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TMI Blog2018 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... for Re-assessment for the A.Y. 2010-11 issued by the Assistant Commissioner of Income Tax, Circle-1, Kalaburgi, u/s. 147/148 of the Income Tax Act, 1961. 2. The reasons communicated on 15.03.2016 to the petitioner-assessee for such re-opening/re-assessment as produced on record are quoted below for ready reference: In the assessment completed u/s 143(3), the assessee was allowed a deduction of ₹ 1,82,03,125/- u/s 80-IA. However, it was verified during the assessment proceedings in the case of the assessee for the AY 2013-14 that the assessee is only a works contractor and not a developer within the meaning of Section 80-IA(4). As such, the assessee is not eligible to claim deduction u/s 80-IA. I, therefore, have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. Accordingly notice U/s. 148 is issued with the prior approval of Pr. Commissioner of Income Tax, Gulbarga. 3. The original Assessing Authority, while passing the Assessment Order under Section 143(3) of the Act, earlier on 28.03.2013, upon a detailed scrutiny of the records of the petitioner-assessee, engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 KRDCL Bangalore 59,50,963 9 SCR Department 36,88,234 Total 19,07,28,450 With regard to the nature of works undertaken from the above mentioned departments, the assessee has produced copies of contract agreements entered into with the concerned Departments. It is noticed from the contract agreements that the works undertaken by the assessee are mostly for the improvement to roads and in some cases improvement and widening of roads. However, it is seen that the Central Board of Direct Taxes, New Delhi, vide Circular No.4/2010(F.No.178/14/2010-IT(A-I),dated18-05-2010 has issued clarification to the effect that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA. However, simply re-laying of an existing road would not be classifiable as a new infrastructure facility for this purpose. In view of the above clarification, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,24,91,540/-. This is further certified that the tender has been given as formation and improvement of National Highway Road works, it includes Widening of an existing road by constructing additional lanes as part of a high way projects . 3. The Executive Engineer PRE Division Gulbarga certified that the tender has been given as formation and improvement of Road works, it includes widening of an existing road by constructing new roads . 4. The Superintending Engineer NH MOST, Bangalore certified that M/s. Kotarki constructing Pvt. Ltd, Bidar has awarded tendered for executed the National Highway Road Works. The nature of work has been given as improvements to Road work as a part of National highway Project work . 5. The Project Director DUDC, Bidar has given a certificate that the tender has been given as construction, formation and improvement of road works, it includes widening of an existing road by constructing additional lanes and this is further certified that the said work details are given as per our tender records . 6. The Manager KRDCL Bangalore certified that M/s. Kotarki construction Pvt. Ltd. Bidar has tendered an executed the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 80-IA of the Income Tax Act, 1961 in respect of works shown against each is worked out as under: Sl.No. Name of the Department Amount (in Rs.) 1 EE PWD Bidar 1,90,04,786 2 EE NH Dn Bijapur 3,24,91,540 3 EE PRE Dn Bidar 57,51,525 4 PD DUDC (BUDA) Bidar 11,84,64,300 5 KRDCL Bangalore 59,50,963 Total 18,16,63,114 Since, the assessee has not maintained any separate books of accounts in respect of the road works, the income attributable to road works which is eligible for the deduction u/s. 80IA of the Income Tax act is worked out in proportion to the turnover. The total turnover achieved by the assessee is ₹ 26,42,24,105/-. Out of this, the turnover attributable to road works is ₹ 18,16,63,114/- which works out to 68.75% of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, infrastructure facility means inter alia:- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; The issue has been examined by the Board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose. [F.No.178/14/2010-ITA.I] (2010) 232 CTR (St) 231 9. Mr.Shankar A., learned counsel, argued that the Assessing Authority without any material, took a different view in the Assessment Order passed for the subsequent A.Y. 2013-14, Assessment Order vide Annexure-J dated 30.11.2015, holding that the petitioner-assessee was engaged only in the business of works contract and therefore was not entitled to the deduction under Section 80-IA(4) of the Act, and on that basis alone the Assessing Authority could not have initiated Re-assessment proceedings for the previous A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e, carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-01 and subsequent years. 4. Thus, it is amply clear from the above that the assessee company, being a mere works contractor, is not eligible to claim the benefit u/s.80-IA. As such, the deduction claimed u/s 80-IA is rejected and the total income of the assessee is estimated @ 8% of the gross receipts as discussed in Para 2 abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Assessing Authority did not consider or apply his mind to the allowability of the deduction u/s.80-IA(4) of the Act on the facts and evidence placed before him while passing the Assessment Order. 16. After satisfying these twin conditions for invoking the jurisdiction u/s. 147/148 of the Act, the subsequent Assessing Authority had yet to further bring on record the relevant material to show that the deduction earlier allowed to the petitioner- assessee was ex-facie illegal or wrong. Such adverse material, the said Assessing Authority should have indicated as available on record before him to show that the deduction which was likely to be disallowed by him, would fall outside the ambit and scope of Section 80-IA(4) of the Act in the light of the said Circular No.4/2010. Merely making a bald averment that since the petitioner-assessee was engaged in the business of works contract, he is not entitled to deduction under Section 80-IA(4) of the Act, could not undo the effect of Section 80-IA(4) of the Act itself, which specifically gives such deductions to the petitioner- assessee engaged in the business of development of infrastructure facilities, which necessarily amounts to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the deduction allowed to the extent of 68.75% only for the works which fell within the four corners of Section 80-IA(4) of the Act could not have been disallowed or intended to be disallowed by resort to Section 147/148 of the Act under the garb of subsequent Assessment order passed for the subsequent A.Y.2013-14, which also prima-facie indicates that the Assessing Authority has been swayed by the words improvement, repairs and widening (sic !) of already existing roads . While the widening of the roads is intended to be included within the ambit of infrastructure facility by the CBDT, the Assessing Authority intends to deny the said claim under the sway of the word works contracts as employed in the Explanation inserted by the Finance Act, 2007. Such sweeping and general words before being used to invoke the reassessment powers u/S. 147/148 of the Act, the Assessing Authority has to record the detailed reasons with the relevant facts existing on record within the parameters of Section 147 of the Act, which would clearly disentitle the assessee from being given that deduction or would render the earlier allowing of such deduction by the original Assessing Authority ex-facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989, ([1990] 182 ITR (St.), 1, 29), which reads as follows: 7.2. Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe in Section 147.-A number of representations were received against the omission of the words reason to believe from Section 147 and their substitution by the opinion of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a period of four years has not been fulfilled in this case. Since the order passed by the Commissioner of Income-tax (Appeals) for assessment year 2007-08 has been passed after the assessment for assessment year 2005-06 has been sought to be reopened by the notice dated June 29, 2011, we have, for the purposes of this discussion, kept that circumstance out of consideration. We have come to the conclusion that the Assessing Officer having failed to establish that there was a failure on the part of the assessee to disclose fully and truly all material facts for assessment year 2005-06, the reopening beyond a period of four years is clearly not valid. There was a finding of fact by the Assessing Officer in the assessment order for assessment year 2005-06 that the business activity of the assessee is manufacturing of jewellery in a Special economic zone. That finding, as the assessment order notes, was based upon a consideration of the facts of the case and upon examining the contentions of the assessee. 24. This Court is therefore satisfied that there was no material on record before the Assessing Authority indicating any failure on the part of the assessee to truly and fully d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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