Reassessment Beyond 4 Years Without New Material Invalid: ITAT Quashes ₹3.40 Cr S. 80IB(10) Disallowance [Read Order]

The Income Tax Appellate Tribunal, Mumbai Bench quashed income tax reassessment proceedings against Komal Enterprises holding that a reassessment after the lapse of four years of completion of original assessment without any new material is invalid in law.

The reassessment was about the disallowance of the income tax deduction claimed under Section 89IB(10) of the Income Tax Act, 1961.

The assessee had filed income tax returns claiming deduction under Section 80IB(10), which offers tax deductions on profits derived from housing projects.

After scrutiny, the original assessment granted the deduction allowance amounting to ₹3.40 Cr was passed. However, about 4 years after the assessment, a notice under Section 148 seeking to reopen the assessment under Section 147 of the Act was issued to the assessee.

The assessee submitted that the original assessment was submitted with full disclosure of all the required details and was allowed deduction after scrutiny. Further, reassessment was not based on any new material facts that came into light, rather it was based on the same records that were available to the respondent at the time of assessment.

The assessee further contented that the absence of new tangible material, no failure to disclose the materials on the part of assessee and the reopening of the assessment after the lapse time was not valid in law.

The Respondent, the tax department sought to justify the reassessment citing that on revision inspection it was noticed that the housing project allegedly contained commercial area that exceeded the limits prescribed and the built-up area of the residential flats also exceeded the prescribed limit this recording of the return was treated as escape assessment by the Assessing Officer.

A notice under section 148 was issued notifying the appellant, following which the reassessment was completed and the addition of disallowance of the tax deduction of the sum which was previously allowed.. The assessee filed an appeal before the CIT(A) which upheld the impugned reassessment order.

The Tribunal addressed three main issues - whether the reopening of assessment by the assessing officer without new material records in matters already closed valid and whether the reassessment after a lapse of four years be valid in law.

After examining the records, the Tribunal noted that the original assessment under section 143(3) was completed after detailed inquiry and material facts and records related to the project and allowance claim were disclosed by the assessee in the original assessment proceeding.

The Tribunal also observed that the reassessment did not disclose any new material that came to the knowledge of the assessing officer and the proceedings were based on mere re-appreciation of the same material that has already been examined. The lapse of four years in opening of the assessment further cemented the Tribunal’s reiteration that the act was bad in law.

The Bench consisting of Shri Anikesh Banerji and Shri Makarand Vasant Mahadeokar, relied on recent judicial precedents such as Vishwas Promoters (P.) Ltd. V. ACIT [29 taxmann.com 19 (Mad)], Anand Developers v. ACIT [425 ITR 261 (Bom)] and Ananta Landmark (P.) Ltd. V. DCIT [439 ITR 168 (Bom)] to decide that the reassessment notice by the Assessment Officer as “bad in law” and quashed pursuant assessment order.

The ruling is expected to help assessees in safeguarding themselves similar reassessment proceedings based on “change of opinion”.

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