD. VS. ADDL. CIT, 314 ITR 2 75 (BOMBAY HIGH COURT) IN WHICH IT HAS BEEN HELD THAT EVEN WHERE REASSESSMENT IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THERE MUST BE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND SUCH REASON TO BELIEVE SHOULD NOT BE ON ACCOUNT OF MERE CHANGE OF OPINION. (IV) IN THE CASE OF MOTILAL R TODI VS ACIT, ITA NO.2910/MUM/2013 (MUMBAI IT AT) IT WAS HELD THAT IF THERE WAS NO 'NEW TANGIBLE MATERIAL' THEN THERE WOULD BE NO 'REASON TO BELIEVE' AND FURTHER THAT THE C ONDITION WITH RESPECT TO AVAILABILITY OF 'NEW TANGIBLE MATERIAL' IS STEP ANTERIOR TO THE CONDITION OF 'NO CHANGE OF OPINION' OR 'REVIEW'. 5.5 IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED OPINION THAT THE REASON TO BELIEVE RECORDED BY THE A.O. IS MERELY ON ACCOUNT OF CHANGE OF OPINION SINCE THE CASE HAS BEEN REOPENED ON THE VERY SAME FACTS WHICH HAVE BEEN VIEWED DURING THE ORIGINAL ASSES SMENT PROCEEDINGS AND THE ASSESSMENT ORDER HAS BEEN PASSED AFTER CONSIDERING THE SAME. THE A.O. HAS FAILED TO ASSUME JURISDICTION U/S.147 OF THE ACT. ACCORDINGLY, IT IS HELD THAT THE NOTICE DATED 18.02.2014 ISSUED U/S, 148 OF THE ACT IS WITHOUT JURISDICTIO N AND THE SAID NOTICE AS WELL AS THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 OF THE ACT, 1961 DATED 31.03.2015 ARE QUASHED. ON A PERUSAL OF THE AFORESAID OBSERVATIONS OF THE CIT(A), IT CAN SAFELY BE GATHERED THAT THE REASSESSMENT WAS QUASHED BY HIM , FOR T HE REASON, THAT THE REOPEN ING OF THE CONCLUDED ASSESSMENT OF THE ASSESSEE COMPANY ON THE BASIS OF A CHANGE OF OPINION AS AGAINST THAT ARRIVED AT BY HIS PREDECESSOR WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3), DATED 27.12.2011, WAS NOT PERMISSIBLE UN DER LAW. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID OBSERVATIONS OF THE CIT(A) AND ARE PERSUADED TO SUBSCRIBE TO THE VIEW TAKEN BY HIM. AS OBSERVED BY US HERE INABOVE , THE A . O HAD INITIATED THE REASSESSMENT PROCEEDINGS FOR TWO FOLD REASONS , VIZ (I) THAT THE ASSESSEE S CLAIM FOR DEDUCTION U/S 80IB(10) IN RESPECT OF THE O THER INCOME S OF RS.23,50,115/ - WAS NOT AS PER THE MANDATE OF LAW; AND (II) THAT THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) W.R.T THE DISALLOWANCES MADE IN ITS COMPUTATION OF INCOME I.E U/S 40(A) : RS.72,733/ - ; U/S 40(A)(IA) : RS.38,62,220/ - ; EMPLOYEES CONTRIBUTION TO PF : RS.1,19,937/ - ; U/S 43B : RS.62,687/ - ; AND DONATIONS : RS. 2,60,767/ - WAS NOT MAINTAINABLE . ON A PERUSAL OF THE RECORDS, WE FIND THAT THE A.O IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS HAD QUERIED AS ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 8 REGARDS THE AFORESAID ISSUES, AND ONLY AFTER BEING SATISFIED WITH THE REPLY FILED BY THE ASSESEE HAD ACCEPTED THE SAME. AS CAN BE GATHERED FROM A LETTER DATED 28/12/2011, P AGE NO.31 OF THE ASSESS EE S PAPER BOOK (FOR SHORT APB ) , THE ASSESSEE ON BEING QUERIED BY THE A.O HAD DULY DEMON STRATED THAT THE ADDITIONS / DISALLOWANCES MADE IN ITS COMPUTATION OF INCOME DULY FORMED PART OF ITS ELIGIBLE PROFITS FOR THE PURPOSE OF QUANTIFICATION OF ITS DEDUCTION U/S 80IB (10). FOR THE SAKE OF CLARITY THE RELEVANT EXTRACT OF THE AFORESAID LETTER IS BEING REPRODUCED AS UNDER: - 1. THE EXPENSES DISALLOWED IN THE COMPUTATION OF INCOME ARE AS STATED BELOW. PARTICULARS AMOUNT (RS.) DISALLOWANCE A. U/S.40{A) 39,34,953 B. U/S. 36{L)(VA) 1,19,937 C. U/S.43B 62,687 D. DONATION 2,60,767 TOTAL DISALLOWANCE 43,78,344 IN THIS CONNECTION WE SUBMIT THAT, AFTER ADDITIONS OF ABOVE STATED EXPENSES ARE COVERED UNDER SECTION BETWEEN SECTION 28 TO SECTION 43D OF INCOME TAX ACT. HENCE, THESE ADDITIONS TO INCOME SHOULD BE TREATED ADDITION TO AS BUSINESS INCOME. ON A SIMILAR FOOTING , WE FIND THAT THE ASSESSEE VIDE ITS LETTER DATED 26/12/2011 , PAGE 33 OF APB, HAD AFTER GIVING THE BIFURCATED DETAILS OF ITS OTHER INCOME S OF RS. 23 , 50 , 115/ - HAD THEREIN EXPLAINED THAT AS TO ON WHAT BASIS THE SAID AMOUNTS WERE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT . THE RELEVANT EXTRACT OF THE AFORESAID REPLY OF THE ASSESSEE IS REPRODUCED AS UNDER: - 4. THE OTHER INCOME FOR THE FINANCIAL YEAR 2008 - 09 INCLUDES THE FOLLOWING: PARTICULARS AMOUNT (RS.) AMOUNT (RS.) ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 9 A) BANK CHARGES 88,600 B) EXPENSES RECOVERABLE FOR RECOVERING DUES 2,73,860 C) CANCELLATION CHARGES 12,43,588 16,06,048 D) UNCLAIMED BALANCES AND PROVISIONS NO LONGER REQUIRED WRITTEN BACK 7,44,067 TOTAL 23,50,115 4.1 THE ABOVE INCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) FOR THE REASONS MENTIONED BELOW: A) BANK CHARGES (INCOME) : RS. 88,600/ - DURING THE FINANCIAL YEAR 2008 - 09, THE ASSESSEE FIRM HAS DEBITED CHEQUE RETURNED TO THE FLAT CUSTOMERS DUE TO LACK OF FUND IN THEIR BANK ACCOUNT OR ANY OTHER REASON. HENCE IT IS WELL JUSTIFIED THAT THIS INCOME IS REIMBURSEMENT OF BANK CHARGES. B) EXPENSES RECOVERABLE FOR RECOVERING DUES : RS. 2,73,860 THE AMOUNT IS RECOVERY OF CHARGES INCURRED BY THE COMPANY FOR RECOVERING DUES FROM CUSTOMERS. THE CUSTOMER WISE LIST OF RECOVERY CHARGES IS ATTACHED AS ANNEXURE 3. HENCE IT IS WELL JUSTIFIED THAT THIS INCOME IS PART OF SALES CONSIDERATION ONLY. C) CANCELLATION CHARGES : RS. 12,43,588 DURING THE PERIOD UNDER CONSIDERATION SOME OF THE CUSTOMERS PAY TOKEN MONEY BUT AFTER THAT THEY MAY NOT ABLE TO MAKE ARRANGEMENT OF BALANCE FUND. HENCE, WE FORFEIT THIS TOKEN MONEY. IN OTHER CASES, SOME OF CUSTOMER BOOK FLATS IN OUR PROJECT. AFTER SOME MONTHS EITHER DUE TO LACK OF FUND OR INTEREST THEY CANCELLED THEIR BOOKING. AS PER AGREEMENT WE CHA RGED 5% OF AGREEMENT TO THE CUSTOMER. HENCE IT IS WELL JUSTIFIED THAT THIS INCOME IS PART OF SALES CONSIDERATION ONLY. D) UNCLAIMED BALANCES AND PROVISIONS NO LONGER REQUIRED WRITTEN BACK: RS. 7,44,067 DURING THE PERIOD UNDER CONSIDERATION ASSESSEE FIRM HAS WRITTEN BACK CREDITORS/CONTRACTORS PAYABLE. THE AMOUNT SO WRITTEN BACK IS RELATED TO BUSINESS ONLY. HENCE, IT IS WELL JUSTIFIED THAT THIS INCOME IS PART OF BUSINESS ONLY. ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 10 8 . IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX, IT CAN SAFELY OR IN FACT INESCAPABLY BE GATHERED THAT THE A . O WHILE FRAMING THE ORIGINAL ASSESSMENT HAD QUERIED ON THE ISSUES IN QUESTION, AND ONLY AFTER CONSIDERING THE REPLY OF THE ASSESSEE , HAD OPINED , THAT THE ASSESEES CLAIM FOR DEDUCTION U/S 80IB(10) WAS IN ORDER. ACCO RDINGLY , WE ARE OF A STRONG CONVICTION THAT THE A . O BACKED BY A MERE CHANGE OF OPINION ON THE SAME SET OF FACTS AS WERE THERE BEFORE HIS PREDECESSOR WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3), DATED 27.12.2011, HAD THEREIN IN HIS ATTEMPT TO RECAST THE ASSESSEES ENTITLEMENT FOR DEDUCTION U/S 80IB(10) REOPENED ITS CONCLUDED ASSESSMENT , WHICH A S NOTICE D BY US HEREINABOVE IN ABSENCE OF ANY FRESH TANGIBLE MATERIAL IS NOT PERMITTED UNDER LAW. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC). IN THE SAID C ASE IT WAS OBSERVED BY THE HONBLE APEX COURT THAT AFTER 1ST APRIL, 1989, A . O HAS POWER TO REOPEN THE ASSESSMENT UNDER S. 147 PROVIDED HE HAS REASON TO BELIEVE THAT IN COME HAS ESCAPED ASSESSMENT AND THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. UPHOLDING THE VIEW TAKEN BY THE HIGH COURT, IT WAS FURTHER OBSERVED BY THE HONBLE COURT THAT A MERE 'CHANGE OF OPINION' CANNOT PER SE BE A REASON TO REOPEN THE CASE . THE HONBLE APEX COURT WHILE DISMISSING THE APPEAL OF THE REVENUE HAD HELD AS UNDER: 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, BUT IN S. 147 OF THE ACT (W.E.F. 1ST APRIL, 1989), THEY ARE G IVEN A GO BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF 'CH ANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, A FTER 1ST APRIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO S. 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 11 ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN S. 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESEN TATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE - INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE AO. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO. 549, DT. 31ST OCT., 1989 [ (1990) 82 CTR (ST) 1 ] , WHICH READS AS FOLLOWS : ' 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO RE - INTRODUCE THE EXPRESSION REASON TO BELIEVE IN S. 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OM ISSION OF THE WORDS REASON TO BELIEVE FROM S. 147 AND THEIR SUBSTITUTION BY THE OPINION OF THE AO. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, REASON TO BELIEVE HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTL ED AND ITS OMISSION FROM S. 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED S. 147 TO REINTRODUCE THE EXPRESSION HAS REASON TO BELIEVE IN PLAC E OF THE WORDS FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION. OTHER PROVISIONS OF THE NEW S. 147, HOWEVER, REMAIN THE SAME.' 5. FOR THE AFORE - STATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMIS SED WITH NO ORDER AS TO COSTS. ALSO, A SIMILAR VIEW HA D THEREAFTER BEEN T AKEN BY THE HONBLE HIGH COURT OF BOMBAY IN RALLIS INDIA LTD. VS. DCIT & ORS. (2019) 411 ITR 452 (BOM) . RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA), IT WAS INTER ALIA OBSERVED BY THE HONBLE HIGH COURT THAT THAT EVEN WHERE A CASE IS TO BE REOPENED WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THERE HAS TO BE TANG IBLE MATERIAL JUSTIFYING THE REOPENING OF SUCH ASSESSMENT. IN FACT, THE HONBLE JURISDICTIONAL HIGH COURT HAD EARLIER TOO IN THE CASE OF ICICI HOME FINANCE CO. LTD. VS. ACIT (2012) 82 CCH 103 (BOM) OBSERVED , THAT E VEN WHERE REASSESSMENT U/S 147 IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THERE MUST BE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND SUCH REASON TO BELIEVE SHOULD NOT BE ON ACCOUNT OF A MERE CHANGE OF O PINION. IN THE CASE OF CARTINI INDIA LTD. VS. ADDL. CIT (2009) 314 ITR 275 (BOM) , IT WAS OBSERVED BY THE HONBLE JURISDICTIONAL HIGH COURT THAT ONCE THE A.O ON CONSIDERATION OF THE MATERIAL ON RECORD AND THE EXPLANATION OFFERED, ARRIVES AT A FINAL CONCLUS ION IN THE ORIGINAL ASSESSMENT THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION AS CLAIMED, ON THE BASIS OF THE VERY SAME MATERIAL, THE A . O CANNOT FORM A PRIMA FACIE OPINION ITA NO. 7041/MUM/2016 A.Y. 2009 - 10 DCIT, CC - 7(3) VS. M/S LODHA CONSTRUCT ION (DOMBIVALI) 12 THAT THE DEDUCTION IS NOT ALLOWABLE AND ACCORDINGLY REOPEN THE ASSESSMENT ON THE GRO UND THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 9 . IN THE BACKDROP OF THE FACTS OF THE PRESENT CASE R.W THE SETTLED POSITION OF LAW, WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE ASSESSEES CLAIM FOR DEDUCTION U/S 80 - IB(10) WAS AFTER EXHAUSTIV E DELIBERATIONS AND SPECIFIC QUERIES AS REGARDS THE ISSUES IN QUESTION ACCEPTED BY THE A.O, THE N, BACKED BY A MERE CHANGE OF OPINION ON THE BASIS OF THE VERY SAME MATERIAL HE COULD NOT HAVE REOPENED THE CONCLUDED ASSESSMENT . ACCORDINGLY , FINDING NO INFIRMITY IN TH E VIEW TAKEN BY THE CIT(A) WHO IN OUR CONSIDERED VIEW HAD BY W AY OF A WELL REASONED ORDER QUASHED THE RE ASSESSMENT ORDER PASSED BY THE A . O U/S 143(3) R.W.S. 147 , DATED 31/0 3 /2015 FOR WANT OF JURISDICTION , WE UPH O LD THE SAME . THE G ROUNDS OF APPEAL NO. 1 TO 4 ARE DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. 10 . RESULTANTLY , THE APPEAL FILED BY THE REVENUE IS DISMISSED. SD/ - SD/ - S. RIFAUR RAHMAN RAVISH SOOD (ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) MUMBAI, DATE: 28 .01.2021 THIRUMALESH, SR.PS COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST.REGISTRAR ITAT, MUMBAI