Section 147 Archives - Tax Heal

No Reassessment if provision for bad & doubtful debts is disclosed in ITR : HC

CA Satbir Singh — Fri, 19 Apr 2019 14:48:14 +0000

Madras High Court

CIT Vs. M/s. Indian Potash Ltd.

Tax Case Appeal No.1363 of 2008

Date of Judgement/Order : 11/09/2018

Related Assessment Year : 1998-99

This appeal filed by the Revenue is directed against the order passed by the Income Tax Appellate Tribunal Bench A, Chennai, in I.T.A.No.2025/Mds/2006, dated 14.03.2008 for the Assessment Year 1998-1999.

2. The appeal has been admitted vide order dated 01.09.2008 on the following substantial question of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the Tribunal erred in holding that the reassessment under Section 143(3) r/w 147 is bad in law ?

3. We have heard Mr.Karthik Ranganathan, learned counsel for the appellant/Revenue and Mr.R.Vijayaraghavan, learned counsel for the respondent/Assessee.

4. The only issue, which falls for consideration, is whether the Tribunal was right in holding that reassessment under Section 147 of the Income Tax Act, 1961 was bad in law ?

5. We have gone through the facts of the case as well as the findings rendered by the Tribunal. The Tribunal has recorded a factual finding that the Assessee has disclosed the figure of provision for bad debts and doubtful debts and interest income also in the Profit and Loss Account submitted along with the return of income. Therefore, the Tribunal held that there is no failure on the part of the Assessee to disclose fully and truly all material facts. Furthermore, it was pointed out that the figures and reasons for reopening were picked up from the assessee’s accounts submitted along with return. In the said factual position, the Tribunal placed reliance on the decision in the case of CIT V Elgi Finance Ltd., (2006) 286 ITR 674 (Mad) and held that the assumption of jurisdiction in the instant case is barred by limitation.

6. We are fully in agreement with the view expressed by the Tribunal. From the facts of the case, it is evidently clear that the reopening was a change of opinion. When there is no allegation that the Assessee is not fully and truly disclosed all the materials, the question of reopening the assessment does not arise. The duty of the Assessee rests only to fully and truly disclose all facts in the return, which has been done by the respondent/Assessee. It is not for the respondent/Assessee to tell the Assessing Officer has to how he has to frame the assessment and in the instant case, it is evidently clear that the reopening was because of change of opinion.

T.S.SIVAGNANAM, J.

and

V.BHAVANI SUBBAROYAN, J.

7. Thus, for the aforesaid reasons, we are of the considered view that there is no error in the order passed by the Tribunal. Accordingly, the appeal filed by the Revenue is dismissed and the substantial question of law is answered in favour of the Assessee and against the Revenue. No costs.

Notice can not be issued in name of dead person to reopen assessment : HC

Re-assessment notice invalid as not sanctioned by proper authority : HC

Reopening of assessment of Sonia Gandhi and Rahul Gandhi is valid : Delhi HC

Reassessment invalid if not proved that advance received was undisclosed income : ITAT

No reassessment because assessee failed to disclose bank a/c if it was submitted during assessment : Bombay High Court

Assessing officer can make preliminary inquiries before issuing notice of reassessment : GUJARAT HC

AO Jurisdiction couldn’t be questioned after expiry of 1 month from date of service of reassessment notice : Delhi HC

No reassessment because capital gain shown by another co-owner is different : GUJARAT HC

No Reassessment on basis of disallowance in succeeding years ,if disclosure was made : ITAT Chandigarh

AO could not issue reassessment Notice if he did not have jurisdiction over assessee

No reassessment because ITR not reflecting in IT system of dept. if it was filed manually by assessee

CA Satbir Singh — Mon, 09 Apr 2018 15:26:51 +0000

IN THE ITAT JAIPUR BENCH

Narain Dutt Sharma

Income-tax Officer, Ward- 6 (1), Jaipu

VIJAY PAL RAO, JUDICIAL MEMBER
AND VIKRAM SINGH YADAV, ACCOUNTANT MEMBER

IT APPEAL NO. 203 (JP.) OF 2017
[ASSESSMENT YEAR 2007-08]

FEBRUARY 7, 2018

P.C. Sharma and Prashant Sharma, Advs. for the Appellant. Ajay Malik (Addl. CIT) for the Respondent.

ORDER

Vikram Singh Yadav, Accountant Member – This is an appeal filed by the assessee against the order of ld. CIT (A)-Jaipur dated 05.01.2017 for Assessment Year 2007-08.

2. In ground No. 1 of the appeal, the assessee has challenged the initiation of proceedings u/s. 147 of the Act for deposition of cash of Rs. 1057000 in the saving bank account during the financial year 2006-07 based on AIR Information and not filing of return of income by the assessee.

3. It was submitted by the ld. AR that the AO had initiated the reassessment proceedings only on the basis of information as per AIR which as per his presumption was not verifiable due to non appearance of assessee’s Income tax return for AY 2007-08 in the Income tax department IT system. It was submitted that the ld. AO completely ignored his own records as the return for the AY 2007-08 was already available with him as filed by the assessee manually on 21.05.2008 vide acknowledgment no. 2611000925 with ITO-6(1) Jaipur. It was submitted that the reasons to believe are de hors, vague and does not lead to formation of belief for the escapement of income on the part of the assessee. It was submitted that the reasons to believe has no nexus and live link with the escapement of income of the assessee. It was submitted that the assessee had deposited cash amounting to Rs. 10,57,000/- in bank account out of the contractual receipts duly disclosed in the return of income filed u/s. 44AD of the Act. It was submitted that the Assessing Officer has formed the belief without verifying the facts and circumstances and as such the reassessment proceedings are bad in law and without application of mind on the facts available on record.

4. It was further submitted that even the requisite sanction u/s. 151 obtained is nothing but a mechanical sanction by the higher authorities without applying their mind towards the facts of the case.

5. It was further submitted that the Assessing Officer has proceeded to reassess the income of the appellant having borrowed the satisfaction from the information generated from AIR without establishing that as to whether there was an escaped income on the part of the appellant and more so, in the facts and circumstances, when the deposited cash in bank is duly covered from the contractual receipts declared by the assessee in his return of income.

6. It was submitted that the AO has not brought on record how the cash deposit in the bank account by the assessee was in the nature of income which had escaped assessment merely on the basis of AIR information and non filing of ITR ignoring the fact that the ITR was already available with his office and the contractual receipts so disclosed in the return of income was sufficient to cover the alleged sum of Rs. 1057000/-. This was a false assumption of the part of the AO for invoking the provisions of section 147 of the Act without bringing on record as to how the cash deposit represented income which has escaped assessment.

7. In support of his contentions, the ld AR relied on the decision of Hon’ble Gujarat High Court in case of Harikishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 for the legal proposition that where the information and material is received from another agency, the AO is required to consider the material on record in the case of the assessee and thereafter required to form an independent opinion that the income has escaped assessment and without forming such an opinion, solely and mechanically, relying upon the information received from other source, there could not be any reassessment.

8. Further, the ld. AR relied on the decision of Co-ordinate Bench in case of Bir Bahadur Singh Sijwali v. ITO [2015] 68 SOT 197 (URO) (Delhi – Trib.) for the proposition that mere fact that deposits had been made that the bank account does not indicate that these deposits constitute income which has escaped assessment. It was submitted that following the said decision, similar view has been taken by the Co-ordinate Benches in case of Gurpal Singh v. ITO [2016] 159 ITD 797 (Asr. – Trib.) and Amrik Singh v. ITO [2016] 159 ITD 329 (Asr. – Trib.)

9. It was further submitted that the confirmation of account of the AO that the source of cash deposit of Rs. 10,57,000/- was unexplained by the ld. CIT (A) is based on subsequent finding of the AO during the course of assessment proceedings and not at the time of formation of belief for initiation of the proceedings u/s. 147 of the Act. It was submitted that the ld. CIT (A) has ignored the settled position of law that the reasons as recorded for re-opening the assessment were required to be examined on a standalone basis only and nothing can be added/deleted to the reasons so recorded as decided by Hon’ble Bombay High Court in the matter of Hindustan Lever Ltd. v. R.B. Wadker [2004] 268 ITR 332.

10. The ld. AR further relied on the decision of Hon’ble Delhi High Court in case of CIT v. Indo Arab Air Services [2015] 64 taxmann.com 257 where it was held that when the Assessing Officer had received certain information from Enforcement Directorate that in books of assessee, there were huge cash deposits which were not explained, he could not reopen assessment on basis of said information alone without even examining as to whether amount in question was reflected in return filed by assessee.

11. The ld. AR has further relied on decision of Hon’ble Gujarat High Court in case of Sagar Enterprises v. Asstt. CIT [2002] 257 ITR 335 where it was held that notice issued u/s. 148 on the basis of factually incorrect basis that the assessee had not filed its return could not be sustained even on the basis of alternative reason since it could not be said that certainty as to which factor weighted with the concerned officer when he issued the impugned notice and when the respondent authority was himself unsecure as to the year of taxability of the income which is stated to be undisclosed income.

12. The ld DR has vehemently argued the matter and relied upon the orders of the lower authorities.

13. We have heard the rival contentions and purused the material available on record. Firstly, it is noted that in the instant case, the notice under section 148 in exercise of powers under section 147 has been issued on 23.03.2014 after the expiry of period of four years from the end of the impunged assessment year i.e, AY 2007-08. In terms of proviso to section 147 of the Act, an action under the said provisions can be taken by reason of failure on the part of the assessee to file his return of income or to disclose fully and truly all necessary facts necessary for his assessment for the subject assessment year. The contention of the Revenue at the time of recording the reasons was that the assessee had failed to file his return of income for the impunged assessment year and the same was not reflected in the IT system. Per contra, the ld AR has submitted that return of income for the AY 2007-08 was filed by the assessee manually with ITO Ward 6(1) Jaipur vide acknowledgment no. 2611000925 on 21.05.2008. It is relevant to note that the return of income so filed manually is with ITO Ward 6(1) who is the same officer who has subsequently issued the notice u/s. 148 of the Act and therefore, Revenue cannot take the plea that return was filed wrongly by the assessee with another officer not having jurisdiction over the assessee. The related contention of the Revenue that the return so filed manually not uploaded in the IT system therefore cannot be accepted more so in the context of reassessment proceedings and where there is fault on the part of the assessee in filing his return of income.

14. Interestingly, during the course of reassessment proceedings, the ITO in his reassessment order stated clearly in Para 5 that “in the return of income filed under the head Business, you have declared income of Rs. 175,510 on gross receipts of Rs. 21,93,870 u/s. 44AD.” It is relevant to note the said return of income was not filed in pursuance to issuance of notice u/s. 148 but the same was the return of income which was originally filed by the assessee u/s. 139 of the Act. It is therefore clear that the whole foundation of the Revenue’s reasoning is contradictory and self-defeating where at the time of issuance of notice u/s. 148, it says that the assessee has failed to file his return of income and subsequently, during the proceedings u/s. 147, it admits that the assessee has filed his return of income originally under section 139. On this ground itself, the assumption of jurisdiction u/s. 147 cannot be sustained and the subject proceedings are liable to be quashed.

15. Now, coming to the reasons which have been recorded by the ITO Ward 6(1), Jaipur for initiating proceedings u/s. 147 of the Act which are reproduced as under:

“As per AIR information generated from the system, the assessee has made investment of Rs. 1057000/- for purchase of units and SB Account during FY 2006-07 relevant for AY 2007-08.

Since as per system no return of income has been filed for A Y 2007-08 the above transaction is not verifiable. I have, therefore, reasons to believe that on account of not filing of return by the assessee, income chargeable to tax has escaped assessment. Therefore, it is requested to accord approval for issuance of notice u/s. 148 of the Act.”

16. The reasons so recorded by the ITO refers to information gathered from AIR database of the Revenue department whereby certain data/information regarding purchase of units and its linkage with the assessee’s saving bank account during the financial year 2006-07 has been reported by the concerned Bank. As per ITO, said information is not verifiable for the reason that assessee has failed to file its return of income for the subject assessment year as per the Revenue’s department IT system. The basis of formation of belief by the ITO that the assessee’s income for the impunged assessment year has escaped assessment is therefore the receipt of certain AIR information from an external source i.e., banking institution with which the assessee maintains his saving bank account and the fact that assessee has failed to file his return of income for the impunged assessment year. In this regard, we refer to the decision of the Hon’ble Gujarat High Court in case of Harikishan Sunderlal Virmani (supra) where it was held as under:

“5.03……It cannot be disputed that on the basis of the information received from another agency, there cannot be any reassessment proceedings. However, after considering the information and material received from other source, AO is required to consider the material on record in the case of the assessee and thereafter is required to form an independent opinion that the income has escaped assessment. Without forming such an opinion, solely and mechanically, relying upon the information received from other source, there could not be any reassessment for verification.”

17. Similar proposition has been laid down by the Hon’ble Delhi High Court in case of Indo Arab Air Services (supra) wherein it was held as under:

“20. Keeping the above legal position in view when the cases on hand are examined, it is seen that as far as Indo Arab is concerned while the AO set out the information received from the ED, he failed to examine if that information provided the vital link to form the ‘reason to believe’ that income of the Assessee had escaped assessment for the AY in question. While the AO has referred to the fact that the ED gave information regarding cash deposits being found in the books of the Assessee, the AO did not state that he examined the returns filed by the Assessee for the said AY and detected that the said cash deposits were not reflected in the returns.

In fact, the AO contradicted himself in the reasons recorded by him by noticing the information of the ED to the above effect and then stating that on perusal of the records for the AY in question it was noticed that the Assessee “had not disclosed these transactions in its books of account.” Further the AO refers to the ED’s information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of account. However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment. The explanation or the lack of it of the entries in the books of account may have certain relevance as far as ED is concerned but that by itself does not provide the vital link for concluding that for the purposes of the Act any part of cash deposits constituted income that had escaped assessment. There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. While the law does not require the AO to form a definite opinion by conducting any detailed investigation regarding the escapement of income from assessment, it certainly does require him to form a prima facie opinion based on tangible material which provides the nexus or the link to having reason to believe that income has escaped assessment.”

18. In the instant case, pursuant to receipt of AIR information from an external agency that cash has been found deposited in assessee’s savings bank account, there has been no further examination by the AO as to whether the cash so found deposited in the assessee’s bank account has been reflected or has any connection with the reported turnover in the return of income so filed by the assessee. The reason for the said action on part of the AO is not hard to found out as the AO has concluded that the assessee has not filed any return of income after looking at the Department’s IT system and without verifying the physical records maintained by the department which shows that the assessee has filed the return of income. When such a conclusion has already been reached, where is the question of examination of such information and its linkage with the return of income. As we have noted above, there is a clear contradiction on part of the AO to hold that assessee has not filed his return when the records so filed before us shows, and a fact which remain undisputed, that the return of income has been filed even though manually and which has been duly acknowledged. In the instant case, the AO has thus failed to examine the AIR information so received which would have provided the nexus or the vital link to form a prima facie opinion that income of the assessee had escaped assessment for the impunged assessment year. In absence of necessary nexus between the tangible material and formation of belief, the reassessment proceedings cannot be sustained in the instant case.

19. In light of above discussions, we are of the view that the jurisdictional required as provided in section 147 read with the proviso has not been fulfilled in the instant case. In the result, the reassessment proceedings are hereby quashed and set-aside. In the result, ground no. 1 of the assessee’s appeal is allowed.

20. Having decided the jurisdiction issue as above, we do not think it would be relevant and necessary to examine the grounds and contentions on merit. Hence, rest all grounds are not adjudicated upon and the same are dismissed as infructious.

In the result, the appeal of the assessee is allowed.

No reopening of case u/s 147 due to increased sales in FY 2016-17 : CBDT Circular

CA Satbir Singh — Sun, 11 Dec 2016 14:20:22 +0000

Circular No. 40/2016

Government of India

Ministry of Finance

Department of Revenue (CBDT)

North Block, New Delhi, the 9th of December, 2016

Subject: – Directions under section 119 of the Income-tax Act, 1961-regd.-

Recent initiatives of the Government to curb the black economy in the country has encouraged people to shift towards digital mode of payment while making financial transactions. By adopting digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of accounts. Under the circumstances, an apprehension has been raised that increased turnover in the current year may lead to reopening of earlier years’ cases involving lower turnover u/s 147 of the Income-tax Act, 1961 (‘Act’) by the Assessing Officer causing undue harassment to tax payers.

2. It is hereby clarified that reopening of cases u/s 147 of the Act is feasible only when the Assessing Officer “has reason to believe that any income chargeable to tax has escaped assessment for any assessment year” and not merely on the basis of any reason to suspect. Mere increase in turnover, because of use of digital means of payment or otherwise, in a particular year cannot be a sole reason to believe that income has escaped assessment in earlier years. Hence, Assessing Officers are advised not to reopen past assessments in cases merely on the ground that the current year’s turnover has increased.

3. The above may be brought to the notice of all for necessary and strict compliance.

4. Hindi version to follow.

(Rohit Garg)

Director-ITA.II, CSDT

(F. No. 225/326/2016/ITA.II)

Retro-amendment in Sec. 80-IB won’t enable AO to reopen assessment

CA Satbir Singh — Thu, 27 Oct 2016 12:56:24 +0000

HIGH COURT OF GUJARAT

Ganesh Housing Corporation Ltd.

Deputy Commissioner of Income-tax, Circle-4 & 1

AKIL KURESHI AND A.J. SHASTRI, JJ.

SPECIAL CIVIL APPLICATION NO. 13589 OF 2011

SEPTEMBER 12, 2016

R.K. Patel, Advocate for the Petitioner. Mrs. Mauna M. Bhatt, Advocate for the Respondent.

JUDGMENT

Akil Kureshi, J. – Petitioner has challenged a notice dated 01.03.2011 issued by the respondent Assessing Officer, reopening the petitioner’s assessment for the assessment year 2004-05. The petition arises in following background.

2. Petitioner is a company registered under the Companies Act and is engaged in the business of construction and development of housing project. For the assessment year 2004-05, the petitioner had filed the return of income declaring total loss of Rs. 28.43 lakhs (rounded off). One of the major claims raised by the assessee in the return was of deduction under section 80IB(10) of the Income Tax Act, 1961 (‘the Act’ for short). Such return was taken in scrutiny by the Assessing Officer, during which, he raised several queries and the petitioner replied to the same. The Assessing Officer passed order of assessment under section 143(3) of the Act on 15.11.2006 determining the total income of assessee at Rs. 1.71 lakhs. In such assessment order, the Assessing Officer considered and granted the deduction under section 80IB(10) of the Act as claimed. However, by applying the MAT provision of section 115JB of the Act, the said assessment was framed.

3. In order to reopen such assessment, the Assessing Officer issued notice, which as can be seen, was done beyond the period of four years from the end of relevant assessment year. For issuing the notice, the Assessing Officer had recorded the following reasons:

‘In this case, the assessee company filed the return of income for the A.Y. 2004-05 on 31/10/2004 declaring total loss of Rs. 28,43,830/-. The assessee company is engaged in the business of civil construction. In the return of income, the assessee company had claimed deduction u/s. 80IB(10) of the Act of Rs. 10,12,56,034/-. The return filed was processed u/s. 143(1) of the Act on 07.02.2005 on the returned income. The assessment was finalized u/s. 143(3) of the Act on 15/11/2006 determining the total income at Rs. 1,71,566/- and the claim of the assessee company for deduction u/s. 80IB(10) of the Act of Rs. 10,12,56,034/- was fully granted. The book profit of the assessee company was computed at Rs. 9,91,52,822/- and since the income determined u/s. 115IB of the Act was higher than the assessed income, tax was calculated on the book profit determined u/s. 115IB of the Act.

As per Explanation inserted below Section 80-IB(10) by the Finance Act (No. 2), Act, 2009 with retrospective effect from 01.04.2000 deduction u/s. 80IB(10) shall not be admissible to a contractor in respect of works contract awarded by any person. For the sake of clarity, same is re-produced hereunder :-

“Explanation – For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person including the Central or State Government.”

In this case, perusal of records revealed that

(i)		During the year, the assessee had constructed housing projects called Maniratnam I & II and has shown net profit of Rs. 10,12,56,034/- (Rs. 4,05,03,151 + Rs. 6,07,52,883/- respectively) and has claimed deduction of 100% u/s. 80IB(10) of the Act.
(ii)		The land on which the housing projects, Maniratnam-I & II has been constructed was originally owned by Dhaneshwar Park Co-operative Housing Society Ltd and the assessee had merely entered into a development agreement with the said society according to which, the assessee company was to bear all the expenses on the housing project and also to connect all the revenue.
(iii)		The assessee company has shown the entire booking receipts actually received and accrued for receivable as income of the assessee after adjusting the amount to be reimbursed to the society for the cost of the land and other expenses incurred by the assessee.
(iv)		The construction of the project was started in A.Y. 2001-02 and as per the 10CCB report annexed to the audit report in 3CD dated 27.06.03, the project in respect of Maniratnam Scheme-I and the Maniratnam-II was in progress. The BU permission from Ahmedabad Municipal Corporation was issued for Block A on 5.5.2003 and other blocks of B to H on 23.09.2003 and since some civil work was being done even after getting BU permission, BU permission was issued on 5.5.03 for Maniratnam-I and 23.09.03 for Maniratnam-II. The BU permission issued was in the name of society for which the development work was done.
(v)		As against No. 28(b) of 3CD report filed with the return of income, the C.A. Has stated that the company is carrying on only construction activities. The raw materials for the construction activities were procured by the co-operative society which has given this order to the company. As the company does not purchase any raw materials, the quantitative details cannot be given.
(vi)		As against item No. 19 of 3CD report, the CA has certified that the gross booking receipts received included the cost of extra work and booking made by the society on behalf of the company and the amount included the cost of land and reimbursement of expenses incurred for purchase of raw materials.
(vii)		The development permission issued by Ahmedabad Municipal Corporation mentions the society as owner and the assessee as developer in respect of Maniratnam-I (51 units) and the owner as the society in respect of Maniratnam -II (92 units) without mentioning the name of the assessee as developer.
(viii)		The construction permission issued by AMC for Maniratnam-I bears the owner of the land as the society, i.e. Dhaneshwar Par Co-Op. Society Ltd. and the developer as Ganesh Housing Corporation Ltd. (assessee). However, in respect of Maniratnam-II, the assessee’s name had not been mentioned as developer. It categorically states that the permission for construction is granted subject to various rules and bye laws laid down by the Gujarat Town Planning and Urban Development Act, 1976.

In view of the above, it has become quite clear that in the Development Permission issued by AMC in respect of Maniratnam-II Project, the assessee’s name was not even mentioned as Developer. Further, the construction permission/Raja Chity issued by AMC in respect of Maniratnam-II also does not mentioned the name of the assessee as a developer. There was failure on the part of the assessee to disregard these facts in Form No. 10CCB while claiming deduction u/s. 80IB(1) of the Act. The Assessing Officer in the assessment proceedings u/s. 143(3) did not give any opinion regarding the allowability or otherwise of deduction u/s. 80IB(10) of the Act. If an issue has not been examined in correct perspective in the initial assessment proceedings, nothing prevents the assessing officer to take a suitable remedial action by way of re-opening the assessment. As seen in Point No. (iii) above, the assessee received the payment from housing societies having ownership of land as contract payment. This is clear from the fact that the societies deducted TDS at the rates applicable to Contractor/Sub contractor.

Accordingly, the assessee company is not eligible to for claim u/s. 80IB(10) of the Act. More so, in the light of the Explanation inserted below Section 80-IB(10) by the Finance Act (No. 2), Act, 2009 with retrospective effect from 01.04.2000, deduction u/s. 80IB(10) shall not be admissible to a contractor in respect of works contract awarded by any person.

In view of the above, I have reasons to believe that the income chargeable to tax to the extent of Rs. 10,12,56,034/- has escaped assessment.

Issue notice u/s. 148 of the I.T. Act, 1961.’

4. The petitioner raised objections against the notice for reopening of assessment, under a communication dated 17.08.2011. Such objections were however, rejected by the order dated 19.08.2011 by the Assessing Officer. Hence, the petition.

5. From the materials on record and in particular, the reasons recorded by the Assessing Officer, it can be seen that the claim of the assessee for deduction under section 80IB(10) of the Act was the principle claim in the return which the Assessing Officer had accepted after scrutiny. The reason for reopening was that according to the Assessing Officer, such claim was not allowable. In background of such facts, counsel for the petitioner raised following contentions:

I.		There was no failure on the part of the assessee to disclose truly and fully all facts.
II.		The Assessing Officer did not have any new material establishing that there has been escapement of income.
III.		The entire claim of deduction under section 80IB(10) of the Act was minutely examined by the Assessing Officer during the original assessment.
IV.		The Assessing Officer has relied on an explanation added to the statute with retrospective effect, which cannot be the ground for reopening of the assessment beyond four years.
V.		Even on merits, the Assessing Officer cannot disturb the claim of the assessee for deduction under section 80IB(10) of the Act.

6. Counsel has relied on several decisions of this Court, to which, reference would be made at appropriate stage.

7. On the other hand, counsel for the Revenue opposed the petition contending that certain vital aspects were not disclosed by the assessee in the return and during the scrutiny assessment. The deduction of tax at source by the societies would indicate that the assessee was acting as a contractor and not as a developer. This aspect was not examined during the original assessment.

8. For multiple reasons, the notice for reopening cannot be sustained. Our reasons for this conclusion are as follows.

9. In the original assessment, the Assessing Officer had occasion to examine the petitioner’s claim for deduction under section 80IB(10) of the Act. In fact, this was the principle claim of the assessee, since bulk of its income was derived from housing projects, with respect to which, the assessee had claimed deduction under section 80IB(10) of the Act. The Assessing Officer raised multiple queries under a letter dated 03.08.2006, one of them calling upon the assessee to substantiate the claim under section 80IB(10) of the Act, amounting to Rs. 10.12 crores alongwith necessary documentary evidence. In reply to such query, the assessee under communication dated 15.09.2006, gave a detailed reply and produced number of documents. These documents contained the development permission and construction permission granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee’s claim of deduction under section 80IB(10) of the Act, except for limiting it to the extent of profit, making following observations.

‘3. On perusal of the return of income filed by the assessee, it is seen that the assessee company is engaged in the field of construction activities i.e. building and developing housing projects. In the return of income the assessee has declared total loss of Rs. 27,84,881/-. The assessee has shown income from undertaking, building and developing housing projects of Rs. 10,12,56,034/-, which has been claimed as deduction of profits of an undertaking developing and building housing projects “Maniratnam” and “Maniratnam-II” u/s. 80IB(10) resulting to total income at Rs. NIL. But the assessee has further claimed loss of Rs. 27,84,880/- and the same cannot be allowed, as the deduction u/s. 80IB is to be allowed only upto the total income available and hence, the assessee was asked to state as to why deduction u/s. 80IB should not be restricted upto the total income. In response to this, the assessee has, vide its letter dated 16.10.2006, submitted as under:

. . . . . . . . . .

. . . . . . . . . . .

4. The reply filed by the assessee company has carefully been considered, but in view of assessee’s own admission and the specific provision of section 80A(2) of the Act, which mentions that the aggregate amount of deduction under chapter VIA should not exceed the gross total income of the assessee, the loss claimed by the assessee is hereby disallowed. Accordingly the returned income is treated as Nil.’

10. Thus, the entire claim of deduction came up for consideration at the hands of the Assessing Officer in the original assessment. The claim was minutely examined and only thereafter accepted. It would therefore not be permissible to the Assessing Officer to disturb such claim in exercise of powers under section 147 of the Act that by issuing the notice beyond the period of four years beyond the period of relevant assessment year. Here again, the Assessing Officer had not recorded, in what manner the assessee failed in its duty to disclose truly and fully all material facts. In fact, the thirst of the contention of the Assessing Officer appears to be that the assessee had not developed housing project, but was acting as a contractor. In this respect, the Assessing Officer has placed reliance on the retrospective explanation added to section 80IB(10) of the Act. It is well settled by the series of judgments of this Court that retrospective amendment in statute would not enable the Assessing Officer to reopen an assessment beyond a period of four years.

11. The stand of the Assessing Officer that in one of the projects in the development permission, the name of the assessee was not mentioned as a developer. The petitioner has explained this in the objections raised to the reasons recorded by pointing out that after development of Phase-I of the project, when permission was granted for Phase-II, the same was done in computerized format, which did not contain an entry for showing of the name of the developer. Quite apart from this explanation, on this ground, it would not be open for the Assessing Officer to reexamine the claim, which was originally accepted after scrutiny. If there was an error in view of the Assessing Officer in granting the claim, the options of the Revenue lay elsewhere. Likewise, the contention that the societies had deducted tax at source, indicating that the relationship between the petitioner and the society was one of the contractor and the employer of a contract, also would not permit the Assessing Officer to reopen the assessment. Firstly, in a claim which is scrutinized, the objection of this nature would be an additional element, which if at all ought to have been examined by the Assessing Officer originally and surely cannot provide a ground for reopening the assessment beyond a period of four years. Secondly, the deduction of tax at source principally is in the hands of the payer of an account. For whatever reason if the tax is deducted at a higher rate or deducted when no such deduction was warranted, it would be for the payee for taking up the issue before the department and claim adjustment or refund, as the case may be. Mere factum of deduction of tax at source or the rate at which it was deducted would not be conclusive proof of the relationship between the parties.

12. Several issues concerning the deduction under section 80IB(10) of the Act came up for consideration before this Court in case of CIT v. Radhe Developers [2012] 341 ITR 403, in which, following observations were made:—

“30. The essence of sub-Section (10) of Section 80IB, therefore, requires involvement of an undertaking in developing and building housing projects approved by the local authority. Apparently, such provision would be aimed at giving encouragement to providing housing units in the urban and semi-urban areas, where there is perennial and acute shortage of housing, particularly, for the middle income group citizens. To ensure that the benefit reaches the people, certain conditions were provided in sub-Section(10) such as specifying date by which the undertaking must commence the developing and construction work as also providing for the minimum area of plot of land on which such project would be put up as well as maximum built up area of each of the residential units to be located thereon. The provisions nowhere required that only those developers who themselves own the land would receive the deduction under Section 80IB(10) of the Act.

31. Neither the provisions of Section 80IB nor any other provisions contained in other related statutes were brought to our notice to demonstrate that ownership of the land would be a condition precedent for developing the housing project. It was perhaps not even the case of the Revenue that under the other laws governing construction in urban and semi-urban areas, there was any such restriction. It is, however, the thrust of the argument of the Revenue that in order to receive benefit under Section 80IB(10) of the Act, such requirement must be read into the statute. We cannot accept such a contention. Firstly, as already noted, there is nothing under Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer to be able to qualify for such deduction. Secondly, term developer has been understood in common parlance as well as in legal sense carrying a much wider connotation. The Tribunal itself in the impugned order has traced different meanings of term developer explained in different dictionaries, which read as under:-

“a. The Webster’s Encyclopedia unabridged of the English Language gives Following meaning of the term ‘developer’ as:

“1. One who or that which develops;

2. A person who invests in and develops the Urban or Suburban potentialities of real estate.

b. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition gives meaning of the term ‘developer’ as persons or company that develops land.

c. Random House Dictionary of the English Language, the following can be found.

Develop:

a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state.

b. To cause to grow or expand.

Developer:

a. The act or process of developing; progress.

b. Synonym: Expansion, elaboration, growth, evolution, unfolding, maturing, maturation.

c. Webster Dictionary, the following definitions emerge:

a. To realize the potential of;

b. To aid in the growth of Strength, develop the biceps,

c. To bring into being: make active (develop a business)

d. To convert ( a tract of land) for specific purpose, as by building extensively.

e. Law lexicon Dictionary: The following definitions could be seen:

Development

a. To act, process or result of development or growing or causing to grow; the state of being developed.

b. Happening.”

32. Section 80IB(10) of the Act thus provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances noted above. It does not provide that the land must be owned by the assessee seeking such deductions.

33. It is well settled that while interpreting the statute, particularly, the taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of Section 80IB(10) of the Act, namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent.

34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence.”

13. In case of Sadbhav Engg. Ltd. v. Dy. CIT [2011] 333 ITR 483 (Guj.), the Division Bench of this Court held that retrospective amendment cannot be a ground for reopening assessment beyond a period of four years from the end of relevant assessment year. This was reiterated in case of Aayojan Developers v. ITO [2011] 335 ITR 234 (Guj.).

14. For such reasons, impugned notice dated 01.03.2011 is set aside. Petition is allowed and disposed of.

Notice issued to Dead person u/s 147 is illegality : High Court

CA Satbir Singh — Wed, 09 Mar 2016 12:42:37 +0000

Facts of the Case

A notice u/S 148 of the Income Tax Act, 1961 in the case of Sh. Inder Pal Singh Walia PAN – AAKPW8463F for the AY 2008-09 was issued by this office on 27th March 2015. This notice has been received back with the postal remarks ‘addresses expired

Issue

AO insisted on continuing with the proceedings under Section 147/148 of the Act.

Held

The limitation for issuance of the notice under Section 147/148 of the Act was 31st March 2015. On 27th March 2015, when the notice was issued, the Assessee was already dead. If the Department intended to proceed under Section 147 of the Act, it could have done so prior to 31st March 2015 by issuing a notice to the legal representatives of the deceased. Beyond that date it could not have proceeded in the matter even by issuing notice to the legal representatives of the Assessee.

The actions of the Revenue in this case in persisting with the proceedings under Section 147/148 of the Act against the Petitioner were wholly misconceived both on facts as well as on merits. Accordingly, the impugned notice dated 27th March 2015 and all proceedings consequent thereto are hereby quashed.

HIGH COURT OF DELHI

Vipin Walia

Income-tax Officer

DR. S. MURALIDHAR AND VIBHU BAKHRU, JJ.

W.P. (C) NO. 8273 OF 2015
CM NO. 17434 OF 2015 (FOR STAY)

FEBRUARY 15, 2016

S. Krishnan, Adv. for the Petitioner. Zoheb Hossain, Adv. for the Respondent.

ORDER

DR. S. Muralidhar, J.- There are certain instances where the facts speak for themselves and this is one such.

2. A notice under Section 148 of the Income Tax Act, 1961 (‘Act’) dated 27th March 2015 was addressed by the Income Tax Officer (ITO) of Ward- 72(3), Delhi to one Mr. Inder Pal Singh Walia, 128 RPS, DDA Flats, Sheikh Sarai Phase-I, Delhi seeking to reopen the assessment for Assessment Year (AY) 2008-09.

3. The above notice was returned unserved to the Department with the postal authorities endorsing on it the remarks “Addressee expired”. That was a correct statement by the postal authority since indeed Mr. Inder Pal Singh Walia had expired on 14th March 2015. In other words, the notice dated 27th March 2015 had been addressed to a dead person.

4. The ITO, obviously unmindful of the requirement of law as far as Section 147 of the Act was concerned, issued a letter dated 15th June 2015 to the Petitioner as under:—

“Sir,

Sub: Notice u/s 148 of the Income Tax Act, 1961 in the case of Sh. Inder Pal Singh Walia PAN – AAKPW8463F for the AY 2008-09 – reg.

Kindly refer to the subject mentioned above.

In this connection, this is to inform you that a notice u/S 148 of the Income Tax Act, 1961 in the case of Sh. Inder Pal Singh Walia PAN – AAKPW8463F for the AY 2008-09 was issued by this office on 27th March 2015. This notice has been received back in this office with the postal remarks ‘addresses expired.’

On this basis of information received from the records, the undersigned spoke to you on your mobile No. 9818200740 on 15th June 2015. Kindly find enclosed the copy of notice u/S 148 of the Income Tax Act issued on 27th March 2015 for the AY 2008-09 in the name of Sh. Inder Pal Singh Walia. You are further requested to kindly provide details of legal heirs/successor of the deceased Assessee to complete the assessment proceedings for the AY 2008-09.

The required details should be submitted to the office of the undersigned on the above mentioned address on or before 6th July 2015.”

5. On 6th July 2015, the Petitioner wrote to the ITO pointing out that his father Shri Inder Pal Singh Walia had expired on 14th March 2015 and that the proceedings initiated under Section 148 of the Act were barred by limitation. Additionally, it was stated that he was unaware of the financial affairs or transactions carried on by his late father.

6. On 18th July 2015, the ITO took the stand that since the intimation of the death of Shri Inder Pal Singh Walia on 14th March 2015 was not received by her office “therefore the notice was not issued on a dead person”. To say the least this was a strange stand to take since the death certificate of Shri Inder Pal Singh Walia confirming the date of his death as 14th March 2015 is on record. With the Department having not been able to counter this basic fact, the stand taken by it that the notice was not issued to a dead person on 27th March 2015 was plainly untenable.

7. Another stand taken in the letter dated 18th July 2015 is treating the endorsement made by the postal authority ( ‘addressee expired’) as a refusal by the family members of the Assessee to accept the notice. This was again plainly erroneous. The notices were not addressed to the family members. Therefor, there was no occasion for them to refuse such notice. The postal authority had correctly noted that the person to whom the notice was addressed had indeed expired by then.

8. Proceeding on the above two erroneous stands, the Department compounded its errors by insisting on continuing with the proceedings under Section 147/148 of the Act. It is at that stage that the Petitioner approached this Court.

9. While issuing notice in the petition on 28th August 2015, this Court stayed further proceedings. No counter affidavit has been filed till date. Learned counsel for the Revenue sought some more time for that purpose. With the facts being evident and the question being purely one of law, the Court declines the request.

10. As far as Assessees who have expired, Section 159 of the Act sets out how the Department should go about proceeding against the legal representatives (‘LRs’) of such Assessee. The said provision reads as under:—

“159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.

(2) For the purpose of making an assessment (including an assessment, reassessment or re-computation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),—

(a)		any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
(b)		any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
(c)		all the provisions of this Act shall apply accordingly.

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.

(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.

(5) The provisions of sub-section (2) of section 161, section 162, and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.

(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub- section (5), be limited to the extent to which the estate is capable of meeting the liability.”

11. Section 159(2) of the Act makes a specific reference to a reassessment proceeding under Section 147 of the Act. While Section 159(2)(a) of the Act talks of a proceeding already taken against an Assessee ‘before his death’. Section 159(2)(b) of the Act envisages any proceeding which could have been taken against the deceased if he had survived. It permits such a proceeding to be taken against the LRs of the deceased Assessee even if it had not taken while the Assessee was alive. Section 159(2)(b) is relevant as far as the present case is concerned.

12. What was sought to be done by the ITO was to initiate proceedings under Section 147 of the Act against the deceased Assessee for AY 2008-09. The limitation for issuance of the notice under Section 147/148 of the Act was 31st March 2015. On 27th March 2015, when the notice was issued, the Assessee was already dead. If the Department intended to proceed under Section 147 of the Act, it could have done so prior to 31st March 2015 by issuing a notice to the LRs of the deceased. Beyond that date it could not have proceeded in the matter even by issuing notice to the LRs of the Assessee.

13. Learned counsel for the Revenue sought to place reliance on the decision of the Supreme Court in CIT v. Jai Prakash Singh [1996] 219 ITR 737 in support of his contention that the ITO was justified in initiating proceeding under Section 147 of the Act even against the Petitioner who admittedly was the LR of the deceased Assessee in this case.

14. A perusal of the said judgment reveals that it is clearly distinguishable on facts. Para 2 of the said decision shows that the son of the deceased Assessee there had filed returns for the three Assessment Years (‘AYs’) for which the deceased Assessee had failed to file the returns. In other words, the proceedings at the instance of the LR of the deceased Assessee were already in progress when the question arose about the notice being issued only to the LR who filed the returns or to all the LRs. The question was whether the failure to issue notice to all the LRs would render the proceedings invalid. It is in those circumstances it was held that the non-issuance of notice to all the LRs would be only an irregularity and not an illegality.

15. The Court fails to understand how the above decision in Jai Prakash Singh (supra) is of any help to the Revenue in the present case where the initial notice under Section 147/148 of the Act was issued to a dead person. The Revenue was unable to issue a notice to the LR of the deceased Assessee under Section 147/148 of the Act within the period of limitation. That would be a plain illegality and not a mere irregularity.

16. Learned counsel for the Revenue then relied on the decision of the Calcutta High Court in Kamalesh Kumar Mehta v.CIT [1977] 106 ITR 855 (Cal.). The facts of that case show that the initial notice under Section 148 of the Act was served to the Assessee who was still alive. He died after the service of such notice under Section 148 of the Act. This makes the decision distinguishable on facts.

17. On the other hand, we have a decision of this Court in Braham Parkash v. ITO [2005] 275 ITR 242 which in similar circumstances has held that “notice could have been served upon a deceased Assessee”. Even in that case there was nothing on record to show that notice under Section 148 of the Act was served on the LR of the deceased within the time prescribed.

18. Consequently, the Court has no hesitation in holding that the actions of the Revenue in this case in persisting with the proceedings under Section 147/148 of the Act against the Petitioner were wholly misconceived both on facts as well as on merits. Accordingly, the impugned notice dated 27th March 2015 and all proceedings consequent thereto are hereby quashed.

19. The writ petition is allowed but in the circumstances with no order as to costs. The application is disposed of.