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2018 (12) TMI 1964
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....ted 30/12/2010. 4. The assessee has made an application under rule 27 of ITAT Rules vide letter dated 27th of June 2013 contending the validity of the reopening under section 147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The relevant contents of the application are reproduced as under: "Prayer under Rule 27 of the Income-tax Appellate Tribunal Rules: The respondent abovenamed most respectfully states that the aforesaid appeals have been filed by the Revenue against order of the first appellate authority dated 8-2-2011 arising out of orders u/s 147. Before the first appellate authority, the appellant had raised a specific ground of appeal challenging the re-opening of the assessment u/s 148 of the Act. During the re-assessment proceedings, the respondent objected to the issue of notice u/s 148 for reasons furnished by the assessing officer. The same were negatived by the assessing officer and the claim for deduction of income u/s 80IA(4) of the Act which was originally allowed in order passed u/s 143(3) of the Act, was diseilowed by way of order u/s 147 of the Act. Before the first appellate authority also the ground r....
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....3 of section 80IA(4) of the Act, by the Finance Act 2009 with effect from 01.04.2000. Accordingly, the AO recorded the reasons for escapement of income and issued a notice to the assessee under section 148 of the Act. The reason recorded by the AO for reopening of the assessment under section 147 of the Act reads as under: "Vide above referred letter you have requested the undersigned for dropping the assessment proceedings u/s.148 on the basis of judicial pronouncements of the Honorable Mumbai High Court in the case of M/s.R.Rallis India Ltd. vs. ACIT, Mumbai writ petition No.2514 (2009). In this regard your kind attention is invited to this office order providing reasons for reopening of assessment for the year under consideration dated 05/07/2010 wherein the reasons for reopening the assessment proceedings have been well discussed. However, it is again informed that the assessment has been reopened on the following reasons: The provision of law outlined in the section 80-IA(4)(i) as it stood during the previous year under consideration and on the basis of which you have claimed deduction, reads as under: [Deduction in respect of profits and ga....
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....e assessment under section 147 of the Act but could not succeed. The assessee carried the matter to the Ld.CIT(A) who did not adjudicate the issue of reopening the assessment under section 147 of the Act. The relevant extract of the Ld. CIT(A) order reads as under: "8. In view of the above decision on merits of the case, the ground related to reopening of assessment has become purely academic, and needs no further adjudication. The same is, therefore, dismissed." 8.1. However, the Ld. CIT(A) was pleased to grant the relief to the assessee on merit. Therefore the assessee did not prefer any appeal to the ITAT. However, the Revenue against the order of Ld. CIT(A) has filed an appeal before the Ld. ITAT. Accordingly, the assessee applied under rule 27 of the ITAT rules challenging the validity of the reassessment under section 147 of the Act. 8.2. Now the controversy arises whether the assessee can challenge the validity of the reassessment under section 147 of the Act by way of an application under rule 27 of ITAT rules. At this juncture we find important to refer to the relevant provisions of rule 27 of ITAT rules which are reproduced as under : "Respondent m....
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....ppellate Commissioner would lie against an order which is adverse to the appellant. May be, on one out of two grounds if the appeal of the assessee is allowed by the Appellate Commissioner in its entirety, he cannot be stated to be a person aggrieved by such order. His appeal under sub-section (1) of section 253 would not be maintainable. The assessee cannot file a standalone appeal challenging a finding of the Appellate Commissioner which may be against the assessee as long as the appellate order of the Commissioner is entirely in favour of the assessee and no part of the appeal of the assessee's claim is rejected. Under sub-section (4) of section 253, it is open for a person either an Assessing Officer or, the assessee, upon receipt of a notice of the appeal filed before the Tribunal to file crossobjection against any part of the order of the Commissioner (Appeals) and such cross-objection would be dealt with by the Tribunal as if it were an appeal presented within the time specified. Two things thus become clear. A cross-objection under section (4) of Section 253 could be directed against any part of the order of the Appellate Commissioner and if so presented, it would be di....
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....charge of an antecedent debt, the respondent was precluded from putting forward a contention that the entire sum of Rs. 80,000/- covered by Exs. A and B went for the discharge of antecedent debts. We do not see any substance in this objection, because the respondent is entitled to canvass the correctness of findings against it in order to support the decree that has been passed against the appellant." 8.4. We also find support and guidance from the judgment of Hon'ble Rajasthan High Court in the case of Deep Chand Kothari Vs. CIT reported in 35 taxman 223 wherein held as under: "It was not in dispute that the jurisdiction of the ITO was duly challenged by the assessee before the ITO himself and also in the memorandum of appeals filed before the AAC. It was not disputed that the AAC did not touch this point in his common order dated 17-3-1972 and decided the appeals on merit in favour of the assessee. As such it would be deemed that the AAC decided the point of jurisdiction against the assessee. Admittedly, the said point of jurisdiction was duly raised before the Tribunal. Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, provides that the respondent, though h....
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.... such retrospective amendment reopened the case of the assessee under section 147 of the Act. The reason for the reopening has already been discussed in the preceding paragraph. 9.1. It is settled law that reopening of the assessment under section 147 of the Act cannot be done on account of retrospective amendment in view of the judgment of Hon'ble Gujarat High Court in the case of Sadbhav Engineering Ltd. Vs. DCIT reported in 45 taxmann.com 388 wherein it was held as under: "In the present case, as could be noted from the material on record, the Assessing Officer on a detailed scrutiny had explained the claim made by the Assessing Officer under section 80-IA(4) of the Act. This was also challenged further before the Commissioner (Appeals) and the Tribunal. The sole question, therefore, is whether the reassessment proceedings can be initiated only on the basis of insertion of Explanation which had been substituted by the Finance (No. 2) Act, 2009 with retrospective effect from 1-4-2000. Such Explanation clarified that the deduction under section 80-IA of the Act would not be admissible in the case of an assessee carrying on business in the nature of works contract. Such....
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.... the ITAT rules is allowed. 13. In the result, the appeal of the Revenue is dismissed. Now coming to ITA No. 214/Rjt/2011 for AY 2008-09 appeal filed by the Revenue 14. Revenue has raised the following grounds of appeal: 1) The learned CIT(A)-I, Rajkot, has erred in law and on facts in deleting addition made on account of disallowance of deduction u/s.80IA(4) of the IT Act. 2) On legal and factual status of the case, the learned CIT(A), ought to have upheld the order of the Assessing Officer. 3) It is, therefore, prayed that the finding given in the order of the Ld.CIT(A) may be dismissed/deleted and that of the Assessing Officer be restored. 15. The only issue raised by the Revenue is that Ld. CIT(A) erred in deleting the disallowance made by the AO for Rs.34,33,399/-under section 80IA(4) of the Act. 16. The assessee during the year has claimed deduction under section 80IA(4) of the Act for Rs. 34,33,399/- only. However, the AO was of the view that the assessee is acting as a works contractor and accordingly held that the assessee is not eligible for deduction under section 80IA(4) of the Act on the basis of explanation added by finance Ac....
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....The issue in question is squarely covered by the decision of the Hon'ble ITAT, Rajkot Bench in the above cases. The Hon'ble ITAT, Rajkot Bench has, in the case of M/s. Ketan Construction Ltd. (in ITA No.ll07/RJT/2010), held as under :- "7. ..................................................... The main issue in controversy which is the subject matter of appeal before us is, whether the claim of the assessee-appellant for deduction of its profits and gains can be said to be admissible in law, in view of the specific provisions of Sec. 80-IA(4) read with the impugned Explanation as applied to the facts and circumstances of the case. While answering this question, it would first be relevant and appropriate for us to examine the past records of assessments of the assessee and of other similar cases dealt with by us and involving similar kinds of businesses. In this context, we find, and there is no dispute from either side in this regard, that the issue regarding nature of business in such cases came to be examined by this Bench in various cases for various assessment years. In I.T.A. Nos 837 & 838/R/2009 for A.Ys, 2003-04 & 2004-05, in I.T.A. Nos. 835 & 836/R/2009 for ....
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....eduction under subsection (4). cannot be denied on the ground of said Explanation. While so holding, we are conscious of the fact that the said Explanation was not on the statute book at the time of passing of our said orders in above-referred ITAs but our finding regarding nature of business of the respective assessees continues to apply even after the insertion of the said Explanation. The factual position regarding nature of business being same as in earlier years of the very same assessee as also in similar other casers before us, has not been controverted before us. Hence, in our view, although it is held that the principle of res judicata does not apply to income tax proceedings, at the same time, the equally well-established rule of consistency also cannot be overlooked. In the case of Radhasoami Satsang vs C.I.T. 193 ITR 321 (SC) the Hon'bfe Supreme Court has laid down the principle which is well accepted all along that absence of any material change, a different view than that taken in earlier years, could not be taken in later years. We are of the opinion that this proposition of law read with the rule of consistency in tax proceedings has been applied all the more wh....
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....rious resources of its own by way of machineries, technical knowledge, technical and other manpower, materials etc. and also funded the same out of its own capital and borrowings. The appellant was required to furnish guarantees including free maintenance of the infrastructure facilities. All these factors combined clearly go to show that the appellant also assumed considerable risk in the capacity of a businessman and the such tasks as undertaken, although under a contract as mandated by the Section, would require skills of planning of work, employing technical know-how to execute the work and to face the consequences of attendant risks. We find that the risks are upon the assessee and not upon the Govt. These elements are generally missing in the case of a sub-contractor. Here, the appellant is directly engaged in performing its functions Further, in the case of Om Metals Infraprojects Ltd. (supra), it is held that if it is the assessee mobilizing people, plants, technical expertise etc., the assessee can be said to be a developer and that ! the assessee cannot be denied deduction from the profits of developing the infrastructure facility though it may not operate or maintain the....
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....red the rival submissions put forth before us by both the sides. We have also perused the orders of lower authorities and the case law cited before us alongwith the material on record. The main issue in controversy which is the subject matter of appeal before us is, whether the claim of the assessee-appellant for deduction of its profits and gains can be said to be admissible in law, in view of the specific provisions of Sec. 80-IA(4) read with the impugned Explanation as applied to the facts and circumstances of the case. While answering this question, it would first be relevant and appropriate for us to examine the past records of assessments of the assessee and of other similar cases dealt with by us and involving similar kinds of businesses. In this context, we find, and there is no dispute from either side in this regard, that the issue regarding nature of business in such "cases came to be examined by this Bench in various for various assessment years. In I.T.A. Nos. 837 & 838/R/2009 for A.Ys. 2003-04 & 2004-05, in IT.A. Nos. 835 & 836/R/2009 for A.Ys. 2003-04 & 2004-05, in I.T.A.Nos.850 & 851/R/2009 for A.Y. 2003-04 & 2004-05, on the issue concerning deduction u/s.80-IA(4) a....
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....d Explanation was not on the statute book at the time of passing of our said orders in abovereferred ITAs but our finding regarding nature of business of the respective assessees continues to apply even after the insertion of the said Explanation. The factual position regarding nature of business being same as in earlier years of the very same assessee as also in similar other casers before us, has not been controverted before us. Hence, in our view, although it is held that the principle of res judicata does not apply to income tax proceedings, at the same time, the equally well-established rule of consistency also cannot be overlooked. In the case of Radhasoami Satsang vs C.I.T. 193 ITR 321 (SC) the Hon'ble Supreme Court has laid down the principle which is well accepted all along that absence of any material change, a different view than that taken in earlier years, could not be taken in later years. We are of the opinion that this proposition of law read with the rule of consistency in tax proceedings has been applied all the more while granting various deductions from total income in the - of another well recognized proposition that any provision granting rebate or benefit....
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....f its own capital and borrowings. The appellant was required to furnish guarantees including free maintenance of the infrastructure facilities. All these factors combined clearly go to show that the appellant also assumed considerable risk in the capacity of a businessman and the such tasks as undertaken, although under a contract as mandated by the Section, would require skills of planning of wade, employing technical know-how to execute the work and to face the consequences of attendant risks. We find that the risks are upon the assessee and not upon the Govt. These dements are generally missing in the case of a sub-contractor. Here, the appellant is directly engaged in performing its functions Further, in the case of Om Metals Infraprojects Ltd. (supra), it is held that if it is the assessee mobilizing people, plants, technical expertise etc., the assessee can be said to be a developer and that the assessee cannot be denied deduction from the profits of developing the infrastructure facility though it may not operate or maintain the same, particularly in view of the insertion of the word "or" in Sec. 80-IA(4). 9. Considering the totality of the facts on record as also t....
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....T(A) who has confirmed the order of the AO by observing as under: "5.3 I have carefully considered the submission of the appellant and the finding of the A.O. in his assessment order. It is seen that this issue has been decided by the Hon'ble Gujarat High Court in the case of Katira Construction Ltd. vs. Union of India (2013) 352 ITR 513. The Hon'ble High Court has held as under:- "In the present- case, therefore, from both the angles, namely, whether the explanation aims to expand the prevailing provision and whether being in the nature of a tax statute, such change can be permitted with retrospective effect, it would be crucial for us to discern the true effect of such explanation. In this context, we may recall that the impugned explanation below sub-section (13) to section 80IA starts with an expression "for the removal of doubts, it is hereby declared that" and provides that nothing contained in this section shall apply to in relation to a business referred to in subsection (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 sub-sect....
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....uch deduction was split into developing or operating and maintaining or developing, operating and maintaining infrastructure facility. The Revenue could therefore, legitimately contend that no such deduction was envisaged for mere execution of works contract. If this was the position, in our understanding, what the explanation, did was to clarify a statutory provision which was at best possible of a confusion. If that be so, the explanation must be seen as one being in the nature of plain and simple explanation and not either adding or subtracting anything to the existing statutory provision. When we hold that the impugned explanation was purely explanatory in nature and did not mend the existing statutory provisions, the question of levying any tax with retrospective effect would not arise. If we agree with the submission of the counsel for the petitioners that such explanation restricted or aimed to restrict the provisions of deduction, certainly a question of reasonableness in the context of retrospective operation would arise. In the present case, however, we have come to the conclusion that the explanation only supplied clarity where, at best confusion was possible in the unam....
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....(A) confirmed the disallowance of the deduction under section 80IA(4) of the Act was distinguishable from the facts of the assessee. 27. In such case, the Hon'ble Gujarat High Court has upheld the validity of explanation added after sub-section 13 of section 80IA(4) under the statute by finance Act 2009 with retrospective effect from 01.04.2000. There was no question before the Hon'ble Gujarat High Court with regard to the fact whether the assessee is acting as a works contractor or not. Therefore no reliance can be placed on the judgment of Hon'ble Gujarat High Court as discussed above in the light of given facts & circumstances. 28. On the other hand the Ld. DR vehemently supported the order of the authorities below. 29. We have heard the rival contentions and perused the materials available on record. It is an undisputed fact that the assessee has been claiming deduction under section 80IA(4) of the Act which was allowed for all the years which was also upheld by the ITAT in its own case. 29.1. However, the ld. CIT-A reversed his stand for the year under consideration. Therefore the issue of whether the assessee is hit by the explanation added to section 80IA(4) of t....
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....)(i)(a)(b) which the assessee satisfies. There is no dispute since there is a valid contract as required. The next requirement for the benefit to be extended under the said provision is that the enterprise should provide an infrastructure facility in relation to establishing a road, a bridge or a rail system or Airport. There is no specific intendment as to the nature of work to be undertaken as is evident from the explanation. Therefore, the word contained therein has wide amplitude. The Assessing Officer was not correct in prescribing certain limits and describing the nature of work. In other words, the assessing authority attempts to dissect the contract and hold that it does not justify the claim for deduction. This is not inclined to be accepted if the requirement of section 80-IA(4)(i) and section 80-IA(4)(i)(c) explanation is satisfied, then the benefit has to flow. The provisions of section 80-IA(4)(i) applies to an enterprise carrying business of a developer, who satisfies the requirement of section 80- IA4(i)(a)(b) and provides an infrastructure facility as set out in the explanation. If the provision is read as a whole and the explanation is read in ter....