SHRI SATPAL SINGH SETHI L/H OF LATE SHRI HARMEETSINGH BHAGWANSINGH SETHI , NAGPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX -1, NAGPUR

ITA 24/NAG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5408 (ITAT-NAGPUR)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MILIND BHUSARI SHRI R K BARAL
• Keywords: Difference of opinion; Competent authority; Change of opinion
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA N O. 24 /NAG. / 2018 ( ASSESSMENT YEAR : 2008 - 09 ) SHRI SATPAL SINGH SETHI L/H OF LATE SHHRI HARMEET SINGH BHAGWANSINGH SETHI 1 ST FLOOR, NARMADA PLAZA, OPPOSITE CHILDREN PARK, DHARAMPETH, NAGPUR - 440 010 PAN AFFPS 6376 H APPELLANT V/S PRINCIPAL COMMISSIONER OF INCOME TAX - 2, AAYKAR BHAWAN, TELENKHEDI ROAD, CIVIL LINES, NAGPUR - 440 010 .... RESPONDENT A S SESSEE BY : SHRI ABHAY AGRAWAL REVENUE BY : SHRI MILIND BHUSARI SHRI R. K. BARAL DATE OF HEARING 08.05.2018 DATE OF ORDER 02.07 .2018 O R D E R PER SHAMIM YAHYA , A .M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 AND PERTAINS TO THE ASSESSMENT YEAR 2008 - 09. 2. THE GROUND S RAISED BY THE ASSESSEE ARE REPRODUCED BELOW: 1. THE LEARNED PR.CIT HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN WRONGLY ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT. 2 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI 2. THAT ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE ASSUMPTION OF JURISDICTION BY THE LEARNED PR.CIT U/S 263 IS MERELY A CHANGE OF OP INION ON THE SAME SET OF FACTS AND DESERVES TO BE QUASHED AND SET ASIDE. 3. THAT THE LEARNED PR.CIT ERRED IN GIVING DIRECTIONS U/S 263 OF THE ACT TO THE LEARNED AQ, ALTHOUGH THE ISSUES WERE DULY CONSIDERED BY THE LEARNED AO PURSUANT TO DIRECTIONS OF HON' BLE NAGPUR TRIBUNAL VIDE ORDER DATED 28/08/2015 (ITA NO.115/NAG/2013) IN ASSESSEE'S OWN CASE FOR AY 2008 - 09 AND AFTER EXAMINING ALL THE DOCUMENTS/SUBMISSIONS, THE LEARNED AO FOUND THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80LA(4)OFTHEACT. 4. WITHOUT PREJUD ICE TO AFORESAID GROUNDS, THE LEARNED PR.CIT HAS ERRED IN OBSERVING THAT THE ASSESSEE DID NOT BEAR THE COST OF THE PROJECT/CONTRACT, WHICH IS INCORRECT AND CONTRARY TO THE EVIDENCES PLACED ON RECORD. 3. IN THIS CASE EARLIER AN ORDER WAS PASSED BY THE ITAT , WHEREIN THE ITAT HAD MODIFIED AN ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX U/S. 263 FOR THE SAME YEAR IN THE CASE OF THE SAME ASSESSEE VIDE ORDER DATED 28.08.2015. IN THE ADJUDICATION T HE ITAT HAD HELD AS UNDER: 8. LEARNED COMMISSIONER HAS PE RUSED THE SAID ASSESSMENT ORDER BUT HE WAS OF THE OPINION THAT INSTEAD OF CONSIDERING THE CORRECTNESS OF THE COMPUTATION OF THE DEDUCTION THE ASSESSING OFFICER WAS EXPECTED TO FIRST EXAMINE WHETHER THE ASSESSEE W AS ELIGIBLE FOR THE DEDUCTION AS PRESCRIBED UNDER SECTION 80IA(4) OF I.T. ACT. WE HAVE ALREADY MENTIONED THE REASONS GIVEN BY LEARNED COMMISSIONER TO INVOKE THE PROVISIONS OF SECTION 263 OF I.T. ACT IN THE PRESENT CASE. WITHOUT REPEATING THOSE REASONS, IN SHORT, THE MAIN BASIS OF HOLDING THAT THE AS SESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA(4), LEARNED COMMISSIONER HAS PLACED RELIANCE ON A DECISION OF A LARGER BENCH OF ITAT, MUMBAI IN THE CASE OF B.T. PATIL AND SONS, BELGAON P. LTD. 35 SOT 171 (MUM.) (LB) IT IS TRUE THAT WHEN THE LE ARNED COMMISSIONER HAS DIRECTED NOT TO ALLOW THE CLAIM OF DEDUCTION, THE DECISION OF B.T. PATIL .AND SONS (SUPRA) WAS IN EXISTENCE. HOWEVER, THE LATEST POSITION IS THAT AFTER THE DECISION OF HON'BLE BOMBAY HIGH COURT PRONOUNCED IN THE CASE OF ABG HEAVY IND USTRIES 322 ITR 323 THE VIEW TAKEN BY THE LARGER BENCH WAS REVERSED. IT IS VERY MUCH EVIDENT FROM A SUBSEQUENT ORDER OF ITAT - B BENCH, PUNE PRONOUNCED IN THAT VERY CASE OF B.T. PATIL AND SONS BELGAON P. LTD. (ITA NO. 1408 & 1409/PN/2003) ASSESSMENT YEAR 200 0 - 01 AND 2001 - 02 ORDER DATED 28 - 02 - 2013 THAT WHILE PASSING THE ORDER UNDER SECTION 255(4) OF I.T. ACT TO GIV E EFFECT OF THE THIRD MEMBER DECISION IT WAS HELD THAT THE ISSUE OF 80IA(4) WAS SUB - JUDICE BEFORE THE HON'BLE BOMBAY HIGH COURT AND AN ORDER WAS MEANWHILE PRONOUNCED BY THE HON'BLE COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA). DUE TO THAT REASON, THE SAID ORDER OF LARGER BENCH WAS RECALLED. THE ITAT, PUNE HAS FINALLY CONCLUDED THAT THE LAW AS INTERPRETED BY THE THIRD MEMBER WAS NO LONGE R A GOOD LAW. AFTER CONSIDERING FEW OTHER DECISIONS, NAMELY, AYUSH AJAY 3 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI CONSTRUCTIONS 79 ITD 213 AND FOLLOWING THE DECISION OF HON'BLE BOMBAY HIGH COURT IT WAS FINALLY CONCLUDED THAT THE SAID ASSESSEE WAS ENTITLED FOR THE CLAIM OF DEDUCTION UNDER THE PROVI SIONS OF SECTION 80IA. 8 . 1 BECAUSE OF THE REASON THAT B.T. PATIL AND SON'S CASE WHICH WAS HEAVILY RELIED UPON BY THE LEARNED COMMISSIONER WAS HELD AS NO MORE A GOOD LAW AND THAT ORDER WAS SUBSEQUENTLY MERGED WITH THE ORDER OF ITAT, PUNE DATED 28 - 02 - 2013 AS DISCUSSED ABOVE, THEREFORE, ONE OF THE BASIS FOR WHICH THE LEARNED COMMISSIONER EXERCISED REVISIONARY POWERS IS NO MORE IN EXISTENCE. HOWEVER, THE OTHER REASON FOR INVOCATION OF REVISIONARY POWER GIVEN BY LEARNED COMMISSIONER WERE THAT THE ASSESSE E WAS NOT FUNCTIONING AS A DEVELOPER OF THE PROJECT BUT MERELY AS A C ONTRACTOR. THIS ASPECT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AS WE HAVE ALREADY MENTIONED HEREIN ABOVE. THE ALLEGATION OF THE LEARNED COMMISSIONER WAS THAT THE CONTRACT BETWEEN T HE ASSESSEE AND MSEDCL WAS A 'CONTRACT AGREEMENT'. THE ASSESSEE WAS SUBMITTING THE MONTHLY BILLS AND RECEIVING ABOUT 90% OF THE BILLING AMOUNT. DUE TO THE SAID REASON THE LEARNED COMMISSIONER HAS APPLIED THE EXPLANATION INSERTED BY FINANCE ACT, 2007 WHICH WAS WITH EFFECT FROM 01 - 04 - 2000. AS PER THE SAID EXPLANATION, IT IS PROVIDED IN THE STATUTE THAT FOR REMOVAL OF DOUBT IT WAS DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB - SECTION (4) OF SECTION 80I A WHICH IS IN THE NATURE OF WORKS CONTRACT'. ACCORDING, TO US THE REVENUE DEPARTMENT IS EXPECTED TO EXAMINE F EW THINGS TO ASCERTAIN WHETHER THE ASSESSEE IS A DEVELOPER OR A CONTRACTOR SUCH AS THE UTILIZATION OF F UNDS, DEVELOPMENT OF PROJECT, THE NATURE OF V EN TURE, THE SUBSTANCE OF THE TRANSACTION ETC. MOREOVER THE PROVISIONS OF SECTION - 80IA ALSO REQUIRE A FINDING TO THE EFFECT THAT WHETHER THE ASSESSEE AS AN ENTERPRISE CARRIED OUT THE BUSINESS OF DEVELOPING A PROJECT OR THE ASSESSEE HAS DEVELOPED, MAINTAI N AND ALSO OPERATING THE PROJECT. THE PROVISIONS ARE APPLICABLE IN RESPECT OF THE PROJECT WHICH IS RELATED TO DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, ONE OF THE PRIMARY REQUIREMENT IS THAT AN ASSESSEE IS ENTITLED FOR THE CLAIM OF DEDUCTION IF HE HAS D EVELOPED THE PROJECT. T HE HON'BLE BOMBAY HIGH COURT HAS, THEREFORE, MENTIONED THAT THE ASSESSEE IS EXPECTED TO SHOULDER OUT THE INVESTMENT AND ALSO SUBJECTED TO TECHNICAL RISK IN RESPECT OF THE WORK EXECUTED. SUCH A DEVELOPER IS LIABLE FOR LIQUIDAT ED DAMAGES IF FAILED TO FULFILL THE OBLIGATION LAID DOWN IN THE AGREEMENT. TO KEEP BREVITY IN MIND IT IS NOT ADVISABLE TO DISCUSS ALL THE PARAMETERS IN THIS REGARD BUT TO LEAVE IT TO THE REVENUE AUTHORITIES TO EXAMINE THE ISSUE IN ITS SO AS TO ARRIVE AT TH E CORRECT JUDICIAL DECISION. IT IS ALSO WORTH TO MENTION THAT THE GUIDELINES ENUMERATED IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) ARE REQUIRED TO BE FOLLOWED WHILE DECIDING THIS ISSUE. 8.2 BEFORE WE CONCLUDE THIS ISSUE AND GIVE DIRECTIONS, IT IS W ORTH TO MENTION THAT IN THE GROUNDS OF APPEAL AS REPRODUCED ABOVE THE APPELLANT HAS NOT CHALLENGED THE JURISDICTION INVOKED BY LEARNED COMMISSIONER UNDER SECTION 263 OF I.T. ACT. IN THE GROUNDS, THIS APPELLANT HAS ONLY CHALLENGED THAT THE LEARNED COMMISSIO NER HAS WRONGLY WITHDRAWN THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT. THEREFORE, THIS IS NOT THE CASE OF THE ASSESSEE THAT ON ONE HAND THE ASSESSING OFFICER HAS RIGHTLY GRANTED THE DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT AND ON 4 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI THE OTHER HAND THERE WAS A CHANGE OF OPINION OF LEARNED COMMISSIONER WHILE PASSING THE ORDER UNDER SECTION 263 OF I.T. ACT. THEREFORE, AFTER RECORDING THESE REASONS , WE ARE OF THE CONSCIENTIOUS VIEW THAT THE ISSUE SHOULD BE RE - EXAMINED BY THE ASSESSING OFFICER. WE, THEREFORE, MODIFY THE DIRECTIONS GIVEN BY THE LEARNED COMMISSIONER IN PARA 5 OF THE IMPUGNED ORDER PASSED UNDER SECTION 263 DATED 31 .01. 2013. WE ARE NOT UPHOLDING THE DIRECTIONS OF LEARNED CIT TO DISALLOW THE CLAIM IN ITS ENTIRETY BUT MODIFY THE SAME AND HEREBY DIRECT THE ASSESSING OFFICER TO EXAMINE THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT IN THE LIGHT OF THE DISCUSSION MADE HEREIN ABOVE. THE ASSESSING OFFICER IS, THEREFORE, EMPOWERED TO ADJUDICATE AS PER LAW. 4. PURSUANT TO THE ABOVE DIRECTION, THE ASSESSING OFFICER HAS PASSED AN ORDER IN THIS CASE VIDE ORDER DATED 08.12.2016. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER REFERRED TO THE DIRECTIONS OF THE ITAT TO FOLLOW THE GUIDELINES IN THE CASE OF ABG HEAVY IND UST RIES LTD. 322 ITR 323 . THEREAFTER, HE REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT AND HELD AS UNDER: THE FACTS OF THE CASE WERE TESTED AGAINST THE PARAMETERS FIXED BY ABOVE JUDICIAL DECISIONS. THE ASSESSEE'S SUBMISSION IS KEPT ON RECORD. O N VERIFICATION OF RECORDS SUBMITTED BY THE ASSESSEE, FOLLOWING FACTS WERE EMERGED: 1. IT IS SEEN FROM THE INVITATION TO BID, CONTRACT IS A ALLOCATED ON TURNKEY BASIS INCLUDING SUPPLY, ERECTION, TESTING, TRANSPORTATION, CONSTRUCTION AND C OMMISSIONING WITH BANK GURANTEE FOR DEFECT LIABILITY PERIOD FOR WORK DONE. WHICH IS APPARENT FROM TENDER NOTICE BEARING NO 'SE/O&M/WRD/TECH /07 - 8/T - 01 TO T - 07', DATED 15 - 12 - 2007. 2. COMPLETE PAYMENT WILL BE RELIEVED AFTER COMPLETION OF THE GURANTEE TEST AN D COMMISSIONING OF THE COMPLETE WORK AND ISSUE OF THE TAKING OVER CERTIFICATE; BALANCE PAYMENT WILL BE RELEASED AFTER SUCCESSFUL COMPLETION OF WORK. 3. THE CONTRACTS ARE AWARDED TO THE ASSESSEE ON TURNKEY BASIS AND ASSESSEE IS SOLELY RESPONSIBLE FOR COMP LETION OF CONTRACT. 4. ALL THE WORK HAS TO BE PERFORMED AS PER STANDARD METHODS AND SPECIFICATIONS AND THE FINAL INSPECTION UPON THE COMPLETION OF WORK WILL BE PERFORMED BY THIRD PARTY. 5. THE CONTRACTOR SHALL GURANTEE THAT THE FACILITIES ARE FREE FROM DEFECTS IN WORKMANSHIP, MATERIALS AND MANUFACTURER'S DEFECT FOR THE CERTAIN PERIOD. 6. DAMAGES ARE TO BE RECOVERED FROM THE CONTRACTOR UPON FAILURE OF ACHIEVING THE TIMELY COMPLETION OF THE PROJECT. FROM THE ABOVE POINTS, DIRECTION OF ITAT NAGPUR IN THI S CASE AND GUIDELINES ENUMERATED BY HON'BLE BOMBAY HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD, IT EMERGES THAT THE ASSESSEE IS RESPONSIBLE FOR UTILIZATION OF FUNDS, DEVELOPMENT OF PROJECT, NATURE OF VENTURE THE SUBSTANCE OF TRANSACTION. THE ASSESSEE IS ALSO RESPONSIBLE FOR RISK COVER, DAMAGES OCCURRED DURING COMPLETION OF 5 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI PROJECT. HENCE, AS PER THE DIRECTIONS GIVEN BY HON'BLE ITAT, NAGPUR AND JUDICIAL PRONOUNCEMENT WHICH ARE TO BE FOLLOWED FOR DECIDING THE ISSUES, THE ASSESSEE IS FOUND ELIGIBLE FOR DEDU CTION U/S 80IA(4) OF THE I. T. ACT, 1961. THE ASSESSEE HAS NOT CHALLENGED ADDITIONS MADE WHILE PASSING ORDER U/S. 143(3) OF THE I. T. ACT, 1961. HENCE INCOME ASSESSED U/S. 143(3) DATED 30.12.2010 REMAIN UNCHANGED. 5. THEREAFTER IN THE PRESENT IMPUGNED ORDER, THE LD. COMMISSIONER OF INCOME TAX REFERRED TO THE ITAT ORDER AND OBSERVED THAT IT IS APPARENT THAT THE ITAT DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CASE PARTICULARLY FROM THE VIEW POINT WHETHER THE ASSESSEE IS EXPECTED TO SHOULDER OUT THE INV ESTMENT PART IN EXECUTION OF THE CONTRACT AWAITED TO HIM, INTERALIA. THEREAFTER, THE LD. COMMISSIONER OF INCOME TAX REFERRED TO B ID D OCUMENT (VO.1) OF MSEDCL AND NOTED THAT THE ASSESSEE HAD REGULARLY RAISED RUNNING BILLS ON MSEDCL AND HAD EXECUTED THE CONT RACT FROM FUNDS MADE AVAILABLE TO THE ASSESSEE BY MSEDCL. HE WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MADE ANY SUBSTANTIAL INVESTMENT IN EXECU TING THE CONTRACT. IN RESPONSE T O T HE LD. COMMISSIONER OF INCOME TAX S ENQUIR Y IN THIS REGARD , THE ASSESSEE HA D GIVEN THE FOLLOWING RESPONSE: WE ARE HEREWITH SUBMITTING THE STATEMENT OF BILLS RAISED TO THE DEPARTMENT COPY ENCLOSED HEREWITH. IT IS CLEAR THAT DEPARTMENT IS NOT GIVING ANY ADVANCE TO THE ASSESSEE AGAINST THE ORDER. ASSESSEE HAS TO COMPLETE THE WORK B Y HIS OWN INVESTMENT AFTER COMPLETION OF THE WORK THE INSPECTION WAS TAKEN BY THE COMPETENT AUTHORITY. THEN WE HAVE TO ISSUE COMPLETION CERTIFICATE DULY SIGN BY COMPLETION AUTHORITY THE COPY OF CERTIFICATE WERE ALSO ENCLOSED HEREWITH THE DOCUMENT SUBMITTED TO THE INCOME TAX OFFICER AFTER THE SUBMISSION OF THE CERTIFICATE THE DEPARTMENT TAKE OVER THE WORK AND THEN THEY WE RAISED THE BILL. AFTER SUBMITTING THE BILL THE DEPARTMENTS AFTER DEDUCTION 10% RETENTION MONEY NEARLY BILLS WHERE PAID AFTER 3 MONTHS AFTE R SUBMISSION OF THE FINAL BILLS AND MAKE THE REMAINING PAYMENT TO THE ASSESSEE FROM HIS OWN FUNDS.' 6. HOWEVER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT CONVINCED. HE OBSERVED THAT THE PERIOD OF THREE MONTHS WAS QUITE NORMAL IN GOVERNMENT SECTOR CONTRACT PAYMENT TO CONTRACTOR. THE LD. COMMISSIONER OF INCOME TAX PROCEEDED TO CONCLUDE AS UNDER: 6 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI TH EREFORE, IN EXERCISE OF THE POWERS VESTED IN ME UNDER SECTION 263 OF THE ACT, I SET ASIDE THE ORDER ON THE ABOVE ISSUE WITH A DIRECTION TO EXAMINE THE MATTER IN THE LIGHT OF ABOVE DISCUSSION AND TO PASS APPROPRIATE ORDER. THE ASSESSING OFFICER MAY ALSO EXA MINE THE CASE FROM THE OTHER PERSPECTIVES ARISING OUT OF THE DECISION OF THE HON. ITAT. THE ASSESSEE SHOULD BE GIVEN A FAIR CHANCE OF BEING HEARD. 7. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS DULY FOLLOWED THE DIRECTION OF THE ITAT IN THIS CASE AND THERE IS NO INFIRMITY THEREIN. HE SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS EXERCISED JURISDICTION WHICH IS NOT AT ALL SUSTAINABLE. HE SUBMITTED THAT THE DIRECTIONS OF THE LD. COMMISSIONER OF INCOME TAX, IN FACT, AMOUNT TO THE LD. COMMISSIONER OF INCOME TAX SITTING IN JUDGMENTS OVER THE DIRECTIONS OF TH E ITAT. IN THIS REGARD, WE MAY GAINFULLY REFER TO THE SUMMARIZED SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. 1.1 THE HON'BLE INCOME TAX ACT, 1961 TAX APPELLATE TRIBUNAL, NAGPUR BENCH HAS PASSED AN ORDER IN ASSESSEE'S OWN CASE FOR AY 2008 - 09VIDE ORDER DATED 28 AUGUST 2015 IN I.T.A NO. 115 OF 2013 [REFER PAGE 1 TO 13 OF FACTUAL PAPER BOOK]. THE APPEAL WAS FILED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE THEN LEARNED CIT WITHDRAWING THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE IN COME - TAX, ACT 1961 [ACT]. THE HON'BLE TRIBUNAL WITHOUT UPHOLDING THE ORDER OF THE THEN LEARNED CIT, MODIFIED THE DIRECTIONS GIVEN BY THE THEN LEARNED CIT.THE HON'BIE TRIBUNAL HAD RESTORED THE MATTER TO THE FILES OF THE LEARNED AO TO EXAMINE THE ISSUE OF CL AIM OF DEDUCTION UNDER SECTION 80IA(4) IN LIGHT OF THE DISCUSSION MADE IN THE HON'BLE TRIBUNAL'S ORDER. THE HON'BLE TRIBUNAL HAS OBSERVED THAT THE REVENUE DEPARTMENT WAS EXPECTED TO EXAMINE A FEW THINGS TO ASCERTAIN WHETHER THE ASSESSEE IS A DEVELOPER OR C ONTRACTOR SUCH AS; THE UTILISATION OF FUNDS, DEVELOPMENT OF PROJECT, THE NATURE OF VENTURE, THE SUBSTANCE OF TRANSACTION, INVESTMENT MADE, TECHNICAL RISK UNDERTAKEN ETC. 1.2 THE LEARNED AO HAD ISSUED NOTICE DATED 20 JULY 2016 UNDER SECTION 142(1) OF THE ACT ASKING THE ASSESSEE TO SUBMIT NECESSARY DOCUMENTS AND DETAILS IN LIGHT OF THE DIRECTIONS GIVEN BY HON'BLE NAGPUR TRIBUNAL. THE LEARNED AO HAD SPECIFICALLY ASKED THE ASSESSEE TO SUBMIT DOCUMENTS RELATING TO UTILISATION OF FUNDS, DEVELOPMENT OF PROJE CT, NATURE OF VENTURE AND SUBSTANCE OF TRANSACTIONS. THE ASSESSEE HAD FILED SUBMISSION BEFORE THE LEARNED AO AND FURNISHED ALL THE NECESSARY DETAILS AND DOCUMENTS AS CALLED FOR. 7 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI 1.3 THE COPY OF SUBMISSION FILED BEFORE THE LEARNED AO IS ENCLOSED AT PA GE 18 TO 20 OF FACTUAL PAPER BOOK. THE ASSESSEE HAD FILED AN INDEX OF DOCUMENTS SUBMITTED VIS - A - VIS EACH PARAMETERS OF THE ISSUE TO BE EXAMINED BEFORE THE LEARNED AO [REFER PAGE 22 TO 23 OF FACTUAL PAPER BOOK]. THE ASSESSEE HAD PROVIDED ITS REMARKS IN THE INDEX AS TO RELEVANCE OF VARIOUS DOCUMENTS SUBMITTED. THE ASSESSEE WAS AWARDED THE CONTRACT BY MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD (MSEDCL) ON 'TURNKEY BASIS' FOR ENERGISATION OF AGRICULTURAL PUMPS ON A SINGLE POINT RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEEHAD EXECUTED A FULL 'TURNKEY CONTRACT' INCLU DING SUPPL . ERECTION, TESTING, TRANSPORT, CONSTRUCTION AND COMMISSIONING WITH 2 - 5 YEARS BANK GUARANTEE FOR DEFECT LIABILITY PERIOD FOR WORK DONE. THAT NO ADVANCE WAS GIVEN TO THE ASSESSEE FOR EXECUTION OF THE PROJECT. AS PER PAYMENT SCHEDULE, 90% OF THE PAYMENT WAS TO BE RELEASED AFTER SUCCESSFUL COMPLETION OF THE GUARANTEE TEST AND COMMISSIONING OF THE WORK AND ISSUANCE OF TAKING OVER CERTIFICATE BY MSEDCL. THE REMAINING 10% O F THE PAYMENT WAS RELEASED AFTER SUCCESSFUL COMPLETION OF THE ENTIRE CONTACT AND POST DEFECT LIABILITY PERIOD. IT WAS SUBMITTED BEFORE THE LEARNED AO THAT THE PAYMENTS WERE RELEASED AFTER A GAP OF THREE MONTHS FROM THE DATE ON WHICH BILLS WERE RAISED ON MS EDCL. THEREFORE, COMPLETE INVESTMENT WAS MADE BY THE ASSESSEE FOR EXECUTION OF THE PROJECT. THE ASSESSEE HAD INVESTED CAPITAL AND HAD ALSO OBTAINED SECURED& UNSECURED LOAN FOR EXECUTION OF THE PROJECT. THE ASSESSEE HAD PURCHASED MATERIAL ON ITS OWN ACCOUNT AND EMPLOYED LABOUR FOR EXECUTION OF THE PROJECT. THE ASSESSEE HAD THE SOLE RESPONSIBILITY TO UNDERTAKE SURVEY OF THE SITE FOR ASSESSING TOPOGRAPHY, HYDROLOGICAL CLIMATE CONDITIONS ALONG WITH ANY OTHER RISK ASSESSMENT FOR CARRYING OUT THE PROJECT. THE ASSESSEE HAD TO GET THE MATERIAL TESTING AND INSPECTION FROM MSEDCL THE ASSESSEE WAS RESPONSIBLE FOR THE FINAL DESIGN OF THE WORK INCLUDING ANY SITE SERVICE, SUBSOIL INVESTIGATIONS AND ALL THE OTHER THINGS NECESSARY FOR PROPER PLANNING AND DE SIGN. AS PER INVITATION TO BID, THE CONTRACT WAS FULL TURNKEY PROJECT INCLUDING SUPPLY, ERECTION, TESTING, TRANSPORT, CONSTRUCTION AND COMMISSIONING WITH 2 - 5 YEARS BANK GUARANTEE FOR DEFECT LIABILITY PERIOD FOR WORK DONE BY THE ASSESSEE. THE ASSE SSEE HAD TO PROVIDE GUARANTEE THAT THE FACILITIES PROVIDED TO MSEDCL WERE FREE FROM DEFECTS IN WORKMANSHIP, MATERIALS AND MANUFACTURERS DEFECT FOR THE PERIOD 2 - 5 YEARS. LIQUIDATED DAMAGES WERE TO BE RECOVERED FROM THE ASSESSEE UPON FAILURE OF ACHIEVING THE TIMELY COMPLETION OF THE PROJECT MILESTONES. 1.4 THE LEARNED AO HAS MADE COMPLETE ENQUIRIES AND APPRECIATED THE SUBMISSIONS ALONGWITH DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE. THE LEARNED AO HAD GIVEN A FINDING THAT THE ASSESSEE HAD UNDERTAKE N TECHNICAL RISK, WAS LIABLE FOR LIQUIDATED DAMAGES, WAS RESPONSIBLE FOR UTILISATION OF FUNDS, DEVELOPMENT OF PROJECT, NATURE OF VENTURE AND SUBSTANCE OF TRANSACTION. THE LEARNED AO TESTED THE CASE OF THE ASSESSEE AGAINST THE PARAMETERS DISCUSSED BY THE HO N'BLE NAGPUR TRIBUNAL AND ON VERIFICATION OF THE RECORDS AND DOCUMENTS SUBMITTED BY THE ASSESSEE, THE LEARNED AO GAVE A SPECIFIC FINDING THAT THE ASSESSEE WAS NOT MERELY A 'CONTRACTOR' BUT WAS A 'DEVELOPER' AND WAS ELIGIBLE FOR 8 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI BENEFITS UNDER SECTION 80IA( 4)OF THE ACT [REFER PARA 3 OF THE LEARNED AO'S ORDER DATED 08 DECEMBER 2016 UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT. 1.5 THE LEARNED CIT HAS ERRED IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT AND REVISING THE ORDER PASSED BY THE LEA RNED AO UNDER SECTION 143(3}R.W.S254 OF THE ACT. THE ASSESSEE HAD FILED SUBMISSIONS BEFORE THE LEARNED CIT[REFER PAGE 14 TO 17 OF FACTUAL PAPER BOOK].THE ASSESSEE HAD SUBMITTED THAT THE ORDER PASSED BY THE LEARNED AO WAS NEITHER ERRONEOUS NOT PREJUDICIAL T O THE INTERESTS OF THE REVENUE AND HENCE INVOKING PROVISIONS OF SECTION 263 WAS BAD IN LAW. THE ASSESSEE HAD SUBMITTED BEFORE THE LEARNED CIT THAT THE LEARNED AO HAD MADE COMPLETE ENQUIRIES AND EXAMINED THE ISSUES AS PER DIRECTIONS OF HON'BLE NAGPUR TRIBUN AL AND FOLLOWING BINDING JUDICIAL PRECEDENTS. THE LEARNED AO FOUND THE ASSESSES ELIGIBLE FOR THE CLAIM OF SECTION 80IA(4) AFTER PROPER APPLICATION OF MIND. 1.6 THE LEARNED CIT DID NOT POINT OUT ANY DEFECT IN THE ENQUIRY MADE BY THE AO BASED ON EXAMIN ATION OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE ONLY OBJECTION OF THE LEARNED CIT WAS THAT THE ASSESSEE HAD RAISED RA BILLS ON MSEDCL FOR WORK COMPLETED AND DULY CERTIFIED. THE LEARNED CIT ERRED IN OBSERVING THAT THE ASSESSEE HAD NOT COMPLETED THE CO NTRACT FROM HIS OWN FUNDS. THE ASSESSEE HAD SUBMITTED BEFORE THE LEARNED CIT THAT IT HAD EMPLOYED HIS OWN FUNDS TO PURCHASE THE MATERIAL, EMPLOY LABOUR AND COMPLETE THE PROJECT. THE ASSESSEE HAD SUBMITTED THAT, AFTER THE PROJECT IS COMPLETED, THE COMPETENT AUTHORITY EXAMINES THE WORK DONE AND ISSUES A COMPLETION CERTIFICATE. THAT IT WAS ONLY AFTER THE ISSUE OF COMPLETION CERTIFICATE, MSEDCL TAKES OVER THE WORK AND THE ASSESSEE RAISES RA BILLS. THE PAYMENT WAS MADE BY MSEDCL NEARLY AFTER THREE MONTHS FROM TH E DATE OF SUBMISSION OF BILLS FOR 90% PAYMENT AND REMAINING 10% PAYMENT IS RETAINED TOWARDS DEFECT LIABILITY. THE ASSESSEE HAD PROVIDED DETAILS OF INVOICE RAISED AND PAYMENTS RECEIVED ALONGWITH COPY OF INVOICES. [REFER PAGE228 - 238 OF FACTUAL PAPER BOOK]. T HE AFORESAID FACT HAS BEEN ACCEPTED BY THE LEARNED CIT IN HIS ORDER. HOWEVER, THE LEARNED CIT DID NOT APPRECIATE THE SUBMISSIONS OF THE ASSESSEE AND ISSUED DIRECTIONS TO THE AO TO REVISE THE ORDER, WITHOUT GIVING AN COGENT REASONING. 1.7 THE ASSESSEE SUBMITS THAT THE LEARNED CIT HAS ERRED IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT ON FOLLOWING GROUNDS WHICH ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER: I. COMPLETE ENQUIRY WAS MADE BY THE LEARNED AO WITH RESPECT TO SUBJECT ISSUE FOLLO WING THE DIRECTIONS OF HON'BLE NAGPUR TRIBUNAL AND BINDING JUDICIAL PRECEDENTS. II. THE LEARNED AO HAD TAKEN A POSSIBLE VIEW AFTER CONSIDERING THE ASSESSEE'S SUBMISSION AND SUPPORTING DOCUMENTS FILED, III. THE LEARNED CIT HAS NOT SHOWN AS TO HOW THE FINDINGS RETURNED BY THE LEARNED AO WERE ERRONEOUS IV. THE LEARNED CIT HAS ERRED IN SUBSTITUTING HIS OPINION IN PLACE OF THE FINDINGS RETURNED BY THE LEARNED AO WHICH IS NOT PERMISSIBLE UNDER SECTION 263 OF THE ACT. V. THE LEARNED CIT HAS ERRED IN MAKING A ROVING AND FISHING ENQUIRY AND AGAIN SETTING ASIDE THE ORDER OF THE LEARNED AO TO FRESHLY EXAMINE THE MATTER WITHOUT SHOWING AS TO HOW THE ORDER WAS ERRONEOUS. 9 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI VI. THE LEARNED CIT HAD ERRED IN NOT APPRECIATING THAT THE ORDER OF LEARN ED AO WAS NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE SINCE THE LEARNED AO HAD FOLLOWED BINDING JUDICIAL PRECEDENTS INCLUDING SPECIFIC DIRECTIONS OF HON'BLE NAGPUR TRIBUNAL. 9. FURTHERMORE, THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON THE FOLL OWING CASE LAWS IN THIS REGARD: 1. CIT VS. GABRIAL INDIA LTD. (203 ITR 108) (BOM) 2. MOIL LTD. VS. CIT, NAGPUR (394 ITR 244) (BOM) 3. CIT VS. GERA DEVELOPMENTS (387 ITR 691) (BOM) 4. CIT VS. SUNBEAM AUTO LTD. (332 ITR 167) (DEL) 5. DIT VS. JYOTI FOUNDATION (357 ITR 388) (DEL) 6. NARAYAN TATU RANE VS. ITO (70 TAXMANN.COM 227) (MUM - ITAT) 7. AMIRA PURE FOODS PVT. LTD. VS. PCIT (51 CCH 473) (DEL - ITAT) 10. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LD. COMM ISSIONER OF INCOME TAX. 11. UPON CAREFU L CONSIDERATION, WE NOTE THAT EARLIER THE ITAT HAD MODIFIED THE DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX U/S. 263 IN THE CASE OF THE SAME ASSESSEE , FOR THE SAME YEAR. THE ITAT HAS DISCUSSED THE ISSUE AND AFTER THE DISCUSSION, IT HELD THAT THE ISSUE IN THE SAID CASE NEEDS TO BE RE - EXAMINED BY THE ASSESSING OFFICER. THE ITAT INTER ALIA DISCUSSED THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF ABG HEAVY INDUST RIES LTD. (SUPRA) . IT NOTED THAT THE HON'BLE BOMBAY HIGH COURT HAS MENTIONED THAT THE ASSESSEE IS EXPE C T ED TO SHOULDER ING OUT THE INVESTMENT AND ALSO SUBJECT ED TO TECHNICAL RISK IN RESPECT OF WORK EX ECUTED . IT HAS FURTHER MENTIONED THAT T O KEEP BREVITY IN MIND IT IS NOT ADVISABLE TO DISCUSS ALL THE PARAMETERS IN THIS REGARD BUT TO LEAVE IT TO THE REVENUE AUTHORITIES TO EXAMINE THE ISSUE IN ITS ENTIRETY. IT HAD MENTIONED THAT THE GUIDELINES ENUMERATED IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) ARE REQUIRED TO BE FOLLOWED WHILE DECIDING THIS ISSUE. AFTER THE SAID DIRECTION OF THE ITAT, 10 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI T HE ASSESSING OFFICER HAD ELABORATELY EXAMINED THE ISSUE. HE HAS SPECIFICALLY MENTIONED THAT HE IS FOLLOWING THE GUIDELINES AS EMANATING FROM THE ABOVE SAID DECISION OF THE ABG HEAVY INDUSTRIES LTD. (SUPRA) BY NUMERICALLY NOTING THE FACTS OF THE CASE WHICH COMPARED FAVOURABLY WITH THE GUIDELINES EMANATING IN THE AFORESAID CASE. THE ASSESSING OFFICER NOTED THAT IN THIS CASE , THE ASSESSEE IS RESPONSIBLE FOR FUNDS AND THE DE VELOPMENT OF THE PROJECT. HE IS ALSO RESPONSIBLE FOR THE RISK, DAMAGE, ETC AND HENCE, TH E ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80 - IA(4) OF THE ACT. 12. NOW AFTER THE AFORE - SAID ORDER, THE LD. COMMISSIONER OF INCOME TAX FURTHER FOUND MISTAKE IN THE ORDER OF THE ASSESSING OFFICER. HE NOTED THAT THE ITAT DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CASE PARTICULARLY FROM THE POINT OF VIEW WHETHER THE ASSESSEE IS EXPECTED TO SHOULDER OUT THE INVESTMENT PART IN EXECUTION OF THE CONTRACT. THIS WE FIND IS TOTALLY AN ERRONEOUS OBSERVATIO N BY THE LD. COMMISSIONER OF INCOME TAX. THE ITAT HAD REFERRED TO VARIOUS ASPECTS INCLUDING THAT INVESTMENT PART , BUT IT NEVER DIRECTED FOR ANY PARTICULAR EXAMINATION OF THE INVESTMENT PART. HENCE, THIS OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX IS TOTALLY EXTRANEOUS AND UNSUSTAINABLE. THEREAFTER, THE LD. COMMISSIONER OF INCOME TAX HAS OBTAINED THE ASSESSEES RESPONSE IN THIS REGARD. HE NOTED THAT THE ASSESSEE WAS SHOULDERING THE INVESTMENT AND AFTER THE SUBSTANTIAL COMPLETION OF THE WORK, WHICH ENTA ILED APPROXIMATELY THREE MONTHS , THE ASSESSEE WAS MADE PAYMENT. THE LD. COMMISSIONER OF INCOME TAX DISREGARDED THIS ASPECT BY HOLDING THAT THE PAYMENT OF BILLS AFTER THREE MONTHS IS NORMALLY PHENOMENON IN GOVERNMENT CONTRACTS. WE FIND THIS OBSERVATION STRANGE AND NOT AT ALL SUSTAINABLE A S EVEN IF THE ASSESSEE IS PUTTING HIS INVESTMENT FOR THREE MONTHS, IT CAN BY NO STRETCH OF IMAGINATION BE 11 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI SAID THAT THE ASSESSEE IS NOT SHOULDERING INVESTMENT. HENCE, THE ASSESSING OFFICERS ACCEPTANCE OF THIS ASPECT CAN BY NO STRETCH OF IMAGINATION BE SAI D TO BE IMPROBABLE OR IMPOSSIBLE VIEW. THE LD. COMMISSIONER OF INCOME TAXS DIRECTION IN THIS REGARD IS TOTALLY UNSUSTAINABLE. FURTHERMORE, WE FIND THAT IN HIS CONCLUDING REMARK THE LD. COMMISSIONER OF INCOME TAX HAS FURTHER STATED THAT THE ASSESSING OFFIC ER IS DIRECTED TO EXAMINE THE MATTER IN THE LIGHT OF THE ABOVE DISCUSSION. HE FURTHER S TATED THAT THE ASSESSING OFFICER MAY ALSO EXAMINE THE CASE FROM THE OTHER P ERS PECTIVE ARISING OUT OF THE DECISION OF THE ITAT. WE FIND THAT THIS CLEARLY SHOWS THAT THE L D. COMMISSIONER OF INCOME TAX IS SITTING IN APPELLATE FORUM OVER THE ITAT DECISION IN THIS CASE , WHICH IS TOTALLY UNSUSTAINABLE. FURTHERMORE, IT ALSO SHOWS THAT THE LD. COMMISSIONER OF INCOME TAX HAS NOT APPRECIATED THE ITAT ORDER AND THE ASSESSING OFFICER S ORDER PURSUANT THERETO AND HE IS ORDERING A RO W ING AND FISHING E NQUIRY , NOT SUSTAINABLE IN LAW. THIS VIEW DRAWS SUPPORT FROM THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM). 13. FURTHERMORE, WE FIND THAT THE ASSESSING OFFICER IN THIS CASE HAS DULY EXAMINED THE ISSUE IN LIGHT OF THE DIRECTIONS OF THE ITAT IN THIS CASE WHICH INTER ALIA MADE REFERENCE TO THE ABG HEAVY INDUSTRIES LTD. (SUPRA) . THE ASSESSING OFFICER HAS DULY OPINED THAT THE ASSESSEES CASE DULY COMPLIES WITH THE ASSESSEES DIRECTION. THE LD. COMMISSIONER OF INCOME TAX HAS NOT FOUND ANY FAULT IN THE ASSESSING OFFICERS ORDER IN COMPLYING WITH THE DIRECTION IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) EXCEPT FOR THAT IN THE OPINION O F THE LD. COMMISSIONER OF INCOME TAX SHOULDERING OF INVESTMENT FOR A PERIOD OF THREE MOTHS CANNOT BE SAID TO BE SHOULDERING OF INVESTMENT. THIS AS WE HAVE ALREADY HELD ABOVE, IS TOTALLY UNSUSTAINABLE VIEW. MOREOVER, AS HELD BY THE HONBLE APEX COURT IN 12 ITA NO. 24/NAG./2018 SHRI SATPAL SINGH SETHI MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) WHEN THERE ARE TWO VIEWS POSSIBLE AND THE ASSESSING OFFICER APPLIES ONE VIEW AND THE LD. COMMISSIONER OF INCOME TAX DOES NOT AGREE WITH IT, I T CANNOT BE SAID THAT THE ASSESSING OFFICERS ORDER IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. FURTHERMORE, THE CASE LAWS REFERRED BY THE LD. COUNSEL OF THE ASSESSEE IN THIS CASE ARE GERMANE AND SUPPORT THE CASE OF THE ASSESSEE. 14. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE QUASH THE ORDER PASSED BY THE LD. COMM ISSIONER OF INCOME TAX U/S. 263 OF THE ACT. 15. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRI BUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 0 2 . 0 7 . 2 0 1 8 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR ; (6) GUARD FILE . // TRUE COPY // BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT, NAGPUR