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2018 (10) TMI 585 - AT - Income TaxReopening of assessment u/s 148 - disallowance of deduction u/s 80IA(4) - reasons to believe - Held that - Referring to the decision of Hon ble Gujarat High Court in the cases of Classic Network Ltd. Vs. DCIT 2014 (6) TMI 263 - GUJARAT HIGH COURT , Parixit Industries P.ltd. Vs. ACIT 2012 (4) TMI 464 - GUJARAT HIGH COURT AO has earlier granted deduction under section 80IA, thereafter reopened the assessment by re-appreciating the same material. Hon ble Court has held that re-opening is being made on account of change of opinion and it is not justifiable. In the present case, AO has re-appreciated the material. Earlier, the AO considered the assessee as engaged in the business of development of infrastructure project, but later on the basis of same material he construed the assessee as a contractor. To our mind, it is a just his change of opinion, and there is no tangible material in possession of the AO to reopen the assessment. Therefore, we allow first ground of appeal in both the years, and quash re-assessment orders in both the years. We taken all the submissions of the assessee while taking cognizance of the statement of facts extracted (supra) vis- vis finding recorded by the AO. AO construed the assessee as a contractor or sub-contractor for two companies viz. s.MSK Infrastructure & Toll Bridge Pvt.Ltd. and MSK Highway Ltd. It is also pertinent to observe that the AO failed to take of the facts that these two companies are wholly owned subsidiaries of the assessee. The assessee has applied in response to the tenders invited by M.P. Rajya Setu Nirman Nigam Ltd.. It was fully qualified and well equipped to undertake development and completion of contract work. According to the assessee on account of certain technicalities, it has to float two subsidiaries as special purpose vehicle. Later on these subsidiaries amalgamated with the assessee company during the accounting period relevant to AY 2005-06. The scheme of amalgamation was approved by the Hon ble Gujarat High Court and given effect from the appointed date i.e. 1.1.2005. These facts have totally been ignored while framing the assessment order. Thus, considering the order of the ITAT in the AY 2010-11 and order of the Commissioner passed under section 264 in the AY 2008-09, and details submitted in these years, we are of the view that the assessee is entitled for deduction under section 80IA(4) - decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of reopening of assessment under section 147 of the Income Tax Act. 3. Disallowance of deduction under section 80IA(4) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal for the Assessment Year (AY) 2005-06 was delayed by 557 days. The assessee argued that the delay was due to a bona fide belief that a retrospective amendment to Section 80IA of the Income Tax Act applied to their case, thus making the deduction unavailable. This belief was reinforced by an assurance from the Assessing Officer (AO) that no penalty would be levied, which was later contradicted by the imposition of a penalty under section 271(1)(c). The Tribunal noted that the reasons for the delay were not deliberate and were influenced by subsequent developments, including penalty proceedings and favorable judicial decisions regarding Section 80IA. Citing principles from the Supreme Court, the Tribunal adopted a liberal approach towards the "sufficient cause" for delay and condoned the delay, allowing the appeal to be heard on merits. 2. Validity of Reopening of Assessment under Section 147: The assessee challenged the reopening of assessments for AY 2005-06 and 2006-07, arguing that the AO had no new material and merely reappreciated existing facts. The original assessments were completed under section 143(3), allowing the deduction under section 80IA(4). The AO later disallowed the deduction, treating the assessee as a contractor rather than a developer of infrastructure projects. The Tribunal found that the AO’s reopening was based on a change of opinion without any new tangible material, which is not permissible. The Tribunal referred to several judgments, including those of the Gujarat High Court, which held that reopening based on a mere change of opinion is not justified. Consequently, the Tribunal quashed the reassessment orders for both years. 3. Disallowance of Deduction under Section 80IA(4): On the merits, the Tribunal examined whether the assessee was eligible for the deduction under section 80IA(4). The assessee argued that it was involved in the development of infrastructure projects through its wholly-owned subsidiaries, which later amalgamated with the assessee company. The Tribunal noted that the assessee had undertaken substantial functions such as planning, designing, and constructing the projects, qualifying it as a developer rather than a mere contractor. The Tribunal also considered previous favorable decisions, including the ITAT’s decision for AY 2010-11 and the Commissioner’s order under section 264 for AY 2008-09, which allowed the deduction. The Tribunal concluded that the assessee met the criteria for the deduction under section 80IA(4) and allowed the deduction for both assessment years. Conclusion: The Tribunal allowed both appeals of the assessee, condoning the delay in filing the appeal, quashing the reassessment orders, and granting the deduction under section 80IA(4) for the relevant assessment years.
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