M/S S.K. Totla Infra Construction Pvt. Ltd. Through Satish Kumar Totla vs. The Commissioner Of Income Tax

1 ITA 73/2017 ITA No.73/2017 Indore, Dated: 05.01.2018 Shri Ashish Goyal, learned counsel for the appellant. Ms. Veena Mandlik, learned counsel for the respondent. Heard on the question of admission. This appeal under Section 260A of the Income Tax Act, 1961 is in respect of the assessment year 2010-2011 directed against the order of the Income Tax Appellate Tribunal, Indore dated 28.09.2016 rejecting the appeal filed by the appellant assessee. The brief facts are that for the relevant assessment year, the appellant had claimed deduction @ 100% under Section 80 IA(4) of the Income Tax Act amounting to Rs.47,23,925/-. The case of the appellant was taken-up in scrutiny under Section 143(3) of the Act and certain queries were raised which were replied by the appellant and thereafter the assessment order dated 28.03.2013 was passed allowing the deduction. The notice under Section 263 of the Act was issued by the CIT to which the reply was filed by the appellant and the revisional order dated 31.03.2015 was passed by the CIT setting aside the assessment order and remanding the matter back to the Assessment Authority with a direction to examine this issue and pass a fresh order after affording proper opportunity to the assessee. The challenge to the revisional order in appeal has been rejected by the ITAT. Learned counsel for the appellant submits that since after inquiry the Assessing Officer had allowed the deduction under Section 81A, therefore, the Revisional 2 ITA 73/2017 Authority was not justified in taking-up the matter in revision under Section 263 of the Income Tax Act. As against this, the learned counsel for the respondent has supported the impugned order. Having heard learned counsel for the parties and on the perusal of the record, it is noticed that the assessment order is silent about the claim of deduction under Section 81A and contains no discussion in this regard though, by that order the deduction has been allowed. The issue was whether the appellant satisfies the condition as enumerated in the section for claiming the deduction therein. The ITAT in the impugned order from paragraph 9 to 12 has considered in detail the scope of Section 263 of the Act and applying the same in the facts of the present case has held under:- “13. We shall now turn to the facts of the case to see whether the case before us is covered by the aforesaid principles. Perusal of the assessment order passed by the Assessing Officer does not show any application of mind on his part. He simply accepted the income declared by the assessee. His assessment order does not whisper any single word regarding claim of deduction u/s 80IA. This is a case where the Assessing Officer mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry. The evidence available on record is not enough to hold that the claim made by the assessee was objectively examined or considered by the Assessing Officer. It is because of such non-consideration of the issues on the part of the Assessing Officer that the claim by the assessee stood automatically accepted without any scrutiny. The assessment order placed before us is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee. The Assessing Officer has completely 3 ITA 73/2017 omitted the issue in question from consideration and made the assessment in an arbitrary manner. His order is a completely non-speaking order. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by set-asiding cancelling the assessment order and directing the Assessing Officer to pass a fresh order, in the light of observations made and after ascertaining facts and affording proper opportunity of being heard and lacks decision as per law. 14. Reverting to the facts of the case, we find from the assessment order that the AO has simply discussed the disallowances out of material expenses, mobile instruments purchase expenses, office expenses and purchase of tiles for making disallowance. No reference to the claim of deduction u/s 80IA of the Income-tax Act, 1961, was made. No other aspects have been examined with regard to nature of contract work performed by the assessee and how conditions laid down u/s 80IA(4) of the Income-tax Act, 1961, are satisfied. We also find that the AO has failed to examine whether the contract receipts from P.W.D. were also eligible for inclusion in the claim of deduction u/s 80IA of the Act. The perusal of the agreement dated 06.10.2008 that MPRRDA reveals that it was work order bearing No.507 executed by the assessee. Therefore, such claim of the assessee was prima facie inadmissible as the claim should have been with reference to the work of development operation and maintenance of infrastructure facility. Thus, the AO has failed to cause necessary enquiry and investigation as required to allow the claim of deduction u/s 80IA. Therefore, the order passed by the AO becomes erroneous as well as prejudicial to the interest of revenue. Therefore,, we are of the considered opinion that the ld. Commissioner has rightly invoked the provisions of Section 263 of the Act on this issue. Therefore, the order so passed was without application of mind or investigation. Hence, the order is erroneous inasmuch as prejudicial to the interests of revenue. We also note that the ld. Commissioner has observed on the basis of instructions to builders at para 2.1 & 2.2 that MPRRDA is the employer and 4 ITA 73/2017 it has got employees, whereas the assessee is a contractor for construction and upgradation on the selected rural road under PMGSY. The ld. CIT has also relied on the case of CIT vs. Deepak Kumar Garg, (2008) 299 ITR 435 (MP), wherein it was observed that where the AO has done only as semblance enquiry and that too in a very slipshod manner and AO had accepted version of the assessee without proper enquiry, as a result of which substantial amount of taxable income was not brought to tax, the ld. Commissioner rightly held assessment order as erroneous and prejudicial to the interests of revenue. Since the facts of the present case are similar, therefore, the above case law is squarely applicable to the facts of this case. We also find that the ld. CIT has also placed reliance on various case laws as discussed in the aforesaid paras, therefore, respectfully following the same, we are of the opinion that the order passed by the AO was erroneous as well as prejudicial to the interests of revenue. Therefore, the ld. CIT has rightly assumed the jurisdiction u/s 263 of the Act. Our findings that the assessee was not entitled to deduction u/s 80IA of the Act are so supported by the decision of the Coordinated Bench in the case of M/s. Sanee Infrastructures Private Limited in I.T.A. No.263/Ind/2015 dated 26.03.2012, wherein it was held that where the works contract are awarded by the Central/State Government for executing “Works Contract” will not be eligible for tax benefit u/s 80IA of the Income-tax Act, 1961. This view is also supported by the decision in the case of M/s. S.C.C. Projects Pvt. Ltd. vs. Addl. CIT (supra). 15. We also find support from the decision of Hon'ble Gujarat High Court in the case of Kataria Construction limited vs. Union of India, 31 taxman.com 250, wherein scope of Explanation substituted by the Finance Act, 2009, with retrospective effect from 01.04.2000 was discussed, wherein it was held that where a person who enters into a contract with another person i.e. with some Enterprises referred to in Section 80IA for executing works contract will not be eligible for the tax benefit u/s 80IA of the Act. Therefore, in the present case, the assessee was not eligible for the tax benefit u/s 5 ITA 73/2017 80IA of the Act. Therefore, in the present case, the assessee was not eligible for deduction u/s 80IA of the Act. Hence, the deduction allowed by the AO renders the order as erroneous and prejudicial to the interests of revenue. 16. In the light of above discussion, we find that the relevant part of the AO in not examining the matter carefully would render his order as erroneous as well as prejudicial to the interests of revenue. Therefore, in view of foregoing paras of this order, we find that the assessment order passed by the AO lacks judicial strength to stand. Therefore, we are of the considered opinion that the ld. Commissioner of Income Tax has correctly exercised his revisional jurisdictional u/s 263 of the Income-tax Act, 1961. Therefore, all the grounds of the assessee for both the assessment years under consideration are rejected.” The aforesaid reasoning which is assigned by the ITAT justifying the revisional power exercised by the CIT does not suffer from any error. The ITAT has prima facie found the claim to be inadmissible. The order of the assessing authority is silent in respect of the claim u/S.80- IA. It does not reflect any application of mind in this regard nor does it contain any reason which clearly indicate that claim was allowed without proper examination, hence order was erroneous and prejudicial to the interest of revenue. This Court also in the matter of Commissioner of Income Tax Vs. Deepak Kumar Garg 2007 (2) MPLJ 477 has held that there is no thumb rule of universal application for exercising the revisional power under Section 263 of the Act and it will depend on facts of each case, but the Commissioner must be satisfied of existence of the twin conditions i.e. the order of the AO is erroneous and that it is prejudicial to the interest of revenue. In the present case, a 6 ITA 73/2017 perusal of the order passed by the CIT reveals that the aforesaid two conditions are satisfied. Learned counsel for the appellant has placed reliance upon the judgment of the Bombay High Court in the matter of Commissioner of Income-tax, Central-III Vs. Nirav Modi (2016) 71 taxman.com 272 (Bombay), in the matter of Commissioner of Income-tax Vs. Krishna Capbox(P).Ltd of Allahabad (2015) 60 taxman.com 243 (Allahabad) and in the matter of Commissioner of Income-tax, Central-I, Kolkata Vs. J.L.Morrison (India) Ltd. (2014) 46 taxman.com 215 (Calcutta), but in the present case, it has been found by the Tribunal that the claim was not objectively examined by the Assessing Officer and the order was passed by the Assessing Officer without proper examination or inquiry or verification or objective consideration of the claim without reflecting any application of mind, therefore, the appellant is not entitled to the benefit of the above judgments. Having regard to the factual and legal position stated above, we are of the opinion that the appeal does not involve any substantial question of law and the issue which the appellant is raising is conclude by the finding of facts already recorded by the CIT as also ITAT. Hence, the appeal is dismissed. c.c as per rules. (PRAKASH SHRIVASTAVA) (VIRENDER SINGH) Judge Judge vm Varghese Mathew Digitally signed by Varghese Mathew DN: c=IN, o=High Court of Madhya Pradesh, ou=Administration, postalCode=452001, st=Madhya Pradesh, 2.5.4.20=b06e85e8115fd7cc0bb34a0888d1d430f979382d4c89 8692d55d8dbb4d9b937e, cn=Varghese Mathew Date: 2018.01.15 12:16:55 +05'30'