ACIT, CIRCLE-2, NOIDA vs. NOIDA SPECIAL ECONOMIC ZONE AUTHORITY, NOIDA

The ld. AR of the assessee submits that reassessment was initiated against the settle principal of governing jurisdiction under section 147. The reassessment can only be initiated if the Assessing Officer forms a , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY bona fide and independent ‘reason to believe’, based on tangible material which has came to his notice. There are two essential condition i.e. existence of fresh ‘tangible material’ and formation of independent belief by Assessing Officer and not at the behest of superior authority. The assessee filed return of income within extended period for filing return of income under section 139(4). Moreover, the ld. CIT(A) in first round of litigation examined the claim of assessee and passed order on merit. Neither the Assessing Officer nor PCIT can revise the order of First Appellate Authority. Grievance if any, against such order could be redressed only on filing further appeal before the Tribunal. The recourse of law adopted by Assessing Officer at the behest of PCIT is against the scheme of statutory provisions. To support his submission, the learned AR of the assessee relied upon the decision of Indian and Eastern Newspaper Society vs CIT AIR 1997, SC 1960, wherein the Hon’ble Apex Court held that reopening on the basis of information forwarded by audit cannot be considered as valid. Further, in case of CIT vs Green Wood Corporation (2009) 314 ITR 81, wherein, it was held that Assessing Officer cannot act as a subordinate officer obeying the direction of superior authority. If the assessment or re-assessment is carried out pursuant to direction of CIT/PCIT, the proceeding are render void and without jurisdiction. On the basis of aforesaid submission, the ld. AR submits that reassessment proceedings initiated by issue a notice under section 147 is without jurisdiction and subsequent action initiated thereon is void-ab-initio and assessment is liable to be quashed.

On the other hand, the learned CIT DR for the Revenue supported the order of the lower authorities. The ld. CIT-DR submits that the reassessment was initiated on fresh material coming to the notice of Assessing Officer, the deduction under section 80AB was claimed despite return was filed belatedly. The Assessing Officer recorded the reasons independently. The doctrine of change of opinion is not applicable in the present assessment. The provision of section 80AC uses clear and , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY negative version that no deduction is allowed unless return is filed within due date under section 139(1). The Assessing Officer and the ld. CIT(A) acted in the act statutory power. The letter written by PCIT was informational and not a direction. Information from superior officer will not vitiate the action of Assessing Officer in recording the reasons. The ratio of various decisions relied by ld. AR of the assessee are not applicable on the facts of the present case. The ld. CIT-DR for revenue also gave his submission in writing. In support of her submission, the ld. CIT-DR relied upon the following decisions:-  PCIT vs Wipro Limited [2022] 140 taxmann.com 223(SC)  Nileshwar Rangekallu Chthu Vyavasaya Thozhiliali Sahakarana Sangham vs CIT [2023] 152 taxmann.com 347 (Kerala),  AA520 Veerappamapalayam Primary Agricultural Cooperative Society Ltd. Vs DCIT [2022] 138 taxmann.com 571 (Madras)  Suolificio Linea Italia (India) (P.) Ltd. Vs JCIT [2018] 93 taxmann.com 462(Calcutta) 6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by learned AR of the assessee. On perusal of contents of assessment order as well as order of ld. CIT(A), we find that ld. AR of the assessee has explained the fact correctly. Even otherwise, the facts are not in much dispute. There is no dispute that in first round of appeal before ld. CIT(A), the assessee was allowed deduction under section 80AB. It is an admitted fact that neither further appeal is filed by the Revenue nor the Assessing Officer made application for rectification of such order that deduction under section 80AB was allowed by learned CIT(A) by ignoring the provision of section 80AC. The , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY Assessing Officer reopened the case on the basis of direction of ld. PCIT. Such fact is clearly discernable from the letter dated 21.07.2016. The Assessing Officer recorded reasons on 09.02.2017. The assessee in its objection stated that belief of Assessing Officer is not based on his own examination of facts. Such objection of assessee was disregarded. It is an admitted fact that learned CIT(A) in first round of appeal has allowed such relief to the assessee. If the Assessing Officer has any grievance, the right course of action was to file appeal before tribunal and not to take recourse of reopening. On independent consideration of fact, we find that Assessing Officer instead of filing appeal before tribunal merely acted on the direction of PCIT which is not justified and such action on Assessing Officer is in defiance of scheme of law. It is settled position under the law that assessment order, if it was subject matter of appeal, the order of Assessing Officer merged with the order of appellate authority. Thus, the Assessing Officer is not empower to revise his assessment order, which has been merged with the order of the appellate authority. The right course of action is only to file appeal before further/superior authority. On careful perusal of reasons recorded, we do not find any averment that there was any failure on the part of assessee in not disclosing fully and truly all the material necessary for assessment, which is a condition precedent if case is reopened beyond four year from the end of the relevant assessment year, thus reasons recorded are not valid.

The Hon’ble Apex Court in CIT vs Ramachandran Hatcheries 305 ITR 117- SC, held that where revenue did not file appeal against the order granting , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY in relief to the assessee, the assessment cannot be reopened on the same issue. Thus, in view of aforesaid factual and legal discussion, the reopening which was based on direction of PCIT is unjustified, consequently, reassessment order dated 05.12.2017 is set-aside.

Even on merit, we find that there are series of decision, wherein it has been held that if return of income is filed within extended time period prescribed under section 139(4), deduction cannot be denied to the assessee. We find that Punjab and Haryana High Court in CIT Vs Jagriti Agarwal (supra) by following the decision of Guwahati High Court in CIT vs Rajesh Kumar Jalan (supra) also held that if a person had not furnished return of previous year within time allowed under section 139(1), the assessee could file return under section 139(4), before expiry of one year from the end of the relevant assessment year and is eligible for deduction under section 54. Further, Himachal Pradesh High Court in PCIT vs HP Housing and Urban Development Authority (supra) also held that where the assessee, State organization, filed return claiming deduction under section 80IB(10) beyond period of limitation as per section 139(1) on account of delay in audit and the assessee has reasonable and bona fide cause for not filing return in time, and tribunal concurrently held that assessee was entitle to claim specifically computed deduction, assessee was not to be burdened with taxes, which it was not otherwise not liable to page and the law. We also find that Delhi Tribunal in Fibrefill Engineers vs ACIT (2017) 83 taxmann.com 34 (Delhi-Trib) also held that deduction under section 80IC cannot be denied only on the basis of filing a belated , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY return of income. It was also held that language of section 139 makes it clear that legislature itself has allowed the assessee to file return belatedly subject to fulfilment of conditions wherein in the said section. Once, those conditions are made, then return filed assessee would for all technical purpose be considered being filed under section 139(1).

The ld. CIT-DR for the revenue has relied on certain case law of different High Courts, wherein, it has been held that deduction under section 80IB could not be allowed when return was filed belatedly in term of section 139(4). Now, we are faced with a situation wherein a different High Courts has taken a different view on similar issue, thus following the principal of law as settled by Hon’ble Supreme Court in the case of CIT vs Vegetables Products Ltd. (1973) 88 ITR 192 (SC) wherein it was held that when there are two interpretation, the ratio in favor of assessee should normally be accepted. Thus, in view of aforesaid factual and legal discussion, the assessee also succeeded on merit.

In the result, the appeal for AY 2010-11 is allowed.

Now, we shall take up Cross Appeals for AY 2012-13. The assessee has raised following grounds of appeal On the facts and circumstances of the case CIT (A) had erred in law and on facts in confirming the addition of Rs. 58,30,808/- by not allowing deduction u/s 80IAB of I.T. Act, 1961 of the (i) disallowances of Rs. 35,98.500/- for excess depreciation and ii) disallowance of Rs.22,32,038/- for expenditure on which TDS u/s 1941 on lease rent.

The ld. AR of the assessee submits that assessee filed return of income for AY 2012-13 on 13.09.2022. The case was selected for scrutiny and assessment was completed under section 143(3) dated 03.03.2015. In the assessment order, the assessee was allowed deduction under section 80AB. Subsequently, the assessment was revised by ld. PCIT by invoking his jurisdiction under section 263 in directing the Assessing Officer to reframe the assessment order. The Assessing Officer passed the fresh assessment order under section 143(3) r.w.s. 263 on 06.02.2017. The Assessing Officer while passing the fresh assessment order disallowed interest income of Rs.2.72 Crore and other income of Rs.5.62 Crore related to business activity of assessee. The Assessing Officer also disallowed excess depreciation of Rs.35,98,500/- and disallowed lease rental of Rs. 22,32,038/- paid to Noida Authority for the want of TDS under section 194I. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld. CIT(A), wherein, the assessee is allowed deduction in respect of interest income earned on deposit with bank and other business receipt. However, the additional/higher depreciation of Rs. 35,98,500/- and lease rent of , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY Rs.22,32,038/- paid to Noida Authority was upheld. Thus, the assessee has challenged the action of ld. CIT(A) in not allowing the additional/higher depreciation of Rs.35,98,500/- and lease rent of Rs.22,32,038/-. Similarly, the Assessing Officer/Revenue has challenged the action in allowing interest and other source of income to assessee under section 80AB.

Against the grounds of appeal raised by the Revenue, the ld. AR of the assessee submits that assessee claim 100% deduction under section 80AB on the profit derived from business, which comprise interest income of Rs.2.72 Crore and other income of Rs.5.62 Crore, which relates to activities of assessee authority in SEZ area. The ld. CIT(A) appreciated the fact and passed a reasoned order while allowing relief to the assessee. While supporting the order of learned CIT(A) on allowing interest income as a part of deduction on section 80AB, the learned AR submits that such interest income is a part of profit and gains derived from business of developing SEZ, as they had temporarily parked the fund with the bank for the purpose of earning interest income. The interest earned on such deposits with bank are directly related to the activities of assessee as the assessee has no option except to deposit the funds till its utilization. So far as other income aggregating of Rs.5.62 Crore is concerned, such receipt are also part of profit & gain derived from the business of developing SEZ, which were explained in the following manner:-

The above income has been earned during the operation of business in SEZ area and related to the business activity of NSEZ. Therefore, other income of NSEZ is part and partial of its regular business activities and eligible for deduction u/s 80IAB. The interest income and other income mentioned above are inextricably connected to SEZ operation of NSEZ and it cannot be said that there is no nexus between the NSEZ Income and the Interest Income/other income. Interest income and other income of NSEZ are part of "profits and gains derived from the business of developing SEZ" and deduction of same should be allowed u/s 80IAB. Accordingly, Ld. CIT (A) has correctly allowed the deduction u/s 80IAB in respect of interest income and other income.

On the other hand, the ld. CIT-DR vehemently supported the order of Assessing Officer. The ld. CIT-DR submit that interest income has no direct nexus with the activities of the assessee. On the other receipt, the ld. CIT-DR submit that ld. CIT(A) allowed relief only on the submission of the assessee.

We have considered the submission of both the parties and perused the orders of lower authorities carefully. We find that the assessee is engaged in the development and maintenance of SEZ. The interest income earned from the assessee from surplus deposited with bank. Such interest income has direct nexus being a part of business activities. Further, the other receipt as explained before us during the hearing, which are also recorded by Assessing Officer in para-5 and 6 of assessment order. The various receipt consisting bid amount, plot transfer charges, auction sale, building permit fees, penalty for different violation and other different kind of receipts are on account of business activities of the assessee. Moreover, from AY 2014-15 onwards, the Department has already issued exemption certificate under section 10(20) of Income Tax Act to the assessee. Thus, we do not find any infirmity in the order of the ld. CIT(A), which may warrant our interference. In the result, grounds of appeal raised by the Revenue are dismissed.

On the other hand, the ld. CIT-DR for the revenue supported the order of lower authorities.

We have considered the submission of both the parties and have gone through the order of the lower authorities carefully. We have also deliberated upon CBDT Circular No.37 of 2016 and other decisions relied by ld. AR of the assessee. We find that Assessing Officer disallowed excess depreciation by taking view that explanation of assessee that there is no prejudice to the interest of the Revenue is not satisfactory and disallow excess depreciation. Similarly for disallowance of lease rent, the assessee stated that no TDS was deducted by then on the presumption that Noida Authority is a local authority. The ld. CIT(A) upheld both the disallowance. On disallowance of excess depreciation, the ld. CIT(A) held that whether claiming excess depreciation would have impact on taxable income or not would not condone the mis-conduct of assessee. The effect of taxability of income of assessee or , 6541 & 6732/DEL/2018 NOIDA SPECIAL ECONOMIC ZONE AUTHORITY otherwise is to be considered by Assessing Officer. On the disallowance of lease rent, the ld. CIT(A) held that Hon’ble Apex Court in Civil Number 792- 793 of 2014 in Noida vs CCIT & Ors upheld the stand of the Income Tax Department. On such observation the action of Assessing Officer in disallowing such deduction is upheld. On independent appreciation of facts, we find merit in the submissions of ld AR of the assessee that ld. CIT(A) failed to appreciate that the entire profit & gain derived by SEZ are 100% allowed to be deducted under section 80IAB and the quantum underline depreciation claim and expenses, even if excess claim will not affect chargeability of tax in case of assessee as such position is accepted by CBDT Circular No.37 of 2016. In the result, the assessing officer is directed to allow both the disallowances. In the result, both the grounds of appeal raised by the assessee are allowed.

In the result, appeal of the assessee for AY 2012-13 is allowed.