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Landbase India Ltd. Versus DCIT,, Circle 4 (1) , New Delhi

Reopening of assessment - deduction of “provision for construction” disallowed - Held that:- Sufficiency of reasons for reopening and assessment does not call for determination at the stage of reopening assessment and secondly though the material were available on record, there was no conscious consideration of the same because there was no application of mind by the Assessing Officer at the time of regular assessment proceedings, therefore, there was no change of opinion by the Assessing Office .....

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, the assessee had furnished details of provisions made for construction expenses as on 31.3. 2000 with copies of bills submitted by the parties, before the Assessing Officer during the original assessment proceedings. Thus, there is nothing to suggest that any new fact/information had come to the notice of the Assessing Officer subsequent to the original assessment to acquire jurisdiction by him to initiate reopening proceedings under sec. 147 of the Act. Thus reassessment as invalid and the sa .....

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e validity of the order of the Assessing Officer passed under sec. 143(3) read with sec. 147 of the Income-tax Act, 1961 ( the Act ), without appreciating that the order of Assessing Officer was beyond jurisdiction, bad in law and void-ab-initio. 1.1 That on the facts and circumstances of the case, the CIT(A) has erred in not appreciating that the reassessment proceedings were initiated by the Assessing Officer on a mere change of opinion without forming reasonable belief of escapement of income .....

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llowing the deduction of provision for construction amounting to ₹ 2,77,52,000, claimed by the appellant during the relevant previous year. 2.1 That on the facts and circumstances of the case, the CIT(A) has erred in holding that the liability on account of construction cost did not accrue to the appellant during the relevant previous year. 2.2 Without prejudice, that the CIT(A) erred on facts and in law in not directing to allow the expenses in respect of which provision was made in the s .....

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the Act vide notice dated 29.9.2004 issued under sec. 148 of the Act on the basis of alleged escapement of income on account of provisions for construction expenses. In the reassessment, the Assessing Officer assessed the loss of assessee at ₹ 5,49,00,749 against the loss of ₹ 8,85,98,137 assessed in the original assessment. The aggrieved assessee questioned the validity of initiation of reassessment and the assessments framed in furtherance thereto before the Learned CIT(Appeals) bu .....

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ment proceedings had examined the issue as the assessee had filed all the relevant details/documents on the issue of provisions for construction expenses. The Learned AR referred page No.9 of the paper book i.e. copy of letter dated 25.3.2003 vide which the assessee has submitted details of provisions made for construction expenses as on 31.3.2000 with copies of bills submitted by the parties, before the Assessing Officer. In the said letter, the assessee had categorically submitted that since t .....

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for the year. It was stated regarding revenue reorganization from the sale of land and constructed apartments - Laburnun Projects on the basis of percentage completion method and inclusion of estimated cost in the profits computation. From the above details/documents, it is apparent that on the issue of provisions for construction expenses, the assessee had made adequate disclosures and the Assessing Officer, in the original assessment proceedings, had, in fact, made specific inquiries/investig .....

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inal assessment order. There is nothing to suggest, either from the reasons recorded and/or from the assessment order that any new fact/information came to the notice of the Assessing Officer subsequent to the original assessment. The Learned AR contended that on perusal of the reasons recorded by the Assessing Officer before initiating the impugned assessment proceedings, it is clearly evident that the Assessing Officer has merely reappraised the details forming part of the original assessment .....

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elhi); viii) ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT - 325 ITR 471 (Bombay). 4. Learned AR submitted further that the decisions in the cases of Gruh Finance Vs. JCIT - 243 ITR 482 (Guj.) and CIT vs. S.R. Talwar - 305 ITR 286 (All.) relied upon by the Learned CIT(Appeals) having distinguishable facts are not relevant in the present case. 5. The Learned CIT(DR) on the other hand tried to justify orders of the authorities below with this contention that no objection was raised before the .....

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er the closure of financial year as on 31.3.2000. The Learned CIT(Appeals) submitted that the Learned CIT(Appeals) has rightly upheld the validity of reassessment framed by the Assessing Officer. She placed reliance on the following decisions: i) CIT vs. PVS Beedies (P) Ltd. (1999) - 103 Taxman 294 (S.C); ii) CIT vs. First Leasing Co. of India Ltd. (2001) - 118 Taxman 181 (Madras); In rejoinder the Learned AR submitted that the documents of later dated were related to the transactions of the rel .....

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t qualify for deduction. Since this liability has actually not arisen and incurred during the previous year, the same is not an allowable deduction for the assessment year 2000-01 . I have reason to believe that an income of ₹ 2,77,52,000 chargeable to tax has escaped assessment for the assessment year 2000-01. Issue notice u/s. 148 for the A.Y. 2000-01. 7. On perusal of the above reasons, we find it apparent that the Assessing Officer has initiated reopening proceedings merely on reapprai .....

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ssment to acquire jurisdiction by him to initiate reopening proceedings under sec. 147 of the Act. The Hon'ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. (supra) affirming the decision of Full Bench of the Hon'ble Delhi High Court has been pleased to hold that sec. 147 of the Act does not postulate conferment of powers upon the Assessing Officer to initiate reassessment proceedings upon his mere change of opinion. The Hon'ble Delhi High Court in the case of CIT vs. Us .....

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any addition in the assessment order. In such situations, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. The expression change of opinion postulates formation of opinion and then a change thereof. The Hon' .....

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ng Officer reached a belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under sec. 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. In that case also, there was no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation. Th .....

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the Assessing Officer during the course original assessment proceedings. The assessee company was also required under the accrual concept of accounting to provide for all expenses related to the construction of the flats till 31.3.2000. In compliance, the assessee had submitted that this provision made was not an ad hoc provision but was made based on the invoices submitted by the various contractors who were engaged in the construction activity and payment was also made by the assessee company .....

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proceedings and thus an arbitrary exercise of the powers conferred under sec. 147 of the Act. We thus concur with the contentions of the Learned AR that the reassessment impugned was nothing but change of opinion which is not permitted under the provisions of the law under sec. 147 to acquire jurisdiction by the Assessing Officer to initiate reopening proceedings. It is also pertinent to discuss over here that the decisions relied upon by the Learned CIT(Appeals) in the cases of Gruh Finance Vs. .....

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plication of mind by the Assessing Officer at the time of regular assessment proceedings, therefore, there was no change of opinion by the Assessing Officer. As discussed above, the factual finding of the Learned CIT(Appeals) that there was no application of mind by the Assessing Officer is contrary to the record. However, it has been fairly admitted by the Learned CIT(Appeals) that the materials were already available on record. The facts in the case of Gruh Finance Vs. JCIT (supra) are differe .....

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