AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2018 (1) TMI 605
X X X X Extracts X X X X
X X X X Extracts X X X X
....As such, the assessee is not eligible to claim deduction u/s 80-IA. I, therefore, have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. Accordingly notice U/s. 148 is issued with the prior approval of Pr. Commissioner of Income Tax, Gulbarga." 3. The original Assessing Authority, while passing the Assessment Order under Section 143(3) of the Act, earlier on 28.03.2013, upon a detailed scrutiny of the records of the petitioner-assessee, engaged in the business of construction of roads, buildings, dams, National Highways etc., namely infrastructural facilities was allowed the deduction u/s. 80-IA(4) of the Act, for the A.Y.2010-11 vide Annexure-C dated 28.03.2013 after discussing all the relevant contracts and certificates issued by the concerned Executive Engineers of the National Highway Divisions of Public Works Department and others, and allowed the said claim of the deduction under Section 80-IA(4) of the Act, partly to the extent of 68.75% against the claim of the petitioner-assessee, and disallowed the remaining part on the ground that some of the works contracts were only for impr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. In view of the above clarification, the assessee is not entitled to claim deduction u/s 80IA of the Income Tax Act since the works undertaken are only improvements to roads. Therefore, the assessee has been asked to clarify as to how the company is eligible to claim deduction u/s. 80-IA of the Income Tax Act. In response to above, the assessee, vide its letter dated 25-03-2013, had stated as under. "Section 80IA(4)(i) states that for the purpose of this clause, infrastructure facility means: a) road including toll road, a bridge or a rail system. b) A highway projects including housing or other activities being an internal part of the highway project. The board in Circular No.4/2010 dated 18-05-2010 has clarified that "it is decided that widening of an existing road by constructing the additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80IA(4)(i). However, simply relaying of an existing road would not be classified as a new infrastructure facility for this purpose". From the above the board has given explanation regarding a h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r KRDCL Bangalore certified that "M/s. Kotarki construction Pvt. Ltd. Bidar has tendered an executed the State Highway Road Works, the nature of work has been given as formation and improvement of State Highway Road works, it includes Widening of an existing road by constructing new roads as part of state highway projects". 7. SCR, Secunderabad certified that "M/s. Kotarki constructing Pvt. Ltd. Bidar has awarded tendered for executed the State Highway Divison Road Works. The nature of works has been given as new Improvements Diversion Road under Bridge as a part of Central Project Work". From the above certificates, it can be seen that EE PWD Bidar, EENH Division Bijapur, EE PRE Division, Gulbarga, PD DUC Bidar, have certified that the works given to the assessee are improvements to Road includes Widening of an existing road by constructing additional lanes/roads. In view of the above certificates, it is to be treated that the works undertaken by the assessee in respect to the above departments are eligible for claiming deduction u/s. 80-IA of the Income Tax Act, 1961. With regard to nature of work undertaken from by SENH MOST Bangalore, it was stated th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eard Mr.Shankar A. and Mr.S.Annamalai, learned counsels appearing for the petitioner and Mr.E.I.Sanmathi, learned counsel for the Respondents-Department. 6. Mr.Shankar A. learned counsel for the assessee, argued that there was no failure on the part of the petitioner- assessee who truly and fully disclosed all the relevant facts and evidence for the developments of the roads and highway undertaken by the petitioner-assessee during the said year and therefore, the Re-assessment proceedings has been undertaken after the end of four years of the A.Y. 2010-11 pm 31.03.2011 after the original Order was passed by the Assessing Authority on 28.03.2013 by issuing the impugned Notice dated 15.03.2016 and thus the 2nd Respondent-Assessing Authority had no jurisdiction to issue the impugned Re-assessment Notice u/s. 147/148 of the Act. 7. He also urged before the Court that even the Central Board of Direct Taxes in its Circular No.4/2010 issued on 18.05.2010 clarifying that the work of widening of an existing road by constructing additional lanes as a part of Highway project would be recorded as a new infrastructure facility for the purpose of Section 80-1A(4)(i) of the Act, however, si....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of assessment proceedings details of the nature of these works were called for and examined. On verification of the details of nature of work, it is seen that most of these works relate to improvements, repairs and widening of already existing roads. These roads and other projects are actually owned by the respective government departments and the assessee is merely a work contractor executing a part of them. By no stretch of imagination can it be said that the assesseee company is the developer of these infrastructure facilities. Explanation provided below Section 80-IA inserted by Finance Act, 2007 and later substituted by the Finance (No.2) Act, 2009 w.e.f.1-4-2000 clearly states that business in the nature of works contract is not eligible to claim the benefit u/s.80-IA. The explanation is reproduced hereunder: Section 80-IA Explanation-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section(4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the petitioner-assessee therefore submitted that the Re-assessment proceedings for the A.Y. 2010-11 deserves to be quashed by this Court. 13. Per contra, Mr.E.I.Sanmathi, learned counsel for the Respondents-Income Tax Department, urged before the Court that Explanation substituted by Finance Bill with retrospective effect from 1st April, 2000, which is quoted above denied such deduction u/s. 80-IA of the Act, in relation to a business in the nature of works contract awarded by any person including the Central or State Government and executed by the Undertaking or Enterprises referred to in sub-section (1) of Section 80-1A and since the petitioner-assessee was only executing the works contracts, the deductions allowed to him by the original Assessing Authority u/s. 143(3) of the Act was wrong and therefore, the Re-assessment proceedings initiated u/s.147/148 were justified. 14. I have heard learned counsels and perused the records. 15. This Court is of the considered opinion that the present writ petition deserves to be allowed and the Re-assessment Notice dated 15.03.2016 deserves to be quashed. The reasons are as follows: (i) Firstly, the original Assessment Order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 01.04.2000 per se confers jurisdiction upon the Assessing Authority to reopen the concluded and considered Assessment orders in such cases and even the development work of laying down of even a new National Highway or a road will amount to a works contract and therefore, the works contract of development of new roads or additional lanes by widening of the existing roads, were not intended to be given the benefit of deduction u/S. 80-I(4) of the Act by the said Explanation, is not sustainable. 18. The said Explanation as explained in the Memorandum of Finance Bill 2007 as quoted above, clearly lays down the guidelines when it says, " in contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA", intended to deny the benefit of such deduction only to the sub-contractors, who were executing such works contracts on behalf of the principal contractors and pure and simple they being the sub-contractors, naturally, the double deduction in the hands of principal contractors and sub- contractors c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act for the A.Y. 2010-11. 21. The powers of reassessment u/S.147/148 of the Act have to be invoked with great amount of circumspection and the relevant material on record, on the basis of which, a "reasonable opinion" can be framed in contrast with a mere "change of opinion" for initiating the reassessment proceedings. 22. Some guidance on this legal position can be deduced from the judgments of the Hon'ble Supreme Court and there are large number of judgments on this settled legal position. In the case of Commissioner of Income Tax vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC), the Hon'ble Supreme Court held as under:- "6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in Section 147 of the Act (with effect from 1st April 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in the place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." For the afore-stated reasons, we see no merit in these civil appeals filed by the Department; hence, dismissed with no order as to costs. 23. In Sitara Diamond Pvt. Ltd., vs. Deputy Commissioner of Income Tax & Others [(2012) 345 ITR 91], the Division Bench of Mumbai High Court, headed by Hon'ble Justice Dr.D.Y.Chandrachud, as his Lordship then was, held as under:- "6. We have considered the rival submissions. By the impugned notice dated 20 June 2011, the assessment for assessment Year 2005-06 is sought to be reopened beyond a period of four years of the end of the relevant assessment year. The condition precedent to the exercise of the jurisdiction to reopen an assessment beyond a period of four years as spelt out in the proviso to Section 147 is that there ought to be a failure on the part of the assessee to disclose ....