2024 (5) TMI 166 - HC - Income Tax

Reassessment notice under Section 147 invalid when income already subject to appeal proceedings

The Bombay HC set aside a reassessment notice u/s 147 issued after earlier proceedings u/s 153A/C. The assessee claimed deduction u/s 80IB(10) for a ... Validity of Re-assessment proceedings u/s 147 - Earlier the notice for Assessment u/s 153A/C was issued - denying deduction u/s 80IB - petitioner’s case that it was not subjected to search and seizure action - HELD THAT:- Section 147 provides for a clear bar that where an income, which is subject matter of any appeal, reassessment of such income is not permissible. The reason to believe escapement of income provides “Notice u/s. 153A/C of the IT Act, 1961 was issued. During the year under consideration the assessee has shown that the project is completed and in its P&L A/c. credited to the total sale consideration and entire profit was claimed as deduction u/s. 80IB (10). AO has made addition on account of deduction in WIP and denied the deduction u/s. 80IB (10) as project is not as approved project in the hands of the assessee because the commencement certificate is not issued to Mr. Harshad Doshi nor his AOP Poonam Builders. Secondly the first approved plan is dated 27.11.1997 which is before 1.10.1998. Thus by no means, the assessee is eligible to claim the benefit of deduction u/s. 80IB (10)' Thus Escapement of income due to claim of deduction under Section 80IB (10) was certainly a subject matter of appeal and admittedly so and, therefore, in our view, on this income reassessment is not permissible. As held by the Hon’ble Apex Court in Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] Revenue could initiate reassessment proceedings subject to fulfilment of the conditions mentioned in Sections 147/148 of the Act, i.e., so long as it is not hit by the third proviso to Section 147 of the Act. Reopening notice set aside - Decided in favour of assessee. Issues Involved:1. Validity of the notice dated 31st March 2015 issued u/s 148 of the Income Tax Act, 1961.2. Legality of the assessment made u/s 153A/C read with Section 143(3) of the Income Tax Act, 1961.3. Applicability of the third proviso to Section 147 of the Income Tax Act, 1961.Summary:Issue 1: Validity of the notice dated 31st March 2015 issued u/s 148 of the Income Tax Act, 1961:The petitioner challenged the notice dated 31st March 2015 issued u/s 148 of the Income Tax Act, 1961, relating to A.Y. 2008-09. The notice was issued to reassess the income of the petitioner, alleging it had escaped assessment. The reasons for the notice included the denial of deduction u/s 80IB(10) based on the claim that the project was not an 'approved project' and the commencement certificate was not in the name of the petitioner. The court found that the same issue was already the subject of an appeal, and thus, the notice was hit by the third proviso to Section 147 of the Act.Issue 2: Legality of the assessment made u/s 153A/C read with Section 143(3) of the Income Tax Act, 1961:The petitioner contended that the assessment order dated 29th October 2010, passed u/s 153A/C read with Section 143(3) of the Act, was invalid as there was no search and seizure action against the petitioner. The CIT(A) had set aside this order on 30th March 2015, without giving any finding on the merits of the claim of deduction u/s 80IB(10). The court agreed with the petitioner that the reassessment was not permissible as the issue was already subject to an appeal.Issue 3: Applicability of the third proviso to Section 147 of the Income Tax Act, 1961:The petitioner argued that the third proviso to Section 147 barred the reopening of assessment on the same issue that was the subject matter of an appeal. The court noted that the claim of deduction u/s 80IB(10) was indeed the subject matter of the appeal, and thus, reassessment on this income was not permissible. The court also referenced the judgment in Principal Commissioner of Income Tax, Central - 3 v/s. Abhisar Buildwell (P.) Ltd. 2023 SCC OnLine SC 481, which supports the view that reassessment proceedings can only be initiated subject to the fulfilment of the conditions in Sections 147/148 of the Act.Conclusion:The court ruled in favor of the petitioner, making the rule absolute and quashing the notice u/s 148 as it was arbitrary, illegal, and against the principles of natural justice. The court emphasized that the basis of the impugned reopening notice was the very issue which was the subject matter of the appeal leading to the order dated 30th March 2015.