TaxTMI 
TaxTMI 
2016 (1) TMI 241
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....-12, Hyderabad dated 21.05.2015 for A.Y. 2012-13. Since the main issue involved in all these appeals is common, the same have been heard together and are being disposed of by a single consolidated order. 2. Brief facts of the case are that the assessee is a company which is engaged in the construction business. Prior to the search and seizure action taken in its case on 08.12.2011, the assessee had filed its returns of income for six out of the seven years under consideration i.e., A.Ys. 2006-07 to 2011-12 and assessments under section 143(3) were also completed for the first three years i.e., A.Ys. 2006-07, 2007-08 and 2008-09. Consequent to the conclusion of the search and seizure action on 03.02.2012 when the last of the authorizations was executed, notices under section 153A were issued by the A.O. on 09.10.2012 for the six years i.e., A.Ys. 2006-07 to 2011-12. In response to the said notices, the returns of income for the relevant six years were filed by the assessee claiming therein deduction under section 80IA. Meanwhile, the return of income for A.Y. 2012-13 was also filed by the assessee on 29.09.2012 claiming deduction under section 80IA. Thereafter, notices under sect....
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....IT(A). During the course of appellate proceedings before the Ld. CIT(A), various submissions were made by the assessee in support of its claim for deduction under section 80IA, which as summarized by the Ld. CIT(A) in his impugned orders, were as under : a) "Section 153A clearly states that the return filed in response to the notice u/s 153A(1)(a) is a return which is required to be furnished u/s 139 of the I.T. Act. Further the section starts with a Nonobstante clause. Thus, a return filed u/s 153A is like a fresh return and all claims can be made in that notwithstanding the earlier returns filed in regular course. b) The return filed by the assessee in response to return u/s 153A steps into the shoes of the returns filed by the assessee u/s 139(1) and the assessment has to be completed afresh on the basis of the return filed u/s. 153A. c) Total income as per section 2(45) is defined as income computed in the manner laid down in the Act and various deductions which are to be given while computing the said income have to be given including claim of deduction u/s 80IA. d) Explanation to sub-section 2 of section 153A provides that all other provisi....
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....t take advantage of the ignorance of assessee to its rights. k) The A.O. totally ignored the returns filed u/s 153A but assessed the income on the basis of previous returns of income and the earlier completed assessment u/s 143(3). l) The A.O. took a completely wrong view that a infrastructure project facility has to be owned by a person to be eligible for deduction. The AO misinterpreted the clause 4(a) of section 80IA. It is the ownership of the enterprise which is developing the infrastructure facility which is being discussed in the sub-section. The Enterprise should belong to a company or a consortium of companies registered in India. The appellant cited the following decisions of jurisdictional Tribunal ITAT to claim that it is eligible for deduction u/s 80IA. (i) KMC Constructions vs. ACIT (ITA No.338/Hyd/2009). (ii) Koya & Company Constructions Pvt. Ltd., vs., ACIT (ITA.No. 180/Hyd/2006, 167 and 168/Hyd/2008 and 221/Hyd/2008). (iii) Ocean Sparkle Ltd., Vs DCIT. (iv) GVPR Engineers Ltd., vs ACIT (ITA No.347/Hyd/2008). (v) Hon'ble ITAT, Mumbai 'E' Bench decision in the case of Pratibha Industries Ltd vs., ACIT (IT....
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....lusion, he again relied on the decision of Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra), wherein these two distinct situations were considered as basis for deciding whether assessee is entitled or not for making a new claim during the course of proceeding under section 153A. The claim of the assessee for deduction under section 80IA thus was allowed by the Ld. CIT(A) for A.Ys. 2009-10 to 2012-13 whereas, the action of the A.O. in disallowing such claim for A.Ys. 2006-07 to 2008-09 was upheld by the Ld. CIT(A). Aggrieved by the same, the assessee has raised this issue in its appeals for A.Ys. 2006-07 to 2008-09 filed before the Tribunal while the Revenue has raised the said issue in the present appeals filed before the Tribunal for A.Ys. 2009-10 to 2012-13. 3. We have heard the arguments of both the sides and also perused the relevant material on record. At the time of hearing before us, the learned representatives of both the sides, besides strongly relying on the relevant portions of the orders of the authorities below which are in their favour, have also cited various case laws in support of their respective stand on the issue relating to the assessee....
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....lose look at the above provision manifests that the Assessing Officer is required to make assessment afresh and compute the 'total income' in respect of each of the relevant six assessment years. As there is no specific inhibition On the jurisdiction of the Assessing Officer in not including any new income to such fresh total income pursuant to search which was not added during the original assessment, in the like manner, there is no restriction on the assessee to claim any deduction Which was not allowed in the original assessment. The requirement of section 153A is to compute the total income of each of such assessment years. Such determination of the total income has to be done afresh without any reference to what was done in the original assessment. Of course, the AO is entitled to make any addition in the fresh assessment, which he made in the original assessment, provided he is satisfied with the merits of the addition. But the mere fact that there was some addition in the original assessment, would not preclude the assessee from Contesting the addition in the subsequent proceedings. As it is going to be a fresh exercise of framing assessment or reassessment of the total inco....
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....sclosed income" as a result of search, which has been defined in section 158B(b), section 153A dealing with assessment in case of search with effect from 01.06.2003 requires the Assessing Officer to determine "total income" and not "undisclosed income." 3.2. For the reasons given above, it was held by the Tribunal that the starting point of the assessment under section 153A is the amount of income declared in the return of income and when the A.O. has to compute the total income of the assessee on the basis of the return of income, there may not be any scope for arguing that the assessee has been rendered powerless to even lodge a claim in respect of which deduction was not allowed earlier. In the said case before the Tribunal, reliance was placed by the learned D.R. in support of Revenue's stand on the decision of Hon'ble Supreme Court in the case of Sun Engineering (supra) as in the present case, but the same was found to be misconceived by the Tribunal for the reasons given in paragraph No.8 of its order which are already extracted above. 4. Besides the decision of Hon'ble Supreme Court in the case of Sun Engineering (supra), the A.O. has relied upon the decision of Hon'bl....
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....rt in the same paragraph No.20 that all the stops having been pulled out, the A.O. under section 153A has been entrusted with the duty of bringing to tax the total income of the assessee whose case is covered under section 153A, by even making reassessments without any fetters, if need be. 4.1. Hon'ble Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra) also did not accept the arguments of the assessee that the new claim can be made for the first time even in the return filed in response to notice under section 153A when the original assessment had already been completed by observing that if the same is taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the Ld. CIT(A), ITAT and the High Court, on a notice issued under section 153A of the Act, the A.O. would have power to un-do what has been concluded up to the High Court. It was held that any interpretation which leads to such conclusion has to be repelled and/or avoided. It is pertinent to note here that when any new claim is made by the assessee for deduction in response to the notice under section 153A which was not made in the....
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....e Chennai Bench of this Tribunal had an occasion to decide a similar issue as involved in the present case. In this context, reliance was placed by the Tribunal on the provisions of section 153A(1)(a) which provide that where a search is initiated under section 132, the A.O. shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years in the prescribed form and verified in the prescribed manner and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. It was held by the Tribunal that it is because of this provision of law stated in section 153A(1)(a) that a statutory presumption is made that a return filed under section 153A is a return required to be filed under section 139(1) of the Act. The Tribunal also took note of the nonobstante clause contained in section 153A and held that said provision over-rides all other provisions stated in the Act in matters of filing of return of income consequent to a search and therefore, the return filed in pursua....
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.... allowed whereas, the relevant ground of the Revenue's appeal on this issue for A.Ys. 2009-10 to 2011-12 are dismissed. 8. During the course of assessment proceedings for all the seven years under consideration, the claim of the assessee for deduction under section 80IA was also examined by the A.O. on merit and on such examination, he held that the assessee not being the owner of the infrastructure facility as required by sub-clause (a) of clause (i) of sub-section (4) of section 80IA was not eligible to claim deduction under section 80IA. In support of this conclusion, the A.O. relied on the decision of Mumbai Special Bench of ITAT in the case of B.B. Patil & Sons 35 SOT 171. The Ld. CIT(A), however, has not agreed with this stand of the A.O. According to him, the ownership of the infrastructure facility is not the intention of the provision of section 80IA(4)(i)(a) and what is contemplated therein is the ownership of enterprise. As pointed out by the Ld. Counsel for the assessee at the time of hearing before us, this issue now stands covered by the decision of Hon'ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd., 322 ITR 323 wherein it was held that afte....
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....n deleting the addition made by the A.O. to the total income of the assessee by rejecting its claim for exemption on account of agricultural income. 9.1. In its return of income filed for A.Ys. 2009-10 to 2012-13, the lease rent received from the agricultural land owned by it was declared by the assessee as agricultural income and the same was claimed to be exempt from tax. During the course of assessment proceedings, the copies of relevant deed evidencing purchase of agricultural land as well as declaration of the concerned farmers who had taken the said land on lease were filed by the assessee. From the perusal of the said documents as well as other material available on record, the A.O. recorded the following findings/observations. i) "The assessee could not produce any lease agreement entered into between the assessee and the farmers. ii) The assessee could not produce Pattadar Pass book to support its claim. iii) It is found from the prospectus of the assessee's company filed with SEBI in the year 2007, issued in connection with public issue that in contains the following clause. "36. Risk pertaining to not obtaining mutation of the title....
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....adar Pass Book Acts, 1971 section 6A extract was filed. b) A written lease agreement with the farmers is not required and an oral agreement or understanding is sufficient especially where it is an issue between the tenant farmers and the land owners. Secondly, keeping the low quantum rent which is 2,00,000/- and the nature of payment being agricultural income, the common practice adopted is giving lands on oral agreements. One has to take into cognizance of oral agreement as held by the Hon'ble Supreme Court in the case of Brij Mohan and Others VS Smt. Subra Begum & Others 1990 SCR(3)413,1990 SSC (4) 147. c) Even a tenant of agricultural land who is not an owner and who does not have a pattadar pass book can also derive agricultural income by way of agricultural operation. Ownership of land is not necessary. The appellant cited in support, the decision of Hon'ble ITAT Pune Bench in the case of ITO Vs Gajanan Agro Farms 142 ITD 571. d) The A.O. cited clause no.36 of the Prospectus of the assessee submitted to SEBI in 2007. This clause mentioned the risk pertaining to not obtaining the mutation of title deed by the company even though an application was mad....
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....rd, the Ld. CIT(A) held that the pattadar passbook relied upon by the A.O. to deny the claim of the assessee of ownership of agricultural land was irrelevant as the purpose of the same was only to facilitate taking a loan from bank and it was never a document to establish the ownership of agricultural land. He also noted that it was common practice adopted in giving agricultural lands on oral agreements and the claim of the assessee of having given its agricultural land to farmers which was duly supported by the declarations filed by the concerned farmers could not be denied merely for want of written agreement as done by the A.O. Having regard to all these finding of facts recorded by the Ld. CIT(A) based on the relevant documentary evidence, which have not been controverted or rebutted by the learned D.R. at the time of hearing before us, as well as other findings given by him in the impugned order, we find no justifiable reason to interfere with the impugned order of the Ld. CIT(A) accepting the claim of the assessee for exemption on account of agricultural income in all the four relevant years. Accordingly, Ground No.3 of the Revenue's appeal for A.Ys. 2008-09 to 2012-13 is dis....
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....y of Rs. 9.9 crores shown by the assessee as payable to GTC, he estimated the amount of inflated expenditure at Rs. 8.89 crores. From the said amount, he reduced a sum of Rs. 3.04 crores being 89.81% of the profit of Rs. 3.39 crores offered by the GTC and arrived at the amount of inflated sub-contract expenditure at Rs. 5.85 crores. Finally, the said amount was rounded-up by him at Rs. 6 crores and the sub-contract expenses calimed by the assessee were disallowed by him to that extent in A.Y. 2011-12. 11.2. On the similar line as adopted in A.Y. 2011-12, the A.O. verified the sub-contract expenses claimed by the assessee in A.Y. 2012-13 and held for the similar reasons as given in A.Y. 2011-12 that one sub-contractor namely M/s. AHA Projects P. Ltd., to whom sub-contract payment of Rs. 8.1 crores was made by the assessee, was used as conduit to inflate sub-contract expenditure. He however, adopted a different method to quantify the alleged inflated sub-contract expenditure for A.Y. 2012-13. In this regard, he adopted the rates given in NHAI Data Book 2009 and applying the same to the work of excavation of soil and embankment construction stated to be done by the concerned sub-co....
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....ame Assessing Officer in fact completed the assessment in the case of GTC as well under 143(3) r.w.s 147 and in fact made an addition of Rs. 7.83 crores as part of turnover from KNRCL not reflected by M/s GTC during the relevant year and proceeded to consider the total contract receipts of Rs. 25.76 crores from M/s KNRCL, the appellant as M/s GTC's receipts. Copy of the asst. order dated 25.03.2015 was submitted as part of the second paper book. This assertion and action of the AO in the assessment order of the GTC actually goes in favour of the appellant. g) Sworn statement was recorded from the proprietor of GTC and it was confirmed that GTC has executed the work on its own. h) Photographs were taken showing the works executed by GTC at the time of the visit of the AO to the project site to inspect whether or not such works was completed on ground. i) The appellant had given as many as ten documents including the photographs of the works executed and referred supra to the AO which were also admitted in para VII & VIII on pages 12 and 13 of the asst. order. j) Contemporary Certificate dated 05.08.2010 obtained from the Sarpanch of that area for ....
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....rks were completed and all the payments were by way of cheques and the same were also offered to tax by the sub contractor. In fact, if one excludes the "suppressed" turnover of Rs. 7.83 crores mentioned in the asst. order of the sub-contractor M/s. GTC by the same Assessing Officer, the actual percentage of profit offered to tax in the tax return filed comes to 19% (3.41 crores on a turnover of 17.93 crores) and is still 13.23 % after considering the turn over as 25.76 crores (17.93 crores plus 7.83 crores) (b) The disallowance was quantified on the basis of outstanding liability of the sub-contractor in the balance sheet of the sub-contractor as on 31.03.2011. Firstly, it is assumed that 89% of this outstanding liability relates to the works given by the appellant. Then the second presumption is that this 89% of liabilities in the books of the sub contractor are "inflated" and are "income" of the main contractor. Now, liabilities in the books are linked to either capital or revenue expenditure and revenue expenditure is debited to P & L acct. The expenditure was accepted without rejecting books but the consequent liabilities, without any reference to the actual ....
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....de of P & L acct of sub contractor was accepted in the detailed scrutiny assessment made in its case) and the absence of any evidence indicating flowing back of cash on account of such "inflation" to the main contractor. In this manner, the AO can estimate and overturn every expenditure debited by comparing with the rate book and estimating "what should be correct expenditure " and deem everything above such " rates" as "inflation" of expenditure. Thus, not only the quantification of what should be "correct expenditure" is questionable, the inference drawn being that of inflation by main contractor is equally questionable." 11.6. On the basis of the findings and observations recorded as above, the Ld. CIT(A) held that the disallowance made by the A.O. on account of alleged inflated sub-contract expenses was not justified and the same was deleted by him in both the relevant years i.e., A.Ys. 2011-12 and 2012-13. Aggrieved by the same, the Revenue has raised this issue in ground No.4 of its appeal for A.Ys. 2011-12 and 2012-13. 12. At the time of hearing before us, the learned D.R. strongly relied on the order of the A.O. in support of Revenue's case on this issue and submitted....
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....ssessments completed under section 143(3) in their cases, the amount claimed to be paid by the assessee on account of sub-contract work was accepted by the A.O. It is, thus, clear that a contrary stand is taken by the A.O. on this issue and while accepting the contract receipts in the hands of the concerned two subcontractors in whose cases the defects and deficiencies were found by him, the A.O. did not accept the payment of the same amount made by the assessee in its case. As rightly held by the Ld. CIT(A) in his impugned order, neither this basis adopted by the A.O. to allege the inflation of sub-contract expenses by the assessee nor the quantification of such inflated expenditure done by him is justified in the facts and circumstances of the case. As further held by the Ld. CIT(A), the assessee had discharged his onus to support and substantiate its claim of sub-contract expenses by establishing on evidence that the relevant work assigned to the said sub-contractors was actually executed, payments were made for the subcontract to the concerned two sub-contractors by cheque and tax was also duly deducted while making such payments. Moreover, there was no evidence brought on reco....