2018 (2) TMI 2114 - AT - Income Tax

Validity of reopening of assessment u/s 147 - satisfaction for issuance of notice u/s. 148 by appropriate authority - whether satisfaction in accordance with section 151(1) is recorded by the prescribed authority or not? - HELD THAT - At the time of hearing, learned AR has submitted before us a copy of the form for recording the reasons for initiating proceedings u/s. 148 which reveals that the satisfaction for issuance of notice u/s. 148 of the Act was recorded by the Additional CIT, Range 12(1), Mumbai. Thus, the aforesaid facts brought on record demonstrate that the recording of satisfaction for issuance of notice u/s. 148 of the Act was not by any of the authorities prescribed under the proviso to section 151(1). DR has not brought any material before us to controvert the aforesaid factual position. That being the case, the notice issued u/s. 148 of the Act being not in accordance with the provisions of section 151 of the Act is invalid. Consequently, the proceedings conducted in pursuance of such notice as well as the assessment order passed u/s. 143(3) r.w.s. 147 of the Act in pursuance thereto is rendered invalid. It is relevant to observe, in assessee's own case for A.Y. 2006-07, 2016 (6) TMI 836 - ITAT MUMBAI the assessment order was quashed by the Tribunal under identical facts due to lack of satisfaction by the prescribed authority in terms of proviso to section 151(1) - Hon'ble Bombay High Court has expressed similar view in the case of Ghanshyam K Khabrani 2012 (3) TMI 266 - BOMBAY HIGH COURT In view of the aforesaid, we have no hesitation in quashing the impugned assessment order. The grounds raised are allowed. Re-opening of assessment on the basis that the assessee is not eligible to claim deduction u/s 801B(10) for the housing project as it was not completed on or before 31% March 2009 - HELD THAT - AO while completing the original assessment has examined all facts and materials relating to assessee's claim of deduction under section 801B(10) of the Act in respect of the housing project and only after proper application of mind has allowed assessee's claim of deduction. While re-opening the assessment, the Assessing Officer had no tangible material to come to the conclusion that there is escapement of income. Only on re-appraisal of the material available at the time of original assessment the AO has reopened the assessment under section 147 of the Act by forming a belief that the assessee is not eligible to claim deduction under section 80IB(10) of the Act due to non-completion of the project within the stipulated time. Thus, consideration of facts and material on record in the light of well settled legal principle leads to the irresistible conclusion that the AO has re-opened the assessment on a mere change of opinion without having in his possession any tangible material. Therefore, it amounts to review of the original assessment order passed in case of the assessee, hence, is legally impermissible. Therefore, we are of the considered opinion that re-opening assessment under section 147 of the Act in the instant case is not valid; consequently, the impugned assessment order passed in pursuance thereto is also invalid and has to be quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act.
2. Validity of the assessment order passed under Section 143(3) read with Section 147 of the Income Tax Act.
3. Disallowance of deduction claimed under Section 80IB(10) of the Income Tax Act.

Detailed Analysis:

1. Validity of Proceedings Initiated under Section 147:

*Assessment Year 2007-08:*
The assessee challenged the validity of the notice issued under Section 148 of the Income Tax Act, asserting that it was issued beyond four years from the end of the relevant financial year without the satisfaction of the Principal Chief Commissioner or Chief Commissioner as required under Section 151(1). The Tribunal found that the notice was indeed issued after the expiry of four years and that the satisfaction was recorded by the Additional Commissioner of Income Tax, which is not in accordance with the prescribed authority under Section 151(1). Consequently, the notice issued under Section 148 was deemed invalid, rendering the proceedings and the assessment order under Section 143(3) read with Section 147 invalid.

*Assessment Year 2008-09:*
Similarly, for the assessment year 2008-09, the Tribunal admitted the additional ground challenging the validity of the notice issued under Section 148. The Tribunal observed that the reopening of the assessment was based on the same materials that were available during the original assessment proceedings. The Tribunal concluded that the reopening was based on a mere change of opinion without any tangible material, which is legally impermissible. Hence, the notice issued under Section 148 and the subsequent assessment order were invalidated.

2. Validity of the Assessment Order Passed under Section 143(3) read with Section 147:

*Assessment Year 2007-08:*
The Tribunal quashed the assessment order passed under Section 143(3) read with Section 147 due to the invalidity of the notice issued under Section 148. The Tribunal noted that the satisfaction for issuing the notice was recorded by an authority not prescribed under Section 151(1), making the notice invalid and, consequently, the assessment order invalid.

*Assessment Year 2008-09:*
For the assessment year 2008-09, the Tribunal found that the reopening of the assessment was based on a mere change of opinion and not on any new tangible material. The Tribunal emphasized that the original assessment had already examined the issue of deduction under Section 80IB(10) and allowed it after proper verification. Therefore, the reassessment proceedings were invalid, and the assessment order was quashed.

3. Disallowance of Deduction Claimed under Section 80IB(10):

*Assessment Year 2007-08:*
Since the Tribunal quashed the assessment order on the grounds of invalid notice, the merits of the disallowance of deduction under Section 80IB(10) were not adjudicated. The Tribunal noted that the grounds raised on merits were of mere academic nature due to the decision on the legal issue.

*Assessment Year 2008-09:*
Similarly, for the assessment year 2008-09, the Tribunal did not adjudicate the merits of the disallowance of deduction under Section 80IB(10) due to the quashing of the assessment order on the grounds of invalid reopening. The Tribunal emphasized that the grounds on merits were of academic interest only.

Conclusion:
Both appeals were allowed, and the assessment orders for the assessment years 2007-08 and 2008-09 were quashed due to the invalidity of the notices issued under Section 148 and the subsequent reassessment proceedings. The Tribunal emphasized the necessity of adherence to the prescribed authority's satisfaction under Section 151(1) and the impermissibility of reopening assessments on a mere change of opinion without tangible material.