S. 80IB(10) Reopening Due to amendment invalid says Guj HC

[ashutosh majumdar]

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

SPECIAL CIVIL APPLICATION No. 15719 of 2011

VINAYAK CONSTRUCTION - Petitioner(s)

Versus


INCOME

TAX OFFICER WARD 9(1) OR HIS SUCCESSOR TO OFFICE & 1 - Respondent(s)


========================================================= Appearance: MR RK PATEL for Petitioner(s) : 1, MR MR BHATT, SR. ADV WITH MRS MAUNA M BHATT for Respondent(s) : 1 -

2.

=========================================================


CORAM HONOURABLE MR.JUSTICE AKIL KURESHI


and


HONOURABLE MS JUSTICE SONIA GOKANI




Date

: 29/11/2011


ORAL

JUDGMENT


(Per

: HONOURABLE MR.JUSTICE AKIL KURESHI)



Rule.

Learned advocate Mrs.Bhatt waives service of rule on behalf of the respondents.




2. Petitioner-assessee has challenged notice of reopening of assessment dated 28.3.2011. The petitioner has also challenged order dated 5.10.211, by which the petitioner's objections to such reopening came to be disposed of by the Assessing Officer.




3. For

the assessment year 2004-05, the petitioner-firm filed its return of income along with necessary documents. The Assessing Officer framed scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (Act for short) on 20th February 2006 and granted deductions under section 80IB(10) of the Act as claimed by the petitioner.




4.

By Finance Act 2 of 2009, certain changes were made in section 80IB(10) of the Act with retrospective effect from 1.4.2011. On 28.3.2011, the Assessing Officer issued the impugned notice seeking to reopen the assessment of the petitioner for the assessment year 2004-05. In the notice, he stated that he had reason to believe that income chargeable to tax for the assessment year has escaped assessment. He, therefore, required the assessee to file return of income within 30 days from the date of receipt of the notice.



5. At

the request of the petitioner, the Assessing Officer supplied the reasons he had recorded for reopening the assessment. Perusal of the reasons would suggest that the Assessing Officer noticed that the local authority which has approved the construction project and granted permission to commence construction had done so in the name of land owners. The assessee had only entered into a development agreement with land-owners. Assessing Officer, therefore, believed that the assessee worked only as a Works Contractor and had not undertaken the development of building and housing project. It was, therefore, not entitled to deduction under section 80IB(10) of the Act by virtue of explanation added in th said section by Finance Act, 2009 with effect from 1.4.2001. He, therefore, recorded that there is reason to believe that income chargeable to tax has escaped assessment due to the fact that the assessee had made incorrect claim of deduction of Rs.35.31 lacs under section 80IB(10) of the Act.




6. The

petitioner raised objections against the reopening notice vide its communication dated 16.5.2011. Such objections were, however, turned down by the Assessing Officer by order dated 5.10.2011. The petitioner has, at that stage, approached this Court challenging the notice for reopening as well as the order rejecting the objections of the petitioner.



7. Counsel

for the petitioner submitted that the assessment which was previously framed after scrutiny is sought to be reopened beyond the period four years from the end of relevant assessment year. In the notice itself, it is suggested that income chargeable to tax has escaped assessment on account of explanation inserted in the statute with retrospective effect. The reasons recorded do not suggest that the petitioner had not disclosed truly and fully material facts for assessment. Counsel for the petitioner, therefore, submitted that reopening beyond four years from the end of relevant assessment year was wholly without jurisdiction.



8. Counsel

pointed out that in the case of this very assessee in the previous year, when the assessment was reopened, the petitioner had carried the issue in Departmental appeal and the Commissioner, Appeals had reversed the Assessing Officer's order and declared the reopening proceedings invalid. The Commissioner had relied on a decision of Division Bench of this Court in the case of Aayojan Developers v. ITO (2011) 335 ITR 234 (Guj).




9. We

have also heard learned Shri Bhatt for the Revenue who opposed the petition.




10. Having

thus heard the learned advocates for the parties and having perused the documents on record, we find that the entire issue is squarely covered by Division Bench decision of this Court in the case of Aayojan Developers (supra). Admittedly, the petitioners return was assessed after scrutiny. The petitioner's claim for deductions under section 80IB(10) was granted on the basis of statutory provisions obtaining at the relevant time. The assessment so framed is sought to be reopened beyond four years on the basis of the statutory amendment brought into statute book with retrospective effect. There is no allegation in the reasons recorded that income chargeable to tax had escaped assessment for the reason of the assessee failing to disclose truly and fully all material facts. Under similar circumstances, Division Bench of this Court in the case of Aayojan Developers (supra) has observed as under:



"Examining

the facts of the present case in the light of the above principles enunciated by the Supreme Court, a bare perusal of the reasons recorded indicates that there is not even a whisper as regards any failure on the part of the petitioner to disclose fully and truly all material facts, nor is it possible to infer any such failure from the reasons recorded. Merely because of the fact that the assessee had asserted that it is a developer in the returns filed by him, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts. At best, the petitioner has made a claim along with supporting documents, namely, development agreements for construction of housing projects, etc. and based upon the said documents, the Assessing Officer had formed an opinion and granted deduction under section 80-IB(10) of the Act. As to whether in a given set of facts, the assessee is a developer or a works contractor is a matter of inference. Hence, the assertion that the petitioner is a developer, without anything more cannot be said to be an incorrect disclosure of facts, as is sought to be contended on behalf of the revenue. In the circumstances, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction under section 147 of the Act after the expiry of four years from the end of the relevant assessment year is illegal and invalid. The proceedings under section 147 of the Act which have been initiated by issuance of the impugned notice under section 148 of the Act, therefore, cannot be sustained."





We

may notice that a similar view was taken by Division Bench of this Court in the case of Sadbhav Engineering Co. Ltd. v. Deputy CIT, 333 ITR 483.




In

the result, we have no hesitation in holding that the notice for reopening is invalid. The same is therefore, quashed. Rule is made absolute accordingly.




(Akil

Kureshi J.)




(Ms.Sonia

Gokani, J.)


(vjn)