M/s. Simplex Infrastructures Ltd., , Kolkata V. Addl. CIT, Range - 12, Kolkata, Kolkata

ITA 1573/KOL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6939 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: S K TULSIYAN
• Keywords: Bogus purchase; Business expenditure; Search and seizure; Principle of natural justice; Opportunity of cross examination; Retrospective amendment; Third party statement; Accommodation entries; Onus to prove; Revised return; TDS; Set aside
• Section: 143(3); 14A; 133(6); 194C; 250; 80IA; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD...............................................................APPELLANT 27, SHAKESPEARE SARANI KOLKATA 700 017 [PAN : AAECS 0765 R] VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-12 KOLKATA..................................RESPONDENT ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 ADDL. COMMISSIONER OF INCOME TAX, RANGE-12(2) KOLKATA..............................APPELLANT VS. M/S. SIMPLEX INFRASTRUCTURES LTD................................................................RESPONDENT 27, SHAKESPEARE SARANI KOLKATA 700 017 [PAN : AAECS 0765 R] APPEARANCES BY: SHRI S.K. TULSIYAN, FCA, APPEARED ON BEHALF OF THE ASSESSEE. SHRI A.K. NAYAK, CIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 31 ST , 2019 DATE OF PRONOUNCING THE ORDER : MARCH 1 ST , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE DIRECTED AGAINST THE COMMON ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-18 (HEREINAFTER THE LD.CIT(A)), PASSED U/S. 250 OF THE INCOME TAX ACT, 1961 (THE ACT), FOR THE ASSESSMENT YEARS 2011-12 & 2012-13 2 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTORS AS WELL AS IN DEVELOPMENT OF INFRASTRUCTURE. IT IS ENGAGED IN VARIOUS INFRASTRUCTURAL PROJECTS SUCH AS CONSTRUCTION OF FLYOVERS, SEWERAGE PROJECTS ETC. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 28/11/2011, DECLARING TOTAL INCOME OF RS.74,73,80,890/-. LATER IT FILED A REVISED RETURN OF INCOME ON 30/03/2013, DECLARING THE SAME INCOME. THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON 30/03/2014 INTERALIA MAKING DISALLOWANCES ON ACCOUNT OF (A) BOGUS PURCHASES AND BOGUS SUB-CONTRACT EXPENSES, (B) DEDUCTION U/S 80-IA(4) OF THE ACT, (C) DISALLOWANCE U/S 14A R.W.R. 8D AND (D) DISALLOWANCE OF EMPLOYEES CONTRIBUTION TOWARDS ESI & PF. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. CIT(A) DELETED ALL THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, EXCEPT DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES/SUB-CONTRACT EXPENSES. 3. FURTHER AGGRIEVED BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 4. WE HAVE HEARD SHRI, S.K. TULSIYAN, THE LD. COUNSEL FOR THE ASSESSEE AND SHRI A.K. NAYAK, THE LD. CIT D/R ON BEHALF OF THE REVENUE. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 5. WE FIRST TAKE UP THE ASSESSEES APPEAL IN ITA NO.1572/KOL/2017; ASSESSMENT YEAR 2011-12. 6. THE SOLE ISSUE THAT IS AGITATED BY THE ASSESSEE IS THE DISALLOWANCE OF PURCHASES AND DISALLOWANCES OF SUB-CONTRACT LABOUR EXPENSES ON THE GROUND THAT THEY ARE BOGUS. THE ASSESSING OFFICER DISALLOWED THE PURCHASES MADE BY THE ASSESSEE COMPANY FROM M/S. BRYTEX INDUSTRIES & M/S. NIKHIL ENTERPRISES ON THE GROUND THAT THE SAME ARE BOGUS PURCHASES. HE ALSO DISALLOWED LABOUR EXPENSES PAID TO M/S. SUPREME CONSTRUCTIONS, M/S. NOVA CONSTRUCTIONS AND M/S. PURNIMA CONSTRUCTIONS. THE ASSESSEES CASE IS THAT IT IS A PROFESSIONALLY MANAGED COMPANY AND THE TOP MANAGEMENT IS NOT INVOLVED IN THE 3 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD DECISION MAKING AT THE PROJECT IMPLEMENTATION LEVEL, AS THERE ARE NUMEROUS PROJECTS BEING CARRIED OUT BY THE ASSESSEE COMPANY ALL OVER THE COUNTRY. IT IS ARGUED THAT THE TOP MANAGEMENT HAS PUT STANDARD OPERATING PROCEDURES IN PLACE FOR ALL EXPENSES IN VARIOUS PROJECTS AND THESE SYSTEMS ARE FOLLOWED. IT WAS SUBMITTED THAT THE ABOVE PARTIES WERE ISSUED PURCHASE ORDERS, SUPPLIER INVOICES WERE GIVEN, TAX INVOICES WERE RAISED, DELIVERY CHALLANS WERE PRODUCED AND PAYMENTS WERE MADE AFTER APPROVAL OF THE BILLS THROUGH BANKING CHANNELS. COPY OF THESE DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND ALSO PLACED BEFORE US AT PAGES 1 TO 53 OF THE PAPER BOOK. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO A LETTER DT. 14/03/2014 WHICH IS AT PAGES 101 TO 105 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE ENTIRE PROCESS OF STANDARD OPERATING PROCEDURE TO THE REVENUE. LEDGER COPIES RECEVIED FROM ALL THESE PARTIES WERE FILED, ALONG WITH BILLS RECEIVED FROM THEM AND COPIES OF THE ORDER OF THE SITE ENGINEERS CERTIFYING WORK EXECUTED. IT WAS ARGUED THAT THE ASSESSING OFFICER MADE THE ADDITION FOR THE SOLE REASON THAT THE NOTICE U/S 133(6) OF THE ACT, WERE ISSUED TO THESE PARTIES TO VERIFY THE GENUINENESS AND ONLY M/S PURNIMA CONSTRUCTIONS, M/S. NIKHIL ENTERPRISES AND M/S. BRYTEX INDUSTRIES DID NOT RESPOND AS THE NOTICES AND THE SAME GOT RETURNED UNSERVED. THE ASSESSEE THEREAFTER FURNISHED THE CORRECT ADDRESSES OF THESE PARTIES AND NOTICES WERE SERVED AND COMPLIED WITH BY THE PARTIES EXCEPT IN THE CASE OF M/S. NIKHIL ENTERPRISES. IN THE CASE OF M/S. NIKHIL ENTERPRISES, IT WAS PLEADED THAT AFTER THE LAPSE OF TWO YEARS, THE WHEREABOUTS ARE NOT KNOWN ABOUT THAT PARTY AND THE ASSESSEE HAS NOT CONTROL OVER IT. AS REGARDS ALL OTHER PARTIES, THEY HAVE RESPONDED TO THE NOTICE U/S 133(6) OF THE ACT AND HAVE CONFIRMED THE TRANSACTIONS. 6.1. ON THE STATEMENTS RECORDED BY THE ASSESSING OFFICER FROM THE FIVE PARTIES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT WRONG INFERENCES WERE DRAWN BASED ON CERTAIN DISCREPANCIES IN THE STATEMENTS. EVEN OTHERWISE, IT WAS SUBMITTED THAT NO OPPORTUNITY FOR CROSS-EXAMINATION OF THE PARTIES WAS GIVEN TO THE ASSESSEE. HE LISTED OUT THE REASONS CITED OUT BY THE ASSESSING OFFICER FOR THE ABOVE DISALLOWANCES AND CONTROVERTED THE SAME POINT WISE. HE SUBMITTED THAT SIMPLY BECAUSE THESE PARTIES WERE FOUND TO PROVIDE 4 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD ACCOMMODATION ENTRIES TO M/S. SOMA ENTERPRISES AND M/S. NAVYUGA ENGINEERING, WHICH ARE THIRD PARTY INFRASTRUCTURE COMPANIES, IT CANNOT BE STATED THAT SIMILAR BOGUS ACCOMMODATION ENTRIES WERE GIVEN TO THE ASSESSEE. HE RELIED ON A NUMBER OF CASE-LAW AND PRAYED THAT THE DISALLOWANCE BE DELETED. THE LD. D/R, ON THE OTHER HAND, DISPUTED THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE GIVEN VERY DETAILED REASONS AS TO WHY THE PURCHASES IN QUESTION AND THE LABOUR PAYMENTS IN QUESTION WERE TREATED AS BOGUS. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE THE DISALLOWANCE MERELY ON THE BASIS OF INFORMATION SENT BY THE INVESTIGATION WING. HE POINTED OUT THAT THE ACTIVITIES OF THESE PERSONS WERE FLAGGED BY FIU (FINANCIAL INTELLIGENCE UNIT) AND DURING THE COURSE OF SEARCH IN M/S. ARYA GROUP, ONE SHRI PROMOD KUMAR SINGH, ADMITTED THAT HE HAS GIVEN BOGUS ENTRIES THROUGH HIS PROPRIETARY CONCERNS. HE SUBMITTED THAT THE SAME WAS CORROBORATED WITH THE MAHARASHTRA SALES TAX DEPARTMENT, WHICH HAD DECLARED THESE PARTIES AS HAWALA OPERATORS. HE FURTHER POINTED OUT THAT SEARCH AND SEIZURE OPERATION WAS CONDUCTED BY THE DEPARTMENT ON THE PREMISES OF OTHER INFRASTRUCTURE COMPANIES I.E., M/S. SOMA ENTERPRISES AND M/S. NAVYUGA ENGINEERING AND THE DIRECTORS OF BOTH THESE CONCERNS HAVE CONFIRMED THAT THEY HAVE TAKEN ACCOMMODATION ENTRIES FROM THESE OPERATORS. THE LD. CIT D/R, FURTHER SUBMITTED THAT NONE OF THESE PERSONS HAD PRIOR EXPERIENCE OF SUPPLY OF MATERIAL AND LABOUR. THE BANK ACCOUNTS GOT CLOSED WITHIN A SHORT PERIOD. IT WAS FURTHER SUBMITTED PRIOR TO GETTING WORK FROM THE ASSESSEE, THESE PARTIES WERE NOT FILING THEIR RETURNS. HE PRAYED THAT THE ORDER OF THE LD. CIT(A) HAS TO BE UPHELD ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. RIVAL CONTENTIONS HEARD. WE FIND THAT THE ASSESSEE SUBMITTED THE FOLLOWING IN REPLY TO EACH OF THE ALLEGATION/CHARGES OF THE ASSESSING OFFICER. THIS IS EXTRACTED FOR READY REFERENCE:- SL.NO. REASONS STATED BY THE LD. A.O. FOR TREATING THE PURCHASES TO BE BOGUS REPLY OF THE ASSESSEE COMPANY 5 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD 1 SECRET TRANSACTION REPORT (STR) RECEIVED FROM FINANCE INTELLIGENCE UNIT (FIU) BY UNIT-IX, MUMBAI THAT THE SIX PARTIES FROM WHOM THE ASSESSEE HAD MADE PURCHASES ACTED IN CONCERT AND THAT THE BANK ACCOUNTS OF ALL THE PARTIES EXISTED IN THE SAME BANK I.E. ICICI BANK, BANDRA KURLA COMPLEX BRANCH, MUMBAI AND ALL OF THEM WERE HAVING HIGH VALUE FREQUENT DEPOSITS FROM THE ASSESSEE. THEREAFTER, THERE WERE MULTIPLE CASH WITHDRAWALS AND TRANSFER OF FUNDS BY THESE SIX PARTIES TO THE PARTIES NAMELY SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION, SURAJ TUBE CORPORATION, CHANCHAL TUBE CORPORATION, ROLLEX CONSTRUCTION, UNIQUE CONSTRUCTION, STAR CONSTRUCTION, INSHA CONSTRUCTION, JAYANT CONSTRUCTION, CHANDAN ENTERPRISES, J K STEELS PURSUANT TO DEPOSITS RECEIVED BY THEM FROM THE ASSESSEE. IN THIS CONNECTION IT IS SUBMITTED THAT THE SIS PARTIES FROM WHOM THE ASSESSEE HAD PURCHASED MATERIALS AND LABOUR ACTED IN CONCERT CANNOT BE A REASON TO HOLD THE PURCHASES FROM THEM AS BOGUS. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE ON REQUIREMENT OF MATERIALS AND LABOUR AT ITS VARIOUS CONSTRUCTION SITES PLACED ORDERS THROUGH PURCHASE ORDERS (PURCHASE ORDERS ARE ENCLOSED AT PAGES 1-53 OF THE PAPERBOOK) AND THE SIX PARTIES PROVIDED REQUIRED MATERIALS AND LABOUR AT THE CONSTRUCTION SITES, PURSUANT TO WHICH THEIR PAYMENTS WERE MADE BY THE ASSESSEE THROUGH PROPER BANKING CHANNELS (COPY OF BANK STATEMENTS ARE ENCLOSED AT PAGES 1- 04, 11-12, 23-24, 32-36, 44 OF THE PAPERBOOK ). THUS THERE WERE HIGH VALUE FREQUENT DEPOSITS MADE BY THE ASSESSEE IN THE ACCOUNTS OF THOSE SIX PARTIES FOR PROVIDING MATERIAL AND LABOUR REGULARLY AT ITS CONSTRUCTION SITES. FURTHER IT NEEDS TO BE NOTED THAT WHETHER THESE SIX PARTIES ACTED IN CONCERT WITH EACH OTHER IN ORDER TO SUPPLY MATERIALS AND LABOUR TO THE ASSESSEE OR FOR ANY OTHER PURPOSE, IS NOT THE ASSESSEES LOOKOUT. AS LONG AS THE ASSESSEE GOT DELIVERY OF THE REQUIRED MATERIALS AND LABOUR FROM THE SAID PARTIES AND MADE THEIR DUE PAYMENTS FOR PROVIDING THE SAME, THE ASSESSEES OBLIGATION TOWARDS THOSE PARTIES ENDED. THEREAFTER NO LIABILITY CAN BE FASTENED ON THE ASSESSEE IN CONSEQUENCE TO ANY ACTION OF THOSE SIX PARTIES. IT IS COMMON KNOWLEDGE THAT IN ANY BUSINESS IF A SELLER/SUPPLIER HAS SHORTAGE OF A PARTICULAR MATERIAL AT A PARTICULAR TIME THEN THEY PROCURE IT FROM OTHER KNOWN SUPPLIERS/SELLERS AND SUPPLY TO THE BUYER. THEREFORE, THE ALLEGATION THAT THEY ACTED IN CONCERT TO SUPPLY MATERIAL AND LABOUR TO THE ASSESSEE HAS NO RELEVANCE. FURTHER, THE FACT THAT THE BANK ACCOUNTS OF THOSE SIX PARTIES WERE SITUATED IN A COMMON BRANCH OF THE SAME BANK CANNOT BE A REASON TO SUSPECT THE ASSESSEES GENUINE PURCHASES SINCE THE ASSESSEE MADE PURCHASES FROM THE SAID SIX PARTIES AND IN RETURN MADE PAYMENTS TO THEM BY DEPOSITING THE FUNDS AT THEIR BANK ACCOUNTS, AS PER THE BANK ACCOUNT DETAILS PROVIDED BY THE SAID SIX PARTIES. 6 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THEREAFTER IT WAS NOT THE ASSESSEES DUTY TO FIND OUT IF AND WHETHER THE PARTIES FROM WHOM IT HAS BEEN MAKING PURCHASES WERE ACTING IN CONCERT OR THEIR BANK ACCOUNTS ARE LOCATED IN A COMMON BRANCH OF THE SAME BANK OR TO WHO ELSE THEY WERE TRANSFERRING THE FUNDS SINCE THE ASSESSEES OBLIGATION TOWARDS THOSE SIX PARTIES ENDED WITH MAKING THEIR DUE PAYMENTS FOR PROVIDING MATERIALS AND LABOUR TO IT. ANYHOW, IT IS NOT SURPRISING IF BUSINESSES LOCATED IN ONE AREA OF A CITY HAVE BANK ACCOUNTS IN A COMMON BANK LOCATED IN THAT AREA. 2 IN CASE OF SEARCH IN ONE ARYA GOUP , A PERSON NAMED SRI PRAMOD KUMAR SINGHS STATEMENT WAS RECORDED WHO HAPPENED TO BE THE PROPRIETOR OF THE FIRST FOUR CONCERNS TO WHOM THE SIX PARTIES (FROM WHOM THE ASSESSEE HAD MADE PURCHASES) TRANSFERRED FUNDS I.E. SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION, SURAJ TUBE CORPORATION, CHANCHAL TUBE CORPORATION . IN THE SAID STATEMENT, THE PERSON ADMITTED OF PROVIDING ACCOMMODATION/BOGUS BILLS WHEREIN MONEY RECEIVED BY HIM FROM PARTIES IN GARB OF PURCHASES WERE RETURNED BACK TO THEM AFTER DEDUCTING HIS COMMISSION. IN THIS REGARD IT IS SUBMITTED THAT WHATEVER WAS POSSIBLE ON THE PART OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND PAYMENTS MADE TO THE SIX PARTIES WAS DONE BY THE ASSESSEE COMPANY. IT ALSO NEEDS TO BE NOTED BOTH THE ASSESSEE AND THE SUPPLIERS OF THE ASSESSEE COMPANY CO-OPERATED WITH THE DEPARTMENT. MERELY ON THE BASIS OF A THIRD PARTY STATEMENT WHO HAS NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE. A.O. DREW INFERENCE THAT THE TRANSACTIONS WITH THE SAID PARTIES ARE BOGUS AND IN GENUINE. 3 FURTHER, THE MAHARASHTRA SALES TAX DEPARTMENT DECLARED THE FOUR PARTIES I.E. SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION, SURAJ TUBE CORPORATION, CHANCHAL TUBE CORPORATION TO BE HAWALA PARTIES . IN THIS REGARD IT IS SUBMITTED THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE FOUR PARTIES NAMELY SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION, SURAJ TUBE CORPORATION, CHANCHAL TUBE CORPORATION, BEING DECLARED HAWALA BY THE MAHARASHTRA SALES TAX DEPARTMENT CANNOT BE A BASIS FOR DECLARING THE ASSESSEES PURCHASES AS BOGUS SINCE THE PURCHASES WERE NOT MADE BY THE ASSESSEE FROM THESE FOUR PARTIES. MOREOVER, THOUGH IT DOES NOT EFFECT OR CONCERN THE ASSESSEE IN ANY WAY, IT WOULD LIKE TO SUBMIT THAT THE FACT THAT THESE PARTIES WERE DECLARED AS HAWALA PARTIES IS AN OBSERVATION/DECLARATION OF A THIRD PARTY, I.E. THE MAHARASHTRA SALES TAX DEPARTMENT, WHICH CANNOT BE THE SOLE BASIS FOR HOLDING ANY TRANSACTIONS AS BOGUS. 4 IN CASE OF SEARCH IN ONE SOMA ENTERPRISES AND NAVYUGA ENGINEERING OF HYDERABAD, BOTH THE IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE MADE PAYMENTS TO THE SIX PARTIES FOR SUPPLY OF MATERIALS AND SUB CONTRACT OF LABOUR PROVIDED AT ITS VARIOUS 7 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD CONCERNS ADMITTED TO TAKING ACCOMMODATION ENTRIES FROM THE SIX PARTIES, FROM WHOM THE ASSESSEE PURCHASED LABOUR AND MATERIALS DURING THE RELEVANT A.Y. SITES. ALL THE PAYMENTS FOR SUCH PURCHASES WERE BACKED BY RELEVANT DOCUMENTS. THE SAID TWO PARTIES HAVING ADMITTED TO TAKING ACCOMMODATION ENTRIES FROM THE SAID SIX PARTIES IS ALTOGETHER A SEPARATE TRANSACTION, DISTINCT FROM THAT OF THE ASSESSEE WITH THE SAID SIX PARTIES. THEREAFTER, IF THE SAID SUPPLIERS AND SUB-CONTRACTORS WERE ALSO ENGAGED IN PROVIDING ACCOMMODATION BILLS TO SOME OTHER PARTIES, IT CANNOT HAVE A BINDING ON THE GENUINE PURCHASE MADE BY THE ASSESSEE COMPANY FROM THE SAID SIX PARTIES. 5 SOME DISCREET ENQUIRIES CONDUCTED BY INVESTIGATION WING OF MUMBAI REVEALED THAT ADDRESSES OF THE SIX PARTIES WITH WHOM ASSESSEE HAD TRANSACTED WERE LOCATED IN CHAWL/RESIDENTIAL PREMISES AND HAD NO GENUINE BUSINESS CARRIED OUT FROM THOSE PREMISES IN THIS RESPECT, THE ASSESSEE WOULD LIKE TO FIRSTLY REITERATE THAT IT IS NOT CONCERNED WITH WHERE THE PARTIES, FROM WHOM IT HAD MADE PURCHASES, WERE SITUATED. THE ASSESSEES ONLY CONCERN WAS WHETHER ON PLACEMENT OF ORDER FOR MATERIALS AND LABOUR BEFORE THE SAID SIX PARTIES, THE SAME WERE SUPPLIED AS PER ITS REQUIREMENTS. THE SIX PARTIES HAD SUPPLIED MATERIALS AND LABOUR AS PER THE ASSESSEES REQUIREMENTS AT ITS CONSTRUCTION SITES PROPERLY AND THE ASSESSEE MADE PAYMENTS FOR THE SAME. FURTHERMORE NOTHING PREVENTS A PERSON FROM CARRYING ON A BUSINESS FROM AN OFFICE LOCATED IN A CHAWL. A NUMBER OF BUSINESSES ARE CARRIED OUT FROM SUCH LOCATIONS AND SIMPLY BECAUSE THEY ARE LOCATED IN CHAWLS CANNOT LEAD TO A CONCLUSION THAT THEY ARE NON-EXISTENT. FURTHERMORE, NO SUCH REPORT OR BASIS FOR SUCH REPORT WAS EVER SUPPLIED TO THE ASSESSEE AND THEREFORE SIMPLY A BALD STATEMENT OF THE LD. AO CANNOT BE THE BASIS FOR DRAWING ADVERSE INFERENCE. 6 . ALL THE BANK ACCOUNTS OF THE SIX PARTIES WERE OPENED IN A COMMON BRANCH OF THE SAME BANK, I.E. ICICI BANK AT BANDRA KURLA COMPLEX, MUMBAI AND HAVE BEEN USED BY THE SAID SIX PARTIES FOR RECEIVING FUNDS FROM THE ASSESSEE AND OTHER PARTIES WHO HAVE TAKEN ACCOMMODATION BILLS. IT WAS FURTHER OBSERVED BY THE LD. AO THAT THE ACCOUNTS WERE OPENED FROM ADDRESSES LOCATED IN KURLA (WEST) WHICH ARE IN CLOSE VICINITY TO ONE ANOTHER. IN THIS REGARD THE ASSESSEE SUBMITTED THAT IT IS NOT THE ASSESSEES RESPONSIBILITY/OBLIGATION TO INVESTIGATE AS TO WHERE AND WHY THE BANK ACCOUNTS OF ITS SUPPLIERS ARE SITUATED OR FOR WHAT OTHER PURPOSES THE BANK ACCOUNTS HAVE BEEN USED BY THE SUPPLIERS (APART FROM RECEIVING PAYMENTS FROM THE ASSESSEE). THE ASSESSEE WHILE PLACING ORDERS WITH THE SIX PARTIES FOR SUPPLY OF MATERIALS AND LABOUR CONTRACTS WERE PROVIDED WITH THEIR RESPECTIVE BANK ACCOUNTS FOR THE PURPOSE OF MAKING PAYMENT. THEREAFTER, THE ASSESSEE WAS NOT CONCERNED ABOUT HOW AND FOR WHAT OTHER PURPOSE THE SIX PARTIES WERE USING THEIR BANK ACCOUNTS. ALSO, EVEN FOR THE SAKE OF ARGUMENT IF IT IS ACCEPTED THAT THE SAID SIX PARTIES WERE PROVIDING ACCOMMODATION ENTRIES AND HENCE RECEIVED PAYMENTS FROM SEVERAL PARTIES, IT CANNOT BE SAID THAT THE DEPOSITS RECEIVED BY THEM FROM THE ASSESSEE FOR LABOUR CONTRACT AND SUPPLY OF MATERIALS WERE BOGUS AS THE SAID PURCHASES ARE BACKED BY RELEVANT DOCUMENTS. 8 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD FURTHER THE FACT THAT THE ACCOUNTS OF THE SIX PARTIES WERE OPENED FROM ADDRESSES LOCATED IN KURLA (WEST), WHICH ARE IN CLOSE VICINITY TO ONE ANOTHER CANNOT BE A BASIS TO DOUBT THE PURCHASES MADE BY THE ASSESSEE. THOUGH, IT IS NOT THE ASSESSEES LOOKOUT AS TO IN WHICH BRANCH OF A PARTICULAR BANK, ITS SUPPLIERS AND CONTRACTORS BANK ACCOUNTS RESTED BUT STILL THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE BANK WHERE THE BANK ACCOUNTS OF THE SIX PARTIES EXISTED WAS ICICI BANK, BANDRA KURLA COMPLEX, MUMBAI AND THEIR ADDRESSES INDICATE THAT THEY WERE SITUATED IN KURLA (WEST) MUMBAI WHICH SUBSTANTIATES THE FACT THAT THE BANK ACCOUNTS WERE OPENED BY THE SIX PARTIES IN A BANK CLOSE TO THEIR LOCATION WHICH IS LOGICAL AND RATHER SUPPORTS A POSITIVE REASON FOR OPENING THE BANK ACCOUNT IN THE SAME BANK. 7 THAT THE SIX PARTIES, APART FROM RECEIVING FUNDS FROM THE ASSESSEE HAVE ALSO RECEIVED FUNDS FROM SOMA ENTERPRISES AND NAVYUGA ENGINEERING OF HYDERABAD, WHO AGAIN HAVE ADMITTED TO TAKING ACCOMMODATION ENTRIES FROM THE SAID SIX PARTIES. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE MADE PAYMENTS TO THE SIX PARTIES FOR SUPPLY OF MATERIALS AND SUB CONTRACT OF LABOUR PROVIDED AT ITS VARIOUS SITES. ALL THE PAYMENTS FOR SUCH PURCHASES WERE BACKED BY RELEVANT DOCUMENTS. THE SAID TWO PARTIES HAVING ADMITTED TO TAKING ACCOMMODATION ENTRIES FROM THE SAID SIX PARTIES IS ALTOGETHER A SEPARATE TRANSACTION, DISTINCT FROM THAT OF THE ASSESSEE WITH THE SAID SIX PARTIES. THEREAFTER, IF THE SAID SUPPLIERS AND SUB-CONTRACTORS WERE ALSO ENGAGED IN PROVIDING ACCOMMODATION BILLS TO SOME OTHER PARTIES, IT CANNOT HAVE A BINDING ON THE GENUINE PURCHASE MADE BY THE ASSESSEE COMPANY FROM THE SAID SIX PARTIES 8 THAT A COMMON MODUS OPERANDI WAS FOLLOWED BY THE SIX PARTIES IN CASE OF HANDLING FUNDS RECEIVED FROM THE ASSESSEE, SOMA ENTERPRISES AND NAVYUGA ENGINEERING WHEREIN CHEQUES WERE ISSUED BY THE ASSESSEE, SOMA ENTERPRISES AND NAVYUGA ENGINEERING TO ONE OF THE SAID SIX PARTIES (NIKHIL ENTERPRISES) AND THEREAFTER NIKHIL ENTERPRISES WITHDREW CASH BELOW RS.10,00,000 AND TRANSFERRED THE BALANCE TO JAYANT CONSTRUCTION WHO AGAIN TRANSFERRED THE BALANCE FUND TO PURNIMA CONSTRUCTION, BRYTEX INDUSTRIES, ALFI BUILDERS AND CONTRACTORS. THUS, FUNDS RECEIVED FROM THE CLIENTS HAD BEEN ROUTED THROUGH A WEB OF BANK ACCOUNTS BELONGING TO THE IN THIS REGARD, THE ASSESSEE WOULD LIKE TO SUBMIT THAT ASSESSEE IS/WAS NOT AWARE OF HOW FUNDS RECEIVED BY THE SIX PARTIES FROM THEIR CLIENTS WERE HANDLED. INFACT, THE ASSESSEE WAS NOT SUPPOSED TO BE AWARE OF HOW FUNDS RECEIVED BY ITS SUPPLIERS FROM ITSELF OR SOME OTHER PARTIES WERE HANDLED. IT WAS SUPPOSED TO MAKE PAYMENTS IN RETURN OF SUPPLY OF MATERIALS AND LABOUR, WHICH IT HAD ACCOMPLISHED SUCCESSFULLY. THEREAFTER, THE ASSESSEE WAS UNDER NO OBLIGATION TO KEEP KNOWLEDGE/TRACK ABOUT THE FURTHER TREATMENT OR MOVEMENT OF THOSE PAYMENTS MADE BY IT. FURTHER, ALTHOUGH IT DOES NOT AFFECT THE ASSESSEES PURCHASES IN ANY WAY BUT STILL THE ASSESSEE WOULD LIKE TO MENTION THAT THE PROPRIETORS OF THE FIVE CONCERNS (OUT OF THE SIX), IN THEIR STATEMENTS GIVEN 9 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD SIX PARTIES AND THE PARTIES MENTIONED ABOVE I.E. (SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION AND THE REST) AND AT THE TRAILING END CASH HAD BEEN WITHDRAWN BY THE ASSESSEE. U/S 131 OF THE INCOME TAX ACT, 1961 ( ENCLOSED AT PAGES 106 TO 150 OF THE PAPER BOOK) HAVE MENTIONED THAT THEY KNEW EACH OTHER AND TRANSFERRED FUNDS TO EACH OTHER SOMETIMES ON TEMPORARY BASIS BECAUSE OF MUTUAL RELATIONS AND ALSO HIRED LABOUR FROM EACH OTHER WHEN REQUIRED, IN RETURN OF DUE PAYMENT. THEY WOULD ALSO TAKE SUPPLY OF LABOUR FROM OTHER PARTIES TO SUPPLY TO THE ASSESSEE OR OTHER CLIENTS IN RETURN OF DUE PAYMENT TO THEM. THUS PAYMENT BY THE SAID PARTIES TO EACH OTHER OR OTHER PARTIES CAN BE BECAUSE OF ANY OF THE SAID REASONS. IT DEFINITELY DOES NOT IMPLY OR PROVE THAT THE ASSESSEE HAD BEEN TRANSFERRING FUNDS TO THE SIX PARTIES FOR ROUTING THE SAME THROUGH A WEB OF BANK ACCOUNTS AND RECEIVE THE FUNDS BACK AGAIN BY INFLATING EXPENSES IN THE GARB OF PURCHASES ESPECIALLY, WHEN ITS PURCHASES ARE BACKED BY DOCUMENTARY DETAILS. 9 THE PROPRIETORS IN THEIR STATEMENTS GIVEN U/S 131 OF THE INCOME TAX ACT, 1961 STATED THAT THEY HAD SUPPLIED LABOURERS AT THE ASSESSEES VARIOUS PROJECT SITES LOCATED AT FAR OFF PLACES LIKE SURAT, GWALIOR, IMPHAL, UTTAR PRADESH, GUJARAT, RANCHI, CHANDIGARH AND VARIOUS SITES IN MAHARASHTRA, KUDANKULAM IN TAMIL NADU ETC AND THAT CASH FOR PAYING THESE LABOURERS AT VARIOUS SITES WERE CARRIED PERSONALLY BY THE PROPRIETORS BY TRAIN OR BUS DAILY AND THAT THE SAME IS NOT FEASIBLE CONSIDERING THE GEOGRAPHICAL LOCATION OF THESE PLACES AS IT IS UNLIKELY HOW HUGE CASH WOULD GET TRANSFERRED TO SUCH FAR-FLUNG OFF PLACES ALL OVER THE COUNTRY. IN THIS REGARD, THE ASSESSEE WOULD LIKE TO SUBMIT THAT CASH FOR MAKING PAYMENTS AT FAR OFF PLACES LIKE SURAT, GWALIOR, IMPHAL, UTTAR PRADESH, GUJARAT, RANCHI, CHANDIGARH AND VARIOUS SITES IN MAHARASHTRA, KUDANKULAM IN TAMIL NADU IS NOT DIFFICULT TO BE CARRIED BY THE SAID PROPRIETORS OR THEIR EMPLOYEES FROM MUMBAI BY TRAIN SINCE MUMBAI IS ONE OF THE PRIME METROPOLITAN CITIES AND THE BUSINESS HUB OF INDIA AND THUS IS VERY WELL CONNECTED BY TRAIN ROUTES TO FAR OFF PLACES ALL OVER THE COUNTRY. IT MUST BE NOTED THAT THE LD. AO AS PER THE STATEMENTS OF THE FIVE PARTIES, HAS MADE A COMMON OBSERVATION REGARDING CARRYING OF CASH TO THE ABOVEMENTIONED LOCATIONS. HEREIN, IT NEEDS TO BE CLARIFIED THAT IT WAS NOT THE ASSESSEES CASE THAT ONE PERSON PERSONALLY CARRIED CASH FROM MUMBAI TO ALL THE ABOVE MENTIONED LOCATIONS AT THE SAME TIME (AS POINTED OUT BY THE LD. AO, WHICH IS APPARENTLY IMPOSSIBLE). AS AND WHEN PROJECTS AT THE RESPECTIVE SITES (MENTIONED ABOVE) WERE IN PROCESS, THE PROPRIETOR WHOSE CONCERN HAD UNDERTAKEN SUPPLY OF LABOUR OR MATERIAL AT THE CONCERNED SITE, CARRIED CASH TO THE SAID SITE. PROJECTS WERE NOT GOING ON AT ALL THE ABOVEMENTIONED PLACES AT THE SAME TIME WHEREIN ONE PARTY OUT OF THE SIX PARTIES HAD UNDERTAKEN THE JOB OF SUPPLYING LABOUR/MATERIAL AND THUS WOULD NOT BE ABLE TO COPE UP. THUS, AS AND WHEN WORK WAS IN PROGRESS AT ANY OF THE ABOVE MENTIONED PROJECT SITES, THE CONCERNED PARTY (OUT OF 10 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THE SIX PARTIES) IN CHARGE OF SUPPLYING MATERIALS/LABOUR CARRIED CASH TO THE RESPECTIVE SITE. THEREFORE CASH WAS NOT REQUIRED TO BE CARRIED TO ALL THE ABOVE MENTIONED PLACES AT THE SAME TIME BY ONE SINGLE PERSON WHICH DEFINITELY IS NOT FEASIBLE. ABOVE ALL, IT IS NOT THE ASSESSEES LIABILITY AS TO HOW CASH PAYMENT IS TRANSFERRED TO LABOURERS WORKING AT THE PROJECT SITES BY THE SAID SUPPLIERS/SUBCONTRACTORS AS LONG AS THE ASSESSEES REQUIREMENT OF MATERIALS/LABOUR AT ITS PROJECT SITE IS SUPPLIED AND THE ASSESSEE MAKES DUE PAYMENT IN RETURN. THEREFORE, OBSERVATION BY THE LD. AO ON THIS ACCOUNT CANNOT BE A BASIS TO FASTEN LIABILITY ON THE ASSESSEE OF HAVING MADE BOGUS PURCHASES. 10 THE LD. AO ALLEGED THAT THE ASSESSEE BEING A COMPANY WITH A TURNOVER EXCEEDING RS.5,500 CRORE, WOULD HAVE A COMPLETELY PROFESSIONAL SYSTEM OF HIRING LABOUR CONTRACTORS AND SUPPLIERS OF MATERIAL FOR QUALITY CONSTRUCTION AND WOULD NOT APPOINT LABOUR CONTRACTORS WHO ARE INDIVIDUALS LOCATED ONLY IN MUMBAI FOR THE PURPOSE OF SUPPLYING AT ITS VARIOUS SITES, ALL OVER THE COUNTRY. IN THIS REGARD, THE ASSESSEE WOULD LIKE TO SUBMIT THAT IT HAVING A PROFESSIONAL SYSTEM OF HIRING LABOUR CONTRACTORS AND SUPPLIERS OF MATERIAL FOR QUALITY CONSTRUCTION DOES NOT CEASE TO EXIST IF SUCH SUPPLIERS/LABOUR CONTRACTORS ARE INDIVIDUALS. THERE ARE NO SET OF RULES/GUIDELINES TO DETERMINE THE PROFESSIONAL SYSTEM OF HIRING LABOUR CONTRACTORS OR SUPPLIERS OF MATERIALS WHICH THE ASSESSEE DID NOT ABIDE BY. FURTHER, THE ASSESSEE WOULD LIKE TO INVITE YOUR GOODSELFS ATTENTION TO THE FACT THAT GOVERNMENT COMPANIES LIKE SAIL, ROURKELA STEEL PLANT AND BHILAI STEEL PLANT HAD GIVEN SUB CONTRACT OF LABOUR TO ONE OF THESE INDIVIDUALS, SHRI HABIBULLAH UMARATI SAYED OF NOVA CONSTRUCTION WHICH IS EVIDENT FROM THE STATEMENT GIVEN BY HIM U/S 131 OF THE INCOME TAX ACT, 1961 ( ENCLOSED AT PAGES 106 TO 114 OF THE PAPER BOOK ). THUS, GOVERNMENT COMPANIES ENTRUSTING THE SAID PARTIES WITH LABOUR CONTRACT AND MATERIAL SUPPLY ASSIGNMENTS FURTHER CORROBORATE THE FACT THAT THE ASSESSEE HAVING GIVEN LABOUR CONTRACTS AND SUPPLY OF MATERIALS TO INDIVIDUALS WAS NOT ACTING UNPROFESSIONALLY. 11 THE LD. AO POINTED OUT THAT AS PER THE BANK STATEMENTS OF THE SAID SIX PARTIES, CASH WITHDRAWALS HAD TAKEN PLACE AT THEIR END EITHER ON THE SAME DAY OR FOLLOWING DAY ON RECEIPT OF HIGH VALUE CHEQUES FROM THE ASSESSEE OR SOMA ENTERPRISES OR NAVYUGA ENGINEERING WHICH DOES NOT CORRESPOND TO THE FACT IN THIS REGARD, THE ASSESSEE WOULD LIKE TO SUBMIT THAT PAYMENTS WERE MADE BY THE ASSESSEE TO THE SUPPLIERS/LABOUR CONTRACTORS AS AND WHEN REQUIREMENT FOR MATERIALS AND LABOUR AROSE AT ITS VARIOUS CONSTRUCTION SITES AND THE SAME WERE PROVIDED BY THE SUPPLIERS/LABOUR CONTRACTORS. THEREAFTER, WHEN THE PAYMENTS MADE BY THE ASSESSEE TO THE SUPPLIERS/LABOUR CONTRACTORS WERE 11 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THAT IF A LABOURER AT SHILLONG IS REQUIRED TO BE PAID, THEN WHAT WAS THE NECESSITY TO WITHDRAW CASH ON THE SAME OR NEXT DAY BY ROUTING FUNDS RECEIVED FROM THE ASSESSEE THROUGH VARIOUS BANK ACCOUNTS. IT ONLY IMPLIED THAT THE ASSESSEE NEEDED TO INFLATE EXPENSES, INSTEAD OF MAKING PAYMENTS FOR BUSINESS PURPOSE. WITHDRAWN BY THEM AND IN WHAT FREQUENCY OR THE AMOUNT OF SUCH WITHDRAWAL EACH TIME IS UNKNOWN TO THE ASSESSEE AND ALSO NOT THE ASSESSEES LOOKOUT. FURTHER, HOW THE MONEY RECEIVED BY THE SIX PARTIES AS PAYMENT FOR SUPPLY OF MATERIALS AND LABOUR WERE WITHDRAWN AND CARRIED OFF TO A CONCERNED SITE WAS NOT THE ASSESSEES CONCERN. 12 THE LD. AO FURTHER RAISED SUSPICION REGARDING THE NECESSITY OF THE SIX PARTIES TO WITHDRAW CASH ON THE SAME DAY WHEN THE FUNDS WERE TRANSFERRED BY THE ASSESSEE AND THAT COMPRISING OF AMOUNTS BELOW RS.10,00,000/- AND NOT RS.10,00,000/- OR ABOVE. IN THIS REGARD, ONCE AGAIN THE ASSESSEE WOULD LIKE TO SUBMIT THAT POST PAYMENT MADE BY IT TO THE LABOUR CONTRACTORS AND MATERIAL SUPPLIERS FOR SUPPLY OF LABOUR AND MATERIAL AT ITS CONSTRUCTION SITES, IT WAS NOT THE ASSESSEES CONCERN OR DUTY TO KEEP A TRACK AS TO THE AMOUNT OF MONEY WITHDRAWN BY THE SAID CONTRACTORS AND SUPPLIERS. THE SAID CONTRACTORS AND SUPPLIERS HAVING WITHDRAWN AMOUNTS BELOW RS.10,00,000/- THUS, DOES NOT CONCERN THE ASSESSEE IN ANY WAY SINCE POST PAYMENT IT IS THEIR MONEY AND WHEN AND HOW SUCH MONEY IS TO BE WITHDRAWN AND ITS FURTHER UTILIZATION IS NOT THE ASSESSEES DOMAIN. IT IS ALSO NOT CLEAR AS TO WHAT WAS THE REASON OF THE BENCHMARKING OF RS.10 LAKHS BY THE LD. AO SINCE UNDER INCOME TAX ACT, NO SUCH BENCHMARKING PREVAILS. 13 THE LD. AO HELD THAT THE SAID SIX PARTIES KNEW EACH OTHER AND THE HIGH FREQUENCIES OF CHEQUE MOVEMENT AMONGST THEMSELVES THROUGH THEIR RESPECTIVE BANK ACCOUNTS PROVE THAT THEY WERE ACTING IN CONCERT TO PROVIDE ACCOMMODATION ENTRIES TO THE ASSESSEE FOR INFLATING ITS EXPENSES. IN RESPONSE TO THE ABOVE OBSERVATION OF THE LD. AO, THE ASSESSEE WOULD LIKE TO SUBMIT THAT MATERIALS AND LABOUR WERE SUPPLIED BY EACH OF THE SIX PARTIES TO THE ASSESSEE, INDIVIDUALLY, AS AND WHEN REQUIREMENT AROSE AND PAYMENTS WERE ALSO MADE BY THE ASSESSEE TO THEM INDIVIDUALLY. THEREFORE, THE SIX PARTIES KNOWING EACH OTHER OR THERE BEING HIGH FREQUENCIES OF CHEQUE MOVEMENT AMONG THEMSELVES DOES NOT HAVE A BEARING ON THE PURCHASES MADE BY THE ASSESSEE FROM EACH OF THEM AND THE SUBSEQUENT PAYMENTS MADE TO EACH OF THEM, INDIVIDUALLY. 14 THE LD. AO HAS ALSO ALLEGED THAT THE PROPRIETOR OF PURNIMA CONSTRUCTION STATED THAT HE WOULD PRODUCE THE BOOKS OF ACCOUNT AT A LATER DATE AND HAS FAILED TO DO SO BUT HAS SUBMITTED COPY OF THE ASSESSMENT ORDER PASSED IN HIS CASE FOR A.Y. 2010-11 IN WHICH THE ASSESSING OFFICER HAD DOUBTED THE GENUINENESS OF LABOUR CHARGE AND IN THIS REGARD THE ASSESSEE WOULD LIKE TO SUBMIT THAT IF GENUINENESS OF LABOUR CHARGE AND WAGES IN CASE OF PURNIMA CONSTRUCTION HAS BEEN DOUBTED BY THE CONCERNED ASSESSING OFFICER WHILE FRAMING HIS ASSESSMENT ORDER, THE SAME WOULD GIVE RISE TO A LIABILITY IN PURNIMA CONSTRUCTIONS CASE AND NOT THE ASSESSEES. THE ASSESSEE HAD NOT MADE ANY PAYMENT OF LABOUR WAGES BUT HAS MADE PAYMENT OF LABOUR SUB CONTRACT EXPENSES. THE WAGE PAYMENT WAS PURNIMA CONSTRUCTIONS OBLIGATION AND NOT THE 12 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD WAGES. ASSESSEES. FURTHER, WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE WOULD LIKE TO SUBMIT THAT GENUINENESS OF LABOUR CHARGE AND WAGES WERE DOUBTED IN PURNIMA CONSTRUCTIONS CASE FOR THE A.Y. 2010-11 AND THE ASSESSEES CASE CONCERNS A.Y. 2011-12. 15 THE LD. AO HAS ALSO ALLEGED THAT ON VERIFICATION OF SUPREME CONSTRUCTIONS ASSESSMENT ORDER, HE FOUND THAT THE CONCERNED ASSESSING OFFICER HAD ALLEGED MONTH-WISE UTILIZATION OF CASH, PARTY WISE DEDUCTION OF TDS IN RESPONSE TO WHICH THE PROPRIETOR EXPLAINED THAT SINCE ALL PAYMENTS WERE MADE IN CASH ON DAILY BASIS AND LABOURERS WERE NOT WORKING CONTINUOUSLY FOR HIM, THEREFORE NO TDS WAS DEDUCTED IN RESPECT OF THOSE PAYMENTS. IN THIS REGARD THE ASSESSEE SUBMITTED THAT DOUBTS RAISED BY THE LD. AO IN CONNECTION TO THE ASSESSMENT ORDER OF SUPREME CONSTRUCTION AND THE STATEMENT GIVEN BY ITS PROPRIETOR OR THE ACTIVITIES CONDUCTED BY IT CANNOT BE LINKED TO THE PURCHASE OF LABOUR AND MATERIALS MADE BY THE ASSESSEE FROM SUPREME CONSTRUCTION. WHETHER AND HOW THE PROPRIETOR OF SUPREME CONSTRUCTION PAID WAGES, HOW AND WHEN IT EMPLOYED LABOURERS, HOW MANY AMONG THEM WERE PERMANENT ETC DOES NOT HAVE ANY NEXUS WITH THE ASSESSEE GIVING SUB CONTRACT OF LABOUR TO SUPREME CONSTRUCTION AND MAKING PAYMENT TO IT FOR THE SAME. THE SAID ACTIVITIES DOES NOT CONCERN THE PAYMENTS MADE BY THE ASSESSEE FOR GIVING SUB CONTRACT OF LABOUR TO SUPREME CONSTRUCTION IN ANY WAY. FURTHER, WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE LD. AO HAS RAISED A DOUBT REGARDING CONTRADICTION IN SUPREME CONSTRUCTIONS PROPRIETORS STATEMENT REGARDING PAYMENT OF LABOUR WAGES IN THE F.Y. 2009-10 WHEREAS THE INSTANT CASE OF THE APPEAL IS CONCERNING THE A.Y. 2011-12. HENCE, THE SAME CANNOT BE LINKED WITH THE ASSESSEES PURCHASES MADE IN THE RELEVANT A.Y. THE RELEVANT DOCUMENTS SUPPORTING SUCH PURCHASE FROM SUPREME CONSTRUCTION IS ENCLOSED AT PAGES 11 TO 22 OF THE PAPER BOOK. 16. THE LD. AO ALLEGED THAT THERE HAS BEEN CONTRADICTIONS IN THE STATEMENT GIVEN BY THE PROPRIETOR OF BRYTEX INDUSTRIES U/S 131 OF THE INCOME TAX ACT, 1916 AND THE REPRESENTATION MADE BY HIM BEFORE THE AO AT THE TIME OF COMPLETING HIS ASSESSMENT FOR THE A.Y. 2010-11 SINCE BEFORE THE AO HE SUBMITTED THAT THE ENTIRE WAGE EXPENDITURE WAS PAID BY HIM IN CASH WHEREAS AT THE TIME OF GIVING STATEMENT HE MENTIONED THAT HE WAS TRADING IN MATERIALS UNDER THE IN THIS REGARD, FIRSTLY THE ASSESSEE WOULD LIKE TO SUBMIT THAT BRYTEX INDUSTRIES PROPRIETORS REPRESENTATION BEFORE THE AO WAS WITH RESPECT TO HIS ASSESSMENT FOR THE A.Y. 2010-11 AND THE STATEMENT GIVEN BY HIM U/S 131 OF THE ACT WAS WITH RESPECT TO THE ASSESSEES CASE CONCERNING A.Y. 2012-13 AND HENCE THERE BEING TWO SEPARATE A.Y.S IN CONSIDERATION, THERE CANNOT BE ANY CONTRADICTION IN REPRESENTATION FOR THE TWO A.Y.S AS FACTS AND SITUATION MIGHT BE DIFFERENT FOR TWO DIFFERENT A.Y.S. THUS, SUCH CONTRADICTION CANNOT BE ATTRIBUTED TO 13 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD NAME BRYTEX INDUSTRIES AND IN MATERIALS UNDER THE NAME INSHA CONSTRUCTION (ANOTHER OF HIS PROPRIETORSHIP CONCERNS) AND THAT HE MADE PURCHASES IN CASH AND THROUGH CHEQUE FROM THE OTHER FIVE PARTIES OUT OF THE SIX PARTIES AND ALSO FROM THE CONCERNS NAMELY, SIDDHI VINAYAK STEEL, ASIAN STEEL CORPORATION, SURAJ TUBE CORPORATION, CHANCHAL TUBE CORPORATION, ROLLEX CONSTRUCTION, UNIQUE CONSTRUCTION, STAR CONSTRUCTION, INSHA CONSTRUCTION, JAYANT CONSTRUCTION, CHANDAN ENTERPRISES, J K STEELS. ALLEGING THE ASSESSEES GENUINE PURCHASES AS BOGUS. THEREAFTER, THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE ASSESSEE IS NOT CONCERNED WITH HOW BRYTEX INDUSTRIESS PROPRIETOR PAID ITS LABOURERS, WHETHER IN CASH OR THROUGH CHEQUE, THE ASSESSEE IS ONLY CONCERNED WITH THE SUPPLY OF MATERIALS FROM BRYTEX INDUSTRIES IN THE RELEVANT A.Y. WHICH IT HAS RECEIVED AND MADE PAYMENTS FOR THE SAME. POST THAT, HOW PAYMENTS WERE MADE BY THE PROPRIETOR OF BRYTEX INDUSTRIES TO LABOURERS OR HOW HE ARRANGED FOR MATERIALS AND LABOUR FOR SUPPLYING TO HIS CLIENTS (INCLUDING THE ASSESSEE) IS NOT THE ASSESSEES LOOKOUT. 8. A PERUSAL OF THESE REPLIES OF THE ASSESSEE AND THE DOCUMENTS PRODUCED BEFORE US IN THE PAPER BOOK, TAKES US TO A CONCLUSION THAT THE DISALLOWANCE IS NOT MADE ON STRONG LEGAL EVIDENCE. THE EVIDENCE COLLECTED WAS AT BEST AGAINST SIX PARTIES BUT NO SPECIFIC EVIDENCE HAS BEEN FOUND AGAINST THE ASSESSEE. RELIANCE WAS PLACED ON THE STATEMENTS RECORDED FROM THIRD PARTIES WITHOUT GRANTING AN OPPORTUNITY TO THE ASSESSEE TO CROSS- EXAMINE THESE PARTIES. THE ASSESSEE IN OUR VIEW HAS DISCHARGED THE BURDEN OF PROOF THAT LAY ON IT IN PROVING THE GENUINENESS OF THE TRANSACTIONS. THE BEHAVIOUR OF THE SUPPLIERS IS NOT IN CONTROL OF THE ASSESSEE. WHEN THE ASSESSEE PRODUCES DIRECT EVIDENCE, IT CANNOT BE REJECTED BASED ON INFERENCES DRAWN FROM SOME OTHER TRANSACTIONS OF THE SUPPLIERS. THESE LEADS SHOULD HAVE BEEN TAKEN TO THE LOGICAL CONCLUSION AND DIRECT EVIDENCE OBTAINED AGAINST THE ASSESSEE. UNLIKE IN OTHER CASES, THESE PERSONS HAVE CONFIRMED THE TRANSACTION. THE EVIDENCE PRODUCED IS NOT CONTROVERTED BY THE REVENUE. 9. FURTHER ON THE OBSERVATIONS MADE BY THE LD. CIT THE ASSESSEE REPLIED TO THE SAME AS FOLLOWS:- SL.NO. OBSERVATIONS OF THE LD. CIT REPLY OF THE ASSESSEE COMPANY 1. ON A PERUSAL OF THE STATEMENTS OF THE FIVE 14 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD PERSONS FOLLOWING POINT EMERGES: ALTHOUGH THEY GOT ORDERS FROM BIG AND ESTABLISHED COMPANIES, BUT THEY WERE NOT SELECTED THROUGH ANY TENDERS. ALL OF THEM CLAIMED TO HAVE STARTED BUSINESS AROUNF F.Y. 2008-09 AND FILED RETURNS OF INCOME ONLY UPTO A.Y. 2011- 12. BUSINESSES OF ALL THESE PERSONS HAD CLOSED DOWN AND THEY HAD CLOSED THEIR BANK ACCOUNT IN THE ICICI BANK. ALL OF THEM WERE CONDUCTING BUSINESS FROM CHAWLS/RESIDENTIAL AREAS AND EMPLOYED VERY FEW PERSONS. THEY ASSESSEE COMPANY HAD PRODUCED ALL THE EVIDENCES TO PROVE THE GENUINENESS OF THE TRANSACTIONS WITH THE SIX PARTIES. THE LD. CIT HAD NOT DENIED THE FACT THAT THE SAID SIX COMPANIES GOT ORDERS FROM BIG AND ESTABLISHED COMPANIES. IT IS NOT THE LD. AOS CONCERN, HOW THE SAID SIX COMPANIES WERE SELECTED FOR THE SUPPLY OF LABOUR AND MATERIAL. THEREFORE, DOUBTING THE GENUINENESS OF THE TRANSACTIONS ON THE BASIS OF THE SAME, IS TOTALLY BASED ON SUSPICION AND SURMISES. IN THIS REGARDS IT NEEDS TO BE NOTED THAT ALL THE SIX PERSONS ARE CONTRACTORS. THEY SUPPLY LABOUR, MATERIAL AND MANY OTHER SERVICES TO VARIOUS ESTABLISHED AND BIG COMPANIES. THEY KEEP SHIFTING THEIR WORK PLACES ACCORDING TO THE REQUIREMENTS OF THE WORK UNDERTAKEN BY THEM. LIKEWISE IN THE CASE OF THE ASSESSEE COMPANY, SINCE THE SITE WAS LOCATED IN MUMBAI, THEY SHIFTED ALL THEIR WORK FORCE TO MUMBAI AND OPENED BANK ACCOUNTS IN MUMBAI AND STARTED THEIR BUSINESS IN MUMBAI. AFTER THE COMPLETION OF THE WORK IN MUMBAI THEY WILL CLOSE DOWN THEIR BUSINESS AND BANK ACCOUNTS OPENED IN MUMBAI AND WILL SHIFT TO ANY OTHER PLACE AS PER THEIR WORK REQUIREMENT. IF THEY GET WORK ORDERS FROM ANY OTHER PLACE IN INDIA THEY WILL SHIFT TO THAT PARTICULAR PLACE, START THEIR BUSINESS AND OPEN BANK ACCOUNTS AT THAT PLACE ITSELF. HENCE, TREATING THE PURCHASES AND SUPPLY OF LABOUR FROM THE SAID SIX PARTIES AS BOGUS BY THE LD. CIT BASED ON THE AFORESAID REASON IS NOT ACCEPTABLE AND IS COMPLETELY WRONG. IN THIS REGARD THE ASSESSEE WOULD LIKE TO SUBMIT THAT IT IS NOT CONCERNED WITH 15 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD CLAIMED TO HAVE TRAVELLED TO FAR AWAY PLACES BY TRAIN ON SEVERAL OCCASIONS CARRYING CASH FOR PAYMENTS TO LABOURERS WORKING AT CONSTRUCTION SITES , BUT NONE OF THEM HAD KEPT THE TRAIN TICKETS. IF THEY WERE INVOLVED IN GENUINE BUSINESS ACTIVITIES THEY COULD HAVE CLAIMED TRAVELLING EXPENSES ON THE BASIS OF THESE TRAIN TICKETS OR OTHER SUPPORTING DOCUMENTS. WHERE THE PARTIES FROM WHOM IT HAD MADE PURCHASES WERE SITUATED. THE ASSESSEES ONLY CONCERN WAS WHETHER ON PLACEMENT OF ORDER FOR MATERIALS AND LABOUR THE SAME WERE SUPPLIED AS PER ITS REQUIREMENTS. AS REGARDS CLAIMING OF EXPENDITURE ON ACCOUNT OF TRAVELLING EXPENSES BY THE SAID SIX PARTIES, IT IS SUBMITTED THAT THE ASSESSEE IS NOT CONCERNED WHETHER THEY HAVE CLAIMED TRAVELLING EXPENSES AS BUSINESS EXPENDITURE OR NOT. IT IS A PART OF THE ASSESSMENT PROCEEDINGS OF THE SIX PARTIES AND THE LD. A.O. SHOULD EXAMINE THE SAME IN THEIR ASSESSMENT AND THE SAME SHOULD NOT BE LINKED WITH THE ASSESSEES CLAIMING OF GENUINE PURCHASES AND LABOUR EXPENSES IN ITS BOOKS OF ACCOUNTS. HENCE THE ALLEGATIONS PUT FORTHWITH BY THE LD. CIT ON THE BASIS OF THE STATEMENTS OF THE FIVE PARTIES ARE BASELESS AND IS DEVOID OF ANY MERIT. 2. ASSESSEES CONTENTION THAT LD. A.O. TREATED ASSESSEES PURCHASE FROM SIX PARTIES AS BOGUS ON THE BASIS OF INFORMATION ACCUMULATED BY HIM IN CASE OF THIRD PARTIES, IS NOT CORRECT. A.O. HAS APPLIED HIS MIND TO THE FACTS GATHERED, RECORDED STATEMENTS OF THE SUPPLIERS, POINTED OUT DISCREPANCIES IN THEIR STATEMENTS AND HAS ESTABLISHED THAT THESE PARTIES WERE NOT CAPABLE OF PROVIDING ANY SERVICES/MATERIALS. IN THE PROCESS OF ESTABLISHING THAT THE SIX PARTIES WERE NOT INVOLVED IN ANY GENUINE BUSINESS TRANSACTIONS, A.O. HAS ALSO POINTED OUT THE DUBIOUS NATURE OF ACTIVITIES WHICH THESE PARTIES INDULGED IN WHILE DEALING WITH OTHERS AND INFORMATION IN RESPECT OF THOSE ACTIVITIES COLLECTED THROUGH VARIOUS SOURCES. IT IS NOT ON THE BASIS OF THIRD PARTY INFORMATION A.O. HAS REACHED A CONCLUSION IN ASSESSEES CASE. THE ASSESSEES CASE IS BACKED BY DOCUMENTARY EVIDENCES WITH REGARD TO PURCHASES MADE FROM BRYTEX INDUSTRIES, NIKHIL ENTERPRISES, SUPREME CONSTRUCTION, PURNIMA CONSTRUCTION AND NOVA CONSTRUCTION LIKE BANK STATEMENT, PURCHASE ORDER, ITEM SUPPLIERS INVOICE, TAX INVOICE, DELIVERY CHALLAN (SPECIMEN COPIES ENCLOSED AT PAGES 01 TO 53 OF PAPER BOOK (COMPLETE DETAILS SUBMITTED BEFORE AO AT THE TIME OF ASSESSMENT) AND STATEMENTS OF THE PARTIES RECORDED BY THE LD. AO HIMSELF UNDER SECTION 131 OF THE ACT CONFIRMING THE SAID TRANSACTIONS. NONE OF THE DOCUMENTS SUBMITTED BEFORE THE LD. AO AT THE TIME OF ASSESSMENT PROCEEDINGS IN SUPPORT OF THE ASSESSEES PURCHASES MADE FROM BRYTEX INDUSTRIES AND NIKHIL ENTERPRISES WERE DISPROVED BY THE LD. AO. GENUINE TRANSACTIONS OF THE ASSESSEE COMPANY WITH THE SAID SIX PARTIES CANNOT BE DOUBTED SIMPLY BECAUSE THESE PARTIES WERE GIVING ACCOMMODATION ENTRIES TO OTHER PARTIES. THE LD. A.O. HAS NOT BROUGHT ANY CONCRETE MATERIAL ON RECORD TO PROVE THAT THE 16 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH THE SAID SIX PARTIES IS INGENUINE AND ARE BOGUS TRANSACTIONS. 3. CASE LAWS RELIED BY THE ASSESSEE COMPANY ARE NOT RELEVANT TO THE FACTS OF ITS CASE: I. RATIO OF CIT VS. DAULATRAM RAWATMAL IS NOT APPLICABLE TO THE ASSESSEES CASE AS THERE IS DIRECT NEXUS BETWEEN THE FACTS AND THE CONCLUSION REACHED BY THE A.O. II. ASSESSEES CASE IS DISTINGUISHABLE FROM RAMESH KUMAR AND CO. VS. ACIT AS IN THE PRESENT CASE, A.O. HAS FOUND OUT THE TRAIL OF CASH WITHDRAWAL WHICH IS HAPPENING EITHER ON THE SAME DATE OR ON THE NEXT DAY AND TWO LEVELS OF ENTRY GIVERS INVOLVED IN COMPLETING THE TRANSACTIONS. CASH WITHDRAWAL IS KEPT BELOW RS. 10 LAKHS III. RATIO OF DECISION OF THE FOLLOWING I. IN THE CASE OF THE ASSESSEE COMPANY, THE LD. A.O. HAS JUMPED TO THE CONCLUSION AND HELD THAT THE PURCHASES AND LABOUR EXPENSES CLAIMED BY THE ASSESSEE COMPANY IS BOGUS BASED ON THE INFORMATION GATHERED FROM OUTSIDE AGENCIES. THE LD. A.O. HAS NOT BROUGHT ON RECORD ANY CONCRETE MATERIAL TO PROVE THAT THE CONTRACT FOR THE PURCHASES AND SUPPLY OF LABOUR ENTERED WITH THE SAID SIX PARTIES IS INGENUINE. THE ASSESSEE COMPANY HAD PRODUCED ALL THE NECESSARY EVIDENCES TO PROVE THE GENUINENESS OF THE TRANSACTIONS OF THE ASSESSEE COMPANY WITH THE SAID SIX PARTIES. THE LD. A.O. AS WELL AS THE LD. CIT HAS NOT DOUBTED ANY DOCUMENTS PLACED ON RECORD. TRANSACTIONS ARE BACKED BY PROPER EVIDENCE. THE CONCLUSION DRAWN BY THE LD. A.O. AS WELL AS THE LD. CIT(A) IS TOTALLY BASED ON SURMISES AND CONJECTURES. THERE IS NO DIRECT CONNECTION BETWEEN THE FACTS OF THE ASSESSEE COMPANY AND THE CONCLUSION DRAWN BY THE LD. A.O. THAT THE PURCHASES ARE BOGUS. IN THIS LIGHT IT IS SUBMITTED THAT UNTIL AND UNLESS THERE IS A DIRECT NEXUS BETWEEN THE CONCLUSION DRAWN BY THE LD. A.O. AND THE FACTS OF THE CASE, ADDITION CANNOT BE MADE MERELY ON SURMISES AND CONJECTURES. II. 17 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD CASES RELIED BY THE ASSESSEE COMPANY IS NOT APPLICABLE BECAUSE OF THE FOLLOWING REASONS: A. ITO VS. PERMANAND REPORTED IN [2007] 107 TTJ 395 (ITAT JODH) B. DCIT VS. SRI RAJEV G. KALATHIL C.O. NO. 06/MUM 2014 C. ACIT VS. TARALA R SHAH IN ITA NO. 5295/MUM/2013 REASON: THE LD. A.O. HAS NOT SOLELY RELIED ON INFORMATION SUPPLIED BY SALES TAX DEPARTMENT. IT IS JUST ONE OF THE CIRCUMSTANTIAL EVIDENCES. A.O. HAS MENTIONED DISCREPANCIES IN STATEMENT, SEARCHES IN OTHER GROUP AND CONFESSIONAL STATEMENT OF ONE OF THE ENTRY GIVERS BEFORE ARRIVING AT THE CONCLUSION. 4. ASSESSEE SUBMITS THAT ONCE THE PAYMENTS WERE MADE TO THE SIX PARTIES, IT WAS NOT ITS RESPONSIBILITY TO KEEP WATCH AS TO HOW PAYMENTS ARE MADE TO THE LABOURERS. THESE PARTIES HAVE CLAIMED THAT THEY WITHDREW CASH FROM THEIR BANK ACCOUNTS IN MUMBAI AND CARRIED THE CASH PHYSICALLY TO WORK SITES. THIS CLAIM DOES NOT APPEAR GENUINE AS THE BANKS ARE PROVIDING FACILITY OF ANYWHERE BANKING TO ITS CUSTOMERS. THIS MEANS A BANK CUSTOMER CAN WITHDRAW CASH FROM ANY BRANCH OF THE BANK IN INDIA. WHEN THIS FACILITY EXISTS, NO PRUDENT PERSON WOULD TAKE THE RISK OF PHYSICALLY CARRYING CASH BY TRAIN OR BUS. BESIDES THESE PERSONS DID NOT FURNISH PROOF OF JOURNEY BY TRAIN, WHICH ESTABLISHED THAT THEIR CONTENTIONS ARE NOT CORRECT. IN THIS REGARD THE ASSESSEE SUBMITS THAT THE CASH HAS BEEN WITHDRAWN BY THE SIX PARTIES FROM THEIR BANK ACCOUNTS FOR THE PURPOSE OF MAKING PAYMENTS TO THEIR LABOURS ON A DAILY BASIS AND THE SAME HAS BEEN ACCEPTED BY THE PROPRIETORS OF ALL FIVE CONCERNS AS SHALL BE EVIDENT FROM THE STATEMENTS ENCLOSED AT PAGES 106-150 OF THE PAPERBOOK . THE SAID PROPRIETORS HAVE ALSO STATED THAT LABOUR PAYMENTS COULD NOT BE MADE IN CHEQUE AS MOST OF THEM NEITHER HAD ANY BANK ACCOUNT OR WERE PERMANENT IN NATURE. AS REGARDS CARRYING OF CASH PHYSICALLY TO WORK SITES, THEY STATED THAT SINCE THEY DID NOT HAVE KNOWLEDGE ABOUT BANKING AT SITES WHICH ARE AT BIHAR AND OTHER PLACES OF INDIA WHERE SITE WORK WAS IN PROGRESS, THEY PERSONALLY CARRIED CASH TO SITES TO AVOID RISK. FURTHER AS REGARDS FURNISHING OF EVIDENCE OF JOURNEY BY TRAIN BY THE SAID SIX PERSONS, IT IS SUBMITTED THAT IT IS NOT THE ASSESSEES LOOKOUT WHETHER THEY FURNISHED PROOF REGARDING TRAVELLING TICKETS OR NOT. THIS DOES NOT IN ANY WAY AFFECT THE GENUINE PURCHASE OF MATERIALS AND LABOUR BY THE ASSESSEE FROM THE SAID SIX PARTIES. 18 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THUS, FROM THE ABOVE, IT STANDS CLEAR THAT THE ALLEGATIONS RAISED BY THE LD. CIT WERE ALREADY BEEN ANSWERED CLEARLY BY THE PROPRIETORS OF THE SIX CONCERNS IN THEIR STATEMENTS RECORDED U/S 131 OF THE ACT DURING THE COURSE OF SURVEY PROCEEDINGS. THE LD. A.O. AS WELL AS THE LD. CIT HAVE NEITHER PLACED ANY MATERIAL ON RECORD TO DOUBT THE GENUINENESS OF THE TRANSACTIONS NOR HAD GIVEN PROPER OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE STATEMENTS GIVEN BY THE PROPRIETORS OF THE SAID SIX CONCERNS. UNDER THIS SITUATION, MERELY ON THE BASIS OF SURMISES AND CONJECTURES, THE GENUINENESS OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH THE SAID SIX CONCERNS CANNOT BE DOUBTED. 5. ASSESSEE IS A WELL ESTABLISHED AND A VERY REPUTED COMPANY. KEEPING IN MIND ITS BRAND NAME, IT IS AN IMPORTANT ISSUE WHOM IT DOES BUSINESS WITH. ANY RATIONAL/PRUDENT BUSINESS MAN OF THE STATURE OF ASSESSEE WOULD NOT GIVE BUSINESS TO SOME PERSON WHO HAS NO EXPERIENCE. FURTHER BUSINESS SHOULD NOT BE GIVEN ON REFERENCE OF INCONSEQUENTIAL PERSONS LIKE SCRAP DEALERS. THESE PARTIES DID NOT EVEN HAVE BANK ACCOUNT WHEN THEY WERE SHORTLISTED FOR DOING WORK. THESE PERSONS WERE NOT FILING ANY RETURN OF INCOME. ANY RATIONAL/PRUDENT BUSINESS MAN OF THE STATURE OF ASSESSEE WOULD NOT ASSOCIATE WITH SUCH PARTIES IN THE NORMAL COURSE OF BUSINESS, UNLESS THERE ARE ULTERIOR MOTIVES. THESE PEOPLE HAVE NO EXPERIENCE AND NO INFRASTRUCTURE TO EXECUTE THE WORK GIVE TO THEM. BESIDES THEIR DEALINGS WITH OTHERS HAVE BEEN PROVED TO BE ONLY HAWALA IN NATURE. THERE IS NO DOUBT ABOUT THE PROFESSIONAL NATURE OF ASSESSEES ACTIVITIES. THAT IS WHY ITS DEALINGS WITH THE SIX PERSONS, UNDER THE CIRCUMSTANCES MENTIONED DOES NOT APPEAR TO BE GENUINE. ONE OF THE PARTIES HAS CLAIMED TO HAVE RECEIVED CONTRACT FROM SAIL AND OTHER PUBLIC SECTOR COMPANIES. HOWEVER, NO EVIDENCE WAS PRODUCED IN THIS REGARD. IN THIS CONNECTION THE ASSESSEE SUBMITS THAT THE ASSESSEE COMPANY HAVING A PROFESSIONAL SYSTEM OF HIRING LABOUR CONTRACTORS AND SUPPLIERS OF MATERIALS FOR QUALITY MANAGEMENT DOES NOT CEASE TO EXIST IF SUCH SUPPLIERS/LABOUR CONTRACTORS ARE INDIVIDUALS. THERE ARE NO SET OF RULES/GUIDELINES TO DETERMINE THE PROFESSIONAL SYSTEM OF HIRING CONTRACTORS OR SUPPLIERS OF MATERIALS WHICH THE ASSESSEE COMPANY DID NOT ABIDE BY. FURTHER IT NEEDS TO BE NOTED THAT IT IS USUAL TREND OF THE CONTRACTORS TO SHIFT THEIR BUSINESS PLACE AFTER THE COMPLETION OF THE WORK AT THAT PARTICULAR PLACE. AS A RESULT OF THE SAME, THEY CLOSE THEIR BANK ACCOUNTS AND ALL THE BUSINESS SET UP REQUIRED FOR THE RUNNING OF THEIR BUSINESS. SIMILARLY BY THIS LOGIC, ALL THE SIX PARTIES AFTER COMPLETION OF THEIR WORK CLOSED THEIR BANK ACCOUNTS AND CLOSED THEIR BUSINESS PREMISES. THEY WILL OPEN A NEW BANK ACCOUNT WITH ALL THE NECESSARY INFRASTRUCTURE REQUIRED FOR THE RUNNING OF THE BUSINESS. FURTHER THE ASSESSEE ONCE AGAIN WOULD LIKE REITERATE THAT GOVERNMENT COMPANIES LIKE SAIL, ROUKELA STEEL PLANT AND BHILAI STEEL PLANT HAD GIVEN SUB-CONTRACT OF LABOUR TO ONE OF THESE INDIVIDUALS, SHRI HABIBULLAH UMARATI SAYAD OF NOVA CONSTRUCTION WHICH IS EVIDENT FROM THE STATEMENT GIVEN BY HIM U/S 131 OF THE INCOME 19 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD TAX ACT, 1961 (ENCLOSED AT PAGES 106-114 OF THE PAPERBOOK). THUS GOVERNMENT COMPANIES ENTRUSTING THE SAID PARTIES WITH LABOUR CONTRACT AND MATERIAL SUPPLY ASSIGNMENTS FURTHER CORROBORATE THE FACT THAT THE ASSESSEE COMPANY HAVING GIVEN LABOUR CONTRACTS AND SUPPLY OF MATERIALS TO INDIVIDUALS WAS NOT ACTING UNPROFESSIONALLY. FURTHER HAVING DEALINGS WITH OTHER BEEN PROVED TO BE ONLY HAWALA IN NATURE DOES NOT AFFECT THE GENUINENESS OF THE TRANSACTION OF THE ASSESSEE COMPANY WITH THE SIX CONCERNS. AS REGARDS THE ALLEGATION OF THE LD. CIT(A) THAT ASSESSEE COMPANY DID NOT PRODUCE ANY EVIDENCE REGARDING CONTRACT ENTERED INTO BETWEEN SAIL (PSU) AND NOVA CONSTRUCTION, IT IS SUBMITTED THAT IT IS THE PERSONAL PROPERTY OF THE CONCERN (NOVA CONSTRUCTION) AND NOT OF THE ASSESSEE COMPANY. ASSESSEE COMPANY HAS NOTHING TO DO WITH THE SAID EVIDENCE. IT IS ON THE PART OF THE DEPARTMENT TO EXTRACT THE SAID EVIDENCE FROM NOVA CONSTRUCTION AND NOT FROM THE ASSESSEE AS THE SAID DOCUMENT DOES NOT BELONG TO THE ASSESSEE COMPANY. THUS ON THE BASIS OF THE ABOVE IT IS SUBMITTED THAT THE ALLEGATIONS OF THE LD. CIT(A) THAT THE TRANSACTIONS WITH THE SAID PARTIES IS IN GENUINE IS COMPLETELY WRONG AND BASELESS. 9.1. THE ITAT MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIRALAL CHUNNILAL JAIN VS. ITO, ITA NO. 4547/MUM/2014, HELD AS FOLLOWS:- 5.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD RECEIVED INFORMATION FROM THE INVESTIGATION WING OF STD, MAHARASHTRA THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES, THAT SHIV SAGAR THE SUPPLIER OF THE GOODS WAS ONE OF THE ENTITIES WHO HAD ADMITTED TO HAVE BOGUS BILLS, THAT THE ASSESSEE HAD ASKED FOR CROSS EXAMINATION OF THE SUPPLIER BUT SAME WAS NOT GIVEN, THAT THE AO HAD NOT SUPPLIED THE COPY OF THE STATEMENTS OF SHIV SAGAR TO THE ASSESSEE, THAT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ALL THE PURCHASES AND SALES WERE RECORDED, THAT PAYMENTS WERE MADE THROUGH BANKING CHANNELS, THAT THE AO HAD MADE ADDITION OF ENTIRE PURCHASES U/S.69 OF THE ACT, THAT THE FAA HAD REDUCED IT TO 20%. IT IS A FACT THAT THE AO HAD NOT 20 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD REJECTED THE SALES OF THE ASSESSEE AND THE ASSESSEE WAS MAINTAINING THE QUANTATIVE DETAILS AND STOCK REGISTER. IN OUR OPINION, ONCE THE SALES ARE ACCEPTED AS GENUINE OR NOT DOUBTED THE AO CANNOT REJECT THE ENTIRE PURCHASE. IN THE CASE OF NIKUNJ EXIMP (SUPRA)THE HON'BLE BOMBAY HIGH COURT HAS HELD IF SALES WERE NOT DOUBTED BY THE AO AND COPIES OF BANK STATEMENT SHOWING ENTRIES OF PAYMENT THROUGH ACCOUNT PAYEE CHEQUES TO THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AND A STOCK STATEMENT, I.E. STOCK RECONCILIATION STATEMENT ARE FILED 4547/14,2545/14 &1275/14, HIRALAL CJ PURCHASED COULD NOT BE REJECTED. IN THE CASE OF RAJEEV KALATHIL (SUPRA) THE TRIBUNAL HAS HELD AS UNDER: '2.4. WE FIND THAT AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. WE AGREE THAT IT WAS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION AND TAKE IT TO LOGICAL END. BUT, HE LEFT THE JOB AT INITIAL POINT ITSELF. SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE. HE COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT AS WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. WE FIND THAT NO SUCH EXERCISE WAS DONE.' IN THE PRESENT CASE ALSO THE AO HAD MADE THE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT, BUT, HE DID NOT MAKE ANY INDEPENDENT INQUIRY. HE DID NOT FOLLOW THE PRINCIPLES OF NATURAL JUSTICE BEFORE MAKING THE ADDITION. THE FAA HAD REDUCED THE ADDITION TO 20%,BUT HE HAS NOT GIVEN ANY JUSTIFICATION EXCEPT STATING THAT SAME WAS DONE TO PLUG THE PROBABLE LEAKAGE REVENUE. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE REVERSING THE ORDER OF THE FAA. 9.2. SIMILAR RATIOS WERE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE FOLLOWING CASES: CIT VS. EMARALD COMMERCIAL LTD. [2001] 250 ITR 539 (CAL) CIT VS. CARBO INDUSTRIAL HOLDINGS LTD. [2000] 244 ITR 422 (CAL) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE FOLLOWING CASES HAS ALSO LAID DOWN SIMILAR PROPOSITIONS OF LAW:- CIT VS. FAQIR CHAMAN LAL REPORTED IN 262 ITR 295 (P&H) CIT VS. RAM NARAIN GOEL REPORTED IN 224 ITR 180 (P&H) 10. IN OUR VIEW, THE ASSESSEE HAS DISCHARGED THE PRIMARY BURDEN THAT IS CAST ON IT TO PROVE THE GENUINENESS OF THESE TRANSACTIONS. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), IN OUR OPINION, HAVE NOT COME OUT WITH IRREFUTABLE PROOF TO NEGATE THE EVIDENCES SUBMITTED BY THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE STANDARD OPERATING PROCEDURE LAID DOWN BY THE ASSESSEES HEAD OFFICE WAS VIOLATED BY THE SITE OFFICE NOR THAT 21 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THE PROCEDURE AND DOCUMENTATION WAS NOT CORRECT . THE ENTIRE DISALLOWANCE IS MADE ON SUSPICION AND PROBABILITIES. THESE CANNOT TAKE THE PLACE OF EVIDENCE. UNDER THESE CIRCUMSTANCES, APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE REFERRED CASE- LAW, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION MADE HEREIN. 11. WE NOW TAKE UP THE REVENUES APPEAL IN ITA NO. 1764/KOL/2017. 12. GROUND NO. 1, IS AGAINST THE DELETION OF THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80-IA OF THE ACT, BY THE LD. CIT(A). 12.1. THE LD. CIT(A) FOLLOWED THE PROPOSITION OF LAW LAID DOWN BY THE ITAT KOLKATA BENCHS DECISION IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08. AT PARA 3.3.2, PAGE 25 TO 37, HE HELD AS FOLLOWS:- 3.3.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION OF THE ASSESSEE. PERUSAL OF THE ITAT ORDER FOR ASSMT. YEAR 2007-08 SHOWS THAT HONBLE ITAT, KOLKATA HAVE UPHELD THE ORDER OF THE LD. CIT(APPEAL)-XII, MENTIONING AS UNDER: 3.1 THE AFORESAID PROJECTS WERE AWARDED BY CENTRAL / STATE GOVERNMENT /LOCAL AUTHORITY / STATUTORY BODY ON TURNKEY BASIS. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE IS ACTING AS A CONTRACTOR. ACCORDINGLY, AO OPINED THAT ASSESSEE IS EXECUTING THE PROJECTS AS WORKS CONTRACTOR WITHIN THE MEANING OF EXPLANATION TO SEC. 80IA OF THE ACT. ON QUESTION BY THE AO FOR THE NON-DEDUCTION OF DEDUCTION UNDER SECTION 80IA OF THE ACT, THE ASSESSEE SUBMITTED THAT THE WRIT PETITION HAS BEEN FILED CHALLENGING EXPLANATION TO SECTION 80IA OF THE ACT IN THE HON'BLE JURISDICTIONAL HIGH COURT AND FURTHER REQUESTED NOT TO CONSIDER THE EFFECT OF THE EXPLANATION TO SECTION 80IA OF THE ACT TILL THE DISPOSAL OF WRIT PETITION. HOWEVER, THE AO OBSERVED THAT NO FURTHER DETAILS WAS SUBMITTED BY THE ASSESSEE HENCE, AO DISALLOWED THE DEDUCTION CLAIM U/S 80-IA(4) FOR AN AMOUNT OF 15,98,85,0511/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO HAS ALLOWED THE DEDUCTION UNDER SECTION 80-IA OF THE ACT BY OBSERVING AS UNDER:- 'NOW, KEEPING IN VIEW THE SCHEME OF THE TAX HOLIDAY UNDER SEC. 80-IA AND THE PROVISIONS OF THE ACT, THE DETAILS FURNISHED IN RESPECT OF THE WORK CARRIED OUT BY THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATION HAVE BEEN PERUSED. THE NATURE OF WORK EXECUTED, INCLUDING WORK RELATING TO PORTS, AIR-PORTS, HIGHWAY AD 22 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD MUNICIPAL CORPORATION, ALL COMING IN THE CATEGORY OF INFRASTRUCTURE FACILITY FROM THE PERUSAL OF THE TERMS AND CONDITIONS OF ALL THE AGREEMENTS, IT IS ABUNDANTLY CLEAR THAT IT IS NOT A CASE WHERE THE APPELLANT WAS PROVIDED WITH THE ESTABLISHMENT AND MATERIALS REQUIRED TO EXECUTE THE WORK, WHICH HAPPENS IN CASE OF WORKS CONTRACT WHERE THE CONTRACTOR GETS THE MATERIAL AND OTHER REQUISITES FROM THE CLIENT AND ALL HE HAS TO DO IS EMPLOY LABOUR. THE APPELLANT IN THE GIVEN CASE WAS TO PROCURE RAW MATERIAL, MAKE ARRANGEMENTS FOR POWER, WATER, PLANT & MACHINERY, OBTAIN STATUTORY CLEARANCES ETC., AND CONDUCT ALL THE OTHER ACTIVITIES NEEDED FOR CONSTRUCTION TO BRING INTO EXISTENCE AN INFRASTRUCTURE FACILITY. FURTHER IT WAS EXPOSED TO VARIOUS RISKS LIKE RISK OF DAMAGE OF PROPERTY, RISK OF ACCIDENTS ETC. THEREFORE, HAVING REGARD TO THE FACT, AND EMERGING LEGAL POSITION, IN MY VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT COMPANY WAS MERELY EXECUTING WORKS CONTRACT AND THEREFORE IT WAS NOT ENTITLED FOR THE TAX HOLIDAY BENEFIT UNDER SECTION 80-IA(4) OF THE ACT. IT MY ALSO BE NOTED HERE THAT IN THE CASE OF PATEL ENGINEERING LTD. V. CIT [2004] 84 TTJ (MUM) 646, THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT THE ENTERPRISE MUST CARRY ON THE BUSINESS OF (A) DEVELOPING, OR (B) MAINTAINING AND OPERATING OR (C) DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. IT IS NOT NECESSARY THAT THE ENTIRE INFRASTRUCTURE PROJECT IS TO BE DEVELOPED BY ONE ENTERPRISE. IN ANOTHER CASE OF CIT V. BHARAT UDYOG LD . [2008] 24 SOT 412 (MUM), IT HAS BEEN HELD THAT IF AN ASSESSEE IS ENGAGED IN DEVELOPING INFRASTRUCTURE FACILITY (I.E ROAD) BUT NOT ENGAGED IN 'OPERATING AND MAINTAINING' SAID FACILITY, IT CAN CLAIM THE BENEFITS OF DEDUCTION UNDER SECTION 80- IA . THE RATIO LAID DOWN IN THE REPORTED CASES ARE SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT''S CASE AND HENCE THE APPELLANT BEING A DEVELOPER OF INFRASTRUCTURE FACILITY DISCUSSED ABOVE IS ENTITLED FOR DEDUCTION UNDER SEC. 80-I OF THE ACT. IT IS ALSO OBSERVED THAT THERE HON'BLE JURISDICTIONAL ITAT 'B' BENCH, KOLKATA IN THE CASES OF M/S SIMPLEX SOM DATTA BUILDERS J.V. VS. ITO WARD 33(4), KOLKATA IN APPEAL NO. 1684/KOL/2011 FOR AY 2007-08 AND IN THE CASE OF M/S SIMPLEX SUBHAS J.V. VS. ITO WARD 33(4) KOLKATA IN APPEAL NO.1685/KOL/2011 FOR AY 2007-08, RESPECTIVELY VIDE THEIR ORDER DATED 18.06.2013, HELD IN PARA 11 & 12 OF THE ORDER WHILE DECIDING ON THE ISSUE HAVING IDENTICAL SET OF FACTS OF THE CASES THAT THE ASSESSEE WERE ENTITLED TO GET THE BENEFIT DEDUCTION U/S. 80IA OF THE ACT AS CLAIMED THEM. IN THE LIGHT OF THE ABOVE DISCUSSION AND FINDINGS, PERUSING THE FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN IN VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT ON THE ISSUE AS DISCUSSED ABOVE, IT IS HELD THAT THE APPELLANT COMPANY IS ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE PROJECTS. THEREFORE, THE APPELLANT HAD ACTED AS DEVELOPER OF THE INFRASTRUCTURE FACILITIES AND HAS NOT ACTED MERELY AS A WORK CONTRACTOR, HENCE, IT WAS ENTITLED TO GET DEDUCTION UNDER SEC. 80-IA(4) OF THE ACT AS CLAIMED BY THE APPELLANT. THE ASSESSING OFFICER IS, THUS, DIRECTED TO ALLOW THE SAME ACCORDINGLY. HENCE, THESE GROUNDS OF APPEAL OF THE APPELLANT ARE ALLOWED.' 23 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD BEING AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL. 5. BEFORE US BOTH THE PARTIES RELIED IN THE ORDER AUTHORITIES BELOW AS FAVOURABLE TO THEM. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE FIND THAT THE INSTANT ISSUE IS ALREADY COVERED IN FAVOUR OF ASSESSEE IN ITS OWN CASE BY THE ORDER OF HON'BLE KOLKATA TRIBUNAL IN ITA NO 2168/KOL/2013 VIDE ORDER DATED 08.02.2017. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW : '6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT THE PROVISIONS OF SECTION 80-IA OF THE ACT APPLIES TO THE ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS 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 CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT ; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995. PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRED ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE 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 BEEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. 6.1 FROM THE ABOVE IT IS CLEAR IN ORDER TO AVAIL DEDUCTION U/S 80-IA ALL THE FOLLOWING CONDITIONS SHOULD BE SATISFIED: (I) THE ASSESSEE IS A COMPANY OR A CONSORTIUM OF COMPANIES; (II) THERE EXISTS AN AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY AND 24 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD (III) PURSUANT TO THE AGREEMENT SPECIFIED IN POINT (II) THE COMPANY ENGAGES ITSELF IN ANY OF THE FOLLOWING ACTIVITIES: (A) DEVELOPMENT OF INFRASTRUCTURE FACILITY (B) OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY (C) DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY 6.2 NOW THE ASSESSEE IN THE GIVEN CASE IS A COMPANY WHICH, PURSUANT TO AGREEMENTS WITH VARIOUS GOVERNMENT BODIES, ENGAGED ITSELF IN THE DEVELOPMENT OF INFRASTRUCTURE FACILITY AS DEFINED IN THE EXPLANATION TO SUB SECTION 4 OF SECTION 80- IA . THESE SET OF FACTS HAVE NOT BEEN DISPUTED BY THE AO. THE LD. AO DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAS CHALLENGED THE PROVISIONS OF EXPLANATION TO SECTION 80IA OF THE ACT TO THE HON'BLE HIGH COURT AND THE COURT HAS RESTRAINED TO ENFORCE THE DEMAND THAT MAY BE RAISED IN PURSUANCE TO THE EXPLANATION TO SECTION 80IA OF THE ACT. THERE IS NO DIRECTION TO KEEP THE ASSESSMENT PROCEEDINGS UNDER ABEYANCE. THE AO TREATED THE ASSESSEE AS A MERE WORKS CONTRACTOR CONDUCTING MERE CIVIL CONSTRUCTION AND HENCE AS PER THE EXPLANATION TO SECTION 80- IA(13), THE DEDUCTION IS NOT AVAILABLE TO HIM. HOWEVER ON EXAMINATION OF THE RECORDS WE FIND THAT THE ASSESSEE HAS WITHDRAWN THE APPEAL FILED BEFORE THE HON'BLE HIGH COURT. AT THIS JUNCTURE ATTENTION IN THIS REGARD IS FIRSTLY INVITED TO THE PROVISIONS OF THE EXPLANATION OF SECTION 80-IA OF THE ACT AS PRODUCED BELOW: 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB- SECTION (1). ' FROM A PLAIN READING OF THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80-IA DOES NOT APPLY TO WORKS CONTRACT. NOW THE RELEVANT QUESTION ARISES BEFORE US FOR ADJUDICATION IS THAT WHAT CONSTITUTES A WORKS CONTRACT. SECTION 80-IA NOWHERE DEFINES THE TERM 'WORKS CONTRACT', HENCE THE NATURAL MEANING OF THE WORD SHALL APPLY. AS PER THE OXFORD DICTIONARY THE TERM 'WORK' MEANS APPLICATION OF EFFORT TO A PURPOSE OR USE OF ENERGY. THUS GOING BY THE DICTIONARY MEANING WE MAY SAY THAT A WORKS CONTRACT IS A CONTRACT WHICH INVOLVES EFFORT OR IN OTHER WORDS LABOUR OF THE CONTRACTOR. FURTHER AS PER THE BLACK'S LAW DICTIONARY, THE TERM 'WORK' MEANS LABOUR OR IN OTHER WORDS PHYSICAL AND MENTAL EXERTION TO ATTAIN AN END ESP. AS CONTROLLED BY AND FOR THE BENEFIT OF THE EMPLOYER. THUS AS PER BLACKS'S LAW ALSO A WORKS CONTRACT IS A LABOUR CONTRACT UNDER WHICH THE CONTRACTOR MERELY EMPLOYS HIS LABOUR AS PER THE DIRECTIONS OF THE CONTRACTEE. FURTHER, ATTENTION IS INVITED TO RELEVANT EXTRACTS OF SECTION 194C OF THE IT ACT: '(IV) 'WORK' SHALL INCLUDE- (A) ADVERTISING; 25 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.' THUS AS PER SECTION 194C ALSO, 'WORKS CONTRACT' DOES NOT INCLUDE A CONTRACT WHEREIN THE CONTRACTOR IN ADDITION TO EMPLOYING LABOUR, PROCURES MATERIAL FROM A THIRD PARTY. THUS, CONTRACTS INVOLVING MERE LABOUR OF THE CONTRACTOR ARE INCLUDED IN THE PURVIEW OF 'WORKS CONTRACT'. FURTHER, ATTENTION IS INVITED TO THE JUDGMENT OF THE SUPREME COURT IN CASE OF ASSOCIATED CEMENT CO. LTD. VS. CIT [201 ITR 435], WHEREIN THE HON'BLE COURT WHILE INTERPRETING THE TERM 'WORK' U/S 194C HELD THAT 'WORDS `ANY WORK' IN SUB-S. (1) OF S. 194C MEANS ANY WORK INCLUDING SUPPLY OF LABOUR TO CARRY OUT WORK AND IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO WORKS CONTRACT, THEREFORE, A PERSON WHO CREDITS TO THE ACCOUNT OF OR PAYS TO A CONTRACTOR ANY SUM PAYABLE ON BEHALF OF ORGANIZATIONS SPECIFIED IN S. 194C(1) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IS LIABLE TO DEDUCT INCOME-TAX AS REQUIRED UNDER THAT SUB-SECTION. THE WORDS IN THE SUB-SECTIONS (1) OF 194C `ON INCOME COMPRISED THEREIN' APPEARING IMMEDIATELY AFTER THE WORDS `DEDUCT AN AMOUNT EQUAL TO TWO PER CENT OF SUCH SUM AS INCOME- TAX' FROM THEIR PURPORT, CANNOT BE UNDERSTOOD AS THE PERCENTAGE AMOUNT DEDUCTIBLE FROM THE INCOME OF THE CONTRACTOR OUT OF THE SUM CREDITED TO HIS ACCOUNT OR PAID TO HIM IN PURSUANCE OF THE CONTRACT, BUT DEDUCTION IS TO BE MADE OUT OF PAYMENTS MADE TO THE CONTRACTOR.' 6.3 WE SEE NO REASON TO CURTAIL OR TO CUT DOWN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. ''ANY WORK' MEANS ANY WORK AND NOT A 'WORKS CONTRACT'', WHICH HAS A SPECIAL CONNOTATION IN THE TAX LAW. INDEED IN THE SUB- SECTION THE 'WORK' REFERRED TO THEREIN EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT A WORK. IT IS A CLEAR INDICATION OF THE LEGISLATURE THAT THE 'WORK' IN THE SUB-SECTION IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO 'WORKS CONTRACT'. THE ISSUE BEFORE THE SUPREME COURT IN THE AFORESAID CASE WAS WHETHER THE TERM 'WORK' USED IN SECTION 194C NEEDS TO BE RESTRICTED TO 'WORKS CONTRACT'. THE APEX COURT LAID OUT THAT THE TERM 'WORK' USED IN SECTION 194C NEED NOT BE RESTRICTED TO 'WORKS CONTRACTS' (I.E. LABOUR CONTRACTS) BECAUSE THE SUB- SECTION EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARRY OUT WORK. IN OTHER WORDS, IT IS IMPLIED THAT WORKS CONTRACT MEANS SUPPLY OF LABOUR TO CARRY OUT WORK. THUS FROM THE ABOVE WE MAY SAY THAT A WORKS CONTRACT CONSTITUTES A CONTRACT UNDER WHICH THE CONTRACTOR IS MERELY EMPLOYING HIS EFFORTS OR LABOUR. UNDER SUCH A CONTRACT, THE CONTRACTEE PROVIDES THE MATERIAL AND OTHER REQUISITES (A COMPLETE INFRASTRUCTURE) NEEDED TO CARRY OUT THE DESIRED WORK TO THE 26 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD CONTRACTOR WHO BY APPLYING HIS LABOUR TO THE SAID MATERIAL TURNS THE MATERIAL INTO A DESIRED PRODUCT. FURTHER, ATTENTION IS INVITED TO THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2007, REPORTED IN [2007] 289 ITR (ST.) 292 AT PAGE 312, WHICH READS AS UNDER: ' SECTION 80-LA , INTER ALIA, PROVIDES FOR A TEN-YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES, INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN {OR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT {OR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT.' ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PROVISIONS OF SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA ) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM 1ST APRIL 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS. THE EXPLANATORY MEMORANDUM CLEARLY LAYS OUT THAT PURPOSE OF EXTENDING TAX BENEFIT U/S 80-IA WAS TO ENCOURAGE INVESTMENTS FROM THE PRIVATE SECTOR AND HENCE WORK CONTRACTS, I.E. CONTRACTS INVOLVING MERELY LABOUR (OR MERE EXECUTION OF CONSTRUCTION WITHOUT MAKING INVESTMENTS) ARE OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 80-1A . THUS, THE TERM 'WORKS CONTRACT' USED IN EXPLANATION TO SECTION 80-IA(L3) MEANS A CONTRACT OF DEVELOPING INFRASTRUCTURE BY MERELY EMPLOYING LABOUR AND MAKING NO INVESTMENTS. WE ALSO FIND SUPPORT FROM THE FOLLOWING JUDGMENTS: THE HYDERABAD BENCH OF TRIBUNAL IN CASE OF M/S. GVPR ENGINEERS LTD. VS. ACIT (2012) 32 CCH 0296 HYDTRIB (2012) 51 SOT 0207 (HYD) (URO). THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER : 'THE NEXT QUESTION TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. WHETHER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRACTOR IS 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 ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GOVERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE 27 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD 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 TO TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY, THE ASSESSEE 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 ASSESSEE 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 DRAINAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF FACILITY 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 OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18- 05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER.' 6.4 IT WAS ALSO OBSERVED THAT '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 THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BUSINESS RISK. SIMILARLY THE CHENNAI BENCH OF TRIBUNAL IN CASE OF R.R. CONSTRUCTIONS, CHENNAI VS DEPARTMENT OF INCOME TAX 2013) 35 CCH 0547 CHEN TRIB (2015) 152 ITD 0625 (CHENNAI) HELD THAT 'WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASSESSEE IS 28 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AND THEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT' THUS, THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2007, FURTHER STRENGTHENS THE CONTENTION OF THE ASSESSEE THAT A WORKS CONTRACT IS A CONTRACT WHICH INVOLVES MERE LABOUR OF THE CONTRACTOR. HOWEVER, IF UNDER A CONTRACT, THE CONTRACTOR EMPLOYS HIS CAPITAL AND ENTERPRISE IN ADDITION TO LABOUR, THEN THE SAID CONTRACT DOES NOT CONSTITUTE A WORKS CONTRACT UNDER THE EXPLANATION TO SECTION 80-IA(L3) AND THE CONTRACTOR SHALL BE ELIGIBLE FOR DEDUCTION U/S 80-IA. NOW COMING TO THE FACTS OF THE CASE, IT IS SUBMITTED THAT THE ASSESSEE WAS NOT MERE WORKS CONTRACTOR, WHO HAD MERELY EMPLOYED ITS LABOUR UNDER THE PROJECTS FROM THE VARIOUS GOVERNMENT AUTHORITIES. THE ASSESSEE WAS A DEVELOPER. IN ADDITION TO EMPLOYING LABOUR IT MADE INVESTMENTS, IT DEVELOPED AN ENTERPRISE/INFRASTRUCTURE TO SUPPORT THE WORK UNDER THE VARIOUS PROJECTS. IN ADDITION TO LABOUR, IT DEPLOYED ITS MACHINERY, MATERIALS AND DID ALL THE THINGS NECESSARY (I.E. PROVIDED AN ENTERPRISE) TO SUPPORT THE CONSTRUCTION WORK UNDERTAKEN UNDER THE VARIOUS PROJECTS. THE ASSESSEE WAS PROVIDED WITH THE SITE ALONE AND BY PUTTING ITS OWN INPUTS (NOT LABOUR ALONE) HE CONVERTED THE SITE INTO AN INFRASTRUCTURAL FACILITY. 6.5 FURTHER, ITAT (HYDERABAD) IN CASE OF SIVA SWATHI CONSTRUCTIONS PVT. LTD. VS DCIT, CIRCLE-3(2) IN ITA NO.1008-09/HYD/2013 FOR AYS 2009-10 & 2010-11 DATED 25.10.2013 HELD THAT 'THE NEXT REASON GIVEN BY THE CIT(A) IS WITH REGARD TO NON- FINANCIAL PARTICIPATION BY THE ASSESSEE, AS THE ASSESSEE HAS GOT MOBILIZATION ADVANCE. THE MOBILIZATION ADVANCE HAS NOT BEEN GIVEN FREELY. IT HAS BEEN GIVEN ONLY AFTER THE ASSESSEE FURNISHED A BANK GUARANTEE, AND THE BANK GUARANTEE HAS BEEN GIVEN BY THE BANK ONLY AFTER GETTING ENOUGH SECURITY FROM THE ASSESSEE, TO PROTECT ITSELF FROM ANY RISK ON ACCOUNT OF ANY DEFAULT ON THE PART OF THE ASSESSEE. THE ASSESSEE HAS TAKEN FINANCIAL ASSISTANCE FROM BANK AND PAID HUGE INTEREST OF RS. 2,87,10,943.00 FOR ASSESSMENT YEAR 2009-10 AND OF RS. 9,35,78,373.00 FOR ASSESSMENT YEAR 2010-11, AS SEEN FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FOR THE RELEVANT YEARS ENDING ON 31.3.2009 AND 31.3.2010 RESPECTIVELY, COPIES OF WHICH ARE FURNISHED BY THE ASSESSEE AT PAGES 20 AND 65 OF THE PAPER-BOOK. SIMILARLY, ASSESSEE HAS INVESTED ITS OWN FUND OF RS.5,55,00,000.00 FOR ASSESSMENT YEAR 2009-10 AND OF RS. 7,86,75,710.00 FOR THE ASSESSMENT YEAR 2010-11, AS SEEN FROM THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2009 AND 31.3.2010 RESPECTIVELY, COPIES OF WHICH ARE FURNISHED BY THE ASSESSEE AT PAGES 21 AND 66 OF THE PAPER- BOOK. IN THIS VIEW OF THE MATTER, THE REASON GIVEN BY THE CIT(A) ON THIS ASPECT FOR DENYING DEDUCTION TO THE ASSESSEE UNDER S.80-IA IS ALSO NOT VALID. THUS IN LIGHT OF THE AFORESAID DECISION OF THE TRIBUNAL HYDERABAD BENCH, THE CONTENTION OF THE AO IS NOT VALID. FURTHER, MERELY BECAUSE THE ASSESSEE WAS RECEIVING PAYMENTS FROM THE GOVERNMENT IN PROGRESS OF WORK IT CANNOT BE SAID THAT THE PROJECTS WERE FINANCED BY GOVERNMENT. IN THIS REGARD IT IS POINTED OUT THAT UNDER SUB- SECTION 4 OF SECTION 80-IA , DEDUCTION IS AVAILABLE TO A DEVELOPER, I.E. IF, AN ASSESSEE, MERELY DEVELOPS THE INFRASTRUCTURE FACILITY WITHOUT OPERATING AND MAINTAINING THE SAME, IT IS ENTITLED TO DEDUCTION. THE BOMBAY HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX V. ABG HEAVY INDUSTRIES LIMITED [322 ITR 323] OBSERVED THAT 'PARLIAMENT AMENDED THE PROVISIONS OF SECTION 80-LA OF THE ACT SO AS 29 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD TO CLARIFY THAT IN ORDER TO AVAIL OF A DEDUCTION, THE ASSESSEE COULD (I) DEVELOP ; OR (II) OPERATE AND MAINTAIN ; OR (III) DEVELOP, OPERATE AND MAINTAIN THE FACILITY. THE CONDITION AS REGARDS DEVELOPMENT, OPERATION AND MAINTENANCE OF AN INFRASTRUCTURE FACILITY WAS CONTEMPORANEOUSLY CONSTRUED BY THE AUTHORITIES AT ALL MATERIAL TIMES, TO COVER WITHIN ITS PURVIEW THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY UNDER A SCHEME BY WHICH AN ENTERPRISE WOULD BUILD, OWN, LEASE AND EVENTUALLY TRANSFER THE FACILITY. ' 'THIS WAS PERHAPS A PRACTICAL REALISATION OF THE FACT A DEVELOPER MAY NOT POSSESS THE WHEREWITHAL, EXPERTISE OR RESOURCES TO OPERATE A FACILITY, ONCE CONSTRUCTED PARLIAMENT EVENTUALLY STEPPED IN TO CLARIFY THAT IT WAS NOT INVARIABLY NECESSARY FOR A DEVELOPER TO OPERATE AND MAINTAIN THE FACILITY. PARLIAMENT WHEN IT AMENDED THE LAW WAS OBVIOUSLY AWARE OF THE ADMINISTRATIVE PRACTICE RESULTING IN THE CIRCULARS OF THE CENTRAL BOARD OF DIRECT TAXES. THE FACT THAT IN SUCH A SCHEME. AN ENTERPRISE WOULD NOT OPERATE THE FACILITY ITSELF WAS NOT REGARDED AS BEING A STATUTORY BAR TO THE ENTITLEMENT TO A DEDUCTION UNDER SECTION 80-IA OF THE ACT. ' 6.6 FROM THE ABOVE IT IS CLEAR THAT EVEN IF AN ASSESSEE IS MERELY DEVELOPING THE INFRASTRUCTURAL FACILITY (WITHOUT OPERATING AND MAINTAINING THE SAME), IT IS ENTITLED TO DEDUCTION U/S 80-1A. FURTHER, CONDITION (B) LAID OUT IN SUB- SECTION 4 OF SECTION 80-IA MANDATES THE EXISTENCE OF AN AGREEMENT WITH THE GOVERNMENT. MOREOVER, IF SECTION 80-IA GRANTS DEDUCTION ON PROFITS FROM THE ACTIVITY OF DEVELOPMENT CARRIED OUT IN PURSUANCE OF AN AGREEMENT WITH THE GOVERNMENT IT PRESUPPOSES THAT ASSESSEE WILL EARN SOME PROFITS FROM MERE DEVELOPMENT (WITHOUT OPERATING AND MAINTAINING) OF THE INFRASTRUCTURE FACILITY. NOW THE RELEVANT QUESTION THAT ARISES HERE IS THAT HOW WOULD AN ASSESSEE ENGAGED IN MERE DEVELOPMENTAL ACTIVITY (AND NO OPERATION) PURSUANT TO AN AGREEMENT WITH THE GOVERNMENT EARN PROFITS ? THE OBVIOUS ANSWER IS THAT THE ASSESSEE WILL RECOVER ITS COST OF DEVELOPMENT FROM THE GOVERNMENT OTHERWISE THE ENTIRE COST OF DEVELOPMENT WILL BE A LOSS IN ITS HANDS. THUS, IF DEDUCTION U/S 80-IA IS DENIED ON THE GROUND THAT THE ASSESSEE HAD RECEIVED PAYMENTS FROM GOVERNMENT, THEN AN ASSESSEE WHO IS ONLY A 'DEVELOPER' (AND NOT AN OPERATOR) WILL NEVER BE ENTITLED TO DEDUCTION U/S 80-IA, WHICH IS CLEARLY NOT THE INTENTION OF LEGISLATURE AS DISCUSSED BY THE BOMBAY HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. THUS, MERELY BECAUSE THE ASSESSEE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK IT CANNOT BE DENIED DEDUCTION UNDER SECTION 80-IA(4) . THE CONTENTION OF THE ASSESSEE FINDS STRENGTH FROM THE FOLLOWING JUDGMENTS: THE ITAT (MUMBAI) IN CASE OF ACIT V. BHARAT UDYOG LTD. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 24 SOT 0412 'AFTER THE AMENDMENT EFFECTED BY FINANCE ACT , 1999 W.E.F. 1ST APRIL, 2000, THE DEDUCTION UNDER S. 80-IA(4) HAS BECOME AVAILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, OR (II) MAINTAINING AND OPERATING, OR (III) DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. SUB-CL. (C) OF CL. (I) OF S. 80- IA(4) IS OBVIOUSLY APPLICABLE TO AN ENTERPRISE WHICH IS ENGAGED IN 'OPERATING AND MAINTAINING' THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995. IT IS NOT APPLICABLE TO THE CASE OF AN ENTERPRISE WHICH IS ENGAGED IN MERE 'DEVELOPMENT' OF 30 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD INFRASTRUCTURE FACILITY AND NOT ITS 'OPERATION' AND 'MAINTENANCE'. THEREFORE, THE QUESTION OF 'OPERATING AND MAINTAINING' OF INFRASTRUCTURE FACILITY BY SUCH ENTERPRISE BEFORE OR AFTER ANY CUT OFF DATE CANNOT ARISE. HOWEVER, IF THE CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE IS ACCEPTED, IT WOULD OBVIOUSLY/UNDERSTANDABLY LEAD TO MANIFESTLY ABSURD RESULTS. WHEN THE ACT PROVIDES FOR DEDUCTION UNDISPUTEDLY FOR AN ENTERPRISE WHO IS ONLY 'DEVELOPING' THE INFRASTRUCTURE FACILITY, UNACCOMPANIED BY 'OPERATING AND MAINTAINING' THEREOF BY SUCH PERSON, THERE CANNOT BE ANY QUESTION OF PROVIDING A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995. SINCE THE ASSESSEE IS ONLY A DEVELOPER OF THE INFRASTRUCTURE PROJECT AND IT IS NOT MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY, SUB-CL. (C) OF CL. (I) OF SUB-S. (4) OF S. 80-IA IS NOT APPLICABLE. THE INTERPRETATION OF REVENUE IS ABSURD ALSO IN VIEW OF THE RATIONALE OF THE PROVISIONS OF S. 80-IA(4)(I) . FROM THE ASST. YR. 2000-01, DEDUCTION IS AVAILABLE IF THE ASSESSEE CARRIES ON THE BUSINESS OF ANY ONE OF THE THREE TYPES OF ACTIVITIES. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSON WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALISE ITS COST ? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFEREE HAS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPRETATION CANVASSED BY THE REVENUE AUTHORITIES IS ACCEPTED, NO ENTERPRISE, CARRYING ON THE BUSINESS OF ONLY DEVELOPING THE INFRASTRUCTURE FACILITY, WOULD BE ENTITLED TO DEDUCTION UNDER S. 80-IA(4) , WHICH IS NOT THE INTENTION OF THE LAW. IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. WHEN THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER, I.E., TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING INFRASTRUCTURE FACILITY. OBVIOUS AS IT IS, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORISATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THEREFROM, AND HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. CONSIDERED AS SUCH, THE BUSINESS ACTIVITY OF THE NATURE OF BUILD AND TRANSFER ALSO FALLS WITHIN ELIGIBLE CONSTRUCTION ACTIVITY, THAT IS, ACTIVITY ELIGIBLE FOR DEDUCTION UNDER S. 80-IA INASMUCH AS MERE 'DEVELOPMENT' AS SUCH AND UNASSOCIATED/ UNACCOMPANIED WITH 'OPERATE' AND 'MAINTENANCE' ALSO FALLS WITHIN SUCH BUSINESS ACTIVITY AS IS ELIGIBLE FOR DEDUCTION UNDER S. 80-IA . THEREFORE, MERELY BECAUSE THE PRESENT ASSESSEE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK, IT CANNOT BE DENIED DEDUCTION UNDER S. 80-IA(4) . A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE A CONTRACTOR NO DOUBT; AND THE ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT AGENCIES 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 CONTRADICTORY TO THE TERM 'DEVELOPER'. ON THE OTHER HAND, RATHER S. 80- 31 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD IA(4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT 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 BEING A DEVELOPER. 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 NOT DETRACT THE ASSESSEE FROM THE POSITION OF BEING A DEVELOPER; NOR WILL IT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION UNDER S. 80-IA(4) . THEREFORE, AN ASSESSEE WHO IS ONLY ENGAGED IN THE DEVELOPING THE INFRASTRUCTURAL FACILITY I.E., ROAD AND NOT ENGAGED IN THE 'OPERATING AND MAINTAINING' THE SAID FACILITY IS ENTITLED TO THE BENEFITS OF THE DEDUCTION UNDER S. 80-IA(4) .-- PATEL ENGINEERING LTD. VS. DY. CIT (2004) 84 TTJ (MUMBAI) 646 FOLLOWED. PROVISIONS OF SUB-CL. (C) OF CL. (I) OF S. 80-IA(4) ARE INAPPLICABLE TO THE ASSESSEE WHICH IS ENGAGED IN MERE DEVELOPING OF THE INFRASTRUCTURE FACILITY AND, THEREFORE, AN ASSESSEE WHO IS ONLY ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND NOT IN 'OPERATING AND MAINTAINING' THE SAID FACILITY IS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER S. 80-IA(4) ; MERELY BECAUSE ASSESSEE IS REFERRED TO AS 'CONTRACTOR' IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY OR SOME BASIC SPECIFICATIONS ARE LAID DOWN, WOULD NOT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION UNDER S. 80-IA(4) .' IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACILITY WAS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE WAS NOT OPERATING THE INFRASTRUCTURE FACILITY. MERELY BECAUSE THE ASSESSEE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK IT COULD NOT BE DENIED DEDUCTION UNDER SECTION 80-IA(4) . THE CHENNAI BENCH OF TRIBUNAL IN CASE OF R.R. CONSTRUCTIONS, CHENNAI VS. DEPARTMENT OF INCOME TAX HELD THAT 'WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPRETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTERPRISE CARRYING ON THE BUSINESS OF ONLY DEVELOPING HE INFRASTRUCTURE FACILITY WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IA(4) , WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHICH DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION. IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER I.E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE FROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. 32 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THE INDORE BENCH OF THE TRIBUNAL IN CASE OF SANEE INFRASTRUCTURE PVT. LTD. VS. ACIT [138 ITD 433] HELD THAT 'AS PER OUR CONSIDERED VIEW, AFTER AMENDMENT BY THE FINANCE ACT , 2002 FOR CLAIM OF DEDUCTION U/S 80IA(4) INFRASTRUCTURE FACILITY IS ONLY REQUIRED TO BE DEVELOPED AND THERE IS NO CONDITION THAT ASSESSEE SHOULD ALSO OPERATE THE SAME. THUS, AFTER AMENDMENT, WHEN THE ASSESSEE IS NOT REQUIRED TO OPERATE THE FACILITY, THE PAYMENT FOR DEVELOPMENT OF SUCH INFRASTRUCTURE IS REQUIRED TO BE MADE BY THE GOVERNMENT ONLY. 'AFTER AMENDMENT, WHEN ASSESSEE UNDERTAKES TO DEVELOP THE INFRASTRUCTURE FACILITY ONLY, IT IS THE GOVERNMENT WHO WILL MAKE PAYMENT TO ASSESSEE IN RESPECT OF INFRASTRUCTURE FACILITY DEVELOPED BY IT IN TERMS OF AGREEMENT SO ENTERED WITH GOVERNMENT. THUS, WE DO NOT FIND ANY INFRINGEMENT OF CONDITIONS {OR CLAIM OF DEDUCTION' 6.7 THUS FROM THE ABOVE, IT IS CLEAR THAT THE FACT THAT THE ASSESSEE HAD RECEIVED PAYMENTS FROM THE GOVERNMENT IN PROGRESS OF ITS WORK HAS NO BEARING ON ELIGIBILITY OF DEDUCTION U/S 80- IA. FURTHER, THE REVENUE IN ALL THE GROUNDS HAS CONTENDED THAT THE CONTRACTS ENTERED INTO BY THE ASSESSEE WERE MERELY 'CONSTRUCTION CONTRACTS' SINCE THE ASSESSEE IS NOT EXPOSED TO ANY ENTREPRENEURIAL AND INVESTMENT RISK. IN THIS REGARD, THE AO HAS OBSERVED THAT THE ASSESSEE IS EXECUTING THE CONTRACT AGAINST PREDETERMINED REVENUE W.R.T THE ABOVE, IT IS SUBMITTED THAT UNDER THE IMPUGNED CONTRACTS, THE ASSESSEE WAS MERELY CARRYING OUT THE CIVIL CONSTRUCTION WORK. IT WAS RESPONSIBLE FOR OVERALL DEVELOPMENT OF THE INFRASTRUCTURE FACILITY. IT WAS MERELY PROVIDED WITH THE SITE WHICH IT HAD TO DEVELOP INTO AN INFRASTRUCTURAL FACILITY BY DEPLOYING HIS RESOURCES I.E. MATERIAL, PLANT & MACHINERY, LABOUR, SUPERVISORS ETC. IT WAS RESPONSIBLE FOR ANY DAMAGE/LOSS CAUSED TO ANY PROPERTY OR LIFE IN COURSE OF EXECUTION OF THE WORKS. IT WAS EVEN RESPONSIBLE FOR REMEDYING OF THE DEFECTS IN THE WORKS AT ITS COST. IT WAS ALSO REQUIRED TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY. HENCE, IT CANNOT BE SAID THAT THE CONTRACT WITH THE GOVERNMENT WAS TO CARRY OUT MERE CIVIL CONSTRUCTION. ATTENTION IN THIS REGARD IS INVITED TO THE FOLLOWING: (I) THE ITAT (AHMEDABAD) IN CASE OF SUGAM CONSTRUCTION (P) LTD. VS. ITO [56 SOT 45] HELD THAT 'IT IS ALSO GATHERED (A) THAT A DEVELOPER IS A PERSON WHO UNDERTAKES THE RESPONSIBILITY TO DEVELOP A PROJECT. (B) THAT A DEVELOPER IS THEREFORE NOT A CIVIL CONTRACTOR SIMPLICITOR. (C) THAT IF WE APPLY THE COMMERCIAL ASPECT, THEN A DEVELOPER HAS TO EXECUTE BOTH MANAGERIAL AS WELL AS FINANCIAL RESPONSIBILITY. (D) THAT THE ROLE OF A DEVELOPER, ACCORDING TO US, IS LARGER THAN THAT OF A CONTRACTOR. (E) THAT WHEN A PERSON IS ACTING AS A DEVELOPER, THEN HE IS UNDER OBLIGATION TO DESIGN THE PROJECT, IT IS ANOTHER ASPECT THAT SUCH DESIGN HAS TO BE APPROVED BY THE OWNER OF THE PROJECT, I. E. THE GOVERNMENT IN THE PRESENT CASE. (F) THAT HE HAS NOT ONLY TO EXECUTE THE CONSTRUCTION WORK IN THE CAPACITY OF A CONTRACTOR BUT ALSO HE IS ASSIGNED WITH THE DUTY TO DEVELOP, MAINTAIN AND OPERATE SUCH PROJECT. (G) THAT TO ASCERTAIN WHETHER A CIVIL CONSTRUCTION WORK IS ASSIGNED ON DEVELOPMENT BASIS OR CONTRACT BASIS CAN ONLY BE DECIDED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE AGREEMENT. ONLY ON THE BASIS OF THE TERMS AND CONDITIONS IT CAN BE ASCERTAINED ABOUT THE NATURE OF THE CONTRACT ASSIGNED THAT WHETHER IT IS A 'WORK CONTRACT' OR A 'DEVELOPMENT CONTRACT'. (H) THAT IN A DEVELOPMENT CONTRACT' RESPONSIBILITY IS FULLY ASSIGNED TO THE DEVELOPER FOR EXECUTION AND COMPLETION OF WORK. (I) THAT ALTHOUGH THE OWNERSHIP OF THE SITE OR THE OWNERSHIP OVER THE LAND REMAINS WITH THE OWNER 33 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD BUT DURING THE PERIOD OF DEVELOPMENT AGREEMENT THE DEVELOPER EXERCISE COMPLETE DOMAIN OVER THE LAND OR THE PROJECT. THAT A DEVELOPER IS NOT EXPECTED TO RAISE BILLS AT EVERY STEP OF CONSTRUCTION BUT HE IS EXPECTED TO CHARGE THE COST OF CONSTRUCTION PLUS MARK-UP OF HIS PROFIT FROM THE ASSIGNEE OF THE CONTRACT. (K) THAT A DEVELOPER IS THEREFORE EXPECTED TO ARRANGE FINANCES AND ALSO TO UNDERTAKE RISK. (I) THAT IN CONTRAST TO THE RIGHTS OF A 'CONTRACTOR' A 'DEVELOPER' IS AUTHORIZED TO RAISE FUNDS EITHER BY PRIVATE PLACEMENT OR BY FINANCIAL INSTITUTIONS ON THE BASIS OF THE PROJECT. THESE ARE FEW BROAD QUALITIES OF A DEVELOPER THROUGH WHICH THE CHARACTER OF A DEVELOPER CAN BE DEFINED. ' (II) ITAT(HYDERABAD) IN CASE OF KOYA AND CO. CONSTRUCTION (P) LTD. VS ACIT [51 SOT 203] HELD THAT 'THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL LONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BUSINESS RISK. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE THE COURT THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOWHOW, EXPERTISE AND FINANCIAL RESOURCES.' THUS, THE FACT THAT THE ASSESSEE DEPLOYS ITS RESOURCES (MATERIAL, MACHINERY, LABOUR ETC.) IN THE CONSTRUCTION WORK CLEARLY EXHIBITS THE RISKS UNDERTAKEN BY THE ASSESSEE. FURTHER, THE ASSESSEE VIDE THE AGREEMENTS HAS CLEARLY DEMONSTRATED THE VARIOUS RISKS UNDERTAKEN BY IT. THE ASSESSEE WAS TO FURNISH A SECURITY DEPOSIT TO THE EMPLOYER AND INDEMNIFY THE EMPLOYER OF ANY LOSSES/DAMAGE CAUSED TO ANY PROPERTY/LIFE IN COURSE OF EXECUTION OF WORKS. FURTHER, IT WAS RESPONSIBLE FOR THE CORRECTION OF DEFECTS ARISING IN THE WORKS AT IT COST. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY RISK. THE ITAT (HYDERABAD] IN CASE OF SIVA SWATHI CONSTRUCTION (P) LTD. (SUPRA) HELD THAT 'FURTHER REASON GIVEN BY THE LD. CIT(A) FOR DENYING DEDUCTION UNDER S.80IA TO THE ASSESSEE IS THAT THE ASSESSEE HAS NOT UNDERTAKEN ANY RISKS. THE OBSERVATIONS OF THE LD. CIT(A) IN THIS BEHALF ARE ALSO NOT VALID AND CORRECT. IT WAS CLEARLY MENTIONED IN THE AGREEMENT THAT THE ASSESSEE SHALL EXECUTE AND FURNISH INDEMNITY BOND FOR A PERIOD OF FOUR YEARS, INDEMNIFYING THE GOVERNMENT AGAINST ANY LOSS OR EXPENDITURE INCURRED, TO REPAIR ANY DEFECT NOTICED DUE TO FAULTY WORKING DONE BY THE CONTRACTOR OR SUBSTANDARD MATERIAL USED BY THE CONTRACTOR. FURTHER, IT IS ALSO MENTIONED IN THE CONTRACT AGREEMENT THAT THE ASSESSEE SHALL NOT CLAIM FOR ANY LOSS DUE TO FORESEEN CIRCUMSTANCES, INCLUDING SUSPENSION OF WORK DUE TO CAUSE. IT IS ALSO PROVIDED THAT IN THE EVENT OF ACCIDENT TO PEOPLE EMPLOYED BY THE ASSESSEE RESULTING IN COMPENSATION TO BE PAID AS PER THE WORKMEN'S COMPENSATION ACT THE SAME SHALL BE PAID BY THE CONTRACTOR, VIZ. THE ASSESSEE ONLY. IN VIEW OF THE VARIOUS SPECIFIC CLAUSES IN THE AGREEMENT FASTENING THE RISKS TO BE UNDERTAKEN BY THE ASSESSEE, DISCUSSED ABOVE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT UNDERTAKEN ANY RISK. 6.8 FROM THE ABOVE, IT IS CLEAR THAT THE CONTENTION OF THE AO THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY ENTREPRENEURIAL AND INVESTMENT RISK IS AN INCORRECT 34 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD INTERPRETATION OF THE FACTS. LASTLY, WITH REGARD TO THE PROJECT O&M, BANGALORE (ON WHICH A DEDUCTION OF RS. 35,16,9411- WAS CLAIMED), IT IS SUBMITTED THAT IT IS AN OPERATION AND MAINTENANCE PROJECT, TO WHICH EXPLANATION TO SECTION 80-IA(13) DOES NOT APPLY. EXPLANATION TO SECTION 80- IA(13) MERELY DISTINGUISHES BETWEEN A DEVELOPER AND WORKS CONTRACTOR. IT CLARIFIES THAT A WORKS CONTRACTOR SHALL NOT BE INCLUDED IN THE CATEGORY OF 'DEVELOPER' U/S 80-1A. THUS, THE EXPLANATION CLEARLY DOES NOT APPLY TO O&M PROJECTS. HENCE, DEDUCTION OF RS. 35,16,9411- CLAIMED FOR THE AFORESAID PROJECT U/S 80-IA CANNOT BE DENIED BY INVOKING THE EXPLANATION TO SECTION 80- 1A . 7. FROM THE PERUSAL OF THE TERMS AND CONDITIONS IN THE AGREEMENT, IT IS CLEAR THAT THE ASSESSEE WAS NOT A WORKS CONTRACTOR SIMPLICITOR AND WAS A DEVELOPER AND HENCE EXPLANATION TO SECTION 80- IA(13) DOES NOT APPLY TO THE ASSESSEE. FURTHER, IN ADDITION TO DEVELOPING THE INFRASTRUCTURE FACILITY, THE ASSESSEE WAS EVEN OPERATING AND MAINTAINING THE SAME. THUS, CLEARLY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-1A. IN OUR CONSIDERED VIEW DO NOT FIND ANY REASON TO UPHOLD THE ORDER OF LD. CIT(A). HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. WE ALSO FIND THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL AS THAT OF THE ABOVE CASE OF THE ASSESSEE'S OWN CASE (SUPRA). IN THE LIGHT OF ABOVE REASONING, WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. WE UPHOLD THE SAME. HENCE, THIS GROUND OF REVENUE'S APPEAL IS DISMISSED. AS HONBLE ITAT IN ASSESSEES OWN CASE IN A RECENT DECISION HAS UPHELD ITS ELIGIBILITY OF CLAIMING DEDUCTION U/S 80IA, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, KOLKATA, A.O. IS DIRECTED TO ALLOW ASSESSEES CLAIM OF DEDUCTION OF RS.54,73,47,509/- U/S 80- IA. 12.2. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS AND SUPPORTED THE ORDER OF THE LD. CIT(A). THE LD. CIT D/R, ON THE OTHER HAND, OPPOSED THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE CANNOT CLAIM DEDUCTION U/S 80-IA(4) OF THE ACT. ON A QUERY FROM THE BENCH, THOUGH NOT LEAVING HIS GROUND HE SUBMITTED THAT THE ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS AND THAT THE ISSUE WAS RESOLVED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, WE RESPECTFULLY FOLLOW THE PROPOSITION OF LAW LAID DOWN BY THE CO-ORDINATE BENCH OF THE ITAT IN THE ASSESSEES OWN CASE ON THE VERY SAME ISSUE AND UPHOLD THE ORDER OF THE LD. CIT(A) THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE ACT. FURTHER, WE FIND FROM THE IMPUGNED ASSESSMENT YEAR 2011-12, THAT 35 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD THE ASSESSEE CLAIMED DEDUCTION OF RS.54,73,47,509/- U/S 80-IA OF THE ACT, IN RESPECT OF THE FOLLOWING PROJECTS:- SL.N O. NAME OF THE PROJECTS CONTRACT NUMBER DEDUCTION CLAIMED (RS) REMARKS 1. PUBLIC WORKS DEPARTMENT, NEW DELHI 2401 AND 2407 8,14,00,294 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA 2010-11 2. DELHI METRO RAIL CORPORATION 2418 2,83,51,702 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA IN A.Y. 2010-11 3. KOLKATA MUNICIPAL CORPORATION 2067-68 1,05,01,342 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA IN A.Y. 2010-11 4. HYDERABAD METROPOLITAN WATER SUPPLY AND SEWERAGE BOARD 2303 4,88,12,831 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA 2010-11 5. MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY 2304-2305 6,40,40,151 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA IN A.Y. 2010-11 6. INDORE MUNICIPAL CORP. 2339 23,92,05,475 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA IN A.Y. 2010-11 7. KOLKATA METRO RAIL CORPORATION LTD 2452-2453 5,69,34,916 NEW PROJECT 8. BANGALORE DEVELOPMENT AUTHORITY 2463 1,81,00,798 NEW PROJECT TOTAL 54,73,47,509 12.2.1. AS CAN BE SEEN FROM THE ABOVE CHART, THE PROJECTS FROM SERIAL NO. 1 TO 2 HAVE BEEN CONSIDERED AS ELIGIBLE PROJECTS FOR CLAIM OF DEDUCTION U/S 80-IA(4) BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS. ONLY IN THE CASE OF KOLKATA METRO RAIL CORPORATION AT S. NO. 7 AND BANGALORE DEVELOPMENT AUTHORITY AT S. NO. 8, THE PROJECTS WERE NOT CONSIDERED EARLIER AS TO WHETHER THEY ARE PROJECTS ON WHICH THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE ACT. ON A QUERY FROM THE BENCH, THE ASSESSEE SUBMITTED THAT THE DETAILS OF THE DUTIES AND RESPONSIBILITIES OF THE ASSESSEE COMPANY AS A CONTRACTOR HAVE BEEN PLACE IN THE PAPER BOOK. IN OUR VIEW, THIS NEEDS TO BE EXAMINED BY THE ASSESSING OFFICER AS THE ASSESSING OFFICER HAS NOT CONSIDERED THE SAME. FOR THE EARLIER ASSESSMENT YEARS 2011-12 & 2012-13, THIS BENCH OF THE TRIBUNAL UNDER SIMILAR CIRCUMSTANCES HAS RESTORED FOUR PROJECTS TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING WHETHER THEY FALL WITHIN THE KEN OF EXEMPTION U/S 80-IA OF THE ACT. THESE ARE AS FOLLOWS:- 36 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD A) DEVELOPMENT OF BUST TERMINAL COMPLEX FOR KARNATAKA STATE TRANSPORT CORPORATION AT BANGALORE B) DEVELOPMENT OF LAUNCH PAD FOR GSLV MARK III FACILITIES OF SATISH DHAWAN SPACE CENTRE SHAR AT SRIHARIKOTA, ANDHRA PRADESH C) DEVELOPMENT OF A TURBINE BUILDING, EMERGENCY POWER SUPPLY BUILDING, CABLE AND PIPE TUNNEL ETC. FOR KUNDANKULAM NUCLEAR POWER PROJECT. D) DEVELOPMENT OF A JETTY AT THE NAVAL BASE AT VISAKHAPATNAM. 12.2.2. THE ASSESSING OFFICER IN AN ORDER PASSED U/S 143(3) R.W.S. 254 OF THE ACT, DT. 21/11/2018 HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AND GRANTED DEDUCTION U/S 80- IA (4) OF THE ACT, EXCEPT A SMALL PORTION OF RS.11,93,413/-. CONSISTENT WITH THE VIEW OF THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS, WE SET ASIDE THE ISSUE OF GRAND OF DEDUCTION U/S 80-IA(4) OF THE ACT, TO THE ASSESSING OFFICER, ON THE FOLLOWING PROJECTS:- 1) KOLKATA MUNICIPAL CORPORATION 2) BANGALORE DEVELOPMENT AUTHORITY AS REGARDS DEDUCTION CLAIMED ON ALL OTHER SIX PROJECTS AT S. NO. 1 TO 6 IN THE TABLE ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 13. IN THE RESULT, GROUND NO. 1 OF THE REVENUE IS ALLOWED IN PART. 14. GROUND NO. 2, IS ON THE DISALLOWANCE MADE U/S 14A OF THE ACT. 14.1. THE LD. CIT(A) APPLIED THE DECISION OF THE HONBLE ITAT KOLKATA IN THE CASE OF REI AGRO LTD. VS. DCIT, CC-XXVII; ITA NO. 1331/KOL/2011 ; WHICH WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT AND DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A OF THE ACT, TO RS.55,565/-. AS THE LD. CIT(A) HAS APPLIED THE DECISION OF THE JURISDICTIONAL TRIBUNAL, WHICH WAS LATER UPHELD BY THE HONBLE HIGH COURT WE FIND NO INFIRMITY IN THE SAME. GROUND NO. 2 OF THE REVENUE IS DISMISSED. 14.2. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS ALLOWED IN PART. 37 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD 15. WE NOW TAKE UP ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2012-13 IN ITA NO. 1573/KOL/2017. 16. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 29/11/2012, DECLARING TOTAL INCOME OF RS.1,61,99,497/-. THEREAFTER IT REVISED IT RETURN OF INCOME ON 01/07/2014, DECLARING TOTAL INCOME OF RS.24,45,12,730/-. THE ASSESSING OFFICER IN AN ORDER PASSED U/S 143(3) OF THE ACT, ON 31/03/2014, INTERALIA MAKING THE FOLLOWING DISALLOWANCES/ADDITIONS:- A) BOGUS PURCHASE B) DEDUCTION U/S 80-IA(4) OF THE ACT C) DISALLOWANCE U/S 14A R.W.R. 8D D) DISALLOWANCE OF EMPLOYEES CONTRIBUTION TOWARDS PF & ESI 17. THE LD. CIT(A) ALLOWED ALL THE GROUNDS OF THE ASSESSEE EXCEPT THE DISALLOWANCE OF PURCHASES FROM M/S. BRYTEX INDUSTRIES & M/S. NIKHIL ENTERPRISES. BOTH THE PARTIES BEFORE US HAVE SUBMITTED THAT THE ARGUMENTS ARE THE SAME AS THOSE MADE FOR THE ASSESSMENT YEAR 2011-12, ON THE SAME ISSUE AND AS THE FACTS ARE IDENTICAL. NO SEPARATE ARGUMENTS ARE ADVANCED. 18. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 19. DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES AND SUB-CONTRACT EXPENSES. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL FOR THE ASSESSMENT YEAR 2011-12. THE FACTS, ARGUMENTS AND THE CONCLUSIONS OF THE BENCH APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE ALLOW THIS GROUND OF THE ASSESSEE. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. 20. WE NOW TAKE UP THE REVENUE APPEAL IN ITA. NO. 1765/KOL/2017 FOR ASSESSMENT YEAR 2012-13. 38 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD 21. GROUND NO. 1 IS AGAINST THE DELETION OF DISALLOWANCE MADE U/S 80-IA(4) OF THE ACT. THE PROJECTS ON WHICH DEDUCTION IS CLAIMED ARE AS FOLLOWS:- SL.N O. NAME OF THE PROJECTS CONTRACT NUMBER DEDUCTION CLAIMED (RS) REMARKS 1. NATIONAL HIGHWAY AUTHORITY OF INDIA 2124 10,27,17,740 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA 2010-11 2. INDORE MUNICIPAL CORP 2339 1,53,70,937 ALREADY ALLOWED BY HONBLE ITAT, KOLKATA IN A.Y. 2010-11 3. BANGALORE DEVELOPMENT AUTHORITY 2463 99,79,770 NEW PROJECT STARTED IN A.Y. 2011- 12. AGREEMENT ENCLOSED AT PAGES 80-140 WITH THE PAPERBOOK OF A.Y. 2011-12 4. KOLKATA MUNICIPAL CORPORATION 2578 25,84,151 NEW PROJECT [AGREEMENT ENCLOSED AT PAGES 1-97 OF THE PAPERBOOK] TOTAL 13,06,52,598 21.1. AS REGARDS NATIONAL HIGHWAY AUTHORITY OF INDIA AND INDORE MUNICIPAL CORPORATION, THE DEDUCTION, IN OUR VIEW HAS BEEN RIGHTLY ALLOWED BY THE LD. CIT(A) AS IT HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE ON THE VERY SAME ISSUE FOR THE EARLIER ASSESSMENT YEARS. CONSISTENT WITH THE VIEW TAKEN BASED ON THE SAME ISSUE FOR THE ASSESSMENT YEAR 2011-12, WE UPHOLD THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF THESE TWO PROJECTS. 22. COMING TO THE CLAIM OF THE DEDUCTION U/S 80-IA(4) FOR BANGALORE DEVELOPMENT AUTHORITY AND KOLKATA MUNICIPAL CORPORATION, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AS THE TERMS AND CONDITIONS OF THE CONTRACT AHS NOT BEEN EXERCISED. THE ASSESSING OFFICER IS DIRECTED TO GRANT DEDUCTION U/S 80-IA(4) OF THE ACT, IN CASE THESE PROJECTS FALL WITHIN THE KEN OF THE SECTION. 23. IN THE RESULT GROUND NO. 1 & 3 OF THE REVENUE ARE ALLOWED IN PART. 24. GROUND NO. 2, IS AGAINST THE DELETION OF DISALLOWANCE U/S 14A OF THE ACT. 24.1. WE FIND THAT THE LD. CIT(A) APPLIED THE DECISION OF THE HONBLE ITAT KOLKATA IN THE CASE OF REI AGRO LTD. VS. DCIT, CC-XXVII; ITA NO. 1331/KOL/2011 ; WHICH WAS UPHELD 39 ITA NO. 1572/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1573/KOL/2017 ASSESSMENT YEAR: 2012-13 ITA NO. 1764/KOL/2017 ASSESSMENT YEAR: 2011-12 ITA NO. 1765/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. SIMPLEX INFRASTRUCTURES LTD BY THE HONBLE JURISDICTIONAL HIGH COURT AND DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A OF THE ACT, TO RS.6,98,400/-. AS THE LD. CIT(A) HAS APPLIED THE DECISION OF THE JURISDICTIONAL TRIBUNAL, WE FIND NO INFIRMITY IN THE SAME. GROUND NO. 2 OF THE REVENUE IS DISMISSED. 25. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND APPEALS OF THE REVENUE ARE ALLOWED IN PART. KOLKATA, THE 1 ST DAY OF MARCH, 2019. SD/- SD/- [S.S. GODARA] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01.03.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. M/S. SIMPLEX INFRASTRUCTURES LTD 27, SHAKESPEARE SARANI KOLKATA 700 017 2. ADDL. COMMISSIONER OF INCOME TAX, RANGE-12(2) KOLKATA 3. ADDL. COMMISSIONER OF INCOME TAX, RANGE-12 KOLKATA 4. DCIT, CC-3(4), KOLKATA 5. CIT(A)- 6. CIT- , 7. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES