2012 (7) TMI 222 - AT - Income Tax

Scope of assessment u/s 153A - search and seizure - whether it encompasses additions, not based on any incriminating material found during the course of search - Held that - In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. Deduction u/s 80IA(4) - CFS - dis-allowance on ground that ICDs, and CFSs are not ports located on any inland water way, river or canal and therefore they cannot be classified as inland ports for the purpose of section 80(IA)(4) - assessee had been operating the CFS at Jawahar Lal Nehru Port Trust - Held that - In the case at hand it is clear that the assets of the CFS are not to be handed over to the Port Trust at any point of time as it is not built on BOT & BOLT Scheme. The CFS is also not located at the Port. CBDT has furnished opinion that ICDs and CFSs are not entitled to such deduction as they do not constitute inland ports, however High Court in the case of Container Corporation of India Ltd (2012 (5) TMI 260 (HC)) held that an ICD is not a port but it is an inland port. The case of CFS is similar situated in the sense that both carry out similar functions, i.e.,ware housing, customs clearance, and transport of goods from its location to the seaports and vice-versa by railway or by trucks in containers. Thus, the issue is no longer res-integra. Respectfully following this decision, it is held that a CFS is an inland port whose income is entitled to deduction u/s 80IA(4) - Decided in favor of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer under Section 153A.
2. Disallowance of deduction under Section 80IA(4).
3. Interpretation of "infrastructure facility" under Section 80IA(4).
4. Applicability of CBDT circulars and notifications.
5. Definition of "Customs Ports" and "Inland Ports".
6. Validity of Commissioner (Appeals) order.
7. Impact of search on completed assessments.
8. Scope of assessment under Section 153A.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer under Section 153A:
The Tribunal examined whether the Assessing Officer (AO) had jurisdiction to make additions under Section 153A if no incriminating material was found during the search. The Tribunal concluded that the AO retains original jurisdiction for pending assessments, which merge with jurisdiction under Section 153A for reassessment. For completed assessments, reassessment under Section 153A can only be based on incriminating material found during the search, such as books of account or undisclosed income or property.

2. Disallowance of Deduction under Section 80IA(4):
The Tribunal addressed whether the Commissioner (Appeals) was justified in upholding the disallowance of deduction under Section 80IA(4). The Tribunal referred to the Delhi High Court's decision in the case of Container Corporation of India Ltd., which held that Inland Container Depots (ICDs) qualify as "inland ports" for the purpose of Section 80IA(4). Based on this precedent, the Tribunal concluded that the Container Freight Station (CFS) operated by the assessee qualifies as an "inland port," and thus, the assessee is entitled to the deduction under Section 80IA(4).

3. Interpretation of "Infrastructure Facility" under Section 80IA(4):
The Tribunal analyzed whether the assessee's CFS qualifies as an "infrastructure facility" under Section 80IA(4). The Tribunal noted that the CFS offers services in handling and temporary storage of import/export cargo under customs control, similar to the functions of an ICD. Therefore, the Tribunal concluded that the CFS qualifies as an "infrastructure facility" under Section 80IA(4).

4. Applicability of CBDT Circulars and Notifications:
The Tribunal considered the applicability of various CBDT circulars and notifications, including Circular No. 793 and Circular No. 10/2005, which clarify that structures at ports for storage, loading, and unloading qualify as "ports" for the purpose of Section 80IA. The Tribunal also noted that the CBDT's clarification dated 6.1.2011, which stated that ICDs and CFSs are not "inland ports," was not binding on the Tribunal.

5. Definition of "Customs Ports" and "Inland Ports":
The Tribunal examined whether the assessee's CFS qualifies as a "Customs Port" or "Inland Port" under the Customs Act and the Income Tax Act. The Tribunal referred to the Delhi High Court's decision in the case of Container Corporation of India Ltd., which held that ICDs qualify as "inland ports" for the purpose of Section 80IA(4). Based on this precedent, the Tribunal concluded that the assessee's CFS also qualifies as an "inland port."

6. Validity of Commissioner (Appeals) Order:
The Tribunal addressed the validity of the Commissioner (Appeals) order, which upheld the disallowance of deduction under Section 80IA(4). The Tribunal concluded that the Commissioner (Appeals) erred in disallowing the deduction, as the assessee's CFS qualifies as an "infrastructure facility" under Section 80IA(4).

7. Impact of Search on Completed Assessments:
The Tribunal analyzed the impact of search on completed assessments. The Tribunal concluded that for completed assessments, the AO can only make reassessments under Section 153A based on incriminating material found during the search. This ensures that the sanctity of completed assessments is maintained unless new incriminating evidence is discovered.

8. Scope of Assessment under Section 153A:
The Tribunal defined the scope of assessment under Section 153A, concluding that the AO must assess or reassess the total income for six assessment years preceding the year of search. For pending assessments, the AO retains original jurisdiction, and for completed assessments, reassessment is limited to incriminating material found during the search.

Conclusion:
The Tribunal ruled that the AO has jurisdiction under Section 153A to reassess completed assessments only based on incriminating material found during the search. The assessee's CFS qualifies as an "inland port" and is entitled to deduction under Section 80IA(4). The Commissioner (Appeals) erred in disallowing the deduction, and the Tribunal's interpretation ensures the sanctity of completed assessments while allowing reassessment based on new incriminating evidence.