Appeal Details
Counselvise Citation
[2012] 122 COUNSELVISE.COM (IT) 8121 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 4 month(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
19-12-2012
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
01-11-2012
Assessment Year
2004-2005
Appeal Filed On
18-08-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NOS. 2197 TO 2199/MUM/2008 (ASSESSMENT YEARS: 2000-01 TO 2002-03) ITAS NO. 2200 TO 2201/MUM/2008 (ASSESSMENT YEARS: 2003-04 TO 2004-05) ITA NO. 2202/MUM/2008 (ASSESSMENT YEARS: 2005-06) ASST. COMMISSIONER OF INCOME-TAX(CC)-45, ROOM NO.659, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS M/S PRATIBHA INDUSTRIES LTD, 574, USHA KAMAL, CHAMBUR NAKA, CHEMBUR, MUMBAI - 400 071 PAN: AAACP 4709 N (APPELLANT) (RESPONDENT) C.O. NOS. 117 TO 121/MUM/2008 (ARISING OUT OF ITAS NO. 2197 TO 2001/MUM/2008 ASSESSMENT YEARS:2000-01 TO 2004-05) M/S PRATIBHA INDUSTRIES LTD, 574, USHA KAMAL, CHAMBUR NAKA, CHEMBUR, MUMBAI - 400 071 PAN: AAACP 4709 N VS ASST. COMMISSIONER OF INCOME-TAX(CC)-45, ROOM NO.659, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (CROSS OBJECTOR) (RESPONDENT) CROSS OBJECTOR APPELLANT BY : SHRI TRALASHWALA AND SHRI HARSHVARDHANA RESPONDENT-REVENUE BY : SHRI PRAVIN KUMAR DATE OF HEARING: 01.11.2012 DATE OF PRONOUNCEMENT: 19.12.2012 O R D E R PER BENCH : THE REVENUE HAS FILED SIX APPEALS AGAINST THE ORDER OF CI T(A)-III, MUMBAI, DATED 23.01.2008, COVERING ASSESSMENT YEARS 2000- 01, 2001-02, 2002-03, 2003-04 & 2004-05 AND ASSESSMENT YE AR 2005-06 M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 2 ALSO DATED 23.01.2008 WHEREIN CIT(A) HAS DELETED THE ADDIT IONS ON ACCOUNT OF DISALLOWANCES UNDER SECTION 153A OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS (CO) AGAINS T THE SAME ORDERS OF THE CIT(A), COVERING ASSESSMENT YEARS 200 0-01, 2001- 02, 2003-03, 2003-04 & 2004-05. 3. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE DE PARTMENT IN THE APPEALS, FILED : (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEDUCT ION UNDER SECTION 80IA OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA IN MOST O F THE INFRASTRUCTURE PROJECTS WHERE THE ASSESSEE IS MERELY A WORK CONTRA CTOR AND NOT A DEVELOPER. (II) THE APPELLANT PRAYS THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. (III) THE APPELLANT CRAVES TO AMEND OR ALTER ANY GR OUND AND/OR ADD NEW GROUNDS WHICH MAY BE NECESSARY. 4. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THE CROSS OBJECTIONS (COS), FILED : 1. THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN SUSTAINING THE ORDER UNDER SECTION 153A OF THE ACT WITHOUT APPRECI ATING THE FACT THAT THERE WAS NO EVIDENCE OR MATERIAL FOUND IN THE COUR SE OF SEARCH ACTION IN RESPECT OF THE YEAR UNDER CONSIDERATION AND HENC E, THE ASSESSMENT ORDER PASSED INVOKING THE PROVISIONS OF SECTION 153 A OF THE ACT IS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) FAILED T O APPRECIATE THAT NO MATERIAL OR EVIDENCE WAS FOUND IN THE COURSE OF SEARCH ACTION AND HENCE, THE UNDERLYING PURPOSE OF MAKING ASSESSMENT UNDER SECTION 153A OF THE ACT I.E. TO ASSESSEE INCOME WHICH IS NO T DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED IN TERMS OF THE PROVISIONS OF SECTION 132 OF THE ACT FAILED AND THUS, THE ASSESSMENT MADE UNDER SECT ION 153A OF THE ACT AS IF IT WERE A REGULAR SCRUTINY ASSESSMENT IS WITH OUT ANY JUSTIFICATION AND LIABLE TO BE QUASHED. 3. THE RESPONDED CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL. 5. APPEAL FILED BY THE DEPARTMENT FOR ASSESSMENT YEAR 20 05-06 IS DEALT WITH SEPARATELY. 6. IN TOTAL THERE ARE ELEVEN APPEALS FOR OUR CONSIDERATION. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 3 7. SINCE ALL THE APPEALS AND COS, FILED BY THE DEPARTMENT A ND THE ASSESSEE, COVERING ASSESSMENT YEARS 2000-01 TO 2004-0 5, EMANATE FROM THE ONE CONSOLIDATED ORDER OF THE CIT(A), WE ARE DISPO SING OFF THE APPEALS AND THE COS THROUGH ONE COMMON AND CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 8. AT THE TIME OF HEARING, THE AR SUBMITTED THAT THE GROU NDS TAKEN UP BY THE DEPARTMENT ARE ON MERITS, WHEREAS, THE GROUN DS TAKEN BY THE ASSESSEE IN COS ARE ON LEGALITY AND APPLICABILITY OF SECTIO N 153A ON THE ASSESSEE, IN THE IMPUGNED ASSESSMENTS. HE, THEREFORE , SUBMITTED THAT IT WOULD BE APPROPRIATE, IF THE ISSUE ON LEGALITY BE HEA RD FIRST, BECAUSE IF THE ASSESSMENTS FRAMED UNDER SECTION 153A RE AD WITH 143(3) OF THE INCOME TAX ACT, ARE HELD TO BE WITHOUT JURIS DICTION, THE ASSESSMENTS WOULD FALL AND GROUNDS FILED BY THE DEPARTMEN T WOULD BECOME INFRUCTUOUS. 9. WE, THEREFORE, PROCEED AND TAKE UP COS FILED BY THE ASS ESSEE. THE AR POINTED OUT THAT IN ASSESSMENT YEARS 2000-01 T O 2004-05, THERE IS JUST ONE SOLITARY GROUND AND THAT IS AGAINST T HE LEGALITY AND APPLICABILITY OF PROVISIONS OF SECTION 153A ON THE ASSESSEE FO R THE ASSESSMENT YEARS IN QUESTION. ACCORDING TO THE AR, THOUG H, IT IS A CASE OF SEARCH AND SEIZURE, PROVISION OF SECTION 153A WOULD NOT BE APPLICABLE ON THE ASSESSEE. 10. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPAN Y ENGAGED IN THE DEVELOPMENT OF PROJECTS, BOTH, INFRASTRUCTURE AND NON INFRASTRUCTURE. IN THE CURRENT YEAR, THE ASSESSEE, BESIDE S HAVING ITS NORMAL BUSINESS OF DEVELOPMENT OF PROJECTS ALSO WAS IN THE DEVELOPMENT OF WATER SUPPLY PROJECTS AND OTHER CONNEC TED INFRASTRUCTURE FACILITIES FOR GOVERNMENT, SEMI GOVERNMENT DEP ARTMENTS. IN DEVELOPMENT OF SUCH INFRASTRUCTURE FACILITIES, THE ASSESS EE UTILIZES M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 4 ITS OWN DESIGNS/PLANS, AS FEASIBLE FOR THE LOCATION OF SITE, SPE CIFICATIONS AND TECHNICAL EXPERTISE THROUGH ITS OWN HUMAN, FINANCIAL & M ATERIAL RESOURCES. BEING IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES THE ASSESSEE USES ITS OWN ASSETS WHICH INCLUDE SOPHISTICATED EARTH EXCAVATION MACHINERIES, TOWER CRANES, STOCKS OF STEEL, CEME NT AND BANKING AND FINANCIAL FACILITIES SUCH AS FDRS, BANK GUARANTEE S AND CREDIT FACILITIES AND ADVANCES TO ITS CONTRACTORS AND CRED ITS TO GOVERNMENT DEPARTMENTS. ACCORDING TO THE AR, THE ASSE SSEE IS ALSO EXPOSED ON ITS OWN, TOWARDS VARIOUS RISKS AND RESPONSIBILIT IES SUCH AS COMPLETION OF CONTRACTS WITHIN STIPULATED TIME, MAINTENANCE, D ELAYED PAYMENTS AND BAD DEBTS, LITIGATION AND GEOLOGICAL RISKS. 11. THE ASSESSEE WAS SUBJECTED TO ACTION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961, ON 17.02.2005. IN THE COURSE OF S EARCH, THE REVENUE SEIZED CERTAIN DOCUMENTS RELATING TO THE PROJE CTS UNDERTAKEN BY THE ASSESSEE. AS A CONSEQUENCE THEREOF, THE ASSESS EE MADE AN OFFER OF RS. 1.95 CRORES, UNDER SECTION 132(4) OF THE INCOME TA X ACT, PERTAINING TO ASSESSMENT YEAR 2005-06, WHEREIN THE ASS ESSEE ADDED BACK TO ITS INCOME, SUNDRY CREDITORS, WHICH WERE MORE TH EN THREE YEARS, UNDER SECTION 41(1). EXCEPT FOR THIS, ACCORDING TO TH E AR, NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND WHICH COULD BE U SED AGAINST THE ASSESSEE FOR DETERMINING THE UNDISCLOSED INCOME OF THE ASSESSEE IN ANY YEAR. 12. AS A CONSEQUENCE OF SEARCH AND SEIZURE OPERATIONS, A S CARRIED OUT UNDER SECTION 132 ON THE ASSESSEE, PROVISIONS OF SECTION 153A WERE TRIGGERED AND THE AO ISSUED NOTICES UNDER SECTION 153A ON THE ASSESSEE, CALLING UPON THE ASSESSEE TO FILE ITS RETURNS IN RESPONSE TO THESE NOTICES UNDER SECTION 153A FOR ASSESSMENT YEARS 2000-01 TO 2005-06. THE RETURNS, IN RESPONSE TO NOTICES UNDER SEC TION 153A WERE DULY FILED BY THE ASSESSEE. THE AO, TAKING UP THE PROCEED INGS UNDER SECTION 153A FOR THE YEARS UNDER CONSIDERATION, MADE CER TAIN M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 5 DISALLOWANCES AND PRIMARILY DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA(4). 13. AT THE TIME OF HEARING BEFORE US, THE AR FILED SYNOPSIS, G IVING BRIEF OF HIS SUBMISSIONS. ACCORDING TO THE SYNOPSIS, THE AR, S UBMITTED HIS REASONS FOR NON APPLICABILITY OF PROVISIONS OF SECTION 153 A, ITS WAS SUBMITTED THEREIN, THAT ASSESSMENTS FOR ASSESSMENT YEAR S 2000-01 TO 2003-04 WERE UNDER SECTION 143(1) ALREADY COMPLETED PRIO R TO ACTION UNDER SECTION 132(1) AND REFUNDS HAD ALSO BEEN ISSUED BY THE AO, WHICH WERE DULY CREDITED IN THE BANK ACCOUNT OF THE ASS ESSEE. ASSESSMENT YEAR 2004-05, THE ASSESSMENT WAS PENDING A LONG WITH THE TIME FOR THE ISSUE OF NOTICE UNDER SECTION 143(2). THE POINT BEING AGITATED BY THE AR, HERE WAS, WHETHER THE AO WAS COMP ETENT TO ISSUE 153A WHERE THERE WAS NO PENDENCY, BECAUSE ACCORDING T O THE AR, AS PER THE 2 ND PROVISO, PROVISIONS OF SECTION 153A CAN ONLY BE INVOKED IN THOSE YEARS, WHERE, ANY PROCEEDING IS PENDING AND ONLY SUCH PROCEEDINGS SHALL GET ABATED AND SHALL BE TAKEN OVER BY THE PROVISIONS OF SECTION 153A. TO EXPLAIN THE ISSUE, HE REFERRED TO THE S UBJECT HEAD, ASSESSMENT IN CASE OF SEARCH OR REQUISITION. THE FOLLOWING SECTIONS WERE INSERTED BY THE FINANCE ACT, 2003, W.E.F. 01.06.2003. SE CTION 153A(1) BRINGS ABOUT THE FOLLOWING SECTIONS WITH THE NON-OBSTANTE EXPRESSION, NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 13 2 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISIT IONED UNDER SECTION 132A AFTER THE 31 ST DAY OF MAY 2003, THE ASSESSING OFFICER SHALL : (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSME NT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISH ED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITI ON MADE: M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 6 PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB SECTION PE NDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OR REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE . 14. THE AR, IN HIS ARGUMENTS REFERRED TO THE PROVISIONS, A ND DEMONSTRATED THAT THE LEGISLATURE HAS USED THE WORD PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132. FOR TH E CASES, WHICH ARE EITHER PENDING IN ASSESSMENT STAGE OR REASSESSMENT STAGE, ONLY THOSE ASSESSMENT OR REASSESSMENT SHALL GET ABATED AND 153A SHALL BE ATTRACTED. IN SHORT, THE AR ARGUES THAT THOSE ASSESSM ENT WHICH HAVE SEEN THE FINALITY, THEY CANNOT BE REVIVED/REVIEWED ALL OVER AGAIN. THIS WAS ALSO THE INTENTION OF THE LEGISLATURE AS WELL, AS THE 2 ND PROVISO IS VERY SPECIFIC, BECAUSE OTHERWISE, 2 ND PROVISO SHALL BE OTIOSE . HE, THEREFORE, SUBMITTED THAT SO FAR AS ASSESSMENT YEARS 20 00-01 TO 2003- 04 WERE CONCERNED, THESE YEARS HAVE REACHED FINALITY UND ER SECTION 143(1) AND AS POINTED OUT, EVEN THE REFUNDS FOR THE YEARS UNDER CONSIDERATION HAD BEEN CREDITED IN THE BANK ACCOUNT OF T HE ASSESSEE (BANK STATEMENT AT PAGES 199 & 200 - APB). 15. THE AR SUBMITTED (IN SYNOPSIS) , THAT THE PURPOSE OF CONDUCTING SEARCH IS TO UNEARTH HIDDEN OR UNDISCLOSED INCOME OR PR OPERTY AND BRING IT TO ASSESSMENT. HE REFERRED TO C VENKATA REDDY VS ITO, REPORTED IN 66 ITR 212 (MYS), WHEREIN THE BASIC OBJECTIVE TO CONDUCT THE SEARCH HAS BEEN EXPLAINED, AND IT IS OBSERVED, (EXTRACTED) , AS SUMMED UP AT PAGE 237, THE RESULT OF THIS DISCUSSION IS - (1) THAT THE IM PUGNED S. 132 DOES NOT TO ANY EXTENT DO AWAY WITH THE APPLICABILITY OF THE NORMAL PROCEDURE PRESCRIBED UNDER THE STATUTE FOR ASSESSMENT OR REAS SESSMENT OF INCOME, NOR DOES IT, THEREFORE, DEPRIVE THE ASSESSEE CONCER NED OF HIS NORMAL RIGHTS OF APPEAL, SECOND APPEAL AND REFERENCE TO TH E HIGH COURT; (2) THAT THE PROVISIONS OF THE IMPUGNED S. 132 MADE WITH THE OBJECT OF PREVENTING EVASION OF PAYMENT OF TAX ARE LIMITED TO GETTING HOLD OF EVIDENCE SOUGHT TO BE WITHHELD FROM THE ASSESSING A UTHORITIES AND GETTING AT INCOME BELIEVED TO HAVE BEEN UNDISCLOSED WITH A VIEW TO BRING IT UNDER ASSESSMENT AND ENSURE RECOVERY OF TAX EVAD ED OR SOUGHT TO BE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 7 EVADED; AND (3) THAT THE APPLICATION OF THE SPECIAL PROVISIONS OF THE IMPUGNED SECTION IS POSSIBLE ONLY WHEN THE APPROPRI ATE AUTHORITY ON THE BASIS OF INFORMATION IN HIS POSSESSION HAS REASON T O BELIEVE THAT THE ASSESSEE IS WITHHOLDING OR ATTEMPTING TO WITHHOLD E VIDENCE OR IS IN POSSESSION OF UNDISCLOSED INCOME EITHER IN THE SHAP E OF MONEY OR IN THE SHAPE OF BULLION, JEWELLERY OR THE LIKE, WHICH BELI EF FURNISHES THE CRITERION FOR MAKING A SEPARATE CLASSIFICATION HAVI NG A REASONABLE RELATION WITH THE OBJECT OF THE LAW. 16. MORE RECENTLY, HONBLE DELHI HIGH COURT IN THE CASE OF L R GUPTA VS UOI REPORTED IN 194 ITR 32 EXPLAINED THE MEANING OF U NDISCLOSED INCOME. THE AR, THROUGH THE SYNOPSIS SUBMITTED THAT CBDT BEING AWARE OF THE COMPLEXITIES FOR ASSESSMENT OF UNDISCLOSED INCO ME, ISSUED CIRCULAR NO. 7, DATED 05.09.2003, REPORTED IN 263 IT R 106 (ST) WHICH CLARIFIED WHAT IS ABATEMENT AND POINTED OUT THAT THE CIRCULAR CLARIFIES THAT ABATEMENT IS ONLY FOR PENDING ASSESSMENT AS ON THE DATE OF SEARCH, WHICH READS AS UNDER, PARA 65.5 THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF EACH OF THESE SIX ASSESSMENT YEARS. ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS PENDING O N THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR REQUI SITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. IT I S CLARIFIED THAT THE APPEAL, REVISION OR RECTIFICATION PROCEEDINGS P ENDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 132 OR R EQUISITION SHALL NOT ABATE. SAVE AS OTHERWISE PROVIDED IN THE PROPOSED SECTION 153A, SECTION 153B AND SECTION 153C, ALL OTHER PROV ISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT OR REASSESSMENT MADE UNDER SECTION 153A. IT IS ALSO CLARIFIED THAT ASSESSMENT OR REASS ESSMENT MADE UNDER SECTION 153A SHALL BE SUBJECT TO INTEREST, PENALTY AND PROSECUTION, IF APPLICABLE. IN THE ASSESSMENT OR REASSESSMENT MADE IN RESPECT, OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL B E CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SUCH ASSESSMENT YEAR . 17. THE AR FURTHER PLEADED THAT THE OBJECT AND PURPOSE OF SEARCH UNDER SECTION 132 IS TO UNEARTH UNDISCLOSED INCOME/PRO PERTY, AND AS A CONSEQUENCE, THEREOF, ASSESS THAT UNDISCLOSED INCOME/PROPERTY AND TO BRING IT TO TAX UNDER PROVISIONS OF SECTION 153A. HE PO INTS OUT AND SUBMITS THAT, TO NOT TO LEAD TO ANY ABSURD & UNJUST RE SULTS OR MISCHIEF, THE HONBLE SUPREME COURT IN THE CASE OF K P VAR GHESE VS ITO, REPORTED IN 131 ITR 597 (SC) LAYS DOWN (HEAD NOTES) ..A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSSIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE THE PL AIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRODUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHICH COULD NEVER HAVE BEEN INTEN DED BY THE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 8 LEGISLATURE, THE COURT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN 'DO SOME VIOLENCE' TO IT, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION . LUKE V IRC [1963] AC 557; [1964} 54 ITR 692 (HL) FOLLOWED. 18. THE AR FURTHER SUBMITTED THAT IN A RECENT DECISION BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANIL KUMAR B HATIA (UNREPORTED), IT HAS BEEN SPECIFIED THAT THE PROVISIONS OF SE CTION 153A REFERS TO ASSESSMENT/REASSESSMENT OF TOTAL INCOME, I.E. TOT AL INCOME AS PER ORIGINAL RETURN OF INCOME OR INCOME ASSESSED UNDER SE CTION 143(1) OR 143(3) PLUS UNDISCLOSED INCOME, IF ANY, FOR THE RELEVANT ASS ESSMENT YEAR (PARAS 20 AND 21) 2O. A QUESTION MAY ARISE AS TO HOW THIS IS TO BE SO UGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED I N RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT . IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF TH E SEARCH/REQUISITION, THE ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME TAKING NOTE OF THE UNDISC LOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. FOR THIS PURPOSE, THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE STRICT PROCEDURE TO AS SUME JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTION 147 AND 148, HA VE BEEN REMOVED BY THE NON OBSTANTE CLAUSE WITH WHICH SUB SECTION ( 1) OF SECTION 153A OPENS. THE TIME-LIMIT WITHIN WHICH THE NOTICE UNDER SECTION 148 CAN BE ISSUED, AS PROVIDED IN SECTION 149 HAS ALSO BEEN MA DE INAPPLICABLE BY THE NON OBSTANTE CLAUSE. SECTION 151 WHICH REQUIRES SANCTION TO BE OBTAINED BY THE ASSESSING OFFICER BY ISSUE OF NOTIC E TO REOPEN THE ASSESSMENT UNDER SECTION 148 HAS ALSO BEEN EXCLUDED IN A CASE COVERED BY SECTION 153A. THE TIME-LIMIT PRESCRIBED FOR COMPLETION OF AN ASSESSMENT OR REASSESSMENT BY SECTION 153 HAS ALSO BEEN DONE AWAY WITH IN A CASE COVERED BY SECTION 153A WITH ALL THE STOP HAVING BEEN PULLED OUT, THE ASSESSING OFFICER UNDER SECTION 153 A HAS BEEN ENTRUSTED WITH THE DUTY OF BRINGING TO TAX THE TOTA L INCOME OF AN ASSESSEE WHOSE CASE IS COVERED BY SECTION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS, IF NEED BE. 21. NOW THERE CAN BE CASES WHERE AT THE TIME WHEN T HE SEARCH IS INITIATED OR REQUISITION IS MADE, THE ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF THE SIX ASSESSMENT YEARS MENTIONED ABOVE, MAY BE PE NDING. IN SUCH A CASE, THE SECOND PROVISO TO SUB SECTION (1) OF SECT ION 153A SAYS THAT SUCH PROCEEDINGS SHALL ABATE. THE REASON IS NOT F AR TO SEEK, UNDER SECTION 153A, THERE IS NO ROOM FOR MULTIPLE ASSESSM ENT ORDERS IN RESPECT OF ANY OF THE SIX ASSESSMENT YEARS UNDER CONSIDERAT ION. THAT IS BECAUSE THE ASSESSING OFFICER HAS TO DETERMINE NOT MERELY THE UNDISCLOSED INCOME OF THE ASSESSEE, BUT ALSO THE TO TAL INCOME OF THE ASSESSEE IN WHOSE CASE A SEARCH OR REQUISITION HAS BEEN INITIATED. OBVIOUSLY THERE CANNOT BE SEVERAL ORDERS FOR THE SA NE ASSESSMENT YEAR DETERMINING THE TOTAL INCOME OF THE ASSESSEE IN ORD ER TO ENSURE THIS STATE OF AFFAIRS NAMELY, THAT IN RESPECT THE SIX AS SESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH THE SEARCH TOOK PLACE THERE IS ONLY ONE DETERMINATION OF THE T OTAL INCOME, IT HAS M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 9 BEEN PROVIDED IN THE SECOND PROVISO OF SUB SUB-SECT ION 153A THAT ANY PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF THE A SSESSEE WHICH ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING REQUISITION SHALL ABATE. ONCE THOSE PROCEEDINGS ABATE;, THE D ECKS ARE CLEARED, FOR THE ASSESSING OFFICER TO PASS ASSESSMENT ORDERS FOR EACH OF THOSE SIX YEARS DETERMINING THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD INCLUDE BOTH THE INCOME DECLARED IN THE RETURNS, IF ANY, FU RNISHED BY THE ASSESSEE AS WELL AS THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH OR REQUISITION. THE POSITION THUS EMERGI NG IS THAT WHERE ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHEN THE SEARCH IS INITIATED OR REQUISITION IS MADE THEY WILL ABATE MAKING WAY FOR THE ASSESSING OFFICER TO DETERMINE THE TOTA L INCOME OF THE ASSESSEE IN WHICH THE UNDISCLOSED INCOME WOULD ALSO BE INCLUDED BUT IN CASES WHERE THE ASSESSMENT OR REASSESSMENT PROCE EDINGS HAVE ALREADY BEEN COMPLETED AND ASSESSMENT ORDERS HAVE B EEN PASSED DETERMINING THE ASSESSEES TOTAL INCOME AND SUCH O RDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS M ADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN THIS LATTER SITUATION, THE ASSESSING OFFICER WILL REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE (WITHOUT HAVING THE NEED TO FALLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT COND ITIONS OF SECTIONS 147, 148 AND 151) AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. SUCH DETERMINATION IN THE ORDERS PASSED UNDER SECTION 15 3A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSESSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME . 19. IN CONTINUATION, THE AR REFERRED TO THE DECISION OF COO RDINATE BENCH AT MUMBAI IN THE CASE OF SAF YEAST CO. PVT. LTD. V S ACIT IN ITA NO. 1074/PU/2007 AND ITA NO. 5182/MUM/2007, DATED 03.10 .2010, WHEREIN, THE ITAT QUASHED THE ASSESSMENT FOR THE REASO NS GIVEN IN PARA 20 ITS ORDER, AFTER APPLYING THE RATIO ARRIVED AT BY THE SPECIAL BENCH, CONCLUDED (AS EXTRACTED) , 20. APPLYING THE RATIO OF THE ABOVE DECISIONS TO TH E FACTS OF THE PRESENT CASE, XXXXXXXXXXXXX. THE POSITION THUS EMERGING IS THAT WHERE ASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHEN THE SEARCH IS INITIATED, THE PENDING ASSESSMENT PROCEEDING STOOD ABATED BY VIRTUE OF THE SECOND PROVISO TO SECTION 153A OF THE ACT. INST EAD OF COMPLYING WITH THE REQUIREMENTS OF SECTION 153A OF THE ACT, THE A. O. PROCEEDED WITH THE PENDING ASSESSMENT PROCEEDING FOR THE A.Y. 2004-05 AND PASSED THE IMPUGNED ASSESSMENT ORDER DURING THE PENDENCY OF TH E ASSESSMENT UNDER SECTION 153A OF THE ACT WHICH IS A NULLITY AN D A SUCH THE ASSESSMENT ORDER DTD. 27-12-2006 PASSED UNDER SECTI ON 143(3) OF THE ACT IS ILLEGAL, ARBITRARY, WHOLLY WITHOUT JURISDICT ION AND, HENCE, THE SAME IS QUASHED. 20. OTHER CASES HAVE ALSO BEEN REPRODUCED HERE. A FTER REFERRING TO THE SUBMISSIONS FROM BOTH THE SIDES, THE COORDINATE BENCH , QUASHED M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 10 THE ASSESSMENTS FRAMED BY THE AO UNDER SECTION 153A O F THE INCOME TAX ACT. 21. ON FURTHER SUBMISSIONS, THE AR REFERRED TO THE DEC ISION OF COORDINATE BENCH AT PUNE, IN THE CONTEXT OF SECTION 153C OF THE INCO ME TAX ACT, IN THE CASE OF SINHGAD TECH. EDU. SOCIETY VS ACI T, IN ITA NO. 114 TO 117/PN/2010 (WHERE ONE OF US WAS A PARTY) , WHEREIN IT WAS HELD THAT, IN THIS REGARD, WE POSED QUESTION TO OURSELVES IF IT IS FAIR TO REOPEN THE ASSESSMENT WHICH IS ALREADY CONCLUDED WITHOUT ANY R EASON OR LOGIC THEREBY ENCROACH ON THE RIGHTS OF THE TAX PAYERS? S HOULD THE AO BE GIVEN UNFETTERED OR ARBITRARY POWERS TO ISSUE NOTIC E FOR THE SIX AYS SPECIFIED IN THE FIRST PROVISO TO SECTION 153A(1) O F THE ACT WHEN THE IMPUGNED ASSESSMENTS FOR THE SAID SIX AYS ARE OTHER WISE REACHED FINALITY AFTER DUE PROCESS OF LAW. IN OUR OPINION, THE ANSWER IS NEGATIVE AND IT IS IN FAVOUR OF THE ASSESSEE. IN ANY CASE, D R HAS NOT BROUGHT ANYTHING ON RECORD TO DEMONSTRATE THAT THE DECISION S GIVEN BY THE TRIBUNAL IN THE CASE OF LMJ INTERNATIONAL (SUPRA) A ND M/S KUMAR COMPANY (SUPRA) ARE NOT TO BE FOLLOWED IN THIS CASE . 1) ANIL KUMAR BHATIA & ORS. (2010) 1 ITR (TRIB) 484 (D EL) CONCLUSION:- IN RESPECT OF AN ASSESSMENT UNDER S. 153A, WHERE P ROCESSING RETURNS UNDER S. 143(1)(A) STOOD COMPLETED III RESPECT OF R ETURNS FILED IN DUE COURSE BEFORE SEARCH AND NO MATERIAL IS FOUND IN SEARCH THEREAFTER, NO ADDITION CAN BE MADE. 2) SUNCITY ALLOYS (P) LTD. (2009) 124 TTJ (JD) 674 CON CLUSION:- ASSESSMENTS OR REASSESSMENTS MADE PURSUANT TO NOTI CE UNDER S. 153A ARE NOT DE NOVO ASSESSMENT AND THEREFORE NO NEW CLA IM OF DEDUCTION OR ALLOWANCE CAN BE MADE BY ASSESSEE WHERE ADMITTEDLY THE REGULAR ASSESSMENTS ARE SHOWN AS COMPLETED ASSESSMENTS ON T HE DATE OF INITIATION OF ACTION UNDER S. 132. 22. THIS DECISION, HAS TAKEN INTO CONSIDERATION, CERTAIN O THER DECISIONS AS WELL, WHOSE UNDERLYING RATIO IS THAT THE EXISTE NCE OF INCRIMINATING DOCUMENT IS A MUST. 23. THE AR SUBMITTED THAT, ONCE AN ASSESSMENT, WHETHER UNDER SECTION 143(1) OR 143(3) HAS REACHED THE STAGE OF FINALITY, TH E 2 ND PROVISO, PRESCRIBING THE ABATEMENT OF THE ASSESSMENT SH ALL HAVE NO EFFECT, BECAUSE, ONLY PENDING PROCEEDINGS ON THE DATE OF SEARCH, CAN GET ABATED. THE AR CITED THE CASE OF UTTRA S SHOREWAL, PLACE D IN THE UNREPORTED PORTION IN 48 SOT 6, WHEREIN THE ADDITIONS MADE BY TH E AO M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 11 WERE DELETED BY THE CIT(A). ADDITIONS MADE IN THE 153A PR OCEEDINGS WERE HELD TO BE NOT VALID. THE RELEVANT OBSERVATION IS, THE INTENTION OF SECTION 153A IS NOT TO DISTURB MA TTERS THAT HAVE REACHED FINALITY BETWEEN THE PARTIES. IT IS TRUE TH AT THE PROVISIONS OF SECTION APPLY NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 147 AND SECTION 148. BUT THAT ONLY CONVEYS THE LIMITED IDEA THAT ONCE A SEARCH TAKES PLACE, IT IS OPEN TO THE ASSESSING OFFICER TO ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PR ECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH WAS CONDUCTED AND IN EXERCISING SUCH POWER, THE ASSESSI NG OFFICER WAS NOT BOUND TO TAKE RECOURSE TO SECTION 147 OR SECTION 14 8. BUT THIS IS ONLY FOR THE PURPOSE OF INITIATING PROCEEDINGS FOR ASSESSMEN T UNDER SECTION 153A IT DOES NOT MEAN THAT MATTERS THAT HAVE ALREADY BEE N DECIDED BETWEEN THE PARTIES AND HAD REACHED FINALITY CAN BE DISTURB ED AND BROUGHT BACK TO ASSESSMENT. IF SUCH A POWER IS GIVEN TO THE ASSE SSING OFFICER, HE COULD EVEN NULLIFY DECISIONS OF THE HIGH COURTS AND SUPREME COURT, A POWER WHICH WOULD BE WHOLLY INCONSISTENT WITH THE L AW OF THE LAND. SECTION 153A CANNOT BE CONSTRUED IN SUCH A MANNER. IN THE ASSESSMENTS MADE UNDER SECTION 153A, THEREFO RE, THE ASSESSING OFFICER HAD NO JURISDICTION TO INCLUDE THE SAME ADD ITIONS, WHICH WERE DELETED BY THE COMMISSIONER (APPEALS) EARLIER AND W HOSE ORDERS HAVE BECOME FINAL. 24. THE AR SUBMITTED THAT IN SO FAR AS ASSESSMENT YEARS 2000-01 TO 2003-04, WERE CONCERNED, THOSE YEARS HAD REACHED THE STAGE OF FINALITY AND EVEN THE AO HAD ISSUED REFUNDS IN THESE YEARS. THE AR, THEREFORE, SUBMITTED THAT THE DISALLOWANCES MADE BY THE AO IN THESE PROCEEDINGS IN SO FAR AS ASSESSMENT YEARS 2000-01 TO 2003-04 WERE ILLEGAL, IN VIEW OF THE CIRCULAR ISSUED BY THE BOARD (SUPRA) AND THE DECISION OF UTTRA S SHOREWAL (SUPRA) . HE REFERRED TO THE CASE OF RECENT SB DECISION IN THE CASE OF ALL CARGO REPORTED IN 137 ITD 287, WHEREIN, IT HAS BEEN HELD, IN PARA 19 SIMILAR ISSUE CAME UP BEFORE THE SPECIAL BENCH OF THIS TRIBUNAL (IN, ONE OF US WAS A PARTY) AND THE SPECIAL BENCH HAD AN OCC ASION TO DEAL WITH THE SCOPE OF INTERPRETATION OF SECTION 153A OF THE ACT IN THE CASE OF IN ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). THE SPECIAL BE NCH OF THE TRIBUNAL AFTER CONSIDERING THE VARIOUS DECISIONS AND CBDT CI RCULARS INCLUDING THE CIRCULAR NO. 7 OF 2003 DTD. 5-9-2003 AND THE DECISI ON OF THE [MENTIONED IN THE LIST OF CASES/CIRCULARS] HAS HELD AS UNDER: 52. THE PROVISION COMES INTO OPERATION IF A SEARCH OR REQUISITION IS INITIATED AFTER 31.5.2003. ON SATISFACTION OF THIS CONDITION, THE AO IS UNDER OBLIGATION TO ISSUE NOTICE TO THE PERSON REQU IRING HIM TO FURNISH THE RETURN OF INCOME OF SIX YEARS IMMEDIATELY PRECE DING THE YEAR OF SEARCH. THE WORD USED IS SHALL AND, THUS, THERE I S NO OPTION BUT TO ISSUE SUCH A NOTICE. THEREAFTER HE HAS TO ASSESS OR REASSESS TOTAL INCOME OF THESE SIX YEARS. IN THIS RESPECT ALSO, TH E WORD USED IS SHALL AND, THEREFORE, THE AO HAS NO OPTION BUT TO ASSES O R REASSESS THE TOTAL INCOME OF THESE SIX YEARS. THE PENDING PROCEEDINGS SHALL ABATE. THIS M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 12 MEANS THAT OUT OF SIX YEARS, IF ANY ASSESSMENT OR R EASSESSMENT IS PENDING ON THE DATE OF INITIATION OF THE SEARCH, IT SHALL ABATE. IN OTHER WORDS PENDING PROCEEDINGS WILL NOT BE PROCEEDED WIT H THEREAFTER. THE ASSESSMENT HAS NOW TO BE MADE UNDER SECTION 153A(1) (B) AND THE FIRST PROVISO. IT ALSO MEANS THAT ONLY ONE ASSESSMENT WIL L BE MADE UNDER THE AFORESAID PROVISIONS AS THE TWO PROCEEDINGS I.E. AS SESSMENT OR REASSESSMENT PROCEEDINGS AND PROCEEDINGS UNDER THIS PROVISION MERGED INTO ONE. IF ASSESSMENT MADE UNDER SUB-SECTION (1) IS ANNULLED IN APPEAL OR OTHER LEGAL PROCEEDINGS, THEN THE ABATED ASSESSMENT OR REASSESSMENT SHALL REVIVE. THIS MEANS THAT THE ASSE SSMENT OR REASSESSMENT, WHICH HAD ABATED, SHALL BE MADE, FOR WHICH EXTENSION OF TIME HAS BEEN PROVIDED UNDER SECTION 153B. 53. THE QUESTION NOW IS, WHAT IS THE SCOPE OF ASSES SMENT OR REASSESSMENT OF TOTAL INCOME UNDER SECTION 153A(1)( B) AND THE FIRST PROVISO? WE ARE OF THE VIEW THAT FOR ANSWERING THIS QUESTION, GUIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1). IF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND FOUND IN THE COURSE OF SEARCH IN OUR HUMBLE OPINION SUCH BOOKS OF ACCOUNT OR OTHER D OCUMENTS HAVE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR RE ASSESSMENT OF TOTAL INCOME UNDER THE AFORESAID PROVISION. SIMILAR POSITION WILL OBTAIN IN A CASE WHERE UNDISCLOSED INCOME OR UNDISCLOSED P ROPERTY HAS BEEN FOUND AS A CONSEQUENCE OF SEARCH. IN OTHER WORDS, H ARMONIOUS INTERPRETATION WILL PRODUCE THE FOLLOWING RESULTS : - A) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESSMENT UNDER SECTI ON 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMEN T YEAR SHALL BE MADE SEPARATELY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE A.O. B) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSESS MENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COUR SE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISCOVER ED IN THE COURSE OF SEARCH. 58. THUS, QUESTION NO. 1 BEFORE US IS ANSWERED A) AS UNDER: (A) IN ASSESSMENTS THAT ARE ABATED, THE A.O. RETAIN S THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON H IM UNDER S. 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY; (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTE XT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (I) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEAR CH. 59. HAVING COME TO THIS CONCLUSION WE NEED NOT GO I NTO VARIOUS ORDERS OF THE TRIBUNAL CITED BY THE RIVAL PARTIES. THE DECISI ONS INCONSISTENT WITH AFORESAID VIEW/CONCLUSION STAND DISAPPROVED AN.. TH E DECISIONS ;TENT WITH THIS VIEW/CONCLUSION ARE APPROVED 20. APPLYING THE RATIO OF THE ABOVE DECISIONS TO TH E FACTS OF THE PRESENT CASE, XXXXXXXXXXXXX. THE POSITION THUS EMERGING IS THAT WHERE ASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHEN THE SEARCH IS INITIATED, THE PENDING ASSESSMENT PROCEEDING STOOD ABATED BY VIRTUE OF THE SECOND PROVISO TO SECTION 153A OF THE ACT. INST EAD OF COMPLYING WITH THE REQUIREMENTS OF SECTION 153A OF THE ACT, THE A. O. PROCEEDED WITH THE PENDING ASSESSMENT PROCEEDING FOR THE A.Y. 2004-05 AND PASSED THE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 13 IMPUGNED ASSESSMENT ORDER DURING THE PENDENCY OF TH E ASSESSMENT UNDER SECTION 153A OF THE ACT WHICH IS A NULLITY AN D A SUCH THE ASSESSMENT ORDER DT. 27-12-2006 PASSED UNDER SECTIO N 143(3) OF THE ACT IS ILLEGAL, ARBITRARY, WHOLLY WITHOUT JURISDICT ION AND, HENCE, THE SAME IS QUASHED. 25. THE AR, IN CONTINUATION OF HIS ARGUMENT THAT WHEN THE PROCEEDINGS HAD REACHED THE STAGE OF FINALITY, THOSE PROC EEDINGS CANNOT BE ABATED AS PER 2 ND PROVISO, POINTED OUT THAT IN SO FAR AS THE PROCEEDINGS FOR ASSESSMENT YEAR 2004-05 WERE CONCERNE D, EVEN THEY COULD BE TAKEN TO BE FINALIZED, AS THE AO HAD NOT ISSUED A NY NOTICE TO REGULARIZE THE ASSESSMENT, EITHER 142(1) OR 143(2), TO MAKE THE ASSESSMENT PROCEEDINGS PENDING ON THE DATE OF SEARCH. 26. THE AR, THEREFORE CONCLUDED THAT SO FAR AS PROCEEDING S UNDER SECTION 153A WAS CONCERNED, THE PROCEEDINGS COULD NOT B E HELD TO BE LEGAL, BECAUSE (I) NO INCRIMINATING MATERIAL AND/OR DOCUMENT WAS FOUND, WHICH COULD INDICATE SOME INCOME HAVING BEEN UNEARTHED AND (II) DENY THE DEDUCTION UNDER SECTION 80IA(4), HOLDING THAT T HE ASSESSEE WAS ONLY A CONTRACTOR AND NOT A DEVELOPER OF INFRASTRUC TURE. THE AR SUBMITTED THAT THIS REASON CANNOT BE A GOOD ENOUGH RE ASON TO INVOKE THE PROVISIONS OF SECTION 153A, AS THIS IS ONLY A LEGAL ARGU MENT, WHICH BY ITSELF, CANNOT CONSTRUE TO BE AN INCRIMINATING MATERIAL. T HE AR, THEREFORE PRAYED THAT THE PROCEEDINGS UNDER SECTION 1 53A FOR ASSESSMENT YEARS 2000-01 TO 2004-05 BE HELD TO BE ILLEG AL AND THEREFORE MUST BE QUASHED. 27. REPLYING TO THE DETAILED SUBMISSIONS, THE DR SUBMITTED THAT IN A CASE WHERE THERE IS A SEARCH OPERATION UNDER SECTION 1 32 OF THE INCOME-TAX ACT OR REQUISITION OF BOOKS, THE AO IS BOUND T O ISSUE NOTICES UNDER SECTION 153A FOR THE PRECEDING SIX YEARS FROM THE FINANCIAL YEAR IN WHICH THE SEARCH HAS TAKEN PLACE. THE DR SUBMITTED THAT THE LEGISLATURE HAS NEITHER GIVEN ANY OPTION NOR ANY DISCRETION TO THE AO TO MAKE ANY DECISION FOR THE ISSUE OR NOT TO ISSUE NOTICES UNDER M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 14 SECTION 153A FOR THE PRECEDING SIX YEARS. THE DR, TO ST RENGTHEN HIS ARGUMENT SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN T HE CASE OF ANIL KUMAR BHATIA, (ALSO REFERRED TO BY THE AR), HAS VERY CA TEGORICALLY HELD THAT 153A EMPOWERS THE AO TO BRING TO TAX THE TO TAL INCOME OF THE ASSESSEE. THE RELEVANT PORTIONS ARE EXTRACTED, UNDER THE PROVISIONS OF SECTION 153A, AS WE HAVE A LREADY NOTICED, THE ASSESSING OFFICER IS BOUND TO ISSUE NOTICE TO THE A SSESSEE TO FURNISH RETURNS FOR EACH ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH OR REQUISITION WA S MADE. XXXX XXXX XXXX XXXX XXXX WITH ALL STOPS HAVING BEEN PULLED OUT, THE ASSESSI NG OFFICER UNDER SECTION 153A HAS BEEN ENTRUSTED WITH THE DUTY OF BR INGING TO TAX THE TOTAL INCOME OF AN ASSESSEE WHOSE CASE IS COVERED B Y SECTION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS, IF N EED BE. 28. THE DR EMPHASIZED THAT THE ASSESSEE HAS NOT S ATISFIED ALL THE CONDITIONS, AS LAID DOWN IN THE PROVISIONS, ALLOWING THE DEDUCT ION. HE PUT FORTH THE SUBMISSIONS, AS MADE BY THE AO, THAT MERE LY BEING A DEVELOPER IS NOT ENOUGH, BUT IN CASE, IF THE DEVELOPER DOE S NOT SATISFY ALL THE UNDERLYING CONDITIONS, AS CAST BY THE LEGISLATURE, TH E DEDUCTION IS NOT ALLOWABLE. HE SUBMITS IN HIS CONCLUSIONS, THE RELEVANT P ORTIONS OF THE AOS OBSERVATIONS, WHICH ARE EXTRACTED AS UNDER : THUS IT HAS BEEN CONCLUDED THAT ASSESSEE BY VIRTUE OF THE MANNER IN WHICH IT IS CARRYING OUT ITS BUSINESS NEITHER FITS IN THE DEFINITION OF DEVELOPER BY GENERAL CONCEPTS NOR IT FITS INTO THE CATEGORY OF PERSONS FOR WHOSE BENEFIT THE PROVISIONS WERE INTRODUCED. WITHO UT PREJUDICE TO THE ABOVE, IT IS ALSO TO BE SEEN AS TO WHETHER THE ASSE SSEE FULFILLS ALL THE OTHER CONDITIONS PRESCRIBED-HI THE SECTION FOR AVAI LING THE BENEFIT. THIS ISSUE HAS BEEN DEALT IN SUBSEQUENT PARAS. (B) SUB-SECTION 801A(4) SPECIFIES THE ENTITIES WHIC H ARE ENTITLED FOR DEDUCTION UNDER SECTION. 801A. IN CLAUSE (I) WHILE STATING THAT ANY ENTERPRISE CARRYING BUSINESS OF (I) DEVELOPING OR ( II) OPERATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAINT AINING INFRASTRUCTURE FACILITY, IT HAS BEEN CLEARLY LAID DOWN THAT SUCH E NTERPRISE SHALL FULFILL ALL THE CONDITIONS LAID DOWN IN SUB CLAUSE (A) (B) AND (C). SUB CLAUSE (C) PUTS A CONDITION THAT THE ENTERPRISE HAS STARTED OR STAR TS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER FIRST DAY OF APRIL 1995. THUS, THE PLAIN LANGUAGE OF PROVISIONS OF SEC. 80IA (2) AND 4(I)(C) MAKES IT VERY DEAR THAT THE DEDUCTION TO AN ENTERPRISE IS AVAILABLE UNDER THIS SECTION ONLY WHEN ENTERPRISE DEVELOPERS AND BEGINS TO OPERATE OR MAINTAIN THE INFRASTRUCTURE FACILITY. 29. THE DR SUBMITTED THAT NO DOUBT THAT THERE WERE NO INCRIMINATING DOCUMENTS PER SE , BUT A WRONG CLAIM OF A DEDUCTION M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 15 WOULD DEFINITELY CONSTRUE TO BE AN INCRIMINATING INFORMATION/DOCUMENT, HE OBSERVES, WHEREAS ASSESSEE SATISFIES THE CONDITIONS REFERRED BY IT IN ITS REPLY REPRODUCED IN PARA 3.1(B) (C) AND (F) WITHOUT ANY DOUBT. THERE ARE SEVERAL DOUBTS OVER THE SATISFACTION OF THE OTHER CONDITIONS . HE SUBMITTED THAT SINCE THE ASSESSEE, WHO HAS BEEN HELD TO BE CONTRACTOR AND NOT A DEVELOPER, THE ASSESSE E WAS NOT ENTITLED TO THE CLAIM OF SECTION 80IA(4), WHICH IS AVAILABLE ONLY TO THE DEVELOPER. THE DR MADE A REFERENCE TO PAGES 18 & 19 OF DPB, WHEREBY HE SUBMITTED THAT THE ASSESSEE WAS IN FACT A CO-CONTRA CTOR WITH THE MUKUT GROUP AND TO THIS EXTENT, THE SAID PAGES CONSTRU E TO BE INCRIMINATING. AS PER THE DR, THE ASSESSEE HAS NOT FULFILLED AN Y OF THE THESE UNDERLYING CONDITIONS, AS PER CLAUSE (II) TO SECTION 80 IA(4), WHICH BY THEMSELVES, ARE ESSENTIAL FOR THE ALLOWANCE OF DEDUCTION. 30. THE DR, THEREFORE, CONCLUDED THAT IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT AND TAKING INTO ACCOUNT PAGES 18 & 19 OF THE SEIZED DOCUMENTS, THE ACTION OF THE AO WITH REGARD TO INV OKING SECTION 153A WAS LEGAL AND AS PER THE PROVISIONS OF THE ACT. ACCO RDING TO HIM, THE ARGUMENTS ADVANCED BY THE AR WERE DEVOID OF ALL LEGAL SANCTIONS. 31. IN THE REJOINDER, THE AR STRAIGHT AWAY SUBMITTED THAT IN SO FAR AS SECTION 80IA(4) IS CONCERNED, IT DOES NOT TALK EITHER ABOU T DEVELOPER OR ABOUT CONTRACTOR, THEREFORE ACCORDING TO THE AR, WHEN T HE RELEVANT SECTION DOES NOT MAKE ANY DISTINCTION BETWEEN EITHER THE DEVELOPER OR CONTRACTOR, THEN HOW CAN THE AO CREATE THE DISTINCTION. HE FURTHER SUBMITTED THAT IN CASES WHERE THE INFRASTRUCTURE DEVELO PMENT IS UNDERTAKEN BY THE GOVERNMENT, THE GOVERNMENT PASSES OVER THE ENTIRE PROJECT ALONG WITH ALL ITS LIABILITIES WITH RESPECT TO DELAY, LEGA L FORMALITIES, LEGAL CASES, MAINTENANCE AND INTERACTION WITH GOVT . DEPARTMENTS FOR SANCTIONS AND ALL FINANCIAL COMMITMENTS TO T HE SO CALLED CONTRACTOR, WHO BASICALLY IS THE DEVELOPER IN ALL SENS E OF THE MATTERS. THE AR FURTHER POINTED OUT THAT THERE ARE PLE THORA OF M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 16 JUDGMENTS WHEREIN THE CONTRACTORS IS HELD AS THE DEVELO PER AND THE RELEVANT DEDUCTION HAS BEEN ALLOWED. 32. THE AR ONCE AGAIN REITERATED HIS ARGUMENTS ON THE IS SUE OF VALIDITY OF PROCEEDINGS UNDER SECTION 153A, AND ONCE AGAIN, HE SUBMITTED THAT ACCEPT FOR THE CHANGE IN VIEW WITH REGARD TO ALLOWANCE OF DEDUCTION UNDER SECTION 80IA(4), THERE IS NO MATERIAL, EITHER FOUND IN THE COURSE OF SEARCH UNDER SECTION 132 OR ANY OTHER MATERIAL WAS BROUGHT TO THE NOTICE, WHICH INDICATED ANY CONCEALED INCO ME. HE SUBMITTED THAT THE PURPOSE OF SECTION 132 IS UNEARTHING UNDISCLOSED/CONCEALED INCOME OR ITEM OF INCOME AND WHERE T HERE IS NO MATERIAL WHATSOEVER, THE CASE FELL WITHIN THE RATIO OF ALL CA RGO (SB) (SUPRA) , WHEREIN IT WAS HELD THAT IN CASE THERE IS A PROCEEDING P ENDING, THAT SHALL BE ABATED AND PROVISIONS OF SECTION 153A SHALL P REVAIL AND ASSESSMENT, IN THE NORMAL COURSE SHALL BE TAKEN, BUT WHER E THE PROCEEDINGS HAD CULMINATED AND THEY HAVE REACHED THE S TAGE OF FINALITY, THE PROVISIONS OF SECTION 153A SHALL ONLY BECOME APP LICABLE IF THERE IS ANY EVIDENCE/MATERIAL FOUND, INDICATING CONCEALMENT/ ITEMS OF INCOME. 33. THE AR FURTHER REFERRED TO THE DECISION OF CIT VS SMT . SHAILA AGARWAL, REPORTED IN 346 ITR 130 (ALL), WHEREIN, IT IS HELD, SECTION 153A OF THE INCOME-TAX ACT, 1961, PROVIDES THAT WHERE NOTICE UNDER THIS SECTION IS ISSUED AS A RESULT OF ANY SEA RCH UNDER SECTION 132, ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS R EFERRED TO UNDER SECTION 153, PENDING ON THE DATE OF INITIATION OF S EARCH UNDER SECTION 132 OR REQUISITION UNDER SECTION 132A SHALL ABATE. THE WORDS PENDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 1 32 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE , HAVE TO BE ASSIGNED THEIR SIMPLE AND PLAIN MEANING. WHERE THE ASSESSMENT OR REASSESSMENT IS FINALISED, THERE ARE NO PENDING PRO CEEDINGS TO ABATE AND BE RESTORED TO THE FILE OF THE ASSESSING OFFICE R. THE WORD ABATEMENT IS REFERABLE TO SOMETHING WHICH IS PEND ING, ALIVE, OR IS SUBJECT TO DEDUCTION. ABATEMENT REFERS TO SUSPENSIO N OR TERMINATION OF PROCEEDINGS EITHER OF THE MAIN ACTION, OR PROCEEDIN GS ANCILLARY OR COLLATERAL TO IT. PROCEEDINGS WHICH HAVE ALREADY TE RMINATED ARE NOT LIABLE FOR ABATEMENT UNLESS THE STATUTE EXPRESSLY P ROVIDES FOR IT. THE WORD PENDING OCCURRING IN THE SECOND PROVISO TO S ECTION 153A OF THE ACT IS QUALIFIED BY THE WORDS ON THE DATE OF INITI ATION OF THE SEARCH, M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 17 AND MAKES IT ABUNDANTLY CLEAR THAT ONLY SUCH ASSESS MENT OR REASSESSMENT PROCEEDINGS ARE LIABLE TO ABATE. THE P ENDENCY OF AN APPEAL IN THE TRIBUNAL AGAINST THE ORDER OF ASSESSM ENT AGAINST WHICH AN APPEAL HAS BEEN DECIDED BY THE COMMISSIONER (APP EALS) IS NOT A CONTINUATION OF THE PROCEEDINGS OF ASSESSMENT. AN A PPEAL UNDER THE INCOME-TAX ACT LIES TO THE APPELLATE TRIBUNAL ON A QUESTION OF LAW. EVEN IF IT IS PENDING ON THE DATE OF SEARCH THE REASSESS MENT PROCEEDINGS WILL NOT ABATE. THE ABATEMENT OF ANY PROCEEDINGS HAS SER IOUS EFFECT INASMUCH AS IT TAKES AWAY ALL THE CONSEQUENCES THAT ARISE THEREAFTER. THE MATERIAL FOUND IN THE SEARCH MAY BE A GROUND FO R NOTICE AND ASSESSMENT UNDER SECTION 153A OF THE ACT BUT THAT W OULD NOT EFFACE OR TERMINATE ALL THE CONSEQUENCES, WHICH ARISE OUT OF THE REGULAR ASSESSMENT OR REASSESSMENT RESULTING IN A DEMAND OR PROCEEDINGS FOR PENALTY. 34. HE ALSO REFERRED TO THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF SSP AVIATION LTD. VS DCIT, REPORTED IN 346 IT R 177, THIS DECISION WAS ALSO REFERRED TO IN THE CASE OF ALL CARGO (SB), WHEREIN, AT PAGE 187 ANSWERS THE FATE OF PROCEEDINGS WHICH IS/ARE PENDING. 35. THE AR, THEREFORE, PRESSED HIS GROUNDS TAKEN IN E ACH OF THE CO, WITH THE ARGUMENTS THAT THE PROCEEDINGS FOR ASSESSMENT YEARS 2000- 01 TO 2004-05 WERE LEGALLY NOT CORRECT. 36. WE HAVE HEARD THE RIVAL CONTENTIONS AT LENGTH, IN THE INSTANT COS, THE ISSUE BEING AGITATED IS, WHEN THERE WAS NO EVIDE NCE OR INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH OPERATIO NS, THE ASSESSMENT ORDERS PASSED, INVOKING THE PROVISIONS UNDER SECTION 153A WERE BAD IN LAW AND LIABLE TO BE QUASHED, AS THE UNDERLYIN G PURPOSE OF MAKING ASSESSMENT OF TOTAL INCOME, UNDER SECTION 153A, I.E. TO ASSESS INCOME WHICH WAS NOT DISCLOSED OR WOULD NOT HAVE BEEN DIS CLOSED, FAILED , AND THUS THE ASSESSMENT MADE AS IF IT WERE REGULAR SCR UTINY ASSESSMENT WAS BEYOND JURISDICTION. 37. THE SEARCH OPERATIONS WERE CARRIED OUT ON THE ASS ESSEES BUSINESS PREMISES & THE RESIDENTIAL PREMISES OF ITS DIRECTOR S ON 17.02.2005. AS A CONSEQUENCE OF WHICH, THE AO INITIATED PRO CEEDING UNDER SECTION 153A FOR ASSESSMENT YEAR 2000-01 TO ASS ESSMENT YEAR 2004-05. FROM THE ARGUMENTS ADVANCED BY THE AR AND W HICH WERE NOT M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 18 CONTROVERTED BY THE DR BEFORE US AND BY THE DEPARTME NT IN THE PROCEEDINGS BEFORE THE REVENUE AUTHORITIES ARE : A) DURING SEARCH OPERATIONS NO INCRIMINATING DOCUMENT WAS FOUND AND SEIZED, WHICH COULD INDICATE ANY UNDISCLOSED INCOME B) THE ONLY ADDITION MADE BY THE AO WAS ON ACCOUNT O F WITHDRAWAL OF DEDUCTION UNDER SECTION 80IA(4). 38. BASED ON THESE TWO ISSUES, WE HAVE TO FIRST ASCERTA IN THE VALIDITY OF THE JURISDICTION CAST BY THE LEGISLATURE ON THE AO FOR T HE ISSUE OF NOTICE UNDER SECTION 153A AND THEN REVERT OUR ATTENTION TO THE VALIDITY OF THE ADDITIONS MADE THEREIN. 39. SECTION 153A WAS INTRODUCED IN THE STATUTE W.E.F. 01.06 .2005, WHEREIN THE SECTION STARTS WITH THE NON OBSTANTE PHRA SE NOTWITHSTANDING , THEREFORE, AS SOON AS THE SEARCH IS CONCLUDED, THE AO HAVING JURISDICTION OVER THE ASSESSEE, A JURISDICTION IS CAST UPON THE AO TO ISSUE NOTICES UNDER SECTION 153A(1), FOR THE PR ECEDING SIX YEARS, CALLING UPON THAT PERSON TO FILE ITS RETURNS. AS SOON AS THE NOTICES ARE ISSUED, DUE PROCESS OF LAW SHALL BEGIN AND AO A ND THE ASSESSEE ARE REQUIRED TO FOLLOW THE SAME, WHICH SHALL CULMIN ATE WITH THE AO TO ASSESS OR REASSESS THE TOTAL INCOME OF THE SEARCHED PE RSON IN ALL THE SIX YEARS IN QUESTION. WHILE CASTING THIS JURISDICTION OVER THE AO, THE LEGISLATURE, TO REMOVE ALL THE DIFFICULTIES WITH REGARD TO THE MULTIPLICITY OF PROCEEDINGS PENDING ON THE DATE OF INITIATION OF SEARCH, THROUGH 2 ND PROVISO, EXPUNGED ALL THOSE PROCEEDINGS, SO THAT THE ASSESSEE AND THE AO SHALL DEAL WITH ONLY ONE TYPE OF PRO CEEDINGS, WHEREIN THE AO SHALL, AS PER CLAUSE (II), ASSESS OR REASSESS THE TOTAL INCOME OF THE SEARCHED PERSON. THIS BARRIER HAS BEEN SET UP BY THE LEGISLATURE ONLY WITH REGARD TO PROCEEDINGS THAT WERE FOU ND PENDING BEFORE THE AO ON THE DATE OF SEARCH. THEREFORE, A PROCEEDING WHICH IS PENDING, ONLY THOSE PROCEEDINGS SHALL GET ABATED. IN OTHER WORDS, ANY PROCEEDING THAT HAS REACHED ITS FINALITY SHALL NOT BE DISTUR BED, AS PER THE CLARIFICATION ISSUED BY THE CBDT, THROUGH CIRCULAR NO. 7, DATED M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 19 05.09.2003 (SUPRA), UNLESS THERE ARE MATERIALS FOUND, INDICATING EXISTENCE OF INCOME EMBEDDED IN THOSE INCRIMINATING DOCUMENT(S). 40. THIS HAS BEEN EXPLAINED BY THE SPECIAL BENCH IN THE C ASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS DCIT REPORTED IN 137 ITD 2 87 (MUM- SB), WHICH STATES, 58. THUS, QUESTION NO. 1 BEFORE US IS ANSWERED A) AS UNDER: (A) IN ASSESSMENTS THAT ARE ABATED, THE A.O. RETAIN S THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON H IM UNDER S. 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY; (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTE XT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (I) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEAR CH. THEREFORE WHAT EMERGES IS THAT NO DOUBT 153A SHALL BE INITIATED, AND ALL THE SIX YEARS SHALL BECOME SUBJECT MATTER OF ASSESSM ENT UNDER SECTION 153A. THE AO SHALL GET THE FREE HAND, THROUGH ABA TEMENT, ONLY ON THE PROCEEDINGS THAT ARE/IS PENDING. IT IS, IN THESE AB ATED PROCEEDINGS, AO CAN FRAME THE ASSESSMENT(S) AFRESH. BUT IN A CASE OR IN A CIRCUMSTANCES WHERE THE PROCEEDINGS HAVE REACHED FINALITY, ASSESSMENT UNDER SECTION 153A READ WITH 143(3) HAS TO BE MADE AS WAS ORIGINALLY MADE/ASSESSED AND IN CASE WHERE CERTAIN IN CRIMINATING DOCUMENTS HAVE BEEN FOUND INDICATING UNDISCLOSED INCOME, TH EN THE ADDITION SHALL ONLY BE RESTRICTED TO THOSE DOCUMENTS/INCR IMINATING MATERIAL, AND CLUBBED ONLY TO THE ASSESSMENT FRAMED ORIGINALLY, AS THE LAW DOES NOT PERMIT THE AO TO DISTURB ALREADY CONCLUDED ISSUES, WHETHER IT PERTAINED TO ANY INCOME OR EXPENDITURE OR DE DUCTION, AS ALSO OBSERVED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA, 18. A PERUSAL OF SECTION 153A SHOWS THAT IT STARTS WITH A NON OBSTANTE CLAUSE RELATING TO NORMAL ASSESSMENT, PROCEDURE WHI CH IS COVERED BY SECTIONS 139, 147, 148, 149, 151 AND 153 IN RESPECT OF SEARCHES MADE AFTER 31.5.2003. THESE SECTIONS, THE APPLICABILITY OF WHICH HAS BEEN EXCLUDED, RELATE TO RETURNS, ASSESSMENT AND REASSES SMENT PROVISIONS. PRIOR TO, THE INTRODUCTION OF THESE THREE SECTIONS, THERE WAS CHAPTER XIV- M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 20 B OF THE ACT, WHICH TOOK CARE OF THE ASSESSMENT TO BE MADE IN CASES OF SEARCH & SEIZURE. SUCH AN ASSESSMENT WAS POPULARLY KNOWN AS BLOCK ASSESSMENT BECAUSE THE CHAPTER PROVIDED FOR A SING LE ASSESSMENT BE MADE IN RESPECT OF A PERIOD OF A BLOCK OF TEN ASSES SMENT YEARS PRIOR TO THE ASSESSMENT YEAR IN WHICH THE SEARCH WAS MADE. I N ADDITION TO THESE TEN ASSESSMENT YEARS, THE BROKEN PERIOD UP TO THE DATE ON WHICH THE SEARCH WAS CONDUCTED WAS ALSO INCLUDED IN WHAT WAS KNOWN AS BLOCK PERIOD. THOUGH A SINGLE ASSESSMENT ORDER WA S TO BE PASSED, THE UNDISCLOSED INCOME WAS TO BE ASSESSED IN THE DIFFER ENT ASSESSMENT YEAS TO WHICH IT RELATED. BUT ALL THIS HAD TO BE MA DE IN A SINGLE ASSESSMENT ORDER. THE BLOCK ASSESSMENT SO MADE WAS INDEPENDENT OF AND IN, ADDITION TO THE NORMAL ASSESSMENT PROCEEDIN GS AS CLARIFIED BY THE EXPLANATION BELOW SECTION 158BA(2). AFTER THE I NTRODUCTION OF THE GROUP OF SECTIONS NAMELY, 153A TO 153C, THE SINGLE BLOCK ASSESSMENT CONCEPT WAS GIVEN A GO-BY. UNDER THE NEW SECTION 15 3A, IN A CASE WHERE SEARCH IS INITIATED UNDER SECTION 132 OR REQU ISITION OF BOOKS OF ACCOUNT, DOCUMENTS OR ASSETS IS MADE UNDER SECTION 132A AFTER 31.5.2008, THE ASSESSING OFFICER IS OBLIGED TO ISSU E NOTICES CALLING UPON THE SEARCHED PERSON TO FURNISH RETURNS FOR THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED OR REQUISITI ON WAS MADE. THE OTHER DIFFERENCE IS THAT THERE IS NO BROKEN PERIOD FROM THE FIRST DAY OF APRIL OF THE FINANCIAL YEAR IN WHICH THE SEARCH TOO K PLACE OR THE REQUISITION WAS MADE AND ENDING WITH THE DATE OF SE ARCH/REQUISITION. UNDER SECTION 153A AND THE NEW SCHEME PROVIDED FOR, THE AO IS REQUIRED TO EXERCISE THE NORMAL ASSESSMENT POWERS I N RESPECT OF THE PREVIOUS YEAR IN WHICH THE SEARCH TOOK PLACE. 19. UNDER THE PROVISIONS OF SECTION 153A, AS WE HAVE AL READY NOTICED, THE ASSESSING OFFICER IS BOUND TO ISSUE NO TICE TO THE ASSESSEE TO FURNISH RETURNS FOR EACH ASSESSMENT YEA R FALLING WITHIN THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDI NG THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE SEARCH OR REQUISITION WAS MADE. ANOTHER SIGNIFICANT FEATURE OF THIS SECTION IS THAT THE ASSESSING OFFICER IS EMPOW ERED ASSESS OR REASSESS THE TOTAL INCOME OF THE AFORESAID YEARS. THIS IS SIGNIFICANT DEPARTURE FROM THE EARLIER BLOCK ASSESS MENT SCHEME IN WHICH THE BLOCK ASSESSMENT ROPED IN ONLY THE UNDISC LOSED INCOME AND THE REGULAR ASSESSMENT PROCEEDINGS WERE PRESERVED, RESULTING IN MULTIPLE ASSESSMENTS. UNDER SECTION 153A, HOWEVER, THE ASSESSING OFFICER HAS BEEN GIVEN THE POWER TO ASSESSEE OR REA SSESS THE TOTAL INCOME OF THE SIX ASSESSMENT YEARS IN QUESTION IN SEPARATE ASSESSMENT ORDERS. THIS MEANS THAT THERE CAN BE ONLY ONE ASSES SMENT ORDER IN RESPECT OF EACH OF THE SIX ASSESSMENT .YEARS, IN WH ICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUG HT TO TAX. 2O. A QUESTION MAY ARISE AS TO HOW THIS IS TO BE SO UGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED I N RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT . IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF TH E SEARCH/REQUISITION, THE ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME TAKING NOTE OF THE UNDISC LOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. FOR THIS PURPOSE, THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE STRICT PROCEDURE TO ASSUME JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTION 147 AND 148, HAVE BEEN REMOVED BY THE NON OBSTANTE CLAUSE WITH WHICH SUB S ECTION (1) OF SECTION 153A OPENS. THE TIME-LIMIT WITHIN WHICH THE NOTICE UNDER SECTION 148 CAN BE ISSUED, AS PROVIDED IN SECTION 1 49 HAS ALSO BEEN MADE INAPPLICABLE BY THE NON OBSTANTE CLAUSE. SECTI ON 151 WHICH M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 21 REQUIRES SANCTION TO BE OBTAINED BY THE ASSESSING O FFICER BY ISSUE OF NOTICE TO REOPEN THE ASSESSMENT UNDER SECTION 148 H AS ALSO BEEN EXCLUDED IN A CASE COVERED BY SECTION 153A. THE TIM E-LIMIT PRESCRIBED FOR COMPLETION OF AN ASSESSMENT OR REASSESSMENT BY SECTION 153 HAS ALSO BEEN DONE AWAY WITH IN A CASE COVERED BY SECTI ON 153A WITH ALL THE STOP HAVING BEEN PULLED OUT, THE ASSESSING OFFI CER UNDER SECTION 153A HAS BEEN ENTRUSTED WITH THE DUTY OF BRINGING T O TAX THE TOTAL INCOME OF AN ASSESSEE WHOSE CASE IS COVERED BY SECT ION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS, IF NEED B E. 21. NOW THERE CAN BE CASES WHERE AT THE TIME WHEN T HE SEARCH IS INITIATED OR REQUISITION IS MADE, THE ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF THE SIX ASSESSMENT YEARS MENTIONED ABOVE, MAY BE PE NDING. IN SUCH A CASE, THE SECOND PROVISO TO SUB SECTION (1) OF SECT ION 153A SAYS THAT SUCH PROCEEDINGS SHALL ABATE. THE REASON IS NOT F AR TO SEEK; UNDER SECTION 153A, THERE IS NO ROOM FOR MULTIPLE ASSESSM ENT ORDERS IN RESPECT OF ANY OF THE SIX ASSESSMENT YEARS UNDER CONSIDERAT ION. THAT IS BECAUSE THE ASSESSING OFFICER HAS TO DETERMINE NOT MERELY THE UNDISCLOSED INCOME OF THE ASSESSEE, BUT ALSO THE TO TAL INCOME OF THE ASSESSEE IN WHOSE CASE A SEARCH OR REQUISITION HAS BEEN INITIATED. OBVIOUSLY THERE CANNOT BE SEVERAL ORDERS FOR THE SA NE ASSESSMENT YEAR DETERMINING THE TOTAL INCOME OF THE ASSESSEE IN ORD ER TO ENSURE THIS STATE OF AFFAIRS NAMELY, THAT IN RESPECT THE SIX AS SESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH THE SEARCH TOOK PLACE THERE IS ONLY ONE DETERMINATION OF THE T OTAL INCOME, IT HAS BEEN PROVIDED IN THE SECOND PROVISO OF SUB SUB-SECT ION 153A THAT ANY PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF THE A SSESSEE WHICH ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING REQUISITION SHALL ABATE. ONCE THOSE PROCEEDINGS ABATE, THE DE CKS ARE CLEARED, FOR THE ASSESSING OFFICER TO PASS ASSESSMENT ORDERS FOR EACH OF THOSE SIX YEARS DETERMINING THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD INCLUDE BOTH THE INCOME DECLARED IN THE RETURNS, IF ANY, FU RNISHED BY THE ASSESSEE AS WELL AS THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH OR REQUISITION. THE POSITION THUS EMERGI NG IS THAT WHERE ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHEN THE SEARCH IS INITIATED OR REQUISITION IS MADE THEY WILL ABATE MAKING WAY FOR THE ASSESSING OFFICER TO DETERMINE THE TOTA L INCOME OF THE ASSESSEE IN WHICH THE UNDISCLOSED INCOME WOULD ALSO BE INCLUDED BUT IN CASES WHERE THE ASSESSMENT OR REASSESSMENT PROCE EDINGS HAVE ALREADY BEEN COMPLETED AND ASSESSMENT ORDERS HAVE B EEN PASSED DETERMINING THE ASSESSEES TOTAL INCOME AND SUCH O RDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS M ADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN THIS LATTER SITUATION, THE ASSESSING OFFICER WILL REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE (WITHOUT HAVING THE NEED TO FALLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT COND ITIONS OF SECTIONS 147, 148 AND 151) AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. SUCH DETERMINATION IN THE ORDERS PASSED UNDER SECTION 15 3A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSESSMENT, W HERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGE THER AND ASSESSED AS THE TOTAL INCOME. 41. ON GOING THROUGH THE PROVISIONS OF SECTION 153A, CLA USE (B) OF SECTION 153A, 2 ND PROVISO AND THE VARIOUS DECISIONS CITED BEFORE US, THREE POSSIBLE CIRCUMSTANCES EMERGE ON THE DATE OF INITIAT ION OF SEARCH M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 22 UNDER SECTION 132(1) OF THE INCOME TAX ACT, (A) PROCEEDINGS ARE PENDING; (B) PROCEEDINGS ARE NOT PENDING BUT SOME INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH, INDICATING SOME INCO ME AND/OR ASSETS NOT DISCLOSED IN THE RETURN AND (C) PROCEEDINGS ARE NOT PENDING AND NO INCRIMINATING MATERIAL HAS BEEN FOUND. 42. WHEN WE TREAD TO TRACE THE CORRECT AND LOGICAL ANS WERS TO THE ABOVE CIRCUMSTANCES, CIRCUMSTANCE (A) IS ANSWERED BY THE ACT ITSELF, THAT IS, SINCE THE PROCEEDINGS ARE STILL PENDING, ALL THOSE PE NDING PROCEEDINGS ARE ABATED AND THE AO GETS A FREE HAND TO MAKE THE ASSESSMENT. CIRCUMSTANCE (B) HAS BEEN ANSWERED BY THE COURTS, INTERPRETING 2 ND PROVISO ALONG WITH CLAUSE (B) TO SECTION 153A, WHEREIN THE HONBLE DELHI COURT OBSERVES AND HOLD, WHERE THE ASSESSMENT OR REASSESSMENT PROCEEDINGS HAVE ALREADY BEEN COMPLETE D AND ASSESSMENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEES TOTAL INCOME AND SUCH ORDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH O R THE REQUISITION IS MADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROC EEDINGS ARE PENDING. IN THIS LATTER SITUATION, THE ASSESSING OFFICER WILL R EOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE (WITHOUT HAVING THE NEED TO FALLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT CONDITIONS OF SECTIONS 147, 148 AND 151) AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. SUC H DETERMINATION IN THE ORDERS PASSED UNDER SECTION 153A WOULD BE SIMILAR T O THE ORDERS PASSED IN ANY REASSESSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESS MENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME . BUT WHEN WE COME TO THIRD CIRCUMSTANCE I.E. CIRCUMSTANCE (C) , WE FIND THAT THIS HAS BEEN LEFT UNANSWERED. PARA 23 OF THE JUDGMENT, THE HONBLE DE LHI HIGH COURT MENTIONS THAT THE ISSUE IS LEFT OPEN. 43. THIS, HAS BEEN EXPLAINED IN THE GRAPHIC MADE BE LOW AND THE RELEVANT PORTION IS IN ITALICS THEREIN. THIS CAN BE EXPLAINED THROUGH THIS GRAPHIC : M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 23 SEARCH | 153A FOR SIX YEARS | _______________ |_________________ __ | | ASSESSMENT PENDING ASSESSMENT NOT P ENDING |- (1) |- (2) 153A READ WITH 143(3) | TO BE FRAMED, AS PER THE | PROVISIONS | _ __________ _________ | | MATERIAL FOU ND MATERIAL NOT FOUND |- (2A) | - (2B) ASSESSMENT TO BE ASSESSMENT UNDER FRAMED : ASSE SSING SECTION 153A TO BE FRAMED INCOME UNEART HED IN ONLY AS PER ORIGINAL ASST. SEARCH + ORIG INALLY WHETHER UNDER SECTION ASSESSED INCO ME. 143(1) OR 143(3) ASSESSMENT : UNDER SECTION 153A/ 143(3) 44. TO ANSWER THE QUESTION, AS TO WHAT SHALL BE THE ASS ESSMENT OF TOTAL INCOME, WHERE THERE IS/ARE NO PENDING PROCEEDINGS A ND NO INCRIMINATING MATERIAL, WE HAVE TO TRACE OUT THE LOGICAL CONC LUSION, BY HARMONISING THE LEGISLATIVE INTENDMENTS AND THE JUDICIAL DEC ISIONS, AS HELD BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF K P VARGHESE (SUPRA), WHEREIN IT WAS OBSERVED, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL C ONSTRUCTION . WHEN WE LOOK INTO THE DECISION OF THE HONBLE DELHI HIGH COURT IN ANIL KUMAR BHATIA (SUPRA) , WE FIND THAT THE HONBLE COURT HAS POINTED OUT THAT IN CASE WHERE THERE IS NO ABATEMENT, TOTAL INCOME H AS TO BE DETERMINED BY CLUBBING TOGETHER THE INCOME ALREADY DETER MINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED A SSESSMENT (SITUATION 2A IN THE GRAPHIC) . IN THE CIRCUMSTANCE, WHAT WE ARE DEALING IN INSTANTLY, THERE ARE FINALIZED ASSESSMENT PROCEEDINGS AN D NO INCRIMINATING MATERIAL INDICATING ANY ESCAPED INCOME (SITUATION 2B IN THE GRAPHIC). TAKING A CUE FROM THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) WE CAN TREAD ON THE SAME PREMISE AND HOLD THAT ON CLUBBING , WHAT REMAINS IS THE INCOME M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 24 ORIGINALLY DETERMINED OR ASSESSED (I.E. INCOME ORIGINALLY DETE RMINED + ZERO = INCOME ORIGINALLY DETERMINED AS THERE WAS NO IN CRIMINATING MATERIAL). 45. IN THE INSTANT CASE(S), WHAT WE FIND AS A MATTER OF FACT : (A) ASSESSMENT YEARS 2000-01 TO 2003-04 HAVE ALREADY B EEN COMPLETED AND FINALIZED AND EVEN THE REFUNDS HAD BEE N ISSUED, THEREFORE, EVEN THE DEPARTMENT HAD ACCEPTED T HE RELEVANT ASSESSMENT YEARS TO BE FINAL. FOR ASSESSMENT YEAR 2004-05, THE TIME FOR ISSUE OF NOTICE UNDER SECTION 14 3(2) WAS UPTO 31.10.2005, WHICH WAS ACCEPTED TO HAVE NOT BEEN ISSUED TILL THE DATE OF SEARCH, I.E. 17.02.2005. THEREFORE , EVEN ASSESSMENT YEAR 2004-05, COULD BE ACCEPTED TO BE COMPLETED AND FINALIZED ON THE DATE OF SEARCH. (B) THE AO REVIVED/REVIEWED THE ASSESSMENT PROCEEDING S FOR ALL FIVE ASSESSMENT YEARS AND PROCEEDED TO MAKE ONLY NORMAL DISALLOWANCES, AND WITHDREW THE DEDUCTION UNDER SECTION 80IA(4), WHICH HAD BEEN ALLOWED TO THE ASSESSEE. 46. THE ARGUMENTS OF THE AR, THAT WHEN THERE WAS NO IN CRIMINATING MATERIAL OR ASSETS, THEN THERE IS NO JURISDICTION OF SECTION 153A, CANN OT BE ACCEPTED. IT IS TRIATE , THAT WHENEVER A PROVISION BEGINS WITH A NON OBSTANTE PROVISION, IT SHALL SUPERSEDE ALL OTHER PROVISIONS. SINCE SECTION 153A BEGINS WITH THE WORD, NOTWITHSTANDING , SECTION BECOMES NON POROUS AND IT HAS TO BE APPLIED FIRST. THEREFORE, WHENE VER A SEARCH IS UNDERTAKEN UNDER SECTION 132 ON ANY PERSON, 153A IS TRIGGERED AUTOMATICALLY. THIS IS A SETTLED PROVISION OF LAW AND NOW WELL SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF ANIL KUMAR BHATIA, WHEREIN IN PARA 19. THE HONBLE DELHI HIGH COURT OBSERVES, UNDER THE PROVISIONS OF SECTION 153A, AS WE HAVE ALR EADY NOTICED, THE ASSESSING OFFICER IS BOUND TO ISSUE NOT ICE TO THE ASSESSEE TO FURNISH RETURNS FOR EACH ASSESSMENT YEARS, FALLING WIT HIN THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMEN T YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH OR REQUISITION WAS MADE. 47. WHEN WE LOOK INTO CLAUSE (B) OF SUB SECTION (1) OF SECTION 153A, THE LEGISLATURE HAS GRANTED AN AUTHORITY ON THE AO TO A SSESS OR M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 25 REASSESS THE TOTAL INCOME. THIS CLAUSE HAS TO BE READ A LONG WITH 2 ND PROVISO, WHERE THE LAW HAS LAID RESTRICTION OVER THE AO A S TO WHICH ASSESSMENT WOULD BECOME ELIGIBLE FOR BEING ASSESSED OR REA SSESSED. 2 ND PROVISO SPECIFIES THAT THE AO CAN ONLY ASSESS OR REASS ESS THE ASSESSMENT YEARS WHICH ARE STILL PENDING BEFORE HIM, AS THE LEGISLATURE HAS ONLY MENTIONED THE WORDS ASSESSEE OR REASSESS, W HICH POWER IS ONLY VESTED WITH THE AO, THEREFORE, NO OTHER PROCEEDING CAN GET ABATED, WHICH INCLUDES APPEAL, REVISION OR RECTIFICATION (AS PER CIRCU LAR NO. 7 (SUPRA) ). 48. NOW WE HAVE TO TREAD INTO A SITUATION WHERE ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 132 OR REQUISITION OF BOO KS, NO PROCEEDING(S) IS PENDING, BUT IN THE SEARCH, MATERIAL IS FOUND INDICATING INCRIMINATING MATERIAL. IN THIS SITUATION, THE AO EMBA RKS ON A JURISDICTION, WHEREIN HE HAS TO CLUB THE TWO SETS OF INCO MES, I.E. RETURNED INCOME AND THE UNEARTHED INCOME AND ARRIVE AT THE TOTAL INCOME. 49. THERE IS ANOTHER CIRCUMSTANCE, WHEREIN, IN THE SEARCH OPERATION, NO INCRIMINATING MATERIAL IS FOUND AND THERE ARE NO PROCEED INGS PENDING BEFORE THE AO. IN THIS SCENARIO, AS PER THE PROVIS IONS OF SECTION 153A(1), THE AO HAS TO ISSUE NOTICES UNDER SECTION 153A, ASKING THE SEARCHED PERSON TO FILE ITS RETURNS. SINCE THER E ARE NO PROCEEDINGS WHICH ARE PENDING BEFORE HIM, 2 ND PROVISO STOPS THE AO TO PROCEED FURTHER, BECAUSE PROCEEDINGS CANNOT BE ABATED AND SINCE THERE IS NO MATERIAL, NO FURTHER JURISDICTION IS EMBARKED ON HIM. THIS IS WHERE, HONBLE DELHI HIGH COURT STOPS AND LEAVES THE QUESTION OPEN . 50. WE FIND THERE IS COMPLETE DISHARMONY IN THE CIRCUMSTAN CE, BECAUSE, THE ACT ALLOWS SIX ASSESSMENTS YEARS TO BE O PEN VIDE SECTION 153A FOR BEING ASSESSED OR REASSESSED TO ASCERTAIN TOT AL INCOME, THEREFORE, THE AO IS BOUND TO PASS AN ORDER UNDER SECT ION 153A READ M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 26 WITH 143(3), WHICH, ACCORDING THE ANIL KUMAR BHATIA (SUPRA), SUCH DETERMINATION IN THE ORDERS PASSED UNDER SECTION 15 3A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSESSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME. THEREFORE, THE AO, ACCORDINGLY HAS TO STOP SHORT IN TH ESE PROCEEDINGS AND RESTRICT HIMSELF TO THE INCOME ALREADY DETERMINED/ASSESSED IN THE ALREADY CONCLUDED PROCEEDINGS FOR THE YEAR(S), WHETHER UNDER SECTION 143(1) OR 143(3). THUS IT IS A CASE OF VALID NOTICE UNDER SECTION 153A, WITH NO UNDISCLOSED INCOME TO BE CLUBBED WITH INCOME ORIGINALLY ASSESSED AND FINALIZED. HOWEVER , IT HAS TO BE ADDED HERE THAT PROCEEDINGS UNDER SECTION 153A ARE LINKED T O THE SEARCH HAVING BEEN INITIATED ON THE PERSON, NOT WITH THE DOCUMENTS FOUND AND SEIZED. THE DOCUMENTS SO FOUND AND SEIZED, MAY BECOME USEFUL TO THE AO FOR MAKING AN ASSESSMENT OF TOTAL INCOME UNDER SECTION 153A READ WITH 143(3). 51. WE REFER HERE, TO THE ARGUMENTS OF THE DR, WHEREIN HE POINTED OUT THAT SEIZED DOCUMENTS NO. 18 AND 19, WHICH SHOWED T HAT THE ASSESSEE WAS CO-CONTRACTOR. AS PER HIS ARGUMENTS, THO SE DOCUMENTS MAY BE CONSIDERED AS INCRIMINATING DOCUMENTS FOR ALL THE YE ARS UNDER CONSIDERATION, PARTICULARLY FROM THE POINT OF VIEW THAT THE TERMS OF THE AGREEMENT, ON WHICH THE ASSESSEE WAS CONDUCTING ITS BUS INESS ON THE PARTICULAR INFRASTRUCTURE FACILITY, WAS STILL UNDER CONTINUATION. 52. IN OUR OPINION, THE REFERRED DOCUMENTS MAY BE CON SIDERED RELEVANT INITIALLY, FOR THE PURPOSES OF 2 ND PROVISO TO SECTION 153A, BUT IN ANY CASE, THESE DOCUMENTS CANNOT BE READ AS STAND-ALO NE AND IN ISOLATION, BUT HAVE TO BE READ ALONG WITH OTHER CONNECTED DOCUMENT S. 53. WHEN WE PERUSE THE ASSESSMENT ORDERS, AS WELL AS THE D ENIAL OF DEDUCTION UNDER SECTION 80IA(4), AT NO POINT OF TIME, THE A O HAS BEEN M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 27 ABLE TO BRING ON RECORD OR REFER TO ANY MATERIAL, WHICH CO ULD BE SAID TO BE EITHER INCRIMINATING, OR FOUND IN THE COURSE OF SEARCH, IN DICATING UNDISCLOSED INCOME. ON THE CONTRARY, WE FIND THAT EVEN TH E WITHDRAWAL OF IMPUGNED DEDUCTION IS ONLY BASED ON THE CHANGED INTER PRETATION OF THE AO, I.E. WHETHER THE ASSESSEE WAS REALLY A CONTRACTO R OR WAS THE ASSESSEE REALLY THE DEVELOPER OF INFRASTRUCTURE, AND WORK ING FOR AND ON BEHALF OF THE GOVERNMENT. STILL LOOKING FROM THE POINT OF VIEW OF THE AO, AS TO HOW THE DEDUCTION COULD BE DENIED, WE, DO NOT FIND EITHER ANY CHANGE IN THE RELEVANT PROVISION ALLOWING DEDUCTION, NOR WAS THERE ANY CHANGE IN THE FACTUAL CIRCUMSTANCE, WHICH COULD HAVE LEAD T O A DISTINGUISHABLE CIRCUMSTANCE, OR ANYTHING ELSE, WHICH THE ASS ESSEE DID NOT BRING ON RECORD IN THE COMPUTATION OF INCOME, FILED FOR T HE VARIOUS YEARS UNDER CONSIDERATION OR THAT THE CLAIM MADE BY TH E ASSESSEE WAS ILLEGAL OR THE CLAIM WAS WRONG. 54. WHEN WE READ SECTION 153A ALONG WITH THE OBSERVATION S MADE IN ANIL KUMAR BHATIA (SUPRA) AND IN ALL CARGO (SUPRA) , WE ARE OF THE OPINION THAT THE AO WAS CORRECT IN LAW TO ISSUE THE NOTI CES UNDER SECTION 153A FOR THE YEARS UNDER CONSIDERATION, AS HE WA S BOUND TO IN RESPECT OF ALL THE CONCERNED ASSESSMENT YEARS. WE CANNO T AGREE WITH THE ARGUMENTS OF THE AR THAT THE PROCEEDINGS UNDER SE CTION 153A HAVE TO BE QUASHED, BECAUSE THERE WAS NO MATERIAL FOUND IN T HE SEARCH, INDICATING, THAT THE ASSESSEE HAD CONCEALED ANY PART OF ITS INCOME. 55. PROCEEDING WITH OUR DECISION FURTHER, WE ARE OF THE OPINION THAT, ONCE SEARCH IS CONDUCTED, THE AO IS BOUND TO ISSUE THE NOTICES UNDER SECTION 153A AND THEN HAS TO PASS ORDERS THEREON. THEREFORE, THE AO WAS LEGALLY CORRECT TO INITIATE PROCEEDINGS UNDER SECTI ON 153A AND PASSING APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. IT MAY, HOWEVER, BE A SEPARATE ISSUE TO BE DEALT WITH SEPARATELY, WHAT SHOU LD BE THE CONTENTS OF THE ORDER(S) PASSED UNDER SECTION 153A READ WITH 143(3 ). M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 28 56. IN THE RESULT, SO FAR AS THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTIONS, FOR ASSESSMENT YEARS 2000-01 TO 2 004-05, AGAINST THE CIT(A)S DECISION TO SUSTAIN THE ASSESSME NTS FRAMED UNDER SECTION 153A ARE INCORRECT, CANNOT BE ACCEPTE D. WE, THEREFORE, SUSTAIN THE DECISION OF THE CIT(A). THE CO S, FILED BY THE ASSESSEE, FAIL, THEREFORE, THE GROUNDS RAISED THERE IN ARE DISMISSED. 57. APROPOS, DEPARTMENTS APPEALS DIRECTED AGAINST THE DE LETION OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA(4), WHEREIN, THE AO HELD IN THE PROCEEDINGS UNDER SECTION 153A, THAT THE ASSESSE E WAS NOT ELIGIBLE FOR THE DEDUCTION, AS THE ASSESSEE WAS A CONTRACT OR AND NOT A DEVELOPER OF INFRASTRUCTURE PROJECTS. 58. THE FACTS HAVE BEEN DISCUSSED EARLIER IN THIS COMBINED ORDER, THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH THE GOVERNMENTAL BODIES TO CARRY OUT INFRASTRUCTURES DEVELOPMENT PROJECT S. IN THE YEARS UNDER CONSIDERATION, THE ASSESSEE WAS CARRYING ON THE P ROJECT CONCERNING WATER SUPPLY. IN YEARS COVERING ASSESSMENT YEARS 2000-01 TO 2004-05, THE RETURNS, CLAIMING THE DEDUCTION UNDER SEC TION 80IA(4) WAS ACCEPTED BY THE AO UNDER SECTION 143(1) AND THE A O ISSUED REFUNDS, WHEREVER IT WAS REQUIRED TO. IN THESE YEARS, TH E AO DID NOT REGULARIZE THE ASSESSMENT PROCEEDINGS BY THE ISSUE OF NO TICE EITHER UNDER SECTION 142 OR 143(2). 59. SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT ON 1 7.02.2005, I.E. FINANCIAL YEAR 2004-05, FALLING IN ASSESSMENT YEAR 2005-06. FOR THE FINANCIAL YEAR IN WHICH THE SEARCH TOOK PLACE, THE ASSESSEE OFFERED UNDER SECTION 132(4), AN AMOUNT OF RS 1.95 CRORES UNDER SECTION 41(1), COVERING CREDITORS WHICH WERE MORE THEN THREE YEARS OLD. 60. AS PER THE PROVISIONS OF SECTION 153A(1), THE AO ISSUED NOTICES CALLING UPON THE ASSESSEE TO FILE ITS RETURNS OF INCOME FOR T HE RELEVANT M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 29 ASSESSMENT YEARS, I.E. ASSESSMENT YEARS 2000-01 TO 200 5-06, WHICH THE ASSESSEE FILED, AND THE ASSESSMENT PROCEEDINGS WERE UNDERTA KEN. 61. IN THE ASSESSMENT PROCEEDINGS, UNDERTAKEN BY THE A O, THE AO ASKED THE ASSESSEE, AS TO HOW THE ASSESSEE FULFILLED THE BASIC CONDITION OF BEING A DEVELOPER OF INFRASTRUCTURE FACILITIES, AND IF IT IS UNA BLE TO FULFILL THE BASIC CONDITIONS, WHY THE DEDUCTION UNDER SECTION 80IA(4) SHOULD NOT BE DENIED/DISALLOWED, WHICH THE ASSESSEE HAD BE EN CLAIMING YEAR TO YEAR. 62. IN REPLY TO THE SHOW CAUSE, THE ASSESSEE REPLIED, 3.1 THE ASSESSEE FURNISHED A NOTE FOR JUSTIFICATIO N OF HIS CLAIM IN WHICH, AFTER REPRODUCING PROVISIONS OF SEC .801A(1) AND (4) OF THE I.T. ACT, HE HAS SUBMITTED THE FOLLOWING ARGUMENTS IN SUPPORT OF ITS CLAIM (A) ON THE BASIS OF SECTION, THE ASSESSEE HAS CONCL UDED THAT FOLLOWING ARE THE CONDITIONS WHICH NEED TO BE SATIS FIED - (A) PROFITS AND GAINS MUST BE DERIVED BY THE UNDERT AKING OR ENTERPRISE FROM THE BUSINESS OF DEVELOPING OR OPERA TING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAININ G ANY INFRASTRUCTURE FACILITY. (B) THE ENTERPRISE CARRYING ON THE ABOVE BUSINESS M UST BE OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONS ORTIUM OF SUCH COMPANIES. (C) SUCH ENTERPRISE MUST ENTER INTO AGREEMENT WITH CENTRAL OR STATE GOVERNMENT OR LOCAL AUTHORITY OR ANY OTHER ST ATUTORY BODY FOR CARRYING OUT THE SAID ACTIVITY. (D) THE ENTERPRISE HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1/4/1995. (E) INFRASTRUCTURE FACILITY WOULD MEAN THE DEVELOPM ENT/ OPERATING/MAINTAINING OF ITEMS AS GIVEN UNDER THE E XPLANATION TO THE SECTION. (B) THEN, IT IS ARGUED THAT (A) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVE LOPING THE INFRASTRUCTURE FACILITY LIKE DEVELOPMENT OF ROAD, W ATER SUPPLY PROJECT, IRRIGATION PROJECT, SEWERAGE SYSTEM ETC. H ENCE, THE ASSESSEE HAS SATISFIED THE REQUIREMENTS OF THE APPL ICABILITY OF SUB-SECTION (4) TO SECTION 80IA OF THE INCOME-TAX A CT. (B) AS PER THE FACTS GIVEN, THE ASSESSEE IS A COMPA NY REGISTERED IN INDIA AND THE PROJECTS ARE UNDERTAKEN AND OWNED BY THE ENTERPRISE OF THE ASSESSEE AND HENCE, THE CONDITION LAID DOWN IN SUB-CLAUSE (A) OF CLAUSE (I) OF SECTION 80IA(4) OF THE I.T. ACT IS FULFILLED. (C) THE ASSESSEE HAS ENTERED INTO AGREEMENTS WITH S TATE GOVERNMENT AND / OR LOCAL AUTHORITY OR STATUTORY BO DY FOR DEVELOPING AND/OR OPERATING AND MAINTAINING OF INFR ASTRUCTURE FACILITY AND HENCE, THE CONDITION STIPULATED IN SUB -CLAUSE (B) OF CLAUSE (1) OF SECTION 80IA(4) OF THE I.T. ACT IS SA TISFIED. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 30 (D) THE AMENDMENT TO SECTION 801A IN 2000 HAS MADE DEDUCTION UNDER SECTION 801A ALLOWABLE ALSO TO THE DEVELOPER OF INFRASTRUCTURE FACILITY. THE DECISION OF THE MUMBAI TRIBUNAL IN PATEL ENGINEERING LTD. V. DY. CIT (2004) 84 TTJ 646 (MUM). RELATES TO THE PERIOD PRIOR TO THE AMENDMENT WHERE IN IT WAS DEBATABLE WHETHER DEDUCTION WAS AVAILABLE TO THE DE VELOPER OF INFRASTRUCTURE FACILITY. EVEN IN THE DECISION THE H ONORABLE ITAT MUMBAI HAS DECIDED IN FAVOUR OF THE ASSESSEE AND AL LOWED DEDUCTION UNDER SECTION 801A. POST AMENDMENT W.E.F. ASSESSMENT YEAR 2000 - 2001 IT HAS BEEN VERY CLEAR THAT DEDUCTION UNDER SECTION 801A IS ALSO ALLOWABLE TO T HE DEVELOPER. THE AMENDMENT HAS SPECIFICALLY INCLUDED DEVELOPER O F INFRASTRUCTURE FACILITY UNDER SUB CLAUSE 4 OF SECTI ON 801A. POST AMENDMENT THE SITUATION IS MORE FAVOURABLE TO THE A SSESSEE. (E) THUS DEDUCTION UNDER S 80IA(4) OF THE INCOME-TA X ACT COULD BE AVAILED EVEN IN CASES WHERE THE ENTERPRISE MEREL Y DEVELOPS THE INFRASTRUCTURE FACILITY AND DOES NOT OPERATE AN D MAINTAIN THE SAME. (F) THE LAST AND THE FINAL CONDITION IS THE MEANING ASSIGNED TO THE TERM INFRASTRUCTURE FACILITY IN THE EXPLANATION UNDER CLAUSE (C) OF SUB-S. (4)(I) OF SECTION 80IA OF THE ACT. AS PER THE FACTS STATED, THE ASSESSEE HAS ENTERED INTO AGREEMENTS FO R DEVELOPMENT OF ROADS, BRIDGES, WATER TRANSMISSION S YSTEM, RAILWAY-STATIONS, ETC. AND THUS, THE PROJECTS DEVEL OPED OR UNDERTAKEN FOR DEVELOPMENT FALLS WITHIN THE SCOPE O F THE MEANING ASSIGNED TO INFRASTRUCTURE FACILITY. HENCE, IN THE CASE OF THE ASSESSEE, THIS TEST ALSO GETS SATISFIED. ACCORDINGLY, IT HAS CLAIMED THAT IT IS ENTITLED FOR BENEFIT OF DEDUCTION. THE ASSESSEE HAS ALSO SUBMITTED A NOTE O N THE BUSINESS PROCESS. XXXX XXXXX XXXXX XXXXX THE SCOPE AND EFFECT OF THE INTRODUCTION OF THE SAI D SECTION HAS BEEN EXPLAINED BY THE DEPARTMENT CIRCULAR NO.717 DA TED 14/8/1995 REPORTED IN 215 JTR (ST.) 70 I.E. EXPLANA TORY NOTES ON PROVISIONS RELATING TO DIRECT TAXES. THE EXPLANA TORY NOTE IS GIVEN IN PARA 34.2 OF THE SAID CIRCULAR WHEREIN IT IS STATED AS UNDER- 34.2 INDUSTRIAL MODERNIZATION REQUIRES A MASSIVE E XPANSION OF; AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE. OUR COUNTRY IS VERY DEFICIENT IN INFRASTRUCTURE SUCH AS EXPRESSWAY S, HIGH WAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPOR T SYSTEMS. ADDITIONAL RESOURCES ARE NEEDED TO FULFIL THE REQUI REMENTS OF THE COUNTRY WITHIN A REASONABLE TIME FRAME. IN M AY COUNTRIES, THE BOT (BUILD-OPERATE-TRANSFER) OR THE BOOT (BUILD-OWN-OPERATE-TRANSFER) CONCEPT HAVE BEEN UTIL IZED FOR DEVELOPING NEW INFRASTRUCTURE . FURTHER, THE NOTES ON CLAUSES OF FINANCE BILL, 1999 AS REPORTED IN 236 1TR (ST.) 135 STATES AS UNDER- IT FURTHER SEEKS TO PROVIDE THAT WHEN AN ENTERPRISE DEVELOPS INFRASTRUCTURE FACILITY AND SUBJECT TO THE AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOC AL AUTHORITY OR STATUTORY BODY, AS THE CASE MAY BE, TH E OPERATION AND MAINTENANCE OF SUCH FACILITY IS CARRI ED ON ITS BEHALF BY SOME OTHER UNDERTAKING, THE PROVISION S OF THIS SECTION SHALL CONTINUE TO APPLY TO SUCH OTHER ENTERPRISE FOR THE UNEXPIRED PERIOD OF THE PRESCRIB ED TIME . M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 31 63. THE AR FURTHER REFERRED TO THE DECISION OF COORDINATE BENCH IN MUMBAI IN THE CASE OF PATEL ENGINEERING LTD. VS DCIT REPOR TED IN 94 ITD 411 (MUM), WHEREIN THE BENCH OF THE ITAT WAS SEIZED W ITH THE SIMILAR ISSUE, AS IN THE INSTANT APPEALS/COS, THAT WE ARE DE ALING WITH. THE COORDINATE BENCH HELD, (EXTRACTED) : THE AMENDMENT IN S. 80IA WAS BROUGHT ABOUT BY FINA NCE ACT, 1995 W.E.F 1ST APRIL, 1996. BY VIRTUE OF THIS AMENDMENT, EXEMPTION UNDER S. 80-IA(4A) WAS PROVIDED TO ANY ENTERPRISE CARRYING O N THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRU CTURE FACILITY. THUS, TO BE ELIGIBLE FOR THIS DEDUCTION AN ASSESSEE WAS R EQUIRED TO CARRY OUT ALL THE THREE ACTIVITIES I.E. (I) TO DEVELOP, (II) TO MAINTAIN AND (III) TO OPERATE. AFTER THE MODIFICATION EFFECTED BY THE FIN ANCE ACT, 1999 W. E.F 1ST APRIL, 2000, DEDUCTION UNDER S. 80-IA (4) HAS B EEN MADE AVAILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVE LOPING OR (II) MAINTAINING AND OPERATING, OR (III) DEVELOPING, MAI NTAINING AND OPERATING THE INFRASTRUCTURE FACULTY. THEREFORE, FR OM ASST. YR. 2000-01, DEDUCTION IS AVAILABLE TO THE ASSESSEE CARRIES ON T HE BUSINESS OF ANY ONE OF THE ABOVEMENTIONED TYPES OF ACTIVITIES, AND ACCORDINGLY ALSO WHEN THE ASSESSEE IS CARRYING ACTIVITY OF ONLY DEVE LOPING. WHEN AN ASSESSEE IS ONLY DEVELOPING THE INFRASTRUCTURE FACU LTY/PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASS ESSEE WILL BE PAID FOR THE COST INCURRED BY IT, OTHERWISE, HOW SUCH PE RSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALIZE ITS CO ST WHERE INFRASTRUCTURE FACILITY IS, AFTER ITS DEVELOPMENT, TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE MERELY BECAUSE THE MAHARASHTRA GOVERNMENT OR APSEB HAS PAI D FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP TH E INFRASTRUCTURE FACILITY. IF THE INTERPRETATION CANVASSED BY THE RE VENUE AUTHORITIES IS ACCEPTED, NO ENTERPRISE CARRYING ON THE BUSINESS OF ONLY DEVELOPING THE INFRASTRUCTURE FACILITY, WOULD BE ENTITLED TO DEDUC TION UNDER S. 80-IA(4). IF A PERSON WHO ONLY DEVELOPED THE INFRASTRUCTURE F ACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOUL D BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE I NFRASTRUCTURE FACILITY. WHEN THE LEGISLATURE HAS PROVIDED THAT THE INCOME O F THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DE DUCTION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER, I.E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING INFRASTRUCTURE F ACILITY. CLAUSE (C), WHICH READS, IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST DAY OF APRIL, 1995 IS OBVIOUSLY APPLICABLE TO AN ENTERPRISE WHICH IS MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY; IT CANNOT A PPLY TO THE CASE OF AN ENTERPRISE, WHICH HAS UNDERTAKEN MERELY DEVELOPMEN T OF INFRASTRUCTURE FACILITY, AND NOT ITS MAINTENANCE A ND OPERATION AND SO THE QUESTION OF OPERATING AND MAINTAINING OF INFR ASTRUCTURE FACILITY BY SUCH ENTERPRISE BEFORE OR AFTER ANY CUT OFF DATE CA NNOT ARISE. HOWEVER, IF THE CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE I S ACCEPTED, IT WOULD OBVIOUSLY/UNDERSTANDABLY LEAD TO MANIFESTLY ABSURD RESULTS. WHEN THE ACT PROVIDED DEDUCTION FOR A PERSON WHO IS ONLY DE VELOPING THE INFRASTRUCTURE FACILITY, UNACCOMPANIED BY OPERATIN G THEREOF BY SUCH PERSON, THERE CAN BE NO QUESTION OF PROVIDING A CON DITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE I NFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995. SINCE THE ASSESSEE IS ONLY A DEVELOPER OF THE INFRASTRUCTURE PROJECT AND IT IS NOT MAINTAINING AN D OPERATING THE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 32 INFRASTRUCTURE FACILITY, CL. (C) OF SUB-SEC (4) IS NOT APPLICABLE TO THE PRESENT ASSESSEE. THUS GOING BY ANY OF THE INTERPRETATION AS DISCUSSE D ABOVE, DEDUCTION UNDER SECTION 80IA(4) OF THE INCOME-TAX A CT COULD NOT BE DENIED EVEN IN CASES WHERE THE ENTERPRISE MERELY DEVELOPS THE INFRASTRUCTURE FACILITY AND DOES NOT OPERATE AND MA INTAIN THE SAME. 64. THE AO, UNABLE TO AGREE WITH THE EXPLANATION AS GIVEN BY THE ASSESSEE, OBSERVED, 3.2 WHEREAS ASSESSEE SATISFIES THE CONDITIONS REFE RRED BY IT IN ITS REPLY REPRODUCED IN PARA 3.1(B) (C) AND (F) WITHOUT ANY D OUBT. THERE ARE SEVERAL DOUBTS OVER THE SATISFACTION OF THE OTHER C ONDITIONS. FOR EXAMPLE WHETHER THE ASSESSEE IS A DEVELOPER OR MERELY A CON TRACTOR. BY WAY OF ARGUMENTS REPRODUCED IN PARA 3.1 (B)(B) AND (C) ASS ESSEE HAS CLAIMED THAT IT FULFILLS THE CONDITIONS LAID DOWN IN SEC 80 1A(4)(I)(A) AND (B). BUT CONDITIONS LAID DOWN IN SUB CLAUSES (A) TO (C) OF C LAUSE (I) OF SUB SEC. (4) NEED TO BE SATISFIED SIMULTANEOUSLY, WHEREAS ASSESS EE IGNORED TO COMMENT UPON CONDITIONS LAID DOWN IN SUB CLAUSE (C) . ACCORDINGLY, ASSESSEE WAS ISSUED SHOW CAUSE NOTICE DATED 21.12.2 006 IN WHICH IT WAS MENTIONED THAT APPARENTLY THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION UNDER SECTION 801A FOR THE FOLLOWING REAS ONS (A) THE DEDUCTION IS AVAILABLE ONLY FOR DEVELOPERS WHILE FROM THE BUSINESS PROCESS DISCUSSED, IT APPEARS TO BE A MERE CONTRACTOR. WITH REGARD TO BUSINESS PROCESS ASSESSEE WAS ALSO ASKED TO CLARIFY ITS ROLE IN CONCEPTUALIZATION AND DESIGNING, OF THE FACILITIES. IT WAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSEE THAT TDS IS BEING MADE O N PAYMENTS CORRESPONDING TO THE CONTRACTS EXECUTED BY IT. (B) IT IS MERELY CONSTRUCTING THE FACILITY NOT SUBS EQUENTLY MAINTAINING OR OPERATING THE FACILITY. IN VIEW OF THE PROVISIONS O F SECTION 801A(2) AND SUBSECTION 4(I)(C), IT APPEARS THAT THE DEDUCTION I S AVAILABLE ONLY WHEN THE ASSESSEE IS OPERATING AND MAINTAINING THE INFRA STRUCTURE WHICH IT HAS NOT DONE. (C) IN RESPECT OF A.YRS. 2000-01 AND 2001-02, ANOTH ER CONDITION FOR ENTITLEMENT OF THE ABOVE DEDUCTION IS THAT TRANSFER OF SUCH FACILITY TO CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORI TY ETC WITHIN A STIPULATED PERIOD. SINCE IT HAS NOT OWNED ANY RIGH T IN THE PROPERTY, THAT IS WHY IT CANNOT BE SAID IT HAS TRANSFERRED IT BACK TO GOVERNMENT. 65. THE AO FURTHER OBSERVES THAT THE ASSESSEE CANNOT BE ALLOWED THE DEDUCTION BECAUSE BEING A DEVELOPER IS NOT ENOUGH, THE O THER REQUIREMENTS SUCH AS OPERATING AND MAINTAINING AND HANDIN G IT BACK TO THE GOVERNMENT ARE ALSO EMBEDDED IN THE SECTION, WHIC H THE ASSESSEE HAD NOT DONE. BESIDES THE FACT THAT THE ASSE SSEE IS REMUNERATED BY THE GOVERNMENT AND ON WHICH THE GOVER NMENT DEDUCTS TAS. THIS SHOWS THAT THE ASSESSEE ONLY RECEIVES PAYME NT AGAINST THE CONSTRUCTION WORK OF THE INFRASTRUCTURE FACILITY AND NOT O UT ITS M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 33 OPERATION. THIS, ACCORDING TO THE AO WAS COMPLETELY AGA INST THE PROVISIONS, ALLOWING THE DEDUCTION UNDER SECTION 80IA. 66. THE AO, THEREFORE, AFTER TAKING INTO ACCOUNT THE DETA ILED ARGUMENTS OF THE ASSESSEE, HELD, THUS, IT HAS BEEN CONCLUDED THAT ASSESSEE BY VIRTUE OF THE MANNER IN WHICH IT IS CARRYING OUT ITS BUSINESS NEI THER FITS IN THE DEFINITION OF DEVELOPER BY GENERAL CONCEPTS NOR IT FITS INTO THE CATEGORY OF PERSONS FOR WHOSE BENEFIT THE PROVISION S WERE INTRODUCED. WITHOUT PREJUDICE TO THE ABOVE, IT IS A LSO TO BE SEEN AS TO WHETHER THE ASSESSEE FULFILLS ALL THE OTHER C ONDITIONS PRESCRIBED IN THE SECTION FOR AVAILING THE BENEFIT. THIS ISSUE HAS BEEN DEALT IN SUBSEQUENT PARAS . SUB SECTION 801A(4) SPECIFIES THE ENTITIES WHICH AR E ENTITLED FOR DEDUCTION UNDER SECTION. 801A. IN CLAUSE (I) WHILE STATING THAT ANY ENTERPRISE CARRYING BUSINESS OF (I) DEVELOPING OR ( II) OPERATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAINT AINING INFRASTRUCTURE FACILITY, IT HAS BEEN CLEARLY LAID DOWN THAT SUCH E NTERPRISE SHALL FULFILL ALL THE CONDITIONS LAID DOWN IN SUB CLAUSE (A) (B) AND (C). SUB CLAUS E (C) PUTS A CONDITION THAT THE ENTERPRISE HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ON OR AFTER FIRST DAY OF APRIL 1995 . THUS, THE PLAIN LANGUAGE OF PROVISIONS OF SEC. 801A (2) AND 4(I)(C) MAKES IT VERY DEAR THAT THE DEDUCTION TO AN ENTERPR ISE IS AVAILABLE UNDER THIS SECTION ONLY WHEN ENTERPRISE D EVELOPS AND BEGINS TO OPERATE OR MAINTAIN THE INFRASTRUCTURE FA CILITY . 67. THE AO, ON THESE OBSERVATIONS, DISALLOWED THE DEDUCTION UNDER SECTION 80IA TO THE ASSESSEE. 68. THE ASSESSEE, ON DENIAL OF DEDUCTION UNDER SECTION 153 A READ WITH 143(3), APPROACHED THE CIT(A), WHEREIN, THE ASSESSEE AGITATED THAT PROVISIONS OF SECTION 153A CANNOT BE CONSTRUED AS REGULA R ASSESSMENT OR REASSESSMENT AND HENCE THE AO WOULD BE BARRED TO UNDERTAKE ENQUIRIES WITH REGARD TO DISALLOWANCES/DEDUCTIONS, WHICH HAV E ALREADY BEEN FINALIZED. 69. THE CIT(A), REJECTED THE ASSESSEES APPEALS, ON THE LEGALITY OF THE ASSESSMENTS FRAMED UNDER SECTION 153A (WHICH HAS BEEN DEALT WITH BY US IN THE COS) AND ON MERITS, THE CIT(A) PERUSED THE SUBM ISSIONS AND RECORDS PRODUCED BY THE ASSESSEE. THE CIT(A) OBSERVED THAT IT WAS THE ASSESSEE WHO DEPLOYED ITS TECHNICAL PERSONNEL WHO UNDERT OOK STUDIES M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 34 ON SITE AND TOOK ALL THE RESPONSIBILITIES FROM THE START OF T HE PROJECT TILL ITS COMPLETION. HE ALSO OBSERVED ONLY THE CONCEPTION OF TH E IDEA AND SELECTION AND OWNERSHIP OF SITE, WHERE THE PARTICULAR PROJE CT HAD TO BE DEVELOPED, DID NOT MAKE THE GOVERNMENT, THE DEVELOPER. T HE CIT(A) AGREED WITH THE ARGUMENT OF THE ASSESSEE THAT THE IMPU GNED SECTION DID NOT USE THE EXPRESSION DEVELOPER OR CONTRACTOR AND SO FAR AS THE SECTION WAS CONCERNED, WHICH READS AS, 80IA(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSE E INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSIN ESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMO UNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED F ROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. THE TERM USED IN THE SECTION IS THEREFORE UNDERTAK ING OR ENTERPRISE WHICH REFERS TO THE ASSESSEE. SECTION 80-IA(4)(I) W HICH QUALIFIES THE TYPES OF ELIGIBLE BUSINESSES READS AS UNDER 801-A (1) (2) (3) (4) THIS SECTION APPLIES TO - (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE F OLLOWING CONDITIONS .. 70. THE CIT(A), THEREFORE, WENT ON TO TRACE THE DIFFERENCE B ETWEEN DEVELOPER AND THE CONTRACTOR, WHICH HAD BEEN INTERPRETE D BY THE COORDINATE BENCH AT MUMBAI, IN PATEL ENGINEERING (SUPRA), RELEVANT PORTION WHICH HAS BEEN EXTRACTED BY THE CIT(A) WHICH IS, THERE HAS ALSO BEEN THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS A CONTRACTOR, EXECUTING CIVIL CONTRACT AND SO IT CA NNOT BE THE DEVELOPER AS SUCH. HOWEVER, WE ARE UNABLE TO AGREE WITH THIS CONTENTION OF THE REVENUE. A PERSON, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE A CONTRACTOR NO DOUBT; AND THIS ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND AL SO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT THAT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICT ORY TO THE TERM DEVELOPER ON THE OTHER HAND, RATHER SECTION 80-IA (4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FAC ILITY AS PER AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERN MENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD, IN NO WAY, BE A BAR TO THE ONE B EING DEVELOPER. THE ASSESSEE, PRESENTLY UNDER CONSIDERATION BEFORE US, HAS DEVELOPED INFRASTRUCTURE FACILITY AS PER AGREEMENT WITH MAHAR ASHTRA STATE GOVERNMENT/APSEB. THEREFORE, MERELY BECAUSE, IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY, ASSESSEE IS REFERRED TO AS CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS ARE LAID DOWN, IT DOES M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 35 NOT DETRACT THE ASSESSEE FROM THE CONSTRUCTING THE ABOVE MENTIONED TWO PROJECT, NAMELY SRISAILAM PROJECT AND KOYANA PROJEC T, AS DETAILED ABOVE, IS APPROPRIATELY A DEVELOPER OF THE SAID TWO INFRASTRUCTURE FACILITIES, AND IN TURN IS ENTITLED, AND ENTITLED J USTIFIABLY, TO CLAIM DEDUCTION UNDER SECTION 80-IA(4). (EMPHASIS SUPPLI ED). THUS FROM THE ABOVE, IT CLEARLY FOLLOWS THAT THERE IS NO DIFFERENCE BETWEEN A CONTRACTOR AND A DEVELOPER AND THAT MERE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY ALSO ENTI TLES THE APPELLANT TO CLAIM DEDUCTION UNDER SECTION 80-IA. 71. THE CIT(A), AFTER EXAMINING THE LEGAL ASPECT, EXAMINED TH E FACTS OF THE ASSESSEE CLAIM, WHEREIN, THE ASSESSEE PRODUCED BEFO RE THE CIT(A), YEAR-WISE SPLIT UP OF INVESTMENT WAS GIVEN RELATIN G TO THE ENTIRE BLOCK PERIOD, WHICH WAS EXAMINED. IT IS SEEN THAT THE INV ESTMENTS ARE IN (A) FIXED ASSETS INCLUDING SOPHISTICATED EARTH EXCAVATI ON MACHINERIES AND TOWER CRANES, ETC. (B) INVESTMENT BY WAY OF FIXED D EPOSITS AND ADVANCES TO CONTRACTORS AND CREDITS TO THE GOVERNMENT DEPART MENT, (C) STOCK OF CEMENT/STEEL ETC. CORRESPONDING PROJECT RECEIPTS WE RE ALSO SUBMITTED AND AN ANALYSIS SHOWS THAT THE RATIO OF PROJECT REC EIPTS TO TOTAL INVESTMENTS VARIED BETWEEN 52% TO 118%. FURTHER, AN ANALYSIS OF THE CONTRACT ENTERED INTO BY THE APPELLANT IT WAS REVEA LED THAT THE APPELLANT WAS EXPOSED TO VARIOUS KINDS OF RISKS NAMELY - (A) COMPLETION OF CONTRACT WITHIN STIPULATED PERIOD, (B) RISK OF MAIN TENANCE, (C) RISK OF DELAYED PAYMENTS OR BAD DEBTS, (D) ARBITRATION & LI TIGATION RISK ARID (E) GEOLOGICAL RISKS. HENCE, THE FACTUAL POSITION, WHICH EMERGES, IS THAT NOT ONLY WAS THE APPELLANT ALSO MAKING ITS OWN INVESTMENTS IN THE DE VELOPMENT OF INFRASTRUCTURE PROJECTS, BUT THE PROCESS OF CREATIN G THE INFRASTRUCTURE FACILITIES IN ITSELF WAS FRAUGHT WITH INHERENT RISK S AND IT WAS NOT THAT THE APPELLANT WAS ENGAGED IN BLINDLY EXECUTING CIVIL WO RK CONTRACTS. IT NEEDS TO BE POINTED OUT HERE THAT IF THE INTERPRETA TION OF THE AO OF A DEVELOPER AS ONLY A PERSONS WHO CONCEIVES THE IDEA IS CORRECT, IN THAT CASE, THE DEDUCTION UNDER SECTION.80-IA COULD BE CL AIMED IN ALMOST EACH AND EVERY CASE, ONLY BY GOVERNMENT/LOCAL BODIES/STA TUTORY AUTHORITIES, AS THE INFRASTRUCTURE PROJECTS WOULD ALWAYS BE CONC EIVED BY THEM. THIS SURELY WAS NOT THE LEGISLATIVE INTENTION BEHIND THE INTRODUCTION OF THE PROVISIONS OF SECTION 80-IA. THE FACT THAT THE APPE LLANT EXECUTED INFRASTRUCTURAL PROJECTS IS NOT DISPUTED BY THE AO. WHAT IS DISPUTED IS THAT THE APPELLANT WAS NOT A DEVELOPER, BUT MERELY A CONTRACTOR. AS IS CLEAR FROM THE DISCUSSION ABOVE, THE AOS REASONING IS FAULTY. IT IS FURTHER AN UNDISPUTED FACT THAT THE APPELLANT IS NO T A SUBCONTRACTOR. THAT BEING SO, THE APPELLANT IS ENTITLED TO CLAIM T HE DEDUCTION UNDER SECTION.80-IA(4). FOR ALL THESE REASONS AND PLACING RELIANCE ON THE DECISION OF THE MUMBAI ITAT IN THE CASE OF PATEL EN GG. LTD. (SUPRA), IT IS THUS HELD THAT EVEN AS A DEVELOPER THE APPELLANT, A S IT IS NOT A SUB- CONTRACTOR, IS ENTITLED TO CLAIM THE DEDUCTION UNDE R SECTION.80-IA. THE CIT(A), THEREFORE, REJECTED THE OBSERVATION OF THE AO WITH REGARD TO THE DISTINCTION BETWEEN DEVELOPER AND CONTRACTOR AS WELL AS THE CONCEPT OF BOT/BOOT AND THAT THE ASSESSEE HAS NOT FUL FILLED THE CONDITIONS UNDER SECTION 80IA(2) AND 80IA(4) COMPLETELY. T HE CIT(A) M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 36 ALSO REJECTED THE OBSERVATION OF THE AO THAT THE CASE OF PATEL ENGINEERING (SUPRA) WAS DISTINGUISHABLE ON FACTS. HE, THEREFORE, OVERRULED THE DISALLOWANCE MADE BY THE AO, AND ALLOWED THE SAME FOR ASSESSMENT YEARS 2000-01 TO 2005-06. 72. AGAINST THIS DECISION OF THE DEPARTMENT IS IN APPEAL BEFO RE THE ITAT. 73. BEFORE US, THE DR SUPPORTED ORDER OF THE AO AND SUB MITTED THAT CONCLUSION OF THE AO THAT THE ASSESSEE WAS ONLY A CONT RACTOR AND NOT THE DEVELOPER WAS CORRECT IN LAW, BECAUSE AS PER THE PA PERS SEIZED FROM THE PREMISES OF PIL IT WAS FOUND THAT THE ASSESSEE WAS WORKING FOR/IN UNISON WITH MUKUT GROUP OF INDUSTRIES, THEREFORE, TH E DR SUBMITTED THAT THE ASSESSEE WAS AT BEST A CONTRACTOR AND IN NO WAY IT CAN BE CALLED THE DEVELOPER. THE DR ALSO SUBMITTED THAT SINCE THESE PAPERS WERE FOUND FROM THE SEARCHED PREMISES, WHICH HAD THE DIRECT BEARING ON THE ALLOWABILITY OF THE DEDUCTION UNDER SECTION 80IA, THE AO WAS FULLY JUSTIFIED IN INVOKING THE PROVISIONS UNDER SECTION 1 53A, WHICH WAS IN LINE WITH THE SB DECISION OF ALL CARGO (SUPRA), AS ALSO AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) . 74. THE DR, THEREFORE, CONCLUDED THAT THE CIT(A) ERRED IN A LLOWING THE DEDUCTION UNDER SECTION 80IA/80IA(4). 75. THE AR, APPEARING FOR THE ASSESSEE SUBMITTED THAT TH E ISSUE WAS SQUARELY COVERED BY THE DECISIONS OF PATEL ENGINEERING (SUPRA) AND ANIL KUMAR BHATIA (SUPRA). THE AR FURTHER POINTED OUT THAT SIMILAR CIRCUMSTANCE AROSE IN THE CASE BEFORE COORDINATE BENCH AT PUNE IN MAHALAXMI CONSTRUCTION CORP LTD. VS ACIT IN ITA NO. 433/P N/2007, WHEREIN, IN PARA 9, IT IS OBSERVED, WE FIND FROM THE DECISION OF HONBLE BOMBAY HIGH C OURT IN AFORESAID CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUP RA) THAT EVEN IN THE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 37 CASE BEFORE THE HONBLE HIGH COURT, THE ASSESSEE AC TED AS A CONTRACTOR FOR GOVERNMENT AGENCY, WAS HELD ELIGIBLE FOR THE PU RPOSES OF CLAIM OF DEDUCTION UNDER SECTION 80-IA(4) OF THE INCOME TAX ACT. AS PER THE SAID DECISION OF THE HONBLE HIGH COURT ASSESSEE WHO ONL Y DEVELOPS INFRASTRUCTURAL FACILITY (EVEN AS A CONTRACTOR) BUT DOES NOT HAVE AN OCCASION TO OPERATE AND MAINTAIN IS ALSO ELIGIBLE F OR CLAIM OF DEDUCTION UNDER SECTION 80-IA(4) OF THE ACT. THE HONBLE HIGH COURT HAS BEEN PLEASED TO OBSERVE THAT QUA SUCH A PERSON THE CONDI TION STATED IN SUB- SECTION (C) OF SEC.80-IA(4)(I) HAS TO BE READ HARMO NIOUSLY WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE, WHO DEVELOPS; OR OPERATES AND MAINTAIN; OR DEVELOPS, MA INTAINS AND OPERATES AN INFRASTRUCTURAL FACILITY. IN OTHER WORD S A DEVELOPER WHO ONLY DEVELOPS (I.E., CONSTRUCTS) AN INFRASTRUCTURAL FACI LITY IS NOT ENVISAGED TO OPERATE AND MAINTAIN SUCH FACILITY, CANNOT BE ACCEP TED TO FULFIL THE CONDITION IN CLAUSE (C) OF SEC. 80-IA(4) SINCE IT W OULD BE AN IMPOSSIBILITY. THEREFORE, IN VIEW OF THE CONSTRUCTION PLACED BY TH E HONBLE BOMBAY HIGH COURT ON THE REQUIREMENTS OF CLAUSE (C) OF SEC . 80-IA(4)(I) REQUIRING IT TO BE HARMONIOUSLY READ WITH THE MAIN SEC. 80-IA(4) , WE DO NOT FIND SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE. W E THUS RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT ON THE ISSUE IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD & ORS ( SUPRA) DECIDE THE MATTER IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION IN QUESTION UNDER S ECTION 80-IA(4). THE ISSUE IS THUS DECIDED IN FAVOUR OF THE ASSESSEE.THE RELATED GROUNDS ARE THUS ALLOWED WITH THIS DIRECTION TO THE AO TO ALLOW THE CLAIMED DEDUCTION TO THE ASSESSEE. 76. IT WAS SUBMITTED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES HAS BEEN FOLLO WED IN A NUMBER OF DECISIONS, WHICH HAVE BEEN MADE PART OF THE AP B, ALONG WITH A NO. OF OTHER DECISIONS, WHICH ARE AS FOLLOWS NO. CONTENTS PAGE NO. 1 MAHALAKSHMI INFRAPROJECT LIMITED VS. ACIT (BOM.HC ) 247 - 248 2 MAHALAXMI CONSTRUCTION CORP. LTD. VS. ACIT (PUNE ITAT) 249 - 254 3 LAXMI CIVIL ENGG. PVT. LTD. VS. ADDL. CIT (PUNE ITAT) 255 - 257 4 PRATIBHA CONSTRUCTION & ENGINEERS (I) PVT.LTD.(PU NE ITAT) 258 - 263 5 TARMET BEL (JV) VS. ITO (RAJKOT ITAT) 264 273 6 GVPR ENGINEERS LTD. VS. ACIT (HYD . ITAT) 274 3 13 77. THE AR POINTED OUT THAT SIMILAR QUESTION CAME UP BEFOR E THE COORDINATE BENCH AT HYDERABAD IN THE CASE OF GVPR ENGIN EERS LTD. VS ACIT IN ITAS NO. 347, 1323/HYD/2008, WHEREIN, VIDE ORDER D ATED 29.02,2012, IT WAS HELD (HEAD NOTES) , THE ASSESSEE-COMPANY ENTERED INTO CONTRACTS WITH T HE GOVERNMENT TO DEVELOP INFRASTRUCTURE FACILITY. THE GOVERNMENT HAN DED OVER THE POSSESSION OF THE PROJECTS SITE TO THE ASSESSEE AND IT WAS THE ASSESSEES RESPONSIBILITY TO DO ALL THE ACTS TILL T HE DEVELOPED INFRASTRUCTURE FACILITY WAS HANDED OVER TO THE GOVE RNMENT. THEREAFTER, THE ASSESSEE HAD TO UNDERTAKE MAINTENANCE OF SAID I NFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. THE ASSESSEE CLAIMED DED UCTION UNDER M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 38 SECTION 80-IA. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE HAD NOT DEVELOPED ANY NEW INFRAST RUCTURE FACILITY AS REQUIRED UNDER SECTION 80-IA(4)(I)(B) BUT HAD ONLY TAKEN UP WORKS CONTRACT FOR RENOVATION AND MODERNIZATION OF EXISTI NG NETWORK/INFRASTRUCTURE FACILITY. THE ASSESSING OFFI CER ALSO OBSERVED THAT THE ASSESSEE ENTERED INTO CONTRACT FOR BUILDIN G OR CONSTRUCTING THE WHOLE PART OF THE PROJECT FOR WHICH THE ENTIRE INVE STMENTS WERE MADE BY THE GOVERNMENT AND THE ASSESSEE WAS PAID ON RUNNIN G BILL TO BILL BASIS AND THERE WAS NO STIPULATION IN ANY OF THE CONTRACT THAT THE FACILITY BUILT WOULD BE TRANSFERRED OR HANDED OVER BACK TO THE OWN ER/EMPLOYER. BEING SO, SUCH CONTRACTS WERE HELD NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA. ON APPEAL: HELD-I THE PROVISIONS OF SECTION 80-IA(4), WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, THE PROVISIONS UNDER SECTION 80- IA(4A) WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTER PRISE EARLIER UNDER SECTION 80-IA(4A) IS ALSO MADE AVAILABLE UNDER SECT ION 80-IA(4) ITSELF FURTHER, THE VERY FACT THAT THE LEGISLATURE MENTION ED THE WORDS (1) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING CLEARLY INDICATES THAT A NY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECO ME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE ACT. WHERE AN ASSESSEE INCUR EXPENDITURE FOR PURCHASE OF MATERIAL S HIMSELF AND EXECUTES THE DEVELOPMENT WORK, I.E., CARRIES OUT TH E CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SEC TION 80-IA. IN CONTRAST TO THIS, AN ASSESSEE, WHO ENTERS INTO A CONTRACT WI TH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRIS E REFERRED TO IN SECTION 80-IA, FOR EXECUTING WORKS CONTRACT, WILL N OT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA. THE WORD OWNED I N SUB-CLAUSE (A) OF CLAUSE (1) OF SUB-SECTION (4) OF SECTION 80-IA REFE RS TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEAR THAT THE /ENTER PRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY LAND NOT THAT THE INFRASTRUCTURE FACILITY S HOULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAU SE (A). THEREFORE, THE WORD OWNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERP RISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE E LIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB-SECT ION (4) OF SECTION 80-IA, THE WORD IT DENOTES THE ENTERPRISE CARRYING ON TH E BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILI TY, PARTICULARLY IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHWAY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT , A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EV EN OTHERWISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFOR E, THERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. THE NEXT QUESTION TO BE ANSWERED IS WHETHER THE ASS ESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE REL IED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2 009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE IS AKI N TO WORKS CONTRACT AND IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4). WHETHER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRACTOR PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 39 ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRU CTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WI TH THE GOVERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PR EMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTU RE FACILITY. IT IS THE ASSESSEE S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS T O TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DE VELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY, THE ASSESSE E SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE AS SESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS , ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRA INAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY H INDRANCE, THE ASSESSEE S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INV OLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NO T. THE AGREEMENT IS NOT FOR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF F ACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE O F THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATER IAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPE RTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFR ASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVERNMENT OR THE PEO PLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE G OVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSE SSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE O CCURRED, IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE A SSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE , IT IS CLEAR THAT FROM AN UNDEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AN D HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE IT S CIRCULAR, DATED 18-5-2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA(4). THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACIL ITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD CLEARLY I NDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IA(4). THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSES SEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. AS PER THE PROVISIONS OF SECTION 80-IA, A PERSON BE ING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVE RNMENT UNDERTAKINGS. SUCH AN AGREEMENT IS A CONTRACT AND F OR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTO R AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DE NOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT O F INFRASTRUCTURE FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRAC T. THE WORD CONTRACTOR IS USED TO DENOTE THE PERSON WHO ENTER S INTO SUCH CONTRACT. EVEN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELO PMENT OF INFRASTRUCTURE FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTR ACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUC TURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 40 SECTION 80-IA INTENDS TO COVER THE ENTITIES CARRYIN G OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INC ENTIVES TO SUCH ENTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SE CTION 80-IA WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80-IA IN THE FINANCE ACT, 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT TO AVOID MISUSE OF THE AFORESAID AMENDMENT, AN EXPLANATION WAS INSERTED IN SECTION 80-IA, IN THE FINANCE ACT, 2007 TO 2009, TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGI BLE FOR DEDUCTIONS UNDER SECTION 80-IA. BUT, CERTAINLY, THE EXPLANATIO N CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWI SE, THE PARLIAMENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN TH E FINANCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DO MERE WORKS C ONTRACT OR SUB- CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CL EAR FROM THE EXPRESS INTENTION OF THE PARLIAMENT WHILE INTRODUCING THE E XPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT, 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR TH E PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK IT CATEGORICALL Y STATES THAT THE DEDUCTION UNDER SECTION 80-IA IS AVAILABLE TO DEVEL OPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT TO THE CONTRACTORS, WHO UNDERTAKE ONLY BUSINESS RISK WITHO UT ANY DOUBT, THE ASSESSEE CLEARLY DEMONSTRATED THAT IT HAS UNDERTAKE N HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL, PLANT A ND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURC ES. AFTER THE AMENDMENT SECTION 80-IA(4) IS READ AS (1) DEVELOPIN G OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. WHILE PRIOR TO AMENDMENT T HE OR BETWEEN THREE ACTIVITIES WAS NOT THERE, AFTER THE AMENDMENT OR HAS BEEN INSERTED WITH EFFECT FROM 1-4-2002 BY FINANCE ACT, 2001. THE REFORE, IF THE CONTRACTS INVOLVE DESIGN, DEVELOPMENT, OPERATING AN D MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LI ABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CON TRACT TO DENY THE DEDUCTION UNDER SECTION 80-IA. THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED, THIS DEDUCTION UNDER SEC TION 80-IA HAVE TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WOR KS CONTRACTS HIT BY THE EXPLANATION TO SECTION 80-IA (13), THOSE WOR K ARE NOT ENTITLED FOR DEDUCTION UNDER SECTION 80-IA. THE PROFIT FROM THE CONTRACTS WHICH INVOLVE DESIGN, DEVELOPMENT, OPERATING AND MAINTENA NCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD IS TO BE COMPUTED BY THE ASSESSING OFFICER ON PRO RATA BASIS OF TURNO VER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE RECORDS ACCORDIN GLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. 78. HE FURTHER POINTED OUT THAT SO FAR AS THE ALLOWANCE O F DEDUCTION TO THE INFRASTRUCTURE DEVELOPMENT IS CONCERNED, THE LEGISLA TURE HAS ITSELF MADE THE DISTINCTION, FOR THE PURPOSES OF SECTION 80IA (4), THE WORDS USED ARE ANY ENTERPRISE , WHEREAS IN SECTION 80IAB, THE WORDS USED ARE AN ASSESSEE, BEING A DEVELOPER. . THE AR, THEREFORE, SUBMITTED THAT THE AO HERE ERRED IN DISALLOWING THE DEDUCTION. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 41 79. IN THE REJOINDER, THE DR POINTED OUT THAT THE ASSES SEE HAD VOLUNTARILY ACCEPTED THE PROVISIONS OF SECTION 194C TO BE APPLIED ON IT, THEREFORE, THE ASSESSEE HAS ITSELF ACCEPTED ITSELF TO BE A CONTRACTOR AND IN ANY CASE, SINCE THE DECISION OF ABG HEAVY INDUSTRIES LT D. HAS NOT GONE INTO THE DISTINCTION OF DEVELOPER AND CONTRACTOR, THE REFORE, ACCORDING TO THE DR, THE DECISION OF ABG (SUPRA) CANNOT BE APPLIED /RELIED UPON AND FINALLY SUBMITTED THAT THE DECISION OF THE AO TO DENY THE DEDUCTION UNDER SECTION 80IA WAS CORRECT IN LAW AND PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE. 80. WE HAVE HEARD THE ARGUMENTS FROM BOTH THE SIDES. T HE BASIC ISSUE BEFORE US IS, WHETHER AT ALL, DEDUCTION UNDER SECTION 80IA(4) COULD BE ALLOWED TO THE ASSESSEE, ON THE PREMISE THAT TH E ASSESSEE WAS A CONTRACTOR AND NOT THE DEVELOPER, AS AGITATED BY THE DR/AO. TO ADDRESS THE IMPUGNED ISSUE, WE MUST FIRST REFER TO THE S ECTION WHICH HAS BEEN DEBATED, I.E. SECTION 80IA(4). THE SECTION READS AS UNDER: (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A C ORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CEN TRAL OR STATE ACT; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENT RAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHE R STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAININ G OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACI LITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS T RANSFERRED ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE W HICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREA FTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE P URPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 42 WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STA TE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS O F THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE TH E ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE B EEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'INFR ASTRUCTURE FACILITY' MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYSTEM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER A CTIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM , IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAG EMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY, INLAND PORT O R NAVIGATIONAL CHANNEL IN THE SEA; . .. 81. AS SEEN, SUB SECTION (4) TALKS ABOUT ANY ENTERPRISE . WHEN WE TRACE THE HEADING OF THE SECTION, IT READS, DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OR E NTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT, ETC.. THIS HEADING ITSELF CLARIFIES THAT IF AN INDUSTRIAL UNDERTAKING IS IN THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT, THAT INDUSTRIAL UNDERTAKING QUALIFIES TO CLAIM THE DEDUCTION UNDER SECTION 80IA. SUB SECTIONS (1) TO (3) TO S ECTION 80IA, THROUGH OPERATION OF LAW IS AVAILABLE TO INDUSTRIAL UNDERTAKING , BUT THERE IS A SLIGHT DEPARTURE IN SUB SECTION (4) OF SECTION 80 IA, WHICH IS THE IMPUGNED SECTION BEFORE US. IT HAS TO BE NOTICED THA T IT IS AVAILABLE TO ANY ENTERPRISE , WHICH MEANS, IT CAN BE MADE AVAILABLE TO AN ASSESSEE, WHICH ITSELF MAY NOT EVEN BE AN INDUSTRIAL UNDERT AKING, WHICH IN LITERAL MEANING, ENVISAGES, THAT EVEN AN ENTERPRISE, WHO SECURES AN INFRASTRUCTURE DEVELOPMENT AND GETS IT DEVELO PED THROUGH ITS VENDORS, EVEN THEN, THE DEDUCTION SHALL BE AVAILABLE TO IT (THOUGH PROVISO TO CLAUSE (III), MAY ALLOW THE DEDUCTION TO BE TRANSFE RRED TO ANOTHER UNDERTAKING). LOOKING FROM THE LEGISLATIVE POINT ONLY , WE FIND THAT THE ASSESSEE IS IN A MUCH BETTER FOUNDATION, BECAUS E, NOT ONLY IT M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 43 SECURED THE DEVELOPMENT PROJECT FROM THE GOVERNMENT A GENCY, BUT IT ITSELF WAS DEVELOPING THE SAME. THE CASE OF THE ASSESSEE IS SIMILAR TO THE CASE OF GVPR ENGINEERS LTD. (SUPRA) , WHEREIN WHO CAN BE CALLED AS A CONTRACTOR IN DEVELOPMENT PROJECTS, HAS BEEN EXPLAINE D, AS REPRODUCED IN EARLIER PARAS. WE ALSO FOUND THE DISTINCTION H AS BEEN DRAWN BY THE LEGISLATURE ITSELF, BECAUSE IN THE IMPUGNED SE CTION, THE WORDS HAVE BEEN USED ANY ENTERPRISE , BUT WHEN WE SEE SECTION 80IAB, THE LEGISLATURE USES THE WORDS, ..AN ASSESSEE, BEING A DEVELOPER, . . THEREFORE, TRACING THE DIFFERENCE, WITHIN THE LEGISLATION ITSELF, PROVES THE FACT, THAT THE LEGISLATURE IS INCLINED TO ALLO W THE DEDUCTION TO AN ENTERPRISE , WHO IS IN THE BUSINESS OF INFRASTRUCTURE DEVELOPMENT, IRRESPECTIVE OF ITSELF BEING A DEVELOPER. 82. WE FIND THAT, THE AO ACCEPTS THAT THE ASSESSEE IS AN INFRASTRUCTURE DEVELOPER. BUT WE LOOK INTO THE MAIN OBJECT ION OF THE AO THAT BEING A DEVELOPER BY ITSELF IS NOT ENOUGH TO AVAIL THE DEDUCTION, BUT THE ASSESSEE SHOULD HAVE MAINTAINED, OPERATED AND H ANDED IT BACK TO THE GOVERNMENT. WE MUST OBSERVE HERE THAT TH E AO ERRED IN INTERPRETING THE RELEVANT CLAUSE (I), BECAUSE AFTER EACH QUA LIFICATION, THE LEGISLATURE HAS USED THE WORD OR , WHICH DOES NOT JOIN THE QUALIFICATIONS BUT SEPARATES ONE QUALIFICATION FROM THE OTHER. BESIDES THIS, THE AO ERRED ONCE AGAIN TO NOT TO READ SUB CLAUSE (B), WHICH READS AS, IT HAS ENTERED INTO AN AGREEMENT . . HERE, IT WOULD MEAN, ANY ENTERPRISE , AS PER CLAUSE (I) TO SECTION 80IA(4). 83. WE HAVE ALREADY PERUSED THE VARIOUS DECISIONS RELIED U PON BY THE AR DURING THE COURSE OF HEARING. WE HAVE ALSO NOT CO ME ACROSS ANYTHING EITHER ON FACTS OR IN LAW, WHICH DISTINGUISHES, THE ALREADY EXISTING POSITION AS ON THE DATE OF SEARCH AND IN THE PRO CEEDINGS UNDER SECTION 153A READ WITH 143(3), WHICH SUBSTANTIATES THE DE NIAL. ACCEPT FOR THE INTERPRETATION, AS MADE OUT BY THE AO, THERE IS N OTHING, WHICH COULD SUBSTANTIATE THE DISALLOWANCE. IN THE ENTIRE PROCEE DINGS UPTO THE M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 44 HEARING BEFORE US, THE DEPARTMENT HAS NOT EVEN SAID THA T THERE WAS EITHER NO AGREEMENT BETWEEN THE ASSESSEE AND THE STA TE GOVERNMENT OR THERE IS ANY CHANGE IN THE AGREEMENT ENTERED INTO BY T HE ASSESSEE AND THE GOVERNMENT DEPARTMENT. IN FACT THE DPB FILED BY THE DEPARTMENT, AT PAGES 48 TO 72, WE FIND THERE ARE LETTERS EXCHANGED, WRITTEN BY THE ASSESSEE AND VARIOUS GOVERNMENT DEPARTMENTS, WHICH INDIC ATE THAT THE ASSESSEE WAS AWARDED THE JOB, WHEREIN THE ASSESSEE HAD PLACED THE BANK GUARANTEE FOR RS. 2,61,62,400, AGAINST THE TENDERED C OST. THIS PROVES BEYOND DOUBT THAT THE ASSESSEE, ITSELF WAS DOING THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, ON BEHALF OF THE GOVERN MENT, BESIDES PLACING ITS OWN FUNDS AT RISK AND PERIL. THESE SEIZ ED DOCUMENTS AND PLACED IN THE DPB, ALSO NEGATE THE ARGUME NTS OF THE DR, WITH REGARD TO DOCUMENTS NO. 18 & 19, REFERRED TO EA RLIER, WHEREIN THE DR HAD STRENUOUSLY ARGUED THAT THE ASSESSEE WAS A CO-CON TRACTOR. 84. THE OTHER ARGUMENT BY THE AO AND THE DR HAD BEEN THAT THE ASSESSEE ACCEPTED ITSELF TO BE CONTRACTOR, BY ACCEPTING THE TAX TO BE DEDUCTED UNDER SECTION 194C, WHICH IS RELEVANT, ONLY IN CA SE OF A CONTRACTOR, ALSO CANNOT BE ACCEPTED. BECAUSE, FIRST, WE H AVE TO ASCERTAIN WHETHER THE ASSESSEE FALLS UNDER SECTION 80IA/ 80IA(4), BECAUSE CHAPTER XVII, WHEREIN SECTION 194C IS EMBEDDED, IS ONLY A MACHINERY CHAPTER FOR COLLECTION AND RECOVERY OF TAXES. 85. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO CONVINCE OURSELVES TO SUSTAIN THE DISALLOWANCE UNDER SECTION 80IA(4), MADE B Y THE AO. WE, THEREFORE, SUSTAIN THE ORDER(S) OF THE CIT(A), ALLOWING THE DEDUCTION UNDER SECTION 80IA(4), AS CLAIMED BY THE ASSESSEE. 86. THE APPEALS FILED BY THE DEPARTMENT, COVERING ASSESSME NT YEARS 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 ARE DISMISSED. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 45 87. IN THE RESULT, THE APPEALS FILED BY THE DEPARTMENT, AS WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR ASSESSMENT YE ARS 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 ARE DISMISSED. ITA NO. 2202/MUM/2008 : APPEAL BY THE DEPARTM ENT : ASST. YEAR 2005-06 88. THE APPEAL FILED BY THE DEPARTMENT RAISES THE FOLLOWING GROUNDS OF APPEAL : (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F DEDUCTION UNDER SECTION 80IA OF THE I.T. ACT WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IA IN MOST OF THE INFRASTRUCTURE PROJECTS WHERE THE AS SESSEE IS MERELY A WORK CONTRACTOR AND NOT A DEVELOPER. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SECTION 80IA ON AMOUNT OF LIABILITI ES WRITTEN BACK WITHOUT APPRECIATING THE FACT THAT THE ASSESSE E FAILED TO PROVE THAT SUCH LIABILITIES PERTAINED TO PROJECTS E NTITLED TO DEDUCTION UNDER SECTION. 80IA OF THE I.T. ACT. 89. SO FAR AS GROUND NO. 1 IS CONCERNED, WE HAVE ALREADY HELD IN ASSESSMENT YEARS 2000-01 TO 2004-05, THAT DEDUCTION S HALL BE AVAILABLE TO THE ASSESSEE. 90. WE, THEREFORE, ARE NOT GOING INTO DETAILED DISCUSSION IN T HE INSTANT YEAR. 91. THEREFORE, PLACING RELIANCE ON THE DECISION TAKEN BY US IN THE PRECEDING YEARS, WHERE WE HAVE DISMISSED THE GROUND TAK EN BY THE DEPARTMENT, WE REJECT THE GROUND IN THE CURRENT YEARS AS WELL. 92. GROUND NO. 1 IS REJECTED. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 46 93. GROUND NO. 2 IS ON ACCOUNT OF ALLOWANCE OF DEDUCTION UN DER SECTION 80IA ON THE AMOUNTS WRITTEN BACK UNDER SECTION 41(1) OF THE INCOME TAX ACT. 94. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT IT HAD OFFE RED RS 1.95 CRORES ON ACCOUNT OF CESSATION OF LIABILITIES UNDER SE CTION 41(1). SINCE THE LIABILITIES PERTAINED TO BOTH TYPES OF PROJECTS, I.E. 80IA AND NON 80IA AND THERE BEING A POSSIBILITY THAT SAME CREDITOR S MAY HAVE SUPPLIED THE MATERIALS WHICH WAS UTILIZED BOTH FOR 80IA AND NON 80IA, ARRIVE AT ACCURATE FIGURES PARTICULARLY TO THE SUPPLIER FOR BOTH THE TYPES OF PROJECTS WAS A VIRTUAL IMPOSSIBILITY. THEREFORE, THE ASSESS EE HAS BIFURCATED THE CESSATION OF LIABILITIES ON THE BASIS OF PROPORT ION OF THE TURNOVER. 95. THE AO REJECTED THE CLAIM OF THE ASSESSEE TO INCLUDE PROPORTIONATE PORTION OF CESSATION OF LIABILITIES TO THE INCOME FOR DETERMINATION OF DEDUCTION UNDER SECTION 80IA(4). 96. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), WHO JU ST ACCEPTED THAT THE ASSESSEE WAS ELIGIBLE TO DEDUCTION UND ER SECTION 80IA(4) AND THEN ACCEPTED THE RATIONAL BIFURCATION OF THE LIA BILITIES WRITTEN BACK ON THE PROPORTION OF TURNOVERS OF 80IA PRO JECTS & NON- 80IA PROJECTS AND HE DIRECTED THE AO TO ALLOW THE LIABILITIE S WRITTEN BACK TO BE ADDED FOR THE COMPUTATION OF DEDUCTION UNDE R SECTION 80IA(4). 97. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT ON THIS GROUND. 98. THE DR REITERATED THE OBSERVATIONS OF THE AO IN HIS S UBMISSIONS AND PLEADED THAT WRITTEN BACK LIABILITIES CANNOT BE INCLUDED FOR THE ALLOWANCE OF DEDUCTION UNDER SECTION 80IA. M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 47 99. ON THE OTHER HAND, THE AR ALSO REITERATED THE SUBMIS SIONS MADE BY HIM BEFORE THE REVENUE AUTHORITIES AND PLEADED THAT O NLY THIS BIFURCATION IS THE MOST APPROPRIATE METHOD TO DISTINGUISH T HE LIABILITIES WRITTEN BACK BETWEEN 80IA PROJECTS AND NON 80IA PROJ ECTS. HE, THEREFORE, PLEADED THAT THE CIT(A) WAS VERY FAIR TO GIVE A REASONABLE DIRECTION TO THE AO. 100. WE HAVE HEARD THE ARGUMENTS. IT IS NOT THE CASE O F THE DEPARTMENT THAT THESE LIABILITIES WERE NON BUSINESS. WHEN THE LIABILITIES WHICH HAVE BEEN WRITTEN BACK/OFFERED TO TAX BY TH E ASSESSEE PERTAINS TO THE BUSINESS, THEN IT HAS TO BE ADDED BACK AS A BUSINESS INCOME. 101. IN THE INSTANT CASE, THE CIT(A) HAS ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEE WAS HAVING TWO TYPES OF PROJECTS, I.E., WHICH QUALIFY FOR DEDUCTION UNDER SECTION 80IA AND WHICH DO NOT QUALIFY . BUT WHILE THE ASSESSEE IS UNDERTAKING BOTH TYPES OF THE PROJECTS , IT IS PROCURING MATERIALS SUCH AS CEMENT, STEEL AND ALL OTHER MATERIALS, WHIC H ARE NEED USED FOR BOTH TYPES OF PROJECTS. IN SUCH CIRCUMSTA NCE, IT IS DIFFICULT TO MAKE PRECISE ALLOCATION. AS HELD BY THE COORDINAT E BENCH AT MUMBAI IN EXTRUSION PROCESS (P) LTD. VS ITO, ITA NO. 630/MU M/2003, REPORTED IN 107 TTJ 1001 (MUM) THAT EVEN FOR COMPUTING D EDUCTION UNDER SECTION 80HHC, IT WOULD BE ADDED AS BUSINESS INCOME. 102. HERE, IN THE INSTANT CASE, WE ARE CONCERNED WI TH DOMESTIC PROJECTS, AND THE CEASED LIABILITIES ARE EMANATING FROM THE N ORMAL COURSE OF BUSINESS OF THE ASSESSEE. HENCE, WE ARE OF THE OPINION THAT THE LIABILITIES WRITTEN BACK WOULD BE ADDED TO THE CLAIM OF DEDUCTION UNDER SECT ION 80IA. SINCE THE ASSESSEE ALSO HAS NON-80IA PROJECTS AND IT HAS BEEN ACCEPTED BY THE ASSESSEE THAT THESE WRITTEN BACK LIABILITIES WOULD ALSO PERT AIN TO NON 80IA PROJECTS, IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSESSEE AND THE CIT(A) WERE VERY REASONABLE IN ALLOCATING THE INCOME OFFER ED UNDER SECTION 132(4) ON M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 48 ACCOUNT OF CESSATION OF LIABILITIES UNDER SECTION 4 1(1) IN PROPORTION OF THE TURNOVER OF 80IA PROJECT AND NON 80IA PROJECTS. 103. WE, DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING REACHED BY THE CIT(A) TO DIRECT THE AO TO ADD THE PROPORTION OF OF FERED AMOUNT OF RS 1.95 CRORES TO THE INCOME ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IA FOR ASSESSMENT YEAR 2005-06. 104. THE GROUND RAISED BY THE DEPARTMENT, IS THEREF ORE, REJECTED. 105. IN THE RESULT, THE APPEAL FILED BY THE DEPARTM ENT IS DISMISSED. WE MAY CLARIFY THAT IN THE COURSE OF HEARING BEFORE US, BOTH THE PARTIES CITED A NUMBER OF DECISION AND JUDGMENT, WHICH HAVE ALL B EEN PERUSED BY US. WE, IN ANY CASE, HAVE REFERRED TO AND CITED ONLY THOSE CASES, WHICH ACCORDING TO US WERE RELEVANT FOR TAKING THE ABOVE DECISIONS IN ALL THE APPEALS FILED BY THE DEPARTMENT AND CROSS OBJECTIONS FILED BY THE ASSESS EE. TO SUM -UP: THE APPEALS FILED BY THE DEPARTMENT, AS WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2000-01 TO 2004-0 5 ARE DISMISSED AND DEPARTMENTAL APPEAL FOR ASSESSMENT YEAR 2005-06 IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 19/12/2012. SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 19/12/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- CENTRAL-III , MUMBAI. 4) THE CIT CENTRAL-IV, MUMBAI, M/S. PRATIBHA INDUSTRIES LTD ITA 2197 TO 2201/MUM/2008 ITA NO. 2202/MUM/2008 C.OS. 117 TO 121/MUM/2008 49 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN
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