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Judgment
The petitioner has sought to question the legality of a notice issued under Section 148 of the Income Tax Act, 1961 seeking to re-open the assessment for AY 2008-09.
An order of assessment was passed under Section 143(3) on 7 May 2010. The Assessing Officer completed the assessment reflecting a total loss of Rs. 84,28,215/-.
A notice under Section 147 of the Income Tax Act was issued to the assessee on 14 March 2014. The notice records that the assessee which was the owner of certain lands had entered into development agreements with M/s. Parsvnath Developers Limited in the financial year 2004-05 and 2006-07 for three projects. The agreements, along similar lines, inter alia, provided that for the due performance of its obligation the developer would pay to the assessee an amount of Rs. 1 crore as a refundable/adjustable security deposit. The agreement contemplated a distribution of the sale proceeds in a stipulated proportion. A supplementary agreement was entered into on 28 September 2006 in respect of one project whereas for the other projects there were supplementary agreements dated 14 June 2007 and 11 July 2007.
By the supplementary agreement, the parties contemplated that the security deposits would be enhanced and the amount which had been paid would be now treated as non-refundable. Subsequently a survey under Section 133-A of the Income Tax Act, 1961 was conducted at the premises of the assessee on 9 September 2013. During the course of the survey a letter dated 29 September 2008 from M/s. Parsvnath Developers Limited was impounded. The letter contained a certification of the amount which had been paid to the assessee up to 31 March 2008 towards non-refundable security deposits and the share of the collaborator in respect of three construction projects.
The Assessing Officer in his reasons indicated that the supplementary agreements dated 14 June 2007 and 11 July 2007 changed the nature of the receipts under the head of security from being refundable/adjustable to non-refundable. Hence the receipts which were received in financial year 2007-08 had become taxable in the assessment year 2008-09. The assessee had not shown the receipts as taxable income in the return filed AY 2008-09. The Assessing Officer noted that the sale of the land had taken place and the assessee had handed over possession thereafter to the developer. The assessee was to get the sale proceeds through an escrow account in accordance with an agreed ratio. The assessee has not shown the sale proceeds as its income in the year under consideration. Receipt amounting to Rs. 2.25 Crore has not been shown as taxable income in the return filed AY 2008-09. The Assessing Officer found that during the course assessment which was completed under Section 143(3) a total loss of Rs. 84,28,215/- was shown.
During the assessment proceeding the issue of nonrefundable security deposits and sale proceeds by way of the supplementary agreements had not been fully and truly disclosed by the assessee.
The assessment in the present case is sought to be re-opened beyond a period of 4 years of the relevant assessment year. The proviso to Section 147 of the Income Tax Act, 1961 stipulates that when an assessment under sub-section 3 of Section 143 has been made no action can be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee, inter alia, to disclose fully and truly all material facts necessary for the assessment for that assessment year.
The reasons in the order of the Assessing Officer would indicate that the jurisdictional requirement for reopening of the assessment beyond a period of four years has been duly fulfilled. The assessment was completed on 7 May 2010 under Section 143(3). A survey took place at the premises of the assessee under Section 133-A on 9 September 2013 during the course of which a certificate issued by the developer in the form of a letter dated 29 September 2008 was found and impounded. The letter reflected the amounts which have been received by the assessee from the developer as non-refundable security deposits in respect of three building projects. The Assessing Officer while recording his reasons has noted that what was initially a security deposit which was refundable or adjustable had become a non-refundable security deposit as a result of the supplementary agreements. There was a failure on the part of the assessee to fully and truly disclose all these facts during the course of the assessment proceedings.
It has been submitted on behalf of the petitioner that during the course of the assessment proceedings the Assessing Officer had called upon the petitioner to disclose the details of certain amounts which had been received from the developer.
The fact of the matter, however, is that there was absolutely no application of mind by the Assessing Officer to the nature of the deposits. The order of assessment only contains the following observations:
"Apart from the above, the company has entered into Development Agreements with Parsvnath Developers Limited for development of land belonging to the assessee company situated at Sahibabad and village Arthala, Ghaziabad for construction of flats thereon. It has received its share of advances from bookings of customers, whereas the construction is going on and is not complete. No sale has so far been booked, which as per policy of the company, is to be booked on the handing over of possession of the flats to the buyers by the company. The company''s share of advances is received from the joint Escrow account opened for the purpose, as per the terms and conditions given in the Development/Supplementary Agreements entered into between the Assessee Company and M/s. Parsvnath Developers Limited".
The material which was impounded during the course of the survey operation under Section 133-A was after the order of assessment was passed. This furnished a valid basis to reopen the assessment under Section 148.
In these circumstances, it cannot be said that the reasons, on the basis of which reassessment is sought, constitute a mere change of opinion. There was, indeed, a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. Hence the jurisdictional requirement for reopening the assessment has been duly fulfilled.
On these findings, we find no substance in the writ petition. The writ petition is, accordingly, dismissed. There shall be no order as to costs.