M/S. SUYOJIT INFRASTRUCTURE (BOT).,,NASHIK vs. PRINCIPAL COMMISSIONER OF INCOME-TAX : 2,,

Both the appeals filed by assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.

The assessee in ITA No.850/PUN/2016, relating to assessment year 2010-11 has raised the following grounds of appeal:- 1. On the basis of facts and the circumstances of the case and as per law, the Order U/s. 263 of the Act passed by the Principal Commissioner of Income Tax - 2, Nashik be quashed as the same is barred by limitation and hence bad in law because the issue raised U/s. 263 of the Act is subject matter of assessment order U/s. 143(3) of the Act which was passed on 01/06/2012. 2. On the basis of facts and the circumstances of the case and as per law, The Principal Commissioner of Income Tax - 2, Nashik is not justified in invoking the provisions of section 263 of the Act in respect of order passed by the A.O. u/s. 147 of the Act particularly when is said order passed by the A.O. is void because the A.O. has not disposed off the objections raised by the appellant for issue of notice U/s. 148 of the Act by way of a speaking order. 3. On the basis of facts and the circumstances of the case and as per law, The Principal Commissioner of Income Tax - 2, Nashik is not justified in invoking the provisions of section 263 of the Act. 4. On the basis of facts and in the circumstances of the case and as per law, The Principal Commissioner of Income Tax - 2, Nashik is not justified in setting aside the assessment which was passed U/s. 147 of the Act by holding that the A.O. has wrongly allowed the deduction U/s. 80IA(4) to the appellant on the basis that the appellant has not entered into any agreement with the Central or State Government or any Local Authority for developing, operation or maintaining a new infrastructure facility particularly when the same was not the subject matter of the reasons recorded for assessment U/s. 147/148 of the Act. 5. On the basis of facts and in the circumstances of the case and as per law, the Principal Commissioner of Income Tax - 2, Nashik is not justified in setting aside the assessment by holding that the AO has wrongly allowed the deduction u/s. 80IA(4) to the appellant particularly when the same was allowed by the AO after due application of mind. 6. On the basis of facts and in the circumstances of the case and as per law, the Principal Commissioner of Income Tax - 2, Nashik is not justified in initiating the proceedings U/s. 263 of the Act and setting aside the assessment by holding that the AO has not carried out verification in respect of credit of bank interest to Profit & Loss Account particularly when all the bank account statements of the appellant were submitted to the AO during the course of assessment proceedings for the year under appeal and the same were duly verified by the AO.

The assessee is in appeal against the order of Commissioner while exercising jurisdiction under section 263 of the Act and quashing the order passed under section 143(3) r.w.s. 147 of the Act.

Briefly, in the facts of the case, original assessment in the case was completed under section 143(3) of the Act on 01.06.2012. The Assessing Officer while passing the said assessment order had verified the claim of deduction under section 80IA(4) of the Act. After elaborating on various aspects of the claim made by the assessee, the Assessing Officer in para 6.1 and para 8 of assessment order had held as under:- “6.1 Further assessee has shown deduction under chapter VI-A u/s 80IA(4) at Rs.1,42,40,062/- being income from the eligible business development, operation & maintenance of infrastructure facility.” 07….. 08. The plea of the assessee is not acceptable, during the year under consideration assessee has sold the plant & machinery for Rs.46,50,000/- the WDV as on date of sale is Rs.42,35,535/- short term capital gain arise at Rs.4,14,465/-. Assessee has also claimed the deduction under chapter VI-A in respect of the business of the assessee eligible for deduction the claim of the assessee in respect of gain on sale of said plant and machinery is disallowed thereby resulting such profit cannot be considered u/s 80IA(4) of the Act and deduction u/s 80IA(4) reduced to Rs.1,38,25,597/- instead of Rs.1,42,40,062/-. (wrongly numbered) 6.1 Further the partnership firm fulfills all these criteria’s provided u/s. 80IA(4)(i)(a)&(b) of the Act, and therefore the said project is eligible for getting the benefits of the provisions of the said section.”

Thereafter, the Assessing Officer recorded reasons for reopening the assessment under section 148(2) of the Act, copy of which is placed at page 8 of Paper Book. The assessee filed objections to the notice issued under section 148 of the Act and pointed out that the issue raised in re-assessment has already been considered by the Assessing Officer while passing the order under section 143(3) of the Act and there was no new material coming into light for initiating proceedings under section 147/148 of the Act, copy of the said letter is placed at

The Commissioner further held as under:- “9. The assessee has objected to the validity of the notice u/s 263 stating that the A.O. had considered the above issue in detail and taken a view. The A.O. in the instant case had dropped proceedings u/s. 148 agreeing with the assessee that the deduction can be claimed by the SPV simply because one of the partners of the SPV was the Awardee of the contract. The AO's view is

The assessee is aggrieved by the exercise of jurisdiction by the Commissioner under section 263 of the Act and hence, the present appeal.

Before proceeding further, it may be pointed out that in assessment year 2010-11, original assessment was completed under section 143(3) of the Act, whereas in assessment year 2011-12, return of income filed by the assessee was processed under section 143(1) of the Act. However, in response to the reasons recorded for reopening the assessment under section 148(2) of the Act, the facts and issues were explained and proceedings initiated under section 148 of the Act were dropped by the Assessing Officer by passing order under section 143(3) r.w.s. 148 of the Act.

The learned Authorized Representative for the assessee pointed out that the case of assessee for assessment year 2010-11 was selected under CASS for verifying the deduction claimed under section 80IA(4) of the Act. He further pointed out that even for assessment year 2009-10, the case of assessee was selected for scrutiny for verifying the deduction claimed under section 80IA(4) of the Act and assessment order was passed under section 143(3) of the Act, which has not been disturbed. He then referred to reasons recorded to verify the claim of deduction under section 80IA(4) of the Act, which are placed at page 8 of Paper Book and reply of assessee which was extensively verified and the Assessing Officer dropped proceedings initiated under section 148 of the Act by passing order under section 143(3) r.w.s. 147 of the Act. The learned Authorized

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the order of Commissioner with special reference to paras 4 and 5.

We have heard the rival contentions and perused the record. Under the provisions of section 263 of the Act, the Commissioner is empowered to exercise his jurisdiction where the order passed by Assessing Officer is erroneous and prejudicial to the interest of Revenue. In case both the conditions of section 263 of the Act are satisfied i.e. order is erroneous and prejudicial to the interest of Revenue, then the Commissioner is empowered to exercise his jurisdiction under section 263 of the Act. However, where the Assessing Officer has considered the issue and has taken a view on the issue, merely because the Commissioner does not agree with the view taken by Assessing Officer would not entitle the Commissioner to exercise his jurisdiction of revision under section 263 of the Act. Such is the proposition laid down by the Hon'ble Supreme Court and various other Courts.

Now, coming to the facts of present case, the assessee has been claiming aforesaid deduction under section 80IA(4) of the Act in the preceding years and even in succeeding years. The claim of assessee was duly verified by the Assessing Officer in preceding year i.e. assessment year 2009-10 and by speaking order passed under section 143(3) of the Act, the said claim of assessee was allowed. The status of assessee remains the same as in earlier years even for the year under consideration. The Assessing Officer has accepted the status of assessee and allowed deduction claimed under section 80IA(4) of the Act by passing speaking order under section 143(3) of the Act. The assessment proceedings in the hands of assessee were initiated under CASS solely for the purpose of verifying the claim of assessee under section 80IA(4) of the Act. The assessee has also filed on record the submissions made before the Assessing Officer justifying its claim of deduction under section 80IA(4) of the Act, which has been verified by Assessing Officer and specific comments to the same has been made. It is undisputed that the assessee was partnership concern and had claimed the aforesaid deduction being income from eligible business of development, operation and maintenance of infrastructural facilities. Vide para 6.1 (wrongly numbered), the Assessing Officer in assessment order dated 01.06.2012 gives his clear finding that Further the partnership firm fulfills all these criteria’s provided u/s. 80IA(4)(i)(a)&(b) of the Act, and therefore the said project is eligible for getting the benefits of the provisions of the said section. Once the criteria of section has been verified and the assessee has been found to have fulfilled the same and the Assessing Officer has thus, accorded the benefits of said section to the assessee, then such a view is not open for any revision by the Commissioner under section 263 of the Act. Here, it may be pointed out that the said order was passed on 01.06.2012

Now, coming to second stage of proceedings in the case of assessee, where after passing of said assessment order, the Assessing Officer had recorded reasons for reopening the assessment proceedings, wherein the sole reason for reopening the assessment was as under:- “On verification of e-return of income for A.Y. 2010-11 filed by the assessee firm, it is seen that it has claimed deduction of ₹ 1,42,40,062/- under section 80-IA of the Act. The deduction u/s 80-IA of the Act is allowable in the case of company only and not to any other person like individual, HUF, firm, etc. needs to be verified.”

The basis for reasons recorded for reopening the assessment under section 148(2) of the Act was deduction claimed under section 80IA(4) of the Act, wherein the Assessing Officer observed that it was allowable in the case of company only and not to any other person i.e. individual, HUF, firm, etc. and hence, it needed verification. Similar reasons have also been recorded for assessment year 2011-12, wherein admittedly, original return of income was processed under section 143(1) of the Act and no assessment order was passed under section 143(3) of the Act. In response to the aforesaid reopening of assessment in the case of assessee, the assessee raised objections to notice issued under section 148(2) of the Act and pointed out that the said issue of allowability of deduction to a person other than company was discussed during assessment proceedings and the Assessing Officer had granted deduction after

The Commissioner in show cause notice under section 263 of the Act refers to reopened proceedings in the case of assessee by issue of notice under section 148 of the Act and holds that action of Assessing Officer in dropping proceedings was not in accordance with law and hence, was erroneous in so far as it is prejudicial to the interest of Revenue. The allegation of Commissioner was that the assessee firm was not eligible for claiming the deduction under section 80IA(4) of the Act, where the agreement was between Suyojit Infrastructure Ltd. and Government of Maharashtra and not with the firm M/s. Suyojit Infrastructure. Another reason for which show cause notice was issued, was the balance shown in bank as per Balance Sheet at about ₹ 3.21 crores, whereas the firm M/s. Suyojit Infrastructure had not shown any interest credited to the Profit and Loss Account for the year and the Assessing Officer had not conducted any enquiries in this regard. At the outset, it may be pointed out that where the Commissioner has exercised his jurisdiction against reopened

Another point, which may be pointed out herein is that original assessment order was consequent to picking up the issue during CASS of claim of deduction under section 80IA(4) of the Act and even re-assessment proceedings were vis- à-vis aforesaid deduction by assessee, who was the partnership concern. The Assessing Officer has already taken a view in this regard and the same cannot

Now, coming to second issue raised in the show cause notice i.e. in respect of balance shown in the Balance Sheet and corresponding interest, no such issue was decided in 148 proceedings neither in reasons recorded for reopening nor in the final assessment order dropping the said proceedings. Hence, the Commissioner has exceeded the jurisdiction vested under section 263 of the Act and the said issue could not form the basis for initiating 263 proceedings against the assessee. Accordingly, even for the second issue, order of Commissioner is both invalid and bad in law. We hold so.

Similarly, for assessment year 2011-12, facts are similar except to the extent that original assessment in the case was completed under section 143(1) of the Act. It may be pointed out that once the claim has been allowed to assessee for the preceding years and there was no change in factual aspects, then there was no need to disturb the position, since rule of consistency is to be applied. Applying the same, where the Assessing Officer had allowed deduction claimed under section 80IA(4) of the Act to the assessee, then even while processing return of income under section 143(1) of the Act, such a stand cannot be said to be erroneous or prejudicial to the interest of Revenue. Hence, there is

In the result, both the appeals of assessee are allowed.