TMI Blog2016 (1) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the assessee is entitled for deduction under section 80IA on merit in all the seven years under consideration. It is pertinent to note here that although this aspect of the matter relating to the assessee’s claim for deduction under section 80IA is decided by the Ld. CIT(A) vide his impugned orders in favour of the assessee in all the seven years under consideration, the department has not disputed the same for A.Ys. 2006-07, 2007-08 and 2008-09 and it is disputed only in A.Ys. 2009-10 to 2012-13. We, therefore, dismiss the grounds raised by the Revenue on this issue in its appeals for the said four years.- Decided in favour of assessee. Rejection of claim for exemption on account of agricultural income - CIT(A) deleted the addition - Held that:- On the basis of these findings recorded by him in the light of documentary evidence available on record, the Ld. CIT(A) held that the pattadar passbook relied upon by the A.O. to deny the claim of the assessee of ownership of agricultural land was irrelevant as the purpose of the same was only to facilitate taking a loan from bank and it was never a document to establish the ownership of agricultural land. He also noted that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of these seven appeals, three appeals being ITA.Nos.946, 947 948/Hyd/2015 are the appeals filed by the assessee which are directed against the common order of Ld. CIT(A)-12, Hyderabad dated 21.05.2015 for A.Ys. 2006-07, 2007-08 and 2008-09, while out of the remaining four appeals that are filed by the Revenue, two appeals being ITA.No.983 984/H/15 are directed against the common order of the Ld. CIT(A)-12, Hyderabad dated 21.05.2015 for A.Ys. 2009-10 and 2010-11, the third appeal being ITA.No.985/Hyd/2015 is directed against the Order of Ld. CIT(A)-12, Hyderabad, dated 21.05.2015 for A.Y. 2011-12 and the 4th appeal being ITA.No.986/Hyd/2015 is directed against the order of Ld. CIT(A)-12, Hyderabad dated 21.05.2015 for A.Y. 2012-13. Since the main issue involved in all these appeals is common, the same have been heard together and are being disposed of by a single consolidated order. 2. Brief facts of the case are that the assessee is a company which is engaged in the construction business. Prior to the search and seizure action taken in its case on 08.12.2011, the assessee had filed its returns of income for six out of the seven years under consideration i.e., A.Ys. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled for deduction under section 80IA on merit also. In support of this conclusion, he relied on the decision of the Mumbai Special Bench of ITAT in the case of BB Patil Sons Belgaum Constructions P. Ltd., vs. ACIT 35 SOT 171 (Mum.) (SB). Accordingly, the claim of the assessee for deduction under section 80IA was disallowed by the A.O. on merit also in the assessments completed under section 143(3) read with section 153A for A.Y. 2006-07 to 2011-12 and under section 143(3) for A.Y. 2012-13. 2.1. The disallowance made by the A.O. on account of its claim for deduction under section 80IA in all the seven years under consideration was challenged by assessee in the appeals filed before Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), various submissions were made by the assessee in support of its claim for deduction under section 80IA, which as summarized by the Ld. CIT(A) in his impugned orders, were as under : a) Section 153A clearly states that the return filed in response to the notice u/s 153A(1)(a) is a return which is required to be furnished u/s 139 of the I.T. Act. Further the section starts with a Nonobstante clause. Thus, a return filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le though the same powers are not there with the AO. Reliance was placed upon the decision of Bombay High Court in the case of CIT Vs Pruthvi Brokers and Shareholders Pvt. Ltd., (ITA NO.3908/2010 dated 21.06.2012) to claim that Appellate Authorities have powers to entertain fresh claim of deduction either in the form of grounds of appeal or additional grounds of appeal when the same was rejected by the AO on the ground that claim was not made by the assessee either in the original return or revised return or in the assessment proceedings. j) The appellant cited CBDT circular no.14 (F.No.35, dated 11.04.1955) to submit that the department should not take advantage of the ignorance of assessee to its rights. k) The A.O. totally ignored the returns filed u/s 153A but assessed the income on the basis of previous returns of income and the earlier completed assessment u/s 143(3). l) The A.O. took a completely wrong view that a infrastructure project facility has to be owned by a person to be eligible for deduction. The AO misinterpreted the clause 4(a) of section 80IA. It is the ownership of the enterprise which is developing the infrastructure facility which is being disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for deduction under section 80IA which had not been made in the original assessment. Accordingly, relying on the decision of Hon ble Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra), he upheld the disallowance made by the A.O. on account of assessee s claim for deduction under section 80IA for A.Ys. 2006-07 to 2008-09. As regards A.Ys. 2009-10 to 2011-12, he held that the original assessment proceedings having got abated, the proceedings under section 153A constituted original proceedings and the assessee therefore, was entitled to make the claim for deduction under section 80IA. For this conclusion, he again relied on the decision of Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra), wherein these two distinct situations were considered as basis for deciding whether assessee is entitled or not for making a new claim during the course of proceeding under section 153A. The claim of the assessee for deduction under section 80IA thus was allowed by the Ld. CIT(A) for A.Ys. 2009-10 to 2012-13 whereas, the action of the A.O. in disallowing such claim for A.Ys. 2006-07 to 2008-09 was upheld by the Ld. CIT(A). Aggrieved by the same, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years. The second proviso to sub-section (1) provides that the assessment or reassessment, if any, relating to any of the six assessment years pending on the date of search u/s 132 or making requisition u/s 132A, shall abate . Sub-section (2) of Section l53A provides that if due to one reason or the other the assessment made u/s l53A is annulled in any appeal or any other proceedings then the assessment or reassessment which had abated in second proviso to subsection (1) shall stand revived with effect from the date of receipt of the order of such annulment. 7. A close look at the above provision manifests that the Assessing Officer is required to make assessment afresh and compute the total income in respect of each of the relevant six assessment years. As there is no specific inhibition On the jurisdiction of the Assessing Officer in not including any new income to such fresh total income pursuant to search which was not added during the original assessment, in the like manner, there is no restriction on the assessee to claim any deduction Which was not allowed in the original assessment. The requirement of section 153A is to compute the total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years, irrespective of the fact whether some concealed income has surfaced as a result of search or not. It is thus apparent that the ambit of assessment u/s 147 cannot be imported into the scope of section 153A. 9. It is further important to note that the provisions of assessment in the case of search u/s l53A etc. have been inserted by the Finance Act, 2003 with effect from 01.06.2003. These provisions are successor of the special procedure for assessment of search cases under Chapter XIV -B starting with section 158B. Whereas Chapter XIV - B required the assessment of undisclosed income as a result of search, which has been defined in section 158B(b), section 153A dealing with assessment in case of search with effect from 01.06.2003 requires the Assessing Officer to determine total income and not undisclosed income. 3.2. For the reasons given above, it was held by the Tribunal that the starting point of the assessment under section 153A is the amount of income declared in the return of income and when the A.O. has to compute the total income of the assessee on the basis of the return of income, there may not be any scope for arguing that the assessee has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del.) wherein it was held that where an assessment order has already been passed either under section 143(1)(a) or 143(3), the A.O. is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, un-earthed during the search. While highlighting these observations of the Hon ble Delhi High Court in the case of Anil Kumar Bhatia (supra), Hon ble Rajasthan High Court however, appears to have not taken cognizance of the further observations made by the Hon ble Delhi High Court in the same paragraph No.20 that all the stops having been pulled out, the A.O. under section 153A has been entrusted with the duty of bringing to tax the total income of the assessee whose case is covered under section 153A, by even making reassessments without any fetters, if need be. 4.1. Hon ble Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (supra) also did not accept the arguments of the assessee that the new claim can be made for the first time even in the return filed in response to notice under section 153A when the original assessment had already been completed by obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, the additions in the assessment under section 153A could be made only on the basis of materials gathered during the course of search. The issue involved in the case of CIT vs. Murali Agro Products Ltd., (supra) before Hon ble Bombay High Court as well as CIT vs. Kabul Chawla (supra) before Hon ble Delhi High Court thus was entirely different than the issue involved in the present case and the ratio of the said decisions cited by the learned D.R. is not applicable in the present case. 6. In the case of ACIT vs. VN Devodoss 157 TTJ 165 cited by the Ld. Counsel for the assessee, the Chennai Bench of this Tribunal had an occasion to decide a similar issue as involved in the present case. In this context, reliance was placed by the Tribunal on the provisions of section 153A(1)(a) which provide that where a search is initiated under section 132, the A.O. shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years in the prescribed form and verified in the prescribed manner and the provisions of this Act shall, so far as may be, apply a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that the assessee is entitled to claim deduction under section 80IA in the returns filed in response to the notices issued under section 153A for the relevant six years i.e., A.Ys. 2006-07 to 2011-12 including A.Ys. 2009-10 to 2011-12 where the assessments had been originally completed under section 143(3) prior to the date of search. We accordingly, reverse the decision of the Ld. CIT(A) rendered on this issue for A.Ys. 2006-07 to 2008-09 and uphold the same for A.Ys. 2009-10 to 2011-12. The appeals of the assessee for A.Ys. 2006-07 to 2008-09 involving this solitary issue thus are allowed whereas, the relevant ground of the Revenue s appeal on this issue for A.Ys. 2009-10 to 2011-12 are dismissed. 8. During the course of assessment proceedings for all the seven years under consideration, the claim of the assessee for deduction under section 80IA was also examined by the A.O. on merit and on such examination, he held that the assessee not being the owner of the infrastructure facility as required by sub-clause (a) of clause (i) of sub-section (4) of section 80IA was not eligible to claim deduction under section 80IA. In support of this conclusion, the A.O. relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t although this aspect of the matter relating to the assessee s claim for deduction under section 80IA is decided by the Ld. CIT(A) vide his impugned orders in favour of the assessee in all the seven years under consideration, the department has not disputed the same for A.Ys. 2006-07, 2007-08 and 2008-09 and it is disputed only in A.Ys. 2009-10 to 2012-13. We, therefore, dismiss the grounds raised by the Revenue on this issue in its appeals for the said four years. 9. In ground No.3 of its appeals for A.Ys. 2009-10 to 2012-13, the Revenue has challenged the action of the Ld. CIT(A) in deleting the addition made by the A.O. to the total income of the assessee by rejecting its claim for exemption on account of agricultural income. 9.1. In its return of income filed for A.Ys. 2009-10 to 2012-13, the lease rent received from the agricultural land owned by it was declared by the assessee as agricultural income and the same was claimed to be exempt from tax. During the course of assessment proceedings, the copies of relevant deed evidencing purchase of agricultural land as well as declaration of the concerned farmers who had taken the said land on lease were filed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Merely because the pattadar pass book was not there, the AO held that agricultural income is not acceptable. The AO ignored the stated facts of ownership of land as testified by the sale deed copies and production of declaration from the farmers who obtained the land on lease for agricultural purpose and gave lease rent. A pattadar pass book only facilitates taking of loan from a bank and is never a document to establish whether the appellant has agricultural lands or not. Copy of statement of objects and reasons Act No.1 of 1999 AP Rights and Pattadar Pass Book Acts, 1971 section 6A extract was filed. b) A written lease agreement with the farmers is not required and an oral agreement or understanding is sufficient especially where it is an issue between the tenant farmers and the land owners. Secondly, keeping the low quantum rent which is 2,00,000/- and the nature of payment being agricultural income, the common practice adopted is giving lands on oral agreements. One has to take into cognizance of oral agreement as held by the Hon ble Supreme Court in the case of Brij Mohan and Others VS Smt. Subra Begum Others 1990 SCR(3)413,1990 SSC (4) 147. c) Even a tenant of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused relevant material on record. It is observed that the claim of the assessee for exemption on account of agricultural income was accepted by the Ld. CIT(A) after having found that the ownership of agricultural land by the assessee was duly evidenced by the sale deed. He also found that the claim of the assessee of having given the said land to the farmers on lease was duly supported by the declaration filed by the said farmers. On the basis of these findings recorded by him in the light of documentary evidence available on record, the Ld. CIT(A) held that the pattadar passbook relied upon by the A.O. to deny the claim of the assessee of ownership of agricultural land was irrelevant as the purpose of the same was only to facilitate taking a loan from bank and it was never a document to establish the ownership of agricultural land. He also noted that it was common practice adopted in giving agricultural lands on oral agreements and the claim of the assessee of having given its agricultural land to farmers which was duly supported by the declarations filed by the concerned farmers could not be denied merely for want of written agreement as done by the A.O. Having regard to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C was used by the assessee as conduit for inflating the expenditure under the Head Sub-contract Expenses . He therefore, proceeded to make an estimation of actual expenditure which might have been incurred by the assessee on execution of the sub-contract purportedly given to GTC. In this regard, he first estimated the expenditure incurred by the GTC on the works given by the assessee by taking the percentage of receipts from the assessee to the total gross receipts at 89.81% and by applying the said percentage to the outstanding liability of ₹ 9.9 crores shown by the assessee as payable to GTC, he estimated the amount of inflated expenditure at ₹ 8.89 crores. From the said amount, he reduced a sum of ₹ 3.04 crores being 89.81% of the profit of ₹ 3.39 crores offered by the GTC and arrived at the amount of inflated sub-contract expenditure at ₹ 5.85 crores. Finally, the said amount was rounded-up by him at ₹ 6 crores and the sub-contract expenses calimed by the assessee were disallowed by him to that extent in A.Y. 2011-12. 11.2. On the similar line as adopted in A.Y. 2011-12, the A.O. verified the sub-contract expenses claimed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of GTC. d) A separate due diligence inspection is also done by NHAI by an independent third party consultant and the copy of certificate of such independent consultation of NHAI confirming the completion of project physically on ground, was submitted. Even the A.O. accepted that the work was indeed completd. e) All the payments to M/s GTC were account payee cheques. TDS certificates were issued to the GTC. GTC had in fact offered a profit of 3.39 crores to tax in its return of income which is 11.84 % of its turnover of 25.68 crores. f) The same Assessing Officer in fact completed the assessment in the case of GTC as well under 143(3) r.w.s 147 and in fact made an addition of ₹ 7.83 crores as part of turnover from KNRCL not reflected by M/s GTC during the relevant year and proceeded to consider the total contract receipts of ₹ 25.76 crores from M/s KNRCL, the appellant as M/s GTC s receipts. Copy of the asst. order dated 25.03.2015 was submitted as part of the second paper book. This assertion and action of the AO in the assessment order of the GTC actually goes in favour of the appellant. g) Sworn statement was recorded from the proprietor of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 284) (2014), which is squarely on this issue. 11.4. On the similar line as above, submissions were also made by the assessee before the Ld. CIT(A) while challenging the disallowance made by the A.O. on account of alleged inflated sub-contract expenses for A.Y. 2012-13. After considering the submissions made by the assessee on this issue as well as the material available on record, the Ld. CIT(A) recorded his findings/observations on this issue in his impugned order for A.Y. 2011-12 as under : (a) The AO found that actually works were completed and all the payments were by way of cheques and the same were also offered to tax by the sub contractor. In fact, if one excludes the suppressed turnover of ₹ 7.83 crores mentioned in the asst. order of the sub-contractor M/s. GTC by the same Assessing Officer, the actual percentage of profit offered to tax in the tax return filed comes to 19% (3.41 crores on a turnover of 17.93 crores) and is still 13.23 % after considering the turn over as 25.76 crores (17.93 crores plus 7.83 crores) (b) The disallowance was quantified on the basis of outstanding liability of the sub-contractor in the balance sheet of the sub-contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in the addition made is the assumption made. The AO, going by the NHAI rate book, perhaps is drawing first a conclusion that the main contractor should have paid only say 5 crores. Then, because, the main contractor had paid 8 crores, the AO then concluded that there is inflation of 3 crores. In doing so, the AO is ignoring the sub cor-traer work agreement, the payment made by the main contractor by way of cheques, the receipt of such payments by the sub contractor, the expenditure incurred by the sub contractor (debit side of P L acct of sub contractor was accepted in the detailed scrutiny assessment made in its case) and the absence of any evidence indicating flowing back of cash on account of such inflation to the main contractor. In this manner, the AO can estimate and overturn every expenditure debited by comparing with the rate book and estimating what should be correct expenditure and deem everything above such rates as inflation of expenditure. Thus, not only the quantification of what should be correct expenditure is questionable, the inference drawn being that of inflation by main contractor is equally questionable. 11.6. On the basis of the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called for in this regard. The A.O. however, brushed aside this explanation of the assessee and proceeded to draw an adverse inference against the assessee by alleging the inflation of expenditure relying on the defects or deficiencies in the books of account and other record maintained by the concerned two sub-contractors, which are third parties not related to the assessee. It is pertinent to note here that no such adverse inference however was drawn by the A.O. in the case of the concerned two sub-contractors and in the assessments completed under section 143(3) in their cases, the amount claimed to be paid by the assessee on account of sub-contract work was accepted by the A.O. It is, thus, clear that a contrary stand is taken by the A.O. on this issue and while accepting the contract receipts in the hands of the concerned two subcontractors in whose cases the defects and deficiencies were found by him, the A.O. did not accept the payment of the same amount made by the assessee in its case. As rightly held by the Ld. CIT(A) in his impugned order, neither this basis adopted by the A.O. to allege the inflation of sub-contract expenses by the assessee nor the quantification of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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