BHARUCH ENVIRO INFRASTRUCTURE LTD.,,ANKLESHWAR vs. DY. COMMISSIONER OF INCOME TAX,, BHARUCH

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.499/AHD/2015 (AY 2006-07) (Hearing in Virtual Court) Bharuch Enviro Deputy Commissioner of Infrastructure Ltd.117-118, Income Tax, Bharuch Vs GIDC Estate-393002 Circle, PAN : AAACB 8075 F Assessee / appellant Revenue /respondent

ITA No.2017/AHD/2014, & ITA Nos. 1470 & 1472/AHD/2017 (AY 2007-08) Enviro Technology Ltd. Assistant Commissioner of 2413/14, GIDC Ankleshwar- Income Tax, Bharuch Vs 393 002 Circle, 1st Floor, Above PAN : AAACE4126G Bank of Baroda, Station Road, Bharuch Assessee / appellant Revenue /respondent

Assessee by ShriSaurabh Soparkar, Senior Advocate with Ms. Urvashi Shodan, Advocate Revenue by Shri Abhishek Gautam, – Sr-DR Date of hearing 19.01.2022 Date of pronouncement 28.02.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These four appeals by assessee are directed against the separate orders of ld. Commissioner of Income tax (Appeals)-VI, Baroda / Commissioner of Income-tax-3, Vadodara [‘CIT(A)’ for short] dated 10.11.2014, 03.03.2014 & 08.03.2017 for assessment years (AY) 2006-07 & 2007-08 respectively. With the consent of parties, all are

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

clubbed, heard and decided by a consolidated order to avoid the conflicting decisions. In appeal for AY 2006-07 the assessee has raised the following respective grounds of appeals:- ITA No.499/AHD/2015 A.Y.06-07

“1. On the facts and in the circumstances of the case and in law, the Commissioner of income -tax (Appeals) [‘CIT(A)’] erred in upholding the action of the Assessing Officer (AO) in re-opening the assessment under section 148 of the Income-tax Act, 1961 (‘the Act’). 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the validity of re-opening the assessment under section148 of the Act in spite of the fact that reassessment under section 147 could not be made after the expiry of four years from the end of the assessment year viz. after 31 March 2011 unless there has been any failure on part of the appellant to disclose fully and truly all material facts necessary for the assessment. 3.On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer (‘AO') in not granting deduction under section 80IA of the Act in respect of profit derived from Landfill Project 1 being an eligible infrastructure facility under section 80IA(4) of the Act. 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding that appellant is not entitled for deduction under section 80IA(4)(i)(b) in respect for Landfill Project 1 since it is not a ‘new’ undertaking as per provisions of section 80IA(4) of the Act. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating that once deduction under section 80IA was granted in the initial assessment year, it ought to be allowed in the subsequent years for the remaining period. 6. Without prejudice to the above grounds of appeal, it is submitted that where the conditions necessary for claiming the deduction are fulfilled at any date subsequent to date from which the undertaking is eligible to claim such deduction, the deduction shall be allowable from such subsequent date.

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. wherein the disallowance of part deduction under section 80IA of the Act was upheld. 3. On further appeal before the Tribunal, the assessee was allowed part relief to the extent of Rs.21,66,454/- on account of interest income as eligible for deduction under section 80IA of the Act vide order dated 28.11.2016 in ITA No.119/AHD/2010. 4. During the pendency of appeal of the assessee before the Tribunal, the AO reopened the assessment under section 147 by issuing notice under section 148 of the Act on 27.03.2013. In response to the notice under section 148 of the Act, the assessee vide its letter dated 27.03.2013 requested for reasons recorded. The reasons recorded was supplied to the assessee vide AO letter dated 23.12.2013. The assessee filed its objection vide objections dated 28.12.2013. The objections of the assessee were rejected by AO vide its order dated 03.01.2014. Further, in response to notice under section 148 of the Act, the assessee filed return of income on 18.04.2013 declaring income of Rs.37,19,360/- [as declared while filing return of income]. The AO recorded that while completing the assessment proceedings for the A.Y. 2010-11 under section 143(3) of the Act on 01.03.2013, the AO observed that assessee did not fulfil the requisite conditions for claim the deduction under

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. section 80IA of the Act. The assessee also claimed deduction under section 80IA of the Act of Rs.2,04,06,980/-. Grounds on which deduction under section 80IA of the Act was disallowed for the A.Y. 2010-11 is applicable for the A.Y. 2006-07. For claiming eligible condition for deduction under section 80IA of the Act, the assessee was required to enter into agreement with any authorities, Central Government or State Government or Local Authority before developing or operating and maintaining the new infrastructure facilities. The assessee claimed deduction under section 80IA of the Act on land proposal, first of Rs.2.04 crore which though commenced its activities on 01.04.1998, but the assessee entered into agreement with GIDC on subsequent date on 15.05.2002 i.e. after date of commencement. Therefore, the deduction could not be allowed on old existing infrastructure facility. As such, the assessee does not fulfil the requisite condition for claiming deduction under section 80IA of the Act for the year under consideration [2006-07], accordingly, the assessee was served show cause notice for disallowance of such deduction under section 80IA. The assessee filed its detailed reply. The of assessee recorded in para 9 of the assessment order. The assessee in its reply explained that they have started claiming deduction 80IA of the Act

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. from A.Y. 2002-03 and the assessee started various projects on various dates for which deduction has been claimed from the A.Y. 2002-03. In A.Y. 2002-03, assesse claimed deduction under section 80IA of the Act for land fill project for Rs.2.04 crore. Though, its activity was commenced on 01.04.1998, but the assessee entered into agreement with GIDC on subsequent date i.e. 15.05.2002. The reply of assessee was not accepted by the AO by taking view that deduction under section 80IA of the Act can be claimed for new infrastructure facility only. For claiming deduction, the requirement of entering into agreement with the Government Authority implies that before incorporation of infrastructure facilities, the agreement should have been done. On the abovementioned observation, the AO disallowed entire disallowance claimed under section 80IA in assessment order passed under section 143(3) read with section 147 dated 31.01.2014. 5. Aggrieved by the disallowance of deduction under section 80IA of the Act as well as on the reopening, the assessee filed appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee filed detailed written submissions on reopening as well as on the addition/disallowances of deduction under section 80IA. Before

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. the ld.CIT(A), on reopening, the assessee submitted that the AO erred in reopening of the assessment proceedings is based on mere change of opinion on the same set of facts, which were available before him during the original assessment proceedings passed under section 143(3) wherein allowance of deduction 80IA of the Act was partly granted to the assessee. The original assessment order under section 143(3) of the Act, was passed after application of mind by the AO and in absence of new information, the case could not have been reopened by him. It was also submitted that assessment made under section143(3) of the Act, reassessment under section 147 of the Act, should not be made after the expiry of Four Years from the end of assessment year after 31.03.2011, unless there has been any failure on the part of assessee in disclosing fully and truly all material facts necessary for assessment. The assessee also relied on certain case laws. The ld.CIT(A) after considering the submission of assessee and after referring the reasons recorded by the AO held that to confer jurisdiction on to the AO, the reopening assessment under section 147 of the Act, beyond Four years from the end of assessment year, two conditions must be satisfied i.e. (a) that assessing officer must have reason to believe that income chargeable to tax has escaped

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. assessment and (b) same was occasioned on account of either failure on the part of assessee to make a report of his income for that assessment year, or to disclose fully and truly all the material facts necessary for assessment of that year. Both the above conditions precedents must be satisfied simultaneously. The ld.CIT(A) referred various decisions in his order and held that perusal of reasons recorded by the AO reveals that AO has articulated the reasons for reopening the case, has brought out the fact that there was failure on the part of assessee who disclosed fully and truly all material facts necessary for assessment and the fact that he had reason to believe that income of Rs.2.04 crore had escaped assessment. The copy of agreement with GIDC was not provided to the AO during the original assessment has not been challenged by assessee in its submission, therefore, necessary pre- conditions for reopening were complied with. The assessee failed to submit any evidence regarding the fact that AO was alive or cognizant of issue of fulfilment of condition prescribed under section 80IA(4)(b) of the Act. During the course of original assessment proceedings, all that he had applied his mind over the issue before granting deduction under section 80IA of the Act. The assessee could not either pin-point any specific query by AO, nor

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. could furnish any copy of specific reply to the AO on the issue of fulfilment of prescribed condition and upheld the order of AO in reopening. 6. On disallowance of deduction under section 80IA of the Act on landfill project, the assessee was held ineligible for deduction under section 80IA for landfill project No.-1 but held eligible for deduction for land fill project No.2 on the basis of decision of his predecessor in AY 2008-09. [para 7.4 to 7.6 of ld.CIT(A)]. Further aggrieved, the assessee has filed his present appeal before this Tribunal. 7. We have heard the submission of Shri Sourabh Suparkar, learned Senior Advocate with Ms.Urvashi Shodhan, Advocate for the Assessee, hereinafter referred “ ld. Senior Counsel” and Shri Abhishek Gautam, ld. Senior Departmental Representative of the Revenue and perused the material available on record. The Ground No.1 and 2 relates to validity of reopening. The learned Senior counsel for the assessee submits that assessment under section 143(3) of the Act was completed on 22.12.2018. In the computation of income the assessee claimed deduction under section 80IA of Rs.2.04 crore, the AO while passing the assessment order restricted the deduction to the extent of Rs.1.72 crore, thereby disallwaning part deduction under section 80IA. The AO in

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. the scrutiny assessment, examined the complete fact regarding the alleged deduction under section 80IA of the Act, thereby partly disallowed to the extent of Rs.31,34,092/-. Aggrieved by part disallowance, the assesse filed appeal before the ld.CIT(A), wherein the action of AO was upheld. Further aggrieved, the assessee filed appeal before the Tribunal. The appeal for A.Y. 2006-07 was adjudicated by Tribunal along with the appeal for A.Y. 2004-05 and 2005-06 vide order dated 28.11.2016 in ITA No.123, 2882 & 119/AHD/2010 for the A.Ys. 2004-05, 2005-06 and 2006-07 respectively. The Tribunal partly granted relief to the assessee to the extent of Rs.21,66,454/- as eligible deduction under section 80IA of the Act. The ld.AR of the assessee submits that copy of ld.CIT(A) dated 01.10.2009 and the order of Tribunal is placed on record. The ld. Senior Counsel for the assessee submits that copy of reasons recorded is also placed on record. The perusal of reasons recorded, which is as mentioned by the ld.CIT(A) in para 5.3 of his order wherein the AO recorded that the assessee entered into agreementwith GIDC on 15.05.2002, though the commence its activity on 01.04.1998 and as such, the assessee does not fulfil the requisite condition for claiming the deduction under section 80IA of the Act. The ld. Senior Counsel for the assessee submits that

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. during the during the original assessment, the issue was extensively examined by the AO, furthermore, the assessee before the AO, explained that on consequent to the amendment in the Finance Act w.e.f 2001 in Explanation to clause-(a) of section 80IA(4) of the Act, the assessee is entitled for claim of deduction under section 80IA of the Act for carrying Solid Waste Management Activities. In compliance of provision of section 80IA of the Act, the assessee vide letter dated 09.02.2002 requested GIDC to execute agreement for obtaining income tax exemption for secured land filling site, accordingly, vide agreement dated 15.05.2002 with GIDC, assessee entered into agreement for carrying out aforesaid project and accordingly claimed deduction under section 80IA of the Act for eligible project in A.Y. 2002-03 and allowed the same deduction till A.Y. 2009-10. 8. The ld. Senior Counsel further submits that the assessee claimed deduction under section 80IA of the Act for the year under consideration and it was partly disallowed on one component, which was further examined on appeal by the ld.CIT(A) in its adjudication and on further appeal, it was allowed by the Tribunal. There was no failure on the part of assessee in making full disclosure and there is no failure on the part of assessee. The

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. assessment was reopened beyond the Four Years from the end of relevant assessment year. The reopening is purely based on change of opinion. The AO has no jurisdiction to reopening the assessment which was a subject matter of appeal before the ld.CIT(A) and was further examined by the Tribunal. To support his submissions, the ld. Senior .Counsel of the assessee relied upon the decision of Gujarat High Court in CIT Vs Nirma Chemical Works P. Ltd. (182 Taxman 183) /309 ITR 67, Nirma Industries Limited 283 ITR 402 (Guj) 155 taxmann 330 (Guj), decision of Hon’ble Supreme Court in Kolkata Discount Company Limited 41 ITR 191 (SC) and in CIT Vs Kelvinator of India Limited 320 ITR 561 (SC). 9. On merit, the ld. Senior Counsel for the Assessee submits that all the grounds of appeal raised by the assessee is covered in favour of assessee by the decision of Tribunal in assessee’s own case for the A.Y. 2008-09 in ITA No.1849/AHD/2011. The ld. Senior Counsel submits that he has not pressing Ground No.3 which relates to write back of pit covering expenses. The ld. Senior Counsel for the assessee also furnished a chart showing short narration of ground of appeal and relevant paragraph of decision of the Tribunal in

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. assessee’s own case for assessment year 2008-09, wherein the grounds of appeal on merits are covered in their favour. 10. On the other hand, the ld.Sr.DR for the Revenue supported the order of ld.CIT(A). The ld.Sr.DR for the Revenue submits that AO has not discussed about the agreement with the GIDC during the original assessment proceedings, thus, there was no change of opinion in making reopening of the assessment. 11. We have considered the rival submission of both the parties and have gone through the orders of authorities below. We have also deliberated on various case laws relied by the ld.CIT(A) in his order as well as various case laws relied by ld.Senior Counsel of the Assessee. There is no dispute that in the computation of total income the assessee claimed deduction under section 80IA. The case was selected for scrutiny and during the scrutiny assessment; the claim of deduction was examined by the assessing officer. The assessing officer disallowed part of the deduction under section 80IA. Being aggrieved, the assessee filed appeal before ld CIT(A). It is matter of fact that the admissibility of claim under section 80IA was not disputed rather a component of income, whether it was derived from eligible business or not was disputed by the lower authorities. Thus, during the original scrutiny assessment, the

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. Assessing Officer examined the claim of deduction under section 80IA of the Act. The case was reopened by assessing officer after recording the reasons of re-opening. The reasons recorded by assessing officer are extracted in para-5.3 in the order of Ld. CIT(A). The main thrust of assessing officer in reasons recorded is that for claiming deduction under section 80IA, the assessee is required to enter into agreement with Central, State Government or with local authority for developing maintaing new infrastructure facilities. The assessee commenced its activity wef 01.04.1998 but entered into agreement with GIDC only on 15/05/2002 (after date of commencement) and that deduction should not have allowed to the assessee. 12. The Ld. Sr. counsel for the assessee vehemently argued that the claim of deduction under section 80IA was vehemently examined and one component of working of profit was partly allowed by Assessing Officer, thus, the reopening of concluded assessment under section 14(3), was nothing but mere a change of opinion. It was also submitted that that the claim of deduction under section 80IA was not only examined by Assessing Officer but was a subject-matter of appeal before Ld. CIT(A) and further before

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. Tribunal and as per the principal of merger the assessing officer has no jurisdiction to reopen such assessment. 13. The Hon’ble Gujarat High Court in CIT Vs Nirma Chemical Works (P) Ltd (supra) held that when the assessee-company claimed relief under section 80-I, the assessing allowed part relief by reworking and reducing the relief available and on appeal entire relief was allowed to the assessee. Thereafter the Commissioner passed order under section 263 disallowing the claim under section 80-I on the ground that new industrial undertaking was formed by splitting/ reconstructing up of old business. The Hon’ble High Court held that when deduction under section 80-I was granted by assessing officer after disallowing a part of claim which was carried in appeal before CIT(A), requirement of conditions stipulated by sub-section (2) of section 80-I was very much subject matter of appeal and merely because Commissioner took a different view, it would not be sufficient to permit Commissioner to exercise power under section 263. 14. Further, the Hon’ble Gujarat High Court in Nirma Industries Ltd Vs DCIT (supra) held that in case where an order of a subordinate forum is carried in appeal, the appellate court may - (i) reverse the order under appeal, (ii) modify the order under appeal, (iii) merely

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. dismiss the appeal and, thus, confirm the order under appeal without any modification. The Apex Court has laid down that in all the three eventualities it is the appellate decision alone which subsists and is operative and capable of enforcement. That there is no difference in principle and it is not possible to draw any distinction between the first two kinds of orders made by the appellate authority and the third kind of order made by the appellate authority. In law the terms ‘affirm’ and ‘confirm’ are synonymous. Both the terms denote notification of a judgment. Therefore, the view expressed by the Tribunal in the impugned order that when the High Court dismisses the appeal by holding that no substantial question of law arises, the High Court does not render any decision is an incorrect proposition and could not be accepted (as per para 16-17. It was also held that when on talks of merger of a judgment, order or a decision of a subordinate court or forum into the judgment, order or decision of a superior court or forum the merger may be of the entire order, i.e., the reasons and the conclusion, or only a part, viz., only the conclusion by a different process of reasoning. In that event what merges is the operative part after the confirmation, reversal or modification, but in any event, the order of the lower court or the forum does not

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. have any independent existence thereafter. This would be a merger in a case where the reasoning of the subordinate forum is either expressly not approved, or a different reasoning is given by the Supreme Court or forum. However, in a case where the superior court either adopts or reiterates the reasoning, or records an express approval of the reasoning, the merger is in relation to both the operative part and the reasons(as per para 18). The net effect is that the order of the subordinate court or the forum merges with the order of the superior Court or forum and has no independent existence in relation to the issue which was carried before the appellate court or forum. If the merger is issue specific, there is fusion of the orders only to that limited extent. That is the reason why principle of merger is stated to be neither rigid nor of universal application. Therefore, it cannot be successfully contended that in the latter situation, i.e., where the appellate court or the forum merely accords approval to the reasoning of the lower court or forum, there is no decision of the appellate court or forum. (as per para 19). The doctrine of merger is founded on principle of propriety in the hierarchy of justice delivery system, the underlying logic being that there cannot be more than one operative order governing same subject-matter at a given point of time. The only

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. caveat to the doctrine of the merger is that the content or the subject-matter of challenge before the superior forum has to be borne in mind. 15. The Hon'ble jurisdictional High Court in the case of Cliantha Research Ltd. (supra), wherein the Hon'ble court held that where during the original assessment assessee’s claim was processed at length and after calling for detailed submission, the same was accepted, merely because a certain element or angle was not in the mind of Assessing Officer while accepting such a claim, could not be a ground for issuing notice under section 148 for reassessment was based on change of opinion on the part of Assessing Officer and that all materials were available before the Assessing Officer which have already scrutinized. Therefore, notice issued after four years from the end of relevant assessment years, issuance of such notice has to be held as nothing but a change of opinion on the part of Assessing Officer. 16. Hon’ble Apex Court in CIT Vs Kelvinator of India Ltd (supra) held that the assessing officer has no power to review; he has a power to reassess, but the reassessment has to be based on fulfilment of certain per-condition and if the concept of ‘change of opinion’ is removed as contemplated on behalf of department, then in the garb

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. of reopening the assessment, review would take place. One must treat the concept of ‘change of opinion’ as an in-built test check to abuse the power of assessing officer. Hence, after 01.04.1989 the assessing officer has a power to re-open, provided there is ‘tangible material’ to come to the conclusion that there is escarpment of income from assessment. 17. Now again adverting to the facts of the present case. We find that notice under section 148 of the Act in the present case was issued on 22.03.2013 i.e., after four years from the end of relevant assessment year and there was no failure on the part of the assessee in disclosing fully and truly all necessary for assessment as the assessing officer fully and extensively examined the whole of the claims while finalising the assessment. The Assessing Officer solely relied on the material information available on record. Further, we find that the assessment order passed by Assessing Officer was the subject-matter of appeal before Ld. CIT(A) and principle of merger would apply. Moreover, there is no tangible material before the assessing officer to reopen the assessment. 18. Thus, in view of the aforesaid factual and legal discussions, we hold that the action of Assessing Officer for re-opening is not valid as the original scrutiny assessment was the subject-matter of

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. appeal before Ld. CIT(A) and again appeal before Tribunal, moreover, the action of Assessing Officer is based on “change of opinion” on similar set of fact. Moreover, it was overreaching to the decisions of the superior authorities on the similar set of fact on similar issues. Therefore, the re-opening is held as invalid and subsequent action initiated thereof are void ab initio. 19. Considering the fact, that we have allowed ground No. 1& 2 of the appeal on the primary submissions of the learned Senior Counsel and held that the reopening under section 147/148 is not valid. Therefore, consideration on his other submissions on the validity of claim under section 80IA and on the adjudication on the merits of various grounds of appeal has become academic. 20. In the result, the appeal of the assessee for AY 2006-07 is allowed. ITA No.2017/AHD/2014 A.Y.07-08 21. This appeal also filed by assessee against the order of Ld. Commissioner of Income-tax (Appeals)-VI, Baroda [‘CIT(A)’ for short] dated 03.03.2014 for assessment year (AY) 2007-08. The assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Commissioner of income -tax (Appeals) [‘CIT(A)’] erred in upholding the re-opening of the assessment under section 148 of the Income- tax Act, 1961 (‘Act’).

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. 22. Brief facts of the case are that initially the assessment was completed under section 143(3) on 29.12.2009 determining total income of assessee at Rs.48,48,260/-. The assessee while filing return of income declared income of Rs.22,41,941/-. The assessee in the computation of income also claimed deduction under section 80IA of Rs. 1.15 Crore. The Assessing Officer while passing assessment order disallowed part of the deduction under section 80IA, thereby restricting it to Rs. 1.01 Crore. The assessing officer also disallowed sludge disposal charges of Rs. 696,574/- and depreciation of Rs. 504,537/-. However, on appeal before ld CIT(A) the assessee was granted relief on sludge disposal charges of Rs. 696,574/- and depreciation of Rs.504,537/-. 23. The case of the assessee was re-opened under section 147 on 28.03.2012. Notice under section 148 was served upon assessee on 30.03.2012. The case of assessee was re-opened by Assessing Officer while finalizing assessment for AY 2010-11 by taking view that assessee is not eligible for deduction under section 80IA as it was not having agreement with the authority for developing operating and maintaining new infrastructure facilities. The agreement was entered on 15.12.2006 and there was no agreement prior to that date with any government, local authority or statutory

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. body. In response to notice under section 148, the assessee filed return of income on 20.04.2012 declaring income of Rs.27,68,770/- and claimed deduction of Rs.1.13 crores under section 80IA. The assessee filed objection against the reopening. The objection of assessee was rejected vide order dated 31.12.2012. The Assessing Officer after rejecting the objection of assessee proceeded for re-assessment. The Assessing Officer while passing assessment order restricted the eligible profit to the extent of Rs.76,29,648/- by disallowing interest income and making addition on account of disallowance under section 43B of the Act of Rs.2,41,651/-.The Assessing Officer while further taking view that in view of his observation that assessee was not having any agreement with any government, local authority & statutory body. Accordingly, following entire disallowance under section 80IA was disallowed. 24. On appeal before Ld. CIT(A) the action of Assessing Officer was upheld in AY 2006-07. Further aggrieved assessee has filed present appeal before the Tribunal. 25. We have heard the submission of Shri Sourabh N. Suparkar Ld. Senior counsel for the assessee and Shri Abhishek Gautam, Ld. Sr. Departmental Representative (DR) for the Revenue. The Ld. Sr.

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. counsel for the assessee submits that during scrutiny assessment completed vide assessment order dated 29.12.2009 and Assessing Officer examined the entire claim of assessee. The Assessing Officer could not reopen the assessment completed after making full enquiry if the Assessing Officer had reasoned to believe that income has escaped assessment. It is based on mere change of opinion on the same set of fact which was submitted during the course of original scrutiny assessment. The Assessing Officer examined the claim of deduction under section 80IA and passing assessment order and allowed deduction under section 80IA at Rs.1.01 crores. Accordingly, the re-opening of assessment is mere change of opinion and same set of fact. Ld. Sr. counsel for the assessee further submits that action of Assessing Officer is that assessee has not developed any new infrastructure facilities on the basis of agreement as required under section 80IA(4)(i)(b) and has only operated old infrastructure facilities and provision of section 80IA(4) does not stipulate that the agreement should have been entered into on or before a particular date and even otherwise. There is enough evidence in the form of correspondence with the Gujarat Industrial Development Corporation (‘GIDC’ in short) and the assessee that a clear agreement exist right from the inception

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. the Central Board of Direct Taxes (‘CBDT’ in short) in its Circular No.1/2006 dated 12.01.2006 clarified that effluents treatment facilities as developed, operate and maintain by assessee is eligible for deduction under section 80IA(4) and subsequent to the aforesaid clarification by CBDT, the assessee entered into formal with GIDC on 15.12.2006 for development, operation and maintenance of effluent treatment plant. Thus, assessee is eligible condition for claiming under section 80IA was fulfilled by assessee. Ld. Sr. counsel for the assessee submits that he has two fold legal arguments i.e., the action of Assessing Officer is based on mere of change of opinion. To support his submission, Ld. Sr. counsel for assessee relied upon the decision of Hon'ble jurisdictional High Court in the case of Cliantha Research Ltd., vs. DCIT (2013) 35 taxmann.com 61 (Guj); Sai Consulting Engineers (P) Ltd., vs. DCIT,Circle-4(1) (2017) and Royal Infrastructure vs. DCIT, Circle- 1(2) (2019) 108 taxmann.com 388 (Guj). Ld. Sr. counsel for the assessee submits that even on principle of merger no re- assessment is not valid, to support his submission, Ld. Sr. counsel for assessee further relied upon the decision of Hon'ble jurisdictional High Court in the case of Commissioner of income- tax vs. Nirma Chemicals Works (P) Ltd., (2009) 182 Taxman 183

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. (Guj) and Nirma Industries Ltd., vs. DCIT (2006) 155 TAXMAN 330 (Guj). Ld. Sr. counsel for the assessee submits that on merit all the grounds of appeal are covered by the decision of Tribunal in ITA Nos. 1849 & 1867/AHD/2014 for AY 2008-09 dated 27.12.2021. 26. On the other hand, Ld. Sr.DR for the Revenue made similar submission has made in AY 2006-07. 27. We have considered the rival submissions of both the parties and have also gone through the order of authorities below carefully. We have also deliberated on various case law relied by Ld. CIT(A) as well as Ld. Sr. counsel for the assessee at the time of making his submission. We find that there is no dispute that initially assessee filed its return of income for AY 2007-08 on 30.10.2007 declaring income of Rs.22,41,941/-. In the computation of income, the assessee claimed deduction under section 80IA of Rs.1.15 crores. In the statement of profit gain eligible for deduction under section 80IA, the assessee reduced of Rs.22,81,941/- as income from other sources (interest income). The detailed of other interest income, the assessee claimed at Rs.25,38,823/- the assessee reduced the expenses @ 10% of such income thereby claimed 10% of Rs.25,38,823/- i.e., Rs.2,53,882/-, thereby claimed Rs.44,849/- as interest income. On appeal before Ld. CIT(A), the action of

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. Assessing Officer was upheld and on further appeal before Tribunal, the order was restored back to file of Assessing Officer in ITA No.2223/AHD/2010 for AY 2007-08 dated 27.02.2017. 28. The Assessing Officer re-opened the assessment for this year by recording the reasons that in case of assessee for AY 2009-10, the assessment under section 143(3) was completed on 30.12.2011. As per the same, deduction claimed under section 80IA was disallowed and assessee did not fulfil the perquisite the claiming of deduction under section 80IA in this year also and the assessee has claimed deduction of Rs.1.01 crores which was not allowable. On receipt of reasons recorded, the assessee filed objection dated 18.12.2012 against re-opening and said objection of assessee was rejected. The Assessing Officer after rejecting the objection for re-assessment, Assessing Officer recorded that for eligible claim of deduction under section 80IA, the assessee was required to enter into an agreement with government, local authority or statutory body. Before developing or operating and maintaining a new infrastructure facilities, the claim of assessee under section 80IA has been made on the basis of such agreement with GIDC dated 15.12.2006. In this case, infrastructure facilities came into existence on 15.02.1997 which is not before the date on which agreement has

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. been entered into. No infrastructure facilitieshas been developed for operating or maintaining on the basis of such agreement. The agreement was a condition precedent for claiming such eligible deduction. That the assessee did not comply with the requirement of section 80IA(4). The Assessing Officer accordingly in the re- assessment order disallowed the entire deduction of Rs.1,12,75,723/-. On appeal before Ld. CIT(A), the assessee filed detailed written submission. The Ld. CIT(A) confirmed the validity of re-opening as well as addition / disallowance under section 80IA of the Act. 29. We find that during the original scrutiny assessment, the Assessing Officer examined the claim of deduction under section 80IA of the Act. The Assessing Officer while recording reasons recorded extracted in para-6.1 in the order of Ld. CIT(A). Ld. Sr. counsel for the assessee vehemently argued that the claim of deduction under section 80IA was vehemently examined and one component of working of profit was partly allowed by Assessing Officer. We find that the claim of deduction under section 80IA was not only examined by Assessing Officer but was a subject-matter of appeal before Ld. CIT(A). The Hon'ble jurisdictional High Court in the case of Cliantha Research Ltd. (supra), wherein the Hon'ble court held

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. that where during the original assessment assessee’s claim was processed at length and after calling for detailed submission, the same was accepted, merely because a certain element or angle was not in the mind of Assessing Officer while accepting such a claim, could not be a ground for issuing notice under section 148 for reassessment. Further, the Hon'ble jurisdictional High Court in the case of Sai Consulting Engineers (P) Ltd. (supra) when re-opening of assessment was within the period of four years on the ground that re-opening was nothing but change of opinion on the part of Assessing Officer and that all materials were available before the Assessing Officer which have already scrutinized. Therefore, notice issued within the period of four years from the end of relevant assessment years, issuance of such notice has to be held as nothing but a change of opinion on the part of Assessing Officer. We find that notice under section 148 of the Act in the present case was issued on 28.03.2012 i.e., within the period of four years from the end of relevant assessment year. Therefore, no tangible material has come to the notice of Assessing Officer. The Assessing Officer solely relied on the material information available on record. Further, we find that the assessment order passed by Assessing Officer was the subject-matter of appeal before Ld. CIT(A) and

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. principle of natural justice would apply. Therefore, we hold that the action of Assessing Officer for re-opening is not valid as the original scrutiny assessment was the subject-matter of appeal before Ld. CIT(A) and again appeal before Tribunal, moreover, the action of Assessing Officer is based on “change of opinion” on similar set of fact. Our view is also fortified by our finding in para 13 to 15 of this order (supra). Considering the aforesaid factual and legal discussions, the re-opening is held as invalid and subsequent action initiated thereof are void ab initio.In the result, ground No.1 of assessee’s appeal is allowed. 30. Considering the fact that we have allowed the appeal of assessee on legal issue, therefore adjudication of other grounds of appeal, which is otherwise claim as covered by the order of Tribunal in AY 2008-09. In our view, the adjudication on merit of the case has become academic and infructuous. 31. In the result, appeal of assessee is allowed. ITA No.1470/AHD/2017 A.Y.07-08 32. This appeal filed by assessee relates to AY 2007-08 is directed against the Ld. CIT(A)-3, Vadodara dated.08.03.2017, which in turn arises the assessment order under section 143(3) r.w.s. 254 of the Act dated 30.03.2015. The assessee has raised the following grounds of appeal:- 31

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. “1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction towards expenses incurred for earning interest income computed at Rs.2,53,882/- being 10% of the interest income amounting to Rs.25,38,823/-, while excluding interest income for the purpose of computing deduction under section 80-IA of the Act. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal.” 33. Facts in brief are that Assessing Officer while passing scrutiny assessment under section 143(3) r.w.s 254 for the year under consideration disallowed 10% ad hoc expenses for earning income from other source (interest income). On appeal before Ld. CIT(A), the disallowance was upheld. On further appeal before the Tribunal in ITA No.225/Ahd/2010 dated 26.07.2013, the issue was restored back to the file of Assessing Officer to verify the nexus between expense incurred and the interest earned. In pursuance to the direction of Tribunal, the Assessing Officer initiated the fresh proceeding and issued show cause notice to assessee to substantiate the claim. The assessee vide its reply / letter dated 04.01.2015 submitted that the Special Bench of Delhi Tribunal in the case of Lalson Enterprises (2004) 89 ITD 25 (Delhi-Trib.) held that some expenditure might be incurred in earning this income which generally of the case is part of common expenses being 10% ad hoc deduction. The Assessing Officer recorded that no details of actual expenditure incurred is furnished and that the decision of 32

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. Special Bench in the case of Lalson Enterprises (supra) has been disapproved by Hon'ble Bombay High Court in the case of CIT vs. Asian Star Co. Ltd. in TA No. 200 of 2009 dated 19.03.2010. Accordingly, the assessment order repeated the addition. On appeal before Ld. CIT(A) the action of Assessing Officer was upheld on similar lines. Further, aggrieved assessee has filed the present appeal before this Tribunal. 34. We have heard the submissions of the parties and have gone through the orders of the lower authorities. The Ld. Senior counsel for the assessee submits that the case relates to AY 2007-08 and no specific evidence or details is not available at present. The Bench may take lenient view and may decide the issue of appeal. 35. On the other hand, Ld. Sr.DR for the Revenue supported the order of authorities below. 36. We have considered the rival submission of both the parties and have gone through the order of authorities below. There is no dispute on the fact that the Assessing Officer disallowed ad hoc expense @ 10% by taking view that no nexus was proved in the setting aside proceedings and that the assessee again failed to prove the nexus with the expense qua the interest income earned. Before us the assessee could not substantiate the cross-

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

examination made the submission that same expense is certainly incurred. In the absence of any nexus, we are unable to concur with the submission of Ld. Sr. counsel for the assessee. Therefore, we affirm the order of Ld. CIT(A). In the result of assessee’s appeal is dismissed. ITA No.1472/AHD/2017 A.Y.07-08

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd.

auditor’s report under section 80-IA inform 10CCB and accordingly, the said claimfrom deduction is a bona fide claim on which penalty is not leviable. 5. On the facts and in the circumstances of the case and in law, the Commissioner of income-tax (Appeals) erred in upholding the action of the Assessing Officer in not appreciating the fact that the issue of eligibility of deduction under section 80-IA on which the penalty has been levied is a debatable issue on which two opinions exist. 6. On the facts and in the circumstances of the case and in law, the Commissioner of income-tax (Appeals) erred in upholding the action of the Assessing Officer in levying penalty on the ground that the claim of deduction under section 80-IA was not substantiated by evidences and the same leads to the conclusion that no accurate particulars were filed by the appellant without appreciating the fact that appellant had furnished / submitted full details during the course of the assessment, reassessment and appellate proceedings. 7. On the facts and in the circumstances of the case and in law, the Commissioner of income-tax (Appeals) erred in holding that the penalty is leviable since the assessment was reopened under section 147 on the ground that the income has escaped assessment because of false / wrong claim of deduction under section 80-IA ignoring the fact that penalty proceedings were initiated not for concealment of income but for furnishing inaccurate particulars. The appellant hereby reserves the right to add to, alter or amplify the above grounds of appeal, at any time before or at the time of appeal, so as to enable the Hon'ble Tribunal to decide the appeal in accordance with law.” 38. Brief facts of the case are that initially the assessment for the year under consideration for A.Y 2007-08 was completed under sectdion143(3) in allowing certain deduction under section 80IA of the Act. The case was re-opened under section 148 and in assessment order passed under section 143(3) r.w.s 147 of the Act. The Assessing Officer made disallowance of deduction under section 80IA, disallowance of provision of “Sludge Disposal

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. Charges” and disallowance of excess depreciation. On appeal before Ld. CIT(A) the disallowance of “Sludge Disposal Charges” and depreciation was deleted. The Assessing Officer after giving show cause notice to the assessee levied penalty on the disallowance of section 80IA. The Assessing Officer worked out the penalty of Rs.36,18,820/-. On appeal before Ld. CIT(A) the action of Assessing Officer levying penalty was upheld. Thus, further aggrieved assessee filed present appeal before Tribunal. 39. We have heard both the parties and perused the materials available on record. The Ld. Senior counsel for the assessee submits that he has extensively argued the appeal for AY 2007-08 on legal issue as well as on merit. The legal issue in on the validity of re-opening is not valid, however, on merit all the additions including the addition of under section 80IA is covered in favour of assessee. Therefore, the penalty order is not sustainable on both legal issue as well as on merit. 40. On the other hand, Ld. Senior DR for the Revenue supported the order of authorities below. 41. We have considered the rival submissions of both the parties and perused the materials available on record. Considering the fact that in quantum appeal ITA No.2017/AHD/2014 we have set aside the

ITA Nos.499/AHD/2015, 2017/AHD/2014, 1470 & 1472/AHD/2017 (A.Y s 06-07 & 07-08) Bharuch Enviro Infrastructure Ltd. & Enviro Technology Ltd. assessment order by holding as invalid and based on change of opinion thereby accepted the appeal of assessee. Considering the fact that appeal of assessee in quantum assessment has been allowed therefore, the addition of disallowance under section 80IA does not survive, therefore penalty levied under section 271(1)(c) has no leg to stand. Therefore, the Assessing Officer is directed to delete the penalty. We order accordingly. 42. In combine result, the appeals of the assessee in ITA No.499/AHD/ 2015; ITA No.2017/AHD/2014 is allowed; ITA No.1470/AHD/2017 is dismissed and ITA No.1472/AHD/2017 is allowed. A copy of the instant common order be placed in the respective case file(s). Order pronounced in the open court on 28/02/2022 by placing the result on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 28/02/2022 Dkp. OutSourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)-Vadodara 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Assistant Registrar, ITAT, Surat True copy/ 37