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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
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.
2 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
The assessee has raised identical grounds in all the three appeals for
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.
The assessee further submits that the re-opening is based on the change of opinion and hence the re-assessment u/s.143(3) r.w.s 147 is not valid in law.
On facts and circumstances of the case as well as in law the Learned Commissioner of Income-tax (Appeals)-1, Nasik erred in confirming the disallowance u/s.80IA of Rs.30,47,211 on the ground that the appellant was not the developer of the infrastructure facility and only acted as a sub-contractor.
The Learned Commissioner of Income-tax (Appeals), 1, Nasik failed to appreciate that as per the substitution agreement dated 25-02-2004, the Government of Maharashtra had recognised the appellant company as the developer of the infrastructure facility and therefore, since all the other conditions of section 80IA has been fulfilled, the deduction claimed by the appellant was justified in law.
On the facts and circumstances of the case as well as in law the Learned Commissioner of Income-tax (Appeals) 1, Nasik erred in not allowing amortization of Rs.33,19,398 in accordance with circular no.9 of 2014 dated April 23, 2014 by treating the appellant as sub-contractor.
The appellant craves your leave to add, alter, amend, expand and/or delete any of the above ground or grounds of appeal before the final disposal of the appeal.
At the outset, it is relevant to mention here that hearing of notice was
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
3 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
assessee’s letter, all the appeals are taken up for adjudication considering the
commonness of the issues in all the three appeals.
Ground No. 1 and 2 relates to the re-opening of assessment and ground
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.
With regard to ground No. 1, validity of re-assessment proceedings, the
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.
The Ld. DR for the Revenue narrated the relevant facts and submitted
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).
4 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
Relevant facts in this regard includes that the Assessing Officer
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
5 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
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.
6 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
During First Appellate proceedings, assessee raised the issue relating to
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.
Regarding the issue of amortization of expenses, CIT(A) dismissed the
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.
Aggrieved by the order of CIT(A), assessee filed appeals before us and
continuously failed to appear before Tribunal.
On hearing the submission of Ld. DR for the Revenue, I find that the
assessee is engaged in the business of toll collection and the said contract work
7 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
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.
In the result, all three appeals of the assessees are partly 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
8 ITA Nos. 2705 to 2707/PUN/2016 A.Ys. 2008-09 to 2010-11
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.