TMI Blog2020 (12) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it could not have been treated a mere works contractor. The corresponding twin infrastructure development agreements involving identical project stipulations to be performed at the assessee's behest which sufficiently reveal that there has not been any deviation vis- -vis all other similar projects in the impugned assessment year. AO has also accepted assessee's section 80IA deduction in succeeding assessment years 2013-14 and 2014-15 as well and the corresponding preceding assessment years since assessment orders to this effect. No disallowance has been made qua section 80IA deduction claim in any of these assessments which have attained finality. We conclude that the Assessing Officer had taken only the plausible view in accepting the assessee's section 80IA deduction claim in his assessment dated 30.03.2015 u/s. 143(3) of the Act. The PCIT exercise of impugned revision jurisdiction is held as not sustainable in the eyes of law going by the foregoing settled legal proposition (supra). The same is accordingly reversed. PCIT's revision show-cause notice had treated the section 143(3) assessment herein as a case of Assessing Officer having erroneously a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egular assessment as an erroneous one causing prejudice to the interest of the Revenue as follows: 5. He thus issued section 263 show-cause notice dated 27.02.17. The assessee appears to have filed a detailed response dated 10.03.17 contesting the PCIT's revision proposal inter alia pleading therein that the Assessing Officer had rightly accepted its section 80IA deduction claim thereby not treating it as a mere works contractor . The PCIT's order under challenge has rejected the same with direction the Assessing Officer to frame a fresh assessment after carrying out proper and adequate verification/enquiry with respect to the assessee's 80IA deduction claim as follows: Considering the above facts, notice u/s. 263 dated 27.02.2017 was issued and duly served upon the assessee allowing the assessee an opportunity of being heard. In response to the above notice u/s. 263, the assessee furnished written submission, the excerpts of which are reproduced as under: We reply as follows: Section 80-IA of the Income Tax Act read as follows: (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board referred to in Clause (7) of section 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or reconstruction or reorganization of the Board under Part XIII of that Act. For the purposes of clause (i), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely: (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) Such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not taken place. For the purposes of this clause, infrastructure facility means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an internal part of the highway project........ After going through the provisions of the Act, background of the provisions as well as the legislative intent coupled with important arguments in favour and against the provisions, following important areas emerge, which are to be kept in mind by the Assessing Officer at the time of investigation as well as drafting the assessment order. The Explanatory Memorandum to Finance Act 2007 clearly states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure section and not for the persons who merely execute the civil construction work. It categorically states that the incentive is intended to benefit developers who undertake entrepreneurial and investment risk and not contractors who only undertake huge risks, deployment of technical personnel, Plant and machinery, technical expertise, know-how and financial resources. Distinction between the two wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re facilities on or after 1st day of April, 1995. e) It is engaged in the business of road infrastructure development and maintenance which comes within the purview of [infrastructure facility'] as is required under Section 80IA as discussed above. The matter has also been discussed at various judicial courts at length and a separate note regarding allowability of deduction under section 80IA is enclosed for your perusal and needful. Since the assessee complies with all the requirement of Section 80IA, it is eligible for deduction of amount equal to 100% of the profits and gains derived from such business, your good self will appreciate. ] 4. It is observed from the Assessment Records the Assessing Officer had allowed the claim of deductions u/s. 80IA of the Income Tax Act, 1961, relying solely on the Claim of the assessee, without making any enquiry into the fact as to whether such claim was indeed admissible to the assessee. The Assessing Officer was required to have enquired into the agreement of the assessee with the Executive Engineer, SH Division, RCD Gaya and the Project Director/Chief Engineer, P.M.U., A.D.B.(Transport), PWD, Dehradun, Uttarakhand to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial order. Where the relevant enquiry was not undertaken, as in the Case, the order is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas or enquiry are pursued the enquiry cannot be said to have been faithfully conducted. The Hon'ble Supreme Court, further, in the case of Rampyari Devi Saraogi-vs-CIT (1968) 67 ITR 87(SC) and Smt. Tara Devi Agarwal-Vs-CIT (1973) 8B ITR 323(SC) has held that in absence of proper enquiries, the assessment order would become erroneous and prejudicial to the interest of the revenue. The Hon'ble Delhi High Court in the case of Gee Vee Enterprise-Vs-Addl. CIT (1975) 99 ITR 375 has also held as under:- The reason is obvious. The position and function of the income tax officer is very different from that of a Civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a Civil Court in the absence of rebuttal. The Civil Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to interest of the Revenue; simultaneously. And also that not each and every assessment fulfils the foregoing twin conditions in case the Assessing Officer has taken one of the plausible views which cannot be substituted by the revision authority's conclusion. Hon'ble jurisdictional high court in Zigma Commodities vs. ITO (2014) 365 ITR 276 (Cal) also holds that an erroneous assessment order is the only one wherein the Assessing Officer has not acted as per law and not in case when the PCIT is not satisfied with the same or when two views are possible. CIT vs. Max India Ltd. (2007) 295 ITR 282(SC) holds that every loss of revenue as a consequence of an assessment order could not be termed as prejudice to interest of the Revenue when the Assessing Officer had adopted one of the two permissible vies in law. Case law CIT vs. Gabriel India Ltd. (1993) 208 ITR 108(Bom) also held that the mere fact of Assessing Officer not having incorporated the corresponding findings in the assessment order does not render the same as an erroneous one causing prejudice to interest of the revenue in case framed after making all due enquiries as per law. 8. We keep in mind the preceding se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project but also to bear the future risks in these twin projects. He further sought to clarify that this assessee is held entitled to section 80IA deduction from assessment year 2005-06 onwards to assessment year 2014-15 and a detailed list thereof sufficiently indicates that it had undertaken 17 road infrastructure projects from assessment year 2010-11. His case therefore is that Assessing Officer's regular assessment accepting section 80IA deduction claim was neither an erroneous one nor prejudicial to interest of the Revenue and therefore, the PCIT has erred in law and on facts in invoking his section 263 revision jurisdiction not sustainable. 10. Learned counsel's next invited our attention to the PCIT's 263 show-cause notice making it clear that the Assessing Officer wrongly accepted the assessee's section 80IA deduction claim in the regular assessment dated 30.03.15 and on the other hand he has merely restored the issue back to the Assessing Officer for framing afresh assessment after carrying out adequate and proper enquiries/factual verification in consequential proceedings. He quoted case laws (2005) 13 SCC 419 Amrit Foods Vs. Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's section 80IA deduction claim in his assessment dated 30.03.2015 u/s. 143(3) of the Act. The PCIT exercise of impugned revision jurisdiction is held as not sustainable in the eyes of law going by the foregoing settled legal proposition (supra). The same is accordingly reversed. 13. We also find that the PCIT's revision show-cause notice had treated the section 143(3) assessment herein as a case of Assessing Officer having erroneously accepted the assessee's section 80IA deduction claim whereas his section 263 order under challenge has merely restored the issue back to the Assessing Officer for afresh adjudication. Case law ITO vs. DG Housing Projects Ltd. 343 ITR 319 holds that such a course of action is not permissible in section 263 revision jurisdiction as under: 8. The Tribunal has set aside the order observing that the CIT had not held and come to the conclusion or given a finding that the actual receipt of consideration was more than what was declared in the return. The CIT had not recorded any finding that the sale consideration of the property was higher. It has been held that the CIT could not have made any addition under Section 50C as the stamp duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.--In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to Section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect. 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC), wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. 14. The aforesaid observations have to be understood in the factual background and matrix involved in the said two cases before the Supreme Court. In the said cases, the Assessing Officer had not conducted any enquiry or examined evidence whatsoever. There was total absence of enquiry or ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfillment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous simply because in his order he did not make an elaborate discussion in that regard. 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase prejudicial to the interest of Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. Other foregoing judicial precedents quoted at the assessee's behest also reiterate the very legal proposition. We adopt the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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