TMI Blog2017 (12) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... ent without any supporting fact cannot be given a judicial approval. Suspicion may be said to be sufficient for the purposes of issuance of Show Cause Notice but thereafter, the suspicion has to be backed by hard facts. Ultimately on the issue on which the order was passed setting aside the order admittedly was not the subject matter of the two show cause notices issued by the Pr. CIT Chandigarh and thus notwithstanding the settled legal position thereon even otherwise we find that in the facts of the present case on a reading of the assessment order itself it is demonstrated that the Assessing Officer has enquired into the said issue also. AO while passing the order proceeded to look into the claim of depreciation for the exempted and non-exempt units and thus the suspicion of the Pr. CIT, Chandigarh that the facts for considering the bifurcation of expenses between the exempted income and non-exempt income have not been looked into is without any justification and in the peculiar facts of the present case based entirely on suspicions. We find that there was no basis for the principal CIT-A to conclude that it is a case of inadequate enquiries. - Decided in favour of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry on the issues which are a subject matter for consideration by the Pr. CIT-I Chandigarh exercising his Revisionary powers. 2.1 In the facts of the present case, it was submitted, that the order was not maintainable. Reliance was placed on the detailed reasons set out in the synopsis running into 13 pages filed on record. Inviting attention to the same, it was submitted that the submissions of the assessee are found addressed therein and the assessee would be heavily relying upon these arguments, facts and submissions. Carrying us through the assessment order and then the arguments advanced before the Pr. CIT in response to the show cause notices issued which submissions have been extracted in the order itself, it was submitted that the said arguments were also heavily relied upon in the present proceedings. These submissions, it was submitted have not been accepted without any specific reason relying only on suspicions. Referring to the impugned order, it was submitted that this fact is evident from the order itself as after examining all the documents in the Revisionary proceedings, the Pr. CIT Chandigarh has not pointed to any error let alone such an error which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in respect of one project i.e. Thural Project, the ITAT struck down similar exercise of power by Pr. CIT vide its order dated 06.02.2017 in ITA 361/CHD/2016. The said fact, it was submitted, was in the knowledge of the Pr. CIT who while passing the present order has acknowledged this fact in para 15 page 15 of the present order where he observes as under : Therefore, since the said contract under similar facts and circumstances is continuing even in this year to my considered opinion now, it cannot be said that the said contract is 'works contract', not eligible for deduction u/s 80IA of the Act, without bringing on record any further material/evidences. 2.5 It was his submission that once it had been demonstrated relying upon queries made and in the course of the proceedings which were made available to the Pr. CIT also that the other contracts taken by the assessee were also of a similar nature and thus in case the Pr. CIT disagreed, then it was incumbent on the Pr. CIT to show that the said claim on facts was wrong by pointing to some error. At the last stage, to sweepingly refer that basic contracts have not been called forth is a contradictory stand and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have shown that even in this regard,, the powers u/s 263 have been wrongly invoked by the Pr CIT. Since heavy reliance is placed on these facts and submissions, for ready reference, the submissions are reproduced hereunder : 4. The other ground of appeal i.e. ground No. 4, by way of which, it has been stated that the Pr. CIT cannot assume the jurisdiction on the issue, which does not find mention in the show cause notice. With this background, the following are the facts of the case:- i. The Assessee Company was awarded contract by Himachal Pradesh Government, Irrigation and Public Health Department, Division Thural and Dehra and also Government of Uttrakhand, Peyjal Nigam Pauri and Rudraparyag as under: ii. The return of income had been filed and for which, the computation of income is there at pages 1 to 4 of the Paper Book and at page-2, the deduction u/s 80IA had been claimed and the other relevant pages are page 17, wherein, there is audit report on Form No. 10CCB and in Col.9, at Page 17 it has been mentioned that initial assessment year when deduction is being claimed is Assessment Year 20112012. read with page 18, wherein the report of Eligible Business under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and in the order at page 56, the reason for selection the case in scrutiny has been mentioned as under: The reasons for selection of case in scrutiny are large deduction claimed under Chapter VIA . Subsequently, questionnaire along with notices U/s 143(2)7142(1) was issued on 11.2.2014/25.9.2014. Thus, the only reason for scrutiny was to verify the deduction U/s 80-IA which has been verified and looked into detail. Reliance is being placed in the assessment order at page No.2 and page 5 of the order and in Para 3.1 form Line 5 at Page 57, it has been mentioned as under: - Further, the assessee company was awarded contract by Himachal Pradesh Government, Irrigation and Public Health Department, Division Thural and Dehra and also Government of Uttarakhand, Peyjal Nigam Pauri and Rudraprayag. The composite project awarded to the assessee in providing Rehabilitation and Source Level Agumentation of various schemes in Changer Area in Tenhil Jaisighpur, Palampur, Khundian and Dehra in District Kangra (HP) Sub head construction of civil work i.e. Percolation Well, Pump House, Compound Walls, retaining breash walls, Wire Crate Works, Roads, Streets Truss Bridge, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein similar claim had been allowed after due consideration and, thus, he had already considered each and every clause and condition of the composite contract for Thural Project and thus on going through the other contracts, he found that they were also identical composite infrastructure contracts. It was reiterated that in the course of the assessment proceedings, it had been argued before the AO that the remaining three new contracts were also identical to the contract for water supply scheme at Thural (HP) which had been considered in the immediately preceding assessment year and thus, since the three new contracts were also of a similar nature taken at Thural (HP) i.e. Dehra (HP) and the other two projects at Pauri and Rudraprayag at Uttrakhand. Thus, apart from referring to facts of Thural Project which was continuing from the earlier year, similarity of nature of contracts, it was submitted, had been argued before the AO as would be evident from Paper Book pages 44, 46 and 48 of the Paper Book. These submissions based on the specific Agreements have been considered by the AO. The Show Cause Notices issued to the assessee, copy of which is placed at page 68 and 71 dated 21.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposite projects awarded to the assessee were on built, operate and transfer basis. It was further submitted that copies of all the contracts/agreements along with the award letters and schedules accompanying thereto, including the site plans of the development activity as per the infrastructure development project/contract, were submitted and produced before the AO during the original assessment. He has again produced the same along with latest photographs of the projects developed, which are placed on record. Thirdly, the AR has submitted that for the AY 2012-2013 the assessee filed his return of income claiming deduction U/s 80-IA on the contracts executed for aforesaid infrastructure projects/infrastructure facilities which was accordingly allowed by the AO under scrutiny and after examining the documentary evidences produced before the AO i.e. copies of contracts/agreements, award letters and accompanied documents, audit report in Form 10CCB including books of account etc. It was also submitted that the said assessment year was the third year of its claim of said deduction, 'which was accordingly allowed. He has also submitted that the infrastructure facility developed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired upon or verified by the Assessing Officer and had accepted the plea of the assessee on face value. It has further been stated that the copy of the contract executed at Thural Division is there in Asstt. Year 2011-12 but not in this assessment year and neither fresh copies of contract are filed by the assessee Our Reply It is submitted that kindly refer to our reply, dated 10.10.2014, placed at page 48 and relevant Para 1, Para 18 and Reply dated 21.11.2014 at Serial No.1, Page 44 and Page 46, wherein, the same nature of contract as of Thural has been explained for other three contracts-f taken during the year at Himachal Pradesh and Uttrakhand. From the above replies, it is quite evident that the same nature and type of new contracts were there and, thus, the Assessing Officer had fully apprised himself of the said nature and type of contracts and allowed the deduction U/s I 80-IA Further, the Assessing Officer in his assessment order categorically mentions in Para 3.1 about the composite contract awarded to the assessee and | how, the Pr. CIT mentions in the order that no such copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation has been looked into by the Assessing Officer i.e. he has made the disallowance of ₹ 65,72,7447- and, as such, the finding of the Pr. CIT on this issue with regard to bifurcation of expenses is not proper, since the Assessing Officer has already applied his mind to the same and what basis should be justified, has not been mentioned by the Pr. CIT and, thus, the assessment order cannot be held to be erroneous and prejudicial to the interest of revenue. 2.12 Addressing the last ground i.e. the point on which the assessee has not been issued any Show Cause Notice which is a subject matter for consideration in the present proceedings, it was submitted that he would want to elaborate the arguments by stating that firstly such an action is not permissible under law and secondly even on merits, the conclusion that there was no inquiry on the issue is an incorrect fact. It was argued that in fact, if it is seen from the Show Cause Notice issued as per page 68, the Pr. CIT accepts the fact that all contracts have been examined, however, he has required the assessee to explain why 80IA benefit would be available as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-15 2 Universal Woollen Mills V/s Commissioner of Income Tax ITA No.616/CHD/2015, ITAT, Chandigarh Bench, Chandigarh 16-32 3 Ved Parkash Contractor V/s Commissioner of Income Tax ITA No.573/CHD/2015, ITAT, Chandigarh Bench, Chandigarh 33-53 4 Kumar Enterprises V/s Deputy Commissioner of Income Tax ITA No.525/CHD/2014, ITAT, Chandigarh Bench, Chandigarh 54-67 5 Venus Woollen Mills V/s Commissioner of Income Tax 36 ITR (Trib) CHD-TRIB 68-70 6 Gupta Spinning Mills V/s Commissioner of Income Tax ITA N0.3398/DEL/2010, ITAT, Delhi Bench at New Delhi 71-87 7 Small Wonder Industries V/s Commissioner of Income Tax ITA No.2464/MUM/2013, ITAT, Mumbai Bench, Mumbai 88-89 8 Commissioner of Income Tax V/s Smt R.G Umaranee 262 ITR 507 MAD-HC 100-104 9 Commissioner of Income Tax V/s C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparatively higher expenses in case of non-exempted units as compared to the exempted projects has been decided in favour of the assessee by the Hon'ble ITAT Bench while passing orders against reopening of assessment u/s 263 for the Asstt. Year 2011-12. The concerned issue has been dealt at page 158-159 of the paper book and at pages 32-33 of the order of the Hon'ble ITAT against reopening of assessment u/s 263 for assessment year 2011-12. Thus, it is prayed that the order of Pr. CIT may be quashed and oblige. 2.14 On the basis of these arguments, facts and submissions and relying upon the Paper Book filed, it was submitted that the copy of the order-sheet placed at pages 32 to 33 and the copies of the queries raised in the course of the assessment proceedings u/s 143(3) at pages 34 to 38 when read alongwith the replies filed by the assessee in respect of queries raised in the course of the assessment proceedings u/s 143(3) at pages 39 to 55 are considered, it was submitted, it would show that all the necessary queries have been made. 2.15 Specific attention was invited to Paper Book page No. 40-44 which is a letter dated 18.07.2014 addressed to the AO explaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... departments of State Government. The contract involves successful development of the -composite project for developing infrastructure for water supply and its successful commissioning and successfully operating the project for a period of five years with all sorts of entrepreneurial risks as the failure of any-component will affect the operation of the entire project. It is altogether different from the risks involved in the service provided -and work done contracts, where the risk is limited to provide -service or work and remove the defects during defect liability period. The performance -guarantee involved in the composite development project is to successfully develop the whole water supply project, successfully commission it and to successfully run the project for a period of five years, whereas in the case of work contracts the performance guarantee is limited to the work done by the -contractor lone. (emphasis supplied) 2.17 Referring to another reply of the assessee on record at Paper Book page 48 which was brought to the notice of the AO, attention was invited to para 1(i) of the said reply. Same is reproduced hereunder : The firm Unipro Techno Infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the different projects was carried out by the AO only after looking through the details made available as per contracts and thus it was submitted it cannot be the case of the Department that the claim of the assessee has been allowed without any inquiry. 2.21 Referring to page 71 which is the second, Show Cause Notice of the Pr. CIT it was submitted that suspicion that on the issues raised in paras (i) and (ii)thereof were not examined are without any basis. Referring to the AO, it was submitted that the AO has taken due notice of exempted and non-exempted units and the Pr. CIT has arbitrarily arrived at the conclusion that it was without any inquiry. It was argued that whereas the fact is that it was enquired into and re-calculated and this fact is coming out from the assessment order itself and no infirmity has been pointed out therein by the Pr. CIT. It was submitted that on the Thural Project, the Pr. CIT does not take any adverse view on account of the order of the ITAT already available on record, however, on the remaining three projects, ignoring the fact that these after examining were considered to be identical, the Pr. CIT without demonstrating that these were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 80IA of I.T Act, 1961 on the profits of the said contract. The project is apparently covered under the definition of Work Contract . Accordingly as per the explanation to sub-section 13 of Section 80IA, deduction u/s 80IA of I.T. Act, 1961 is not allowable on the profits derived from these projects. Allowance of deduction u/s 80IA has thus resulted in loss of Revenue. ii) Deduction u/s 80IA has been claimed on profits derived from the project of Water Supply. It is seen that in Trading Account, a payment of ₹ 2,92,48,936/- has been made for Job Work Done by Sub-Contractors . Proportionate profits earned on the job work executed by a sub-contractors is not eligible for deduction u/s 80IA. This issue has not been examined by the AO during the course of assessment proceedings and has resulted in loss of Revenue. iii) It further seen that the receipts from the Water Supply Project and Hamirpur Bye Pass Project are in the ration of 2.8 : 1 whereas the expenses incurred on Freight Carriage, Fuel and Wages Salary are comparatively higher in case of Hamirpur Bye Pass Project. The comparative details have not been examined by the AO viz-a-viz the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on built, operate and transfer basis. ii) For the execution of contract the machinery installed including its components, engineers labour employed, designing, execution, financing in the form of capital investment, entrepreneurship risk, performance guarantee etc. is the responsibility of the assessee. iii) A certificate for deduction of tax at lower rate was issued to the assessee by the CIT(TDS) in view of the fact that the contract awarded to the assessee qualifiers for deduction u/s 80IA of the Act. iv) Deduction u/s 80IA was allowed by the AO on the ground that the contract was for infrastructure development and not a civil contract. v) Similar contract in the case of M/s Kavery Infrastructure Pvt. Ltd./Unipro Techno Infrastructure was held as infrastructural contract in the A.Y. 2008-09 by another Assessing Officer. vi) The proceedings u/s 263 have been initiated after receipt of objection from Revenue audit party without bestowing conscious attention to the factual position. The assessee has further stated, that the proceedings initiated u/s 263 deserve to be dropped in view of the following:- i) The proceedings have been initiated on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had relied on the decision of Hon'ble Apex Court in CIT Vs Max India Ltd [295 ITR 282 (SC)] wherein it was held that at the relevant time two views were possible on the word 'profits' in the provision to section 8HHC (3). In the present case, it is not a question of having a view different than the one held by the AO. In the present case the applicability of Explanation to sub section 13 of section 80IA was not examined which prohibits deduction u/s 80IA(4J in the case of work contract. Thus whether the profits derived by the assessee fell under the preview of Explanation to section 13 was an essential condition for the applicability of section 80IA(4j of the Act. The assessee has further relied on the decision in Narain Singla Vs. Principal Commissioner of Income Tax(Central), Ludhiana (62 taxmann.com [2015] 255 (Chandigarh - Trib.), the facts of which are not applicable to the case of the assessee. On Contrary to the claim of the assessee, the Hon'ble Tribunal in the said case has held that in case of lack of inquiry, cause of action u/s 263 of the Act was open. The case of the assessee precisely falls under these observations as no inquiry has been made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of the revenue, if in the opinion the Principal Commissioner or Commissioner, - (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring in to the claim; (c) The order has not been made in accordance with' any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. Hence, legal provisions/Court decisions as cited by the assessee with respect to limitation/validity of invoking provisions of Section 263 are not applicable in this case. In view of the above, it is evident that the issues mentioned in show cause notice as detailed above have not been examined/verified at the time of assessment proceedings. It is therefore held that the said assessment order is erroneous in so far as prejudicial to the interest of revenue for the reasons discussed above in view of the provisions of section 263, inter-alia, including Explanation 2 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nothing apart from suspicion had been pointed by the Revenue in support of the conclusion of Pr. CIT in the earlier year also. 2.25 Reiterating the submissions, it was submitted that qua ground No. 4, order is assailed as the Show Cause Notice available on record does not make a mention of the said issues. The fact that the AO has enquired into the issue at length and a speaking order has been passed, are arguments on merit but first the preliminary objection of the assessee remains as in the facts of the present proceedings, the Pr. CIT has not show caused the assessee on the issue and relying upon the decision in CIT Vs Smt. R.G.Umaranee 262 ITR 507 (Mad), CIT Vs Contimeters Electricals P.Ltd. 317 ITR 249 (Del), Colocraft Builders V ITO 105 ITD 599 (Mum) and Peerless General Finance Investment Co. Ltd. V ACIT 5 SOT 17 (Kol-Tribunal), the order was stated to be bad in law. It was reiterated that the order was passed after due application of mind after making requisite inquiries. 3. The ld. CIT-DR inviting attention to the impugned order submitted that two show cause notices have been issued to the assessee and apart from one of the projects i.e. the Thural Project out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracts and appropriate order-sheet entries should have been made and pertinent queries should have been raised as only then can it be said to be a case of adequate and full enquiry by the AO. It was also his submission that if change of opinion is to be considered, then the opinion of the Pr. CIT should have greater relevance as opposed to the AO. Accordingly, it was his prayer that the order deserves to be upheld. 4. We have heard the rival submissions and perused the material available on record the relevant documents in the paper book to which our attention was invited and the judgements of the different courts and Tribunals referred to by the parties for our consideration have all been considered even if specific reference thereto is not made in the order. 4.1 The assessee in the facts of the present proceedings has prayed for quashing the impugned order on the grounds that the original assessment order was passed by the Assessing Officer after scrutinizing all details and after making full and proper enquiries on the issues and thus, necessarily after considering the three new Contracts entered into by the assessee in the year under consideration. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order passed in the year under consideration. Pr. CIT, it has been argued has set aside the order to the extent it pertains to the remaining three new Contracts. The decision has been arrived at on the basis of facts as the AO is held to have allowed the claim of deduction qua Dehra, Pauri and Rudraprayag Projects without caring to enquire into the issues at all. The Assessing Officer is held to have accepted the claim of the assessee that the three new Projects entered into are identical to the Thural Project and has passed the order blindly accepting the assessee's claim without even caring to call for the copy of the new contract/Agreements entered into by the assessee. The said order, it has been claimed, has been set aside by the Pr. CIT, Chandigarh exercising his power as the order passed by the Assessing Officer consequently, is without proper enquiry and also without adequate enquiry and thus, the order is erroneous and prejudicial to the interests of the Revenue. It has been urged that for addressing these specific shortcomings, the said power has been vested by the Statute in the Pr. CIT. 4.6 The counter arguments on behalf of the assessee has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blindly accepted by the Assessing Officer as these were different from the composite Infrastructural BOT Contract with Thural Project, then the Pr. CIT has brought nothing on record to show that the suspicion was well founded. It has been urged that this suspicion was not supported by the Pr. CIT by pointing to any error let alone an error which was prejudicial to the interests of the Revenue as he has merely set aside the order holding that it is a case of inadequate enquiry which claim on the basis of facts alone it has been argued is not maintainable. 4.10 Before we specifically address the arguments of the respective parties, we deem it appropriate to refer to certain relevant documents on record. The fist of which being Paper Book page 68 which is the copy of the first Show Cause Notice issued by the Pr. CIT, Chandigarh to the assessee dated 21/09/2016: F.No: Pr. CIT-I/Chd/Judl./263/2016-17/2936 Dated: 21.09.2016 To, Sub. Proceedings u/s 263 of the Income Tax Act, 1961 for the A.Y. 2012-13 - Regarding- ******* Your attention is invited to the assessment order passed u/s 143(3) of I.T. Act, 1961 dated 20.12.2014 in your case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c projects were not available on record, then necessarily the Pr.CIT Chandigarh would have had to call for the Agreements which is not so in the facts of the present case. Accordingly, the departmental claim based on the arguments of the ld. CIT-DR that even the Contracts were not available on record and assessee's claim has been allowed without even caring to look into the agreements/contracts is rejected as the facts on record are to the contrary. 4.12 A perusal of para-3 of the above Show Cause Notice further brings out the fact that on considering the Agreements/Contracts the Pr.CIT, Chandigarh concludes that the contracts involve the activity of sale goods for the purposes of construction/erection etc. and hence falls in the definition of Works Contract. When the said show cause notice issued is considered with the body of the order passed it is seen that no such allegation has been raised for setting aside the order. No specific clause or condition of the agreement has been referred to by the Pr. CIT to support the suspicion. On the contrary repeatedly the assessee before the Assessing Officer during the assessment proceedings and before the Pr. CIT, Chandigarh durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee clarifies for deduction under section 80IA of the Act. The Assessing Officer further added that this was the second year of claim of deduction since the assessee company had been awarded the same project by the same Government. Thus, we find that the Assessing Officer after having applied his mind to the explanations and evidences filed by the assessee arrived at a logical and reasonable conclusion that the assessee was eligible to claim deduction under section 80IA of the Act as its activity qualified for the said claim. We find that the view taken by the Assessing Officer is a plausible view since as demonstrated before us, the assessee had been granted a certificate of lower deduction of tax for assessment years 2010-11 to 2013-14 after considering the eligibility of the claim of the assessee to deduction under section 80IA of the Act. The assessee has also demonstrated before us that in the preceding and succeeding assessment years, identical claim on account of very same project had been allowed to it by the Assessing Officer and also that for identical project another Assessing Officer had granted deduction under section 80IA of the Act to a sister concern of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer so as to cause prejudice to the Revenue. The action of the learned Pr. CIT in exercising his revisionary powers on this ground is set aside. 22. Besides the above argument Ld. Counsel for the assessee also argued before us that the issue of eligibility of claim of deduction under section 80IA of the Act having been examined in the 1 s t year of claim of the assessee i.e. AY 2010-11, the same could not have been disturbed in the succeeding years. In support of its contention the Ld. Counsel relied upon the decision of the Punjab and Haryana High Court in the case of CIT versus Micro Instrument Company in ITA. No. 958/2008 dated 2.9.2016 more specifically at para 12 of its order had stated as follows: 12. However, while undertaking this exercise, the Assessing Officer is not entitled to reopen an issue that had been decided in respect of a previous assessment year. In other words, an Assessing Officer is not entitled to question the validity of the grant of a deduction under Section 80-IB in a previous assessment year on any ground. The Assessing Officer would not be entitled to say that a particular condition was not fulfilled in an earlier assessment year if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same it could not have been dislodged in the impugned year. 25. In view of the above we set aside the order of the learned Pr. CIT on this count. 4.14 It is deemed appropriate to also refer to the second show cause notice dated 14.02.17 issued to the assessee by the Pr. CIT to address the arguments of the respective parties before the Bench. The same is reproduced hereunder for ready reference : F.No: Pr. CIT-I/Chd/Judl./263/2016-17/5519 Dated: 14.02.2017 To, M/s Unipro Techno Infrastructure Pvt. Ltd., SCO 36, Sector- 7C, Chandigarh Sir, Sub: Proceedings u/s 263 of the Income Tax Act, 1961 for the A.Y. 2012-13 - Regarding- ******* In continuation to the show cause notice issued vide letter No. 2936 dated 21.09.2016 in your case. From the perusal of assessment record the following discrepancies have also been noticed. i) It is seen that in the Trading Account, a payment of ₹ 8,55,16.150/-has been made for Job work done by subcontractors , proportionate profits earned on the job work executed by a sub-contractors is not, eligible for deduction u/s GOIA. This issue has not been examined by the AO during the course of assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamining the same the Assessing Officer had allowed the claim. The Ld. counsel for the assessee stated that it cannot now be said that the claim of the assessee had not been duly examined by the Assessing Officer during assessment proceedings. The Ld. counsel of the assessee further stated that the job work done by subcontractors was not a separate contract but sub contract of the main project awarded to it and the assessee as per the provisions of section 80IA was entitled to claim deduction of the entire profits earned by it on the project executed on infrastructure development. The fact that it had sub-contracted a part of the work did not affect its claim of deduction of the entire profits and the sub contract work could not be treated as separate for the purpose of claiming deduction under section 80IA of the Act. 28. Ld.DR, on the other hand, relied upon the order of the learned Pr. CIT and stated that the profits earned on the sub contract work were not eligible for deduction under section 80IA of the Act and the same having not been examined by the Assessing Officer an error had crept in the order of the Assessing Officer causing prejudice to the revenue by allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised the issue the Pr. CIT, Chandigarh did not make the same the basis for setting aside the order. 4.17 The next issue addressed by the Pr. CIT, Chandigarh in the second show cause notice is the ratio of receipts from exempted and non-exempt units. A perusal of the aforesaid order of the ITAT throws light on this aspect also and it would be seen that this issue also had been considered by the ITAT in Paras 30 to para-32 of the order. For ready reference these also reproduced hereunder : 30. The 3 r d reason given by the learned Pr. CIT for exercising revisionary powers under section 263 is that while the receipts from the water supply project and Hamirpur bypass project in the ratio of 2.8:1, the expenses incurred on freight and carriage, fuel and wages and salary are comparatively higher in case of Hamirpur bypass project and the comparative details have not been examined by the Assessing Officer vis-a-vis the provisions of section 80IA(8)/80IA(10) of the Income Tax Act, 1961 causing error in the order of the Assessing Officer and prejudice to that extent. 31. The Ld. counsel of the assessee reiterated his arguments made on account of point No.1 raised by the learned P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contracts entered into by the assessee with Himachal Pradesh Government in respect of Dehra Project or with the Uttrakhand Govt. in respect of Pauri and Rudraprayag Projects have been referred to in his order by the Pr. CIT or in his arguments by the ld. CIT-DR. Mere argument that the three Projects were different without any supporting fact cannot be given a judicial approval. Suspicion may be said to be sufficient for the purposes of issuance of Show Cause Notice but thereafter, the suspicion has to be backed by hard facts. 4.19 On giving our consideration to the issues remaining at hand, we find that ultimately on the issue on which the order was passed setting aside the order admittedly was not the subject matter of the two show cause notices issued by the Pr. CIT Chandigarh and thus notwithstanding the settled legal position thereon even otherwise we find that in the facts of the present case on a reading of the assessment order itself it is demonstrated that the Assessing Officer has enquired into the said issue also. It is seen that the AO while passing the order proceeded to look into the claim of depreciation for the exempted and non-exempt units and thus the sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 263 of the Act being supervisory in nature, permitting suo motu review of any assessment already made, the statutorily enjoined sanctions circumscribing the same have to be rigorously construed. The legislative intendment of conditioning the plenitude of the power conferred is manifest in the two preconditions lodged in the section. To sustain the delicate balance between this supervisory and other remedial jurisdictions, as designed by the lawmakers, a constricted connotation and purport of the enabling prerequisites for the exercise of the revisional powers is an imperative necessity. 5.1 Thus, no doubt the power to set aside has been vested with the Pr. CIT. However, the power has to be exercised judiciously and fairly. The Revisionary order cannot be silent in the face of the challenge of the assessee that the Contracts are identical composite Infrastructure Development Contracts on BOT basis i.e. were trunkey projects where after initially setting up, the assessee was tasked with making it functional post completion operation and maintenance of the same for a specific period. The Contracts were available with the Pr. CIT and the stated claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this requirement, cannot be said to be erroneous and prejudicial to the interests of the Revenue. The Court in unambiguous terms has fastened the responsibility for exercising the Revisionary Power on the Commissioner to necessarily point out as to what error was committed by the Assessing Officer in having reached the conclusion which was sought to be set aside. The said effort was found to be missing in the facts of the said case as in the facts of the present case also. In the facts of the present case, the Pr. CIT having failed to point out any error, let alone an error which is prejudicial to the interests of the Revenue as the necessary exercise for addressing the error has not been done in the order nor has the ld. CITDR been able to demonstrate that there were clauses and conditions in the Contracts entered into with Executive Engineer, IPH Dehra (HP), Executive Engineer, Uttrakhand Peyjal Nigal, Construction Division, Rudraprayag and Executive Engineer, Uttrakhand Peyjal Nigam, Construction Division, Pauri vis- -vis the contract entered into with Executive Engineer, IPH Thural (HP) on the basis of which they could not be said to be Composite Infrastructure Development ..... X X X X Extracts X X X X X X X X Extracts X X X X
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