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2022 (5) TMI 677 - AT - Income TaxReopening of assessment u/s 147 - reopening was within 4 years - disallowance u/s 14A - case was reopened on the allegation that the assessee had not commenced its business activities and therefore pre-commencement expenses should have been capitalized - HELD THAT:- AO had asked for various details which were duly responded to by the assessee. The Ld. AO, after considering the same, chose to make disallowance u/s 14A and accepted all the other particulars filed by the assessee. Subsequently, the case has been reopened on same set of material as available before Ld. AO. Evidently no fresh tangible material has come to the possession of Ld. AO subsequent to conclusion of regular assessment proceedings. Under such factual matrix, the ratio of cited decisions, as enumerated in preceding paragraphs, is squarely applicable to the facts of the case. Therefore, we would hold that reassessment proceedings were nothing but based on mere change of opinion which is impermissible. The assessment is set-aside as without jurisdiction. The assessee’s cross-objections stands allowed. Commencement of business - So far as the merits of the case are concerned, it could be seen that the assessee was incorporated on 20.03.2007 and became public limited company in September, 2007. Initially the assessee was engaged in development of SEZ. However, the object of the assessee had undergone change w.e.f. 31.01.2008. As per revised object Clause, the main objects to be pursued by the assessee are to deal in land, buildings for the purpose of development and for carrying out development activities. In essence, the assessee’s main object includes real estate development and construction activities. As per the object clause, the assessee could purchase, hire, lease or exchange or acquire any immoveable properties for carrying on the business of developers, builder, realtors, contractors and dealer and to sell or transfer the immoveable property whether as a developed or undeveloped plots. The assessee had already started various activities such as purchase of land, making advances to the parties, laying roads, building construction etc. In a huge project like the one being undertaken by the assessee revenue generation may take time but the same could be a reason to construe as to non commencement of business. The purchase of land was done, advances were given to parties, the land was registered in assessee’s name, roads have been laid, buildings have been under construction. All these facts would prove that the assessee has started business activities. All these findings remain undisputed before us. Therefore, it could be seen that the assessee had already initiated certain activities towards fulfillment of its objectives and already procured land which would be very vital to start real estate development. Therefore, the conclusion that the assessee had commenced business could not be said to be perverse in any manner. Tribunal erred in holding that merely because the manufacturing and sale of the vehicle did not take place, the business of the assessee has not been set up. The manufacturing activity of the assessee was a part of the composite business activities of the assessee and the same had not commenced because the construction of the building and installation of plant and machinery was in progress. Accordingly, Hon’ble Court confirmed the first appellate order. The ratio of this decision is applicable to the merits of the case. Therefore, we would concur with adjudication on merits, in the impugned order. The revenue’s appeal stands dismissed.
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