IN THE HIGH COURT OF GUJARAT AT AHMEDABAD. SPECIAL CIVIL APPLICATION No of 2011

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1 SCA/17056/2011 7/7 JUDGMENT Print IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No of 2011 With SPECIAL CIVIL APPLICATION No of 2011 With SPECIAL CIVIL APPLICATION No of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS JUSTICE SONIA GOKANI Whether Reporters of Local Papers may be allowed to see 1 the judgment? 2 To be referred to the Reporter or not? Whether their Lordships wish to see the fair copy of the 3 judgment? Whether this case involves a substantial question of law 4 as to the interpretation of the constitution of India, 1950 or any order made thereunder? 5 Whether it is to be circulated to the civil judge? RAMNKRISHNA STHAPATYA - Petitioner(s) Versus INCOME-TAX OFFICER & 1 - Respondent(s) Appearance : MR RK PATEL for Petitioner(s) : 1, (1 of 6)18/01/2012 5:36:55 PM

2 MR PRANAV G DESAI for Respondent(s) : 1-2. CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 11/01/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Rule. Learned counsel Shri Pranav Desai waives service of rule for the respondents. Looking to the controversy involved, the petition is taken up for final disposal today. 2. All the petitions arise out of common impugned notices of reopening earlier assessments. Briefly stated, facts are as under : 2.1 The petitioner which is common in all the petitions, is a partnership firm. It is engaged in the business of developing housing project. For the assessment year, , the petitioner claimed deduction under Section 80IB(10) of the Income Tax Act, 1961 for its income derived from developing a housing project at the site situated at Kidvay Nagar, Rajkot. The petitioner had filed necessary documents including the permission from Rajkot Municipal Corporation for developing and also for commencement of construction. Along with the permissions so granted by the Municipal Corporation, maps of the property and proposed construction were also attached. The petitioner had also filed necessary audit report in Form 10CCB in support of the claim. Such return of the assessee was taken under scrutiny assessment. Assessing Officer after examining various aspects allowed the claim of the assessee for deduction under Section 80IB(10) of the Act. 2.2 In the return filed for the assessment year also, the petitioner putforth its claim for deduction under Section 80IB(10) of the Act in connection with same housing project. Such claim was accepted though without scrutiny. (2 of 6)18/01/2012 5:36:55 PM

3 2.3 For the assessment year , petitioner once again claimed deduction under Section 80IB(10) of the Act for the same project. Such claim was also accepted after scrutiny. 2.4 By issuing three different notices, all dated , the Assessing Officer sought to reopen such assessments. At the request of the assessee, the Assessing Officer supplied the reasons recorded for reopening the assessment. Since such reasons are common for all three years, we may notice those recorded for reopening assessment for the year which reads as under : On verification of the case records, it is noticed that the claim of the assessee for deduction u/s80ib(10) of the I.T. Act an amount to Rs.40,95,546/- is not correct and was wrongly allowed, as the project is approved by the local authority i.e. RMC in the name of Shri Sureshbhai M. Makadiya in the capacity of individual and not in the name of the firm. Thus housing project was not approved by the local authority in the name of assessee I.e. M/s. Ram Krishna Sthapatya, which resulted into under assessment. In these circumstances, I have reason to believe that the income chargeable to tax had escaped assessemtn for the year under view. Accordingly, the proceedings u/s147 is being initiated. 2.5 The petitioner raised detailed objections on with respect to Assessing Officer's proposal for reopening assessments. In particular, it was contended that the project was approved in the name of M/s. Suresh Kumar and others and others included Girishbhai Makadia and Pramodbhai Makadia. Thus permission was granted and project was approved by the local authority in the name of all the partners of the firm. It was pointed out that the land was jointly purchased by said three persons on Same was thereafter, converted into nonagricultural land by order of the Collector dated Three owners thereafter, constituted a partnership firm on in which also there was a reference of land in question being brought in the fold of the partnership property. 2.6 The objections of the petitioner, however, were disposed of by the Assessing Officer by his order dated At that stage, the petitioner has approached this Court (3 of 6)18/01/2012 5:36:55 PM

4 challenging the notices of reopening as also the order disposing of the objections of the petitioner. 3. Counsel for the petitioner submitted that notices issued by the Assessing Officer are invalid. He submitted that for the assessment year , reopening notices were issued beyond four year from the end of relevant assessment year without there being any indication that income chargeable to tax had escaped assessment for the reason of assessee failing to disclose truly and fully all material facts. 3.1 Counsel further submitted that once the eligibility of assessee for deduction under Section 80IB(10) of the Act was examined and accepted for initial years, it was thereafter, not open for the Assessing Officer to reopen the issue for subsequent years. 3.2 Counsel submitted that for the assessment year , also the return was accepted after scrutiny which included claim of deduction under Section 80IB(10) of the Act. Such issue cannot be reopened on a mere change of opinion. 3.3 Counsel submitted that even otherwise the reasons recorded would not enable the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. He submitted that permission was granted in the name of M/s. Suresh Kumar and others. From the record, it could be established that the others would include other two partners of the firm. The project was thus developed by the partnership firm. The Assessing Officer on a super technical ground seeks to reopen the assessment. 4. On the other hand, counsel for the Revenue relying on the documents on record and affidavit in reply filed by respondents contended that the assessee had not truly and fully disclosed all the material facts. Permissions by local authority were in the name of M/s. Suresh Kumar and others and not in the name of partnership firm. The claim of the firm for deduction under Section 80IB(10) of the Act was thus not sustainable. 4.1 Counsel further submitted that for the subsequent years, reopening is sought to be made within four years from the end of relevant assessment year and in fact for assessment of , assessment was framed without scrutiny. (4 of 6)18/01/2012 5:36:55 PM

5 4.2 Counsel for the Revenue contended that permission was obtained after formation of partnership. There was no reason to obtain such permission in the name of individual partners and not partnership firm. 5. Having thus heard learned counsel for the parties, we may notice at the outset that for assessment year , which was the first year of deduction claimed by the assessee under section 80IB(10) of the Act, the Assessing Officer after scrutiny and examination of records had granted the relief. Such assessment is sought to be reopened beyond the period of four years from the end of relevant assessment year. From the record, we do not even find that there is any allegation that the Assessing Officer believed that income chargeable to tax had escaped assessment for the reason of assessee failing to disclose truly and fully all material facts necessary for assessment. On this short ground alone, we would be justified in quashing reopening of assessment year However, there are additional reasons why we would be prompted to do so. Firstly the entire assessment was taken for scrutiny. Claim of the assessee was examined by the Assessing Officer during the original assessment. Further, reasons recorded to our mind are not germane. The development permission as well as permission to commence construction granted by the local authority of-course are in the name M/s. Suresh Kumar and others. From the maps attached to such permissions, which were also certified by the local authority, it clearly emerges that others included two remaining partners of the firm. Assessee had through objections pointed out that land was initially purchased by the partners individually and the partnership was thereafter, formed after converting the land in to non agricultural use. Land was also brought within the fold of partnership property and partnership firm had started the business of developing housing project in the said land. Merely because the name of partners are indicated in development permission granted by the local authority, one cannot jump to the conclusion that partnership firm was not engaged in business of developing housing project. Such a view, in our opinion, would be too rigid and technical, particularly, when the development permission is granted in the name of all three partners of firm and there are no other partners other than those in whose favour such permission was granted. Merely because development permission recorded name (5 of 6)18/01/2012 5:36:55 PM

6 of partners and not firm, would hardly be an issue on which deduction under Section 80IB(10) of the Act could be denied particularly, if the firm was found to have developed the housing project and fulfilled all other conditions for claiming such deduction. Merely because permission is issued in the name of all partners of the firm would not be conclusive evidence to show that partnership had not engaged itself in the business of developing housing projects. 6. Once we hold that reopening of assessment for the year was impermissible, being a deduction in nature of successive relief, by virtue of decision of this Court in case of Saurashtra Cement & Chemical Industries Ltd. v. Commissioner of Incometax, Gujarat-V reported in (1980) 123 ITR 669, we have serious doubt whether for subsequent years, Revenue can deny the benefits. However, we need not rest on this sole ground. Additionally, we also find that for assessment year , the claim was once again examined, scrutinized and accepted. On mere change of opinion even within four years such concluded assessment could not be reopened. Further on facts also as already held earlier, we are of the opinion that reasons recorded would not arm the Assessing Officer with the jurisdiction to reopen the assessment since we find that he had no reason to believe that income chargeable to tax had escaped assessment. For reasons recorded, we are inclined to and hereby quash all the respective impugned notices dated Petitions are disposed of accordingly. Rule made absolute to above extent. (Akil Kureshi,J.) (Ms.Sonia Gokani,J.) (raghu) Top (6 of 6)18/01/2012 5:36:55 PM