Loading judgment…
Facts
The assessee, engaged in developing infrastructure facilities, claimed deduction under Section 80IA(4) of the Income Tax Act for AY 2016-17. The AO denied the deduction, treating the assessee as a works contractor. The Ld.CIT(A) confirmed the AO's order but on new grounds, allegedly without providing the assessee an opportunity to respond, despite consistent allowance of similar claims in prior assessment years.
Held
The Tribunal found that the assessee was not given a proper opportunity by the lower authorities and that new documents were produced. Relying on the principle of natural justice and Supreme Court precedent, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO for a de novo assessment, allowing the assessee to file all relevant documents.
Key Issues
Whether the assessee qualifies as a developer for Section 80IA(4) deduction or merely a works contractor, and whether the lower authorities violated principles of natural justice by not providing proper opportunity or introducing new grounds without confrontation.
Sections Cited
80IA, 80IA(4)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short "theLd.CIT(A)”), Pune-11, dated 06.06.2023 for the Assessment Year (hereinafter in short "AY”) 2016-17.
At the outset, the Ld.AR of the assessee pointed out that assessee’s main grievance was that the AO as well as the Ld.CIT(A) didn’t give proper opportunity to the assessee and therefore, assessee couldn’t file relevant evidences before lower authorities and especially before the AO to substantiate its claim for deduction u/s.80IA(4) of Income Tax Act, 1961 (hereinafter in short "the Act").
The brief facts relevant to examine this issue are that the assessee company is in the business of developing infrastructure facilities like national highway, hydro electric project works, etc., apart from other general construction. For the year under consideration, the assessee had filed its return of income (RoI) on 20.07.2017 for AY 2016-17 declaring income of Rs.9,18,16,710/- under the normal computation and Rs.11,01,38,172/- under MAT. The AO noted that the assessee had made claim of deduction of Rs.3,32,11,911/- u/s.80IA(4) of the Act called for submission of relevant documents by issuing notice at the fag-end before completion of the assessment on 24.12.2018, which resulted in the assessee not able to file certain relevant documents and hence, the AO held assessee to be a works contractor and not a developer of the infrastructure facilities and denied the deduction u/s.80IA(4). On appeal, the assessee assailed the action of the AO and asserted that AO erred in holding the assessee to be only a works contractor by producing documents to establish that it was into the business of developing infrastructure facilities and also brought to Ld CIT(A)’s notice that the assessee on similar set of facts had been consistently allowed deduction u/s.80IA of the Act from AY 2007-08 onwards. It was pointed out by the Ld.AR that for AY 2007-08, the Ld.CIT(A) allowed the deduction, which action has been confirmed by the Tribunal by order dated 03.10.2021 [ITA No.206/MDS/2010]. And thereafter for AYs 2011-12 to 2014-15, the Ld.CIT(A) has allowed the deductions u/s.80IA of the Act by order dated 25.02.2016 & 30.06.2017. However, for the relevant year, the Ld.CIT(A)
1. has taken a different stand and decided the appeal on totally new grounds and that too without giving opportunity to the assessee to rebut the new grounds that was held against it [the assessee]. Therefore, according to the Ld.AR, the impugned order of the Ld.CIT(A) is legally fragile for violation of natural justice; the impugned action of the Ld.CIT(A) is bad in law. Further, the Ld.AR for assessee relying on the decision of Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC) submitted that since the assessee has been allowed deduction u/s.80IA(4) of the Act for the earlier years for AY 2007-08 to the relevant AY, the assessee’s claim ought not to have been decided against without giving proper opportunity and therefore, prays for one more opportunity before the authorities below.
Per contra, the Ld.DR doesn’t want us to give one more innings to the assessee and submitted that the assessee ought to have produced relevant evidences at the time of assessment/first appellate proceedings and therefore, the omission on the part of the assessee to produce the same, can’t be a ground to produce new evidences before the Tribunal and anyway, he doesn’t want us to give one more opportunity to the assessee.
We have heard both the parties and perused the material available on record. We note that the assessee is engaged in the business of developing infrastructure facilities by executing hydro electric projects, highway projects, water supply projects, etc., and had filed its RoI admitting total income of Rs.9,18,16,710/- which was selected for scrutiny; and the AO noted that the assessee had claimed deduction u/s.80IA(4) of the Act of an amount of Rs.3,32,11,911/-. Therefore, the AO asked for the details of the relevant documents to substantiate its claim and pursuant to it, the assessee filed few documents and also brought to his notice that from AY 2007-08 onwards, similar claim of assessee’s has been allowed by the Ld.CIT(A)/ITAT. However, the AO expressed his dissatisfaction and gave show cause notice to assessee ‘as to why the claim should not be disallowed’, which show cause notice according to the Ld.AR, was given at the fag-end of the assessment proceedings, and then hurriedly, the AO framed assessment on 24.12.2018 wherein the AO disallowed the claim of deduction u/s.80IA(4)
to the tune of Rs.Rs.3,32,11,911/-. On appeal, the Ld.CIT(A) confirmed the action of the AO but on different reasons which was done without confronting the assessee about it. According to the assessee, it had only assailed the action of the AO on the grounds spelled out by him in the assessment order. Thereafter the assessee is aggrieved by the omission on the part of the Ld.CIT(A) not confronting it with the new reasons given by him to deny the claim; and in this regard, brought to our notice that the AO had denied the claim on the ground that the assessee’s nature of business was execution of works contract and not a developer of the infrastructure facilities, but the Ld.CIT(A) without giving notices has held that the works executed by the assessee were not “infrastructure facility” as defined in the explanation u/s.80IA(4) and (ii) that National Projects Construction Corporation Ltd., [NPCCL] and UJVN Ltd., [A government of Uttarakand Enterprise] were neither central government nor state government nor local authority nor statutory body and thus execution of their projects by the assessee were not covered by sec.80IA(4); and in that process, according to the Ld.AR, the Ld.CIT(A) didn’t adjudicate the main issue as to whether assessee is a developer or contractor. In this context, it is noted that the assessee had filed new documents like copy of project allotment letter, work order for all the five projects, etc., before the Ld.CIT(A) which are found placed at Page Nos.197-203 of the paper book, and it is noted that these documents were not filed before the AO and the assessee’s assertion that the assessee is entitled for deduction u/s.80IA(4) of the Act by relying on the earlier orders of the Ld.CIT(A)/ITAT for earlier years has not been properly dealt with and since, new documents/materials are being produced for supporting its claim for deduction u/s.80IA(4) of the Act, for the interest of justice and fair play, and relying on the decision of the Hon’ble Supreme Court in the case of TIN Box Company v. CIT reported in [2001] 249 ITR 216 (SC), we are inclined to set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO for de novo assessment.
The assessee is at liberty to file all relevant documents to substantiate its claim of deduction u/s.80IA(4) of the Act and the AO is at liberty to call for any documents/make enquiry in accordance to law after hearing the assessee pass a speaking order.
In the result, appeal filed by the assessee is allowed for statistical purposes.