Lokhandwala Construction Industries Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Reopening Beyond Four Years Held Invalid Because No Failure to Disclose Material Facts Was Shown; ITAT Cancels Reassessment Because No Fresh Tangible Material Existed for Reopening; Assessment Reopening Quashed Because Notice Was Issued to Non-Existing Company; ITAT Invalidates Reassessment Because Revenue Attempted to Correct Earlier Assessment Error.
The Income Tax Appellate Tribunal (ITAT) Mumbai allowed the assessee’s appeal and held that the reassessment proceedings initiated under Sections 147 and 148 of the Income-tax Act were invalid in law. The assessee, engaged in real estate development, had filed its original return for Assessment Year 2010-11 declaring income of Rs.92.06 crore, later revised to Rs.83.28 crore. An assessment under Section 143(3) was completed on 06.03.2013. Subsequently, the Assessing Officer reopened the assessment through notice dated 31.03.2017 on the ground that advertisement, sales promotion, legal, professional, and related expenses had been excessively allowed.
The reassessment proceedings arose from the Assessing Officer’s view that only 49% of certain expenses should have been allowed because the assessee still had closing work-in-progress and stock. The Assessing Officer accordingly disallowed Rs.4.47 crore. The assessee contended that the expenses related to a completed project and had already been examined in earlier assessment years. The assessee had previously claimed 72% of the expenses in Assessment Year 2009-10, which had been accepted during scrutiny assessment, while the remaining 28% was claimed in AY 2010-11 and also accepted during the original scrutiny assessment.
