TMI Blog2022 (5) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndum of appeal filed by the Department and had advised the Department to rectify the mistake within 10 days of receipt of the defect notice. The assessee was under bona-fide impression that the period of 30 days for filing the cross objection would reckon from the date of rectification of the mistake by the Department and therefore, there was delay in forwarding the papers to the Authorized Representative. Though Ld. DR opposed the condonation, however, keeping in view the principles of natural justice and considering the period of delay, we condone the delay and proceed for adjudication of cross objection on merits. 3. The grounds raised by the Revenue read as under: 1. The order of the Id CIT(A) is contrary to law and facts and circumstances of the case. 2. The Id CIT(A) erred in law in holding that assessee's activities of giving advance and purchase registration of land, laying of roads, construction of buildings etc. constitute starting of business activities and accordingly the expenses are allowable as business expenses. 2.1 The Id CIT(A) ought to have noted that assessee has riot generated any revenue from its business operations and hence pending a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had not commenced business and hence the expenses incurred by the appellant would partake the character of pre commencement expenses. The decision of the Commissioner of Income tax (Appeals) is supported by material on record and hence, in the opinion of the appellant, no interference with the decision by the Tribunal is warranted. 3. For these grounds and such other grounds as may be raised either before or during the course of hearing of the appeal, the respondent prays that the Hon'ble Tribunal may be pleased to pass orders cancelling the decision of the Commissioner of Income tax (Appeals) with regard to reopening of assessment and dismiss the departmental appeal as devoid of merits and render justice. As evident, the Revenue is aggrieved by the action of Ld. CIT(A) in concluding that the assessee had started business activities and accordingly, the expenses were allowable as business expenditure. The assessee, in its cross-objections, challenges the validity of assessment proceedings which have been upheld by Ld. CIT(A) in the impugned order. 5. The Ld. DR supported the findings of Ld. AO and submitted that the assessee was engaged in deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2011 wherein the sole disallowance made by Ld. AO was disallowance u/s 14A and returned loss of Rs.509.40 Lacs was revised to Rs.488.58 Lacs. 7.3 However, subsequently forming a belief that the income escaped assessment, the case was reopened and notice u/s. 148 of the Act was issued on 31.01.2014 which is within 4 years from the end of relevant assessment year. The reasons for reopening were communicated to the assessee and the assessee s objections thereto were rejected. The reason for reopening the assessment was that pre-commencement expenses should have been capitalized and income earned by the assessee was to be assessed as income from other sources . The assessee, in its objection to reopening, submitted that there being no fresh material to disturb the reasoning arrived at by Ld. AO during regular assessment proceedings, the reopening was not sustainable. However, Ld. AO rejected the same on the ground that the principle of change of opinion would apply where Ld. AO had applied the mind and taken a conscious decision on a particular matter. It will have no application where the assessment order does not address itself to the aspect which forms the basis for reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated first. Upon due consideration of material facts, it could be gathered that the return of income was already scrutinized u/s 143(3) wherein the sole disallowance made by Ld. AO was disallowance u/s 14A. However, subsequently, the case was reopened on the allegation that the assessee had not commenced its business activities and therefore pre-commencement expenses should have been capitalized. Though the assessment has been reopened within 4 years from end of relevant assessment year, however, after perusal of reasons of reopening, it could be gathered that the reasons have not been formed on the basis of any new tangible / fresh material coming to the possession of Ld. AO. Rather the formation of belief is on the same set of material which was available before Ld. AO during the course of assessment proceedings. The Hon ble Supreme Court in the case of Kelvinator of India Ltd. (2010; 320 ITR 561) held that reasons to believe must be based on new information. The Ld. AO has power to reassess but no power to review. Formation of belief on same set of material would result into review of the order. After 01.04.1989, the assesseing officer has power to reopen provided there is tang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It has already been noted by Ld. CIT(A) that the assessee was engaged into development of integrated feeder township and SEZ on approx. 900 acres of land near Coimbatore. 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 na ..... X X X X Extracts X X X X X X X X Extracts X X X X
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