Gujarat High Court
Ranjit Projects Pvt Ltd vs Deputy Commissioner Of Income Tax on 5 May, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
C/SCA/2161/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 2161 of 2014
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RANJIT PROJECTS PVT LTD....Petitioner(s)
Versus
DEPUTY COMMISSIONER OF INCOME TAX....Respondent(s)
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Appearance:
MR SN SOPARKAR, SR. ADV WITH MR B S SOPARKAR, ADVOCATE for the
Petitioner(s) No. 1
MR SUDHIR M MEHTA, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 05/05/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) We have heard the learned counsel for the parties for final disposal of the petition.
Petitioner has challenged a notice dated 24.8.2012 issued by the respondent Assessing Officer seeking to reopen the assessment of the petitioner for the assessment year 200809. Brief facts are as under:
The petitioner is a company registered under the Companies Act. The petitioner is engaged in Page 1 of 14 C/SCA/2161/2014 ORDER the business of developing infrastructure facilities. For the assessment year 200809, the petitioner filed its return of income on 27.9.08 declaring nil income. The petitioner was assessed under section 115JB of the Income Tax Act, 1961 ('the Act' for short) and paid tax of Rs.51.09 lacs (rounded off). The petitioner had claimed deduction under section 80IA(4) of the Act.
Such return was taken in scrutiny assessment. During the scrutiny assessment, the Assessing Officer raised several queries with respect to the petitioner's claim for deduction under section 80IA(4) of the Act. After examining the representation of the petitioner, the Assessing Officer framed the assessment on 29.9.2010. He accepted the petitioner's claim for deduction under section 80IA(4) of the Act in toto. We would refer to the contents of such order a while later.
It is this scrutiny assessment which the respondent desires to reopen for which the impugned notice under section 147 of the Act came to be issued. The petitioner was supplied with reasons recorded by him for issuing the notice. Such reasons read as under:Page 2 of 14 C/SCA/2161/2014 ORDER
"In this case, the Assessee, M/s.Ranjit Projects (P) Ltd. engaged in infrastructure development projects in sector road, bridges, byepasses, filed its return of income for the A.Y. 200809 for "Nil" income and paid tax of Rs.51,09,690/ u/s.115JB. The income under the normal provisions of the Act was arrived at after claiming hundred percent deduction of the profit and gains of business of Rs.41519662/ under section 80IA. The case was completed in scrutiny manner u/s. 143(3) on 29/09/2010 by accepting the income declared by the assessee in its return and tax was charged u/s.115JB.
On verification of the assessment records revealed that the assessee was allowed deduction u/s.80IA for development of four lane rail over bridge (ROB) in lieu of an existing under pass at chhayapuri (Nr.GSFC Junction) on MumbaiDelhi Broad guage Railway lane Baroda. The project, as per the assessee was given to it on Build operate and transfer (BOT) basis by Gujarat State Road Development Corporation (GSRDC) a Govt. of Gujarat enterprise incorporate under the Companies Act, 1956. It was observed that the assessee had entered into a "Concession Agreement" with GSRDC on 13/10/2001 wherein, assessee was entitled to collect toll from ROB for 181 months and at the end of the stipulated period, ROB was to be transferred of Govt. of Gujarat. Based on the concession agreement between assessee and GSRDC, the Govt. of Gujarat issued a Not.Toll/102001 (20) Party I Pvt. Cell dt 7/3/3 authorizing the assessee to collect Toll from ROB.
Thus, it was clear that the assessee had not entered into any agreement with Central Govt. or State Govt. or local authority or any other statutory body as required in section 80IA(4)(i)
(a) of the Act. GSRDC was a company and not a statutory body nor local authority. Thus, the condition laid down in section 80IA(4)(i)(a) of the Act was not fulfilled. The assessee only subcounteracted the project allotted to GSRDC by the state Govt.
Page 3 of 14 C/SCA/2161/2014 ORDERThus in view of the nonfulfillment of condition of section 80IA, the deduction allowed to the tune of Rs.4,15,19,662/ was irregular and liable to be disallowed. The under assessment of Rs.4,15,19,662/ involved income Tax as under:
IT@ 30% on Rs.41519662 Rs.1,24,55,898/ Surcharge @ 10% Rs. 12,45,589/ Ed. Cess @ 30% of IT + SC Rs. 4,11,044/ Total IT Rs.14,11,14,531 Less IT charges u/s 115JB Rs. 51,09,690 +Int. u/s.234B@ 1% PM on Rs.9002841 for 4/08 to 9/10 i.e. 30 months (30)% Rs. 27,00,852 Total short levy of income tax Rs. 1,17,03,693
2. As per section 80IA(1) of the Act, any income derived from the eligible business sis eligible for hundred percent deductions.
Without prejudice to the facts and observation made in subpara (1) above, it was also observed that total receipts of Rs.41519662/ shown as derived from eligible business during the year, consisted of an amount of Rs.1980537/ received from GSRDC as contract receipt and assessee also claimed TDS credit of Rs.450719/. This contract payment of Rs.19890537/ was not entitled for deduction u/s.80IA of the Act as it was derived from the business of the enterprise. It was only attributable to such business. No observing the provisions of the Act resulted in under assessment of Rs.19890537/ involving Income Tax of Rs.6760793/ including surcharge and education cess.
In view of the above facts, I have reason to believe that short levy of Income Tax is to the extent of Rs.1,17,03,693/. Accordingly, assessment is reopened u/s.147 of the Income Tax Act, 1961."
The petitioner raised detailed objections to the Page 4 of 14 C/SCA/2161/2014 ORDER notice of reopening. In such objections, the petitioner pointed out that the entire issue was examined at length in the original assessment. The petitioner had satisfied the Assessing Officer about the validity of the claim. Such objections were, however, rejected by the Assessing Officer by the order dated 23rd December 2013. Hence the petition.
Learned counsel Shri Soparkar for the petitioner raised the following contentions.
(1) That the entire issue was examined by the Assessing Officer in the original scrutiny assessment. All aspects of the petitioner's claim for deduction under section 80IA(4) were gone into. Upon being satisfied by the replies of the petitioner, the claim was accepted. Any attempt on the part of the Assessing Officer now to revisit the issue would be based on a mere change of opinion.
(2) He further contended that this was the sixth year of the petitioner's claim for exemption under section 80IA(4) of the Act for having built fourlane railway overbridge. In the earlier years, the claim was accepted after scrutiny. It would, therefore, not be open for the Assessing Officer to discard the claim Page 5 of 14 C/SCA/2161/2014 ORDER without recalling the exemption granted in the base year. In this respect, reliance was placed on a decision in the case of Saurashtra Cemennt & Chemical Industries Ltd v. CIT, 123 ITR 669(Guj). Reference was also made to a recent decision of the Supreme Court in the case of CIT v. Excel Industries Ltd., 358 ITR 295(SC).
On the other hand, learned counsel Mr.Mehta for the Revenue opposed the petition contending that in the original assessment, the question whether the petitioner had entered into an agreement with the Central Government, State Government or local authority or any other statutory body was not examined. In any case, the amount of Rs.1.98 crores (rounded off) received by the assessee did not pertain to toll collection. Such income, therefore, cannot be said to have been derived from development of infrastructure facility. In this respect, he relied on the following decisions:
(1) In the case of Sharavathy Steel Products P. Ltd v. ITO, 347 ITR 371 (Karn.).
(2) In the case of CIT v. Le Passage to India Tour and Travels P. Ltd., 335 ITR 69 (Delhi).Page 6 of 14 C/SCA/2161/2014 ORDER
(3) In the case of CIT v. Maharani Packaging (P) Ltd., (2012) 24 taxmann.com. 204 (HP).
The counsel also referred to a decision of the Karnataka High Court in the case of CIT v. Rinku Chakraborthy, reported in (2012) 20 taxmann.com 609 (Kar.) to contend that the tax payer should not be allowed to take advantage of the oversight or mistake committed by the taxing authority.
Having thus heard the learned counsel for the parties, if we peruse the reasons more closely, the Assessing Officer desired to disallow the assessee's claim for deduction under section 80IA(4) of the Act on two grounds. Firstly, that the agreement which the assessee entered for development of infrastructure facility was not with the Central Government, State Government, local authority or any statutory body in terms of section 80IA(4)(i)(a) of the Act and therefore, the assessee was not entitled to the deduction claimed. The second objection was that a sum of Rs.1.98 crores received from the contractee, according the Assessing Officer, was not derived from development of infrastructure project.
We have noticed that deduction under section Page 7 of 14 C/SCA/2161/2014 ORDER 80IA(4) was virtually the sole claim of the assessee in the return filed. This claim was thoroughly examined. In the scrutiny, the Assessing Officer raised several questions, some of them read as under:
"i. toll collection income shown at Rs.5,53,33,491 include receipt from GSRDC at Rs.1,98,90,537 for which GSRDC has issued TDS certificate in Form 16 in which payment is shown to contractors and subcontractors. What is the nature of this payment by GSRDC and for what purpose? Complete set of document with copy of contract is required by which GSRDC is paying the amount. Why the payment by GSRDC should not be treated as "Work Contract".
ii. what is the final participation of GSRDC or Government of Gujarat or other Bank etc.? How the repayments were made? All agreements should be justified with complete set of documents.
iii. How can the assessee claim that he is the owner of the bridge for claiming depreciation. This is not under BOOT? Justification for ownership required with documents.
iv. complete bifurcation of Reserve and Surplus shown in balance sheet.
v. none of the conditions under rule 18BBB of IT Rules is satisfied i.e. I. Audit Report in the Form 10CCB is not filed.
II. Copy of agreement with Govt. is not enclosed.
vi. submit report in form 29B."
Page 8 of 14 C/SCA/2161/2014 ORDERIn response to such queries, the assessee gave detailed answers. The fact that the assessee had entered into an agreement with the Gujarat State Road Development Corporation (GSRDC) was on record even along with the original return. In a note appended to the return, the petitioner had pointed out that GSRDC is a 100% State Government Company working under the Road and Building Department of the Government of Gujarat. The petitioner was collecting toll under a notification issued by the State Government. This was further elaborated in the reply filed by the petitioner dated 16.8.2010 during the assessment, where it was pointed out to the Assessing Officer as under:
"1. G.S.R.D.C. has paid Rs.2,04,77,266/ for Toll free passage of two wheelers and three wheelers vehicles over the ROB constructed by us. There was agitation by the people from Baroda and nearby places for levy of Toll tax on two wheelers and three wheelers at the relevant time during F.Y. 200203. The Government after considering the agitation permitted Toll free passage of two wheelers and three wheelers vehicle over the ROB undertaking to pay us the Toll charges for such vehicles. G.S.R.D.C. Is considering the passage of two wheelers and three wheelers periodically and as per its working pay us the Toll charges for such vehicle on which TDS is made. The payment by G.S.R.D.C. Is therefore, not payment for any work contract executed by us. But it is also Toll income.Page 9 of 14 C/SCA/2161/2014 ORDER
2. The Government of Gujarat or G.S.R.D.C. Or other Banks/Financial Institutions have not participated for financial loans. The Company has arranged financial requirement for the project from its shareholders through quashi equity deposits which is shown in Balance Sheet as unsecured loans.
3. As per Concession Agreement entered with G.S.R.D.C. The Toll Bridge work was awarded to us on build, own/operate and transfer basis. We have accordingly, built this Bridge at our own cost and we have to own it and operate it, maintain it and collect Toll income for the stipulated period mentioned in the Concession Agreement. After that period, we have to transfer this Toll Bridge to Government without any further monetary consideration. This can be seen and verified from the Concession Agreement.
4. Complete bifurcation of reserve and surplus is as under:
1. General Reserve Rs.16,82,16,204/. The general reserve is built up by the accumulated profit of the earlier years.
5. We have submitted tax Audit Report along with Report in 10CCB during the course of assessment proceedings. If, however, Audit Report in Form CCB is not found on record, we submit herewith another copy of the said Report.
The Concession Agreement with G.S.R.D.C. Was produced for verification during the course of hearing. The Agreement runs into hundreds of pages and therefore, we had also submitted Xerox copies of some important pages of the said Agreement.
6. We submit herewith Auditor's report in Form 29B for working of Book profit u/s.115JB.
We hope the above information will suffice with the requirement to finalize our assessment. If, however, any further details are required that may please be called for."
Page 10 of 14 C/SCA/2161/2014 ORDERIt was only after such detailed scrutiny that the Assessing Officer in the order of assessment concluded as under:
"2. Assessee is engaged in business of infrastructure development projects in the sector roads, bridges, and by passes. During the year under consideration the assessee has shown gross income of Rs.5,53,33,491/ and net income was declared of Rs.4,15,16,662/ as compared to last year's gross income of Rs.5,50,69,522/ declared net profit of Rs.3,89,00,111114/.
3. During the year under consideration the assessee has claimed deduction us/.80IA(4) of Rs.4,15,19,662/ and for examination of the assesee's claim a notice u/s.142(1) was issued to the assessee vide this office letter dated 4/8/2010.
4. In response to the above letter, the assessee has submitted its reply vide letter dated 16/8/2010 which is reproduced as under:
.....
.....
5. The submission of the assessee is carefully considered and the deduction claimed u/s.80IA(4) of the Act is allowable to the assessee as the assessee has produced the documentary evidence in respect of the eligibility of deduction claimed u/s.80IA(4) of the Act.
6. After considering the details income of assessee is computed as under: Gross total income Rs.4,15,19,662/ Less:Deduction u/s 80IA Rs.4,15,19,662 Total Rs. Nil Page 11 of 14 C/SCA/2161/2014 ORDER Calculate tax on book profit (Rs.4,50,98,755/) u/s.115JB i.e. Rs.10% of Book Profit Tax is worked as MAT u/s.115JB
7. Assessed u/s.143(3) of the I.T.Act. Issue demand notice and challan charge interest u/s.234B and 234C of the I.T.Act.Give credit for the prepaid taxes if any."
It can thus be seen that the sole claim of the assessee for deduction under section 80IA(4) of the Act came up for consideration during scrutiny assessment. On being satisfied that the assessee was entitled to such claim, the assessment order was passed. Any attempt on the part of the Assessing Officer now to revisit such a claim would be based on a mere change of opinion. The Supreme Court in the case of CIT v. Kelvinator of India Ltd., 320 ITR 561 (SC) observed as under:
"On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open Page 12 of 14 C/SCA/2161/2014 ORDER assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "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."
Under the circumstances, even within four years, it would not be open for the respondent to reopen the assessment. The agreement between the petitioner and the GSRDC was on record. The petitioner had pointed out that GSRDC is a 100% Government owned company. The status of the contractee was very much before the Assessing Officer. He examined the entire claim. Having found that the claim was valid, the same was granted. This would include the eligibility as well as the computation of deduction. Under the circumstances, even without referring to the petitioner's second contention that the claim being an ongoing one and this being the sixth year of deduction, the same cannot be disturbed without disturbing the original claim of the base year, we are of the opinion that reopening cannot be permitted.
Page 13 of 14 C/SCA/2161/2014 ORDERIn the result, the petition is allowed. The impugned notice dated 24.8.2012 is quashed. The petition is disposed of accordingly.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) (vjn) Page 14 of 14