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Issues: (i) Whether the reopening of the assessment under sections 147 and 148 was valid in the absence of tangible material and on the basis of an audit objection. (ii) Whether the assessee was entitled to deduction under section 80-IB(10) in respect of the Indian Ocean housing project.
Issue (i): Whether the reopening of the assessment under sections 147 and 148 was valid in the absence of tangible material and on the basis of an audit objection.
Analysis: The original assessment had been completed under section 143(3) after survey and detailed verification of the project records. The reasons for reopening did not disclose any fresh tangible material showing escapement of income and the reassessment was founded substantially on an audit objection and reappraisal of material already on record. In reassessment proceedings, the recorded reasons alone govern the jurisdiction to reopen, and a mere change of opinion cannot sustain action under section 147.
Conclusion: The reopening was invalid and the reassessment could not be sustained.
Issue (ii): Whether the assessee was entitled to deduction under section 80-IB(10) in respect of the Indian Ocean housing project.
Analysis: The deduction had to be examined project-wise and not by denying relief merely because another project on the same land had commenced earlier. The approved plan and municipal records showed that the Indian Ocean project had local authority approval, commenced after 1 October 1998, was completed within the relevant time, had a plot area exceeding one acre on the proper calculation, and contained residential units within the prescribed built-up area limit. The adverse computation made by the Assessing Officer on the basis of hillock area and an incorrect flat-area calculation was rejected as unsupported by the record.
Conclusion: The assessee satisfied the statutory conditions for deduction under section 80-IB(10).
Final Conclusion: The reopening failed for want of valid jurisdictional basis, and the disallowance of the housing project deduction was unsustainable on facts and in law; the assessee's claim was upheld.
Ratio Decidendi: Reassessment under section 147 requires tangible material giving rise to a bona fide reason to believe that income has escaped assessment, and deduction under section 80-IB(10) must be allowed where the housing project independently satisfies the statutory conditions on approved records and correct project-wise computation.
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