TMI Blog2011 (9) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-2011 - Dr. D.Y. Chandrachud, A.A. Sayed, JJ. J.D. Mistry and B.V. Jhaveri for the Petitioner. Vimal Gupta for the Respondent. JUDGMENT Dr. D.Y. Chandrachud, J Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2. The challenge in these proceedings under Article 226 of the Constitution is to a notice dated 11 January 2011 issued under Section 148 of the Income Tax Act, 1961 by which the assessment for the assessment year 2007-08 is sought to be reopened. 3. The Petitioner filed its return of income for assessment year 2007-08. The income from business was computed after deducting an amount of Rs. 3.49 crores which was the profit from an Association of Persons (AOP) exempt under Section 167B(2). A note was appended to the return of income stating that the Assessee is a member of an AOP doing business under the name and style of Fortaleza Developers and that since the tax on the income of the AOP was payable in the case of the AOP itself under Section 167B(2), no tax is payable by the assessee in respect of its share of income from the AOP. In the profit and los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profit from the AOP, Fortaleza Developers. The reasons recorded state that a survey took place under Section 133A at the business premises of the Assessee on 23 December 2010 and the material impounded included the following. Original copy of the A O P agreement dated 28.04.2003. Copy of the audited financial statements of M/s Fortaleza Developers for FY 2007-08. Books of account of the assessee company showing the treatment of land in its accounts since inception. Copy of the development agreement between the Assessee Company and M/s. Yerawada Stud Farm and Agriculture. Letter written by Auditor Shri Suresh C Shah to the Assessee Company dated 19.06.2008 indicating the working of the amount that has to be received by the assessee from M/s Fortaleza Developers. Standard agreements in respect of sale of residential units in Fortaleza Complex. According to the Assessing Officer, the evidence indicated that the Assessee had received a share of 35% from gross receipts on the sale of residential units in the AOP. According to the Assessing Officer, the Assessee had not received its share out of the profits of the AOP and when a director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reopening the assessment. As regards Sr. No. vi the same is just standard agreement of sale of Residential unit of Fortaleza Developers." [Emphasis supplied] The objections submitted by the Assessee have been rejected by an order dated 14 July 2011 passed by the Assessing Officer. 8. Learned Counsel appearing on behalf of the Assessee submitted that (i) The Assessing Officer has sought to reopen the assessment merely on the basis of a change of opinion; (ii) The Assessee had submitted full information to the Assessing Officer pertaining to the AOP and the Assessing Officer was aware of the fact that the amount of Rs. 3.49 crores received by the Assessee from the AOP during the assessment year 2007-08 represented 35% of the gross sale receipts; (iii) There was no tangible material on the basis of which the Assessing Officer could come to the conclusion that income had escaped assessment; (iv) Admittedly, the AOP has been brought to tax and an order of assessment had been passed on the basis that there is a valid AOP in existence; and (v) Once the AOP has been assessed as such, and has been brought to tax at the maximum marginal rate of tax, no Assessing Officer properly instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessee from the AOP and which the Assessee claims to be exempt under Section 167B (2). The note appended to the return of income tax explained the nature of the receipts. The profit and loss account similarly contained a disclosure of the share of profits in the amount of Rs. 3.49 crores from the AOP. The Assessing Officer called for a disclosure of a ledger extract of the Assessee's capital account with the AOP which was disclosed to the Assessing Officer, in reply. During the course of hearing, the Assessee filed a copy of the joint venture agreement dated 26 August 2002 and a copy of the agreement pertaining to the AOP by its letter dated 6 November 2009. On these facts, it is necessary for the Court to now advert to the basis on which the assessment was sought to be reopened. 12. The Assessing Officer has adverted to the receipts of Rs. 3.49 crores in para 4 of the assessment order as being the share of profits of the Assessee from the AOP. The assessment order also contains a statement reflecting the awareness of the Assessing Officer of the fact that the gross sale proceeds were liable to be shared between the Assessee and its collaborator in the proportion of 35% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled a return of income tax for the assessment year 2007-08 disclosing a gross total income of Rs. 14.58 crores. The surplus transferred to the members of the AOP was disclosed in the profit and loss account to be 14.25 crores. The share of the Assessee was disclosed at Rs. 3.49 crores which corresponds to what is reflected in the return of income correspondingly filed by the Assessee. The working out of the distribution of profits is reflected in the accounts of the AOP; the computation there shows that the share of the Assessee representing 35% of the basic flats' cost has been computed at Rs. 15.11 crores and after deducting an amount of Rs. 11.62 crores as capital investment and PMC charges, the Assessee's share of profit is shown at Rs. 3.49 crores. The Assessing Officer passed an order on 18 December 2009 under Section 143 (3) in relation to the AOP. The Assessing Officer denied the benefits of Section 80IB(10) to the AOP and an amount of Rs. 14.63 crores was brought to tax. In appeal the CIT (Appeals) by an order 25 March 2010 granted the benefit of a deduction under Section 80IB(10) to the AOP. The Court is informed by learned Counsel that the Revenue has filed an appeal ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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