THE DCIT, CIRCLE-1,, RAJKOT-GUJARAT vs. M/S. KISHORE PROJECTS PVT. LTD.,, RAJKOT-GUJARAT

The Revenue has raised the following revised grounds of appeal:

On the facts and circumstances of the case, the learned CIT(A) erred in not taking into account the various decisions of Hon'ble Supreme Court of India on the issue of "work contract" viz. decision in the case of M/s

The Ld. C1T(A)-1, Rajkot, has erred in law and on facts in deleting addition of Rs.2,05,67,269/- made on account of disallowance of deduction u/s. 80IA(4] of Income Tax Act.

The Ld. CIT(A)-1, Rajkot, has erred in law and on facts in directing to allow deduction u/s. 80IA(4) of the Income Tax Act, on disallowance of Rs.1,65,64,840/- made u/s. 40(a)(ia) of the Income Tax Act.

On legal and factual status of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

It is, therefore, prayed that the finding given in the order of the Ld. CIT(A) may be dismissed/ deleted and that of the Assessing Officer be restored.”

On the facts and circumstances of the case, the learned CIT(A) erred in not taking into account the various decisions of Hon'ble Supreme Court of India on the issue of "work contract" viz. decision in the case of M/s HAL 55 STC 327 (SC) dated 16/12/1983 to decide on the issue of "work contract" vis-a-vis "development contract" for deduction u/s. 80IA(4) of the Act. In the said case of M/s. HAL, Hon'ble Apex Court had held that no element of ownership or right of property is produced in the case of "work contract". Applying this binding decision of Hon'ble Apex Court, none of the appellant's projects could be termed as development projects so as to be eligible for deduction u/s. 80IA(4) of the Act.

The Ld. CIT(A]-1, Rajkot, has erred in law and on facts in deleting addition of Rs.2,23,44,530/- made on account of disallowance of deduction u/s. 80IA(4] of Income Tax Act.

On legal and factual status of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

It is, therefore, prayed that the finding given in the order of the Ld. CIT(A) may be dismissed/ deleted and that of the Assessing Officer be restored.”

The assessee company is engaged in the business activity of executing civil contract thereby doing civil construction. The assessee filed return of income on 31.10.2005 declaring income at Rs.74,79,790/-. The assessee claimed deduction under /section 80IA(4) of the Income Tax Act, 1961 to the extent of Rs.2,17,98,999/- whereas in the order finalised under Section 143(3) of the Act, the assessee provided deduction under Section 80IA(4) of the Act to the extent of Rs.2,05,67,269/-. The case was reopened and notice under Section 148 was issued on 14.10.2009 and served upon the assessee on 06.11.2009. The assessee was provided a detailed order providing reasons recorded for reopening of the case. The assessee filed objection on 15.09.2010 with respect to reopening of the assessment. But he objection filed by the assessee was rejected by the Assessing Officer on 04.10.2010. The Assessing Officer made addition in respect of deduction claimed under Section 80IA(4) towards Rs.2,05,67,269/-. The Assessing Officer further made addition under Section 40(a)(i) of the Act thereby disallowing Rs.1,64,65,840/- as the TDS was paid after the due date of filing of return of income.

Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. AR submitted that the assessee has filed application under Rule 27 of the Income Tax Appellate Tribunal Rules thereby raising following ground that the CIT erred in sustaining the action under Section 40A of the Act but dismissed the ground challenging the issue of notice under Section 148 of the Act. Ld. AR submitted that during the reassessment proceedings the assessee objected to the issue of notice under Section 148 of the Act for the reasons furnished by the Assessing Officer. The same were negated by the Assessing Officer and made addition by way of

The Ld. DR submitted that the contention of the Ld. AR that application under Rule 27 of the Income Tax Appellate Tribunal Rules to be decided first as the assessee’s case was reopened on the very same issue which were originally decided under Section 143(3) of the Act. Ld. DR submitted that the reopening of the issue raised was valid under Section 148 of the Act as after giving reasons the same was re-opened and the assessee was given opportunity to object the same and the Assessing Officer has categorically rejected the said objections with reasoned order. Therefore, the application under Rule 27 of the Income Tax Appellate Tribunal Rules should not be entertained.

We have heard both the parties and perused all the relevant material available on record decided. Firstly we are taking up application filed by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1962. Since this issue goes to the root of the legality of the assessment, we hold that assessment itself is bad-in-law. It is not disputed that the reopening was on the very same material on which the original assessment was passed. The reopening is only on explanation which is retrospective in nature and, therefore, the reopening itself is bad in law. The appeal filed by the Revenue does not sustain; therefore, we are dismissing the appeal of the Revenue.

As regards ITA No.213/RJT/2011 for A.Y. 2006-07, the same is identical to that of A.Y. 2005-06, hence the same findings will be applicable. Thus, ITA No.213/RJT/2011 for A.Y. 2006-07 is dismissed.

In the result, both the appeals filed by the Revenue are dismissed. Order pronounced in the open Court on this 28th day of September, 2022.