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2018 (5) TMI 506
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....ist West Medinipur, West Bengal. 4. A search and seizure operation u/s 132 of the Act was conducted on the assessee on 18.02.2013. Notice u/s 153A of the Act was issued to the assessee on 08.05.2014 for all the impugned assessment years. In response to the notices u/s 153A of the Act the assessee filed its return of income. The AO passed an order u/s 153A r.w.s. 143(3) of the Act on 31.03.2015 for A.Y.2009-10, 2010-11, 2011-12 and 2012- 13. 5. The ld. Pr. CIT, Central-I, Kolkata issued a show cause notice u/s 263 of the Act on 28.02.2017 proposing to initiate proceedings u/s 263 of the Act, on the points mentioned in the said notice. 6. The said points are as follows :- "2. Scrutiny of assessment record reveals that you have claimed deduction u/s 801A(4) for your Private Railway Sidings. It appears that you have developed and owned two private sidings situated from Nimpura to Gokulpur in West Bengal and Barajamda to Barbil in Odisha and that you have entered into two separate agreements with South Eastern Railways. Perusal of agreements reveals the following: : (i) The private siding was not an infrastructure facility of Public Utility. Rather those were ....
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....he Act and as the assessments for A.Y.2009-10, 2010-11 and 2011-12 have not abated, no disallowance can be made u/s 80IA of the Act by the AO as per law. Hence the AO's order is in accordance with law.. (b)There was no lack of enquiry by the AO during the course of assessment proceedings on this issue. Hence it was argued that the orders in question are not erroneous or prejudicial to the interest of the revenue. (c) On merits, it was submitted that the assessee company is entitled to claim of deduction u/s 80IA of the Act. Reliance was placed by the assessee on a number of case law. 8. The ld. Pr.CIT rejected the various contentions of the assessee. At para - 4(a) at page 11 and 12 of his order, he held that the certain documents had been found during the course of search and that these documents indicate that the assessee has been using the railway sidings in this business and that he was claiming deduction u/s 80IA of the Act for the same. The contention of the assessee that no incriminating material relating to the claim of deduction u/s 80IA of the Act was found during the course of search was rejected as not based on facts. The material in question as per the ld. CIT....
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....on the issue of claim of deduction u/s. 80IA(4), on the assessment already completed prior to search. The above issues are not part of any incriminating document found / seized as a result of a search. As such, as per well settled law, no addition can be made u/s 143(3)/153A proceeding on the completed assessment. As such, jurisdiction u/s 263 of the Act cannot be exercised on the same. The order passed u/s 263 of the I. Tax Act needs to be quashed. 2) That without prejudice to our above ground, the AO has conducted proper enquiry. The order of the AO is not erroneous as well as prejudicial to the interest-of the revenue on the issue of claim of deduction u/s 80IA(4). As such, exercising of the power u/s 263 of the I. Tax Act is bad in law and needs to be deleted. 3) That the Ld. PCIT was wrong in alleging that deduction of Rs. 17,62,41,550/- u/s. 80IA(4) of the I.T. Act has been wrongly allowed based on his inference that the assessee had developed and at that time maintaining and operating the Private Railway Siding for its own personal benefit and thus the infrastructure facility was inaccessible to the general public. The company-has entered into agreement wit....
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.... freight has been evaded by the assessee. He submitted that the assessee has challenged these allegations of the DRM before the High Court, and that hence this is not a incriminating material. He further submits that the document has no relevance or in connection with the claim of deduction u/s 80IA of the Act. 14. He further submitted that each of the said three documents were before the AO during the course of assessment proceedings and the assessee had submitted detailed replies to the AO on the documents on queries made, copies of which are placed at pages 51A to 51M of the common paper book. He submits that the AO found these explanations satisfactory and accepted the same as part of the regular books of accounts of the assessee. He relied on a number of case laws in support of his contention that revisionary powers exercised by the ld. Pr.CIT on the facts and circumstances of the case is bad in law. We will be referring to these case laws as and when necessary. 15. For A.Y.2012-13, he submitted that, it is an abated assessment and hence the above arguments on finding of incriminating material advanced for A.Y.2009-10, 2010-11 and 2011-12 do not apply. 16. On merit....
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.... is a captive unit of the assessee, deduction u/s 80IA cannot be denied as per law. For this proposition, he relied on a number of decisions some which are (a)M/s Tamilnadu Petro Products Ltd vs ACIT vide (2010) 338 ITR 643 (b)ACIT vs Tata Metalics Ltd vide ITA No.737 to 740 & 956 to 959 (Kol) of 2012 (c)M/s West Coast Paper Mills Ltd vs ACIT (2014) 52 taxmann.com 268 (d)ACIT vs Jindal Steel & Power Ltd vide ITA No.3257 and 3485 (Delhi) of 2005. He prayed that the order of the Pr. CIT passed u/s 263 be quashed as bad in law. 19. The ld. Departmental Representative, on the other hand, strongly opposed the contentions of the assessee and submitted that, it is a case where the assessee has constructed an infrastructure facility, which is used exclusively for itself and to the exclusion of others. He submitted that it is not a public private partnership and it is of no benefit to the public on the copies of the letters filed by the assessee in support of the contentions that various third parties have utilised the facility, he submitted that the railways have permitted limited use and such temporary permission in select cases cannot be consider....
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.... ld. DR. He further relied on certain decision for the proposition that, the claim of deduction u/s 80IA of the Act should be examined in the 1st year of claim and that the claims made in the subsequent years should not be disturbed on the principle of consistency. 24. Heard rival contentions, on a careful consideration of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below as well as case law cited, we hold as follows :- 25. For A.Y.2009-10, 2010-11 and 2011-12 the statement submitted by the assessee and not disputed by the revenue is as follows :- Particulars Assessment Years 2009-10 2010-11 2011-12 Date of filing of return u/s 139(1) of the Act 29.09.2009 14.10.2010 29.09.2011 Returned Income Nil Rs.16,03,88,042/- Rs.28,63,29,580/- Date of Revised Return NA NA 30.03.2012 Returned Income Rs.8,42,58,348/- NA Rs.30,80,00,000/- Deduction claimed u/s 80IA Rs.13,75,28,366/- Rs.19,37,58,406/- Rs.31,39,28,826/- Date of Completion of Assessment u/s 143(3) of the Act 28.04.2011 30.12.2011 - ....
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....n made by the AO on this issue. The assessee has also challenged this letter in the courts of law. The addition itself was the subject matter of appeal before the ld. CIT(A). Under the circumstances, it cannot be held that this letter is incriminating material. Even otherwise this letter is not connected with the claim of deduction u/s 80IA (4) of the Act. In fact, when the disallowance is made based on this letter the profit increase, and consequently the claim of deduction u/s 80IA(4) of the Act also increases. In fact none of these three documents are related to claim of deduction u/s 80IA(4) of the Act. 29. Moreover, we find that all these documents were examined by the AO and the assessee has replied to the queries posed by the AO on these documents during the course of assessment proceedings and the AO had accepted the replies. Thus there is no new material much less incriminating material that has been found during the course of search. 30. Hence, we conclude that there is no incriminating material found during the course of search relatable to the claim of deduction u/s 80IA (4) of the Act by the assessee. 31. The law on these facts is discussed by the Co-ordinate ....
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.... as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. (2 Supra) and observed that every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Assessing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing ....
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....e Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been impos....
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....he facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer; but that would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure; there must be material available on the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh inquiry in matters which have already been concluded under law. 29. In M.S. Raju(15 Supra), this Court has held that the power of the Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interes....
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....ith which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. c) To invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the ....
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....nvestigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer....
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....on is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the ....
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....he Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90-92, 102) COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS 296 ITR 238 (P&H HC) A reference to t....
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....he opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr.Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed - "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the ....
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....or several times in the contract agreement. Moreover the assessee has in his Return filed in response to notice u/s 153A claimed tax credit on tax deducted at source u/s 194C [TDS on contractual receipts], which clearly affirms my findings as discussed above. In this regard, the claim of the assessee that no incrementing evidence relatable to the aforementioned issue and claim of deduction u/s 80IA was found during the course of search operations, is thus, not legally tenable. The case laws relied upon by the assessee, are thus distinguishable and does not apply to the instant case." (Emphasis ours) 14. We have examined the said material document found and seized during search. In our view, the material bearing mark SRK-20, a notarized affidavit filed before the Government of Bihar cannot by any stretch of imagination, said to be an incriminating material. The affidavit states that the assessee is a registered contractor with the Road Construction Department of Government of Bihar. We are unable to uphold the view of the ld. Pr. CIT that this affidavit is incriminating material. This document is part of the record and is filed for obtaining tenders and it reflects that the asses....
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....7 "6. We have heard the rival submissions and perused the materials available on record including the paper books filed by the assessee containing the seized documents and explanations given by the assessee thereon before the Id AO and the Id CFT. It is not in dispute that as on the date of search the original assessment for Asst Year 2010-11 was completed u/s 143(3) of the Act and hence stood unabated. It is now well settled by various high courts including the Hon'ble Jurisdictional High Courts relied upon supra that the concluded assessments could be disturbed only in the event of presence of any incriminating materials found in the course of search. We find from the above explanation of various seized documents found in the course of search, there was absolutely no material much less any incriminatingmaterial, so as to disturb the earlier concluded assessment for the Asst Year 2010-1 1. Hence the Id AO had rightly not considered the aspect of deemed dividend and claim of depreciation on motor lorries at 30% while framing the search assessment u/s 153A of the Act. Moreover, we find that the assessee had given proper explanations regarding these items before the lowe....
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....s in the assessments framed u/s 153A of the Act. Moreover, we find that the assessee had given proper explanations regarding these items before the ld CIT as reproduced above. We find that the assessee had also duly explained the complete contents of the seized documents relied upon by the Id CIT in his order. In our considered opinion, those material are not incriminating at all and are forming part of regular books of accounts of the assessee. These explanations have been completely ignored by the Id CIT while directing the Id AO to frame the assessment afresh. We hold that when an addition could not be made as per law in section 153A proceedings, then the said order cannot be construed as erroneous warranting revisionary jurisdiction u/s 263 of the Act by the Id CIT. We hold that even on merits, there is no case made out by the Id CIT for making any addition on the issues proposed in the show cause notice of, Id CIT. In these facts and circumstances, we find that the order of the Id CIT u/s 263 of the Act for the Asst Years 2008-09 to 2011-12 deserve to be quashed. Accordingly, the preliminary ground raised by the assessee on the issue of assumption of jurisdiction u/s 263 of th....
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....opositions of law laid down by the Co-ordinate Benches of the ITAT to the facts of the case, we have to hold that the order passed by the ld. Pr. CIT, for all the three Assessment Year 2008-09, 2009-10 & 2010-11, is bad in law." 32. Respectfully following the propositions of law as discussed and applied in the above case law, we uphold the contentions of the assessee that order passed u/s 263 of the Act for A.Y.2009-10, 2010-11 and 2011-12 are bad in law as no incriminating material relatable to the claim of deduction u/s 80IA(4) of the Act was found during the course of search and as the assessments have not abated and are completed assessments. 33. Coming to the merits of the case of allowability of deduction u/s 80IA (4) of the Act, we find that the ld. Pr.CIT has categorically held that at page 16 of his order that the claim of deduction u/s 80IA (4) of the Act, in respect of providing railway sidings claimed by the assessee, was not allowable under the facts and circumstances of the case. When such categorical findings, is given by the ld. Pr. CIT, there is nothing left for the AO to adjudicate though the Pr. CIT at the last para of his order directed the AO to pass a fr....
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....and maintenance after 1.4.1995. Hence in our view all the conditions are satisfied. 37. Be it as it may, clause -19 of the agreement between the assessee company and the railways reads as follows :- "19. .Railway Administration's Rights regarding use of the siding: - In addition to any other rights, powers and liberties herein provided for, the Railway Administration shall have the following rights, -powers and liberties, over and in connection with the siding or any extension or part thereof, namely- (a)To use the siding or any extension or part thereof for any purposes' of the Railway Administration free of charge or any remuneration to the Applicant in respect of such use (b)To connect or allow to be connected with the siding or any extension or part thereof any other siding or sidings branching or extending there from which may have been constructed or which may hereinafter be constructed by or under the authority of the Railway Administration for any other person or persons whomsoever or for the purpose of the Railway Administration and to make or allow such alterations as may be necessary to effect such connection. (c)To use or t....
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....there is no operation and maintenance of the Railway sidings. In this regard, earned Counsel for the assessee submitted that finding of the Ld. PCIT is not correct as the assessee has developed and agreement, which is reads as under: - "Clause No. 8(b) Wherein it is mentioned net; Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. " 14. Therefore, Learned Counsel for the assessee submitted that, it is very clear from the above clause that the assessee is bearing the expenses of maintenance of the sidings. Even otherwise he submits that the Hon'ble Bombay High Court in case of CIT v. ABG Heavy Industries Limited 322 ITR 323(Bom) has held that: - "Deduction under section 80-IA is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates....
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....me to be treated as an infrastructural facility for claiming deduction u/s 801A of the Act. "19. With regard to the objection of the Ld. PCIT regarding usage of the siding by the Railway he submits that its usage for shunting or otherwise is not a condition precedent as per the provisions of section 80IA( 4) of the Act. He submits that nowhere this section says anything about the usage of rail system developed by the assessee company. Learned Counsel for the assessee referred to clause 19 of the agreement made by the assessee company with South Western railway which state as under: - "Railway administration 's rights regarding use of the siding: In addition to any other rights, powers and liberties herein provided for, the Railway Administration shall have the following rights, powers and liberties, over and in connection with the siding or any extension part thereof, namely -(a)To use the siding or any extension part thereof for any purposes of the Railway Administration free of charge or any remuneration to the Applicant in respect of such use" 20. Referring to the above clause he submits that the above mentioned clause clearly provides unhindered r....
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....ay siding was allowed and the Revenue even took up the matter before the Hon 'ble Bombay High Court and the Hon'ble Bombay High Court by order dated 02.04.2014 in ITR 6070 of 2010 refused to answer the question of law. The assessee furnished this copy to the. Assessing Officer in the course of Assessment Proceedings and the Assessing Officer after examining the details furnished by the assessee as well as the order of the ITAT in the case of M/s.Ultratech Cements Limited (supra) for the Assessment Years 2004-05 and 2005-06 took a view that assessee is entitled for deduction u/s. 80lA of the Act in respect ot Railway sidings and water supply system. In our view, this is one of the view possible and therefore the Id. PCIT should not have hold that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue/ in view of the decision of the Hon 'ble Supreme Court in the case of CIT v.Max India' Limited [295 ITR 287} and Malbar Industries Co Ltd. v. CIT [243 FTR 83}. 33 ........................... 38. Learned Counsel for the assessee also took us through the agreement entered into by' the assessee in respect of t....