DCIT, CHENNAI vs. M/S. R.R. CONSTRUCTIONS & INFRASTRUCTURE INDIA PVT.LTD.,, CHENNAI

Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order.

At the outset, learned DR for the Revenue submitted that appeals filed by the Revenue are time barred by 2 days for which necessary petition for condonation of delay explaining the reasons for the delay has been filed. The DR further submitted that the Revenue could not file appeals within the time allowed under the Act, due to movement of files which caused meager delay of 2 days. The delay in filing appeals is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. The learned AR, on the other hand, has no objection for condoning delay.

Having heard both sides and considered the petition filed by the Revenue for condonation of delay, we are of the considered view that reasons given by the Revenue for not filing the appeals within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeals is condoned and appeals filed by the Revenue are admitted for adjudication.

The Revenue, has more or less filed common grounds of appeal for both assessment years, therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2009- 10 are reproduced as under:-

“1. The order of the Ld. Commissioner of Income-tax (Appeals) is contrary to law and facts of the case.

The first issue that came up for consideration from ground no.2 of the Revenue appeal is addition towards disallowance of sub-contract charges paid to M/s.Shakti Projects. The facts with regard to impugned dispute are that the assessee has engaged M/s. Shakti Projects for carrying out sub-contract works. During the course of assessment proceedings, it was noticed that the assessee has paid a sum of Rs.4,84,69,197/- to M/s. Shakti Projects. In order to verify genuineness of claim made by the assessee, the Assessing Officer called upon the assessee to file necessary details, including agreement, if any, between the sub-contractor, bills for rendering contract work etc. In response, the assessee has filed various details, including agreement between the parties, bills submitted by sub-contractor and relevant bank statement . From the details filed by the assessee, it was noticed that the assessee has transferred money through RTGS to bank account of M/s.

Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has filed necessary evidences, including work order issued to M/s. Shakti Projects, bills raised by the sub-contractor and relevant payment details to prove that M/s. Shakti Projects has carried out sub-contract work for the assessee which is supported by necessary evidences. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of various facts deleted additions made by the Assessing Officer towards additions made on account of sub-contract charges paid to M/s. Shakti Projects on the ground that the Assessing Officer has not brought out any cogent and worthwhile materials to substantiate his allegation that amount paid to M/s. Shakti Projects is bogus in nature, except making allegation that amount transferred to sub- contract or account has been withdrawn by employees of the assessee company. Therefore, deleted additions made by the Assessing Officer. Aggrieved by the learned CIT(A) order, the Revenue is in appeal before us.

The learned D.R submitted that the issue is covered in favour of the Revenue by the decision of the ITAT., Chennai in assessee’s own case for the assessment year 2011-12, where the Tribunal under identical circumstances held that payments made to M/s. Shakti Projects is not substantiated with necessary evidences. The learned DR further submitted that if you go through evidences filed by the assessee, including agreement between the parties, scope of work mentioned in the agreement is something else, whereas bills submitted by the assessee specifies some other work, which is not related to work specified in the agreement and therefore, from the above, it is very clear that payment made to above party is not genuine and thus, the Assessing Officer has rightly disallowed amount paid to sub-contractor. The learned CIT(A), without considering necessary facts has simply deleted additions made by the Assessing Officer.

The learned A.R for the assessee supporting order of the learned CIT(A) submitted that sole basis for the Assessing Officer to disallow entire payment made to M/s.Shakti Projects is on account of withdrawal of money from bank account of sub- contractor, except this, no other evidence suggests that transactions between the parties are not genuine. Further, the assessee has made payment through bank which is supported by necessary work orders issued by the assessee and bills submitted by sub-contractor. Further, M/s.Shakti Projects is carrying out various works, including sub-contract work awarded by the assessee, which is evident from financial statement of sub-contractor where it has generated huge revenue from operations. The learned CIT(A), after considering relevant facts has rightly held that payment made to M/s.Shakti Projects is genuine which cannot be disallowed and hence, their order should be upheld.

We have heard both the parties, perused material available on record and gone through orders of the authorities below. The sole basis for the Assessing Officer to disallow total sub-contract charges paid to M/s. Shakti Projects is amount transferred to sub-contractor’s bank account and subsequent withdrawn of money from said bank account. According to the Assessing Officer, although payment has been made through RTGS/cheques, but entire amount transferred to sub-contractor account has been withdrawn through bearer cheques and such withdrawal has been made through employees of the assessee company. Except this, there is no finding from the Assessing Officer regarding evidences filed by the assessee, including work orders, bills and necessary evidences to justify genuineness of payment made to the sub-contractor. In fact, the assessee has filed various evidences, including agreement between the assessee and sub-contractor dated 12.05.2005 & 18.07.2006 which specifies nature and scope of work to be carried out by sub-contractor. The assessee had also placed on record work order issued in favour of the sub-contractor, which specifies nature and scope of work. The assessee has also filed ledger extract of M/s. Shakti Projects in the books of the assessee to prove payments made through proper banking channels. TDS has been deducted on total sub-contract payments which is evident from Form No.16A issued by the assessee. The assessee had also filed income-tax returns of sub-contractor along with audit report, as per which M/s. Shakti Projects had undertaken various projects other than sub- contract work undertaken for the assessee. From the above, what is clear is that the Assessing Officer has not doubted payments made to M/s. Shakti Projects and necessary evidences filed by the assessee to support its claim. However, only reason for the Assessing Officer to doubt genuineness of payment made to sub-contractor is withdrawal made from bank account of the sub-contractor by the employees of the assessee company. In our considered view, basis for the Assessing Officer to doubt genuineness of payment to sub- contractor is purely on suspicious and surmises basis, without there being any evidence to justify his stand, because although, it may be fact that employees of assessee company has withdrawn amount from M/s. Shakti Projects bank account, but there is no finding from the Assessing Officer to allege that said payment is withdrawn and returned to the assessee.

Insofar as case laws relied upon by the learned DR in assessee’s own case for the assessment year 2011-12, we find that the order passed by the Tribunal in assessee’s own case for the assessment year 2001-12 is ex-parte. The assessee does not have any occasion to explain its case before the ITAT. We further noted that the Tribunal has reversed findings of the learned CIT(A) only on the basis general principles of onus of the assessee to establish genuineness of transaction, however, there is no finding with regard to observations of the learned CIT(A) that payment made to M/s. Shakti Projects is genuine and which is supported by necessary evidences.

The next issue that came up for our consideration from ground no.3 of Revenue appeal is deduction claimed u/s.80IA of the Income Tax Act, 1961. The Assessing Officer has denied deduction claimed u/s.80IA of the Act, on the ground that the assessee is not a developer of infrastructure project as contemplated u/s.80IA , but only a contractor who executes works contract awarded by another person. The learned CIT(A) has allowed deduction claimed u/s.80IA(4) by following decision of the ITAT., Chennai in assessee’s own case for earlier assessment year, where the Tribunal held that the assessee is a developer of infrastructure project and further entitled to claim deduction u/s.80IA(4) of the Income Tax Act, 1961.

The learned DR submitted that the learned CIT(A) erred in allowing deduction claimed u/s.80IA(4) of the Act, even though the assessee has not developed any new infrastructure project as contemplated u/s.80IA of the Act, but carried out only renovation of existing facility which does not come under definition of new infrastructure facility. The learned DR further submitted that as per Explanation to section 80IA of the Act, if an assessee is a works contractor, then it is not eligible to claim deduction u/s.80IA of the Act. In this case, facts brought on record clearly indicate that that the assessee is only a works contractor for project developed by either State or Central Govt. or local bodies. Therefore, the assessee cannot claim any deduction u/s.80IA(4) of the Act. The learned DR further submitted that the issue has been considered by the Tribunal for earlier assessment year and set aside the issue to the file of the Assessing Officer for further examination in light of provisions of section 80IA and Explanation provided thereto.

The learned A.R for the assessee, on the other hand, supporting order of the learned CIT(A) submitted that although the learned CIT(A) has given categorical finding in light of decision of the Tribunal in assessee’s case for earlier years and held that the assessee is a developer of infrastructure facility and is entitled for deduction u/s.80IA(4) of the Act, but because the Tribunal has taken contrary view for the assessment year 2011-12 & 2012-13 and set aside the issue to the file of the Assessing Officer for further examination, this year also the issue may be set aside to the file of the Assessing Officer for examining case of the assessee.

We have heard both the parties, perused material available on record and gone through orders of the authorities below. The provisions of section 80-IA deals with deduction in respect of profits & gains of an enterprises engaged in developing infrastructure facility etc. As per said provisions, an assessee which is involved in business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility, which fulfills certain conditions can claim deduction towards profit derived from said business. As per Explanation to section 80-IA, if any business which is in the nature of works contract awarded by any person, including Central or State Government and executed by undertaking or enterprises referred to in sub- section (1) is not entitled to claim deduction u/s.80-IA of the Act. In this case, it was arguments of the assessee that it is in the business of developing infrastructure facility, however, the Assessing Officer noted from evidences filed by the assessee that it is only carrying out works contract awarded by other persons, but not developing infrastructure facility. The facts are contradictory. Therefore, we are of the considered view that the issue needs further examination from the Assessing Officer in light of arguments of the assessee and evidences filed to justify its case in light of Explanation to Section 80-IA of the Income Tax Act, 1961. Further, the Tribunal for the assessment years 2011-12 & 2012-13 had considered identical issue and set aside the issue to file of the Assessing Officer with a direction to reexamine the claim in light of provisions of section 80-IA(4) of the Act and Explanation provided thereto. Therefore, consistent with the view taken by the co-ordinate Bench of the Tribunal, we are of the considered view that the issue needs to go back to the file of the Assessing Officer and thus, we set aside the issue of deduction claimed u/s.80IA of the Act, to the file of the Assessing Officer and direct the A.O to consider the issue afresh in accordance with law, after allowing opportunity of being heard to the assessee.