TaxTMI 
TaxTMI 
2026 (2) TMI 84
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....ssee has taken the following grounds. "1. The Hon CIT(A) erred in upholding the re-opening the assessment u/s 147 of the I. Tax Act 1961, by issue of notice u/s 148 dt 26.03.2018, not appreciating that the original assessment was completed u/s 143(3) and four years had lapsed from the end of the relevant asst year and as per first proviso to sec 147, the re-opening could not be without any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which being not the case, the re-opening of assessment u/s 147 is bad-in-law and the asst. order flowing therefrom is required to be struck down on that count. 2. The Hon CIT(A) erred in upholding the re-opening the assessment u/s 147 of the I. Tax Act 1961, by issue of the notice u/s 148 dt 26.03.2018, not appreciating that such re-opening was not valid as per law and therefore the notice u/s 148 dt. 26.03.2018 as well as the assessment order flowing therefrom were required to be struck down and quashed as bad-inlaw. 3. The Hon CIT(A) erred in not appreciating that the Id AO had framed the assessment u/s 143(3) r.w.s. 147 of the I.T Act, 1961 on 28.12....
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....re the decision of the appeal." 4. The brief facts of the case are that the assessee is a partnership firm and engaged in business of construction of residential complexes. The partnership firmed filed his return on 25.08.2011 declaring total income nil after claiming deduction u/sec. 80IB (10) of the Act. The case was originally selected under CASS to verify the taxability of sale of property as reported in AIR. The order u/sec. 143(3) of the Act was passed on 21.05.2015 by allowing deduction u/sec. 80IB (10). On verification the Ld. AO found that the assessee has not fulfilled the basic condition for availing deduction u/sec. 80IB(10) of the Act amount of Rs. 3,40,39,914/- that is commercial space in housing project exceeded prescribed limit of 5% though the housing project was even 25 km. from municipal corporation of Mumbai city. Further, build up area of the same of residential flats exceeded prescribed limit of 1000 sq. feet, making the housing project ineligible for deduction u/sec. 80IB (10) amount to Rs. 3,40,39,914/-. The Ld. AO treated the return as escape assessment and issue the notice u/sec. 148 of the Act. Finally the reassessment was completed and the addition wa....
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....d by the local authority i.e. Kalyan-Dombivli Municipal Corporation, (KDMC) by its Sanction order dtd. 21/07/2006 thereafter assessee has submitted revised approval of plan which is approved by KDMC vide letter dtd. 05/11/2008. As per provision of the Act the project was completed before 31/03/2012 (as per condition of sec. 80IB(10)), During the financial year firm has completed building/Wing No A,B,C,D & E. During the year under consideration, as per construction profit & loss account assessee has shown WIP at Rs. 14,63,70,000/-. It is seen that the assessee firm is following Percentage Completion method and during the year under consideration firm has declared profit Rs 3,48,42,934/- before interest & remuneration to the partner and claimed deduction u/s. 80IB (10) of the I.T. Act, under chapter VIA and has thus arrived at Nil income." 6. The Ld. AO supplied the recorded reason after submission of the return u/sec. 148 of the Act by the assessee. The observations of the Ld. AO contained in recorded reason are reproduced as below: "The assessee is a partnership firm and engaged in the business of building construction work. The assessee has e-filed its return of income....
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....(3) of the LT Act, 1961 was completed by the ITO, Ward 3(1), Kalyan on 05.02.2014, wherein our total income was determined at Rs. Nil, after allowing deduction u/s 80IB(10) amounting to Rs. 3,40,39,914/-. As is noted in the said assessment order, the then AO had examined all the issues relevant to A.Y.2011-12, including the eligibility of our claim for deduction u/s 80IB(10) of the I.T Act, 1961. Only after due examination of our claim and verification of relevant records, the Id. AO had accepted our claim for deduction u/s 80IB(10) of the IT Act, 1961 in respect of the residential housing project "Sarvodaya Anand" developed by our firm at village Bhopar, Manpada Road, Dombivli (E), Dist. Thane. 4. The reasons recorded prior to issue of notice u/s 148 has raised two issues by which our claim for deduction u/s 80IB(10) of the IT Act, 1961 is sought to be challenged. We address the said issues as under. 4.1 Compliance with conditions of sub-clause (c) of section 80IB(10)-Bulls-up area of flats In the reasons recorded, it is mentioned that our project "Sarvodaya Anand" at village Bhopar, Manpada Road, Dombivli (E), Dist. Thane is situated within 25 kms from ....
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....ginal assessment the registered development agreement dated 21.05.2008 with M/s. Amit Constructions was submitted on record. The same was further referred by the assessee during the objections submitted against the recorded reason and as per the said development agreement the assessee has undertaken to develop only 5 buildings being building nos. A, B, C, D and E of the sanctioned plan. All these buildings are residential buildings with no commercial establishment therein. It is thus, the case that the development rights of commercial building were never granted to the assessee. The copy of the development agreement is duly annexed in APB page no. 89 to 105. So the entire observation made by the Ld. AO has no basis and without any tangible material and only by change of opinion. Hence, the notice issued U/s 148 is bad in law which is vitiated the entire proceeding. 9. The Ld. DR argued and submitted that the assessee had violated the provisions of section 80IB(10) of the Act. It was contended that, during the original assessment proceedings, the Ld. AO had not examined the issue relating to the existence of commercial units in the project, nor had the AO verified whether the pro....