2016 (9) TMI 764 - HC - Income Tax

Reopening of assessment - deduction under section 80IB(10) - whether retrospective amendment cannot be a ground for reopening assessment beyond a period of four years? - Held that - In the original assessment, the Assessing Officer had occasion to examine the petitioner s claim for deduction under section 80IB(10) of the Act. In fact, this was the principle claim of the assessee, since bulk of its income was derived from housing projects, with respect to which, the assessee had claimed deduction under section 80IB(10) of the Act. The Assessing Officer raised multiple queries under a letter dated 03.08.2006, one of them calling upon the assessee to substantiate the claim under section 80IB(10) of the Act, amounting to ₹ 10.12 crores alongwith necessary documentary evidence. In reply to such query, the assessee under communication dated 15.09.2006, gave a detailed reply and produced number of documents. These documents contained the development permission and construction permission granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee s claim of deduction under section 80IB(10) of the Act, except for limiting it to the extent of profit. Thus, the entire claim of deduction came up for consideration at the hands of the Assessing Officer in the original assessment. The claim was minutely examined and only thereafter accepted. It would therefore not be permissible to the Assessing Officer to disturb such claim in exercise of powers under section 147 of the Act that by issuing the notice beyond the period of four years beyond the period of relevant assessment year. Here again, the Assessing Officer had not recorded, in what manner the assessee failed in its duty to disclose truly and fully all material facts. In fact, the thirst of the contention of the Assessing Officer appears to be that the assessee had not developed housing project, but was acting as a contractor. In this respect, the Assessing Officer has placed reliance on the retrospective explanation added to section 80IB(10) of the Act. It is well settled by the series of judgments of this Court that retrospective amendment in statute would not enable the Assessing Officer to reopen an assessment beyond a period of four years. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice for reopening the assessment.
2. Alleged failure of the assessee to disclose all material facts.
3. Retrospective amendment as a ground for reopening the assessment.
4. Eligibility for deduction under section 80IB(10) of the Income Tax Act.

Detailed Analysis:

1. Validity of the Notice for Reopening the Assessment:
The petitioner challenged the notice dated 01.03.2011 issued by the Assessing Officer for reopening the assessment for the year 2004-05. The notice was issued beyond the period of four years from the end of the relevant assessment year. The Assessing Officer recorded reasons for reopening, citing that the assessee's claim for deduction under section 80IB(10) was not allowable. The court noted that the original assessment had thoroughly examined and accepted the deduction claim after scrutiny. Therefore, disturbing such a claim through reopening beyond four years was impermissible.

2. Alleged Failure of the Assessee to Disclose All Material Facts:
The Assessing Officer alleged that the assessee failed to disclose material facts fully and truly, particularly regarding the nature of its business and the relationship with the housing societies. The court observed that the assessee had provided detailed replies and documents during the original assessment, which included development and construction permissions. The court held that the Assessing Officer did not record how the assessee failed in its duty to disclose material facts, and such claims could not justify reopening the assessment.

3. Retrospective Amendment as a Ground for Reopening the Assessment:
The Assessing Officer relied on an explanation added to section 80IB(10) with retrospective effect from 01.04.2000, which stated that deduction under section 80IB(10) shall not be admissible to a contractor in respect of works contract awarded by any person. The court reiterated that retrospective amendments in the statute could not be used to reopen an assessment beyond four years. This principle was supported by previous judgments, including Commissioner of Income-Tax v. Radhe Developers and Sadbhav Engineering Ltd. v. Deputy Commissioner of Income-Tax.

4. Eligibility for Deduction under Section 80IB(10):
The court examined whether the assessee was eligible for the deduction under section 80IB(10). It was argued that the assessee acted as a contractor rather than a developer, as evidenced by tax deductions at source by the societies. The court referred to the case of Commissioner of Income-Tax v. Radhe Developers, where it was established that ownership of land was not a prerequisite for claiming deduction under section 80IB(10). The court emphasized that the assessee's role as a developer, despite not owning the land, was sufficient for the deduction. The court also dismissed the argument that the development permission did not mention the assessee as a developer, explaining that such technicalities could not justify reopening the assessment.

Conclusion:
The court concluded that the notice for reopening the assessment was invalid and unsustainable. The original assessment had thoroughly examined and accepted the deduction claim under section 80IB(10). The retrospective amendment could not justify reopening beyond four years, and the assessee had disclosed all material facts during the original assessment. Consequently, the impugned notice dated 01.03.2011 was set aside, and the petition was allowed.