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2016 (10) TMI 404

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..... 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 the objection. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 16237 of 2010 - - - Dated:- 5-10-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. For The Petitioner : MR SN DIVATIA, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE A.J. SHASTRI) 1. The petition is filed for the purpose of challenging the validity of impugned notice issued under section 148 of Income Tax Act, 1961 ('the Act' for short) dated 25.03.2010 and also 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 tota .....

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..... occasion, this very issue has been examined at length and therefore, it cannot be allowed to reopen again. The reasons which are reflected from petition compilation supplied to the petitioner, read as under: The assessee has filed the return of income for A.Y. 20032004 on 23.10.2003 showing total 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 work contractor and not undertaken any developing and building of housing project approved by the Local Authority and hence, the claim of the assessee for deduction u/s. 80IB(10) of the I. T. Act, is not in accordance with law. Finance Act 2009 has amended the section 80IB(10) by way of inserting the Explanation with retrospective effect from 01/04/2001. After the introduction of the Explanation to .....

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..... or 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 dated 20/07/20058 and the Assessing Officer after thoroughly scrutinizing the details, has passed assessment order on 30/09/2005 granting claim u/s. 80IB(10) of the Income Tax Act, 1961. (2) We would further like to point out that Notice u/s. 148 of the Income Tax Act, 1961 was issued on 25/03/2010 i.e. after 5 year and 11 months of expiry of the assessment order. In this connection, your attention is invited to the proviso to section 147, which is reproduced hereunder: Provided that where an assessment 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) o .....

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..... contention that during the F.Y. 200203, the firm has carried forward debit interest of ₹ 6,16,863/and earned interest of ₹ 4,07,778/from Shilp Corporation. Accordingly 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 for entitlement of deduction under Sec.80IB( 10). 4.4 In view of the above facts and legal provisions, the interest income of ₹ 4,07,778/received from M/s. Shilp Corporation is considered as its income and deduction claimed under Sec.80IB( 10) is reduced to that extent. 7. Therefore, it appears that in the past assessment proceedings, the issue has been gone into in detail and only thereafter the deduction is made available to the petitioner. Therefore, the counsel for the petitioner is contending that the o .....

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..... 340 , the Division Bench of this Court while dealing with this very issue related to reopening of assessment beyond the period of four years in the context of insertion of explanation attach to section 80IB(10) of the Act, has held as under: It is true that when there is a statutory amendment with retrospective effect, the statutory amendment has to operate as if the law as amended was there on the statute book. However, as per the settled legal position the fiction is to operate within the field which it is meant. Hence, if the proceedings were pending on 1/4/1986 when the statutory amendment was 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 the present case, it could never be said by any stretch of imagination that in the year 1983 .....

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..... emed that the petitioner has 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 consideration, the notices under section 148 of the Act having been issued after the expiry of a period of four years from the end of the relevant assessment years, the very initiation of proceedings under section 147 of the Act stand vitiated and as such cannot be sustained. 13. Similar is the case with respect to Classic Network Ltd. v. Deputy Commissioner of IncometaxCircle1 reported in (2014) 45 taxmann.com 234 (Gujarat) , in which also, in the explanatory amendment which was inserted with retrospective 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 reopen .....

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