Kalpataru Sthapatya Pvt.Ltd vs Income Tax Officer Ward 1(3)

Honourable Mr. Justice Akil Kureshi

Rule. Learned advocate Shri PG Desai waives service of rule. Looking to the nature of the controversy involved, this petition is taken for final hearing immediately.

Petitioner is a limited company assessed to tax regularly. The petitioner challenged the notice dated 18.3.2011 issued by the Assessing Officer seeking to reopen the assessment for the year 2004-05. Reasons communicated for such reopening are as follows:

On verification of the records, it is noticed that the assesee had undertaken the project known as Sheth Nagar Situated at Jamnagar Road, Rajiot and claim for deduction of an amount equal to 100% of the profit derived in the previous year from such housing project u/s 80IB(10) of the I.T.Act.

On verification of the record, it is noticed that theclaim of the assessee for claiming deduction 80IB ofthe IT Act is not correct and was wrongly claimed asbuilt area of the shops and other commercialestablishment of the project is 7.96% which is mar moreexceeding the statutory limit of 5% of the aggregatebuilt up area of the housing project or 2000 Sq. ftswhichever is less as laid down under sub-section (d) of section 80IB(10) of the I.T.Act, 1961.thus the assessee is not eligible for claiming deduction u/s 80IB(10) of the IT Act,1961.

In view of the above fact, the assessment is required to be reopened u/s. 147 of the Act for bringing the escaped income amounting to Rs.15,0 4,042/ under tax net.

I have, therefore, reasons to believe that the incomeassessable to tax has escaped assessment within themeaning of section 147 of the Act for A.Y.2004-05.Issue notice u/s 148 of the Act.

The petitioner raised its objection to the proposed reopening vide its communication dated 17.8.2011. The Assessing Officer, however, rejected the objection by the order dated 10.10.11. At that stage, the petitioner has approached this Court filing the present petition challenging the notice for reopening.

On 28.11.11, while issuing notice, we had recorded thus :

Counsel for the petitioner submitted that the assessment previously framed under scrutiny has sought to be reopened beyond a period of 4 years from the end of the relevant assessment year. He submitted that the reasons recorded does not allege that income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts. Counsel further pointed out that the Assessing Officer has found a belief that income has escaped assessment because the project had commercial construction in excess of 5% and that therefore, deduction could not be granted u/s 80IB(10) of the Income Tax Act, 1961, whereas such restriction of the commercial construction, not being in excess of 5%, was introduced later on.

Under the circumstances issue notice returnable on19.12.2011. In the meantime, the Assessing Officer mayproceed with the assessment. Pursuant to impugnednotice, he shall not pass final order of assessmentwithout permission of the Court.

Counsel for the petitioner submitted that the assessmentpreviously framed after scrutiny is sought to be reopenedbeyond the period of four years. In the reasons recorded,there is no allegation that income chargeable to tax hadescaped assessment due to failure on the part of theassessee in disclosing fully and truly all materialsnecessary for such assessment. Counsel submitted that thepetitioner was granted deduction u/s 80IB of the Act in the original assessment. Such deduction is sought tobe withdrawn on the premise that in the housing projectdeveloped by the petitioner there are commercialestablishments occupying 7.96% of the constructed areawhile as per clause (d) of section 80IB(10), the limit is5% of the aggregate built up area or 2000 sq. fts.whichever is less. Counsel submitted that such requirementwas introduced with effect from the assessment year 2005-06and that therefore was not applicable during the year underconsideration.

On the other hand, though counsel for the Revenue wasnot able to dispute that the requirement of commercialestablishment not exceeding 5% of the total construction or2000 sq. ft. whichever is less was introduced in theassessment year 2005-06, it is submitted that housingproject developed by the petitioner contained commercialestablishments and was therefore not eligible for deductionunder section 80IB(1) of the Act.

Having heard the Learned Counsel for the parties, wehave no hesitation in holding that the notice for reopening is wholly invalid. The only reason for which assessmentpreviously framed was sought to be reopened beyond theperiod of four years was that the housing project developedby the petitioner occupied commercial establishmentexceeding 5% of the constructed area. Admittedly, clause (d) of section 80IB(10) of the Act disqualifying theassessee from claiming benefits u/s 80IB(10) wasintroduced subsequently. Admittedly, such amendment is notmade with retrospective effect. In that view of the matter,there was no scope for reopening the assessment alreadyclosed. Further, the contention that even without the aidof clause (d) of section 80IB(10), assessee was noteligible for deduction cannot be accepted. Firstly, this isnot the reason on which the reopening is sought to be done.Secondly, there is no allegation that the assessee hadconcealed any material particularly. In the reasonsrecords, there is not even any hint to this effect. In theaffidavit in reply filed by the respondent although atcouple of places it is stated that the assessee did notsupply necessary particulars such assertion is with respectto the requirement of commercial establishment notexceeding 5% of the constructed area. In that view of thematter, we do not find that reopening can be sustained.

In the result, the impugned notice for reopening is quashed. Rule is made absolute accordingly.