M/S. BORSE BROTHERS INFRASTRUCTURES PRIVATE LIMITED,DHULE vs. DEPUTY COMMISSIONER OF INCOME TAX,

आदेश / ORDER

PER D. KARUNAKARA RAO, AM

This bunch of three appeals filed by assessee are directed against the common order of Commissioner of Income Tax (Appeal)-1, Nashik dated 09.09.2016 for assessment years 2008-09 to 2010-11.

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A.Y. 2008-09 to 2010-11. For the sake of this order, grounds and facts pertain

to assessment year 2008-09 are considered. Grounds raised by assessee for

assessment year 2008-09 are extracted as under:

“1. The assessee submits that the re-opening of the assessment is bad in law as the re-opening is beyond 4 years from the end of the Assessment year and all the material facts were fully and truly disclosed to the learned Assessing Officer in the original assessment order.

issued initially on 01.12.2016 and subsequently, the case was posted for

hearing on 20.03.2018. On the said date, assessee filed adjournment letter

dated 19.03.2018. Accordingly, the case was adjourned announcing the date in

open court and posted the case for hearing on 15.05.2018. On the said date of

hearing i.e. on 15.05.2018, none appeared on behalf of the assessee.

Considering the service of notice and adjournment in response to the

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assessee’s letter, all the appeals are taken up for adjudication considering the

commonness of the issues in all the three appeals.

No. 3 and 4 relate to claim of deduction u/s. 80IA of the Income Tax Act, 1961

(hereinafter referred to as ‘the Act’). Ground No. 5 deals with claim of

amortization of expenses.

assessee has raised this legal issue for the first time before the Tribunal. It is

the claim of the assessee, as claimed in the ground, that the reassessment

order is bad in law as the re-opening is done beyond 4 years and there is no

default of the assessee of disclosure relevant facts fully and truly, which are

required for making of the original assessment order. The said default is the

requirement of the laws i.e. proviso to section 147 of the Act for reopening the

completed assessment. The assessee submitted that the present reassessment

constitutes change of opinion on the issue relating to deduction u/s. 80IA of

the Act.

that this legal issue may be remanded to the file of CIT(A) for fresh adjudication

after investigation of the real facts required on this legal issue.

On the issue relating to correctness of claim of deduction u/s. 80IA of

the Act as well as on the issue of amortization of expenditure, the Ld. DR relied

heavily on the order of Assessing Officer and CIT(A).

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furnished copies of reasons recorded for re-opening to the assessee and

assessee did not file any objections to the reasons recorded. Notice u/s. 142(1)

was issued to the assessee to explain the claim of deduction but the assessee

failed to furnish any response with regard to said notice. Assessing Officer

issued notice u/s. 144 of the Act giving a final opportunity to the assessee and

in response to the said notice, assessee filed written submission which is

placed at Para 6 of the reassessment order. Eventually, the CIT(A) found that

the assessee is engaged in the business of toll collection of BOT works and

contract of work was issued to Borse Brothers Engineers and Contractors and

not to the assessee i.e. M/s. Borse Brothers Infrastructure Private Limited,

Dhule. On finding that there is no agreement between Government of India and

Borse Brothers Engineers and Contractors, the Assessing Officer is of the

opinion that the assessee is not a contractor within the meaning of sub section

4 of Section 80IA of the Act and assessee is not entitled to claim deduction.

Contents of Para 6.1 to 6.3 are relevant in this regard and same are extracted

as under:

“6.1 The submission of the assessee has been perused. It is clear from the material as per record that the work order was not granted to the assessee company but in fact to M/s Borse Brothers Engineers. This is a basic prerequisite under the provision as laid out in S. 80IA which has not been compiled by the assessee. The assessee has been unable to dispute this fact. The assessee has stated that the work was allotted to the assessee company as "entrepreneur" for this work. As per the letter produced for this fact, it is seen that the concerned PWD Executive Engineer has merely recognized that the work is being done by the assessee company. The letter is reproduced as under –

Annexure-1 No. AB/TC/492/03 Office of the Executive Engineer, P.W. Division, Ahmednagar, Dated 21/6/2003

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To,

M/s. Borse Brothers Engineers & Contractors, A/P Varshi, Tal. Shindkheda Dist.- Dhule.

Sub : Allotment of work to M/s. Borse Brother Infrastructures Pvt. Ltd. Ref.- Work order No.AB/TC/51 of 2003 dtd. 28/1/03 and Agreement with PWD, Ahmednagar.

With reference to the work order No. AB/TC/6 of 2003 dated 28.1.2003 and agreement with P.W.D, Ahmednagar, we confirm that as the said work has been allotted by M/s.Borse Brothers Engineers and Contractors to M/s.Borse Brothers Infrastructure Pvt. Ltd., we are registering M/s. Borse Brothers Infrastructures Pvt. Ltd As ‘entrepreneur’ for the said work. M/s. Borse Brothers Infrastructures Pvt Ltd. will have all the rights and obligation under the said work order which are at present with M/s. Borse Engineers and contractors. Sd/- Executive Engineer, Public Works Division, Ahmednagar 6.2 As can be seen from above, the Executive Engineer himself has not allotted the work to Assessee Company. In fact, what is apparent is that the work is allotted by M/s.Borse Brothers Engineers to the assessee company and only this fact has been recognized. The contention of the assessee is hence without merit. 6.3 Thus it is clear from above that the assessee company has in fact done work in the nature of works contract being awarded from by M/s. Borse Brothers Engineers. Such work contracts is clearly covered under explanation to s.80IA and the deduction claimed is not allowable. Further, there is no direct agreement of the assessee company with Local Authority as is the basic prerequisite. The assessee has submitted form 10CCB as required but does not meet prerequisites as provided under section 80IA of the Income Tax Act, 1961. The claim of the assessee is clearly not allowable and the same is being disallowed and added back to the total income of the assessee. Therefore the amount of Rs.30,47,211/- is disallowed and added back to the total income of the assessee. The assessee has furnished inaccurate particulars of his income and concealed his income. Penalty proceedings u/s.271(1)(c) are initiated separately.”

There is no addition in reassessment order on account of amortization

expenses. Probably, this claim is raised before the Appellate bodies as an

alternative one.

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claim of deduction u/s.80IA(iv) of the Act and submitted that assessee is

entitled to get amortization as per circular dated 23.04.2014. However, the

assessee did not raise said legal issue relating to the re-opening of the

assessment at that stage. On considering the written reply given by assessee

before First Appellate Proceedings, the CIT(A) discussed the issue in Para 4 of

the order and held that the substitution agreement furnished by assessee do

not grant any award to the assessee in principle which was substituted for

M/s. Borse Brothers Engineers and Contractors. It appears that there is sub

contract agreement dated 21.05.2003 for allotment of the project work and

assignment of rights described in BOT agreement to the assessee. The CIT(A) is

of the view that the assessee is not the original developer but a sub contractor.

The CIT(A) discussed this issue relying on the order of Chennai Bench of the

Tribunal in the case of Shri B. Dhanasekaran dated 6/11/2015 in ITA No. 620

of 2013 and 360 of 2015 as well as decision of Hon'ble Jurisdictional High

Court in the case of ABG Shipyard for the proposition that in similar facts,

conditions specified under provisions of section 80IA(4)(i) of the Act cannot be

considered meet by the assessee.

same giving reasons in Para 5 and its sub paras of the order. With regard to

assessment year 2009-10 & 2010-11, the CIT(A) has given same findings.

continuously failed to appear before Tribunal.

assessee is engaged in the business of toll collection and the said contract work

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was not originally granted to the assessee. But there was an agreement

between the parties concerned without making Government of India as party to

the said agreement. From this point of view, the question which arises is

whether the assessee falls within the scope of provision of sub section (4) of

section 80IA of the Act. Further, on the legal issue, I find that the Assessing

Officer who has onus to discharge failed to discharge the same, specifying the

details which are not fully and truly discussed by assessee, relevant for making

of assessment in the first round. The issue relating to amortization is found

first time before the CIT(A) and not before assessment proceedings. Considering

the same, I am of the view that there is requirement of fresh adjudication of all

the issues after considering the facts and decisions relating to the issue of

claiming deduction u/s.80IA(4) of the Act qua developer Vs. contractor.

Accordingly, I remand all the issues raised in all the three appeals to the file of

CIT(A) for want of speaking order. The CIT(A) shall grant reasonable

opportunity of being heard to the assessee in accordance with set principles of

natural justice. Accordingly, grounds raised by assessees in all the three

appeals are allowed for statistical purposes.

Order pronounced on 17th day of May, 2018.

Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 17th May, 2018. SB

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आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.