TaxTMI 
TaxTMI 
2018 (4) TMI 703
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....e and in law, the Ld. CIT (A) was right in quashing the order passed u/s 143(3) r.w.s 147 of I.T. Act holding that the reopening of the assessment u1s 147 was bad in law as it was a clear case of change of opinion." 2. "On the facts and circumstances of the case the Ld.CIT (A) erred in ignoring the fact that there was no change of opinion as the matter was not examined in the proceedings u/s 143(3) of I.T. Act and the material on record proved that there was escapement of income as such the claim of assessee for the deduction u/s 80IB (10) was allowed without examination." 3. "Whether on the facts of the case and in law the Ld. CIT (A) was right in allowing the claim of the assessee of deduction u/s 80IB(10) of Rs. 2,05,33,831/- in respect of Slum Rehabilitation Project (SRA) ignoring the fact that project was approved prior to 1.04.2004 and was not eligible for deduction u1s 80IB(10) as per the notification of CBDT no.67 dated 03.08.2010 read with corrigendum vide notification no.2 of 2011. 4. "The appellant prays that the order of CIT CA) on the above ground be set aside and that of the Assessing Officer be restored." 5. "The appellant craves l....
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....cluded assessment u/s 147 of the 1961 Act. The AO also obtained necessary approval from learned Commissioner of Income Tax before reopening the concluded assessment u/s 147. The reasons for reopening of the concluded assessment u/s 147 were provided by the AO to the assessee. The assessee submitted before the AO on 25.10.2013 that the original return of income filed may be treated as return of income in response to notice u/s. 148. The assessee objected to the reopening of the assessment and made submissions before the AO on 18.12.2013. The objections of the assessee were disposed of by the AO vide letter dated 27.12.2013. The AO observed that during FY 2006-07 relevant to the impugned AY 2007-08, the project was incomplete. It was observed by the AO that the assessee project at Parel,Mumbai was approved by Slum Rehabilitation Authority on 07.10.2002 and the commencement certificate was issued on 31.03.2003. Thus, the AO observed that the project was approved prior to 1st day of April of 2004, and hence the project did not fall within the notification of the CBDT no. 67 dated 31.08.2010 read with Corrigendum vide notification no. 2 of 2011 by CBDT. The assessee claimed that the pro....
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....e(a) and (b) of section 80IB(10) is applicable in the instant case as the assessee has not complied with term & condition as the assessee project admittedly has not been completed before 31st March 2008, which led to the addition to tune of Rs. 2,05,33,831/- as the claim of deduction u/s. 80IB (10) stood withdrawn. The contention of the assessee to accept revised project submitted on 28/04/2004 and approval by SRA of the revised project on 04/06/2004 as date of approval was rejected by the AO, vide assessment order dated 07-03-2014 passed u/s 143(3) r.w.s. 147 of the 1961 Act. 5. Aggrieved by the assessment order dated 07-03-2014 passed by the AO u/s 143(3) r.w.s. 147 of the 1961 Act, the assessee came in appeal before the learned CIT-A and the learned CIT-A granted relief to the assessee by holding as under:- "5. DECISION 5.1 I have given due consideration to the facts of the case and the contentions of the appellant. It is noted that the instant case has its origin in the assessment order u/s 143(3) for A.Y. 2009-10 wherein the AO had disallowed appellant's claim u/s 80lB (10) for the first time. The instant assessment year 2007-08 had already been assess....
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....pinion' must be treated as an in-built test to check abuse of power by the Assessing Officer and that the reasons must have a live link with formation of belief. Important excerpt of the decision is reproduced hereunder: "However, one needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material to come to conc....
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....on 147. 5.2.9 Where a deduction has been considered and allowed, subsequent withdrawal of same under section 148 amounts to change of opinion. Notice under section 148 is not valid - CIT v. Chakiat Agencies (P.) Ltd. [2009] 314 ITR 200 (Mad.); Cartini India Ltd. v. Addl. CIT [2009] 314 ITR 275/179 Taxman 157 (Bom.); Pan Drugs Ltd. v. DCIT[2009] 121 TTJ 81 (Ahd.) 5.2.10 In view of the unequivocal stance of the jurisdictional High Court of Bombay and in line with the judicial view across jurisdictions, I find that in the instant case the AO has reopened the assessment on change of opinion and decided to disallow a deduction earlier claimed by the appellant, scrutinized by the AO and allowed in original assessment order u/s 143(3) of the Act. Therefore, I find that reopening of the assessment for AY 2007-08 was not justified. Respectfully following the decisions of Hon'ble High Court of Bombay, this ground of appeal is allowed. ALLOWED 5.3 Ground 2 & 3 5.3.1 These grounds pertain to the substantive issue of appellant's claim of deduction u/s 80IB of the Income Tax Act, 1961. As stated above, the instant reassessment has its genesis in the....
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....% of the project at Parel as on 31-03-2008 and also 67% of the project was completed as on 31.03.2009. Thus, it is undisputed that the first approval of this Residential Project located at Parel, Mumbai was granted by SRA before 01-04-2004 and project could not be completed before 31-03-2008. This information came into possession of the AO during the course of assessment proceedings conducted for AY 2009-10 which led to reopening of the concluded assessment for AY 2007-08 u/s 147 of the 1961 Act. The AO disallowed the entire claim of deduction u/s 80IB which was later allowed by learned CIT(A) both on merits as well on re-opening of the concluded assessment u/s 147 of the 1961 Act. It is important at this stage to refer to the provisions of Section 80IB(10), which are reproduced hereunder: "Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. **** **** [(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in ....
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....ty as per explanation (i) to clause (a) to Section 80IB(10). In the instant case, the project was first approved by SRA on 07.10.2002 and commencement certificate was received on 31-03-2003 which are prior to 01-04-2004 and hence that shall be deemed to be the relevant dates and hence the project ought to be completed by the assessee by 31-03-2008 which is not been done in the instant case as only 67% of the project was admittedly complete by 31-03-2008. The proviso after clause(b) to Section 80IB(10) carries non obstante clause which stipulates that nothing contained in clause(a) and (b) to Section 80IB(10) shall apply to housing project provided housing project is carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf. The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010. This notification was further clarified by the CBDT in Notification....
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....l authority(SRA) on or after 01-04-2004 but before 31-03-2008. In the instant case before us the project of the assessee is approved prior to 01-04-2004 and hence the assessee will not be entitled for exemption from the rigors of clause(a) and clause(b) of Section 80IB(10) and consequently the assessee will not be entitled for deduction u/s 80IB(10) as its project was first approved prior to 01-04-2004. Whence the Parliament while enacting statute has clearly stipulated in provisions of Section 80IB(10) that deduction shall be available subject to certain conditions, it becomes absolutely essential that those conditions are met as Revenue is foregone by Government by way of granting deduction u/s 80IB(10) based on fulfillment of certain conditions which were required to be essentially fulfilled before any deduction can be allowed u/s 80IB(10) and one of the conditions, inter-alia, was that scheme is approved for slum rehabilitation/redevelopment by local authority on or after 01-04-2004, but before 31-03-2008 which came by way of CBDT notifications and it was very much mandated in the statute itself by way of proviso after clause (b) to Section 80IB(10) that the project has to comp....
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....llant herein, in its income tax returns for the assessment year in question, i.e., Assessment Year 2005-06, had claimed the deductions mentioned in Section 42(1)(b) and (c) of the Act, we should take note of the nature of these deductions. Section 42(1) (b) provides for deductions of expenditure incurred in respect of drilling or exploration activities or services or in respect of physical assets used in that connection, except for those assets on which allowance for depreciation is admissible under Section 32. Section 42(1)(c) speaks of allowances pertaining to the depletion of mineral oil in the mining area. In order to be eligible to the deductions, certain conditions are stipulated in this very section which have to be satisfied by the assessees. As is clear from the reading of this Section, these conditions are as under: (a) it grants such special allowances to those assessees who carry on business in association with the Central Government or with any person authorized by it; (b) business should relate to prospecting for, extracting or producing mineral oils, petroleum or natural gas; (c) there has to be an agreement in writing between the Central G....
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.... mentioned in Section 42 of the Act are not fulfilled. In the two PSCs, no provision is made for making admissible the aforesaid allowances to the assessee. It is obvious that the Assessing Officer could not have granted these allowances/deductions to the assessee in the absence of such stipulations, a mandatory requirement, in the PSCs. *** *** 46) The matter is, however, compounded by certain acts of respondent no. 1 and made complex to some extent by the Income Tax Authorities in giving benefit of these allowances/deductions under Section 42 of the Act to the appellant under these very PSCs in respect of earlier assessment years. Further, this very state of affairs continued for few years insofar as giving such a benefit by the Income Tax Authorities is concerned it may not pose a serious problem. We have already held above that on proper construction of the provisions of Section 42 of the Act and application of these provisions to the instant case, the appellant was not entitled to any such deductions under the PSCs. Thus, when in law no such deduction was permissible as per the PSCs in the present form, even if such deduction was given wrongly in the....
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.... is covered within rigors of Section 147/148 of the 1961 Act as the view adopted by the AO was perverse and contrary to the provisions of Section 80IB(10), as there could not be two different views on this issue and hence there can be no question of change of opinion by the AO. Any view adopted by the AO which is contrary to the provisions of law will give rise to an occasion for Revenue to reopen the concluded assessment within rigors of Section 147/148 as the income had escaped assessment due to perverse view contrary to law adopted by the AO in original assessment. Hence reopening of the concluded assessment u/s 147 in the instant case before us is considered to be valid as also on merits, the assessee claim for deduction u/s 80IB(10) deserves to be rejected and the appeal of the Revenue stood allowed. Reference is drawn to Mumbai tribunal decision in the case of Bhavya Construction v. ACIT reported in (2017) 77 taxman.com 66 (Mumbai-trib.), wherein the tribunal has elaborated deliberated and discussed this issue in details as under:- "2.6 Before coming to any conclusion we are reproducing hereunder the relevant portion from the provision of section 80IB(10) of the A....
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....ed by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation.-For the purposes of this clause,- (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of (ii) such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Boar....
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....tain conditions as enumerated therein. Commencement Certificate for building No. C-2 was issued to the assessee on 29/06/2002 (page No. 19 of the paper book) subject to condition enumerated in communication dated 10/07/1998 (supra). Full occupation certificate for Rehabilitation of building No. A was issued to the assessee on 27/01/2001. Full occupancy certificate for building No. C-1 was issued on 02/06/2003 and for building No. B was issued on 27/04/2004. Full occupation permission for sale of building No.C-2 was issued on 17/01/2008 (No.SRA/Eng/ 731/HE/PL/AP/OCC). 2.9 Under the aforementioned facts, now we shall deal with the legal position and objections raised in the impugned order. One of the objections raised by the Ld. Commissioner of Income Tax (Appeals) is that the plot of land on which rehabilitation was done by the assessee is less than one acre. The stand of the Department is that minimum one acre land is required for getting the benefit of deduction. However, we note that as per amendment by the Finance Act (No.2) 2004, w.e.f. 01/04/2005, a proviso was added to the said section, wherein, the condition of one acre was relaxed in the cases of metros like Delhi ....
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....f the said section so as to provide, inter alia, a hundred per cent, deduction of the profits derived by an undertaking developing and building housing projects approved by a local authority before 31st March, 2007 instead of 31st March, 2005 under the existing provisions, subject to the conditions that (a) such undertaking has commenced or commences development and construction of the housing project on or after 1st October, 1998 and completes the construction within four years, from the end of the financial year in which the housing project is approved by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre except in the case of a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings, and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred sq....
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.... such a scheme should be notified by the Board in this behalf. Thus, an exception has been carved out by the proviso in cases of housing project development in slum area under a Govt. scheme and overrides the condition mentioned in clauses (a) and (b). The scheme of SRA contained in regulation 33(10) of Development Control Regulation for Greater Mumbai has been notified by CBDT Notification no.67, dated 3rd August 2010. This notification was further clarified by the CBDT in Notification no.2 of 2011 dated 5th January 2011, wherein it was provided that:- "In the notification of the Govt. of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number S.O. 1898(E), dated the 3rd August, 2010 (2010) 233 CTR (ST.) 56 2010) 43 DTR (St.) 8] published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), dated the 3rd August, 2010, in paragraph 2 for "This notification shall come into force with effect from the date of its publication", read "This notification shall be deemed to apply to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, ....
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....ral construction of its words". (Ref : Micklethwait [1885] 11 Ex 452, p. 456, referred to in Tenant v. Smith [1892] AC 150, St. Aubyn v. A.G. [1951] 2 All ER 473, Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd. AIR 1989 SC 611, Saraswati Sugar Mills v. Haryana State Board AIR 1992 SC 224. In a classic passage LORD CAIRNS stated the principle thus: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute". (Ref: Partington v. A.G. [1869] LR 4 HL 100, in IRC v. Duke of Westminster [1936] AC 1 (HL); Bank of Chettinad v. CIT AIR 1940 PC 183, Potts' Executors v. IRC [1951] 1 All ER 7....
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....ssion 'moneys payable' in section 41(2) of the Income-tax Act, 1961 was not construed to include 'money's worth'. In fiscal legislation a transaction cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy". (Ref: IRC (supra); Bank of Chittinad (supra); Potts' Executors (supra); A.V. Fernandez (supra); CIT v. Keshavlal AIR 1965 SC 866; M & G Stores (supra), Jt. CTO v. YMA Madras AIR 1970 SC 1212; Europa Oil (NZ) Ltd. v. Inland Revenue Commissioner [1976] 1 All ER 503, (Legal rights arising from a transaction and not its economic results are material); Gujarat State Financial Corpn. v. Natson Mfg. Co. Ltd. AIR 1978 SC 1765; Andhra Pradesh Rayons Ltd. (supra), Mathuram Agrawal v. State of Madhya Pradesh, AIR 2000 SC 109. See further Hansraj & Sons v. State of Jammu & Kashmir AIR 2002 SC 2692; Commissioner of Central Excise v. ACER India Ltd. (supra). In refuting the doctrine of 'the substance of the matter' LORD TOMLIN observed: "It is said that in revenue cases there is a doctrine t....
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....a), where LORD REID said: "The words of a taxing Act must never be stretched against a tax-payer. There is a very good reason for that rule. So long as one adheres to the natural meaning for the charging words the law is certain, or at least as certain as it is possible to make it, but if courts are to give to Charging words what is sometimes called a liberal construction who can say just how far this will go. It is much better that evasion should be met by amending legislation.") As stated by LORD SIMON: "It may seem hard that a cunningly advised tax-payer should be able to avoid what appears to be his equitable share of the general fiscal burden and cast it on the shoulders of his fellow citizens. But for the courts to try to stretch the law to meet hard cases (whether the hardship appears to bear on the individual tax-payer or on the general body of tax-payers as represented by the Inland Revenue) is not merely to make bad law but to run the risk of subverting the rule of law itself. The same rule applies even if the object of the enactment is to frustrate legitimate tax avoidance devices for moral precepts are not applicable to the interpretation of revenue....
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....xing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency." The Hon'ble Supreme Court decision in the case of Joshi Technologies Inc. v. UOI [2015] 374 ITR 322/232 Taxman 201/57 taxmann.com 290 has followed principles of strict interpretation of taxing statute by observing as under: "70. Keeping in mind the aforesaid principles and after considering the arguments of respective parties, we are of the view that on the facts of the present case, it is not a fit case where the High Court should have exercised discretionary jurisdiction under Article 226 of the Constitution. First, the matter is in the realm of pure contract. It is not a case where any statutory contract is awarded. 71. As pointed out earlier as well, the contract in question was signed after the approval of Cabinet was obtained. In the said contract, there was no clause pertaining to Section 42 of the Act. The appellant is presumed to have knowledge of the legal provision, namely, in the absence of such a clause, special allowances under Section 42 would be impe....
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....ligibility for the benefit of deduction u/s 80IB(10) of the Act in accordance with the provision of the statute and once the assessee establishes its entitlement to the said deduction, then deduction provisions are to be liberally construed to give the full intended benefit of Section 80IB(10) of the Act to the assessee so that the intended purposes of beneficial provisions can be fully achieved. The Courts shall not adopt to the principles of contemporance expositio when the plain language of the statute is clear and unambiguous. Considering the factual matrix and the judicial precedent discussed hereinabove, we are of the view that the proviso introduced by Finance Act, 2004 clearly grant relief to slum redevelopment or reconstruction projects which are approved by Central Government or State Government and the scheme is notified by the Board. The Board Notification clearly stipulate that benefit shall be granted to the projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 2004, and before 31st day of March, 2008, while in the case of the assessee the projects are approved prior to 1st day of April 2004 as set out above in preceding p....
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.... "6.1 Therefore, from the proviso below clause (b) of sub-section 80IB(10), it is clear that if any project is declared within the scheme framed by Central Government or State from Slum Rehabilitation /Redevelopment, then rigors of clause (a) and (b) will not apply to such projects. There is no denial of the fact that the project of the assessee has been approved as Slum Rehabilitation Project by Slum Rehabilitation Authority of Maharashtra State and the approval has been given on 4.6.2004, therefore, it is clearly covered by the proviso below clause(b) of sub-section 80IB(10),.........." The above order was followed by tribunal in ITA no. 6645/Mum/2014 for AY 2010-11, vide orders dated 30-05-2016. Thus, in view of the major error which crept in the orders for AY 2009-10 and AY 2010-11 wherein the learned CIT(A) and tribunal proceeded on the belief that the project was approved by SRA on 04-06-2004 which was a wrong belief instead of correct date of approval of the project by SRA on 07-11-2002 and the said error goes to the root of the matter to decide this controversy because CBDT vide its notification no. 67 dated 31-08-2010 which was later clarified vide notification no. ....