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2013 (6) TMI 737 - AT - Income TaxValidity of proceeding initiated under section 147 - assessee declaring Nil income after claiming deduction under section 80IA - Held that - Held that - Remit the mater back to the file of Assessing Officer who shall examine the issue afresh after considering the contract document as a whole and all other evidence that may be submitted by the assessee to demonstrate the fact that the assessee has actually developed the infrastructure facilities by undertaking the activities of design, development, engineering, construction, maintenance, financial involvement, defect correction of the contract during the warranty period. If the assessee will be able to establish such facts by supporting evidence, then, the assessee would be entitled to the deduction under section 80IA(4) of the Act. With the aforesaid observations, we set aside the Order of the CIT(A) and direct the Assessing Officer to decide the issue afresh by keeping in view of our observations made hereinabove.
Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act. 2. Disallowance of deduction claimed under Section 80IA(4) of the Income Tax Act. 3. Addition of Rs. 4,23,918/- to the gross total income. Issue-wise Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 147: The assessee filed its return for the A.Y. 2000-01 on 31.10.2000 declaring Nil income after claiming deduction under Section 80IA of the Act. The return was processed under Section 143(1) on 11.1.2001. Subsequently, the Assessing Officer (AO) reopened the assessment under Section 147, citing that the deduction claimed under Section 80IA was not allowable as the assessee had not fulfilled the conditions laid down in the section. The AO issued a notice under Section 148 and completed the assessment on 13.12.2007, disallowing the claim of exemption under Section 80IA. The CIT(A) upheld the AO's action, stating that since the return was only processed under Section 143(1), no opinion was formed, making the reopening valid. The assessee did not present substantive arguments against the reassessment proceedings before the tribunal, which confirmed the CIT(A)'s order. 2. Disallowance of Deduction Claimed Under Section 80IA(4): The assessee, a joint venture between two companies, entered into contracts for constructing infrastructure projects, including a flyover and an approach road. The AO disallowed the deduction under Section 80IA(4), arguing that the assessee acted merely as a contractor and not as a developer, and did not own the infrastructure facilities. The AO cited various circulars and legislative intentions to support the view that ownership and development under BOT/BOOT schemes were prerequisites for claiming the deduction. The CIT(A) concurred, noting that the assessee did not fund the projects and acted only as a contractor, not fulfilling the conditions of Section 80IA. The assessee contended that it acted as a developer and that the amendments to Section 80IA(4) allowed deductions even if only one of the activities-developing, maintaining, or operating-was undertaken. The tribunal noted that the AO had not examined the contracts in their entirety and had not considered whether the assessee undertook activities like designing, financing, and maintaining the infrastructure. The tribunal remitted the matter back to the AO to re-examine the contracts and other evidence to determine if the assessee indeed developed the infrastructure facilities, making it eligible for the deduction under Section 80IA(4). 3. Addition of Rs. 4,23,918/- to the Gross Total Income: The assessee claimed that the AO mistakenly included Rs. 4,23,918/- in the gross total income. The CIT(A) sustained this addition due to the absence of a proper explanation from the assessee. During the tribunal hearing, the assessee did not advance any argument to support this ground. Consequently, the tribunal confirmed the CIT(A)'s order. Conclusion: The tribunal confirmed the validity of the reassessment proceedings under Section 147. It remitted the issue of disallowance of deduction under Section 80IA(4) back to the AO for fresh examination, directing the AO to consider the entire contract and additional evidence. The tribunal upheld the addition of Rs. 4,23,918/- to the gross total income due to lack of substantiation from the assessee. The appeals were partly allowed for statistical purposes.
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