The Asstt. Commissioner of Income Tax, Cir. 23, Mumbai Versus M/s. Oberoi Realty Ltd. (Formerly known as Kingston Properties Pvt. Ltd.)
Income Tax
2016 (6) TMI 452 – ITAT MUMBAI – TMI
ITAT MUMBAI – AT
Dated:- 8-6-2016
ITA No. 6044/MUM/2013, C.O. No. 06/Mum/2015
Income Tax
Shri G. S. Pannu, Accountant Member And Shri Pawan Singh, Judicial Member
For the Revenue : Smt. Sudha Ramachandran
For the Assessee : Shri R. Murlidhar
ORDER
Per G. S. Pannu, AM
The captioned appeal by the Revenue and cross objection by the assessee are directed against order of CIT(Appeals) -40, Mumbai dated 28/08/2016, which in turn arises out of an order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short 'the Act') dated 06/12/2012.
2. In its appeal the solitary grievance of the Revenue is against the action of the CIT(Appeals) in allowing assessee's claim for deduction under section 80IB(10) of the Act to the extent of gross total income o
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versy in the Revenue's appeal.
3.1 The stand of the Assessing Officer is that the claim of deduction under section 80IB(10) is to be restricted to the extent of income under the head 'business or profession', whereas as per the assessee the claim of deduction under section 80IB(10) is allowable to the extent of gross total income. Notably, the stand of the assessee has been upheld by the CIT(Appeals) and accordingly, Revenue is in appeal before us.
4. Factually speaking, assessee is, inter-alia, engaged in the business of development and construction of a housing project, income whereof is eligible for deduction under section 80IB(10) of the Act. There is no dispute between assessee and the Revenue that the quantum of deduction under section 80IB(10) of the Act is Rs. 71,99,25,721/-. In its return of income, assessee claimed a deduction of Rs. 71,99,25,721/- under section 80IB(10) of the Act as it was within the limit of its gross total income amounting to Rs. 82,58,43,666/-. However
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sions of section 80IB(10) of the Act do not place any such restriction and the deduction allowable cannot be limited to the income assessable under the head 'business or profession'.
6. In the present case, respondent is an assessee engaged in the business of real estate and development of properties. With respect to development and building of a project – 'Oberoi Woods', it earned profits. Such project was eligible for the relief prescribed in Sec. 80IB(10) of the Act. There is no dispute between the assessee and the Revenue that the quantum of the claim u/s 80IB(10) of the Act amounts to Rs. 71,99,25,721/-. In the impugned assessment finalized u/s 143(3) r.w.s. 147 of the Act, the gross total income (before allowing deduction under Chapter VI-A) was arrived at Rs. 82,55,23,592/- which comprised of (i) income from house property – Rs. 13,51,076/-, (ii) income from business – Rs. 68,18,56,583/-; and, income from other sources – Rs. 14,23,15,933/-. The total taxable income has been com
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manner as may be prescribed. The sub-section relevant for our purpose is sub-section (10) of Sec. 80IB which prescribes for deduction in case of an undertaking developing and building housing projects. We do not dwell much on the aspect of deduction prescribed u/s 80IB(10) inasmuch as there is no dispute between the assessee and the Revenue that the claim of deduction u/s 80IB(10) works out to Rs. 71,99,25,721/-. So however, what is relevant to decide the controversy before us is the scheme in which the deductions prescribed in Chapter VI-A of the Act are allowable. For that matter, sub-section (1) of Sec. 80A prescribes that in computing the total income there shall be allowed from the gross total income, deductions specified in Sec. 80C to 80U of the Act subject to the conditions prescribed therein. The claim of the assessee is u/s 80IB(10) which is also liable to be governed by the prescription of Sec. 80A(1) of the Act. Sub-section (2) of Sec. 80A further prescribes that the aggreg
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ns of Chapter VI-A of the Act. No doubt, the profits derived from the eligible business, which in the present case is the development and building of a housing project, is relevant to compute the amount of deduction, so however, its allowability has to be reckoned in the context of the availability of gross total income of the assessee. Considered in this light, in our view, CIT(Appeals) has made no mistake in coming to conclude that the claim u/s 80IB(10) of the Act is to be allowed to the extent of gross total income as claimed by the assessee and not to be restricted to the extent of income from business or profession.
8. We find that the aforesaid conclusion of the CIT(Appeals) is in consonance with the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of M/s. J.B. Boda & Co. P. Ltd. in Income Tax Appeal No. 3224 of 2009 dated 18.10.2010. In the said case, the amount of eligible deduction u/s 80-O of the Act (which is also a part of Chapter VI-A) was d
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nd the Revenue fails in its appeal.
9. In the cross-objection filed by the assessee, a solitary point has been raised which seeks to challenge the validity of the proceedings initiated by the Assessing Officer by issuance of notice u/s 147/148 of the Act.
10. In order to appreciate the aforesaid controversy, following facts are relevant. In the assessment originally finalised by the Assessing Officer u/s 143(3) of the Act dated 24.12.2009, the Assessing Officer determined the gross total income at Rs. 82,58,43,666/- comprising of (i) income from house property – Rs. 13,51,076/-, (ii) income from business – Rs. 68,18,56,583/-; and, income from other sources – Rs. 14,23,15,933/-. While computing the total income at Rs. 10,59,17,945/-, the Assessing Officer allowed deduction u/s 80IB(10) of the Act to the extent of Rs. 71,99,25,721/-, as claimed by the assessee. Subsequently, the Assessing Officer recorded reasons and issued notice u/s 148 of the Act dated 6.7.2012 reopening the assessm
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the provisions of Sec. 148 of the Act inasmuch as there was no fresh material with the Assessing Officer, and the reopening was based on entire material and facts already on record. It was also pointed out that in the original assessment finalised u/s 143(3) of the Act dated 24.12.2009, the Assessing Officer specifically discussed the allowability of deduction u/s 80IB(10) of the Act in para 7 of the assessment order and, therefore, it could not be said that there was any lack of application of mind. In this manner it was sought to be pointed out that the impugned reassessment would tantamount to a mere change of opinion, which is impermissible in law. Further, the learned representative also pointed out that the reasons recorded by the Assessing Officer are on a wrong footing and therefore there is no justification for initiation of proceedings u/s 147/148 of the Act. In the course of arguments, reliance has been placed on the following decisions to assail the initiation of proceeding
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below Sec. 147 of the Act brings out that even a case where income has been made subject of excessive relief can be construed as escapement of income, but the presence of the expression 'reason to believe' in Sec. 147 postulates that the Assessing Officer must formulate a belief that a particular income chargeable to tax has escaped assessment, which shall be well-founded. Therefore, we may examine the reasons recorded by the Assessing Officer to reopen the assessment, which read as under :-
“In this case assessment was completed u/s.143(3) r.w. s. 153C of the I. T. Act 1961, on 24.12.2009, assessing the total income of Rs. 10,59,17,950/- after allowing the deduction u/s 801B(10) of Rs. 71,99,25,721/-.
The assessee has claimed deduction of Rs. 71,99,25,721/- u/s 80IB(10) of the Income Tax Act 1961 in the return. The assessee had income of Rs. 68,18,56,583/- under the head Business and Profession. Therefore the assessee has claimed and has been allowed deduction in excess of its bus
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e offered under the head business and profession.
In view of the aforesaid facts and circumstances of the case and reason recorded as above, the assessment completed u/s 143(3) r.w.s. 153C of the I.T. Act, 1961 on 24.12.2009 is proposed to be re- opened. Issue notice u/s 148.”
A perusal of the aforesaid reasons reveal that the belief of escapement of income is founded on the ground that deduction u/s 80IB(10) of the Act has been allowed excessively to the extent that it is beyond the amount of income under the head 'business or profession'. It is a trite law that 'reason to believe' referred to in Sec. 147 of the Act is one which is prudent and plausible in law and not based on any misconception either in law or on facts. In the present case, the reasons recorded clearly suggest that Assessing Officer is under a misconception in inferring that there is an excessive grant of deduction u/s 80IB(10) of the Act. Ostensibly, the proposition in the mind of the Assessing Officer is not bor
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