ASSISTANT COMMISSIONER OF INCOME-TAX vs. MAHALAXMI INFRAPROJECTS LTD.,, KOLHAPUR

This bunch of appeals filed by the Revenue relating to same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. The facts and issues in all the appeals are similar. However, in order to adjudicate the issues, we are taking up the appeal in ITA No.142/PUN/2016, relating to assessment year 2007-08. The issue raised in the present appeal is against claim of deduction under section 80IA(4) of the Act on additional income offered on account of purchases of Rs.35,98,460/-.

The assessee in ITA No.142/PUN/2016, relating to assessment year 2007-08 has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in allowing deduction u/s.80IA(4) of the Act of Rs.35,98,460/- on the additional income offered on account of purchases. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in holding that the ratio laid down by the Hon’ble Mumbai High Court in the case of CIT Vs. ABG Heavy Industries Ltd. (2010) (322 ITR 323) (Bom) is applicable to the facts and circumstances of assessee’s case?

Briefly, in the facts of the case, the assessee for the year under consideration had furnished the return of income declaring total income of Rs.1,26,07,123/- on 31.10.2007. Search and seizure operations were carried out on the premises of assessee on 23.09.2009. In response to notice issued under section 153A of the Act, the assessee filed return of income on 20.07.2010 declaring total income of Rs.1,57,43,879/-. The assessment was finalized under section 143(3) r.w.s. 153A(b) of the Act vide assessment order dated 27.12.2011 at Rs.12,69,30,330/-. The order was rectified under section 154 of the Act on 02.02.2012 and the revised assessed income was Rs.12,08,15,377/-. Survey action under section 133A of the Act was conducted on the business premises of assessee and group cases on 04.01.2013. Statement on oath of Mr. Ravindra Dhondiram Shinde, Managing Director of assessee company and Shri Balwant Patil, Accountant was recorded. During the course of Survey action, purchases made by the assessee from financial year 2005-06 till the date of search were verified. However, purchases amounting to Rs.48,78,977/- from the parties M/s. Manvir Metal Pvt. Ltd. and M/s. B.A. Trading & Co. Pvt. Ltd. amounting to Rs.41,00,611/- were found to be not genuine and on verification during Survey were proved to be bogus. The assessee had declared different amounts against said parties’ names in different financial years, which were not supported by adequate documentary evidence. In the absence of any documentary evidence i.e. purchase order, delivery challans, goods received, the Director was asked during the course of Survey action how the said purchases could be proved to be genuine. The assessee after going through the said list of parties and amount

Against the assessment made under section 143(3) r.w.s. 153A(b) of the Act, the CIT(A) allowed substantial relief to the assessee. The Assessing Officer gave effect to the order of CIT(A) vide order dated 06.11.2012 and the balance income was determined at Rs.2,90,66,850/-. The Revenue preferred an appeal before the Tribunal. Meanwhile, the case of assessee was reopened under section 148 of the Act by recording reasons for reopening the assessment. Notice under section 148 of the Act was issued on 28.03.2013. The assessee in response thereto, furnished the return of income declaring total income of Rs.1,12,90,298/- in which additional income of Rs.41,00,611/- was offered and

The Assessing Officer noted that the Tribunal had allowed deduction under section 80IA(4) of the Act for assessment year 2003-04 in assessee’s own case. However, the appeals for assessment years 2004-05 to 2006-07 were pending before the Tribunal. The Assessing Officer further observed that the Revenue has filed an appeal against the order of Tribunal for assessment year 2003-04 before the Hon’ble Bombay High Court and hence, the claim of deduction under section 80IA(4) of the Act on the entire amount of additional purchases is not allowable in the hands of assessee. The said amount was added to the income of assessee. The Assessing Officer also did not allow said deduction on the profits originally declared by assessee.

The CIT(A) observed that the basis for making addition by the Assessing Officer was on the plea that the Director of assessee company had admitted the purchases to be bogus. However, after reading the relevant part of statement of Director, the CIT(A) observed that on plain reading of statement, there is no mention of purchases from M/s. Manvir Metal Pvt. Ltd. nor any clear-cut admission of said purchases being bogus. Mr. Shinde has simply said that some of the purchases were not supported by delivery challans, inspection reports, etc. Further, he asked time to produce evidence and eventually, he stated that he was not able to substantiate all the purchases and in that case, credit may be allowed to him for the disclosure of additional income made during the course of search. The CIT(A) thereafter, referred to letter dated 08.01.2013, which was partly reproduced in the assessment order. The CIT(A) has reproduced

The next issue raised before the CIT(A) was against the disallowance of claim of deduction under section 80IA(4) of the Act amounting to Rs.35,98,460/-. The CIT(A) noted that in 153A proceedings, additional income was offered and the same was allowed by the CIT(A) i.e. in respect of additional income offered during the course of search. Similar decision was taken by the CIT(A), Kolhapur in the case of Laxmi Civil Engineering Services in appeal No.Kop-186 to 192, order dated 01.06.2015. Following the same, the CIT(A) allowed the claim of assessee. Since the initial claim of eligibility for deduction under section 80IA(4) of the Act as infrastructural developer was decided by the Tribunal in assessee’s own case for assessment years 2004-05 and 2005-06 vide order dated 25.08.2015, where the Tribunal had already allowed assessee’s appeal in assessment year 2003-04 vide its order dated 06.02.2012. The CIT(A) has reproduced the relevant portion of decision of the Tribunal relating to assessment years 2004-05 and 2005-06 at pages 19 to 21. The CIT(A) vide para 5.3.6 relying on the ratio laid down by the jurisdictional High Court in the case of Sheth Developers reported in 25 taxmann.com 173 (Bom), was of the view that income disclosed during the course of Survey, retains the nature of business income and since it pertains to the same business, against which the assessee was claiming deduction under section 80IA(4) of the Act, hence the assessee is entitled to claim of deduction under section 80IA(4) of the Act. The CIT(A) also placed reliance on different decisions of various Benches of Tribunal in this regard, including the case of assessee.

The Revenue is in appeal against the order of CIT(A) and the issue which has been raised is only against the order of CIT(A) in allowing deduction under section 80IA(4) of the Act on additional income offered on account of purchases

The learned Departmental Representative for the Revenue relying on the order of Assessing Officer pointed out that the assessee was not eligible to claim deduction under section 80IA(4) of the Act on additional income. He further pointed out that the issue raised in grounds of appeal No.2 and 3 was against the deduction allowable to the assessee under section 80IA(4) of the Act.

The learned Authorized Representative for the assessee after taking us through the factual aspects of assessee pointed out that after search carried out against the assessee in 2009, assessment was completed and the deduction claimed under section 80IA(4) of the Act was denied on account of two reasons i.e. the assessee was not engaged in infrastructural projects, as the assessee was a developer; hence not entitled to claim the deduction. Secondly, the assessee had offered additional income on account of bogus expenses and on such enhanced income, deduction under section 80IA(4) of the Act was denied to the assessee. The Tribunal while deciding the appeal against 153A proceedings had allowed the deduction under section 80IA(4) of the Act on both the counts. He further pointed out that after Survey proceedings were carried out on the premises of assessee on 08.01.2013 and the assessment proceedings were reopened from assessment year 2006-07, the documents which were found and seized during the course of Survey had revealed bogus purchases, which were accepted by the assessee. However, the assessee claimed deduction under section 80IA(4) of the Act on such enhanced income. Our attention was drawn to

In respect of assessment years 2011-12 and 2012-13, assessments were made under section 143(3) of the Act, wherein the grounds of appeal No.1 to 3 are raised against basic claim of deduction under section 80IA(4) of the Act. He pointed out that where the facts herein remain same, then the said deduction merits to be allowed to the assessee. In respect of ground of appeal No.4, he pointed out that the issue was only in respect of deduction claimed under section 80IA(4) of the Act on additional income.

We have heard the rival contentions and perused the record. In the facts of the present case, the assessee was engaged in the business of executing contracts of civil work. In the return of income filed for the year under consideration, the assessee had claimed deduction under section 80IA(4) of the Act. The assessee had furnished the return of income on 31.10.2007 declaring total income of Rs.1.26 crores after claiming the aforesaid deduction at Rs.7.89 crores. Search and seizure operations were carried out on 23.09.2009. In 153A proceedings, the assessee was held to be not eligible for claiming deduction under section 80IA(4) of the Act on the return of income filed by it. Further, during the course of search, certain additional income was offered by the assessee on account of certain expenses, on which the assessee claimed deduction under section 80IA(4) of the Act. The Assessing Officer denied deduction under section 80IA(4) of the Act on basic profits of business and also deduction on additional income. The case of assessee travelled upto the Tribunal and in ITA Nos.2571 to 2577/PN/2012, relating to assessment years 2004-05 to 2010-11 and Cross Appeals in ITA Nos.50 to 56/PN/2013, the first issue which was raised before the Tribunal was the claim of deduction under section 80IA(4) of the Act on account of infraprojects carried on by the assessee.

After search proceedings, survey action under section 133A of the Act was conducted on the business premises of assessee, during the course of which, purchases made by the assessee from financial year 2005-06 onwards were verified. The assessee was unable to produce the documents in support of said purchases i.e. purchase orders, delivery challans, goods received, etc. and consequently, the Director of assessee company offered the said purchases as assessee’s additional income. However, with a rider that during the course of search in the year 2009 the assessee had already declared certain additional income and hence, while estimating the amount of non-genuine purchases, the set off of disclosure already made should be given. In respect of certain purchases, the assessee furnished complete information but in respect of certain purchases, information could not be furnished. The Assessing Officer in such

Coming to the second issue raised by the Revenue. It may be pointed out that this is not first proceedings which have been taken place against the assessee. The first was 153A proceedings initiated pursuant to search on the premises of assessee in 2009. The assessment in that case was completed vide order passed under section 143(3) r.w.s. 153A(b) of the Act, dated 27.12.2011. In the said assessment order, the Assessing Officer denied deduction under section 80IA(4) of the Act holding that the assessee was just a contractor and hence, not entitled to the said benefit. The matter travelled upto the Tribunal and the Tribunal vide order dated 09.12.2015 has categorically held that the assessee was engaged in executing infra projects and hence, was entitled to deduction under section 80IA(4) of the Act. The said decision of the Tribunal has not been overturned by the Hon’ble High Court till now and hence, stands. In

Now, coming to the first issue raised by the Revenue i.e. against the order of CIT(A) in allowing deduction under section 80IA(4) of the Act on additional income offered by the assessee. It may be pointed out herein itself that during the course of search also, certain additional income was offered by the assessee, on which it claimed the aforesaid deduction under section 80IA(4) of the Act. The Tribunal vide paras 132 to 136 at pages 80 to 85 had considered the second issue of allowability of deduction under section 80IA(4) of the Act on the additional income declared during the course of search. The said additional income was offered on account of certain non-genuine expenditure being debited in the books of account. The Tribunal in turn, relied on the ratio laid down by the Hon’ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. 333 ITR 175 (Bom) and in the case of CIT Vs. Sheth Developers (P) Ltd. in ITA No.3724/2010, vide order dated 27.07.2012 and also other decisions of Pune Bench of Tribunal. The Tribunal held the assessee to be eligible to claim the said deduction on the additional income offered.

Now, coming to the assessment completed on account of re-assessment proceedings under section 147 / 148 of the Act. The addition has been made on account of certain purchases, against which the assessee was unable to furnish complete documentary evidence of purchase order, delivery challans, transportation, etc. Undoubtedly, the said additional income has been assessed in the hands of assessee. The only issue which arises before us is whether the assessee is eligible to claim the aforesaid deduction under section 80IA(4) of the Act on such additional income. We find that the issue stands squarely covered by the order of Tribunal in assessee’s own case for the instant assessment year, wherein pursuant to search operation upon the assessee, order under section 143(3) r.w.s. 153A(b) of the Act, for the year under appeal was passed. Further, the assessment was completed under section 143(3) r.w.s. 147 of the Act, wherein further addition was made on account of additional income on account of certain purchases not being verified. Following the same parity of reasoning as laid down by the Tribunal vide order dated 09.12.2015, we hold the assessee eligible to claim the said deduction under section 80IA(4) of the Act. For the sake of brevity, we are not reproducing the findings of Tribunal in the case of assessee itself. Accordingly, ground of appeal No.1 raised by the Revenue is dismissed.

We find similar issue has been raised by the Revenue in assessment years 2008-09 to 2010-11, which are the proceedings which were initiated under section 147/148 of the Act and the assessment was made thereafter. Our decision in assessment year 2007-08 would apply mutatis mutandis to the issues raised in assessment years 2008-09 to 2010-11.

Now, coming to the appeal in assessment years 2011-12 and 2012-13, wherein the assessment was completed under section 143(3) of the Act.

The Revenue in ITA No.146/PUN/2016, relating to assessment year 2011- 12 has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in holding that the assessee was eligible for deduction u/s.80IA(4) of the Act of Rs.31,22,80,444/- without deciding the issue that the assessee was developer or simply executed the works contracts. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in holding that the ratio laid down by the Hon’ble Mumbai High Court in the case of CIT Vs. ABG Heavy Industries Ltd. (2010) (322 ITR 323) (Bom) is applicable to the facts and circumstances of assessee’s case? 3. Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] be read cumulative though it was not the issue prevailing in the case of the assessee. 4. Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing deduction u/s 80IA(4) of the Act of Rs.9,25,18,881/- on the additional income offered on account of purchases.

The grounds of appeal No.1 to 3 are against the claim of deduction under section 80IA(4) of the Act against the business profits of undertaking. The factual aspects of the case in the year under appeal are identical to the factual aspects in earlier years and the Revenue has failed to point out any difference in the same and where the assessee is engaged in execution of infra projects, as in the earlier years, the assessee is entitled to claim the deduction under section 80IA(4) of the Act. Accordingly, we hold so.

The second issue which is arising in the present appeal is whether the assessee is entitled to claim the aforesaid deduction under section 80IA(4) of the Act on additional income offered. We have already decided the said issue also in

The facts and issues in ITA No.147/PUN/2016 are identical to the facts and issues in ITA No.146/PUN/2016 and our decision in ITA No.146/PUN/2016 shall apply mutatis mutandis to ITA No.147/PUN/2016.

In the result, all the appeals of Revenue are dismissed.