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2016 (10) TMI 404 - GUJARAT HIGH COURT

2016 (10) TMI 404 - GUJARAT HIGH COURT - TM - Reopening of assessment - claim of deduction under section 80IB(10) - Held that:- The action initiated by the authority is beyond the period of four years from the end of relevant assessment year. It is also emerging from record that there is no allegation of any nature that the petitioner has not truly or fully disclosed all material facts related to deduction section 80IB(10) of the Act and in absence of any such element, we feel it necessary not t .....

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e, considering this overall set of circumstance and keeping in mind the ratio laid down by consistently three different decisions reproduced herein above, it appears that the reopening of assessment is not justified beyond a period of four years from the end of relevant assessment year. - Hence, we are of the opinion that action on the part of the respondent authority is impermissible and we accordingly quashed and set aside the impugned notice as well as order dated 16.12.2010 for rejecting .....

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so the order passed on objection raised by the petitioner. Brief facts are as under. 2. The petitioner is a partnership firm indulged in the business of development and construction of housing project. The assessee firm has filed the return of income for assessment year 2003-04 on 23.10.2003 declaring total income as Nil after claiming deduction under section 80IB(10) of the Act to the extent of an amount of ₹ 71,88,961/and while claiming such, the report in form no.10CCB as required is al .....

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section 147 of the Act and thereby, called upon the petitioner to justify. On receipt of such notice, the petitioner has submitted a letter to respondent asking for reasons which have been recorded for the purpose and requested the authority to treat the original return which had been filed as return in response to impugned notice and the said letter was sent to the department on 17.06.2010. IT appears from the record that subsequently the notice for hearing under section 143(1) as also under s .....

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ing the objection. 3. Learned advocate Mr.S.N.Divetia representing the petitioner has contended that this very issue with regard to a claim of deduction under section 80IB(10) of the Act had been gone into in detail while scrutiny assessment was undertaken by the authority. In response to the same, learned advocate has also submitted that the sole reason which appear to have been assigned by the authority to reopen the assessment is that by virtue of insertion of explanation to section 80IB(10) .....

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l income of Rs. Nil after claiming deduction of ₹ 71,88,961/u/ s. 80IB(10) of the Incometax Act. In this case assessment u/s. 143(3) of the I. T. Act was passed on 30.09.2005. However, on verification of the details, it is noticed that the assessee firm was in the business of developing and building of housing project. The assessee had entered into a development agreement with Jivan Jyot (Motera) Coop. Housing Society for developing and building housing project. The assessee is merely a wo .....

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he deduction u/s. 80IB(10) is not available to an enterprise which executes the housing project for another entity as a works contractor. In view of the above, I have, therefore, reasons to believe that due to illegitimate claim of deduction of ₹ 71,88,961/made by the assessee u/s. 80IB(10) of the I. T. Act, income chargeable to tax has escaped assessment within the meaning of section 147 of the I. T. Act. 4. Learned counsel has further drawn the attention that on 08.12.2010, the query was .....

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laim. (3) The claim of deduction u/s.80IB(10) of the I.T. Act amounting to ₹ 71,88,961/is proposed to be disallowed in view of the reasons recorded while reopening the assessment. You are thereby requested to showcause why the claim of deduction should not be disallowed. 5. In response to the said queries which have been raised by the department under a communication dated 14.12.2010, the detail explanation has been forwarded to the authority and contended that the petitioner is not merely .....

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ax Act, 1961. Deduction of ₹ 71,88,961/was claimed therein u/s.80IB(10) of the Income Tax Act, 1961. The return was processed u/s.143(3) of the Act., thereafter case was selected for scrutiny u/s.143(3) and notice u/s.142(1) was issued on 21/06/2005 calling for details including development agreement entered into the Society for development of housing project. Necessary details regarding the project like sanctioned building plans, development agreement etc. were submitted vide our letter d .....

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essment under subsection (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose full .....

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were submitted to the Assessing Office and, therefore reopening of the assessment is bad at law. (3) It is also submitted that Explanation to Section 80IB (9) has been inserted specifically to exclude undertaking which executes housing project as works contract. In the present case, housing project has not been executed by way of works contract which is clear from the copy of the Development Agreement submitted during the course of assessment which makes clear that the project has been executed .....

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trusted and dealing with the housing project. It was also pointed out before the authority that development agreement dated 17.04.1999 had also taken place and it has been contended that this very particulars have been examined by the assessing authority at the time when scrutiny assessment has taken place and a specific opinion was formulated with respect to that issue and therefore, allowing at this stage to reopen the assessment would be purely based upon a change of opinion which is impermis .....

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cordingly there is a debit in interest account at ₹ 2,09,085/is not correct. There is no relevancy in interest payment and interest earned. Interest is earned on the advances given to Shilp Construction which is sister concern of the assessee. It is not the income earned from the development of housing project. It is the income from the surplus fund advanced to Shilp Corporation. It is not the profit derived from developing and building housing project which is the preliminary condition fo .....

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ending that the opening of assessment at this stage would tantamount to based upon change of opinion, which is not permissible. 8. Learned counsel for the petitioner has further contended that this action is initiated beyond the period of four years and the reasons which have been recorded, do not reflect any element of non disclosure of material facts on the part of the petitioner. It is only on the basis of insertion of explanation attached to section 80IB(10) of the Act with retrospective eff .....

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that the action on the part of the respondent authority is justified. Counsel has submitted candidly that there is no element of non disclosure alleged in the reasons for reopening, therefore, based upon the main contention about the insertion of explanation to section 80IB(10) of the Act with retrospective effect, counsel submitted not to entertain the petition. 10. Having heard learned counsel appearing for the respective parties and having gone through the relevant material on record, it tra .....

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submitted that retrospective insertion of explanation to section 80IB(10) of the Act will have to be given an effect to, but on this issue, a consistent proposition of law has explained that the said insertion will not have any impact on reopening of assessment, especially when it is beyond a period of four years. In case of Denish Industries Ltd. v. Incometax officer reported in (2004) 271 ITR 340, the Division Bench of this Court while dealing with this very issue related to reopening of asse .....

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as made, whether assessment proceedings or proceedings by way of appeal or revision or reference, Explanation 8 would have certainly operated. However, on the question whether the assessee had failed to disclose fully and truly all material facts necessary for assessment, it is obvious that when the assessee had filed its return in 1983 it could not have assumed that such a legislative amendment was going to be made in the year 1986 with retrospective effect from the year 1974. In the facts of t .....

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han the amount of investment allowance and depreciation allowance taken together. 12. Yet in another decision, a similar view is taken. In case of Sadbhav Engineering Ltd. v. Deputy Commissioner of Incometax reported in (2011) 333 ITR 483 (Guj), it has been held that especially when the proceedings under section 147 have not been initiated by reason of any failure on the part of the petitioner to disclose truly and fully all material facts necessary for its assessment, for assessment year under .....

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e admissible to an assessee who carries on business which is in the nature of works contract. That the petitioner assessee being a civil contractor working for the Government is not eligible for deduction under section 80IA as claimed by the assessee, hence there was reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration. The record of the case does not in any manner indicate that proceedings under section 147 are sought to be reopened .....

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s failed to disclose the correct facts. As to whether or not there is any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, is a matter of fact and there can be no deemed failure as is sought to be contended on behalf of the respondents. In the circumstances, in absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment years under consideratio .....

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effect and the same was utilized for the purpose of issuing notice for reopening, the High Court has dealt with the issue and, even if in that case, the reopening was within the period of four years, the Court has not allowed the same to be reopened. The relevant extract of the said decision reads as under: In the instant case, admittedly, the only ground which had made the Assessing Officer to initiate proceedings of reassessment is the insertion of explanation to subsection (13) of section 80I .....

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