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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-III, Baroda, dated 08th September 2011 arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2004-2005.
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The assessee has raised the following revised grounds of appeal:
The Learned Commissioner of Income Tax (Appeal) erred in law and on the facts in indirectly confirming the action of the Ld.A.O in framing assessment order u/s.147 of the Income Tax Act, 1961. 2. The Learned Commissioner of Income Tax(Appeal) erred in law and on fact in confirming the disallowance to the extent of Rs.5179626/- u/s.80IA of the Income Tax Act, 1961, made by the Ld.A.O. 3. The appellant may be allowed to add, amend, alter or raise additional grounds of appeal.
The assessee in ground No. 1 has challenged the validity of the assessment framed under section 147 of the Act.
The assessee in the present case is a limited company and engaged in the business of civil construction and infrastructure development. The assessee filed its return of income dated 1st November 2004 claiming deduction of ₹ 84,63,208.00 under the provisions of section 80 IA of the Act which was allowed in the assessment framed under section 143(3) of the Act vide order dated 29th December 2006.
4.1 Subsequently, the AO found that the assessee was not eligible for deduction under section 80 IA(4) of the Act and therefore he initiated the proceedings by issuing notice under section 148 of the Act dated 15th March 2010 on account of escapement of income. The assessee challenged the reassessment proceedings initiated under section 147 of the Act vide letter dated 5th August 2010 which were disposed of by the AO vide order dated 8th October 2010 upholding the initiation of the proceedings under section 147 of the Act.
4.2 The learned CIT (A) also confirmed the initiation of the reassessment proceedings under section 147 of the Act vide order dated 8 September 2011.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
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The learned AR before us submitted that the proceedings were initiated under section 147 of the Act for the explanation inserted below section 80 IA (4) of the Act by the Finance Act 2009 with retrospective effect from 1st April 2000. As per the explanation the assessee was denied for the benefit of deduction under section 80 IA (4) of the Act if it is arising from the project which is the nature of works contract. Accordingly, the AO assumed that the assessee being a works contract is not eligible for deduction of the benefit granted under section 80 IA (4) of the Act. It was contended by the learned AR that the explanation was brought under the statute by the Finance Act 2009 with retrospective effect from 1st April 2000. As such, at the time of framing the assessment under section 143(3) of the Act there was no such explanation available under the statute which is denying the deduction if it is found that the assessee is engaged in the capacity of works contractor in the project awarded by the Government/ Local Authority. The learned AR was of the view that such amendment with retrospective effect cannot be a basis for initiating the proceedings under section 147 of the Act as held by various Hon’ble Courts. The learned AR in support of his contention made reference to the orders of this tribunal in its own case for the assessment years 2005-06 and 2006-07 in ITA Nos. 1864/AHD/2013 and 225/AHD/2014.
On the other hand, the learned DR contended that the assessee has not furnished the reasons recorded for initiating the proceedings under section 147 of the Act in support of his contention that the proceedings were initiated on account of the insertion of explanation under section 80 IA (4) of the Act. In the absence of such reasons recorded, it is not possible to draw any inference.
The learned AR in his rejoinder admitted the fact that the reasons recorded are not available on record but drew our attention on the order of the AO dated 8 October 2010, disposing of the objections raised by it. As per the learned AR, the reasons were disposed of by the AO after referring to the explanation to section 80 IA(4) of the Act which evidences that proceedings were initiated under section 147 of the Act for the explanation to section 80 IA(4) of the Act.
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We have heard the rival contentions of both the parties and perused the materials available on record. The Hon’ble Gujarat High Court in the case of Sadbhav Engineering Ltd versus DCIT reported in 45 taxmann.com 388 held that there cannot be any reassessment proceedings on the basis of any retrospective amendment made under the provisions of law. Any proceedings initiated based on the retrospective amendment will amount to mere change of opinion. The relevant finding of the Hon’ble High Court reads as under:
In the present case, as could be noted from the material on record, the Assessing Officer on a detailed scrutiny had explained the claim made by the Assessing Officer under section 80- IA(4) of the Act. This was also challenged further before the Commissioner (Appeals) and the Tribunal. The sole question, therefore, is whether the reassessment proceedings can be initiated only on the basis of insertion of Explanation which had been substituted by the Finance (No. 2) Act, 2009 with retrospective effect from 1-4-2000. Such Explanation clarified that the deduction under section 80-IA of the Act would not be admissible in the case of an assessee carrying on business in the nature of works contract. Such explanation having held to be clarificatory in nature, the ratio laid down in the case of Asstt. CIT v. Parikshit Industries (P.) Ltd. [2012] 25 taxmann.com 301 (SC) would apply. The Assessing Officer initiated such proceedings of reopening solely on such ground of insertion of Explanation and, therefore, it needs to be held as mere change of opinion. Hence, the assumption of jurisdiction on the Assessing Officer shall need to be interfered by way of writ jurisdiction. [Para 16]
9.1 When the assessment was framed for the year under consideration there was no such explanation available under the statute. For any particular assessment year the law as applicable to that assessment year has to be prevailed while deciding the issue on hand as held by the Hon’ble High Court of Gujarat in the case of M/s Denish Industries Ltd versus Income Tax Officer reported in 271 ITR 340. The relevant extract of the judgment is reproduced as under: Whether for purpose of deciding question under section 147 as to whether assessee had disclosed fully and truly all material facts necessary for relevant assessment year, law applicable would be such law as it stood on date of filing of such return - Held, yes - Whether since when assessee filed its return, it could not have assumed that such a legislative amendment was going to be made with retrospective effect, it could be said that there was failure on part of assessee to disclose truly and fully all material facts - Held, no - Whether, therefore, notice was liable to be quashed and set aside - Held, yes
9.2 In the light of the above stated discussion, we have to evaluate the present facts and circumstances whether the reassessment proceedings were initiated on the basis of the explanation inserted to section 80 IA (4) of the Act. Admittedly, the
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reasons recorded for initiating the reassessment proceedings are not available on record. In this regard, the learned DR was also directed to produce the reasons recorded and for this purpose he was provided enough time at the time of hearing after treating the matter as part heard. However, the learned DR failed to provide the reasons recorded by the AO for initiating the reassessment proceedings.
9.3 Nevertheless, to adjudicate the issue on hand we have referred objection raised by the assessee against the initiation of the reassessment proceedings under section 147 of the Act. The objections were raised vide letter dated 5 August 2010 which are placed on pages 101 to 110 of the paper book. The relevant extract of the objections are reproduced as under: Sir we now refer to the validity of notice u/s 148 with the opinion of the case are as under the assessment u/s 143(3) was completed by the .learned Assistant Commissioner of Income tax after verifying all material .facts and thereafter to issue notice under section 148 is not proper because it is basically a change of opinion. As held in the case of Star India (p) Ltd. Vs. Commissioner of Central Excise. Ref No. (2006) 201 CTR (SC) 63: (2006) 260 ITR 321 (SC) : (2006) 150 Taxman 128 and similarly in the case of Danish Industries Ltd. Vs. income Tax Officer Ref No. (2004) 190 CTR (GuJ) 485: (2004) 271 ITR 340 (Guj): (2004) 140 Taxman 456 reassessment under section 147(a)- full and true disclosure - retrospective amendment, of law. Petitioner had claimed depreciation and investment allowance on the cost of assets which included capitalized interest paid in connection with the acquisition of machinery for the post installation period. When the assessee had failed its return for the assessment year 1983-84 in 1983 it could not have assumed that a legislative amendment by way of Expln.8 to section 43(1) was going to be made in the year 1986 with retrospective effect from the year 1974- Thus, it could not be said that the petitioner had failed to disclose all the material facts and hence the condition precedent for invocation of powers under section 147 r/w ss. 148 and 149 was not fulfilled impugned notice quashed and set aside. We invite your attention to the Judgment by ITAT Mumbai 'J' Bench of Mumbai in the case of Jewel Enterprises Vs. 1TO Ref No. ITA Nos. 6477 & 6478 /Mum/07 as long as an AO has taken a possible view of a matter after applying his mind to fact of case and legal provision, view so taken cannot be subjected to revision proceedings under section 263 merely because the Commissioner has a different view of that matter. The true test, therefore, must lie in whether or not the view taken by the Assessing Officer could be said to be a possible view of the matter, upon due application of mind to facts of the case as also the applicable legal provisions. In view of the above facts it is very clear that notice issued by you for reassessment under section 148 is not proper and it is requested that the proceedings initiated may kindly be dropped.
9.4 Likewise, we refer the order of the AO dated 8 October 2010 where objection raised by the assessee were disposed off. The copy of the order is placed on pages
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111 to 115 of the paper book. The relevant extract of the order is reproduced as under: On going through the facts of the case of the assessee, it is observed that all the mandatory conditions as specified herein above were not fulfilled therefore the assessee was not entitled to the deduction u/s 80IA of the Income tax Act, 1961. As a matter of facts, many assessees who worked as contractors or subcontractors used to wrongly claim deduction u/s 80IA of the Income tax Act, 1961 merely on the ground that they considered themselves 'involved in the business of infrastructure development'. It is therefore that section 80IA was amended by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2000 and the following Explanation was inserted:- "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or Sate Government) and executed by the undertaking or enterprise referred to in sub section (1)." As noted at the outset, the assesses worked as a contractor or a sub-contractor but did not fulfill the conditions prescribed u/s 80IA of the Income Tax Act, 1961; the assessee was found to have wrongly claimed deduction of Rs.8463208 so the assessee was issued a notice u/s 148 of the Act.
9.5 From the above details, it is transpired that the reopening of the reassessment under section 147 of the Act was challenged by the assessee on the reasoning that explanation inserted to section 80IA(4) of the Act with retrospective effect. Likewise, the objections were disposed of based on the explanation inserted under section 80IA (4) for of the year under consideration.
9.6 Moving further, we note that the proceedings were also initiated under section 147 of the Act in the own case of the assessee for the assessment years 2005-06 and 2006-07 vide notice dated 15th March 2010 under section 148 of the Act. In the present case the notice under section 148 was also issued on the same date i.e. 15th March 2010. In the assessment year 2005-06 and 2006-07 the reassessment proceedings were held to be invalid. Therefore, the issue on technical ground was decided in favour of the assessee. The facts of the present case seems to be similar to the assessment year 2005-06 and 2006-07 as the notice under section 148 was issued on the same date. Accordingly, we can draw an inference that the proceedings were initiated merely on the change of opinion. The relevant extract of the order of the ITAT for the assessment year 2005-06 and 2006-07 in ITA No. 1864/AHD/2013 and 225/AHD/2014 is reproduced as under:
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At the time of hearing, the ld.counsel for the assessee made reference to the decision of Hon’ble Gujarat High court in the case of Classic Network Ltd. Vs. DCIT, (2014) 45 taxmann.com 234(Guj), Parixit Industries P. ltd. vs. ACIT, 352 ITR 349 (Guj) and Sadbhav Engineering Ltd. Vs. DCIT, (2014) 223 taxmann 229 (Guj) (Mag). In all these judgments, the AO has earlier granted deduction under section 80IA, \ thereafter reopened the assessment by re-appreciating the same material. The Hon'ble Court has held that re- opening is being made on account of change of opinion and it is not justifiable. In the present case, the Id.AO has re-appreciated the material. Earlier, the AO considered the assessee as engaged in the business of development of infrastructure project, but later on the basis of same material he construed the assessee as a contractor. To our mind, it is a just his change of opinion, and there is no tangible material in possession of the AO to reopen the assessment. Therefore, we allow first ground of appeal in both the years, and quash re- assessment orders in both the years.
9.7 In view of the above and after considering the facts in totality, we are of the view that the proceedings in the year under consideration were initiated on account of the insertion of explanation to section 80 IA(4) of the Act which is nothing but change of opinion. Accordingly, we disagree with the finding of the authorities below. As such, the proceedings initiated under section 147 of the Act are bad in law and liable to be quashed. Hence, the technical issue raised by the assessee is allowed.
9.8 As we have decided the technical issue in favour of the assessee, we are not inclined to decide the issue raised by the assessee on merit. Accordingly, the issues raised by the assessee on merit become infructuous. Hence we dismiss the same as infructuous.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 07/10/2021 at Ahmedabad.
Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 07/10/2021 Manish