Appeal Details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 0782 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 11 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-12-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
12-06-2015
Assessment Year
2010-2011
Appeal Filed On
04-01-2013
Judgement Text
] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.2571 TO 2577/PN/2012 !$ $ / ASSESSMENT YEARS : 2004-05 TO 2010-11 MAHALAKSHMI INFRA PROJECTS LTD., 223/3, S-1(B), MALATI TOWERS, TARABAI PARK, KOLHAPUR 416001 PAN NO. AADCM2170P . / APPELLANT V/S DCIT, CENTRAL CIRCLE, KOLHAPUR . / RESPONDENT . / ITA NOS.50 TO 56/PN/2013 !$ $ / ASSESSMENT YEARS : 2004-05 TO 2010-11 ACIT, CENTRAL CIRCLE, KOLHAPUR . / APPELLANT V/S MAHALAKSHMI INFRA PROJECTS LTD., 223/3, S-1(B), MALATI TOWERS, TARABAI PARK, KOLHAPUR 416001 PAN NO. AADCM2170P . / RESPONDENT / ASSESSEE BY : SHRI SUNIL PATHAK / DEPARTMENT BY : SMT. M.S. VERMA, CIT / DATE OF HEARING : . 11.09.2015 / DATE OF PRONOUNCEMENT:09.12.2015 2 / ORDER PER R.K. PANDA, AM : ITA NOS. 2571 TO 2577/PN/2012 FILED BY THE ASSESSEE AND ITA NOS. 50 TO 56/PN/2013 FILED BY THE REVENUE ARE CROSS APPEA LS AND ARE DIRECTED AGAINST THE COMMON ORDER DATED 30-10-2012 OF THE CIT(A ) KOLHAPUR RELATING TO ASSESSMENT YEARS 2004-05 TO 2010-11 RESPE CTIVELY. FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS WERE HEARD TOGETHE R AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.2571/PN/2012 (BY ASSESSEE) (A.Y. 2004-05) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF EXECUTING CONTRACTS FOR CIVIL W ORK. IT HAD FILED ITS ORIGINAL RETURN OF INCOME ON 01-11-2004 DECLARING TOTAL INCOME OF RS.28,80,290/-. A SEARCH U/S.132 OF THE I.T. ACT WAS CARR IED OUT IN THIS GROUP OF CASES ON 23-09-2009. IN RESPONSE TO NOTICE U /S.153A THE ASSESSEE FILED ITS RETURN OF INCOME ON 20-07-2010 DECLARING TOTAL INCOME AT RS.68,02,950/-. THE AO DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTED THAT WHILE FINALIZING THE SCRUTINY ASSESSMENT U/S.143( 3), THE THEN AO HAD DISALLOWED DEDUCTION CLAIMED U/S.80IA(4) AT RS.84,02,55 5/-. THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE AND ON FURT HER APPEAL THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE REVENUE AND UP HELD THE DECISION OF THE CIT(A). THE ASSESSEE FILED AN APPEAL BEFORE T HE HIGH COURT AND THE DECISION IS AWAITED. THE AO DID NOT FURTHER DWELT UPON THIS ISSU E. 3. IN APPEAL THE LD.CIT(A) ALSO DID NOT DECIDE THE ISSUE FOR A.Y. 2004- 05 AND 2005-06 HOLDING THAT THE MATTER IS PENDING WITH HIGH COURT AND NOT ABATED. SIMILARLY FOR A.Y. 2006-07 ALSO HE DID NOT DEC IDE THE ISSUE ON THE GROUND THAT THE MATTER IS PENDING BEFORE THE TRIBUNAL. 3 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) ERRED IN NOT ALLOWING THE DEDUCTI ON U/S.80IA(4) OF RS.84,02,555/-. 1.1 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE ASSESSE E COMPANY WAS ENTITLED TO DEDUCTION U/S.80IA(4) AND THE SAME SHOULD BE ALLOWED TO THE ASESSEE COMPANY. 1.2 THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT SI NCE THE ASST. U/S.143(3) WAS ALREADY COMPLETED PRIOR TO SEARCH FOR THIS YEAR, T HERE WAS NO REASON TO DISALLOW THE DEDUCTION U/S.80IA(4) IN THE ASST. FRAMED U/S.153A. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 5. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGES 1 5 TO 97 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE CLAIM MADE U/S.80IA(4) AMOUNTING TO RS.84,02,555/-. REFERRING TO PAGES 15 TO 26 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) ON 22-12-2006 WHERE THE AO AT PARA 4 .13 OF THE ORDER HAS DISALLOWED SUCH CLAIM OF DEDUCTION U/S.80IA(4) OF THE I.T ACT, 1961. REFERRING TO THE ORDER OF THE TRIBUNAL, FOR A.Y. 2004-05, COPY OF WHICH IS PLACED AT PAGES 3 TO 8 OF THE PAPER BOOK HE SUBMITTED THAT THE TRIBUNAL FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CAS E FOR THE PRECEDING ASSESSMENT YEAR, CONFIRMED THE ORDER OF THE CI T(A). REFERRING TO THE COPY OF THE ORDER OF THE HONBLE HIGH COURT PLACED A T PAGES 1 AND 2 OF THE PAPER BOOK HE SUBMITTED THAT THE HONBLE HIGH COUR T VIDE ITA NO.1458/PN/2011 ORDER DATED 11-02-2013 FOLLOWING THE DEC ISION IN ASSESSEES OWN CASE FOR A.Y. 2003-04 HAS RESTORED THE ISSUE TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION IN ACCORDANCE WITH LAW. 6. REFERRING TO PAGE 9 OF THE PAPER BOOK HE DREW THE AT TENTION OF THE BENCH TO THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.433 /PN/2007 ORDER DATED 06-02-2012 FOR A.Y. 2003-04 WHEREIN THE TRIBUNAL HA S ALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4) OF THE I.T. ACT. HE SUBMITTED THAT SINCE NO DISALLOWANCE HAS BEEN MADE U/S.80IA(4) IN THE ASSESSMENT O RDER PASSED 4 U/S.153A THE ISSUE OF ALLOWING DEDUCTION U/S.80IA(4) BECOMES ACADEMIC IN NATURE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D FAIRLY CONCEDED THAT SINCE THE AO HAS NOT MADE ANY DISALLOWANC E IN THE ORDER PASSED U/S.153A, THEREFORE, THIS ISSUE BECOMES ACADEMIC IN NATURE. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) DATED 22-12-2003 THE AO DISALLOWED THE CLAIM O F DEDUCTION U/S.80IA(4). THE CIT(A) UPHELD THE DISALLOWANCE AND THE TR IBUNAL ALSO CONFIRMED THE ORDER OF THE CIT(A). ON FURTHER APPEAL BY TH E ASSESSEE, THE HONBLE HIGH COURT, FOLLOWING THE DECISION IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEAR, RESTORED THE ISSUE TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION IN ACCORDANCE WITH LAW. THE RELEVANT OBSERV ATION OF THE HONBLE HIGH COURT AT PARA 2 TO 4 OF THE ORDER READ AS UNDER : 2. IN THIS APPEAL, THE ASSESSEE HAS IN RESPECT OF ASSESSMENT YEAR 2004-05 RAISED THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERA TION. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE ON A PROPER AND REASONABLE INTERPRETATION OF S.80IA(4), THE TRIB UNAL IS RIGHT IN HOLDING THAT GOVERNMENT OR STATUTORY BODY IS THE DEV ELOPER OF INFRASTRUCTURE FACILITY AND HERE APPELLANT IS NOT EN TITLED TO DEDUCTION UNDER THAT SECTION? 3. THE TRIBUNAL, WHILE DISMISSING THE ASSESSEES APPEAL, F OLLOWED ITS ORDER FOR ASSESSMENT YEAR 2003-2004 WHILE DENYING THE DEDUCTI ON CLAIMED UNDER SECTION 80IA(4) OF THE INCOME TAX ACT. THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-2004 HAS BEEN SET ASIDE BY THIS COURT IN APPEAL FILED BY THE APPELLANT BEING I.T. APPEAL NO.4610 OF 2010 ON 30 TH AUGUST, 2011 AND RESTORED TO THE TRIBUNAL FOR A FRESH DECISION. 3. FOR THE REASONS MENTIONED IN THE ORDER DATED 30 TH AUGUST, 2011, WE SET ASIDE THE IMPUGNED ORDER RELATING TO ASSESSMENT YEAR 200 4-2005 AND RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL, FOR A FRESH DECISION IN ACCORDANCE WITH LAW. 4. ALL THE CONTENTIONS OF PARTIES ARE KEPT OPEN TO BE URGED BEFORE THE TRIBUNAL. 5 9. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PREC EDING ASSESSMENT ORDER VIDE ITA NO.433/PN/2007 ORDER DATED 06-02-2012 FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. ABG HEAVY INDUSTRIES LTD. AND OTHER REPORTED IN 322 IT R 323 AND VARIOUS OTHER DECISIONS ALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4) OF T HE ACT. HOWEVER, AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSES SEE WE FIND NO DISALLOWANCE HAS BEEN MADE U/S.80IA(4) IN THE ASSESSMENT O RDER PASSED U/S.153A OF THE ACT. THEREFORE, THE GROUND RAISED BY THE ASSESSEE BECOMES ACADEMIC IN NATURE. ACCORDINGLY, THE SAME ARE DISMISSED. 10. GROUNDS OF APPEAL NO.2 BY THE ASSESSEE BEING GENERAL IN NATURE IS DISMISSED. ITA NO.50/PN/2013 (BY REVENUE) (A.Y. 2004-05) : 11. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE U/S.69 B ON ACCOUNT OF DIFFERENCE IN VALUATION TO THE TUNE OF RS.18,58,001/-. 12. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS AC QUIRED 5 PROPERTIES BEING FLAT NOS. 7,12,13,15 AND 25 AT PARTHA VIHAR, GUJARATH COLONY, KOTHRUD, PUNE AT RS.25,49,999/- AS ON 24-07-2003. TO KN OW THE INVESTMENT IN THE SAID PROPERTY THE AO MADE A REFERENCE U/S.142A TO THE DVO TO DETERMINE THE COST OF THE PROPERTIES IN THE HAND S OF THE ASSESSEE AS ON THE DATE OF ACQUISITION. THE DVO VALUED THE PROPE RTIES AT RS.44,08,000/-. THE AO, THEREFORE, ASKED THE ASSESSEE TO E XPLAIN THE DIFFERENCE IN THE VALUATION TO THE TUNE OF RS.18,58,001/-. IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD PURCHASED AN OPEN PLOT AD MEASURING 42000 SQ.FT. VIDE AGREEMENT DATED 15-09-1989 BY THE FIRM M/S. MA HALAXMI CONSTRUCTION CORPORATION SUBSEQUENTLY SUCCEEDED BY TH E ASSESSEE 6 COMPANY, I.E. MAHALAXMI INFRA PROJECTS LTD. THIS PROPERTY WAS HANDED OVER FOR DEVELOPMENT TO PARTHA DEVELOPERS ON 24-07-200 3. POST DEVELOPMENT THE ASSESSEE WAS GIVEN 5 FLATS IN THE SAID A PARTMENT, STAMP DUTY VALUATION OF WHICH WAS RS.63,09,160/- AS ON 24-07-200 3 AS AGAINST THE SALE CONSIDERATION RECEIVED BY IT FROM PARTHA DEVELOPE RS OF RS.69,50,000/-. IT WAS ARGUED THAT THE VALUATION MADE BY THE DVO WAS ERRONEOUS AS THE SAME WAS BASED ON THE RATES PREVAILIN G DURING THE YEAR 2005 AND NOT 2003. IT WAS FURTHER SUBMITTED THAT THERE WAS BOOM IN PUNE REAL ESTATE MARKET BETWEEN 2003 TO 2005 AND PRICES WE RE SUDDENLY INCREASED BY MORE THAN 60 TO 70% IN THE SAID PERIOD. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PUNIT SABH ARWAL REPORTED IN 338 ITR 485 WAS BROUGHT TO THE NOTICE OF THE AO WH EREIN IT HAS BEEN HELD THAT ADDITION CANNOT BE MADE ONLY ON THE BASIS OF REPORT OF DVO. THE PRIMARY BURDEN TO PROVE THE UNDERSTATEMENT OR CONCEA LMENT OF INCOME IS ON THE REVENUE. 13. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE VALUATION OFFICER HAS VALUED THE PROPERTY AS ON THE DATE OF TRANSFER OF THE PROPERTY TO THE ASESSS EE, I.E. IN 2003. THEREFORE, THE CONTENTION OF THE ASSESSEE REGARDING STEE P RISE DURING 2003 TO 2005 IS OUT OF PLACE. REJECTING THE VARIOUS EXPLANATION S GIVEN BY THE ASSESSEE THE AO MADE ADDITION OF RS.18,58,001/- U/S.69B OF THE I.T. ACT . 14. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME ARGU MENTS AS MADE BEFORE THE AO. IT WAS SUBMITTED THAT VARIOUS DOCUMENTS IN CONNECTION WITH THE ABOVE PROPERTY WERE FURNISHED BEFORE THE AO DU RING ORIGINAL ASSESSMENT PROCEEDINGS U/S.143(3). THESE WERE VERIFIED AND THE PROFITS RETURNED BY THE ASSESSEE WERE ACCEPTED BY THE AO. IT WAS FURTHER ARGUED THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING T HE COURSE OF SEARCH NO ADDITION COULD HAVE BEEN MADE. THE DECISION OF HONBLE DELHI 7 HIGH COURT IN THE CASE OF CIT VS. PUNEET SABHARWAL REPO RTED IN 338 ITR 485 WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A). 15. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 15. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS ON RECORD. AS NOTICED ABOVE, AN ADDITION OF RS. 18,58,001/- HAS BEEN MADE UNDER SECTION 69B. I FIND THAT WHILE FILING THE RET URNS OF INCOME FOR THE ASSESSMENT YEAR 2004-05, THE APPELLANT HAD SHOWN PROFIT ON SALE OF PLOTS RECEIVED IN KIND TO THE TUNE OF RS.25,50,000/-. THI S INCOME HAD ALSO BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD O THER INCOME ON WHICH PROFIT ON SALE OF PLOT WAS INCLUDED. THE ASSESSING OFFIC ER HAD CONSIDERED THIS ITEM OF INCOME IN THE COURSE OF ASSESSMENT PROCEEDINGS AN D THE APPELLANT HAD PROVIDED THE AGREEMENT FOR SALE OF DEVELOPMENT RIGHT S OF PLOT ENTERED INTO WITH PARTH DEVELOPERS AND M.J. YEOLE IN THE YEAR 200 3. THUS, AS HELD ABOVE, SINCE THE MATTER WAS ALREADY LOOKED INTO BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3) IN ASSESSMENT YEAR 2004-05, THE SAME COULD NOT BE REVISITED IN THE COURSE OF REASSESSMENT UNDER SECTION 153A, SPECIALLY WHEN NO INCRIMINATING EVIDENCE IS FOUND DUR ING THE COURSE OF SEARCH AND SEIZURE. 16. EVEN OTHERWISE, THE ADDITION IS NOT WARRANTED BEC AUSE THE DVO HAS APPLIED THE VALUATION RATES EXISTING IN THE YEAR 2005 -06 WHEREAS THE PROPERTY WAS TRANSFERRED DURING THE YEAR 2003-04. FURTHER, NO RECORD OF ANY UNDERHAND DEALING WAS FOUND DURING THE COURSE OF SEARCH AND SEIZU RE WHICH WOULD LEAD AN INFERENCE THAT THE PROPERTY WAS UNDERVALUED IN ANY M ANNER AT THE TIME OF TRANSFER FOR A TOTAL CONSIDERATION OF RS. 69.50 LAKHS. THE DVO HAS ADOPTED THE SALE VALUE PERTAINING TO FLATS SOLD DURING THE YEAR 20 05-06. THE APPELLANT HAD ENTERED INTO AN AGREEMENT FOR DEVELOPMENT OF THE PL OT IN KOTHRUD IN EXCHANGE OF A SUM OF RS.44 LAKHS PAYABLE IN CASH AND FLATS ADMEA SURING 4250 SQ.FT, THE VALUE OF WHICH WAS ADOPTED AT RS. 25.50 LAKHS IN 2003- 04. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE VALUATION OF 425 0 SQ.FT. OF CONSTRUCTION AT RS.25.50 LAKHS DID NOT REFLECT THE ACTUAL MARKET VALU E OF FLATS EXISTING IN THE AREA DURING 2003-04. HENCE, THE ADDITION MADE IS UNW ARRANTED EVEN ON MERITS. THIS GROUND OF APPEAL IS ALLOWED. 16. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 17. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPOR TED THE ORDER OF THE AO. SHE SUBMITTED THAT THE ASSESSEE COULD NOT EXPLA IN SATISFACTORILY THE DIFFERENCE BETWEEN THE VALUATION DONE BY THE DVO AND THE FIGURES SHOWN BY THE ASSESSEE. THEREFORE, THE CIT(A) WAS NOT JU STIFIED IN DELETING THE ADDITION. 8 18. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE OW NED A PLOT OF LAND IN KOTHRUD, PUNE WHICH WAS PURCHASED ON 15-09-1989. REFER RING TO PAGES 32 TO 53 OF THE PAPER BOOK HE DREW THE ATTENTION OF TH E BENCH TO THE DEVELOPMENT AGREEMENT DATED 24-07-2003 BETWEEN THE A SSESSEE AND M/S. PARTHA DEVELOPERS. REFERRING TO THE VARIOUS CLAUSES OF TH E AGREEMENT HE SUBMITTED THAT THE ASSESSEE WAS TO RECEIVE CONSIDERATIO N OF RS.44 LAKHS AND 5 FLATS. IN THE ORIGINAL RETURN FILED BY THE ASSESSEE IT HAS COMPUTED THE INCOME ON SALE OF PLOT BY CONSIDERING THE CONSIDERATION RECEIVED AT RS.24 LAKHS. THEREAFTER THE ASSESSEE FILED A REVISED RETUR N WHEREIN THE INCOME ON SALE OF PLOT WAS ENHANCED BY RS.25,50,000/- BEIN G VALUATION OF 5 FLATS TO BE RECEIVED BY THE ASSESSEE AS PER THE SAID AGREEMENT. REFERRING TO PAGES 94 TO 97 OF THE PAPER BOOK THE LD. COUNSEL FO R THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE ORIGINAL COMPUTATION ST ATEMENT AND THE REVISED COMPUTATION STATEMENT. HE SUBMITTED THAT THE O RIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) AND DURING THE ORIGIN AL ASSESSMENT PROCEEDINGS THE AGREEMENT ENTERED INTO WITH PARTHA DEV ELOPERS WAS SUBMITTED TO THE AO. HE SUBMITTED THAT THE AO IN THE A SSESSMENT PROCEEDINGS U/S.153A HAD REFERRED THE MATTER TO THE DV O FOR VALUING THE COST OF 5 FLATS TO BE RECEIVED BY THE ASSESSEE. SINCE TH E DVO DETERMINED THE COST OF THE 5 FLATS AT RS.44,08,000/- THE AO MADE AD DITION OF RS.18,58,001/- AS UNEXPLAINED INVESTMENT U/S.69B. HE SUBMIT TED THAT THE CIT(A) HAS DELETED THE ADDITION ON 2 GROUNDS. THE FIRS T ONE IS THAT THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND SECOND ONE IS THAT THE DVO VALUED THE PROPERTY BY ADO PTING RATES OF YEAR 2005-06 WHILE THE PROPERTY WAS TRANSFERRED IN THE YEAR 2003-04. HE SUBMITTED THAT THE ORDER OF THE CIT(A) IS FULLY JUSTIFIED. N O INCRIMINATING EVIDENCE WHATSOEVER WAS FOUND AS A RESULT OF SEARCH OR DURING THE PROCEEDINGS U/S.153A. THEREFORE, IN VIEW OF THE DECISION OF HONBLE 9 BOMBAY HIGH COURT IN THE CASE OF CIT VS. ALL CARGO GLOBAL LOGISTICS LTD./CONTINENTAL WAREHOUSING CORPORATION REPORTED IN 120 DTR 89 NO ADDITION CAN BE MADE AND THE AO WHILE PASSING INDEPENDENT ASSESSMENT ORDER U/S.153A R.W.S. 143(3) OF THE I.T. ACT, 1961 COULD NO T HAVE DISTURBED THE ASSESSMENT ORDER WHICH HAS ATTAINED FINALITY. 19. REFERRING TO PAGE 61 OF THE PAPER BOOK THE LD. COUN SEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE VALUAT ION REPORT OF THE DVO WHEREIN HE HAS REFERRED TO SALE INSTANCES OF NOVEMBE R AND DECEMBER 2005. HE SUBMITTED THAT WHEN THE PROPERTY WAS TRANSFE RRED IN F.Y. 2003- 04 THE DVO WAS NOT JUSTIFIED IN ADOPTING THE RATES FOR 2005-06. 20. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PUNEET SABHARWAL (SUPRA) HE SUBMITTED THAT THE HONBLE H IGH COURT IN THE SAID DECISION HAS HELD THAT ADDITION TO INCOME BASED SOLELY ON REPORT OF DVO IS NOT VALID IN ABSENCE OF ANY EVIDENCE OF UNDERSTATEM ENT OF CONSIDERATION. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BEING IN ACCORDANCE WITH LAW SHOULD BE UPHELD AND THE GROUND R AISED BY THE REVENUE ON THIS ISSUE SHOULD BE DISMISSED. 21. THE LD. DEPARTMENTAL REPRESENTATIVE IN HER REJOINDE R SUBMITTED THAT THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSE E IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD./CONTINENTAL WAREHOUSING CORPOR ATION (SUPRA) IS NOT APPLICABLE. SHE SUBMITTED THAT THE GENERAL PROPOSIT ION IS THAT ALL PENDING ASSESSMENTS SHALL ABATE AND BE OPEN FOR EXAMINAT ION BUT CONCLUDED ASSESSMENTS CAN BE EXAMINED ONLY WITH RESPE CT TO CERTAIN CIRCUMSTANCES WHERE INCRIMINATING MATERIAL OR RELEVANT MATE RIAL HAS BEEN UNEARTHED DURING THE SEARCH OR DURING THE PROCEEDINGS U/S.,153A. SHE EMPHASIZED ON THE LATER CONDITION, I.E. UNEARTED DURING PRO CEEDINGS U/S.153A. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MURALI AGRO PRODUCTS LTD. VIDE ITA NO.36/2009 S HE DREW THE 10 ATTENTION OF THE BENCH TO THE FOLLOWING OBSERVATIONS OF TH E HONBLE COURT TO THE PROPOSITION THAT WHAT WOULD ABATE AND WHAT WILL NOT ABATE : 13) IN THE PRESENT CASE, THERE IS NOTHING ON RECORD T O SUGGEST THAT ANY MATERIAL WAS UNEARTHED DURING THE SEARCH OR DURING THE 153A PR OCEEDINGS WHICH WOULD SHOW THAT THE RELIEF UNDER SECTION 80 HHCC WAS ERRONE OUS. IN SUCH A CASE, THE A.O. WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 153 A READ WITH SECTION 143(3) COULD NOT HAVE DISTURBED THE ASSESSMENT ORDER FIN ALISED ON 29.12.2000 RELATING TO SECTION 80 HHC DEDUCTION AND CONSEQUENT LY THE CIT COULD NOT HAVE INVOKED JURISDICTION UNDER SECTION 263 OF THE ACT. 14) MOREOVER, SINCE THE A.O. HAD MADE ADDITION ON AC COUNT OF UNDISCLOSED INCOME AT RS.89,19,477/- IN THE ASSESSMENT ORDER PASSED U NDER SECTION 153A, THERE WAS NO QUESTION OF COMPUTING BOOK PROFITS UNDER SECTION 115 JA OF THE I.T ACT. WHEN THE ADDITION OF UNDISCLOSED INCOME WAS D ELETED BY CIT (A) 'WITHOUT ANY DIRECTION TO COMPUTE THE BOOK PROFITS, THE A.0. WAS BOUND TO MODIFY THE ASSESSMENT ORDER PASSED UNDER SECTION 153A REA D WITH S. 143(3) OF THE ACT AS DIRECTED BY CIT(A). THEREFORE, IN THE FAC TS OF THE PRESENT CASE, NO FAULT COULD BE FOUND WITH THE A.O. IN GIVING EFFECT TO THE ORDER OF CIT (A). CONSEQUENTLY, THE CIT COULD NOT INVOKE JURISDICTION U NDER SECTION 263 OF THE INCOME-TAX ACT ON THE GROUND THAT THE ASSESSMENT UNDER SECTION I53A READ WITH SECTION 143 (3) WAS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. ' 22. SHE ALSO RELIED ON THE FOLLOWING DECISIONS TO THE PROPOS ITION THAT ADDITIONS CAN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS : 1. M/S. CANARA HOUSING DEVELOPMENT VS. THE DCIT ORDER DA TED 25-07-2014 2. CIT VS. ANIL KUMAR BHATIA REPORTED IN 82 CCH 113 DE LHI HIGH COURT. 3. NANDINI DELUX VS. ACIT REPORTED IN 54 TAXMANN.COM 1 72 (BANGALORE) (TRIBUNAL) 23. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUBM ITTED THAT THE HONBLE BOMBAY HIGH COURT HAS CONSIDERED THE DECISION OF HONBLE KARNATAKA HIGH COURT AND DELHI HIGH COURT RELIED ON BY T HE LD. DEPARTMENTAL REPRESENTATIVE. 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSE E DURING THE COURSE OF ORIGINAL PROCEEDINGS U/S.143(3) VIDE LETTER DATED 26-07-20 06, A COPY OF WHICH IS PLACED AT PAGE 30 OF THE PAPER BOOK HAD GIVEN T HE AGREEMENT FOR 11 SALE OF DEVELOPMENT RIGHTS OF PLOT AS PER CLAUSE 10 OF THE SAID LETTER. IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) ON 22-12- 2006 THERE IS NO ADDITION ON THIS ISSUE. THE SUBMISSION OF THE LD. COUNS EL FOR THE ASSESSEE THAT NO INCRIMINATING MATERIAL WAS FOUND DURING T HE COURSE OF SEARCH ALSO COULD NOT BE CONTROVERED BY THE LD. DEPART MENTAL REPRESENTATIVE. THE ADDITION HAS BEEN MADE BY THE AO M AINLY BASED ON THE VALUATION REPORT OF THE DVO. THE HONBLE DELHI HIGH CO URT IN THE CASE OF PUNEET SABHARWAL (SUPRA) HAS HELD THAT ADDITION TO INCOM E BASED SOLELY ON REPORT OF DVO IS NOT VALID IN ABSENCE OF ANY EVIDENCE OF UNDERSTATEMENT OF CONSIDERATION. WE FURTHER FIND FROM THE REPORT OF THE DVO THAT HE HAS VALUED THE PROPERTY BY ADOPTING THE R ATE OF THE F.Y. 2005-06 WHEREAS THE PROPERTY HAS BEEN TRANSFERRED IN THE YEAR 2003-04. UNDER THESE CIRCUMSTANCES WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITION IS NOT JUSTIFIED SINCE THE DVO HAS TAKEN THE SALE INSTANCE OF THE YEAR 2005-06 INSTEAD OF TAKING COMPARABLE SALE INSTANCES OF 2003-04. 24.1 WE FURTHER FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (SUPRA) AFTER CONSIDERIN G THE DECISION OF HONBLE KARNATAK HIGH COURT IN THE CASE OF CAN ARA HOUSING DEVELOPMENT COMPANY (SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) HAS HELD THAT THE AO WHILE P ASSING THE INDEPENDENT ASSESSMENT ORDER U/S.153A R.W.S. 143(3) OF THE ACT COULD NOT HAVE DISTURBED THE ASSESSMENT/RE-ASSESSMENT ORDER WH ICH HAS ATTAINED FINALITY UNLESS THE MATERIALS GATHERED IN THE COURSE OF SEAR CH OR THE PROCEEDINGS U/S.153A OF THE I.T. ACT ESTABLISH THAT THE R ELIEFS GRANTED IN THE FINALIZED ASSESSMENT/RE-ASSESSMENT WERE CONTRARY TO THE FACTS UNEARTHED DURING THE COURSE OF 153A PROCEEDINGS. SINCE IN THE INSTANT CASE, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY M ATERIAL WAS UNEARTHED DURING THE SEARCH OR IN 153A PROCEEDING WHICH WOULD SHOW 12 THAT NON-ADDITION U/S.69B WAS ERRONEOUS, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MAD E BY THE AO. IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) DELETING THE ADDITION MADE U/S.69B OF THE ACT WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE IS DISMISSED. 25. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S.80IA(4) OF RS.84,02,555/-. 26. AFTER HEARING BOTH THE SIDES, WE FIND THE LD.CIT(A) HAS N OT ALLOWED ANY DEDUCTION U/S.80IA(4) AMOUNTING TO RS.84,02,555/- FOR TH IS ASSESSMENT YEAR. THEREFORE, THIS GROUND BY THE REVENUE BEING INFRUCTUOUS IS DISMISSED. 27. GROUNDS OF APPEAL NO.3 AND 4 BY THE REVENUE BEING GE NERAL IN NATURE ARE DISMISSED. ITA NO.2572/PN/2012 (BY ASSESSEE) (A.Y. 2005-06) : 28. GROUNDS OF APPEAL NO.1 TO 2 BY THE ASSESSEE READS AS UNDER : 1. THE LD.CIT(A) ERRED IN CONFIRMING AN ADDITION O F RS.7,07,195/- ON ACCOUNT OF UNDERVALUATION OF WIP. 1.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE MATERIAL PURCH ASED BY THE ASSESSEE WAS EXPENSED OUT IN THE BOOKS BY THE ASSESSEE AND HENCE, T HERE WAS NO REASON TO INCLUDE THE SAME IN THE CLOSING WIP. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T NO INCRIMINATING EVIDENCE WAS FOUND AS A RESULT OF SEARCH PERTAINING TO THIS TRANSACTION AND HENCE, NO SUCH ADDITION COULD BE MADE IN THE ASST. U/S 153A AND HENCE, THE ADDITION MADE OUGHT TO HAVE BEEN DELETED. 29. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS ON VERIFICATION OF THE BALANCE SHEE T NOTED THAT THE 13 ASSESSEE IS IN RECEIPT OF VARIOUS ADVANCES FROM CONTRACTE E, VIZ., MOBILIZATION ADVANCE, MACHINERY ADVANCE, SECURITY ADVANCE, A DVANCE AGAINST SECURITY DEPOSITS, ADVANCE AGAINST ERECTION AND COMMISSION, ADVANCE AGAINST WORK DONE ETC. OUT OF THIS, SECURITY ADV ANCE HAS BEEN RECEIVED FROM THE CONTRACTEE AGAINST MATERIAL LYING AT SIT E. THE RATIO OF ADVANCE TO COST OF MATERIAL IS 75:100. THE AO FURTHER NOT ED THAT THE ASSESSEE HAS SHOWN NIL WORK-IN-PROGRESS IN CONNECTION WIT H GUNJAWANI PROJECT BUT HAD SHOWN RECEIPT OF SECURITY ADVANCE RECE IVED DURING A.Y. 2005-06, 2006-07 AND 2008-09. THE AO THEREFORE HELD TH AT THE WORK-IN- PROGRESS SHOULD BE ATLEAST RS.7,07,195/- FOR THIS ASSESSM ENT YEAR AS AGAINST NIL WORK-IN-PROGRESS SHOWN BY THE ASSESSEE. HE THEREFORE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. 30. IT WAS EXPLAINED BY THE ASSESSEE THAT THE MATERIAL P URCHASED AT SITE OR MATERIAL TRANSFERRED FROM HEAD OFFICE TO SITE IS EXPENSE D OUT AND INCLUDED IN COST OF CONSTRUCTION OF SITE. HOWEVER, THE AO W AS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY CONSUMPTION RECORD OF MAT ERIAL AT SITE. NO RA BILLS ARE RAISED AFTER DATE OF RECEIPT OF SAID ADVANCE TO THE END OF RELEVANT YEAR. EVEN IF MATERIAL IS EXPENSED OUT IT GOES TO CONSTRUCTION WHICH IS NOT CLAIMED SO AS TO GO TO CONTRACT RECEIPT ACCOUNT. THEREFO RE, THE AO HELD THAT NON DISCLOSURE OF WORK-IN-PROGRESS HAS RES ULTED INTO SHORT DISCLOSURE OF INCOME. IN VIEW OF THE ABOVE HE MADE ADDITION OF RS.7,07,195/- TO THE TOTAL INCOME OF THE ASSESSEE AS UNDIS CLOSED WORK-IN- PROGRESS. 31. BEFORE CIT(A) IT WAS SUBMITTED THAT IN RESPECT OF THE A .YRS. 2005-06 AND 2006-07 ORIGINAL ASSESSMENTS WERE COMPLETED IN ITS CA SE. NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE SEARCH AND THEREFORE THIS ISSUE COULD NOT BE RE-AGITATED IN POST SEARCH ASSESSMEN TS. IT WAS FURTHER 14 SUBMITTED THAT THE AO HAD PASSED AN ORDER U/S.154 REC TIFYING THE DEDUCTION ON ACCOUNT OF OPENING WORK-IN-PROGRESS IN RESP ECT OF SUBSEQUENT YEARS 2006-07, 2007-08 AND 2010-11. 32. HOWEVER, THE CIT(A) ALSO WAS NOT CONVINCED WITH THE AR GUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 20. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT. ON THIS ISSUE, I AGREE WITH THE ACTION OF THE ASSESSING OFFICER IN BRING ING THE CLOSING STOCK INTO TAXATION DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSI NG OFFICER HAS NOTED THAT THE RATIO OF ADVANCE TO COST OF MATERIAL LYING AT SITE IS 75:100. SINCE NO RA BILLS WERE RAISED AFTER THE RECEIPT OF ADVANCE, IT IS APPARENT THAT THE ADVANCES WERE RECEIVED IN RESPECT OF MATERIAL LYING AT SITE. SINCE THE RA BILLS HAVE NOT BEEN RAISED, THERE IS NO OCCASION TO EXPENSE OUT THE MATERIAL LYING AT SITE AND INCLUDED IN THE COST OF CONSTRUCTION AS CLAIMED BY THE APPELLANT. THE APPELLANTS ASSERTION THAT THEY HAVE BEEN FOLLOWING T HE METHOD OF ACCOUNTING FOR EXPENSING OUT THE MATERIAL AT SITE FOR WHICH RA B ILLS HAS BEEN RAISED IN EARLIER YEARS AND THE SAME HAS BEEN ALLOWED IS NOT A GO OD REASON FOR MAKING THE ADDITION IN THIS YEAR. THERE IS NO BAR ON THE DEPARTMENT TO SET RIGHT AN INCORRECT METHOD OF VALUATION OF WIP EV EN THOUGH THE SAME MAY HAVE BEEN REGULARLY FOLLOWED AND ALLOWED IN ASSESSM ENT IN EARLIER YEARS. IT IS WELL-KNOWN THAT THERE IS NO RES-JUDICATA IN INCOME-TAX PROCEEDINGS. 21. THE APPELLANT'S COUNSEL HAD SUBMITTED THAT IN CASE THE ADDITION IS CONFIRMED THEN THEY MAY BE ALLOWED THE BENEFIT OF C LAIMING THIS VALUE AS THE OPENING STOCK IN THE SUCCEEDING YEAR. THE CLAIM IS WEL L-FOUNDED AND IS CONSISTENT WITH THE PRINCIPLES OF ACCOUNTING. HENCE, I DIRECT THE ASSESSING OFFICER TO ALLOW THE APPELLANT TO ADOPT THE WIP OF THE EARLIER PREVIOUS YEAR ADDED AS INCOME OF THE APPELLANT AS THE OPENING WIP OF THE SUCCEEDING FINANCIAL YEAR. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL IS DISMISSED. 33. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 34. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGES 33 TO 44 OF THE PAPER BOOK SUBMITTED THAT ORIGINAL ASSESSMENT IN THE INS TANT CASE WAS COMPLETED U/S.143(3) ON 25-04-2007 WHICH IS PRIOR TO THE S EARCH. THE ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF THE DE TAILS SUBMITTED IN THE BALANCE SHEET AND NO INCRIMINATING EVIDENCE WAS FOUND IN THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS. THEREFORE, THIS ADD ITION IS NOT 15 JUSTIFIED IN ASSESSMENT COMPLETED U/S.153A. FOR THE ABOV E PROPOSITION, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD./CO NTINENTAL WAREHOUSING CORPORATION (SUPRA) AND SUBMITTED THAT NO AD DITION CAN BE MADE IN COMPLETED ASSESSMENT IN ABSENCE OF ANY INCRIMINATIN G MATERIAL FOUND. HE RELIED ON HIS SUBMISSIONS MADE FOR A.Y. 2004-05 W HILE ARGUING ADDITION U/S.69B IN THE GROUND OF APPEAL NO.1 FILED BY THE REVENUE. 35. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). SHE SUBMITTED THAT AD DITION CAN BE MADE NOT ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH BUT EVEN DURING ASSESSMENT PROCEEDINGS U/S.153A OF THE I.T .ACT. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON HER ARGUME NTS FOR A.Y. 2004-05 WHILE ARGUING FOR DELETION U/S.69B. 36. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. IT IS AN ADMITTED FACT THAT IN THE ORIGINA L ASSESSMENT COMPLETED U/S.143(3) THERE WAS NO ADDITION ON ACCOUNT OF W ORK-IN- PROGRESS. NEITHER ANY INCRIMINATING MATERIAL WAS FOUND DURIN G THE COURSE OF SEARCH NOR ANYTHING WAS UNEARTHED DURING THE COURSE OF 153A PROCEEDINGS. THE AO HAS SIMPLY MADE THE ADDITION ON THE BASIS OF THE AUDITED ACCOUNTS FILED BY THE ASSESSEE. IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (SUPRA) COMPLETED ASSESSMENT CANNOT BE DISTURBED BY MA KING ADDITION IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COUR SE OF SEARCH OR UNEARTHED DURING 153A PROCEEDINGS. AS MENTIONED EAR LIER ADMITTEDLY IN THE INSTANT CASE NO INCRIMINATING MATERIAL ON ACCOUNT OF WORK-IN- PROGRESS WAS FOUND EITHER DURING THE COURSE OF SEARCH O R UNEARTHED BY THE 16 AO DURING THE COURSE OF 153A PROCEEDINGS OR FROM ANY O UTSIDE SOURCES. WHATEVER ADDITION HAS BEEN MADE IS ON THE BASIS OF THE A UDITED ACCOUNTS SUBMITTED BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME . WE THEREFORE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSE SSEE THAT NO ADDITION CAN BE MADE TO COMPLETED ASSESSMENTS IN ABSENC E OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD./CONTINENTAL WAREHOUS ING CORPORATION (SUPRA). THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 37. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARIN G DID NOT PRESS GROUNDS OF APPEAL NO.3 AND 3.1 FOR WHICH THE LD. DE PARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE ABOVE GROUNDS ARE DISMISSED AS NOT PRESSED. 38. GROUNDS OF APPEAL NO.4 TO 4.2 BY THE ASSESSEE READ AS UNDER : 4. THE LD.CIT(A) ERRED IN NOT ALLOWING THE DEDUCTI ON U/S.80IA(4) OF RS.1,46,85,364/-. 4.1 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE ASSESSE E COMPANY WAS ENTITLED TO DEDUCTION U/S.80IA(4) AND THE SAME SHOULD HAVE BEEN ALLOWED TO THE ASSESSEE COMPANY. 4.2 THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT SI NCE THE ASST. U/S.143(3) WAS ALREADY COMPLETED PRIOR TO SEARCH FOR THIS YEAR, T HERE WAS NO REASON TO DISALLOW THE DEDUCTION U/S.80IA(4) IN THE ASST. FRAMED U/S.153A. 39. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSEE COM PANY HAD CLAIMED DEDUCTION U/S.80IA(4) IN ITS ORIGINAL RETURN FILED U/S.139 (1). IN THE ORDER PASSED U/S.143(3) ON 24-04-2007 THE CLAIM OF DE DUCTION U/S.80IA(4) WAS DISALLOWED. THE MATTER TRAVELLED UPTO THE T RIBUNAL AND THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. THE ASSESS EE FILED AN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT. THE HONBLE HIGH C OURT VIDE ORDER DATED 11-02-2013 IN ITA NO.1459/2011 RESTORED THE ISSU E TO THE FILE OF THE 17 TRIBUNAL FOR FRESH ADJUDICATION. IN THE ASSESSMENT COMPLET ED U/S.153A THE AO, WHILE COMPUTING THE TOTAL INCOME, HAS STARTED WITH THE FIGURE OF INCOME AS PER ASSESSMENT ORDER PASSED U/S.143(3). HE HA S NOT MADE ANY DISALLOWANCE U/S.80IA(4) IN THE ASSESSMENT ORDER COMPLETED U/S.153A. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE TH E HONBLE HIGH COURT HAS RESTORED THE ISSUE TO THE FILE OF THE TRIBUNAL AND SINCE NO DISALLOWANCE HAS BEEN MADE U/S.80IA(4) IN THE ASSESSMENT O RDER PASSED U/S.153A, THEREFORE, THIS ISSUE OF ALLOWING DEDUCTION U/S.80IA(4 ) BECOMES ACADEMIC. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY AG REED FOR THE ABOVE SUBMISSION OF THE ASSESSEE. 40. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE ORIGINAL ORDER PASSED U/S. 143(3) THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4). THE CIT(A) UPHELD THE DISALLOWANCE AND THE TRIBUNAL ALSO CONFIRMED THE ORDER OF T HE CIT(A). ON FURTHER APPEAL BY THE ASSESSEE, THE HONBLE HIGH COURT, FO LLOWING THE DECISION IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSM ENT YEAR, RESTORED THE ISSUE TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION IN AC CORDANCE WITH LAW. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT AT PARA 2 TO 4 OF THE ORDER READ AS UNDER : 2. IN THIS APPEAL, THE ASSESSEE HAS IN RESPECT OF ASSESSMENT YEAR 2005-06 RAISED THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERA TION. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE ON A PROPER AND REASONABLE INTERPRETATION OF S.80IA(4), THE TRIB UNAL IS RIGHT IN HOLDING THAT GOVERNMENT OR STATUTORY BODY IS THE DEV ELOPER OF INFRASTRUCTURE FACILITY AND HERE APPELLANT IS NOT EN TITLED TO DEDUCTION UNDER THAT SECTION? 3. THE TRIBUNAL, WHILE DISMISSING THE ASSESSEES APPEAL, F OLLOWED ITS ORDER FOR ASSESSMENT YEAR 2003-2004 WHILE DENYING THE DEDUCTI ON CLAIMED UNDER SECTION 80IA(4) OF THE INCOME TAX ACT. THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2003-2004 HAS BEEN SET ASIDE BY THIS COURT IN APPEAL FILED BY THE APPELLANT BEING I.T. APPEAL NO.4610 OF 2010 ON 30 TH AUGUST, 2011 AND RESTORED TO THE TRIBUNAL FOR A FRESH DECISION. 18 3. FOR THE REASONS MENTIONED IN THE ORDER DATED 30 TH AUGUST, 2011, WE SET ASIDE THE IMPUGNED ORDER RELATING TO ASSESSMENT YEAR 200 5-2006 AND RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL, FOR FRESH DE CISION IN ACCORDANCE WITH LAW. 4. ALL THE CONTENTIONS OF PARTIES ARE KEPT OPEN TO BE URGED BEFORE THE TRIBUNAL. 41. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.433/PN/2007 ORDER DATED 06-02-2012 FOR A.Y. 2003-04, FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. AND OTHER REPORTED IN 322 ITR 323 AND VARIOUS OTHER DECISIONS, HAS ALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4) OF TH E ACT. HOWEVER, AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSES SEE WE FIND NO DISALLOWANCE HAS BEEN MADE U/S.80IA(4) IN THE ASSESSMENT O RDER PASSED U/S.153A OF THE ACT. THEREFORE, THE GROUNDS RAISED BY TH E ASSESSEE BECOME ACADEMIC IN NATURE. ACCORDINGLY, THE SAME ARE DISMISSED. 42. GROUND OF APPEAL NO.5 BEING GENERAL IN NATURE IS DISMISSED. ITA NO.51/PN/2013 (BY REVENUE) (A.Y. 2005-06) : 43. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S.80IA(4) OF RS.1,46,85,364/-. 44. AFTER HEARING BOTH THE SIDES WE FIND THE LD.CIT(A) HAD N OT ALLOWED ANY DEDUCTION U/S.80IA(4) AMOUNTING TO RS.1,46,85,364/-. TH EREFORE, THIS GROUND BY THE REVENUE BEING INFRUCTUOUS IS DISMISSED. ITA NO.2573/PN/2012 (BY ASSESSEE) (A.Y. 2006-07) : 45. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARIN G DID NOT PRESS GROUNDS OF APPEAL NO.3 AND 3.1 FOR WHICH THE LD. DEP ARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE ABOVE GROUNDS ARE 19 DISMISSED AS NOT PRESSED. GROUND OF APPEAL NO.5 BEING G ENERAL IN NATURE IS DISMISSED. 46. GROUNDS OF APPEAL NO.1 TO 2 BY THE ASSESSEE READ AS UNDER : 1. THE LD.CIT(A) ERRED IN CONFIRMING AN ADDITION OF RS.61,14,953/- ON ACCOUNT OF UNDERVALUATION OF WIP. 1.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE MATERIAL PURCH ASED BY THE ASSESSEE WAS EXPENSED OUT IN THE BOOKS BY THE ASSESSEE AND HENCE, T HERE WAS NO REASON TO INCLUDE THE SAME IN THE CLOSING WIP. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T NO INCRIMINATING EVIDENCE WAS FOUND AS A RESULT OF SEARCH PERTAINING TO THIS TRANSACTION AND HENCE, NO SUCH ADDITION COULD BE MADE IN THE ASST. U/S 153A AND HENCE, THE ADDITION MADE OUGHT TO HAVE BEEN DELETED. 47. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN DS BY THE ASSESSEE ARE IDENTICAL TO GROUNDS OF APPEAL NO.1 AND 2 IN ITA NO.2572/PN/2012 FILED BY THE ASSESSEE FOR A.Y. 2005-06. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESS EE HAVE BEEN ALLOWED. FOLLOWING THE SAME REASONINGS, THE ABOVE GROUNDS BY THE ASSESSEE ARE ALLOWED. 48. GROUNDS OF APPEAL NO. 4 TO 4.2 BY THE ASSESSEE READ AS UNDER : 4. THE LD.CIT(A) ERRED IN NOT ALLOWING THE DEDUCTI ON U/S.80IA(4) OF RS.1,55,18,839/-. 4.1 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE ASSESSE E COMPANY WAS ENTITLED TO DEDUCTION U/S.80IA(4) AND THE SAME SHOULD HAVE BEEN ALLOWED TO THE ASSESSEE COMPANY. 4.2 THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT SI NCE THE ASST. U/S.143(3) WAS ALREADY COMPLETED PRIOR TO SEARCH FOR THIS YEAR, T HERE WAS NO REASON TO DISALLOW THE DEDUCTION U/S.80IA(4) IN THE ASST. FRAMED U/S.153A. 49. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSEE COM PANY HAD CLAIMED DEDUCTION U/S.80IA(4) IN THE ORIGINAL RETURN FILED U/S.1 39(1). THE AO PASSED THE ASSESSMENT U/S.143(3) ON 02-12-2008 DISALLOWING THE CLAIM OF DEDUCTION U/S.80IA(4) AT RS.1,53,18,839/-. THE ASSESSEE CH ALLENGED THE 20 DISALLOWANCE AND THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE. THE MATTER IS PENDING BEFORE THE TRIBUNAL, AS MENTIONED IN THE ORDER OF CIT(A). IN THE MEANTIME, THE AO SUBSEQUENT TO THE SEARCH COMP LETED U/S.132 OF THE I.T. ACT, ISSUED NOTICE U/S.153A OF THE ACT. IN THE ORDER PASSED U/S.153A R.W.S.143(3) DATED 27-12-2011 THE AO NOTED THAT AGAINST THE ORDER OF THE CIT(A) THE ASSESSEE HAS PREFERRED AN APPE AL BEFORE THE TRIBUNAL AND THE DECISION IS AWAITED. HOWEVER, THE AO HAS NOT MADE ANY DISALLOWANCE U/S.80IA(4) IN THE ASSESSMENT COMPLETED U/S.153 A. WHILE COMPUTING THE TOTAL INCOME THE AO HAS STARTED WITH THE FIGURE OF INCOME ASSESSED U/S.143(3) ASSESSMENT. 50. IN APPEAL THE LD.CIT(A) HAD NOT DECIDED THE ISSUE OF DE DUCTION U/S.80IA(4) ON THE GROUND THAT THE MATTER IS PENDING WITH ITAT AND THE MATTER IS NOT ABATED. 51. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 52. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT SINCE NO DISALLOWANCE HAS BEEN MADE U/S.80IA(4) IN THE ASSESSME NT ORDER PASSED U/S.153A, THEREFORE, THIS ISSUE OF ALLOWING DEDUCTION U /S.80IA(4) BECOMES ACADEMIC. 53. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND FAIRLY CONCEDED THAT SINCE THE AO HAS NOT MADE ANY DISALLOWANC E IN THE ORDER PASSED U/S.L53A, THEREFORE, THIS ISSUE BECOMES ACADEMIC IN NATURE. 54. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS RAISE D BY THE ASSESSEE IN THE IMPUGNED APPEAL ARE IDENTICAL TO THE GROU NDS RAISED IN ITA NO.2571/PN/2012 FOR A.Y. 2004-05 AND ITA NO.2572/PN/2012 FOR A.Y. 2005-06. SINCE THE AO HAS NOT MADE ANY DISALLOWANCE U/S .153A, 21 THEREFORE, THE GROUNDS BECOME ACADEMIC IN NATURE. ACCO RDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. ITA NO.52/PN/2013 (BY REVENUE) (A.Y. 2006-07) : 55. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEPRECIATION ON WINDMI LL OF RS. 28,37,565/- AND MEDA CHARGES OF RS. 6,25,000/- HOLDING THAT THIS ISSUE I S ALREADY BEEN LOOKED INTO DURING THE COURSE OF ORIGINAL ASSESSMENT U/S 143(3) AND AN OPINION WAS FORMED THAT DEPRECIATION IS ALLOWABLE ON FOUNDATION OF WINDMILL AT THE RATES APPLICABLE TO WTGS AND MEDA CHARGES WERE AN ALLOWABL E BUSINESS EXPENDITURES. HENCE, IT IS NOT POSSIBLE FOR THE ASSESSING O FFICER IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH TO MAKE THE DISALLOWANCE AS THE SAME TANTAMOUNT TO A CHANGE OF OPINION WHICH IS N OT PERMITTED IN THE COURSE OF ASSESSMENT UNDER SEC. 153A. 56. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS INSTALLED NEW WINDMILLS. ON PERUSAL OF DETAILS FURNISHED BEFORE HIM HE NOTICED THAT THE ASSESSEE HAD CLAIMED DEPR ECIATION ON THE ENTIRE EXPENDITURE INCLUDING PURCHASE AND INSTALLATION OF TH E WINDMILL. HE THEREFORE ASKED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM M ADE ON THE ASSETS OTHER THAN THE WINDMILL. 57. THE ASSESSEE SUBMITTED THAT THERE WAS NO CIVIL WORK INVOLVED FOR ERECTION OF THE WIND TURBINE AS PARTS LIKE CONTROL PANELS A ND DISPLAY METERS WERE USED WITHIN THE TOWER ITSELF. IT WAS SUBMITTE D THAT THE CIVIL WORK DONE IN THE FORM OF FOUNDATION WORK COULD NOT BE SEP ARATED FROM THE WIND TURBINE AND THEREFORE IT WAS ENTITLED FOR DEPRECIATION ON THE ENTIRE COST OF THE WIND TURBINE. 58. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. AFTER VERIFYING THE BILLS IN CONNECTION WITH VARIOU S EXPENSES INCURRED ON WIND TURBINE THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION ON CIVIL WORK, PAYMENT TOWARDS MEDA CHARGES ETC. FOR THE 22 ABOVE PROPOSITION THE AO RELIED ON THE DECISION OF THE TRIB UNAL IN THE CASE OF POONAWALLA FINVEST AND AGRO PVT. LTD. VS. ACIT REPORTED IN 100 TTJ 68 AND RULE 32(1) OF THE I.T. RULES, 1962 APPENDIX I, PART A , ITEM III(3)(IXVIII)(I). THE AO ACCORDINGLY REWORKED THE DEPRECIATION . SIMILARLY THE AO NOTED THAT THE ASSESSEE HAS PAID RS.6,35,000/- TOWAR DS PROCESSING CHARGES TO MEDA FOR INSTALLATION OF WINDMILL AT AKHATWADE, DIST . NANDURBAR. THE CHARGES WERE CLAIMED AS INDIRECT EXPENSE S. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT THE SAID EXPENDITU RE INCURRED IS TOWARDS CAPITAL ASSETS AND HENCE SHOULD HAVE BEEN CAPIT ALIZED. HE FURTHER NOTED THAT THE ASSESSEE HAD SHOWN MEDA CHARGES AS C APITAL EXPENDITURE AND CLAIMED DEPRECIATION THEREON FOR A.Y. 2007-08. HE TH EREFORE ADDED THE AMOUNT OF RS.6,25,000/- TOWARDS THE TOTAL INCOME OF THE ASSESSEE . 59. BEFORE CIT(A) IT WAS SUBMITTED THAT IN THE ORIGINAL ASSES SMENT PROCEEDINGS FOR A.Y. 2006-07 THE AO ALLOWED DEPRECIATION @8 0% ON THE ENTIRE COST OF WINDMILL WHICH INCLUDED EXPENSES FOR CIVIL WORK, FO UNDATION, ERECTION AND COMMISSIONING AND TESTING. IT WAS POINTED O UT THAT DURING THIS YEAR MEDA PROCESSING CHARGES OF RS.6,25,000/- WAS A LSO ALLOWED AS REVENUE EXPENSES AS CLAIMED. IT WAS SUBMITTED THAT THE ADDITION SHOULD NOT HAVE BEEN MADE IN THE ORDER PASSED U/S.143(3) R.W.S. 153A FOR THE REASON THAT THE ISSUE OF DEPRECIATION ON WINDMILL FOR A.Y. 200 6-07 WAS ALREADY CONCLUDED IN THE ORIGINAL ASSESSMENT PASSED U/S.14 3(3) AND NO INCRIMINATING MATERIAL/EVIDENCE IN THIS RESPECT WAS FOUND DUR ING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS. 60. IN ITS ALTERNATE CONTENTION IT WAS SUBMITTED THAT THE WINDMILL REQUIRES SPECIFIC TYPE OF CIVIL FOUNDATION AND IN THE NATURE O F GENERAL CIVIL CONSTRUCTIONS. RELYING ON VARIOUS DECISIONS IT WAS SUBMITT ED THAT THE FOUNDATION EXPENSES OF PLANT AND MACHINERY/WINDMILL IS PART O F COST OF PLANT AND MACHINERY AND WINDMILL. IT WAS ACCORDINGLY ARGUE D THAT DEPRECIATION @80% BE ALLOWED TO IT ON CIVIL WORK AND ALSO ME DA CHARGES. 23 IT WAS FURTHER SUBMITTED THAT SINCE SEPARATE COST OF FOU NDATION WAS NOT AVAILABLE, DEPRECIATION FOR A.Y. 2006-07 BE ALLOWED TO IT @80%, BASED ON THE DETAILS GIVEN FOR A.Y. 2007-08. 61. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UNDER : 33. IN RESPECT OF THE DISALLOWANCE MADE ON DEPRECIAT ION CLAIMED ON WINDMILL AND DISALLOWANCE OF MEDA CHARGES DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S.153A, I FIND THAT THE ASSESSING OFFICER HAD NOTED IN THE ASSESSMENT ORDER PASSED U/S.143(3) ON 02-12-2008 THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER THROUG H WINDMILL. 34. VIDE LETTER NO.KOP/ADDL.CIT, R-2/QUESTIONNAIRE/2 98/2008-09 DATED 03-10-2008, THE ASSESSING OFFICER HAD SPECIFICALLY ASKED THE APPELLANT TO PROVIDE DETAILS IN RESPECT OF CLAIM OF DEPRECIATION A ND INSTALLATION OF WINDMILLS. QUESTION NOS. 1 AND 2 OF THIS LETTER ARE SPECIFICALLY D IRECTED TOWARDS THESE ISSUES. THESE DETAILS WERE PROVIDED BY THE APPELLANT VI DE THEIR LETTER DATED 03- 10-2008. APPLYING THE PRINCIPLES FOR ASSESSMENT AS ABOV E IN THE FOREGOING PARAGRAPHS I HOLD THAT THESE ISSUES WERE ALREADY LOOKED INTO DURING THE COURSE OF ORIGINAL ASSESSMENT AND AN OPINION WAS FORMED THAT DE PRECIATION IS ALLOWABLE ON FOUNDATION OF THE WINDMILL AT THE RATE S APPLICABLE TO WTGS AND THAT MEDA CHARGES WERE AN ALLOWABLE BUSINESS EXPENSE. H ENCE, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER, IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH TO MAKE THE AFORESAID DISALLOWANCE AS THE SAME TANTAMOUNT TO A CHANGE OF OPINION WHICH IS NOT PERMI TTED IN THE COURSE OF REASSESSMENT U/S.153A. THE APPEAL ON THIS GROUND IS ALLOW ED FOR ASSESSMENT YEAR 2006-07. 62. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 63. THE LD. DEPARTMENTAL REPRESENTATIVE AT THE OUTSET R ELIED ON THE ARGUMENTS ADVANCED BY HER WHILE ARGUING THE SCOPE OF 15 3A PROCEEDINGS IN A.Y. 2004-05 AND SUBMITTED THAT THE AO CAN MAKE DISALLO WANCE ON THE BASIS OF INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS. SHE ACCORDINGLY SUBMITTED THA T THE ADDITION MADE BY THE AO IS JUSTIFIED. THEREFORE, THE ORDER OF THE C IT(A) SHOULD BE REVERSED AND THAT OF THE ORDER OF THE AO BE RESTORED. 24 64. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ALL C ARGO GLOBAL LOGISTICS LTD./CONTINENTAL WAREHOUSING CORPORATION (SUPRA) SUBMITTED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND EITHER DURING THE COURSE OF SEARCH OR UNEARTHED DURING THE COURSE OF 153A PROCEED INGS AND SINCE THE DISALLOWANCE MADE BY THE AO WAS ON THE BASIS OF MATERIAL A LREADY AVAILABLE ON RECORD AND SINCE IN THE ORIGINAL ASSESSMENT P ROCEEDINGS THE AO HAS ALREADY ALLOWED DEPRECIATION @80%, THEREFORE, THE O RDER OF THE CIT(A) BEING IN ACCORDANCE WITH LAW SHOULD BE UPHELD. 65. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO IN THE ORDER PASSED U/S .143(3) ON 25-04- 2007, A COPY OF WHICH IS PLACED AT PAGES 42 TO 45 OF THE PAPER BOOK, HAS NOT MADE ANY DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON W INDMILL. THE AO HAS ACCEPTED THE RATE OF DEPRECIATION AS CLAIMED BY T HE ASSESSEE AND MEDA CHARGES WAS ALLOWED AS BUSINESS EXPENDITURE. NO INC RIMINATING MATERIAL WHATSOEVER WAS FOUND DURING THE COURSE OF SEAR CH OR 153A PROCEEDINGS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF ALL CARGO GLOBAL LOGISTICS LTD./ CONTINENTAL WAREHOUSING CORPORATION (SUPRA) HAS HELD THAT COMPLETED ASSESSMENTS CANNOT BE DISTURBED BY MAKING ADDITIONS WHICH IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS. THE HONBLE HIGH C OURT WHILE DECIDING THE ISSUE HAS CONSIDERED THE DECISIONS OF HONBLE KARNATAKA HIGH COURT AND HONBLE DELHI HIGH COURT WHICH WERE RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE. ACCORDINGLY, THE ORDER OF T HE CIT(A) BEING IN ACCORDANCE WITH LAW LAID BY THE JURISDICTIONAL HIGH COURT CI TED (SUPRA) IS UPHELD AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED . 25 66. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 69B ON ACCOUNT OF DIFFERENCE IN VALUATION TO THE TUNE OF RS. 2,64,000/-. 67. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD A CQUIRED LAND AT R.S.NO.152, AT VILLAGE AKHATWADE, R.S.NO.73 AT VILLAGE GANGAPUR, DIST. NANDURBAR IN THE FINANCIAL YEARS RELEVANT TO A.YRS. 2006-07 AND 2007-08 RESPECTIVELY. THE AO MADE A REFERENCE TO THE DVO U/S.1 42A OF THE I.T. ACT TO DETERMINE THE COST OF THE PROPERTIES IN THE HANDS O F THE ASSESSEE AS ON THE DATE OF ACQUISITION. THE DVO IN HIS REPORT ADOPTED TH E METHOD OF VALUATION FOR COST OF ACQUISITION OF LAND TAKING INTO CONSIDER ATION OF OLD RATES REFLECTED IN THE READY RECKONER AND FACTORS AFFECTIN G THE VALUATION LIKE, SIZE, SITUATION, LOCATION, LOCALITY, AGE, ACCESS TO CIVIL AMENITIE S, AREA, TYPE OF OCCUPATION, PURPOSE OF VALUATION, USE ETC. FOR THE FAIR MARKET RAT E OF THE PROPERTY. HE ACCORDINGLY VALUED THE PROPERTY AT R S.3,84,000/- AS AGAINST RS.1,20,000/- DECLARED BY THE ASSESSEE. SIMILARLY FOR THE A.Y. 2007-08 AS AGAINST THE VALUE DISCLOSED BY THE ASSESSEE AT RS.1,80,000/- THE DVO VALUED THE SAME AT RS.6,71,000/-. 68. THE AO PROVIDED THE COPY OF THE VALUATION REPORT TO THE ASSESSEE AND SOUGHT ITS EXPLANATION AND ASKED THE ASSESSEE AS TO W HY THE DIFFERENCE IN THE VALUATION SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT WAS EXPLAINED BY THE ASSESSEE THAT COST OF LAND AS PER BOOKS OF ACCOUNT IS MORE THAN THE ESTIMATED VALUE OF LAND BY THE DVO. HOWE VER, THE AO REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS SHOWN THE VALUE AT RS.15 LAKHS IN BOOKS OF ACCOUNT W HICH INCLUDES THE COST OF RS.13,29,100/- BEING PAID TO SAJJAN REALTIES LT D. FOR EASY ACCESS AND KEEPING THE AREA VACANT OF SURROUNDING LAND AND RS.50,900/- WAS SPENT ON STAMP DUTY. HE ACCORDINGLY HELD THAT THE CONTENTION OF THE ASSESSEE IS NOT CORRECT AND HENCE NOT ACCEPTABLE. REJ ECTING THE VARIOUS 26 EXPLANATIONS GIVEN BY THE ASSESSEE THE AO MADE ADDITION OF RS.2,64,000/- DURING A.Y. 2006-07 AND RS.4,91,000/- DURING A.Y. 2007-08, TH E DETAILS OF WHICH ARE AS UNDER : ASST. YEAR VALUATION DONE BY DVO (EXCLUDING COST INCURRED FOR LAND WORK) VALUE DISCLOSED BY THE APPELLANT DIFFERENCE ADDED TOTAL INCOME 2006 - 07 3,84,000/ - 1,20,000/ - 2,64,000/ - 2007 - 08 6,71,000/ - 1,80,000/ - 4,91,000/ - 69. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE ISSUE OF LAND COST, WINDMILL INVESTMENTS ETC., WAS DEALT WITH BY THE AO IN THE OR IGINAL ASSESSMENT U/S.143(3) FOR A.Y. 2006-07 AND HENCE CANNOT B E RE-AGITATED. IT WAS ARGUED THAT NO INCRIMINATING DOCUMENT IN THE ABOV E ACCOUNT WAS FOUND DURING THE SEARCH PROCEEDINGS. ALTERNATIVELY, IT WAS ARGUED THAT NO ADDITION COULD BE MADE ONLY ON THE BASIS OF THE VALUATION REPORT AND THAT IT WAS FOR THE DEPARTMENT TO PROVE THE UNDERSTATEMENT OR CONCEALMENT OF INCOME. THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. PUNEET SABHARWAL REPORTED IN 338 ITR 485 WAS RELIED UPON. 70. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 38. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT . I FIND THAT AS AGAINST THE VALUATION OF RS.3.84 LAKHS AND RS.6.71 LAKHS DONE D URING THE COURSE OF VALUATION BY THE DVO FOR ASSESSMENT YEARS 2006-07 AND 20 07-08, RESPECTIVELY, THE APPELLANT HAS BOOKED THE COST OF RS.15 LAKHS AND RS. 17 LAKHS AS COST OF LAND IN THESE TWO YEARS. THEY INCLUDE A SUM OF RS.13,29,100 /- (2006-07) AND RS.14,48,160/- (2007-08) WHICH WAS SPENT BY THE APPELL ANT IN CONSTRUCTION OF APPROACH ROAD, EASY ACCESS AND FOR KEEPING THE AREA VA CANT. IT ALSO INCLUDES THE STAMP DUTY PAID OF RS.50,900/- FOR ASSESSMENT YEARS 2006-7 0 AND RS.71,480/- FOR ASSESSMENT YEAR 2007-08. THE DVO HAS ADOPTED THE V ALUE OF RS.3.84 LAKHS AND RS. 6.71 LAKHS ON THE BASIS OF THE RATES REFLECTED I N THE READY RECKONER AND OTHER FACTORS LIKE SIZE, SITUATION, LOCALITY, ACCESSIBIL ITY ETC. APPARENTLY, THIS IS MERELY AN ESTIMATION AND NOT BASED ON COMPARABLE INSTA NCES OF SALE IN THIS LOCALITY. FURTHER, IT IS WELL-KNOWN THAT THE WINDMI LLS ARE LOCATED IN FAR-FLUNG AREAS WHICH ARE OFTEN NOT EASILY APPROACHABLE. THEREF ORE, THE VALUATION OF LAND IN THESE AREAS WILL NOT BE THE SAME AS THE VALUE OF A L AND WHICH IS EASILY MARKETABLE. THE APPELLANT HAS ALSO INCURRED SUBSTANTIAL COST OF IMPROVEMENT AND INCLUDED IT IN THE COST OF LAND. TAKEN TOGETHER THE AMOUNT DEBITED TOWARDS THE COST OF LAND IS MUCH HIGHER THAN THE VALUE ADOPTE D BY THE DVO. I THEREFORE, 27 DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITIONS. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL IS ALLOWED FOR THE YEARS UNDER CONSID ERATION. 71. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 72. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. ADMITTEDLY, IN THE INSTANT CASE THE AO HAS MADE ADDITION U/S.69B ON THE BASIS OF THE VALUATION REPORT OBTAINED FROM THE DVO. NO INCRIMINATING MATERIAL WHATSOEVER WAS FOUND DURING THE COUR SE OF SEARCH OR 153A PROCEEDINGS. THE HONBLE DELHI HIGH COURT IN THE CASE OF PUNEET SABHARWAL (SUPRA) HAS HELD THAT ADDITION TO INCOME BASED SOLELY ON THE REPORT OF THE DVO IS NOT VALID IN ABSENCE OF ANY EVIDENCE OF UNDERSTATEMENT OF CONSIDERATION. IN THIS VIEW OF THE MATT ER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) WE FIND NO INFIRMITY IN HIS ORDER ON THIS ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GR OUND RAISED BY THE REVENUE IS DISMISSED. 73. GROUNDS OF APPEAL NO.3 BY THE REVENUE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S.80IA OF RS. 1,55,18,839/-. 74. AFTER HEARING BOTH SIDES, WE FIND THE LD.CIT(A) HAS NOT ALLOWED ANY DEDUCTION U/S.80IA(4) AMOUNTING TO RS.1,55,18,839/-. THEREFORE , THIS GROUND BY THE REVENUE BEING INFRUCTUOUS IS DISMISSED. 75. GROUNDS OF APPEAL NO. 4 BY THE REVENUE BEING GENERA L IN NATURE IS DISMISSED. 28 ITA NO.2574/PN/2012 (BY ASSESSEE) (A.Y. 2007-08) : 76. GROUNDS OF APPEAL NO.1 AND 7 BY THE ASSESSEE BEING GENERAL IN NATURE ARE DISMISSED. GROUND OF APPEAL NO.6 WAS NOT PRE SSED BY THE LD. COUNSEL FOR THE ASESSEE FOR WHICH THE LD. DEPARTMENTAL REPRESENT ATIVE HAS NO OBJECTION. ACCORDINGLY, GROUND OF APPEAL NO.6 BY THE A SSESSEE IS DISMISSED AS NOT PRESSED. 77. GROUND OF APPEAL NO. 2 TO 2.6 BY THE ASSESSEE RELATE S TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.2,00,17,500/- MADE B Y THE AO ON THE BASIS OF LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH. 78. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE CO MPANY IS IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF IRRIGATION PROJ ECTS. A SEARCH U/S.132 OF THE I.T. ACT WAS CONDUCTED ON THE ASSESSEE COMPANY ON 23-09-2009. DURING THE COURSE OF SEARCH CERTAIN LOOSE P APERS MARKED BUNDLE NO.1 CONTAINING 40 LOOSE SHEETS WERE FOUND FROM TH E RESIDENCE OF SHRI DHIRENDRA ANANT BHAT, TECHNICAL DIRECTOR OF THE COMPA NY. THE ABOVE LOOSE SHEETS INDICATED EVIDENCES OF SPEED MONEY DEPICTING THE NAME OF THE PROJECT, AMOUNT, DATE OF PAYMENT, NAME OF PAYER, NAME OF THE RECIPIENT, DESIGNATION OF THE PRIME RECIPIENT, SHARE OF SUCH UNEXPLAINED EXPENDITURE BETWEEN MAHALAXMI INFRA PROJECTS PVT. LTD. AND ITS J.V. PART NER B.T. PATIL AND SONS, BELGAUM CONSTRUCTION COMPANY LTD. ETC. THE MA IN EVIDENCE OF SPEED MONEY PAYMENT RELATES TO GHODZHARI PROJECT, A PR OJECT OF IRRIGATION DEPARTMENT OF GOVERNMENT OF MAHARASHTRA UNDERTAKEN BY JOINT VENTURE COMPRISING OF MAHALAXMI INFRA PROJECTS PVT. LTD. AND B.T. P ATIL AND SONS, BELGAUM CONSTRUCTION COMPANY LTD. THE SAID SEIZED DOCUME NTS CONTAIN DETAILS OF TOTAL SPEED MONEY PAID IN RESPECT OF GHODZHARI P ROJECT UPTO 04-02-2009. THE TOTAL SPEED MONEY PAID IN RESPECT OF G HODZHARI PROJECT AS ON 04-02-2009 AMOUNTS TO RS.43,83,64,000/-. 50% OF TH E ABOVE AMOUNTING RS.21,91,82,000/- RELATES TO THE ASSESSEE COMPA NY AND THE 29 BALANCE 50% OF RS.21,91,82,000/- TO B.T. PATIL AND SONS, BELGA UM CONSTRUCTION COMPANY LTD. ASSESSEES J.V. PARTNER. BOTH THE ASSESSEE AND ITS JV PARTNER B.T. PATIL AND SONS, BELGAUM CONSTRUCTIO N COMPANY LTD. ADMITTED THAT RS.43,83,64,000/- IS THE TOTAL UNEXPLAINED EXPENDITURE RELATED TO GHODZHARI PROJECT AND THEIR 50% SHARE IS RS.2 1,91,82,000/-. HOWEVER, THE ASSESSEE COMPANY AND ITS J.V. PARTNER HAVE DECLARED ADDITIONAL INCOME FOR A.YRS. 2009-10 AND 2010-11 WHEN THE ACTUAL UNEXPLAINED EXPENSES RELATE TO A.YRS. 2007-08, 2008-09 AND 2009-1 0. 79. THE AO NOTED THAT IT IS THE CLAIM OF THE ASSESSEE C OMPANY AND ITS J.V. PARTNER THAT THE UNEXPLAINED PAYMENTS MENTIONED IN TH E DOCUMENTS SEIZED FROM SHRI D.A. BHAT, TECHNICAL DIRECTOR OF THE ASSESSE E COMPANY ARE ONLY PROJECTED PAYMENTS AND NOT PAYMENTS ACTUALLY BEEN MADE. THEREFORE, ACCORDING TO THE AO, THE ONLY DISPUTE IN RESPECT OF UNEX PLAINED PAYMENTS RELATED TO GHODZHARI PROJECT IS THE YEAR OF TAXATION AN D NATURE OF PAYMENTS. THE AO ANALYSED THE YEAR WISE BREAK UP OF S PEED MONEY PAID BY THE ASSESSEE COMPANY AND ITS J.V. PARTNER, B.T. PATIL AND SONS IN RESPECT OF GHODZHARI PROJECT AS PER THE DOCUMENTS SE IZED FROM SHRI D.A. BHAT WHICH IS GIVEN AT PAGES 4 TO 17 OF THE ASSESSMENT ORDER. HE ALSO REFERRED TO THE STATEMENT RECORDED U/S.132(4) OF THE I.T . ACT FROM SHRI D.A. BHAT ON 24-09-2009 AND NOTED THE FOLLOWING CONCLUSIONS AS PER PARA 7.7 OF THE ASSESSMENT ORDER : (I) SHRI D.A. BHAT IS A TRUSTED AND LOYAL EMPLOYEE OF ASSESSE E COMPANY WORKING FOR NEARLY 2 DECADES. (II) HE IS INVOLVED IN THE PROJECT RIGHT FROM AWARDING OF THE CONTRACT TILL THE COMPLETION, INCLUDING RELEASE OF PAYMENTS ETC. (III) THE SEIZED DOCUMENTS ARE IN THE HAND WRITING OF SHRI D.A. BHAT AND HE HAS CATEGORICALLY STATED U/S.132(4) THAT SPEED MONEY PA YMENTS HAVE BEEN MADE. (IV) QUANTUM, DATE OF PAYMENT OF SPEED MONEY, DETAILS OF P AYER AND RECIPIENT ARE AVAILABLE IN THE SEIZED DOCUMENTS. (V) SHRI D.A. BHAT WAS MAINTAINING THE ACCOUNTS RELATED T O SPEED MONEY OF GHODZARI PROJECT, SEIZURE OF EVIDENCE FROM HIS RESIDEN CE PROVES THIS FACT BEYOND DOUBT. MOREOVER, SEIZURE OF DOCUMENTS OF B.T. PATIL & SONS IN 30 RESPECT OF SPEED MONEY FROM THE RESIDENCE OF SHRI D.A. BHAT FORTIFIES THIS FACT. HAD SHRI D.A. BHAT NOT BEEN MAINTAINING ACCOUNTS RELATED TO SPEED MONEY THERE WAS NO NEED TO SEND SPEED MONEY STATEM ENTS BY B.T. PATIL & SONS TO SHRI D.A. BHAT FOR RECONCILIATIO N FROM TIME TO TIME. (VI) THERE ARE IRREFUTABLE EVIDENCES TO PROVE THAT THE SPE ED MONEY PAYMENTS HAVE ACTUALLY BEEN MADE AND THEY ARE NOT PR OJECTED EXPENSES. (VII) INFACT, THERE ARE EVIDENCES TO PROVE THAT SPEED MONEY PAYMENTS HAVE BEEN MADE AT PRE-TENDER STAGE IN ORDER TO GET THE CO NTRACT ALLOTTED. (VIII) THERE ARE EVIDENCE TO PROVE THAT SPEED MONEY EXPENSE S ARE SHARED EQUALLY BY THE ASSESSEE COMPANY AND B.T. PATIL & SONS. 80. IN VIEW OF THE ABOVE, THE AO HELD THAT UNEXPLAINED EX PENSES IN THE FORM OF SPEED MONEY PAYMENTS SHOULD BE TAXED IN THE YEA R OF PAYMENT. ACCORDING TO THE AO AS PER HIS ANALYSIS THE SPEED MONE Y FOR A.Y. 2007-08 COMES TO RS.550.35 LAKHS OUT OF WHICH SHARE OF THE ASSESS EE COMPANY IS RS.270.175 LAKHS. HE THEREFORE ASKED THE ASSESSEE TO EX PLAIN AS TO WHY THE AMOUNT OF RS.270.175 LAKHS SHOULD NOT BE ADDED TO THE TOTAL INCOM E OF THE ASSESSEE. SIMILARLY, HE NOTED THAT FOR A.Y. 2008-09 T HE ASSESSEES SHARE COMES TO RS.1490.675 LAKHS AND RS.425.97 LAKHS FOR A.Y. 2009-10. 81. THE AO FURTHER NOTED THAT DURING THE SEARCH PROCE EDINGS EVIDENCES OF SPEED MONEY PAYMENT OTHER THAN GHODZHARI PROJECT WERE FOUND AT THE RESIDENCE OF SHRI R.D. SHINDE, MANAGING DIRECTOR OF THE ASS ESSEE COMPANY AND AT THE OFFICE PREMISES OF THE ASSESSEE COMPANY. AT T HE RESIDENCE OF SHRI D.A. BHAT EVIDENCE OF SPEED MONEY PAPER IN RESPECT O F KOYNA PROJECT WERE ALSO FOUND IN ADDITION TO GHODZHARI PROJECT. THE ASS ESSEE DISCLOSED 51% OF THE SAID AMOUNT OF RS.1,41,85,000/- RELATED TO KOYNA PROJECT AMOUNTING TO RS.72,34,350/- AS ADDITIONAL INCOME FOR THE A.Y. 2007-08. ASSESSEE DISCLOSED ADDITIONAL INCOME OF RS.25 LAKHS TOWARDS UNEXPLAINED EXPENSES RELATED TO PROJECTS OTHER THAN GHODZHARI PROJECT. 82. THE AO FURTHER NOTED THAT ON THE DATE OF SEARCH S TATEMENT U/S.132(4) WAS RECORDED FROM SHRI R.D. SHINDE, AT HIS RESIDEN CE AND EVIDENCES OF PAYMENT OF SPEED MONEY WERE CONFRONTED TO HIM. HE 31 ADMITTED CATEGORICALLY THAT SPEED MONEY PAYMENTS WERE MADE. HE ALSO REFERRED TO THE STATEMENT U/S.132(4) RECORDED FROM SHRI A JIT R. GURJAR, PROJECT MANAGER OF THE ASSSESSEE COMPANY AND MR. B.T. PATIL, ACCOUNTANT OF THE ASSESSEE AT THE OFFICE PREMISES OF THE ASSESSEE. W HEN THE EVIDENCES RELATED TO SPEED MONEY FOUND AT OFFICE PREMISES WERE PLACE D BEFORE THEM BOTH OF THEM ADMITTED THAT SPEED MONEY PAYMENTS WERE MADE. 83. THE AO HELD FROM THE EVIDENCES FOUND AT THE RESIDENC E OF MANAGING DIRECTOR SHRI R.D. SHINDE, OFFICE OF THE ASSESSEE COMPANY AND RESIDENCE OF SHRI D.A. BHAT, TECHNICAL DIRECTOR OF THE ASSESSEE THAT THE SE EVIDENCES PROVE THAT SPEED MONEY PAYMENTS FOR GETTING THE CONTR ACT AWARDED AND TO GET THE PAYMENTS RELEASED IS PART OF STANDARD OPERATING SYSTEM. THE AO FURTHER NOTED THAT BUNDLE NO.1 SEIZED FROM THE RESIDENCE OF SHRI R.D. SHINDE, MANAGING DIRECTOR OF ASSESSEE COMPANY CONTAINS TH E DETAILS OF RECEIPT OF KICKBACK FROM VARIOUS SUB CONTRACTORS. THE S EIZED DOCUMENTS ARE SMSS OF AMOUNTS RECEIVED FROM SUB CONTRACTORS BY S HRI R.D. SHINDE THROUGH HIS ACCOUNTANT. THE AMOUNT IS PAID THROUGH CH EQUE TO THE SUB CONTRACTORS AND THE SAME IS RECEIVED BACK IN CASH. EVID ENCES WERE FOUND FOR RS.4,35,65,000/-. THIS AMOUNT WAS ADMITTED BY THE ASSE SSEE AS ADDITIONAL INCOME IN THE HANDS OF R.D.S. CONSTRUCTION COMPA NY, SISTER CONCERN OF THE ASSESSEE COMPANY. 84. IN VIEW OF THE ABOVE THE AO WORKED OUT THE YEAR W ISE SPEED MONEY PAYMENTS AS PER SEIZED MATERIAL AND THE ASSESSEES SHA RE OUT OF TOTAL SPEED MONEY IS AS UNDER : A.Y.2007 - 08 A.Y.2008 - 09 A.Y.2009 - 10 TOTAL TOTAL SPEED MONEY PAID 550. 3 5 LAKHS 2981.35 LAKHS 851.94 LAKHS 4383.64 LAKHS ASSESEES SHARE,I.E.50% 275.175 LAKHS 1490.675 LAKHS 425.97 LAKHS 2191.82 LAKHS 32 AS PER THE ABOVE TABLE, THE AO CAME TO THE CONCLUSION T HAT UNEXPLAINED EXPENSES IN THE FORM OF SPEED MONEY PAYMENTS SHOULD BE TAXED IN THE YEAR OF PAYMENT. HOWEVER, HE NOTED THAT INSTEAD OF DISCLOSING T HE UNEXPLAINED EXPENSES IN THE YEAR OF PAYMENT, THE ASSESSEE COMPANY DISCLOSED UNEXPLAINED EXPENSES RELATED TO GHODZHARI PROJECT IN TH E A.YRS. 2009-10 AND 2010-11 AS UNDER : A.Y. ADDITIONAL INCOME DISCLOSED BY THE ASSESSEE TOWARDS UNEXPLAINED EXPENSES 2009 - 10 RS.7,46,12,030 2010 - 11 RS.10,55,06,970 TOTAL RS.18,01,19,000 85. HE OBSERVED THAT AS AGAINST THE ASSESSEES SHARE OF UNEXPLAINED EXPENSES FOR A.Y. 2007-08 AT RS.270.175 LAKHS THE ASSESSE E HAS DISCLOSED NIL ADDITIONAL INCOME. THEREFORE, DURING THE ASSESSMENT PROC EEDINGS U/S.153A THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WH Y THE UNEXPLAINED EXPENSES RELATED TO GHODZHARI PROJECT SHOULD NOT BE T AXED AS PER THE SEIZED DOCUMENT. 86. IT WAS SUBMITTED BY THE ASSESSEE THAT SHRI D.A. BHA T, TECHNICAL DIRECTOR OF THE ASSESSEE COMPANY HAS RETRACTED HIS STA TEMENT U/S.132(4) OF THE I.T. ACT BY FILING A LETTER DATED 11-10-2009. SHRI D.A. BHAT IS ONLY A TECHNICAL MAN AND IS NOT ACQUAINTED WITH FINANCIAL MATTERS. THE UNEXPLAINED EXPENSES SEIZED FROM RESIDENCE OF SHRI D.A. BHAT RELATED ONLY TO PROJECTED EXPENSES AND NOT ACTUALLY PAID. FURTHER, S HRI R.D. SHINDE IN HIS STATEMENT RECORDED ON 12-10-2009 IN REPLY TO QUES TION NO.23 HAD STATED THAT AS ON THE DATE OF SEARCH THE JOINT VENTUR E HAS RECEIVED RS.98 CROREES ONLY IN RESPECT OF GHODZHARI PROJECT AND THER EFORE PAYMENT OF RS.43 CRORES IS HIGHLY UNREASONABLE. 87. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE MAHALAXMI-B.T. PATIL, J.V. IS FORMED FOR 33 THE PURPOSE OF GHODZHARI PROJECT AND KOYNA PROJECTS. DURING THE COURSE OF SEARCH LOOSE PAPERS 1 TO 40 (BUNDLE NO.1) WAS FOUND AT THE RESIDENCE OF SHRI D.A. BHAT WHO IS TECHNICAL DIRECTOR OF THE COMPANY. T HE LOOSE PAPERS DEPICTED DATE WISE DETAILS OF VARIOUS UNEXPLAINED BUSINESS E XPENDITURE OF GHODZHARI PROJECT OF RS.43.8364 CRORES. SINCE ASSESSEE S SHARE IN SUCH EXPENSES IS 50%, MANAGING DIRECTOR OF THE ASSESSEE COMPA NY SHRI R.D. SHINDE ADMITTED THE ADDITIONAL INCOME OF RS.21.9182 CRORES. 88. ACCORDING TO THE AO SHRI D.A. BHAT, WHO IS A TRUSTED AND LOYAL EMPLOYEE OF THE ASSESSEE COMPANY WORKING FOR NEARLY 2 D ECADES, IS INVOLVED IN THE PROJECT RIGHT FROM AWARDING OF THE CONTRAC T TILL COMPLETION INCLUDING RELEASE OF PAYMENTS ETC. THE SEIZED DOCUMENTS A RE IN ANYWAY OF SHRI D.A. BHAT WHO HAS CATEGORICALLY STATED U/S.132(4) THAT SPEED MONEY PAYMENTS HAVE BEEN MADE. THE STATEMENT U/S.132(4) HAS IMMENSE EVIDENTIARY VALUE. THE SEIZED DOCUMENTS CONTAIN QUANTUM, DATE OF PAYMENT OF SPEED MONEY, DETAILS OF PAYER AND RECIPIENT. S HRI D.A. BHAT WAS MAINTAINING THE ACCOUNTS RELATED TO SPEED MONEY OF G HODZHARI PROJECT. SEIZURE OF EVIDENCE FROM HIS RESIDENCE PROVES T HIS FACT BEYOND DOUBT. FURTHER, SEIZURE OF DOCUMENTS OF B.T. PATIL AND SO NS IN RESPECT OF SPEED MONEY FROM THE RESIDENCE OF SHRI D.A. BHAT FORTIFIES TH IS FACT. HAD SHRI D.A. BHAT NOT BEEN MAINTAINING ACCOUNTS RELATED TO SP EED MONEY THERE WAS NO NEED TO SEND SPEED MONEY STATEMENTS BY B.T. PATIL AND SONS TO SHRI D.A. BHAT FOR RECONCILIATION FROM TIME TO TIME. ACCORDING TO THE AO, THERE ARE IRREFUTABLE EVIDENCES TO PROVE THAT THE SPE ED MONEY PAYMENTS HAVE ACTUALLY BEEN MADE ON THE RESPECTIVE DATES AND A RE NOT PROJECTED EXPENSES. FURTHER THERE ARE EVIDENCES TO PROVE THAT THE SPEED MONEY HAVE BEEN MADE AT PRE TENDER STAGE IN ORDER TO GET THE CO NTRACT ALLOTTED. ALTHOUGH SHRI D.A. BHAT IS THE TECHNICAL DIRECTOR, HOWEVER , HE IS ALSO INVOLVED IN FINANCIAL MATTERS OF THE COMPANY. THE ASSESSEE HAS NOT SUBMITTED ANY SUPPORTING EVIDENCE IN SUPPORT OF ITS CONTE NTION THAT THE 34 SAID EXPENSES HAVE BEEN PAID AFTER RECEIPT OF RA BILLS. AC CORDING TO THE AO THE PAPER/DOCUMENT SHOULD BE READ AS A WHOLE AND ALL T HE CONTENTS OF THE PAPERS ARE PRESUMED TO BE TRUE AND CORRECT UNLESS CO NTRARY IS PROVED. THE ASSESSEE IS ACCEPTING THE FIGURES OF PAGES 39 AND 40 BUT NOT ACCEPTING THE DATES OF PAGES 39 AND 40. THEREFORE, THE CONTENTION OF T HE ASSESSEE IS CONTRADICTORY. 89. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT SH RI D.A. BHAT HAD RETRACTED FROM HIS STATEMENT U/S.132(4) WHICH ACCORDING TO HIM WAS GIVEN UNDER TREMENDOUS MENTAL TENSION AND PRESSURE THE AO N OTED THAT THE STATEMENT U/S.132(4) HAS IMMENSE EVIDENTIARY VALUE. THE R ETRACTION IN THE PRESENT CASE IS NEITHER IMMEDIATE NOR IS CORROBORAT ED WITH ANY EVIDENCE. ADMISSION IS A VERY IMPORTANT PIECE OF EVIDENCE A ND BRUSHING IT ASIDE WHIMSICALLY WOULD DISTORT THE WHOLE PURPOSE OF THE PR OVISIONS. ACCORDING TO THE AO IN ORDER TO ALLOW A WITHDRAWAL OR A R ETRACTION OF THE SAME CONCLUSIVELY, THERE MUST BE MITIGATING CIRCUMSTANCES MAKING OUT A CASE FOR SUCH RETRACTION, A FACT WHICH IS COMPLETELY ABSE NT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. TO ALLOW RETRACTION W ITHOUT ANY COGENT MATERIAL WOULD AMOUNT TO MAKING A MOCKERY AND TRAVESTY OF THE SEARCH AND SEIZURE OPERATIONS. THE ASSESSEE HAVING ESTOPPED T HE REVENUE BY THE ADMISSION CANNOT BE ALLOWED TO GO BACK ON ITS PROMISE H ELD OUT BY HIM. RELYING ON VARIOUS DECISIONS AND HOLDING THAT STATEMENT U /S.132(4) CARRIES STRONG EVIDENTIARY VALUE AND OBSERVING THAT THE STATEME NT OF SHRI D.A. BHAT IS CORROBORATED BY INDEPENDENT EVIDENCES THE AO M ADE ADDITION OF RS.275.175/- TO THE TOTAL INCOME OF THE ASSESSEE. WHILE DO ING SO, THE AO MADE THE FOLLOWING OBSERVATION WHICH IS REPRODUCED HEREUNDER : 11.19. MOREOVER, STATEMENT OF SHRI D.A.BHAT IS CORRO BORATED BY INDEPENDENT EVIDENCES. COMPREHENSIVE EVIDENCES DEPICTING AMOUNT OF PAYMENT, DATE OF PAYMENT OF SPEED MONEY, DETAILS OF PAYER AND RECIPIEN T ARE AVAILABLE IN THE SEIZED DOCUMENTS. SHRI D.A.BHAT WAS MAINTAINING THE AC COUNTS RELATED TO SPEED MONEY OF GHODZARI PROJECT. SEIZURE OF EVIDENCE FROM HIS RESIDENCE PROVES THIS FACT BEYOND DOUBT. MOREOVER, SEIZURE OF DO CUMENTS OF B.T.PATIL & SONS IN RESPECT OF SPEED MONEY FROM THE RESIDENCE OF SH RI D.A.BHAT FORTIFIES THIS FACT. HAD SHRI D.A.BHAT NOT BEEN MAINTAINING AC COUNTS RELATED TO SPEED 35 MONEY THERE WAS NO NEED TO SEND SPEED MONEY STATEMENTS B Y B.T.PATIL & SONS TO SHRI D.A.BHAT FOR RECONCILIATION FROM TIME TO TI ME. 11.20. AS DISCUSSED AT PARA.NO.8 SUPRA, MANAGING DIRECT OR OF ASSESSEE COMPANY SHRI R.D.SHINDE HIMSELF ADMITTED THAT SPEED MONEY HAS BEEN PAID. FURTHER, SHRI A.R.GURJAR, PROJECT MANAGER AND SHRI B.P.PATIL, ACC OUNTANT, BASED ON EVIDENCES FOUND AT OFFICE PREMISES, ADMITTED PAYMENT OF SPEED MO NEY. ALL THE FOUR NAMELY SHRI R.D.SHINDE, SHRI D.A.BHAT, SHRI A.R.GUR JAR AND SHRI B.P.PATIL ADMITTING PAYMENT OF SPEED MONEY U/S 132(4) ON THE DA TE OF SEARCH AT DIFFERENT PREMISES IS NOT A MERE COINCIDENCE. ANY STATE MENT AT A LATER STAGE CONTRARY TO WHAT WAS STATED AT THE TIME OF SEARCH SHOU LD BE CORROBORATED BY STRONG EVIDENCE. IT IS PERTINENT NOTE THAT ASSESSEE HAS D ISCLOSED ADDITIONAL INCOME OF RS.75,00,000 FOR AY 2008-09 ON ACCOUNT OF UNEXPLAINED EXPENSES RELATED TO PROJECTS OTHER THAN GHODZARI PROJECT IN THE RETURN OF INCOME U/S 153A. THUS, THE STAND OF THE ASSESSEE THAT NO SPEED MONEY HAS BEEN PAID IS SELF-CONTRADICTORY. 11.21 IN THE INSTANT CASE, DEPOSITION OF SHRI D.A. BHA T ON THE DATE OF SEARCH IS SUPPORTED BY STRONG CORROBORATIVE EVIDENCES. ON THE CO NTRARY, HIS RETRACTION IS NOT BASED ON ANY EVIDENCE AND DEVOID OF ANY STRENGTH. THEREFORE, RETRACTION SHRRI D.A. BHAT IS AN AFTERTHOUGHT, SELF-SERVING DOCUM ENT AND DESERVES REJECTION. AS REGARDS ARGUMENT OF SHRI R.D.SHINDE, THAT AS ON TH E DATE OF SEARCH THE JV HAS RECEIVED RS.98 CRORES ONLY IN RESPECT OF GHODZARI PRO JECT AND, THEREFORE, PAYMENT OF RS.43 CRORES IS HIGHLY UNREASONABLE, FOLLOWI NG FACTS ARE VERY RELEVANT. ASSESSEE BEFORE STARTING THE WORK RECEIVED MOB ILIZATION ADVANCE OF RS. 28,02,00,000/- ON 31/3/2007 FROM GOVERNMENT. FUR THER, ADDITIONAL MOBILIZATION ADVANCE OF RS. 22,80,00,000/- WAS RECEIV ED FROM GOVERNMENT BY THE ASSESSEE ON 25/2/2008. THUS, MOBILIZATION ADVANCE OF RS. 50.82 CRORES WAS RECEIVED FROM GOVERNMENT BY THE ASSESSEE AS ON 25/2/ 2008. THEREFORE, PAYMENT OF RS.43 CRORES (APPROX.) AS SPEED MONEY AS ON 4 /2/2009 IS ONLY RETURN OF MONEY TAKEN FROM GOVERNMENT. THEREFORE, T HIS CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. IN ANY CASE, THERE ARE CLEAR EVIDENCES PROVING THE FACT THAT RS.4383.64 LAKHS OF SPEED MONEY HAS BEEN ACTU ALLY PAID BY ASSESSEE AS ON 4/2/2009. IN THE LIGHT OF THE AFORESAID FACTS, THE CONTENTION OF T HE ASSESSEE IS HEREBY REJECTED. 11.22. TO CONCLUDE, THERE ARE IRREFUTABLE EVIDENCES TO PROVE THAT THE SPEED MONEY PAYMENTS HAVE ACTUALLY BEEN MADE ON THE RESPECT IVE DATES AND BY NO STRETCH OF IMAGINATION THEY ARE PROJECTED EXPENSES. TH E EVIDENTIARY VALUE OF DOCUMENTS WHICH ARE IN THE HANDWRITING OF SHRI D. A. BHAT, CORRECTNESS OF WHICH WAS ACKNOWLEDGED BY HIM U/S-132(4) CANNOT BE U NDERSCORED. 11.23. IN THE LIGHT OF THE FOREGOING DISCUSSION, UNEXP LAINED EXPENSES RELATED TO AY 2008-09 AMOUNTING TO RS. 1490.675 LAKHS IS HEREBY B ROUGHT TO TAX. IT MAY BE NOTED THAT ASSESSEE INSTEAD OF DISCLOSING RS. 1490.675 LAKHS HAS DISCLOSED RS. NIL AS ADDITIONAL INCOME FOR AY 2008-09. THEREFOR E, RS. 1490.675 LAKHS IS ADDED FOR AY 2008-09. 90. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME SUBM ISSIONS AS MADE DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE STATED THA T OUT OF THE TOTAL ADDITIONAL INCOME OF RS.21,91,82,000/- DECLARED ON ACCOUNT OF UNEXPLAINED EXPENSES OF GHODZHARI PROJECT, AN AMOUNT OF 36 RS.1,50,00,000/- WAS SHOWN IN SOURCE AND APPLICATION STATEM ENT AS PERTAINING TO ITS SISTER CONCERN M/S. RDS CONSTRUCTION CO MPANY. IT WAS SUBMITTED THAT THE ASSESSING OFFICER FAILED TO ACCEPT THIS FACT AND TAX ED THIS AMOUNT IN THE ASSESSEES HANDS. THE ASSESSEE SUBMITTE D THAT THE FOLLOWING SCHEDULE, AS APPEARING IN PAGES 38 TO 40 IN RESPEC T OF GHODZHARI PROJECT, WOULD BE CONTRARY TO THE NORMAL PRACTICE IF IT WA S ASSUMED THAT SOME PAYMENT WAS REQUIRED TO BE GIVEN FOR GETTING CONT RACT AND REALIZATION OF BILLS: FIGURES IN THOUSANDS (I) PRE - TENDER, I.E. BEFORE SEPT.,2006 525.00 (II) TENDER DATE TO WORK ORDER DATE JAN,2007 NIL (III) WORK ORDER DATE TO FIRST R.A.BILL NOV, 2007 2085.13 (IV) FIRST R.A. BILL TO DATE OF SEARCH SEP, 2009 1773.51 TOTAL 4383.64 91. IT WAS FURTHER SUBMITTED THAT VARIOUS PAPERS FOUND DURING SEARCH IN THE CASE OF B.T. PATIL AND SONS, BELGAUM CONSTRUCTION PVT. LTD. ALSO SHOWED THAT PAYMENTS IN RESPECT OF GHODZHARI PROJECT WAS MADE IN A PERIOD RELEVANT TO ASSESSMENT YEARS 2008-09 AND 2010- 11, WHICH WAS IGNORED IN THE CASE OF B.T. PATIL AND SONS. ALTERNATIVELY, THE ASSESSEE DREW THE ATTENTION OF LD.CIT(A) TO CERTAIN DISCREPANCIES IN THE SEIZED PAPERS. AFTER TAKING INTO ACCOUNT THESE DISCREPANCIES, THE ASSESS EE WORKED OUT A REVISED SOURCE AND APPLICATION STATEMENT TO ARRIVE AT TH E UNDISCLOSED INCOME AS UNDER : ASSESSMENT YEAR UNDISCLOSED INCOME 2006 - 07 42,58,200/ - 2007 - 08 14,35,54,700/ - 2008 - 09 5,20,63,750/ - 2009 - 10 4,75,94,030/ - TOTAL 24,74,69,680/ - 92. THE ASSESSEE SUBMITTED THAT THE UNDISCLOSED INCOME W ORKED OUT ABOVE, SHOULD BE TAXED AS AGAINST THE FIGURES ADOPTED BY THE ASSESSING OFFICER. 37 93. HOWEVER, THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 56. I HAVE GIVEN CAREFUL CONSIDERATION TO THE CONTE NTIONS OF THE APPELLANT WITH REFERENCE TO THE FACTS OF THE CASE. THIS IS A CASE WHERE SHRI D.A. BHAT, DIRECTOR IN APPELLANT COMPANY, HAS RETRACTED FROM TH E STATEMENT GIVEN EARLIER ON 24-09-2009 AND SHRI RAVINDRA D. SHINDE, MANAGING DIRECTOR/PROMOTER OF THE APPELLANT FIRM HAS BRUSHED ASIDE THE REVELATIONS MA DE BY SHRI D.A. BHAT AS ALSO THE DOCUMENTS PERTAINING TO GHODZHARI PROJECT, E XECUTED BY THE APPELLANT FIRM IN JOINT VENTURE WITH B.T. PATIL & SONS (BELGAU M) CONSTRUCTION CO. LTD. RETRIEVED FROM SHRI D A BHAT'S RESIDENCE. AS PER THE J OINT VENTURE AGREEMENT DATED 03/08/2007, SHRI NAVIN B PATIL (SON OF SHRI B T PATIL) AND SHRI D A BHAT WERE NOMINATED TO BE THE AUTHORIZED REPRESENTATIVE O F JOINT VENTURE. SHRI D A BHAT REPRESENTING MAHALAXMI CONSTRUCTION CORPORATION LTD. AND SHRI NAVIN BHAT WAS ON BOARD ON BEHALF OF B T PATIL AND SONS WER E WITNESSES TO THE JOINT VENTURE AGREEMENT. THESE FACTS LEAD TO AN IRREFUTABLE CONCLUSION THAT SHRI D A BHAT WAS A CLOSE CONFIDANTE OF SHRI RAVINDRA D SHINDE AND NOT MERELY A PERSON LOOKING AFTER TECHNICAL ASPECTS AS ALLEGED BY SHRI RAV INDRA D SHINDE. 57. IT IS HELD IN THE CASE OF PULLANGODE RUBBER PRO DUCE CO. LTD. V. STATE OF KERALA [1973J 91 ITR 18 (SC) THAT- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDEN CE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MAD E THE ADMISSION TO SHOW THAT IT IS INCORRECT. EARLIER ALSO THE HON'BLE SUPREME COURT IN NARAYAN BH AGWANTRAO GOSAVI BALAJIWALE V. GOPAL VINAYAK GOSAVI AIR 1960 SC 100 H AD HELD THAT AN ADMISSION IS THE BEST EVIDENCE THAT AN OPPOSITE PARTY C AN RELY UPON AND, THOUGH NOT CONCLUSIVE, YET COULD BE DECISIVE OF THE M ATTER UNLESS SUCCESSFULLY WITHDRAWN OR PROVED ERRONEOUS. 58. THOUGH THERE IS NOTHING SPECIFIC IN THE INCOME-TA X ACT OR IN THE INDIAN EVIDENCE ACT TO MAKE ADMISSIONS AS CONCLUSIVE PROOF OR A S ALWAYS BINDING ON THE MAKER, YET IT IS ALMOST A SETTLED POSITION BY WAY O F JUDICIAL DECISIONS THAT IN THE ABSENCE OF REBUTTAL OR RETRACTION THE EARLIER STA TED FACTS IN MOST OF THE CASES, MAY BE CONCLUSIVE AND CAN BE ACTED UPON. SPECIF IC PROVISIONS OF THE INCOME-TAX ACT AS CONTAINED UNDER SECTIONS 132(4), 133 A(5), ETC., PROVIDE THAT STATEMENTS RECORDED IN THE INCOME-TAX PROCEEDINGS HAVE EVIDENTIARY VALUE. THOUGH THEY HAVE EVIDENTIARY VALUE, YET THEY ARE NO T ALWAYS CONCLUSIVE PROOF. THE SUPREME COURT IN THE CASE OF AVADH KISHORE DAS V. RAM GOPAL AIR 1979 SC 861 HAS HELD THAT EVIDENTIARY ADMISSIONS ARE NOT CONCLU SIVE PROOF OF THE FACTS ADMITTED AND MAY BE EXPLAINED OR SHOWN TO BE WRONG, BUT THEY DO RAISE AN ESTOPPEL AND SHIFT THE BURDEN OF PROOF ON TO THE PERSO N MAKING THEM. THE SUPREME COURT FURTHER HELD THAT UNLESS SHOWN OR EXPLAI NED TO BE WRONG, THEY ARE AN EFFICACIOUS PROOF OF THE FACTS ADMITTED. 59. IN THE INSTANT CASE THE EXPLANATION GIVEN BY SHRI D. A. BHAT WAS RETRACTED BY HIM VIDE A LETTER WRITTEN TO THE ADDL. DIT (INV.) O N 11/10/2009. SHRI D. A. BHAT IS AN EMPLOYEE DIRECTOR OF THE APPELLANT COMPANY. TH IS LETTER IS WRITTEN JUST A DAY BEFORE THE FINAL STATEMENT OF SHRI RAVINDRA D. SHINDE, PROMOTER AND MANAGING DIRECTOR OF THE APPELLANT COMPANY, WAS RECO RDED U/S. 132(4) ON 12/10/2009. IN THE LETTER DATED 11/10/2009, SHRI D. A. BHAT HAS INTIMATED THAT THE EARLIER ADMISSION MADE BY HIM WAS ON A MISTAKEN UND ERSTANDING AND MISCONCEPTION OF FACTS. HE ALSO STATED THAT HE WAS UNDER MENTAL STRESS AT THE TIME OF MAKING THE STATEMENT. HOWEVER, WHAT IS OF REL EVANCE IS THE FACT THAT IT IS 38 NOT THE CASE OF SHRI D. A. BHAT THAT THE STATEMENTS WE RE UNTRUE, OR INVOLUNTARY; OR WERE MADE UNDER UNDUE INFLUENCE, PRESSURE OR COERC ION. 60. LOGICALLY THE BURDEN TO PROVE THE ADMISSION AS INE FFECTIVE IS ON THE MAKER. THUS, ON THE FAILURE OF THE MAKER TO PROVE THAT EARL IER STATED FACTS WERE WRONG, HIS EARLIER STATEMENTS ARE SUFFICIENT TO CONCLUDE A MAT TER. AT THIS JUNCTURE, IT MUST BE NOTED THAT THE STATEMENT TO BIND THE MAKER MU ST BE VOLUNTARY AND ONLY IF IT APPEARS TO HAVE BEEN OBTAINED BY COERCION , INDUCEMENT OR THREAT IT MUST BE REJECTED. ON RETRACTION, EARLIER STATED FACTS OR ADMISSIONS, LOSE THEIR EFFECT AS A BINDING EVIDENCE AND IT MAY NOT BE PERMI SSIBLE FOR THE INCOME-TAX AUTHORITY TO CONCLUDE A MATTER ON THE BASIS OF EARLI ER STATEMENT ALONE. AT THE SAME TIME, BALD RETRACTIONS OF EARLIER ADMISSIONS WILL NOT BE ENOUGH AND EVEN AFTER RETRACTION SUCH STATEMENTS CANNOT AUTOMATICALLY BECOME NULLITIES. MERELY BECAUSE A STATEMENT IS RETRACTED, IT CANNOT BECOME AS I NVOLUNTARY OR UNLAWFULLY OBTAINED. FOR ANY RETRACTION TO BE SUCCESSFUL IN THE E YES OF LAW THE MAKER HAS TO SHOW AS TO HOW EARLIER RECORDED STATEMENTS DO NOT STATE THE TRUE FACTS OR THAT THERE WAS COERCION, INDUCEMENT OR THREAT WHILE RECOR DING HIS EARLIER STATEMENTS. 61. IN SPECIFIC REFERENCE TO THE INCOME-TAX PROCEEDI NGS, IT WOULD BE USEFUL TO REFER TO THE DECISION OF THE MADRAS BENCH OF THE I NCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF T.S. KUMARASAMY V. ASSTT. CIT [1998] 65 ITD 188 WHERE, TAKING NOTE OF THE FACT THAT ITOS ARE NOT POLICE OF FICERS AND, AS SUCH, THEY DO NOT USE OR RESORT TO, UNFAIR MEANS IN RECORDING OATH STATEM ENTS DURING THE SEARCH OPERATIONS OR DURING THE COURSE OF ANY PROCEEDINGS BEF ORE THEM, IT WAS HELD THAT SUCH STATEMENTS, ADMISSIONS AND CONFESSIONS ARE BINDING AND CANNOT BE RETRACTED, UNLESS AND UNTIL IT IS PROVED BY LEGALLY AC CEPTABLE EVIDENCE THAT SUCH ADMISSION, CONFESSION OR OATH STATEMENT WAS INVOLUNTARY O R WAS TENDERED UNDER COERCION OR DURESS. DRAWING SUPPORT FROM THE DEC ISION OF THE SUPREME COURT IN THE CASE OF SURJEET SINGH CHHABRA V. UNION OF INDIA [1997] 1 SCC 508 THE TRIBUNAL DISALLOWED PLEA OF RETRACTION OF THE ASSE SSEE ON THE GROUND THAT NEITHER THE GROUND OF COERCION OR DURESS NOR THE GROU ND OF INVOLUNTARY STATEMENT WAS PROVED TO HAVE EXISTED AT THE TIME OF RE CORDING OF THE STATEMENT. THIS DECISION OF THE TRIBUNAL GOES TO INDICATE THAT AD MISSIONS OR CONFESSIONS MADE IN THE STATEMENTS RECORDED DURING SEARCH OR SURV EY, WITHOUT THERE BEING ANY OTHER EVIDENCE TO SUPPORT SUCH ADMISSIONS, CAN SUCCE SSFULLY BE MADE USE OF TO ASSESS THE INCOME, UNLESS THEY ARE PROVED TO BE INV OLUNTARY OR ARE PROVED TO HAVE BEEN TAKEN UNDER DURESS, COERCION, MISCONCEPT ION, ETC. FURTHER, INSTEAD OF RETRACTING INITIAL STATEMENTS OR ADMISSIONS IN A BALD MANNER, ONE HAS TO BRING ON RECORD COGENT REASONS OR EVIDENCES, BECAUSE IN THE A BSENCE OF THIS EVEN AFTER RETRACTION MATTERS MAY BE DECIDED AGAINST HIM O N THE BASIS OF INITIAL STATEMENT ITSELF. GENERALLY, AS COMPARED TO A SUBSEQUEN T STATEMENT WHEREBY EARLIER ADMITTED FACTS OR POSITIONS ARE RETRACTED, THE FIRST STATEMENT MUST BE PRESUMED TO BE MORE RELIABLE FOR THE REASON THAT SUCH WAS THE STATEMENT WHICH WAS RECORDED FIRST IN POINT OF TIME AND WAS MADE ON TH E SPOT. POSSIBILITY OF AN AFTERTHOUGHT OR TO CONCOCT AN EXPLANATION AND FABRI CATE THE EVIDENCE IN SUBSEQUENT STATEMENT CANNOT BE RULED OUT. A RETRACTION TO HAVE ANY EVIDENTIARY VALUE MUST PREFERABLY BE IN A STATEMENT NOT ONLY DENY ING THE EARLIER STATED FACTS BUT EXPLAINING THE REASONS FOR MAKING A STATEMENT EARLIER AND GIVING SUBSTITUTED FACTS IN SUPPORT OF RETRACTION. TOTAL DENIA L OF WHAT HAS BEEN STATED IN THE PREVIOUS STATEMENT CANNOT BE SAID TO BE EFFECTI VE AND IT SHALL AT BEST BE DEEMED MERELY AS A PLEA OF DENIAL WHICH MAY NOT BE O F MUCH HELP. 62. THE IMPORTANT ASPECT OF THE MATTER IS THAT DURING THE COURSE OF SEARCH SHRI D. R. BHAT CAME WITH AN EXPLANATION THAT AMOUNTS WRI TTEN IN THE PAPERS AND DOCUMENTS DISCOVERED FROM HIM WERE IN THE NATURE OF SP EED MONEY OR GRATUITOUS PAYMENTS MADE FOR THE PURPOSE OF ACQUIRING THE CONTRACT FOR GHODZHARI PROJECT BY THE JOINT VENTURE BETWEEN THE APPELLANT AND B. T. PATIL AND SONS (BELGAUM) LTD. THE EXPLANATION PROFFERED HA D TWO LIMBS VIZ. ONE 39 PERTAINING TO THE NATURE OF EXPENSE RECORDED AND THE OTHER PERTAINING TO THE PERIOD IN WHICH THE EXPENSE WAS INCURRED. IN RESPECT O F THE NATURE OF ENTRIES, SHRI RAVINDRA D. SHINDE, MANAGING DIRECTOR OF THE A SSESSEE COMPANY, DID NOT ACCEPT THAT THE RECORDINGS MADE BY SHRI BHAT INDICAT ED INSTANCES OF PAYMENT OF SPEED MONEY. WHAT HE ADMITTED IN THE STATEMENT MADE U NDER SECTION 132(4) ON 12/10/2009 WAS THAT THE AMOUNTS IN QUESTION REFLEC TED THE INCOME OF THE APPELLANT GENERATED BY INFLATING THE EXPENSES OF MAH ALAXMI INFRAPROJECTS LTD. AND RDS CONSTRUCTION COMPANY. HENCE, IT WAS STATED THA T THE AMOUNT IN QUESTION REVEALED THE CONCEALED BUSINESS INCOME OF THE APPELLANT. THIS PART OF THE EXPLANATION WAS ACCEPTED IN SEARCH AND SEIZURE PRO CEEDING AND IN ASSESSMENT WHEREIN THE DECLARATION WAS TREATED AS BUSINESS INCOME OF THE APPELLANT EARNED BY INFLATING THE EXPENSES. IN RESPECT OF THE SECOND LIMB OF THE ADMISSION, SHRI RAVINDRA SHINDE AVERRED THAT SHRI D. A. BHAT, BEING A TECHNICAL DIRECTOR NOT CONCERNED WITH FINANCIAL ASPECTS OR ACCO UNTS OF THE COMPANY, HAS GIVEN CONTRADICTORY STATEMENTS IN AS MUCH AS HE MENTI ONS DIFFERENT RATES OF EXPENSES ALLEGEDLY INCURRED FOR PROCURING THE CONTRAC T. HE EXPRESSED INABILITY TO UNDERSTAND HOW THE FIGURES HAVE BEEN GENERATED BY SHRI BHAT IN THE LOOSE PAPERS AND DOCUMENTS MAINTAINED BY HIM. SHRI RAVINDRA D. SHIN DE ACCEPTED THE FIGURES WRITTEN BY SHRI D. A. BHAT AS THE AMOUNT OF CONCEALED INCOME. SIGNIFICANTLY, SHRI RAVINDRA D. SHINDE DID NOT QUEST ION THE AUTHENTICITY OF DOCUMENTS IN RESPECT OF THE FIGURES MENTIONED AND WRIT TEN THEREIN AND ACCEPTED THE SAME. IN FACT THESE DOCUMENTS HAVE BEEN R ELIED UPON TO MAKE CLAIMS ABOUT SHIFTING OF EXPENSES INCURRED IN RESPECT O F AMOUNTS RECORDED AGAINST AN ENTITY 'AB'. HE MERELY STATED THAT THE IMP UGNED AMOUNTS IN RESPECT OF GHODZHARI PROJECT RELATED TO FINANCIAL YEARS 2007 -08, 2008-09 AND 2009-10, AND THAT EXPENSES PERTAINING TO KOYNA PROJECT RELATED TO THE FINANCIAL YEAR 2009-10 FOR THE REASON THAT MAJOR AMOUNTS WERE REALISE D FROM THESE PROJECTS WHEN R.A. BILLS WERE ACCEPTED AND CORRESPONDING FUNDS WERE RELEASED BY THE CONCERNED AUTHORITIES. THAT PART OF EXPLANATION OF S HRI RAVINDRA D. SHINDE IS FOUND TO BE INCORRECT BY THE ASSESSING OFFICER WITH REF ERENCE TO THE DOCUMENTS MAINTAINED BY SHRI D. A. BHAT. THE ASSESSING OFFICER HA S ELABORATELY AND ABLY DEMONSTRATED, AFTER A SCRUTINY OF ALL THE SEIZED MATE RIAL AT HAND, THE REASONS FOR NOT ACCEPTING THE EXPLANATION OF SHRI RAVINDRA D. S HINDE. 63. AS ALREADY MENTIONED, SHRI D A BHAT IS A TRUSTED A ND LOYAL EMPLOYEE OF THE APPELLANT COMPANY APART FROM BEING A CLOSE CONFIDANT OF THE MANAGING DIRECTOR, SHRI R D SHINDE. IT IS APPARENT FROM THE D OCUMENTS SEIZED FROM HIS RESIDENCE WHICH PERTAINED TO THE JOINT VENTURE BETWE EN THE APPELLANT COMPANY AND B T PATIL AND SONS (HEREINAFTER REFERRED TO AS 'B HAT DOCUMENTS') THAT SHRI BHAT WAS INVOLVED IN THE PROJECT SINCE INCEPTION IN M ORE WAYS THAN JUST BEING RESPONSIBLE FOR TECHNICAL MATTER. THE FACT THAT HE USE D TO MAINTAIN THE ACCOUNT OF UNACCOUNTED PAYMENTS AND WAS THE APPELLANT COMPANY 'S MAIN INTERFACE WITH THE JOINT VENTURE PARTNER B T PATIL AND SONS IS APPARENT FROM THE FACT THAT B T PATIL AND SONS USED TO SEND THE FINANCIAL RECONCIL IATION STATEMENT TO SHRI BHAT ON REGULAR BASIS. THE ASSESSING OFFICER HAS ELABORAT ELY DISCUSSED THE ISSUE BETWEEN PAGES NO. 3 TO 43 OF THE ASSESSMENT ORDER FOR TH E ASSESSMENT YEAR 2007-08. THIS ASPECT OF ASSESSMENT IS REPEATED IN ASSESSMENT Y EARS 2008-09, 2009-10 AND 2010-11. THE ASSESSING OFFICER HAS ALSO MADE THE SEIZED DOCUMENTS A PART OF THE ASSESSMENT ORDER IN THESE PAGES. T HE EVIDENCES INDICATE THAT CERTAIN AMOUNTS WERE PAID TO VARIOUS PE RSONS ON SPECIFIC DATES. IN ALL THE PAPERS, THE WORD 'PAID' IS VERY CONSPICUOUS. T HE SEIZED MATERIAL ALSO REFERS TO THE PERSONS WHO HAVE MADE THE PAYMENT I.E. E ITHER B T PATIL AND SONS OR MAHALAXMI CONSTRUCTION CORPORATION LTD. AS THE APP ELLANT COMPANY WAS KNOWN ITS EARLIER AVATAR. PAGE NO. 39 MENTIONS VARIOU S DATES ON WHICH PAYMENTS WERE MADE AND THE AMOUNTS PAID ON THESE DATES . PAGE NO. 38 IS A DATA SHEET CONTAINING THE DATES OF PAYMENT, LOOSE IDEN TITY OF THE PERSONS TO WHOM THE PAYMENTS WERE MADE AND THE DATES OF PAYMENT. SIMILARLY, PAGE NO. 18 CONTAINS THE SAME DATA. THE FACT THAT THESE PAGES AR E CONTEMPORANEOUS DOCUMENTS REGARDING THE PAYMENTS ON A PARTICULAR DATE , IS EVIDENT FROM PAGE 40 NO. 32 AND PAGES NO. 1 TO 5 AND 7 OF THE BHAT DOCUME NTS. PAGE NO. 32 AND REVERSE OF PAGE NO. 16 CONTAINS ENTRIES OF OVERHEADS A S ON 26/02/2008 AGGREGATING TO RS.48.90 CRORES OF WHICH RS. 26.64 CRORES WAS ALREADY DISBURSED TO VARIOUS ENTITIES AND PERSONS. THIS PAGE ALSO CONTAINS D ETAILS OF SITE EXPENSES AND PURCHASES OF MACHINERY WHICH WERE ENTERED INTO TH E REGULAR BOOKS OF ACCOUNT OF THE FINANCIAL YEAR 2007-08. SIMILARLY, P AGE 31 IS A RECONCILIATION OF THE SEIZED BILLS IN RESPECT OF PAYMENTS MADE TILL 16/06 /2007 BETWEEN THE PARTNERS IN THE JOINT VENTURE WHICH WAS GIVEN TO SHRI BHAT BY B T PATIL AND SONS. SO IS PAGE NO. 28. THIS PAGE ALSO CONTAINS THE DET AILS LIKE IDENTITY OF THE PERSONS WHO HAVE MADE THE PAYMENTS ON BEHALF OF B T PA TIL AND SONS AND THE DATES ON WHICH THE PAYMENTS WERE MADE. IT ALSO GIVES TH E BALANCE OF PAYMENT AS ON 14/04/2007. PAGE 17 HAS SIMILAR CONTENTS AS ON PA GE 28. THIS WAS FAXED BY B T PATIL AND SONS TO SHRI D A BHAT AND IT SHOWS T HE STATE OF AFFAIRS OF VARIOUS PAYMENTS AS ON 18/07/2007. PAGE 16 IS A SUMMARY SHEET OF PAYMENTS MADE BY THE PARTNERS IN THE JOINT VENTURE AS ON 28/01 /2008. AS AGAINST THESE OVERWHELMING EVIDENCES, THE APPELLANT MERELY STATES TH AT THE PAYMENT OF RS. 43 CRORES IS HIGHLY UNREASONABLE. SHRI SHINDE DISMISSED T HE EVIDENCE GATHERED DURING THE COURSE OF SEARCH WHICH SHOWS THAT EXPENSES HA VE BEEN INCURRED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEARS 200 7-08, 2008-09 AND 2009-10 TO THE TUNE OF RS. 2191.82 LAKHS (50% OF TOTA L EXPENSES OF RS.4383.64 LAKHS) AND MADE A DISCLOSURE OF ADDITIONAL INCOME FOR THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEARS 2009-10 AND 2010-11 OF RS. 1801.19 CRORES ONLY. IN VIEW OF THE DISCUSSION ABOVE AND THE REASONS MENTIONE D IN PARAGRAPHS 7.14 ON PAGES 12-13 OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YE AR 2010-11 (CORRESPONDING PARAGRAPH 7.7 FOR ASSESSMENT YEARS 2007-08 , 2008-09 AND 2009-10), I HOLD THAT THE ASSESSING OFFICER HAS CORRECTL Y TAKEN COGNIZANCE OF THE LOOSE PAPERS FOUND IN THE RESIDENCE OF SHRI D A BHAT A ND ACCORDINGLY TAXED THE UNEXPLAINED EXPENSES IN THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. 64. CONSEQUENTLY, THE PROTECTIVE ADDITIONS MADE OF RS. 3.20 CRORES IN ASSESSMENT YEARS 2009-10 AND RS.10.55 CRORES IN 2010-11 STA NDS DELETED. 94. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 95. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE NOTINGS ON THE LOOSE PAPER S ARE NOT ABOUT THE PAYMENTS ACTUALLY MADE BUT THESE ARE PROJECTED E XPENSES YET TO BE INCURRED BEFORE THE SEARCH. HE REFERRED TO THE PAPERS FOUND WITH B.T. PATIL AND SONS DURING THE SEARCH AT THEIR PLACE PLACED AT PAG ES 238 TO 246 OF THE PAPER BOOK AND SUBMITTED THAT THESE PAPERS DO NO T INDICATE THE DATES AS NOTED ON THE PAPERS FOUND WITH THE ASSESSEE. HE AC CORDINGLY SUBMITTED THAT THESE PAPERS INDICATE THE PROJECTED EXPENSES AND NOT THE EXPENSES ACTUALLY INCURRED. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THESE PAPERS NOWHERE STATE THAT THE PAYMENTS WERE MADE AS SPEED MONEY. HE 41 SUBMITTED THAT EVEN U/S.132(4A) THE NOTINGS CANNOT BE PR ESUMED TO BE REFLECTING IN THE SPEED MONEY PAID FOR AWARDING OF CONTRACT S FOR PASSING THE BILLS. THEREFORE, TO CATEGORIZE THESE NOTINGS AS AMOUN TING TO SPEED MONEY PAID IS WRONG. HE SUBMITTED THAT SHRI D.A. BHAT WAS ONLY A TECHNICAL DIRECTOR WHO WAS NOT INCHARGE OF THE FINANCIAL TRA NSACTIONS AND THEREFORE HIS STATEMENT SHOULD NOT BE TAKEN AS CORRECT . FURTHER, REFERRING TO PAGE 178 OF THE PAPER BOOK HE SUBMITTED THAT SHRI D.A. BHAT RETRACTED IMMEDIATELY HIS STATEMENT ON 11-10-2009. REFERRING TO PA GE 202 OF THE PAPER BOOK HE SUBMITTED THAT IT WAS EXPLAINED THAT GHOD ZHARI PROJECT, TO WHICH THE PAPERS MAINLY RELATE TO, WAS STARTED IN 2007 AND MAJOR R .A. BILLS WERE RELEASED FROM F.Y. 2008-09 ONWARDS AND TILL THE SEARC H THE JOINT VENTURE HAD RECEIVED BILLS FOR RS.98 CRORES ONLY. IF THAT IS SO THE PAYMENT OF RS.43 CRORES AS PER THE PAPERS DOES NOT LOOK COMMER CIALLY POSSIBLE AND HIGHLY UNREASONABLE IF CONSIDERED AS SPEED MONEY ALREADY PAID. REFERRING TO PAGE 209 OF THE PAPER BOOK AND PAGE 34 OF THE ORDE R OF THE CIT(A) HE DREW THE ATTENTION OF THE BENCH TO THE REPLY GIVEN BY THE MANAGING DIRECTOR SHRI R.D. SHINDE IN HIS STATEMENT RECORDED U/S.132 (4) ON 12-10- 2009 DURING THE COURSE OF SEARCH REGARDING THE AMOUNT OF RS.43.83 CRORES ON ACCOUNT OF SPEED MONEY GIVEN FOR GETTING THE CONTRAC TS. HE SUBMITTED THAT THE SEIZED PAPERS CANNOT BE CONSIDERED AS REFLECTIN G THE PAYMENT OF SPEED MONEY AND THEREFORE IT CANNOT BE PRESUMED U/S.13 2(4A) THAT THE PAYMENTS NOTED IN THE PAPERS ARE ALREADY MADE. HE SUB MITTED THAT THE AO HAS NOT PROVED THAT THE VARIOUS PAYMENTS ARE MADE IN DIFFERENT YEARS AS STATED AT PAGE 30 OF THE ASSESSMENT ORDER. HE SUB MITTED THAT THE ASSESSEE IS AGREEABLE TO THE DECLARATION MADE IN THE ST ATEMENT U/S.132(4) BUT IT OBJECTS TO THE CHANGE OF YEARS MADE BY THE AO FOR MAKING THE ADDITIONS. HE SUBMITTED THAT THE TOTAL OF ADDITIONS MADE IN DIFFERENT YEARS BY THE AO IS THE SAME AS THE TOTAL DECLARED INCOME BY THE ASSESSEE BUT THE AO HAS SHIFTED PART OF THE INCOME TO A.Y. 2007-08 AND 20 08-09 WHICH IS 42 NOT CORRECT. HE SUBMITTED THAT THE AO HAS INCREASED T HE INCOME FOR A.YRS. 2007-08 AND 2008-09 AND REDUCED THE INCOME DECLARED B Y THE ASSESSEE FOR A.YRS. 2009-10 AND 2010-11. HE SUBMITTED THAT THE AO AT PAGE 30 A ND 56 OF THE ASSESSMENT ORDER HAS HELD THAT THESE EXPENS ES ARE INCURRED OUT OF THE BOGUS EXPENDITURE VOUCHERS DEBITED IN THE ACCOUN TS AND HE ACCORDINGLY INCREASED THE BUSINESS INCOME OF THE ASSESSE E BY THE ABOVE AMOUNTS. HE ACCORDINGLY SUBMITTED THAT THE ADDITION OF R S.2,00,17,500/- MADE BY THE AO IN A.Y. 2007-08 ON THE BASIS OF THE LOOSE PAPERS IS NOT JUSTIFIED AND THEREFORE THE SAME SHOULD BE DELETED. 96. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE AO AND CIT(A). SHE SUBMITTED T HAT EVIDENCES REGARDING THE SPEED MONEY IS BASED ON STATEMENT OF 4 IMPORTANT FUNCTIONARIES VIZ., SHRI D.A. BHAT, TECHNICAL DIRECTOR OF THE ASS ESSEE COMPANY, SHRI R.D. SHINDE, MANAGING DIRECTOR OF THE ASSESSE E COMPANY, SHRI A.R. GURJAR, PROJECT MANAGER OF THE ASSESSEE COMPAN Y AND SHRI B.T. PATIL, ACCOUNTANT OF THE ASSESSEE. FURTHER, FAXES, PAPERS AND RECONCILED DOCUMENTS OF SPEED MONEY MAINTAINED IN THE BOOKS WERE A LSO FOUND DURING THE COURSE OF SEARCH. ANALYSIS OF SMSS RECEIVED B Y SHRI D.A. BHAT WHO KEPT ACCOUNTS FOR THE SPEED MONEY PAID BY THE COM PANY ALSO GIVES EVIDENCE REGARDING PAYMENT OF SPEED MONEY. SHE SUBMITT ED THAT THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH PAYMENTS HAVE TO BE RELATED TO RA BILLS IS BASELESS. IT IS VERY CLEAR THAT THE PAYMENTS WERE FIRST MADE FOR INITIATING THE PROJECT AND GETTING VARIOUS APPROVALS. THE DESTINATION AND TIMING OF SUCH PAYMENTS MAKES IT ABUNDANT LY CLEAR THAT SOME OF THESE WERE IN THE PRE-OPERATIVE PHASE OF THE PR OJECT. SHE SUBMITTED THAT IT IS BASELESS TO CLAIM THAT SUCH EXPENSES WERE PROJECTED EXPENSES ALONE AS IT IS VERY CLEAR FROM THE PAPERS SEIZE D THAT PAYMENTS WERE MADE ON SPECIFIC DATES DURING THE F.YS. 2007-08 TO 2010-11. SUCH ELABORATE NOTINGS CANNOT BE MADE FOR PROJECTED EXPENSE S ESPECIALLY SINCE 43 ALL AMOUNTS MATCH ON A YEARLY BASIS. THE SCANNED COPY OF THE SEIZED DOCUMENTS AT PAGE 17 OF THE ASSESSMENT ORDER PASSED U/S. 153 A FOR THE A.Y .2009-10 SHOWS THE TABULATION OF EXPENSES IN TWO DISTIN CT COLUMNS 'TO BE PAID' AND 'ALREADY PAID:'. SHE SUBMITTED THAT THE AS SESSEE HAS BEEN UNABLE TO DISCHARGE THE ONUS PLACED UPON IT TO SUPPORT ITS CONTENTION THAT SUCH EXPENSES WERE INCURRED ONLY IN THE A.YRS 2009-10 AND 2010-11 BY A SHRED OF EVIDENCE. REFERRING TO THE SECOND TABLE ON PAGE 35, PARA 55 OF THE ORDER OF CIT(A) SHE SUBMITTED THAT THE ASSESSEE BEFORE T HE LD.CIT(A) HAD ACCEPTED THAT THE PAYMENTS ARE SPREAD OVER A PERIOD OF 4 YEARS FROM A.YS 2006-07 TO 2009-10. SHE SUBMITTED THAT THE ADMISSION TO CLAIM THAT IT WAS MONEY PAID TO HURRY UP OPERATIONAL ACTIVITIES AND HEN CE ONLY IN LATTER YEARS IS INCORRECT. IT IS CRYSTAL CLEAR THAT IT IS NOT ON LY DURING OPERATIVE PERIOD BUT ALSO DURING THE PRE-OPERATIVE PERIOD OF THE PR OJECT THE ASSESSEE HAS PAID SPEED MONEY. SHE ACCORDINGLY SUBMITTED THAT T HE ORDER OF THE CIT(A) BE UPHELD. 97. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE INSTANT CASE THE AO MADE THE ADDITION ON THE GROUND THAT THESE LOOSE PAPERS INDICATE THE DATES OF PAYMENTS OF VARIOUS AMOUNTS AS SPEED MONEY PAID TO DIFFERENT PERSONS DATE-WISE WITH THE NAMES OF THE PAYERS AND THE RECIPIENT. BASED ON T HE BIFURCATION OF PAYMENTS OF ALLEGED SPEED MONEY AT PAGE 30 OF THE ASSES SMENT ORDER THE AO TAXED THE AMOUNT OF RS.2,75,17,500/- BEING 50% SHARE OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. SIMILAR ADDITIONS WERE MADE IN A.Y. 2008-09 AT RS.1490.675 LAKHS AND RS.425.97 LAKHS IN A.Y. 20 09-10 WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE THAT NOTINGS ON THE LOOSE PAPERS ARE NOT ABOUT THE PAYMENTS ACTUALLY MADE BUT THESE ARE PROJECTED EXPENSES TO BE INCURRED. FURTHER, IT IS ALSO HIS CONTENTION THAT THE SEIZED PAPERS DO NOT INDIC ATE ANY PAYMENT 44 OF SPEED MONEY AND THEREFORE THE REVENUE AUTHORITIES A RE NOT JUSTIFIED IN HOLDING THAT THE PAYMENT NOTED ON THE SEIZED PAPERS RE FLECT SPEED MONEY PAID BY THE ASSESSEE COMPANY ESPECIALLY WHEN MR. BHAT H AD RETRACTED HIS STATEMENT IMMEDIATELY AT THE EARLIEST OPPORTUNITY. WE DO NOT FIND ANY SUBSTANCE IN THE ABOVE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. THE AO HAS MADE ADDITION NOT ONLY ON THE BASIS OF THE P APERS SEIZED FROM THE PREMISES OF SHRI D.A. BHAT, BUT ALSO ON THE BASIS OF STA TEMENTS RECORDED FROM RESPONSIBLE PERSONS OF THE ASSESSEE COMPA NY NAMELY MR. D.A. BHAT, TECHNICAL DIRECTOR, SHRI R.D. SHINDE, MANAGING DIRECTO R, MR. GURJAR, PROJECT MANAGER AND MR. B.T. PATIL, THE ACCOUNTA NT OF THE COMPANY. THEREFORE, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE NOTINGS INDICATE PROJECTED EXPENSES IS NOT COR RECT. HOWEVER, WE ALSO FIND THAT THE NOTINGS EQUALLY DID NOT CLEARLY INDICATE THE NATURE OF THE EXPENSES NOTED. NOWHERE ON THE SEIZED PAPERS THERE IS ANY EVIDENCE THAT THE EXPENDITURE NOTED ON SAID PAPERS INDICATE PAYMENT O F SPEED MONEY/BRIBE. NO CORROBORATIVE EVIDENCE IS BROUGHT ON RE CORD BY THE LOWER AUTHORITIES TO SUPPORT THE CASE THAT THE PAYMENTS INDIC ATE SPEED MONEY. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO H AS NOT CARRIED OUT ANY VERIFICATION IN SUPPORT HIS CONTENTION THAT NOTINGS CON CLUSIVELY PROVE THAT THE ENTRIES IN THE LOOSE PAPERS ARE INFACT SPEED MO NEY/BRIBE PAID TO VARIOUS PERSONS WHOSE NAMES ARE MENTIONED AGAINST EACH FIGURE. ON A POINTED QUERY RAISED BY THE BENCH DURING THE COURSE OF HEARING THE LD. DEPARTMENTAL REPRESENTATIVE ALSO CANDIDLY ADMITTED THAT NO SUCH EXERCISE HAS BEEN DONE EITHER BY THE INVESTIGATION WING AFTER THE SEARCH OR BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFO RE, IT IS NOT CORRECT TO HOLD THAT THE PAYMENTS NOTED ON THE SEIZED PAPERS INDICATE SPEED MONEY/BRIBE PAID BY THE ASSESSEE COMPANY TO VAR IOUS PERSONS. HOWEVER, CONSIDERING THE PRESUMPTION LAID DOWN IN SECTION 1 32(4A) OF THE I.T. ACT, SINCE THESE PAPERS ARE FOUND WITH THE ASSESSEE COMPANY, 45 THEREFORE, THE AO IS JUSTIFIED IN HOLDING THAT THE ASSESSEE COMPANY HAS PAID THE AMOUNT NOTED ON THE SEIZED PAPERS AND THE CI T(A) IS JUSTIFIED IN UPHOLDING THE ADDITION. IN THIS VIEW OF THE MATTER AND IN V IEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) WE UPHOLD THE ORDE R OF LD.CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 98. IN GROUND OF APPEAL NO. 3 TO 3.2 THE ASSESSEE HAS CH ALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.6,02,856/- MADE BY THE AO. U/S.41(1) OF THE I.T. ACT. 99. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE COMPA NY HAS SHOWN HUGE AMOUNT OUTSTANDING IN THE NAME OF SUB CONTRACTORS AND LABOUR CONTRACTORS. TO VERIFY THE GENUINENESS OF CREDITORS THE AO ASKED THE ASSESSEE TO GIVE DETAILS OF OUTSTANDING CREDITORS VIZ, NAME AND ADDRESS, CREDIT DURING THE YEAR, DEBIT DURING THE YEAR, CLOSING BALAN CE AND DATE OF PAYMENT OF OUTSTANDING BALANCE IN TABULARIZED FORM. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT A N UMBER OF CREDITORS ARE OUTSTANDING FOR MORE THAN 3 YEARS AND SOME CREDITO RS ARE EVEN OUTSTANDING FOR MORE THAN 10 YEARS. HE, THEREFORE, ASKED THE ASSESSEE TO SHORTLIST THE NAMES OF CREDITORS WHO ARE OUTSTANDING FOR MORE THAN 3 YEARS AND SINCE WHEN THEY REMAIN UNPAID. THE AO FURTHER NOTE D THAT INVESTIGATION DURING THE SEARCH AND ASSESSMENT PROCEEDIN GS REVEALED THAT THE ASSESSEE IS GENERATING UNACCOUNTED INCOME BY INFLATING THE EXPENDITURE. SINCE ASSESSEE IS DOING GOVERNMENT CONTRAC TS IT CANNOT SUPPRESS THE RECEIPTS. FIRST METHOD IS WHEN AN EXPENDIT URE IS DEBITED IN THE BOOKS, THE PAYMENT IS MADE THROUGH CASH FROM OUT O F UNACCOUNTED INCOME. HOWEVER THE LIABILITY IS CONTINUED TILL SUCH TIME, THE C ASH BOOK HAS SUFFICIENT CASH BALANCE. WHENEVER THERE IS SUFFICIENT CASH BALANCE, TH E PAYMENT IS SHOWN IN THE BOOKS AND LIABILITY IS LIQUIDATED. THE LABOUR CHARGES ARE SHOWN AS PAYABLE FOR A LONG TIME, SOMETIMES Y EARS TOGETHER. 46 ACCORDING TO THE AO SINCE THE LABOURS ARE POOR AND THE Y LEAD HAND TO MOUTH EXISTENCE IT IS UNLIKELY THAT THEY WAIT FOR SUCH A LONG TIME FOR THE PAYMENT TO BE RECEIVED. IN VIEW OF THE DETAILED DISCUSSIO N BY THE AO AT PARA 17.2 OF THE ORDER THE AO REJECTED THE CREDITS OUT STANDING FOR MORE THAN 3 YEARS AT RS.6,02,856/- FOR THE IMPUGNED YEAR A ND MADE ADDITION U/S.41(1) OF THE I.T. ACT. SIMILAR ADDITION OF RS.70,57,702/- WA S MADE BY THE AO FOR A.Y. 2010-11. 100. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGER (TV) AND SONS LTD. REPORTED IN 222 ITR 344 UPHELD THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 42. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THERE IS MERIT IN THE APPELLANT'S CONTENTION WITH REGARD TO THE ADDITIONS M ADE ON THE ABOVE ISSUE FOR ASSESSMENT YEARS 2004-05 AND 2006-07. A PERUSAL OF THE NO TICE ISSUED UNDER SECTION 143(2) DATED 19/06/2006 FOR ASSESSMENT YEAR 200 4-05 DURING SCRUTINY ASSESSMENT INDICATES THAT THE ASSESSING OFFICER HAD CALLED FOR A LIST OF SUNDRY CREDITORS AND DEBTORS ABOVE RS.1,00,000/ - WITH PAN, ADDRESS, NATURE OF TRANSACTION. IN RESPONSE, THE APPELLANT HAD, VIDE T HEIR LETTER OF 07/07/2006, PROVIDED A LIST OF CREDITORS AND DEBTORS. SIMILARLY, F OR ASSESSMENT YEAR 2006- 07, THE APPELLANT HAD, VIDE ITS LETTER DATED 03/10/2 008, FURNISHED THE DETAILS OF SUB-CONTRACTORS FOR WORKS DONE ABOVE RS. 5,00,000/- IN COMPLIANCE TO THE ADDL.CIT'S LETTER ISSUED DURING SCRUTINY PROCEEDINGS. I ALSO FIND THAT IN ASSESSMENT ORDERS PASSED, CONSEQUENT UPON SCRUTINY IN THESE YEARS, NO ADDITIONS WERE MADE ON ACCOUNT OF OUTSTANDING CREDITO RS WHICH GOES TO SHOW THAT THE ASSESSING OFFICER DID NOT DEEM IT NECESSARY TO GO FURTHER INTO DETAILS ON THE ISSUE AND HAD ACCEPTED THE SAME. THEREFORE, THE ISSU E OF OUTSTANDING CREDITORS WAS ALREADY SUBJECT TO SCRUTINY DURING ORIGI NAL ASSESSMENT AND IT IS NOT THE ASSESSING OFFICER'S CASE THAT THEY HAVE TO BE REC ONSIDERED ON ACCOUNT OF INCRIMINATING MATERIAL IN REASSESSMENT UNDER SECTION 153 A. THE ADDITIONS MADE FOR ASSESSMENT YEARS 2004-05 AND 2006-07 ARE DELETE D. 43. IN SO FAR AS THE ADDITIONS MADE IN ASSESSMENT YEARS 200 7-08 AND 2010-11 ARE CONCERNED, THE QUESTION WHICH IS REQUIRED TO BE A NSWERED IS WHETHER OR NOT SECTION 41 (1) CAN BE INVOKED IN SUCH CASES. IT HAS BEEN HELD THAT MERE EXPIRY OF THE PERIOD OF LIMITATION, SAY 3 OR 6 YEARS, WITHIN WHICH THE CREDITOR COULD SUE THE ASSESSEE TO RECOVER HIS AMOUNT, WOULD NOT C ONSTITUTE A CESSATION OF THE LIABILITY OF THE TRADER I.E. OF THE ASSESSEE AS IT CANNOT BE SAID THAT THE EXPIRY OF THE PERIOD OF LIMITATION EXTINGUISHES THE D EBTOR'S LIABILITY TO PAY UNDER SUBSTANTIVE LAW OR THE RIGHT OF THE CREDITOR TO DEMAND REPAYMENT FROM THE ASSESSEE. THE SUPREME COURT IN A CASE RELATED TO PAY MENT OF WAGES IN BOMBAY DYEING AND MANUFACTURING COMPANY LTD. V/S STA TE OF BOMBAY AIR (1958) (SC) 328, 335 HAS POINTED OUT THAT THE EXPIRY OF LIMITATION PERIOD ONLY DEPRIVES THE CREDITOR OF HIS REMEDY TO INSTITUTE A SUIT IN A COURT OF LAW BUT THE INDEBTEDNESS OF THE OTHER PARTY CONTINUES. HOWEVER, I T IS ALSO A FACT THAT THE SITUATION WOULD BE DIFFERENT IF IT IS SHOWN THAT THE C REDITORS HAVE ABANDONED THEIR RIGHT TO RECOVER THE DEBT FROM THE DEBTOR. TH IS IMPLIES THAT THE ACTION OF THE CREDITOR WHICH IS AN EXPRESSION OF THE INTENTION N OT TO PURSUE RECOVERIES CAN BE SUFFICIENT TO HOLD THAT THERE IS A CESSATION O F LIABILITY. THAT THE CREDITOR 47 HAS ABANDONED HIS RIGHT TO ENFORCE RECOVERY WOULD BEC OME STRONGER WITH A FLUX OF TIME IF NO ACTION IS TAKEN. UNDER THESE CIRCUMSTANC ES, THERE IS NO REQUIREMENT OF AN UNEQUIVOCAL DECLARATION ON THE PA RT OF THE CREDITOR THAT HE DOES NOT WISH TO PURSUE RECOVERY OR AN ACKNOWLEDGEMENT OF THIS INTENTION BY THE ASSESSEE BY WAY OF RECORDING THE SAME IN HIS BOOKS OF ACCOUNT. IN FACT, IN THIS CASE, ALL THAT IS RELEVANT IS THAT THE MONEY SHOULD HAVE BEEN RECEIVED OR THE DEBT WOULD HAVE BECOME DUE BY THE ASSESSEE DURING THE N ORMAL TRADING OPERATIONS. THIS WOULD BE A CASE WHERE THE DECISION IN THE CASE OF CIT V. T. V. SUNDARAM IYENGAR (T. V.) & SONS LTD. [1996J 88 TAXMA N 429 (SC) [1996J 222 ITR 344 (SC) WILL BE APPLICABLE. THE DECISION- 22. THE PRINCIPLE LAID DOWN BY ATKINSON, J., APPLIES IN FULL FORCE TO THE FACTS OF THIS CASE. IF A COMMONSENSE VIEW OF THE MATTER IS TAKEN, THE ASSESSEE, BECAUSE OF THE TRADING OPERATION, HAD BECOME R ICHER BY THE AMOUNT WHICH IT TRANSFERRED TO ITS PROFIT AND LOSS ACCO UNT. THE MONEYS HAD ARISEN OUT OF ORDINARY TRADING TRANSACTIONS. ALTHOUGH THE AMOUNTS RECEIVED ORIGINALLY WAS NOT OF INCOME NAT URE, THE AMOUNTS REMAINED WITH THE ASSESSEE FOR A LONG PERIOD UNC LAIMED BY THE TRADE PARTIES. BY LAPSE OF TIME, THE CLAIM OF TH E DEPOSIT BECAME TIME BARRED AND THE AMOUNT ATTAINED A TOTALLY DIFFE RENT QUALITY. IT BECAME A DEFINITE TRADE SURPLUS, ATKINSON, J. POINTED OUT THAT IN MORLEY'S CASE (SUPRA) NO TRADING ASSET WAS CREATED. MERE CHANGE OF METHOD OF BOOK-KEEPING HAD TAKEN PLACE. BUT, WHERE A NEW ASSET CAME INTO BEING AUTOMATICALLY BY OPERATION OF LAW, COMMONSENSE DEMANDED THAT THE AMOUNT SHOULD BE ENTERED IN THE PR OFIT AND LOSS ACCOUNT FOR THE YEAR AND BE TREATED AS TAXABLE INCOM E. IN OTHER WORDS, THE PRINCIPLE APPEARS TO BE THAT IF AN AMOUNT IS RECEIVED IN COURSE OF TRADING TRANSACTION, EVEN THOUGH IT IS NOT T AXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE A MOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEE'S OWN MON EY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTORY OR CO NTRACTUAL RIGHT. WHEN SUCH A THING HAPPENS, COMMONSENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. [EMPH ASIS MINE] 44. IN VIEW OF THE PRINCIPLES ENUNCIATED M THE CASE OF CIT V. T. V.SUNDARAM IYENGAR (T. V.) & SONS LTD. (SUPRA), I HOLD THAT THE PROVISIONS OF SECTION 41 (1) HAS BEEN CORRECTLY INVOKED AND THE AMOUNTS OF OUTSTAN DING CREDITORS HAVE RIGHTLY BEEN BROUGHT TO TAX UNDER SECTION 41(1) AS CE SSATION OF LIABILITIES IN ASSESSMENT YEARS 2007-08 AND 2010-11, RESPECTIVELY. THE P RINCIPLE IS PARTICULARLY APPLICABLE IN CASES OF SUBCONTRACTORS AND LABOUR SUPPLIERS. IT IS WELL KNOWN THAT THESE CATEGORIES OF SERVICE PROVIDERS D O NOT WORK IF PAYMENT IS NOT MADE TO THEM IMMEDIATELY ON PERFORMANCE OF TH EIR PART OF CONTRACTED WORK. THEREFORE, THE PROBABILITY THAT THE AMOUNTS WO ULD BE OUTSTANDING AGAINST SUBCONTRACTORS AND LABOUR IS CONTRARY TO NORMAL HUMAN AND BUSINESS CONDUCT. THE APPELLANT FAILS ON THIS GROUND. 101. AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 102. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT MERELY BECAUSE THE CREDITORS WERE OUTSTANDING FOR A PERIOD OF 3 YEARS OR MORE IT DOES NOT MEAN THAT IN THE HANDS OF THE 48 ASSESSEE THE LIABILITY HAS CEASED. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS REPOR TED IN 236 ITR 518 HE SUBMITTED THAT THERE IS NO REASON TO HOLD THAT THE LIABILITY HAS CEASED IN THE HANDS OF THE ASSESSEE AND SUCH AMOUNTS OF OLD CREDITORS CONSTITUTE THE INCOME U/S.41(1). HE ALSO RELIED ON THE DECIS ION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF HRISHIKESH L. JOSHI VIDE ITA NO.702/PN/2007 WHEREIN IT HAS BEEN HELD THAT SIMPLY BECAUSE THE LIA BILITY IS UNPAID FOR A PERIOD OF MORE THAN 3 YEARS IT CANNOT BE TAXED AS CESSATION OF LIABILITY U/S.41(1). 103. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). SHE SUBMITTED THAT THE LD.CIT(A) FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGER (TV) AND SONS LTD. (SUPRA) HAS PASSED A DETAILED ORDER GIVING REASONS FOR SUSTAINING THE ADDITION MADE BY THE AO U/S.41(1). SHE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD. 104. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE MADE ADDITION OF RS.6,02,856/- U/S.41(1) OF THE I.T. ACT, 1961 ON ACCOUNT OF OUTSTANDING SUNDRY CREDITORS HOLDING THAT THESE TRADE CREDITORS ARE OUTSTANDING FOR A FEW YEARS AND THE LIABILITY OF THE ASSESSEE HAS CEASED. WE FIND IN APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGER & SONG LTD. (SUPR A) HELD THAT THE PROVISIONS OF SECTION 41(1) HAS BEEN CORRECTLY INVOKED AND THE AMOUNTS OF OUTSTANDING CREDITORS HAVE RIGHTLY BEEN BROUGHT TO TAX U/S.41(1) AS CESSATION OF LIABILITY. ACCORDING TO HIM, THE PRINCIPLE IS PARTIC ULARLY APPLICABLE IN CASE OF SUB-CONTRACTORS AND LABOUR SUPPLIERS SINCE IT IS WELL 49 KNOWN THAT THESE CATEGORIES OF SERVICE PROVIDERS DO NOT WORK IF PAYMENT IS NOT MADE TO THEM IMMEDIATELY ON PERFORMANCE OF THEIR PA RT OF CONTRACTED WORK. THEREFORE, THE PROBABILITY THAT THE AMOUNTS SHOULD BE OUTSTANDING AGAINST SUB-CONTRACTORS AND LABOURERS IS CONTRARY TO N ORMAL HUMAN AND BUSINESS CONDUCT. HE ACCORDINGLY UPHELD THE ADDITION MADE BY THE A O. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE SUBSEQUENT DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUGALI SUGAR WORKS PVT. LTD. (SUPRA) THERE IS NO REASON TO HOLD THAT T HE LIABILITY HAS CEASED IN THE HANDS OF THE ASSESSEE AND SUCH AMOUNT O F OLD CREDITORS CONSTITUTE INCOME U/S.41(1). 105. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF S UGALI SUGAR WORKS PVT. LTD. (SUPRA) WHILE DECIDING THE ISSUE OF CESSATION OF LIABILITY U/S.41(1) OF THE I.T. ACT HAS OBSERVED AS UNDER : 13.2 EVEN ON MERIT ALSO, WE FIND THE ISSUE STANDS COVER ED IN FAOVUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS PVT. LTD. (SUPRA). WE FIND THE HONBLE SUPREME COURT IN THE SAID DECISION WHILE DECIDING ON THE ISSUE OF CESSATION OF LIA BILITY U/S.41(1) OF THE I.T. ACT HAS OBSERVED AS UNDER: THE RESPONDENT-ASSESSEE IS A PRIVATE LIMITED COMPANY. IN THE PROCEEDINGS FOR ASSESSMENT OF TAX FOR THE YEAR ENDING 30.6.1964 RELEVAN T TO THE ASSESSMENT YEAR 1965-66, THE ASSESSEE TRANSFERRED A SUM OF RS. 3,45 ,000 OUT OF THE SUSPENSE ACCOUNT RUNNING FROM 1946-47 TO 1948-49 TO TH E CAPITAL RESERVE ACCOUNT. THE INCOME TAX OFFICER FOUND THAT AN AMOUN T OF RS. 1,29,.000 WAS WITH REFERENCE TO THE DEPOSITS AND ADVANCES WHICH HAD BEEN PAID BACK AND HE INCLUDED A SUM OF RS. 2,56,529 UNDER SECTION 41 OF TH E INCOME TAX ACT IN THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE WENT ON APPEAL B EFORE THE APPELLATE ASSISTANT COMMISSIONER AND THE ORDER OF THE I.T.O. WAS CO NFIRMED. THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL. THE TRIBUN AL ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT ITS UNILATERAL ENTRY IN THE ACCOUNTS TRANSFERRING THE AMOUNT TO THE CAPITAL RESERVE ACCOUN T WOULD NOT BRING THE MATTER WITHIN THE SCOPE OF SECTION 41 OF THE INCOME TAX ACT AND CONSEQUENTLY HELD IN FAVOUR OF THE ASSESSEE. THE DECISION OF THE TRIB UNAL WAS CHALLENGED BEFORE THE HIGH COURT. THE HIGH COURT OBSERVED : 'THE TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO IS A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HOW A DEBTOR, BY HIS OWN UNILATERAL ACT, CAN BRING ABOUT THE CESSATION OR REMISSION OF HIS LIABILITY. REVISI ON HAS TO BE GRANTED BY THE CREDITOR. IT IS NOT IN DISPUTE AND IT INDEED CANN OT BE DISPUTED THAT IT IS NOT A CASE OF REMISSION OF LIABILITY. SIMILARLY A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRING ABOUT A CESSATION OF HIS LIABILITY. THE C ESSATION OF THE LIABILITY MAY OCCUR EITHER BY REASON OF THE OPERATION OF LAW, THAT IS, ON THE LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY 50 HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMEN T IS DEMANDED BY THE CREDITOR OR A CONTRACT BETWEEN THE PARTIES, OR BY D ISCHARGE OF THE DEBT THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. TRAN SFER OF AN ENTRY IS NEITHER AN AGREEMENT BETWEEN THE PARTIES NOR PAYMENT OF THE LIABILITY.' ON THAT REASONING, THE HIGH COURT ANSWERED THE QUESTIO N IN REFER-ENCE IN FAVOUR OF THE ASSESSEE. AGGRIEVED THEREBY, THE COMMISSION ER OF INCOME TAX HAS PREFERRED THIS APPEAL. 2. LEARNED COUNSEL FOR THE APPELLANT CONTENDS THAT IN THE FACTS OF THE PRESENT CASE, THE LIABILITY HAS COME TO AN END AS A PERIOD OF MORE THAN 20 YEARS HAD ELAPSED AND THE CREDITOR HAD NOT TAKEN ANY STEP TO RE COVER THE AMOUNT. CONSEQUENTLY, ACCORDING TO HIM, THERE IS A CESSATION OF THE DEBT AND THE MATTER WOULD FALL WITHIN THE SCOPE OF SECTION 41 OF THE ACT . SECTION 41 READS AS FOLLOWS: 'WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN TH E ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABIL ITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE HA S OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, AN Y AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SU CH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAI NED BY HIM, SHALL BE DEEMED TO BE PROFITS AND GAIN OF BUSINESS OR PROFESSION A ND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVI OUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IN EXISTENCE IN THAT YEAR OR NOT.' 3. IT WILL BE SEEN THAT THE FOLLOWING WORDS IN THE SE CTION ARE IMPOR-TANT: 'THE ASSESSEE HAD OBTAINED, WHETHER IN CASH OR IN ANY OTHER M ANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM'. THUS, THE SECTION CONTEMPLATES THE O BTAINING BY THE ASSESSEE OF AN AMOUNT EITHER IN CASH OR IN ANY OTHER MANNER W HATSOEVER OR A BENEFIT BY WAY OF REMISSION OR CESSATION AND IT SHOULD BE OF A PAR TICULAR AMOUNT OBTAINED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEFI T BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR THE APPLICATION OF THI S SECTION. THE MERE FACT THAT THE ASSESS HAS MADE AN ENTRY OF TRANSFER IN HIS ACCOU NTS UNILATERALLY WILL NOT ENABLE THE DEPART-MENT TO SAY THAT SECTION 41 WO ULD APPLY AND THE AMOUNT SHOULD BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THE REASONING OF THE HIGH COURT IS CORRECT AND WE ARE IN AGREEMENT WITH T HE SAME. 4. LEARNED COUNSEL FOR THE APPELLANT DRAWS OUR ATTENT ION TO THE JUDGMENT OF THE CALCUTTA HIGH COURT IN COMMISSIONER OF INCOME TAX V. GENERAL INDUSTRIAL SOCIETY LTD., (1994) 207 ITR 169. THE DIVISION BENCH OF THE CALCUTTA HIGH COURT HAS TAKEN CARE TO SET OUT THE TWO IMPORTANT FACTORS IN THAT CASE WHICH WEIGHED WITH THEM TO COME TO THE PARTICULAR CONCLUSION. THE BENCH SAID : 'IT APPEARS FROM THE ASSESSMENT ORDER THAT THERE IS ONE PECULIAR ASPECT IN THE PRESENT CASE. IT IS THE PRACTICE OF THE ASSESSEE TO WRITE BACK SUCH UNCLAIMED AND UNSPENT LIABILITIES FROM YEAR TO YEAR ON GROUNDS OF B AR LIMITATION OF THE LIABILITY AND TO GET AWAY WITHOUT PAYING TAX ON SUCH AMOUNT WR ITTEN BACK TO PROFIT ON THE SAME PLEA. THIS HAS BEEN HAPPENING SINCE THE ASSESSMEN T YEAR 1977-78. THIS FACT, TO OUR MIND, IS VERY SIGNIFICANT. ONE MORE NOTABLE FEATURE IS THAT THE ASSESSEE NEVER DIVULGED TO THE ASSESSING OFFICER THE DETAIL S AND PARTICULARS OF THE CLAIMS DEQAITE SPECIFIC ENQUIRY. THESE TWO FACTORS COMBINE TO LEND TO THE CASE A COLOUR DIFFERENT FROM THE CASE RELIED UPON ON BEHALF OF THE ASSESSEE.' (AT PAGES 172-73) THE BENCH DISTINGUISHED THE OTHER DECISIO NS REFERRED TO BEFORE IT BY POINTING OUT THAT THE FACTS WERE ENTIRELY DIFF ERENT IN THOSE CASES. HENCE, THE RULING OF THE CALCUTTA HIGH COURT IN THE CASE CI TED WILL NOT HELP THE APPELLANT AS IT TURNED ON THE PECULIAR FACTS OF THE CASE AS STATED IN THE PASSAGE EXTRACTED. 51 5. LEARNED COUNSEL SUBMITS THAT THE SAID JUDGMENT HAS BE EN FOLLOWED BY THE CALCUTTA HIGH COURT IN COMMISSIONER OF INCOME-TAX, V. JIAJEE RAO COTTON MILLS LTD., (1997) 227 ITR 860. THERE IS NO SEPARATE REASONI NG IN THE SAID JUDGMENT AND DOES NOT TAKE THE MATTER ANY FURTHER. 6. LEARNED COUNSEL ALSO REFERRED TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN COMMISSIONER OF INCOME-TAX V. BENNETT COLEMAN AND CO. LTD., (1993) 201 ITR 1021. THE BENCH HELD THAT IT WAS DIFFICULT TO AC CEPT THE CONTENTION OF THE ASSESSEE THAT CESSATION OF LIABILITY CAN TAKE PLACE ONLY AS A RESULT OF A BILATERAL ACT, BUT IT WILL DEPEND UPON THE FACTS OF EACH CASE. THE BENCH POINTED OUT THAT THERE MAY BE CASES WHERE THE LIABILITY IS NOT BARRED B Y OPERATION OF LAW, BUT IN SUCH CASES BILATERAL ACT OF THE PARTIES WILL BE NECESSARY TO BRING ABOUT CESSATION OF LIABILITY. ACCORDING TO THE BENCH, IF THE RECOVE RY HAD BECOME BARRED BY LIMITATION BY OPERATION OF LAW, UNILATERAL EXPRESSION OF INTENTION OF THE DEBTOR NOT TO TREAT THE AMOUNT ANY MORE AS LIABILITY MIGHT BE SUFFICIENT TO BRING ABOUT A CESSATION OF THE LIABILITY. THE BENCH ALSO ACCEPTED THE ALTERNATIVE ARGUMENT THAT WHERE AN ASSESSEE HAD WRITTEN OFF HIS TIME BARRED L IABILITY FROM HIS ACCOUNTS AND TRANSFERRED THE AMOUNT TO HIS PROFIT AND LOSS ACCOUNT THEREBY TREATING IT AS HIS INCOME, HE COULD NOT BE PERMITTED TO TURN ROUND WHEN THE QUESTION OF INCLUSION OF SUCH AMOUNT IN HIS INCOME UNDE R SECTION 41(1) OF THE ACT AROSE. THE BENCH DISTINGUISHED THE JUDGMENT IN KOH INOOR MILLS CO. LTD. V. CIT, (1963) 49 ITR 578, BY OBSERVING THAT THERE WAS N O CESSATION OF LIABILITY IN THAT CASE DESPITE THE EXPIRY OF PERIOD OF LIMITATION TO ENFORCE THE SAME. THE BENCH SAID THAT THE ASSESSEE COULD NOT GET RID OF HIS LI ABILITY WHEN CALLED UPON TO MEET EITHER BY THE EMPLOYEES UNDER THE INDUSTRIAL DISPUTES ACT OR BY THE GOVERNMENT UNDER THE BOMBAY WELFARE FUND ACT ON ACC OUNT OF THE SPECIAL PROVISIONS OF THOSE ACTS. WE ARE UNABLE TO ACCEPT THE R EASONING OF THE BOMBAY HIGH COURT IN THAT CASE. JUST BECAUSE AN ASSESSEE MAKES AN ENTRY IN HIS BOOKS OF ACCOUNTS UNILATERALLY, HE CANNOT GET RID OF HIS LIABI LITY. THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION IS NO T A MATTER WHICH CAN BE DECIDED BY CONSIDERING THE ASSESSEE'S CASE ALONE BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CONCER NED AUTHORITY. IN THE ABSENCE OF THE CREDITOR, IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT IS BARRED AND HAS BECOME UNENFORCEABLE. THER E MAY BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEE DING FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED IN THELIMITATION ACT. 7. ONE ASPECT OF THE MATTER HAS BEEN COMPLETELY IGNOR ED BY THE JUDGMENT OF THE DIVISION BENCH OF THE BOMBAY HIGH COURT. AS POINTED OUT ALREADY, THE CRUCIAL WORDS IN THE SECTION REQUIRE THAT THE ASSESSEE HAS TO OB TAIN IN CASH OR IN ANY OTHER MANNER SOME BENEFIT. THAT PART OF THE SECTION HAS BEEN OMITTED TO BE CONSIDERED BY THE DIVISION BENCH OF THE BOMBAY HIGH C OURT. THE SAID WORDS HAVE BEEN CONSIDERED BY A FULL BENCH OF GUJARAT HIGH COURT IN DETAIL IN THE COMMISSIONER OF INCOME-TAX, GUJARAT-II, AHMEDABAD V. M/S. BHARAT IRON & STEEL INDUSTRIES, BHAVNAGAR, (1993) TAX L R 188. THE FOLLOW ING PASSAGES IN THE JUDGMENT BRINGS OUT OF THE REASONING OF THE FULL BENC H SUCCINCTLY : '11. IN OUR OPINION, FOR CONSIDERING THE TAXABILITY OF AMOUNT COMING WITHIN THE MISCHIEF OF S. 41(1)OF THE ACT, THE SYSTEM OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE IS OF NO RELEVANCE OR CONSE-QUENCE. WE HAVE TO GO BY THE LANGUAGE USED IN S. 41(1) TO FIND OUT WHETHER OR NOT THE AMOUN T WAS OBTAINED BY THE ASSESSEE OR WHETHER OR NOT SOME BENEFIT IN RESPECT OF TR ADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF WAS OBTAINED BY THE ASSESSEE AND IT IS IN THE PREVIOUS YEAR IN WHICH THE AMOUNT OR BENEFIT, AS THE CASE MAY BE, HAS BEEN OBTAINED THAT THE AMOUNT OR THE VALUE OF THE BENEFI T WOULD BECOME CHARGEABLE TO INCOME TAX AS INCOME OF THAT PREVIOUS YEAR. 52 12. WE FULLY AGREE WITH THE VIEW TAKEN BY THE DIVISI ON BENCH IN C.I.T. V. RASHMI TRADING (1977) TAX LR 520 GUJARAT (SUPRA) THAT THE ONLY MEANING THAT CAN BE ATTACHED TO THE WORDS 'OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPEND ITURE' INCURRED IN ANY PREVIOUS YEAR CLEARLY REFER TO THE ACTUAL RECEIVING OF THE CASH OF THAT AMOUNT. THE AMOUNT MAY BE ACTUALLY RECEIVED OR IT MAY BE AD JUSTED BY WAY OF AN ADJUSTMENT ENTRY OR A CREDIT NOTE OR IN ANY OTHER FO RM WHEN THE CASH OR THE EQUIVALENT OF THE CASH CAN BE SAID TO HAVE BEEN RECE IVED BY THE ASSESSEE. BUT IT MUST BE THE OBTAINING OF THE ACTUAL AMOUNT WHICH IS C ONTEMPLATED BY THE LEGISLATURE WHEN IT USED THE WORDS 'HAS OBTAINED; WHETH ER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE IN THE PAST'. AS RIGHTLY OBSERVED BY THE DIVISION BENCH IN THE CONTEXT IN WHICH THESE WORDS OCCUR, NO OTHER MEANING IS POSSIBLE.' WE AR E IN AGREEMENT WITH THE SAID REASONING. 8. THERE IS ANOTHER JUDGMENT OF THE BOMBAY HIGH COUR T WHICH WAS RENDERED MUCH EARLIER IN J.K. CHEMICALS LTD. V. COMMISSIONER OF INCOME-TAX, BOMBAY CITY II, (1966) 62 ITR 34. THE BENCH OBSERVED : '........THE TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO IS A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HOW A DEBTOR, BY HIS O WN UNILATERAL ACT, CAN BRING ABOUT THE CESSATION OR REMISSION OF HIS LIABILITY. REMISSION HAS TO BE GRANTED BY THE CREDITOR. IT IS NOT IN DISPUTE, AND IT INDEED CANNOT BE DISPUTED, THAT IT IS NOT A CASE OR REMISSION OF LIABILITY. SIMILA RLY, A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRING ABOUT A CESSATION OF HIS LIABILITY. THE CESSATION OF THE LIABILITY MAY OCCUR EITHER BY REASON OF THE O PERA-TION OF LAW, I.E., ON THE LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CRED ITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR A CONTRACT BETWEEN T HE PARTIES OR BY DISCHARGE OF THE DEBT - THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. TRANSFER OF AN ENTRY IS NEITHER AN AGREEMENT BETWEEN THE PARTIES NOR PAYMENT OF THE LIABILITY.......'(AT PAGE 41) 9. THIS JUDGMENT HAS BEEN QUOTED BY THE HIGH COURT IN THE PRESENT CASE AND FOLLOWED. WE HAVE NO HESITATION TO SAY THAT THE REASON ING IS CORRECT AND WE AGREE WITH THE SAME. 10. THE PRINCIPLE THAT EXPIRY OF PERIOD OF LIMITATI ON PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT, HAS BEEN WELL SETT LED. IT IS ENOUGH TO REFER TO THE DECISION OF COURT IN BOMBAY DYEING & MANUFACTURI NG CO. LTD. V. THE STATE OF BOMBAY AND OTHERS, [1958] SCR 1122, IF THAT PRINCIP LE IS APPLIED, IT IS CLEAR THAT MERE ENTRY IN THE BOOKS OF ACCOUNTS OF THE DEBTOR MAD E UNILATERALLY WITHOUT ANY ACT ON THE PART OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. APART FROM THAT, THAT WILL NOT BY ITSELF CONFER ANY BENEFIT ON THE DEBTOR AS CONTEMPLATED BY THE SECTIO N. 11. IN THE CIRCUMSTANCES, WE FIND NO MERIT IN THIS APP EAL AND IT IS DISMISSED. THERE WILL BE NO ORDER AS TO COSTS. 105.1 WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF HRISHIKESH L. JOSHI (SUPRA) WHILE DELETING THE ADDITION U/S.41(1) OF THE ACT, FOLLO WING THE ABOVE DECISION AND VARIOUS OTHER DECISIONS HAS OBSERVED AS UNDER : 53 12. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT(A ), THE ASSESSEE FILED GROUND 3 OF THE APPEAL BEFORE US. FURTHER, AGGRIEVED WITH THE RELIEF GIVEN TO THE ASSESSEE THE REVENUE IS IN APPEAL VIDE THE GROUND 7 OF THE APPEAL. DURING THE PROCEEDINGS, THE ASSESSEE FILED A WRITTEN NOTE STATI NG THAT THE AO INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT AND ACCORDI NG TO THE SAID PROVISIONS, THE AO CANNOT TREAT THE SAID AMOUNTS AS INCOME OF THE ASSESSEE OR DEEM THEM AS CASE OF REMISSION OR CESSATION OF LIABILITIES, WHERE TH E SAID AMOUNTS WERE NOT WRITTEN OF BY THE ASSESSEE IN THE BOOKS OF THE ASSESSEE. DURING THE PROCEEDINGS BEFORE US, THE ASSESSEE FILED CASE LAWS TO SUPPO RT VIEW INCLUDING THE PUNE BENCH DECISION IN THE CASE OF M/S ATIDAB CON CRETE PIPES AND PRODUCTS PUNE VIDE ITA NO 1017/PN/2002 TO SUPPORT THE ABOVE. FURTHER, COUNSEL STATED THAT THE SAID AMOUNTS WERE WRITTEN OFF A S THE INCOME OF THE ASSESSEE IN THE YEAR RELEVANT TO THE AY 2006-07 AND THE REFORE, THERE IS NO NEED FOR ANY ADDITION DURING THE YEAR UNDER CONSIDERATION . FURTHER, WE FIND THE JUDGMENTS IN THE CASES OF DSE ENGINEERS (30 SOT 31) ( MUM), SUGAOLI SUGAR WORKS P LTD (236 ITR 518) HOLDS THAT THE LIABILITIES D O NOT CEASE TO EXISTS MERELY BY EFFLUX OF TIME. CONSIDERING THE ABOVE SETTL ED PRINCIPLES ON THE ISSUE, WE FIND THAT THE FINDING OF THE CIT(A) HAS TO BE REV ERSED ON THIS ISSUE. ACCORDINGLY, THE RELEVANT GROUND OF THE ASSESSEE ARE A LLOWED. FURTHER, THE GROUNDS OF THE REVENUE ARE DISMISSED. 106. FOLLOWING THE ABOVE DECISIONS CITED (SUPRA) WE HOLD THA T THE LD.CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.6,0 2,856/- MADE BY THE AO U/S.41(1) OF THE I.T. ACT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWE D. 107. IN GROUND OF APPEAL NO.4 AND 5 THE ASSESSEE HAS CH ALLENGED THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO APPORTION THE C OST OF POWER EVACUATION FACILITY AND MISCELLANEOUS EXPENSES BETWEEN BUILDIN G/ROAD AND WINDMILL IN THE RATIO OF 60:40. 108. AFTER HEARING BOTH THE SIDES WE FIND THIS GROUND BY THE ASSESSEE IS CORRELATED WITH THE GROUND RAISED BY THE REVENUE IN GRO UND OF APPEAL NO.3. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT JUSTIFY HOW THE ORDER OF CIT(A) ON THIS IS ERRONEOUS OR WRONG. WHILE DECIDING THE GR OUND RAISED BY THE REVENUE, WE HAVE UPHELD THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. SINCE THE ORDER OF T HE CIT(A) IS IN CONSONANCE WITH THE DECISION OF THE TRIBUNAL, THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 54 109. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND WHICH READS AS UNDER : THE APPELLANT SUBMITS THAT THE DEDUCTION U/S.80IA(4) SHOULD BE CORRECTLY ALLOWED ON ADDITIONS FINALLY SUSTAINED. 110. AFTER HEARING BOTH THE SIDES AND FOLLOWING THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF NTPC LTD. REPORTED IN 229 ITR 383 AND JUTE CORPORATION OF INDIA LTD. REPORTED IN 187 ITR 688, THE AD DITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION AS NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED. 111. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS CORRELATED WITH THE GR OUND RAISED BY THE REVENUE WHEREIN THE DEPARTMENT HAS CHALLENGED THE ALLOW ANCE OF DEDUCTION U/S.80IA(4). ACCORDINGLY, THE ADDITIONAL GROUND IS BEING ADJUDICATED ALONGWITH THE GROUND RAISED BY THE REVENUE ON THIS ISSU E. ITA NO.53/PN/2013 (BY REVENUE) (A.Y. 2007-08) : 112. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER SEC . 69B ON ACCOUNT OF DIFFERENCE IN VALUATION TO THE TUNE OF RS.4,91,000/- . 113. AFTER HEARING BOTH THE SIDES, WE FIND THE AO MADE ADD ITION OF RS.4,91,000/- U/S.69B ON THE BASIS OF VALUATION REPORT ON A CCOUNT OF PURCHASE IN LAND IN DISTRICT NANDURBAR. AS AGAINST THE PU RCHASE COST OF RS.1,80,000/- THE DVO HAD VALUED THE SAME AT RS.6,71,000/- AND ACCORDINGLY THE AO MADE ADDITION OF RS.4,91,000/-. IN APP EAL THE LD.CIT(A) DELETED THE ADDITION WHICH HAS ALREADY BEEN REPRO DUCED AT PARA 64 OF THIS ORDER. WE FIND THE ABOVE GROUND RAISED BY THE REVENUE IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.52/PN/2013 FILED BY THE 55 REVENUE FOR A.Y. 2006-07. WE HAVE ALREADY DECIDED THE ISS UE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWI NG THE SAME REASONING THIS GROUND BY THE REVENUE IS DISMISSED. 114. GROUND OF APPEAL NO.2A AND 2B BY THE REVENUE READS AS UNDER : 2. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED M ALLOWING DEDUCTION UNDER SEC. 80IA(4) OF RS. 7,88,92,588/- WHICH WAS EARLIER CONFIRMED BY THE LD. CIT(A) AS WELL AS THE H ON 'BLE ITAT FOR A.Y. 2004- 05 AND 2005-06 AS THE ASSESSEE IS ONLY A WORK CONTRACTOR AND NOT A DEVELOPER AS PER THE EXPLANATION BELOW 80IA(13). B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 80IA(4) OF RS. 21,93,856/- WHICH IS THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARC H PROCEEDINGS, ON ACCOUNT OF EXPENSES FROM UNEXPLAINED SOURCES WHICH ATTR ACT PROVISION OF S. 69C OF THE INCOME TAX ACT WHICH IS NOT AN INCOME FRO M THE BUSINESS OF UNDERTAKING REFERRED TO IN SEC. 80IA(4). 115. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE IN THE RETURN OF INCOME HAS CLAIMED DEDUCTION U/S.80IA OF THE ACT AMOUNTING TO RS .7,88,92,588/-. DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE AS SESSEE AS TO WHY THE DEDUCTION U/S.80IA(4) SHOULD NOT BE DISALLOWED. IN RESP ONSE TO THE SAME, THE ASSESSEE VIDE HIS EXPLANATION DATED 11-11-2010 SUBMITTED AS UNDER WHICH HAS BEEN REPRODUCED BY THE AO IN THE BODY OF THE ASSE SSMENT ORDER AND WHICH READS AS UNDER : THE COMPANY HAS CLAIMED THE DEDUCTION IN RESPECT OF INFRASTRUCTURE PROJECT U/ S.80-IA(4) OF THE I.T. ACT. THE YEARWISE DETAILS AR E AS UNDER; F.Y. A.Y. AMOUNT PENDING BEFORE 2002 - 03 2003 - 04 1,52,76,714 ITAT 2003 - 04 2004 - 05 84,02,555 HC 2004 - 05 2005 - 06 1,46,85,364 HC 2005 - 06 2006 - 07 1,55,18,839 ITAT 2006 - 07 2007 - 08 7,88,92,588 AO . 2007 - 08 2008 - 09 24,03,21,259 AO. 2008 - 09 2009 - 10 15,66,30,732 AO. 2009 - 10 2010 - 11 24,45,32,117 AO. 2010 - 11 2011 - 12 25,52,13,274 AO . NOW THE ISSUE OF CLAIM OF DEDUCTION U/S.80IA (4) IN CA SE OF CONTRACTOR IS DECIDED BY HONOURABLE ITAT PUNE IN CASE OF LAXMI CIV IL ENGG. PVT. LTD. ITA NO. 766/PN/09, 754/PN/08, 43/432/PN/07 ON 08.06.2011 AN D IN CASE OF PRATIBHA CONSTRUCTION (ENGINEERS & CONTRACTORS) INDIA PVT. LTD. ITA NO.118/ 56 PN/ 08, 119/PN/08, 932/PN/08, 278/PN/10 ON 27 TH SEPTEMBER 2011 AND HELD THAT THE CONTRACTOR IS ELIGIBLE FOR DEDUCTION U/S.80 IA(4) OF THE I.T.ACT. THE HONOURABLE MUMBAI HIGH COURT ALSO SET ASIDE OUR CA SE TO THE FILE OF ITAT, PUNE FOR AY.2003-04. SINCE THE ISSUE OF DEDUCTION OF CLAIM U/S. 80IA(4) IS DECIDED BY JURISDICTION AT ITAT, PUNE, THE DEDUCTION U/S. 80IA(4) BE ALLOWED FOR A Y.2003-04 TO 2011-12. DURING THE COURSE OF SEARCH THE ADDITIONAL INCOME FOR FOLLOWING YEARS WAS DECLARED. A.Y. ADDITIONAL INCOME DECLARED 2007 - 08 25,00,000 2008 - 09 75,00,000 2009 - 10 8,40,00,000 2010 - 11 15,31,00,000 IT IS SPECIFICALLY MENTIONED IN THE STATEMENT RECORDED U/S. 132(4) OF THE I.T. ACT THAT THE ABOVE INCOME IS GENERATED BY INFLATING THE CONSTRUCTION EXPENSES. THIS FACT IS ALSO PROVED FROM CERTAIN LOOSE PAPERS / SMS FOUND DURING THE SEARCH. THIS ADDITIONAL INCOME IS PART OF BUSINESS INCOME. ON T HE BASIS OF TOTAL TURNOVER AND TURNOVER OF ELIGIBLE PROJECT, THE PROP ORTIONATE CLAIM U/S. 80IA(4) IS WORKED OUT AS UNDER A.Y. CLAIM U/S.80IA(4) IN RESPECT OF ADDITIONAL INCOME 2007 - 08 21,93,856 2008 - 09 67,33,791 2009 - 10 8,31,99,954 2010 - 11 15,27,87,220 THE ABOVE DEDUCTION IN RESPECT OF CLAIM U/S. 80IA(4) IN RESPECT OF ADDITIONAL INCOME DECLARED DURING SEARCH BE ALLOWED. ' 116. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE IS A CONTRACTOR AND IN VIEW OF EXPLANATION 2 TO SECTION 80IA OF THE I.T. ACT, 1961 THE A SSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80IA(4). FURTHER, THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING YEARS HAS ALREADY REJECTED SUCH CLAIM. THE AO ACCORDINGLY REJECTED THE CLAIM OF DEDUCTION U/S.80IA(4) OF T HE I.T. ACT FOR THIS YEAR AND OTHER YEARS AS CLAIMED BY THE ASSESSEE. 117. BEFORE CIT(A) IT WAS SUBMITTED THAT FOR THE A.Y. 2003-0 4 THE AO HAD DISALLOWED CLAIM OF DEDUCTION U/S.80IA(4) WHICH WAS UPHELD BY T HE TRIBUNAL. THE ASSESSEE CHALLENGED THE MATTER BEFORE THE HONBLE HIGH COURT. THE HONBLE HIGH COURT HAD SET ASIDE THIS ISSUE T O THE FILE OF THE 57 TRIBUNAL AND SUBSEQUENTLY THE TRIBUNAL VIDE ITA NO.433/PN /2006 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE APPEALS FOR A.YRS. 2004- 05 & 2005-06 HAVE BEEN SET ASIDE BY THE HONBLE HIGH C OURT TO THE FILE OF THE TRIBUNAL AND THE MATTER FOR A.Y. 2006-07 IS PENDING BEFORE THE TRIBUNAL. IT WAS SUBMITTED THAT SINCE CHAPTER VIA DEDUC TION IS ALLOWED AGAINST UNDISCLOSED INCOME FOUND DURING THE SEARCH THE AS SESSEE IS ENTITLED TO DEDUCTION U/S.80IA(4)(I) CLAIMED IN RESPECT OF THE A DDITIONAL INCOME OFFERED FOR TAXATION AS BUSINESS INCOME. THE ASSESS EE FURTHER SUBMITTED THAT THE CLAIM OF DEDUCTION WAS NOT A FRESH CLAIM . IT WAS ORIGINALLY MADE IN THE RETURN AND WAS REVISED THEREAFTER THROUGH A LETTER SUBMITTED DURING ASSESSMENT PROCEEDINGS. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. VS. CIT RE PORTED IN 282 ITR 323 WAS BROUGHT TO THE NOTICE OF THE CIT(A) IN RESPECT O F THE CONTENTION THAT EVEN IF IT WAS TO BE CONSIDERED FOR THE CLAIM FOR THE FIRST TIME, THE APPELLATE AUTHORITIES HAD THE DISCRETION TO ADMIT SUCH FRES H CLAIM. FINALLY, IT WAS CONTENDED THAT IF IN THIS PROCEEDINGS THE YEAR OF T AXATION OF UNEXPLAINED EXPENSES AND UNDISCLOSED INCOME WAS HELD TO B E IN THE ASSESSMENT YEAR, I.E. 2007-08 AND 2008-09, THEN THE ADDIT IONAL DEDUCTION CLAIMED U/S.80IA(4) SHOULD ALSO BE ALLOWED FOR THESE YEARS. 118. THE ASSESSEE IN AN ALTERNATE CONTENTION POINTED OUT THAT IF ADDITION IS CONFIRMED RESULTING IN HIGHER BUSINESS INCOME, THEN DEDUC TION U/S.80IA(4)(I) BE ALLOWED TO IT ON INCREASED PROFITS ON ELIGIBLE P ROJECTS. FURTHER, IN RESPECT OF THE A.YRS. 2007-08 TO 2010-11 IT W AS CONTENDED THAT IF FOR THE SAKE OF ASSUMPTION THE DEDUCTION U/S.80IA(4)(I) WAS NOT ALLOWABLE, THEN NO INTEREST U/S.234B AND 234D WAS LEVIABLE IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2 003-04 TO 2005- 06. 119. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 58 91. I HAVE GIVEN CAREFUL CONSIDERATION TO THE SUBMI SSION OF THE APPELLANT WITH REFERENCE TO THE FACTS OF THE CASE. I HAVE ALSO PERUSED THE VARIOUS CASE LAWS CITED BY THE APPELLANT IN ITS DETAILED SUBMISSION. THE CONTROVERSY PERTAINS TO THE ISSUE OF WHETHER DEDUCTION U/S.80IA(4) IS ALLOWABLE TO THE APPELLANT IN VIEW OF EXPLANATION BELOW SECTION 80IA WHICH DENIES EXEMPTION TO A WORKS CONTRACTOR. 92. THE ASSESSEE HAS CLAIMED DEDUCTION U/ S 80IA(4) IN RE SPECT OF VARIOUS CONTRACTS AWARDED BY THE GOVERNMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITIES OF RELATED TO WATER SUPPLY IRRIGATION FACI LITIES. RELEVANT PROVISIONS OF THE LAW FOR CLAIM OF EXEMPTION U/S. 80IA(4), WHICH W AS AMENDED BY THE FINANCE ACT, 2002 AND APPLICABLE W.E.F. 1.4.2002 I. E. ASSESSMENT YEAR 2002-03 READS AS UNDER: DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUST RIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT, ETC . 80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FRO M ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFER RED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT T O THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFI TS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. . . . (4) THIS SECTION APPLIES TO - (1) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVE LOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWI NG CONDITIONS, NAMELY:- (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR B Y A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPORA TION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRA L GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTO RY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE IST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRED O N OR AFTER THE IST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEROR ENTERPRISES) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREE MENT WITH THE CENTRAL GOVERNMENT. STATE GOVERNMENT, LOCAL AUTHORITY OR STA TUTORY 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 DED UCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD H AVE BEEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. 59 EXPLANATION:- FOR THE PURPOSES OF THIS CLAUSE, 'INFRASTR UCTURE' MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYSTEM (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACT IVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT. (C) A WATER SUPPLY PROJECT, TREATMENT SYSTEM, IRRIGAT ION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY, INLAND PORT O R NAVIGATIONAL CHANNEL IN THE SEA.' FOLLOWING EXPLANATION WAS SUBSTITUTED BY THE FINANCE ( NO.2) ACT, 2009, W.E.F. 1-4-2000. [EXPLANATION.-FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y 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 CONTR ACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) A ND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION ( 1).] PRIOR TO ITS SUBSTITUTION, EXPLANATION, AS INSERTED BY T HE FINANCE ACT, 2007, W.R.E.F. 1-4-2000, READ AS UNDER: EXPLANATION.-FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO E XECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTER PRISE, AS THE CASE MAY BE. 93. AS PER THE AMENDED LAW W.E.F. ASSESSMENT YEAR 2002-0 3, DEVELOPMENT OF INFRASTRUCTURE FACILITY IS SUFFICIENT FOR CLAIM OF DE DUCTION U/S 80IA(4). IN THE INSTANT CASE CONDITIONS STIPULATED IN SUB CLAUSE (A) OF SU B-SECTION (4)(I) WITH REGARD TO THE ENTERPRISE BEING OWNED BY THE COMPANY REGISTERED IN INDIA IS DULY FULFILLED. THE CONDITION STIPULATED IN SUB-CLAUSE (B) REQUIRING THAT THE ASSESSEE COMPANY TO ENTER INTO AGREEMENT WITH THE CENTR AL OR STATE GOVERNMENT FOR DEVELOPMENT OF NEW INFRASTRUCTURE FAC ILITY IS ALSO FULFILLED. THE CONDITION STIPULATED UNDER SUB-CLAUSE (C), WHICH R EQUIRED THAT THE ASSESSEE HAS STARTED OPERATING AND MAINTAINING INFRASTRUCT URE FACILITY ON OR AFTER 1ST DAY OF APRIL, 1995, DOES NOT APPEAR TO BE F ULFILLED. HOWEVER, THE PROVISION OF CLAUSE (C) WOULD APPLY ONLY TO SUCH ENTER PRISES ENGAGED IN MAINTAINING AND OPERATING THE INFRASTRUCTURE AS HELD IN THE CASE OF CIT V. ABG HEAVY INDUSTRIES LTD. [2010] 322 ITR 323 (BOM.) WHERE IN THE HONBLE HIGH COURT OBSERVED THAT THE REQUIREMENT THAT THE OPERATI ON AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY CAME AFTER FIRST OF APRIL , 1995 HAS TO BE HARMONIOUSLY CONSIDERED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO THE ASSESSEE WHICH DEVELOPS OR OPERATES, MAI NTAINS AND DEVELOPS OR OPERATES AND MAINTAINS INFRASTRUCTURE FACILITY. CLA USE (C) IS RELEVANT FOR ANY ENTERPRISE WHICH COMMENCES ITS OPERATION ON OR BEF ORE 01-04-1995 AND CONTINUES TO DO THE SAID ACTIVITY FOR THE ASSESSMENT YEAR S 1996-97AND IS ELIGIBLE FOR DEDUCTION UNDER THE ERSTWHILE SUB-SECTION (4A)AND WILL CONTINUE TO BE ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (4). SUB SECTION (4A) WAS REMOVED WITH EFFECT FROM THE ASSESSMENT YEAR 2000-01 BY THE FINANCE ACT, 1999 AND SIMULTANEOUSLY A NEW SUB SECTION (4) WAS INTROD UCED WHICH EXTENDED DEDUCTION TO SUCH ENTERPRISES WHICH DEVELOP I NFRASTRUCTURE OR WHICH MAINTAIN AND OPERATE INFRASTRUCTURE FACILITY O R WHICH DEVELOPS, MAINTAINS AND OPERATES AN INFRASTRUCTURE FACILITY. AFT ER AMENDMENT BY THE FINANCE ACT, 2001 FOR CLAIM OF DEDUCTION U/S 80IA(4) INFRASTRUCTURE FACILITY IS ONLY REQUIRED TO BE DEVELOPED AND THERE IS NO CONDIT ION THAT ASSESSEE SHOULD ALSO OPERATE THE SAME. THUS, AFTER AMENDMENT, WHEN THE ASSESSEE IS NOT 60 REQUIRED TO OPERATE THE FACILITY AND WHEN ASSESSEE UNDE RTAKES TO DEVELOP THE INFRASTRUCTURE FACILITY, THE PAYMENT FOR DEVELOPMENT OF SUCH INFRASTRUCTURE IS REQUIRED TO BE MADE BY THE GOVERNMENT ONLY. AFTER A MENDMENT, ONLY, IT IS THE GOVERNMENT WHO WILL MAKE PAYMENT TO ASSESSEE IN RESPECT OF INFRASTRUCTURE FACILITY DEVELOPED BY IT IN TERMS OF AGREEMENT SO ENT ERED WITH GOVERNMENT. THUS, THERE DOES NOT APPEAR TO BE ANY INFRINGEMENT O F CONDITIONS FOR CLAIM OF DEDUCTION U/S 80IA(4) WHEN THE GOVERNMENT HAS MADE P AYMENT TO THE ASSESSEE IN RESPECT OF THE PROJECT OF INFRASTRUCTURE DEVE LOPMENT UNDERTAKEN BY IT IN TERMS OF RESPECTIVE AGREEMENT ENTERED INTO W ITH GOVERNMENT. 94. TODAY, THE CONTROVERSY REVOLVES AROUND THE MEANIN G OF THE TERM 'DEVELOPER' WITH REFERENCE TO A PERSON ENGAGED IN IN FRASTRUCTURE DEVELOPMENT VIS-A-VIS THE TERM 'CONTRACTOR'. THE EXP LANATION WHICH WAS INSERTED BY THE FINANCE ACT, 2007, W.R.E.F. 1-4-2000 BELOW SUB-SECTION 13 OF SECTION 80IA AND SUBSEQUENTLY SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2009, W.R.E.F. 1-4-2000 CLARIFIES THAT DEDUCTION UNDER SECT ION 80IA(4) WILL NOT BE AVAILABLE TO A WORKS CONTRACTOR. THE RATIONALE BEHIN D INSERTION OF THE EXPLANATION WAS EXPLAINED IN CIRCULAR NO. 3/2008 DAT ED 12-03-2008 AS- 34. CLARIFICATION REGARDING DEVELOPER WITH REFERENC E TO INFRASTRUCTURE FACILITY, INDUSTRIAL PARK, ETC. FOR THE PURPOSES OF SECTION 80-IA 34.1 SECTION 80-IA PROVIDES FOR A TEN-YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED M DEVELOPMENT OR OPERATION AND MAINTENANCE OR DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRASTRUC TURE FACILITIES, PROVIDING TELECOMMUNICATION SERVICE, GENERATION OR GENERATION AND DISTRIBUTION OF POWER OR DEVELOPMENT OF AN INDUSTRIAL PARKS OR A SPECIAL EC ONOMIC ZONES. 34.2 THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT IN DUSTRIAL MODERNIZATION REQUIRES A MASSIVE EXPANSION OF, AND QUAL ITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPOR TS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY . THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVA TE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTUR E SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT. THE INCENTIVE HAS ALL ALONG BEEN INTENDED TO BENEFIT DEVELOPERS WHO UNDERTAKE ENTREPRENEURIAL AND INVESTMENT RISK AND NOT CONTRACTORS WHO ONLY UNDERTAKE BUSINESS RISK. 34.3 ACCORDINGLY, IT HAS BEEN CLARIFIED BY INSERTING AN EX PLANATION THAT THE PROVISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTER PRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVEST MENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE C IVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80-IA . IN CONTRAST TO THIS, A PERSON, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (INCL UDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-I A) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA. 34.4 APPLICABILITY - THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM APRIL 1, 2000 AND WILL, ACCORDINGLY, APPLY IN RELAT ION TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT ASSESSMENT YEARS. 95. WHILE THE CONTRACTORS WHO EXECUTE COMPLICATED AN D LARGE INFRASTRUCTURE PROJECTS ON BEHALF OF VARIOUS STATE AND CENTRAL GOVER NMENTS UNANIMOUSLY CLAIM TO BE A DEVELOPER ENTITLED TO DEDUCTION UNDER SECTION 80IA(4), THE DEPARTMENT HAS BEEN CONSISTENT IN ITS STAND THAT A CONTR ACTOR IS NOT A 61 DEVELOPER AND HENCE IS NOT ENTITLED TO CLAIM DEDUCT ION UNDER SECTION 80IA(4). THE MATTER IS CONTENTIOUS AND IS THE SUBJECT OF VARIOUS DECISIONS BY HIGHER AUTHORITIES. 96. THE ITAT, PUNE BENCH 'A' VIDE ORDER DATED 8-6-2011 IN THE CASE OF LAXMI CIVIL ENGG. (P.) LTD. V. ADDL. CIT [ITA NO. 766 (PN ) OF 2009] HAS HELD THAT THE ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION EVEN IF THE PERSO N IS A CONTRACTOR IF ALL THE CONDITIONS MENTIONED IN SECTION 80IA(4) ARE FULF ILLED. IN THIS CASE THE HON 'BLE JURISDICTIONAL TRIBUNAL RECOGNISED THAT THE CONT ENTIOUS ISSUES BEFORE THEM WERE (I) WHETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPE R WITHIN THE MEANING OF SECTION 80IA(4)(I) OF THE ACT; AND (II) WHETHER THE CONDITION PLACED IN CLAUSE (C) IS APPLICA BLE TO THE CASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTAINING THE INFRASTRUCTURAL FACILITIES. IN THE OPINION OF THE HON 'BLE TRIBUNAL, THE ANSWER TO THESE QUESTION WERE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT I N THE CASE OF ABG HEAVY ENGG. LTD (SUPRA). IT WAS HELD- 6. THE ABOVE JUDGMENT OF THE HON'BLE HIGH COURT IS D ELIVERED IN THE CASE OF ABG HEAVY ENGG. LTD (SUPRA), WHO IS A CONTRACTOR FOR THE JNP TRUST AND THAT CONTACTOR, ASSESSEE IS FOUND TO BE AN ELIGIBLE DEVELOPE R FOR MAKING CLAIM OF DEDUCTION U/S. SECTION 80IA(4) OF THE ACT. FROM THE A BOVE, IT IS EVIDENT THAT THE PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE DO NOT HAV E THE OCCASION TO OPERATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURTHE R EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUDGMENT IN THE CASE OF AN ENTERPRISE CARRYING ON BUSI NESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERRED TO CLAUSE (I) OF SECTION 80IA(4) SHOULD REFER TO THE CONDITIONS AS APPLICABLE T O THE DEVELOPER. IN OTHER WORDS, THE DEVELOPER WHO IS ONLY DEVELOPING THE INFRA STRUCTURE FACILITIES SINCE HE DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FACI LITIES, CANNOT BE EXPECTED TO FULFIL THE CONDITION AT SUB CLAUSE (C) WHICH IS AN IMPOSSIBILITY AND THE REQUIREMENTS TO FULFIL THE SAID CONDITION SHALL AMOUN T TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREM ENT OF HARMONIOUS READING OF SUB-CLAUSE (C) VIS-A-VIS OF CLAUSE (I) OF SECTION 80I A(4) OF THE ACT. THUS, THE DISCUSSION IN HIGH COURT'S DECISION IN PARAGRAPH-22 EXTR ACTED ABOVE, IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE AND EVENTUALLY I S ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. ACCORDINGLY, THE M ODIFIED GROUND, WHICH IS COMMON IN ALL THE FOUR APPEALS IS ALLOWED IN FAVOUR O F THE ASSESSEE. 97. SIMILARLY, THE ITAT, PUNE BENCH 'A' VIDE ORDER DATED 27-09-2011 IN THE CASE OF PRATIBHA CONSTRUCTIONS AND ENGINEERS LTD. V. AC IT [ITA NO. 118/PN/08 (AY 2003-04), ITA NO. 119/PN/08 (A Y 2004-05), ITA NO.932/PN/08 (AY 2005-06) AND ITA NO. 278/PN/10 (AY 2006-07)] HAS HEL D THAT THE ISSUE RAISED BY THE REVENUE THAT THE ASSESSEE HAS ACTED ONLY AS A CONT RACTOR WHO HAS BEEN AWARDED WORK BY A GOVERNMENT AGENCY AND, THEREFORE, CANNOT BE SEEN AS CARRYING ON THE BUSINESS OF 'DEVELOPMENT' AS ENVISAGED U NDER SECTION 80IA(4) OF THE ACT HAS BEEN SQUARELY ADDRESSED BY THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. ABG HEAVY ENGINEERING LTD. [201 O J 322 ITR 323 (BORN.). THUS AN ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION EVEN IF T HE PERSON IS A DEVELOPER WHO ONLY DEVELOPS (I.E. CONSTRUCTS) AN INFR ASTRUCTURE FACILITY AS HE IS NOT ENVISAGED TO MAINTAIN AND OPERATE SUCH FACILITY. 98. THE ITAT, MUMBAI 'F'-BENCH IN THE CASE OF PATEL ENGG. LTD. V. DY. CIT [2005J 94 ITD 411 (MUM.) HAS HELD THAT THE TERM 'CON TRACTOR' IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM 'DEVELOPER'. IT WAS HELD THAT A PERSON WHO HAS UNDERTAKEN THE CONTRACT FOR DEVELOPMENT IS NO T ONLY A CONTRACTOR BUT 62 IS ALSO A 'DEVELOPER' ELIGIBLE DEDUCTION UNDER SECTIO N 80IA(4) OF THE ACT. IT WAS FURTHER HELD THAT THE TERM 'CONTRACTOR' IS NOT NECESSA RILY CONTRADICTORY TO THE TERM 'DEVELOPER'. ON THE OTHER HAND, RATHER SECTION 80IA(4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONT RACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A 'DEVELOPER'. THE ASSESSEE H AS DEVELOPED INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH MAH ARASHTRA GOVERNMENT/ APSEB, THEREFORE, MERELY BECAUSE IN THE AGREEMENT FO R DEVELOPMENT OF INFRASTRUCTURE FACILITY THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS ARE LAID DOWN, IT DOES NOT DET RACT THE ASSESSEE FROM THE POSITION OF BEING A 'DEVELOPER'; NOR WILL IT DEB AR THE ASSESSEE FROM CLAIMING DEDUCTION U/S 80IA(4). 99. THE MUMBAI BENCH OF THE ITAT IN THE CASE OF ASSTT. CIT V. BHARAT UDYOG LTD. [2009] 118 ITD 336 HAS HELD THAT AN ASSESSEE ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE BUT NOT IN MAINTAINING AND OPERATING THE SAME WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) THOUGH HE IS DESCR IBED AS A CONTRACTOR AND WAS PAID BY THE GOVERNMENT. 100. IT IS HELD IN THE CASE OF METAL INFRA PROJECTS LT D. V. CIT [2009] 26 DTR 359 (JP) (TRIB.) THAT SIMPLY BECAUSE THE AGREEMENT MENTIO NED THE ASSESSEE AS CONTRACTOR, HE WOULD NOT CEASE TO BE THE DEVELOPER. 101. THE EFFECT OF EXPLANATION INTRODUCED BY THE FI NANCE ACT, 2007 WHEREBY ANY ASSESSEE WHO ENTERED INTO A CONTRACT WITH THE ENTER PRISE MENTIONED IN SUB-SECTION (4) WOULD NOT BE ELIGIBLE FOR DEDUCTION AND ITS SUBSEQUENT SUBSTITUTION WITH RETROSPECTIVE EFFECT FROM 01-04-2000 BY THE FINANCE ACT, 2009 WHICH ADDED THAT THOSE ENTERPRISES UNDERTAKING W ORKS CONTRACTS BY ENTERING INTO AGREEMENTS WITH THE ENTERPRISES OR WITH THE GOVERNMENT OR GOVERNMENT ORGANIZATIONS WOULD NOT BE ELIGIBLE FOR D EDUCTION HAS BEEN CONSIDERED BY THE HON BLE ITAT, HYDERABAD BENCH 'A' IN THE CASE OF KMC CONSTRUCTIONS LTD. V. ACIT, CIRCLE-2(2) [2012] 21 TAX MANN.COM 138 (HYD.). IN THIS CASE JUDICIAL NOTE WAS ALSO TAKEN OF THE DECISIONS I N LAXMI CIVIL ENGG. (P.) LTD. V. ADDL. CIT (ITA NO. 766 (PN) OF 2009J, B. T. PATIL & SONS BELGAUM CONSTRUCTION (P.) LTD. V. ASST. CIT [2010] 35 SOT 171 (MUM.) (LB), AND ANOTHER DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN HUME PIPE CO. LTD., V. DY.CIT IN ITA NO. 5172/MUM/2008, DATED 29-7-2011 FOR ASSESSMENT YEAR2004-05. THE EFFECT OF THE AMENDMENT BRO UGHT ABOUT BY THE FINANCE ACTS 2007 AND 2009 WAS EXPLAINED IN THE FOLLO WING MANNER- WHETHER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRACTOR I S 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 AGRE EMENT 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 AND THE GOVERNMENT. WE FIN D THAT THE GOVERNMENT/GOVERNMENT BODY HANDED OVER THE POSSESSION O F THE PREMISES OR THE EXISTING ROAD TO THE ASSESSEE TILL THE DEVELOPMENT O F INFRASTRUCTURE FACILITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ANY ACT TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. IF THE EXISTING ROAD IS TO BE DEVELOPED INTO A FOUR LANE ROAD, THE FIRST PHASE IS TO TAKE OVER THE EX ISTING AND DEVELOPED ROAD. SECONDLY, THE ASSESSEE HAS TO ARRANGE FOR THE TRAFFIC AN D SHALL FACILITATE THE PEOPLE TO USE THE FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE TH E RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACI LITY. 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 63 BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC W ITHOUT ANY HINDRANCE, THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT IN VOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR N OT. 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 ASSE SSEE. 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. TH E GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WO RKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXP ERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTR UCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PR OCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLET ION OF THE DEVELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 48 MONTHS. DURIN G THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL H AVE 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 DEV ELOPED 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 SE CTION 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. IT WAS FINALLY HELD- THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRA CTS INVOLVE DEVELOPMENT/CONSTRUCTION, OPERATING/MAINTENANCE, FIN ANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD, THEN SUCH CO NTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT. IN OUR OPINION THE CONTRACTS WH ICH CONTAIN ABOVE FEATURES ARE TO BE SEGREGATED AND ON THESE CONTRACTS DE DUCTION U/S. 80-IA HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE IN THE NATURE OF PURE WORKS CONTRACTS HIT BY THE EXPLANATION TO SECTION 80IA(13), THOSE WORKS ARE NOT ENTITLED FOR DEDUCTION U/ S 80IA OF THE ACT. TO THE SAME EFFECT IS THE DECISION OF BENCH 'A' OF THE ITAT HYDERABAD IN THE CASE OF KOYA & CO. CONSTRUCTION (P.) LTD. V. ACIT, CI R. - 2(1), HYDERABAD [2012] 51 SOT 203 (HYD), BENCH 'B' OF THE ITAT HYDERABAD I N GVPR ENGINEERS LTD. V. ACIT, CIRCLE - 2(3), HYDERABAD [2012] 21 TAXMANN.CO M 35 (HYD.). 102. THE ISSUE AVAILABILITY OF DEDUCTION UNDER SECTION 80IA(4) TO A 'DEVELOPER' VIS A VIS A 'WORKS CONTRACTOR' WAS DISCUSSED IN THE CASE O F CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD., IN ITA NO. 1179/MDS/08 WH O VIDE ORDER DATED 26TH FEBRUARY, 2010, SUBSEQUENTLY FOLLOWED FOR ASSESSMEN T YEARS 2007-2008 & 2008-09 IN ITA NOS. 1312 & 1313/MDS/2011 VIDE ORDER DATED 18-11-2011, HAS TAKEN THE SAME VIEW BY INTER ALIA HOLDING AS FOLLO WS: 7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLANATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE MODERNISATION REQUIRE S A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURES LIKE E XPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MEREL Y EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORK CONTRACT HAS BEEN ENCOURAGED BY GIVING TAX BENEFITS. THUS THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SECTION BUT WHERE A PERSON MAKES TH E INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES OUT THE CIVIL CONSTRUCTION 64 WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA. 103. THE ITAT CHENNAI HAS ARRIVED AT IDENTICAL CONCL USION IN THE CASE OF EAST COAST CONSTRUCTIONS & INDUSTRIES LTD V. DCIT IN ITA NO. 554/ MDS/201 0 DATED 13-09-2011. IT WAS HELD- WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FAC ILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN A SSESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSO N, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMEN T, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACIL ITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVE LOP 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 SECTIO N 80IA(4), WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVEL OPMENT 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 DEVEL OPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION, IT PRESUPPO SES THAT THERE CAN BE INCOME TO DEVELOPER I.E. TO THE PERSON WHO IS CARRYI NG ON THE ACTIVITY OF ONLY DEVELOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEV ELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF INF RASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/ AUTHORI ZATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE FR OM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING T HE RETURN, THE ASSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) OF THE ACT. 104. THE JAIPUR BENCH 'A' OF THE ITAT HAS VIDE ORDER DATED 05-08-2011 ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) TO THE ASESSEE IN THE CASE OF OM METALS INFRAPROJECTS LTD. V. ADDL. CIT, RANGE 2, JAI PUR IN ITA NO. 911/JP/2010 FOR THE ASSESSMENT YEAR 2007-0B. IN THIS CASE THE ASSESSEE WA S PROVIDED WITH A WORKS CONTRACT BY THE GOVERNMENT OF MAHARASHTRA IN G HOSIKHURD PROJECT. THE CONTRACT ENVISAGED DESIGNING, FABRICATION, ERECTION A ND COMMISSIONING OF GATES OF AN EARTHEN DAM AND TRANSPORTATION AND SUPPLY OF TH E RAW MATERIAL AND MECHANICAL EQUIPMENT AND PARTS OF THE GATE, WHICH WO ULD PROVIDE DRINKING WATER AND IRRIGATION FACILITIES TO CERTAIN PARTS IN M AHARASHTRA STATE. THE ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 80IA(4) TO THE ASSESSEE IN VIEW OF THE INSERTION OF EXPLANATION BY THE FINANCE ACT, 2007 AND ITS SUBSEQUENT SUBSTITUTION BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01-04-2000. THE CIT(APPEAL) UPHELD THE ORDER O F THE ASSESSING OFFICER. IN APPEAL THE HON 'BLE TRIBUNAL HELD- IN VIEW OF ALL THESE FACTS AND CIRCUMSTANCES AND IN VIE W OF VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS A DEVELOPER AND ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) EVEN AFTER EXPLANATION ADDED IN SECTION 80IA(4) BY FINANC E ACT, 2007 AND AMENDED BY FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. ACCORDINGLY WE ALLOW THIS GROUND OF THE ASSESSEE AND DIRECT THE DEPARTM ENT TO ALLOW THE DEDUCTION CLAIMED UNDER SECTION 80IA(4) TO THE ASSESSEE. 105. THERE IS A CONTRA DECISION IN CASE OF INDIAN HUME PIPE CO. LTD., V.DY. CIT IN ITA NO. 5172/MUM/2008, DATED 29-7-2011 FOR ASSESSMEN T YEAR 2004-05 PRONOUNCED AFTER THE PUNE BENCH DECISION IN THE CASE OF LAXMI CIVIL ENGG. (P.) LTD. (SUPRA)WHICH CONSIDERS THE TRIBUNAL DECISION OF B. T. PATIL & SONS BELGAUM CONSTRUCTION (P.) LTD. V. ASST. CIT [2010] 35 SOT 171 (MUM.) AS WELL AS THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE O F ABG HEAVY INDUSTRIES 65 (SUPRA) AND GOES ON TO HOLD THAT THE ASSESSEE IS NOT ENTIT LED TO THE DEDUCTION UNDER SECTION 80IA(4) IN VIEW OF THE EXPLANATION INT RODUCED WITH RETROSPECTIVE EFFECT. 106. FINALLY THERE IS THE DECISION OF THE JURISDICTION AL TRIBUNAL IN APPELLANT'S OWN CASE WHERE THE EFFECT OF INSERTION OF EXPLANATION WITH RETROSPECTIVE EFFECT FROM 01-04-2000 BY THE FINANCE ACT, 2009 WAS TAKEN C OGNIZANCE OF WHILE HOLDING THAT THE APPELLANT IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4). THE ISSUE OF APPLICATION OF THE AMENDED PROVISIONS OF THE E XPLANATION BELOW SECTION 80IA BY THE FINANCE (F.NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01/04/2000 WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE HONOURABLE ITAT IN APPELLANT'S OWN CASE IN ITA NO. 433/PN/2007. IT WAS TH US CONTENDED ON BEHALF OF THE DEPARTMENT THAT IN VIEW OF THE SUBSTI TUTED EXPLANATION, NOTHING CONTAINED IN SECTION 80IA WILL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF WORKS CONTRAC T AWARDED BY ANY PERSON (INCLUDING CENTRAL OR STATE GOVERNMENT) AND E XCLUDED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION ( 1). THUS, THE ARGUMENT OF THE DEPARTMENT WAS THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT BROUGHT ABOUT IN THE EXPLANATION BELOW SECTION 80IA, THE APP ELLANT WOULD NOT BE ENTITLED TO CLAIM A DEDUCTION UNDER SECTION 80IA(4). THE HONOURABLE TRIBUNAL WAS PLEASED TO DEAL WITH THE ISSUE IN THE FOLLOWING MAN NER: 7. WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COUR T IN THE APPEAL PREFERRED BY THE ASSESSEE HAS BEEN PLEASED TO RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION ON THE ISSUE IN ACCORDANCE WITH LAW. ON EARLIER OCCASION THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE REVEN UE BY RELYING UPON THE DECISION OF THIRD MEMBER BENCH OF THE TRIBUNAL IN TH E CASE OF B.T. PATIL & SONS BELGAM CONSTRUCTION (P) LTD VS. ACIT 126 ITJ (MUM)(TM ) 577. THE HON'BLE HIGH COURT HAS OBSERVED THAT IT IS NOT IN DISPUTE THAT THE SAID DECISION OF THE TRIBUNAL IN THE CASE OF B.T. PATIL & SONS (SUPRA) HAS B EEN RECALLED BY THE TRIBUNAL BY ORDER DATED 18.2.2011 AS EVIDENT FROM TH E ORDER PASSED BY THE TRIBUNAL IN ITA NO.766/PN/2009 DATED 8.6.2011. THE HON'BLE HIGH COURT HAS ACCORDINGLY QUASHED AND SET ASIDE THE IMPUGNED ORDER O F THE TRIBUNAL DATED 24.2.2010 PASSED IN ITA NO.433/PU/2003 RELATING TO AY 2003-04, AND HAS RESTORED THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION. 8. HAVING GONE THROUGH THE CITED DECISIONS BY THE LE ARNED AR WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUPRA). RELEVANT PARA NOS. 22 & 23 OF THE SAID DECISION OF THE HON'BLE HIGH COURT IS BEING REPRODUCED HERE UNDER FOR A READY REFERENCE. 22. ANOTHER SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT UNDER CL. (III) OF SUB-SEC. (4A) OF SEC. 80-IA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINI NG THE INFRASTRUCTURE FACILITY ON OR AFTER IST APRIL, 1995. THE SAME REQUIR EMENT IS EMBODIES IN SUB-D. (C) OF SUB-SEC. (4) OF THE AMENDED PROVISIONS OF SEC. 80 IA. ON THIS BASIS, IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAIN TAINING THE FACILITY, HE DID NOT FULFIL THE CONDITION. THIS SUBMISSION IS FALLACI OUS BOTH IN FACT AND IN LAW. AS A MATTER OF FACT, THE TRIBUNAL HAS ENTERED A FINDI NG THAT THE ASSESSEE WAS OPERATING THE FACILITY AND THIS FINDING HAS BEEN CONF IRMED EARLIER IN THIS JUDGMENT. THAT THE ASSESSEE WAS MAINTAINING THE FACILIT Y IS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER LST APRIL, 1995. THEREFO RE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN O PERATIONAL AFTER 1 ST APRIL, 1995. AFTER SEC. 80-IA WAS AMENDED BY THE FINANCE ACT OF 2001, THE SECTION APPLIED TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I ) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPE RATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS CERTAIN CONDITI ONS. THOSE CONDITIONS ARE: (I) 66 OWNERSHIP OF THE ENTERPRISE BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM; (II) AN AGREEMENT WITH THE CENTRAL OR ST ATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (III) THE START OF O PERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY ON OR AFTER IST APRIL, 19 95. THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACI LITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH TH E MAIN PROVISION UNDER WHICH A DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OPERATES AND MAINTAINS AN I NFRASTRUCTURE FACILITY. UNLESS BOTH THE PROVISIONS ARE HARMONIOUSLY CONSTRUED, TH E OBJECT AND INTENT UNDERLYING THE AMENDMENT OF THE PROVISION BY THE FIN ANCE ACT OF 2001 WOULD BE DEFEATED. A HARMONIOUS READING OF THE PROVISION IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS; OR (II) OPERATES AND MAINTAINS; OR (III) DEV ELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY SHOULD BE AFTER IST APRIL, 1995. IN THE PRESENT CASE, THE ASSESSEE CLEARLY FULFILLED THIS CONDITI ON. 23. IN VIEW OF WHICH WE HAVE TAKEN, ALL THE ASSESSMENT YEARS IN QUESTION TO WHICH THIS BATCH OF APPEALS RELATES WOULD BE GOVERNED BY THE SAME PRINCIPLE. THE SUBSEQUENT AMENDMENT OF SEC. 80-IA(4A) OF THE ACT TO CLARIFY THAT THE PROVISION WOULD APPLY TO AN ENTERPRISE ENGAGED IN (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPE RATING AND MAINTAINING AN INFRASTRUCTURE FACILITY WAS REFLECTIVE OF A POSITION W HICH WAS ALWAYS CONSTRUED TO HOLD THE FIELD. BEFORE THE AMENDMENT THAT WAS BRO UGHT ABOUT BY PARLIAMENT BY FINANCE ACT OF 2001, WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. TH E AMENDMENT MADE BY PARLIAMENT TO SEC. 80-IA(4) OF THE ACT SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPM ENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE CUMULATIVE IN N ATURE. 9. WE FIND FROM THE DECISION OF HON'BLE BOMBAY HIGH COURT IN AFORESAID CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUPRA) THAT EVEN IN THE CASE BEFORE THE HON'BLE HIGH COURT, THE ASSESSEE ACTED AS A CONTRACTOR F OR GOVERNMENT AGENCY, WAS HELD ELIGIBLE FOR THE PURPOSES OF CLAIM OF DEDUCTI ON U/S 80-IA(4) OF THE INCOME TAX ACT. AS PER THE SAID DECISION OF THE HON ' BLE HIGH COURT ASSESSEE WHO ONLY DEVELOPS INFRASTRUCTURAL FACILITY (EVEN AS A CONTRACTOR) BUT DOES NOT HAVE AN OCCASION TO OPERATE AND MAINTAIN IS ALSO ELIG IBLE FOR CLAIM OF DEDUCTION U/S 80-IA(4) OF THE ACT. THE HON 'BLE HIGH COURT HAS BEEN PLEASED TO OBSERVE THAT QUA SUCH PERSON THE CONDITION STATED IN SUB-SECTION (C) OF SEC. 80-IA(4)(I) HAS TO BE READ HARMONIOUSLY WITH THE MAIN PROVISION UN DER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE, WHO DEVELOPS; OR OPERATES AND M AINTAIN; OR DEVELOPS, MAINTAINS AND OPERATES AN INFRASTRUCTURAL FACILITY. I N OTHER WORDS A DEVELOPER WHO ONLY DEVELOPS (I.E., CONSTRUCTS) AN INFRASTRUCTURAL FACILITY IS NOT ENVISAGED TO OPERATE AND MAINTAIN SUCH FACILITY, CANNOT BE ACC EPTED TO FULFIL THE CONDITION IN CLAUSE (C) OF SECTION 80-IA(4) SINCE IT WOULD BE A N IMPOSSIBILITY. THEREFORE, IN VIEW OF THE CONSTRUCTION PLACED BY THE HON'BLE B OMBAY HIGH COURT ON THE REQUIREMENTS OF CLAUSE (C) OF SEC. 80-IA(4)(I) REQUIRING IT TO BE HARMONIOUSLY READ WITH THE MAIN SEC. 80-IA(4), WE D O NOT FIND SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE BOMBAY HIGH COURT ON THE ISSUE IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUPRA) DECIDE THE MATTE R IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION IN QUESTION U/S 80-IA(4). THE ISSUE IS THUS DECIDED IN FAVOU R OF THE ASSESSEE. THE RELATED GROUNDS ARE THUS ALLOWED WITH THIS DIRECTION T O THE AO TO ALLOW THE CLAIMED DEDUCTION TO THE ASSESSEE. (EMPHASIS SUPPLIED) 107. IT APPEARS THAT HON'BLE BENCHES OF ITAT AT HYDER ABAD, CHENNAI, JAIPUR AND PUNE ARE UNANIMOUS IN THEIR DECISIONS THAT IN EXECUTIO N OF EVERY DEVELOPMENT WORK THE 'DEVELOPER' WILL DEFINITELY BE A 'WORKS CON TRACTOR' BUT EVERY 'WORKS CONTRACTOR' MAY NOT BE A 'DEVELOPER'. A 'DEVELOPER' IS A SPECIFIC KIND OF 'WORKS 67 CONTRACTOR' WHO IS ELIGIBLE FOR DEDUCTION U/S 80IA(4) IF HE DEVELOPS OR OPERATES AND MAINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. IN THE WORDS OF THE HON'BLE HYDERABAD ITAT IN KMC CO NSTRUCTIONS LTD. (SUPRA) 'THE TERM 'CONTRACTOR' IS NOT NECESSARILY CONTRADICTO RY TO THE TERM 'DEVELOPER'. ON THE OTHER HAND, RATHER SECTION 80IA(4) ITSELF PROV IDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEM ENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD I N NO WAY BE A BAR TO THE ONE BEING A 'DEVELOPER'.' IT IS FURTHER STATED THAT- SECTION 80IA(4)(I)(B) REQUIRES DEVELOPMENT OF INFRAST RUCTURE FACILITY AND TRANSFER THEREOF ... TO THE CONCERNED AUTHORITY AS RE QUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSION OF DEVELOPED INFRAST RUCTURE FACILITY/PROJECT IS THE TRANSFER OF THE INFRASTRUCTURE FACILITY / PROJE CT BY THE ASSESSEE TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FA CILITY/PROJECT BY THE DEVELOPER TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RECOUPMENT OF THE DEVELOPER'S COSTS WHETHER IT BE 'BT' OR 'BOT' OR 'BOOT '. IN 'BOT' AND 'BOOT' MODEL RECOUPMENT IS BY WAY OF COLLECTION OF TOLL OR TITHE OR REVENUE THERE FROM WHEREAS IN 'BT' IT IS BY WAY OF PERIODICAL PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOLVED IN INFRASTRU CTURE FACILITY/PROJECT ALWAYS BELONGS TO THE GOVERNMENT/LOCAL AUTHORITY ETC. , WHETHER IT BE THE CASE OF 'BOT' OR 'BOOT' AND IT IS HANDED OVER BY THE GOVE RNMENT/AUTHORITY TO THE DEVELOPER FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY /PROJECT. SO, DEDUCTION U/S. 80IA(4) IS ALSO AVAILABLE TO THIS ASSESSEE WHICH HAS UNDERT AKEN WORK OF A MERE 'DEVELOPER'. RATHER, THE STATUTORY PROVISION AS CONTA INED IN SECTION 80IA WHICH PROVIDES FOR DEDUCTION OF INFRASTRUCTURE FACILITY NO WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PROJECT HAS TO BE DEVELOPED B Y ONE ENTERPRISE. THUS, AS PER SECTION 80IA THE ASSESSEE SHOULD DEVELOP THE INFRASTRU CTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL/STATE GOVERNMENT/LOC AL AUTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, IN NO WAY BE A BAR TO THE ONE BEING A 'DEVELOPER'. 108. IT IS A FACT IN THIS CASE THAT ASSESSEE HAS DEVELOPED THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE STATE GOVERNM ENT. THE ASSESSEE HAS DEMONSTRATED THAT IT HAS UNDERTAKEN RISKS IN TERMS OF D EPLOYMENT OF TECHNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. DUE TO THE FACT THAT THE CONTRACTS FOR VARI OUS PROJECTS UNDERTAKEN BY THE APPELLANT INVOLVE DESIGN, DEVELOPMENT, AND CONSTR UCTION OF SHAFTS, TUNNELS, BARRAGES, CANALS, GATES, EARTHEN DAMS, LIFT IRRIGATION S SYSTEMS, ERECTION AND MAINTENANCE OF EOT CRANES, HYDRAULIC HOISTS; FINANCIAL INVOLVEMENT INCLUDING FURNISHING SECURITY DEPOSIT; AND DEFECT CORRECTION IN LIABILITY PERIOD, THEN AS HELD IN VARIOUS DECISIONS CITED ABOVE, THE CONTRACTS EN TERED INTO BY THE ASSESSEE CANNOT BE CALLED SIMPLE WORKS CONTRACT SO AS TO DE NY THE DEDUCTION AVAILABLE UNDER SECTION 80IA(4). THE APPELLANT HAS CL AIMED DEDUCTION UNDER SECTION 80IA(4) IN RESPECT OF VARIOUS PROJECTS UNDERTAK EN DUE TO A VALID CONTRACT ENTERED INTO WITH THE STATE GOVERNMENT. TH E ADDITIONAL CLAIM IS IN RESPECT OF INCREASED BUSINESS INCOME FOUND AS A RESULT OF SEARCH AND SEIZURE OPERATION AND LARGELY PERTAINS TO INCOME FROM GHODZ HARI PROJECT WHICH IS A PART OF THE LARGER GHOSIKHURD PROJECT, IN WHICH THE CONTRACT WAS FOR CONSTRUCTION OF SHAFTS AND TUNNELS WHICH IS AN INFRASTRU CTURE PROJECT OF IMMENSE COMPLEXITY IN EXECUTION AND OF HUGE MAGNITUD E. THE APPELLANT WAS, AS A JOINT VENTURE CONSTITUENT, REQUIRED TO BRING IN TH E FINANCE, TECHNICAL EXPERTISE AND MATERIAL AND ADHERE TO THE QUALITY REQUIREMENTS IRRESPECTIVE OF COST. IN COMPLETION OF THE PROJECT THE ASSESSEE UTILIZED ITS OWN FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TOOK RESPONSIBILITY OF DEVELOPING INFRAST RUCTURE FACILITY. THE INFRASTRUCTURE FACILITY IS STILL UNDER DEVELOPMENT. U NDER SUCH CIRCUMSTANCES, IT IS THE OVERWHELMING OPINION IN MAJORITY OF THE DECISI ONS OF VARIOUS BENCHES OF 68 THE HONOURABLE ITAT AND ESPECIALLY OF THE JURISDICTIO NAL TRIBUNAL IN THE CASE LAXMI CIVIL ENGG.(SUPRA), PRATIBHA CONSTRUCTIONS AND E NGINEERS LTD. (SUPRA) AND APPELLANTS OWN CASE (SUPRA), THAT THE DEVELOPER OF THE INFRASTRUCTURE FACILITY CANNOT BE DENIED THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80IA(4). I, RESPECTFULLY FOLLOWING THE DECISION OF THE JURIS DICTIONAL TRIBUNAL IN THE ABOVE CASES AND THE OTHER CITED DEC ISIONS, ALLOW THE CLAIM OF THE APPELLANT IN RESPECT OF CLAIMS OF DEDUCTION INCLUDING ADDITIONAL CLAIM OF DEDUCTION MADE UNDER SECTION 80IA(4) IN RE SPECT OF ALL THE YEARS IN THE MANNER INDICATED BELOW. THE FACT THAT THE ASSE SSEE HAS CARRIED OUT THE DEVELOPMENT OF INFRASTRUCTURE WORK IN CONSORTIUM OR J OINTLY WITH ANY OTHER AGENCY WOULD NOT MITIGATE AGAINST THE ASSESSEE IN ITS ENT ITLEMENT FOR DEDUCTION U/S.80IA(4). 109. THE DEDUCTION UNDER SECTION 80IA(4) CLAIMED AND ALLOWED ACCORDINGLY IS GIVEN BELOW: ASST. YEAR CLAIM AS PER RETURN ADDITIONAL CLAIM REMARKS 2004 - 05 RS.84,02,555/- PENDING WITH HIGH COURT - NOT ABATED 2005 - 06 RS. 1,46,85,364/ - - DO - 2006 - 07 RS.1,55,18,839/- PENDING WITH ITAT NOT ABATED 2007 - 08 RS. 7,88,92,588/ - RS. 21,93,856/ - CLAIMED AND ALLOWED 2008 - 09 RS. 24,03,21,259/ - RS. 67,33,791/ - - DO - 2009 - 10 RS.15,66,30,732/ - RS.8,31,99,954/ - - DO - 2010 - 11 RS.24,45,32,117/ - RS.15,27,87,220/ - - DO - IT SHOULD BE NOTED THAT THE CLAIM OF 80IA(4) DEDUCTI ON IN RESPECT OF INFRASTRUCTURE DEVELOPMENT IS MADE FOR VARIOUS YEARS IN CLUDING THOSE IN WHICH THE MATTER OF ALLOWABILITY OF DEDUCTION IS PENDING B EFORE THE ITAT OR THE HIGH COURT. SINCE THE ISSUE OF ALLOWABILITY OF DEDUCTION I N RESPECT OF THESE AMOUNTS IS NOT ABATED, THE CLAIM OF DEDUCTION UNDER SECTION 1 53A CANNOT BE ALLOWED AND WILL BE SUBJECT TO THE DECISION GIVEN BY THE HONO URABLE TRIBUNAL OR THE HIGH COURT AS THE CASE MAY BE. HOWEVER, IN RESPECT OF NEW CLAIM MADE BY THE APPELLANT INCLUDING ADDITIONAL CLAIM ON ACCOUNT OF DECLARATION OF UNEXPLAINED BUSINESS EXPANSES, AS HELD IN THE PRECEDING PARAGRAPHS, T HE DEDUCTION CLAIMED BY THE APPELLANT IS ALLOWED ON PRORATA BASIS I.E. PROP ORTIONATE DEDUCTION IS ALLOWED TO THE APPELLANT. 110. THE ADDITIONAL CLAIM UNDER SECTION 80IA4 WAS MAD E BY THE APPELLANT FOR ASSESSMENT YEARS 2007-08 TO 2010-11 IN RESPECT OF THE ADD ITIONAL BUSINESS INCOME OFFERED FOR TAX AS A RESULT OF SEARCH AND SEIZUR E. THE CLAIM WAS NOT MADE ALONG WITH THE RETURN FILED UNDER SECTION 153A. HOWEVER, THE SAME WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE IS NOTHING IN THE ASSESSMENT ORDER TO SHOW AS TO WHY THE CLAIM WAS REJECTED. IN ALL PROBABILITIES, THE CLAIM WAS REJECTED BECAUSE DEDUCTION WAS DISALLOWED TO THE APPELLANT IN RESPECT OF THE ORIGINAL CLAIM ITSELF. AS A MATTER OF P RINCIPLE, THE ADDITIONAL CLAIM IN RESPECT OF BUSINESS INCOME DECLARED DURING THE COUR SE OF SEARCH AND SEIZURE IS NOT INSULATED FROM THE PROVISIONS OF SECTION 80IA(4) AND AN ASSESSEE IS ENTITLED TO MAKE THE CLAIM AS LONG AS IT REMAINS THE B USINESS INCOME OF AN ASSESSEE WHO IS ENTITLED TO MAKE THE CLAIM UNDER THIS SECT ION. RECENTLY, THE HONOURABLE BOMBAY HIGH COURT IN THE CASE OF CIT(CEN TRAL)-II V/S SHETH DEVELOPERS PVT. LTD. IN ITA NO.3724 OF 2010 DATED 27 /07/2012 HAVE HELD IN THE CONTEXT OF ASSESSMENT OF UNDISCLOSED INCOME IN CHAPT ER XIV B OF THE INCOME-TAX ACT THAT WHERE THE TOTAL INCOME / LOSS FOR THE BLOCK PERIOD HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE SAI D ACT AND THE SAME 69 WOULD INCLUDE CHAPTER VIA OF THE SAID ACT WHILE COMP UTING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD THEN THE RESPONDENT ASSESSEE IS ENTITLED TO CLAIM DEDUCTION FROM ITS INCOME UNDER SECTION 80IB OF THE A CT. THE RATIO OF THIS DECISION APPLIES UNEQUIVOCALLY TO THE PROVISIONS OF SECT ION 153A. SIMILARLY, THE HONOURABLE GUJARAT HIGH COURT IN THE CASE OF SUMAN P APER AND BOARDS LTD. [2009] 314 ITR 119 HAS HELD THAT DEDUCTION UNDER SECT ION 80IA IS AVAILABLE IN RESPECT OF UNDISCLOSED INCOMES ALSO. SIMILARLY, IN THE C ASE OF MEDICOR LABORATORIES PUT. LTD. ITA NO. 402/ PN/ 2009, THE HO NOURABLE PUNE TRIBUNAL HAS UPHELD THE ALLOWABILITY OF DEDUCTION UNDER CHAPT ER VI A IN RESPECT OF ALL ADDITIONS TO THE INCOME MADE IN ASSESSMENT WHEN THERE WA S NO SPECIFIC FINDING THAT INCOME WAS REQUIRED TO BE TAXED UNDER A NY HEAD OTHER THAN 'BUSINESS INCOME'. HENCE, THE ADDITIONAL CLAIM IS ALLOW ED. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO CHECK THE COMPUTATION O F THE CLAIM AND THEN ALLOW THE SAME . 120. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 121. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OPPOS ED THE ORDER OF THE CIT(A). SHE SUBMITTED THAT THE ASSESSEE IS ONLY A W ORKS CONTRACTOR AND NOT A DEVELOPER AS PER EXPLANATION BELOW 80IA(13), THE REFORE, DEDUCTION U/S.80IA(4) AMOUNTING TO RS.7,88,92,588/- SHOULD N OT HAVE BEEN GRANTED BY THE CIT(A). 122. AS REGARDS THE ALLOWANCE OF DEDUCTION U/S.80IA(4) AMOU NTING TO RS.21,93,856/- OUT OF THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARCH PROCEEDINGS IS CONCERNED THE LD. DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE ADDITIONAL INCOME SO DECLARED IS ON ACC OUNT OF EXPENSES FROM UNEXPLAINED SOURCES WHICH ATTRACT PROVISIO NS OF SECTION 69C. THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUC TION U/S.80IA(4) ON SUCH ADDITIONAL INCOME. SHE ACCORDINGLY SUBM ITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE OR DER OF THE AO BE RESTORED. 123. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAN D STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED THAT A SSESSEE TAKES UP IRRIGATION PROJECTS WHICH ARE CONSIDERED AS INFRASTRUCTUR E FACILITIES U/S.80IA(4). THE EXPLANATION TO THE SECTION DEFINES INFRASTRU CTURAL FACILITIES. THE ASSESSSEE HAD CLAIMED THE RELIEF U/S.80IA(4) ON THE PROFITS 70 FROM THE INFRASTRUCTURE PROJECTS IN THE RETURN AMOUNTING TO RS.7,88,92,588/-. THE AO FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR AND HOLDING THAT THE ASSESSEE IS ONLY A CONTRACTOR AND IN VIEW OF EXPLANATION TO SECTION 80IA(4) IT IS NOT ENTITLED TO DEDUCTION U/S.80IA(4) REJECTED THE CLAIM. RELY ING ON VARIOUS DECISIONS FILED IN THE PAPER BOOK HE SUBMITTED THAT IN THE FOLLOWING DECISIONS THE TRIBUNAL HAS ALLOWED THE CLAIM OF DEDUCTION U/S .80IA(4) ON IRRIGATION CONTRACTS : 1. LAXMI CIVIL ENGINEERING PVT. LTD. ITA NO.766/PN/ 2009 2. PRATIBHA CONSTRUCTIONS & ENGINEERS LTD. ITA NO S.118, 119 & 932/PN/2008 AND ITA NO.278/PN/2010 3. B.T. PATIL & SONS BELGAUM CONSTRUCTIONS PVT. LTD. 35 CCH 238 124. HE SUBMITTED THAT THE ORDER FOR A.Y. 2003-04 IN ASSE SSEES OWN CASE, WHICH WAS CONFIRMED BY THE TRIBUNAL, WAS CHALLENGED BEFORE THE HONBLE BOMBAY HIGH COURT AND THE HONBLE HIGH COURT SET ASIDE THE ISSUE TO THE FILE OF THE TRIBUNAL. SUBSEQUENTLY, THE TRIBUNAL VIDE ORDER D ATED 06-02- 2012 IN ITA NO.433/PN/2007 FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. REPO RTED IN 322 ITR 323 HAS ALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4). SINCE THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 AND FURTHER SINCE THE LD.CIT(A) HAS ALSO RELIED ON VARIOUS DECISIO NS UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THEREFORE, THE CLAIM OF DED UCTION U/S.80IA(4) IS JUSTIFIED AND THE ORDER OF THE CIT(A) HAS TO BE UPHELD. 125. SO FAR AS THE ADDITION TO THE INCOME FROM INFRA PROJE CTS IS CONCERNED HE SUBMITTED THAT THE ASSESSEE ALSO MADE A CLAIM U/S.80 IA(4) ON THE ADDITIONS TO BE MADE TO THE BUSINESS INCOME, IF ANY, IN THE ASSESSMENT U/S.153A. REFERRING TO THE DECISION IN THE CASE OF B.G. S HIRKE CONSTRUCTIONS TECHNOLOGY PVT. LTD. VIDE ITA NO.727 TO 730 /PN/2012 ORDER DATED 31-10-2013, A COPY OF WHICH IS PLACED AT PAGES 106 TO 118 OF THE PAPER BOOK, HE SUBMITTED THAT THE TRIBUNAL HAS HELD THAT A FRESH CLA IM CAN 71 BE MADE IN THE ASSESSMENT U/S.153A WHICH HAS NOT ABATE D AND ACCORDINGLY THE ASSESSEE WAS JUSTIFIED IN MAKING THE CLAIM U/S.80IA(4) IN THE ASSESSMENT PROCEEDINGS U/S.153A. HE SUBMITTED THAT IT HAS ALREADY BEEN CLARIFIED THAT THE ASSESSEE HAD DEBITED BOGUS BILLS TO GENERATE CASH FOR MEETING VARIOUS EXPENSES AS PER THE SEIZED PAPERS. THIS WAS ADMITTED RIGHT FROM THE SEARCH AND IT IS ACCEPTED BY THE AO IN TH E ASSESSMENT. THE BOGUS BILLS DEBITED FOR GENERATING CASH ARE TO BE DISALLOWE D AND THUS THIS RESULTS IN INCREASE IN INCOME FROM BUSINESS OF THE ASSESSEE . THUS THE ADDITION IS MADE BY THE AO NOT U/S.69C AS WRONGLY STAT ED BY THE DEPARTMENT IN THE GROUNDS OF APPEAL. AS THE BUSINESS INC OME IS INCREASED IN THE ASSESSMENT THE DEDUCTION U/S.80IA(4) HAS TO BE INC REASED CORRESPONDINGLY. FOR THE ABOVE PROPOSITION THE LD. COUN SEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. REPORTED IN 330 ITR 175, THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. SHETH DEVELOPERS PVT. LTD. REPORTED IN 254 CTR 127 AND THE DE CISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MALPANI ESTATES VS. ACIT VIDE ITA NO.2296 TO 2298/PN/2012 ORDER DATED 30-01-2014 FOR A.Y . 2008-09 TO 2010-11. IN ALL THESE CASES THE QUESTION INVOLVED WAS R EGARDING DEDUCTION U/S.10A OR CHAPTER VIA AND IT WAS HELD THAT IF BECAUSE OF THE ADDITION MADE IN THE ASSESSMENT, THE INCOME GOES UP, THE DEDUCTIO N SHOULD BE GRANTED ON SUCH ENHANCED INCOME. ACCORDINGLY, THE CIT(A ) HAS RIGHTLY GRANTED THE DEDUCTION ON THE ENHANCED INCOME ALSO. 126. HE SUBMITTED THAT THE CIT(A) HAS ALLOWED THE CLAIM AS PER THE RETURN AND ALSO THE ADDITIONAL INCOME CLAIMED FOR ALL THESE YEARS BA SED ON THE ADDITION MADE ON ACCOUNT OF BOGUS VOUCHERS. HOWEVER, TH E FIGURES OF ADDITIONAL DEDUCTION CLAIMED FOR THESE YEARS ARE BASED ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. HE SUBMITTED THAT THE C IT(A) SUSTAINED THE ADDITIONS FOR THESE YEARS WHICH ARE DIFFERENT FROM THE FIGURES OF 72 ADDITIONAL INCOME OFFERED BY THE ASESSEE IN EACH OF THESE Y EARS. THUS, THE ADDITIONAL DEDUCTION U/S.80IA(4) HAS TO BE GIVEN IN EVERY Y EAR CONSIDERING THE ADDITIONS SUSTAINED BY THE CIT(A). HOWEVER, SINCE THER E IS A MISTAKE COMMITTED BY THE CIT(A) WHILE CALCULATING THE DEDUCTION HE S UBMITTED THAT A DIRECTION MAY BE GIVEN TO THE AO TO ALLOW THE CORRECT DEDUCTION WHICH WILL COVER THE ADDITIONAL GROUND. HE SUBMITTED THAT THE AS SESSEE HAS FILED A CHART DURING THE COURSE OF HEARING IN WHICH THE CORREC T CLAIM OF DEDUCTION U/S.80IA4) ON THE ADDITIONS MADE IN EACH OF THE YEARS IS GIVEN. HE SUBMITTED THAT THE SAID STATEMENT SHOWS TOTAL DEDUC TION ALLOWABLE U/S.80IA(4) ON REGULAR INCOME AND ADDITIONAL INCOME DECLARE D IN SEARCH. HE ACCORDINGLY SUBMITTED THAT WHILE THE ORDER OF THE CIT (A) ALLOWING THE CLAIM OF DEDUCTION U/S.80IA(4) IS CORRECT, HOWEVER, BECAUSE OF CALCULATION ERROR, THE AO MAY BE DIRECTED TO ALLOW THE CORRECT DEDUCTION. 127. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE, IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A, HAD CLAIMED DEDUCTION U/S.80IA(4) AMOUNTING TO RS.7,88,92,588/-. DURING THE COURSE OF ASSESSMENT PROCEED INGS APART FROM REITERATING THE DEDUCTION U/S.80IA(4) AS CLAIMED IN THE ORIGINAL RETURN THE ASSESSEE ALSO CLAIMED DEDUCTION U/S.80IA(4) IN R ESPECT OF ADDITIONAL INCOME SO DECLARED. WE FIND THE AO REJECTED THE CLAIM OF DEDUCTION U/S.80IA(4) ON THE GROUND THAT THE ASESSEE IS A CONTRACTOR AND IN VIEW OF EXPLANATION TO SECTION 80IA(4) THE ASSESSEE IS N OT ENTITLED TO DEDUCTION U/S.80IA(4), WE FIND THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY RELYING ON VARIOUS DECISIONS ON THE DEDUCTIO N CLAIMED U/S.80IA(4) IN THE RETURN AS WELL AS ON THE ADDITIONAL INCOME DECLARED. 73 128. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF DEDUCTION U/S.80IA(4) AS PER THE RETURN AS W ELL AS THE DEDUCTION ON THE ADDITIONAL INCOME. SO FAR AS THE CLAIM OF D EDUCTION U/S.80IA(4) CONSIDERING THE IRRIGATION PROJECT OF THE ASSESS EE AS AN INFRA PROJECT IS CONCERNED WE FIND THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 2003-04 VIDE ITA NO.433/PN/2007 ORDER DATED 06-02-2012. THE RELEVANT O BSERVATION OF THE TRIBUNAL FROM PARA 7 TO 9 READS AS UNDER : 7. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COU RT IN THE APPEAL PREFERRED BY THE ASSESSEE HAS BEEN PLEASED TO RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION ON THE ISSUE IN ACCORDA NCE WITH LAW. ON EARLIER OCCASION THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE BY RELYING UPON THE DECISION OF THIRD MEMBER BENCH OF THE TRIBU NAL IN THE CASE OF B.T. PATIL & SONS BELGAM CONSTRUCTION (P) LTD VS. ACIT 126 TTJ (MUM) (TM) 577. THE HONBLE HIGH COURT HAS OBSERVED THAT IT IS NOT IN DISPUTE THAT THE SAID DECISION OF THE TRIBUNAL IN THE CASE OF B.T. PATIL & SONS (SUPRA) HAS BEEN RECALLED BY THE TRIBUNAL BY ORDER DATED 18.2.2011 A S EVIDENT FROM THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.766/PN/2009 DATED 8. 6.2011. THE HONBLE HIGH COURT HAS ACCORDINGLY QUASHED AND SET ASIDE THE IM PUGNED ORDER OF THE TRIBUNAL DATED 24.2.2010 PASSED IN ITA NO.433/PU/2003 RELATING TO AY 2003- 04, AND HAS RESTORED THE MATTER TO THE FILE OF THE TR IBUNAL FOR FRESH DECISION. 8. HAVING GONE THROUGH THE CITED DECISIONS BY THE LEA RNED AR WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY IN DUSTRIES LTD & ORS (SUPRA). RELEVANT PARA NOS. 22 & 23 OF THE SAID DECISI ON OF HONBLE HIGH COURT IS BEING REPRODUCED HERE UNDER FOR A READY REFERENCE . 22. ANOTHER SUBMISSION WHICH WAS URGED ON BEHALF O F THE REVENUE IS THAT UNDER CL. (III) OF SUB-SEC. (4A) OF SEC. 80-IA , ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MA INTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIES IN SUB-CL. (C) OF SUB-SEC. (4) OF THE AMEN DED PROVISIONS OF SEC. 80-IA. ON THIS BASIS, IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFIL THE CON DITION. THIS SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. AS A MATTER OF FACT, THE TRIBUNAL HAS ENTERED A FINDING THAT THE ASSESSEE WAS OPERATING THE FACIL ITY AND THIS FINDING HAS BEEN CONFIRMED EARLIER IN THIS JUDGMENT. THAT THE ASSES SEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMME NCED AFTER 1 ST APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOV ER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE IN FRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1 ST APRIL, 1995. AFTER SEC. 80-IA WAS AMENDED BY THE FINANCE ACT OF 2001, THE SECTION APPLIED TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING; OR (II) OPERATING AND M AINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE : (I) OWN ERSHIP OF THE ENTERPRISE BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM; (II ) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STA TUTORY BODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRU CTURE FACILITY ON OR AFTER 1 ST APRIL, 1995. THE REQUIREMENT THAT THE OPERATION AN D MAINTENANCE OF THE 74 INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDE R WHICH A DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES A ND MAINTAINS, OR DEVELOPS, OPERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY. UNLESS BOTH THE PROVISIONS ARE HARMONIOUSLY CONSTRUED, THE OBJECT AND INTENT U NDERLYING THE AMENDMENT OF THE PROVISION BY THE FINANCE ACT OF 2001 WOULD B E DEFEATED. A HARMONIOUS READING OF THE PROVISION IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) D EVELOPS; OR (II) OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINTAINS AND OPERATE S THAT INFRASTRUCTURE FACILITY SHOULD BE AFTER 1 ST APRIL, 1995. IN THE PRESENT CASE, THE ASSESSEE CLE ARLY FULFILLED THIS CONDITION. 23. IN VIEW OF WHICH WE HAVE TAKEN, ALL THE ASSESS MENT YEARS IN QUESTION TO WHICH THIS BATCH OF APPEALS RELATES WOU LD BE GOVERNED BY THE SAME PRINCIPLE. THE SUBSEQUENT AMENDMENT OF SEC. 80-IA( 4A) OF THE ACT TO CLARIFY THAT THE PROVISION WOULD APPLY TO AN ENTERPRISE ENG AGED IN (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING , OPERATING AND MAINTAINING AN INFRASTRUCTURE FACILITY WAS REFLECTIVE OF A POSI TION WHICH WAS ALWAYS CONSTRUED TO HOLD THE FIELD. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY FINANCE ACT OF 2001, WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO SEC. 80-IA(4) OF THE ACT SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITION S FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE C UMULATIVE IN NATURE. 9. WE FIND FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN AFORESAID CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUPRA) TH AT EVEN IN THE CASE BEFORE THE HONBLE HIGH COURT, THE ASSESSEE ACTED AS A C ONTRACTOR FOR GOVERNMENT AGENCY, WAS HELD ELIGIBLE FOR THE PURPOSES OF CLAIM OF DEDUCTION U/S 80-IA(4) OF THE INCOME TAX ACT. AS PER THE SAID D ECISION OF THE HONBLE HIGH COURT ASSESSEE WHO ONLY DEVELOPS INFRASTRUCTURAL FAC ILITY (EVEN AS A CONTRACTOR) BUT DOES NOT HAVE AN OCCASION TO OPERATE AND MAINTAIN IS ALSO ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80-IA(4) OF THE ACT. THE HONBLE HIGH COURT HAS BEEN PLEASED TO OBSERVE THAT QUA SUCH A PERSON THE CONDITION STATED IN SUB- SECTION (C) OF SEC.80-IA(4)(I) HAS TO BE READ HARMONIO USLY WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSE SSEE, WHO DEVELOPS; OR OPERATES AND MAINTAIN; OR DEVELOPS, MAINTAINS AND OPER ATES AN INFRASTRUCTURAL FACILITY. IN OTHER WORDS A DEVELOPER WHO ONLY DEVEL OPS (I.E., CONSTRUCTS) AN INFRASTRUCTURAL FACILITY IS NOT ENVISAGED TO OPERATE A ND MAINTAIN SUCH FACILITY, CANNOT BE ACCEPTED TO FULFIL THE CONDITION IN CLAUSE (C) OF SEC. 80-IA(4) SINCE IT WOULD BE AN IMPOSSIBILITY. THEREFORE, IN VIEW OF THE CONSTRUCTION PLACED BY THE HONBLE BOMBAY HIGH COURT ON THE REQUIREMENTS OF CLA USE (C) OF SEC. 80- IA(4)(I) REQUIRING IT TO BE HARMONIOUSLY READ WITH T HE MAIN SEC. 80-IA(4), WE DO NOT FIND SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BO MBAY HIGH COURT ON THE ISSUE IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & O RS (SUPRA) DECIDE THE MATTER IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION IN QUESTION U/S 80-IA (4). THE ISSU E IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELATED GROUNDS ARE THUS ALL OWED WITH THIS DIRECTION TO THE AO TO ALLOW THE CLAIMED DEDUCTION TO THE ASSESSEE. 10. CONSEQUENTLY THE APPEAL IS ALLOWED. 129. THEREFORE, THE ISSUE AS TO WHETHER THE ASSESSEE B EING A CONTRACTOR AND NOT A DEVELOPER AND THEREFORE IS NOT IS ENTITLED TO DEDUCTION 75 U/S.80IA(4) OF THE I.T. ACT HAS TO BE DECIDED IN FAVOUR OF THE ASSESSE E. 130. NOW COMING TO THE CLAIM OF DEDUCTION U/S.80IA(4) ON THE ADDITIONAL INCOME DECLARED IS CONCERNED THE QUESTION THAT ARISE IS AS TO WHETHER THE ASSESSEE CAN MAKE A NEW CLAIM DURING THE COURSE OF ASSE SSMENT PROCEEDINGS U/S.153A. THIS ISSUE ALSO HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF D .J. MALPANI VS. ACIT AND VICE VERSA VIDE ITA NOS. 1148 TO 1154/PN/201 3 AND ITA NOS. 1183 TO 1188/PN/2013 ORDER DATED 30-10-2015. THE RE LEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 52 TO 53 ARE AS UNDER : 52. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSEE IN THE INSTANT CASE FI LED HIS RETURN OF INCOME U/S.139(1) ON 31-10-2007. THE SEARCH TOOK PLA CE ON 06-10-2009. AT THE TIME OF SEARCH THE ASSESSMENT FOR THE IMPUGNED ASSESSMEN T YEAR WAS NOT COMPLETED. THE ASSESSEE FILED THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S.153A ON 24-06-2010 DISCLOSING TOTAL INCOME OF RS.12 ,80,97,695/- AFTER CLAIMING DEDUCTION OF RS.5,36,44,728/- U/S.80IA(4) OF THE I.T. ACT. THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4) ON THE GROUND THAT THE SAME WAS NOT CLAIMED IN THE ORIGINAL RETURN FILED U/S.139(1) OF THE I.T. ACT. RELYING ON THE PROVISIONS OF SECTION 80AC AND 80IA (5) THE AO DISALLOW ED THE CLAIM MADE BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/ S.153A. WE FIND THE LD.CIT(A) UPHELD THE ABOVE ACTION OF THE AO. WE FI ND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF B.G. SHIRKE CONSTRUCTION TECH NOLOGY PVT. LTD. (SUPRA) HAD AN OCCASION TO DECIDE SUCH AN ISSUE. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 9 ONWARDS READ AS UNDER : 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, SEARCH U/S 132(1) OF THE ACT WAS CARRIED OUT ON 18.12.2008. ON THE BASIS OF THE SECOND PROVISO TO SECTION 153A(1) OF THE ACT, WHICH READS AS U NDER :- 'PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS [SUB-SECTION] PENDING ON THE DATE OF INITIATION O F THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS TH E CASE MAY BE, SHALL ABATE.' IN THE PRESENT CASE, THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ARE FOR ASSESSMENT YEARS 2007-08 AND 2008-09, A ND THUS SUCH ASSESSMENTS ABATE. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONCEDED THAT ASSESSMENTS FOR ASSESSMENT YEARS 2003-04 AND 2006-07 WERE NOT PENDING ON THE DATE OF INITIATION OF SEARCH AND THUS THE SAME DO NOT ABATE AS PER THE AFORESAID PROVISO TO SECTION 153A(1) OF THE ACT. THE A FORESAID POSITION IS NOT DISPUTED BY THE REVENUE ALSO. 10. IN THE ABOVE UNDISPUTED FACT SITUATION, NOW WE M AY EXAMINE THE SCOPE OF ASSESSMENTS TO BE MADE U/S 153A(1)(B) OF THE ACT FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, WHICH HAVE ABATED AND FOR THE ASSESSMENT YEARS 2003- 76 04 AND 2006-07, WHICH DO NOT ABATE. FOLLOWING THE R EASONING LAID DOWN IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA) , IT HA S TO BE HELD THAT IN SO FAR AS THE ASSESSMENT YEARS 2003-04 AND 2006-07 ARE CONCERNED, ASSESSMENTS U/S 153A(1)(B) OF THE ACT WOULD BE MADE ON THE BASIS OF I NCRIMINATING MATERIAL, WHICH HAS BEEN EXPLAINED TO MEAN (I) BOOKS OF ACCOUNT , OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT; AND, (II) UNDISCLOSED INCOME OR PROPERTY DISC OVERED IN THE COURSE OF SEARCH. OF COURSE, THE INCOME SO DETERMINED SHALL BE IN ADDITION TO THE INCOME ALREADY ASSESSED IN REGULAR ASSESSMENT PROCEEDINGS F OR THE SAID TWO ASSESSMENT YEARS. NOW, THE MOOT POINT IS AS TO WHETHER THE IMPUGNED CLAIM OF THE ASSESSEE FOR EXCLUDING INCOME ON ACCOUNT OF RETENTI ON MONEY CAN FALL IN THE SCOPE AND AN AMBIT OF AN ASSESSMENT MADE U/S 153A(1)(B) O F THEI.T ACT FOR THE ASSESSMENT YEARS 2003-04 AND 2006-07. OSTENSIBLY, AS OBSERV ED EARLIER ON THE BASIS OF THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), AN ASSESSMENT U/S 153A(1)(B) FOR TH E ASSESSMENT YEARS 2003-04 AND 2006-07 WOULD BE BASED ON INCRIMINATING MATERIAL, BOOKS OF ACCOUNTS, OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT OR ANY UNDISCLOSED INCOM E OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. AT THE TIME OF HE ARING, THE LD. COUNSEL FOR ASSESSEE FAIRLY CONCEDED THE POSITION THAT IMPUGNED CLAI M RELATING TO EXCLUSION OF INCOME ON ACCOUNT OF RETENTION MONEY DOES NOT FAL L IN THE AFORESAID CATEGORY AND THUS, IT IS BEYOND THE SCOPE AND AMBIT OF AN ASSESSMEN T ENVISAGED U/S 153A(1)(B) OF THE ACT FOR ASSESSMENT YEARS 2003-04 AND 2 006-07. THEREFORE, ON THIS POINT ITSELF, WE UPHOLD THE STAND OF THE REVEN UE FOR ASSESSMENT YEARS 2003-04 AND 2006-07 IN DENYING ASSESSEE'S CLAIM FOR EXC LUDING INCOME ON ACCOUNT OF RETENTION MONEY. 11. ACCORDINGLY, THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 AND 2006-07 ARE DISMISSED. 12. NOW, IN SO FAR AS THE ASSESSMENTS FOR ASSESSMENT YEARS 2007 -08 AND 2008- 09 ARE CONCERNED, THE ORIGINAL ASSESSMENTS WERE PENDING ON THE DATE OF INITIATION OF SEARCH, AND THE SAME STAND ABATED IN TER MS OF THE SECOND PROVISO TO SECTION 153A(1) OF THE ACT. FOLLOWING THE REASONIN G LAID DOWN IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), IN SO FAR AS ASSE SSMENT YEARS 2007-08 AND 2008-09 ARE CONCERNED, THE ASSESSING OFFICER RETAI NS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON HIM U /S 153A OF THE ACT. IN THIS CONTEXT, THE PRELIMINARY ISSUE IS AS TO WHETHER THE SCOP E OF ASSESSMENTS U/S 153A(1)(B) OF THE ACT FOR ASSESSMENT YEARS 2007-08 AND 2 008-09 CAN INCLUDE CONSIDERATION OF ASSESSEE'S PLEA TO EXCLUDE INCOME ON ACC OUNT OF RETENTION MONEY, CONSIDERING THE FACT THE RETURNS OF INCOME FI LED BY THE ASSESSEE FOR ASSESSMENT YEARS 2007-08 AND 2008-09 U/S 139(1) OF THE AC T DID NOT CONTAIN ANY SUCH CLAIM. IN THE ASSESSMENTS U/S 153A(1)(B) OF THE A CT, ASSESSEE CLAIMED THAT INCOME ON ACCOUNT OF RETENTION MONEY BE EXCLUD ED IN THE YEARS WHEN THE CUSTOMERS HAD WITHHELD THE RETENTION MONEY AND INSTEAD TAX IT IN THE YEAR OF ITS ACTUAL RECEIPT. NO DOUBT, THE SAID CLAIM DOES NOT PERTAIN TO ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH, SO HOWEVER, ON ACCOUNT OF THE FACT THAT THE ASSESSING OFFICER RETAINS HIS ORIGINAL JURISDICTION AS WELL IN THE ASSESSMENTS FOR THE YEARS 2007-08 AND 2008-09 TO BE MADE U/S 153A(1)(B) OF THE ACT, IN OUR CONSIDERED OPINION, AS THE FOLLOWING DISCUSSION WOULD SO, SUCH A CLAIM THOUGH MADE FOR THE FIRST TIME IN THE IMPUGNED ASSESSMENT PROCEEDING, WOULD FALL WITHIN THE AMBIT AND SCOPE OF IMPUGNED ASSE SSMENT CARRIED OUT U/S 153A(1)(B) OF THE ACT. PERTINENTLY, THE ORIGINAL JU RISDICTION VESTED WITH THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2007-08 AND 2008- 09 EMPOWERS HIM TO CONSIDER THE IMPUGNED CLAIM; AND, TO PUT IT I N OTHER WORDS, ASSESSEE WAS COMPETENT TO RAISE SUCH A FRESH CLAIM IN THE CONTEXT O F THE ORIGINAL JURISDICTION VESTED WITH THE ASSESSING OFFICER, THOUGH IT WAS NOT RAISE D IN THE RETURNS OF INCOME ORIGINALLY FILED. 77 13. WE MAY ALSO CONSIDER THIS FROM ANOTHER ANGLE. AS ON THE DATE OF INITIATION OF SEARCH I.E. 18-12-2008, THE RETURNS OF INCOME FILED B Y ASSESSEE U/S 139(1) OF THE ACT FOR ASSESSMENT YEARS 2007-08 AND 2008-09 WERE PE NDING FOR ASSESSMENT AND THE IMPUGNED CLAIMED WAS NOT MADE IN THE RETURNS OF INCOME ORIGINALLY FILED. SO, HOWEVER, U/S 139(5) OF THE ACT , ASSESSEE WAS COMPETENT TO FURNISH A REVISED RETURN AND MAKE SUCH A CLAIM, AND TH US THE ASSESSING OFFICER WAS REQUIRED TO ENTERTAIN SUCH A CLAIM IN THE COURSE OF EXERCISING HIS ORIGINAL JURISDICTION TO MAKE AN ASSESSMENT U/S 143(3) OF THE ACT. NOW, CONSEQUENT TO SEARCH ACTION, FOR ASSESSMENT YEARS 2007-08 AND 2008-09, ASSESSING OFFICER NOT ONLY ACQUIRES JURISDICTION TO MAKE ADDITIONS BASED ON THE INCRIMINATING MATERIAL BUT ALSO RETAINS THE ORIGINAL JURISDICTION, A S EXPLAINED BY THE SPECIAL BENCH OF TRIBUNAL IN THE CASE ALL CARGO GLOBAL LOGIST ICS LTD. (SUPRA). THUS, THE ENSUING ASSESSMENTS U/S 153A(1)(B)OF THE ACT FOR ASSESSMENT YE ARS 2007-08 AND 2008-09 WOULD ENABLE THE ASSESSING OFFICER TO CONSI DER THE IMPUGNED CLAIM WHICH HAS BEEN JUSTIFIABLY MADE BY THE ASSESSEE. C ONSIDERING THE ENTIRETY OF CIRCUMSTANCES AND IN LAW, WE, THEREFORE, HOLD THAT IN SO FAR AS THE ASSESSMENTS FOR THE ASSESSMENT YEARS A.Y. 2003-04, 2006-07, 2007-08 & 2008- 09 2007-08 AND 2008-09 ARE CONCERNED, THE INCOME-TA X AUTHORITIES ERRED IN NOT ENTERTAINING THE IMPUGNED CLAIM OF THE ASSESSEE MER ELY BECAUSE IT WAS MADE IN THE COURSE OF AN ASSESSMENT U/S 153A(1)(B) OF THE ACT AND WAS NOT MADE IN THE RETURNS OF INCOME ORIGINALLY FILED U/S 13 9(1) OF THE ACT. 14. FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, ANOTHE R OBJECTION RAISED BY THE REVENUE IS TO THE EFFECT THAT THE CLAIM WAS NO T MADE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S 153A(1)(A ) OF THE ACT, BUT WAS SUBMITTED BY WAY OF A LETTER DURING THE ASSESSMENT PROCE EDINGS AND THEREFORE FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT, (2006) 284 ITR 323 (SC), THE A SSESSING OFFICER WAS JUSTIFIED IN NOT ENTERTAINING SUCH A CLAIM. 15. ON THIS ASPECT, THE LEARNED COUNSEL FOR THE ASSESSEE P OINTED OUT THAT IN THE RETURN OF INCOME SUBMITTED IN RESPONSE TO NOTICE U/S 15 3A(1)(A) OF THE ACT, ASSESSEE HAD ENCLOSED A NOTE DATED 14.09.2009, A COPY O F WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGE 1 TO 2, PUTTING-FO RTH ITS CLAIM FOR EXCLUDING INCOME ON ACCOUNT OF RETENTION MONEY, BUT IN THE CO MPUTATION OF INCOME NO SPECIFIC CLAIM WAS MADE BECAUSE THE QUANTIFICATION OF THE CLAIM COULD NOT BE MADE IN THE LIMITED TIME PERIOD ALLOWED TO FILE A R ETURN IN RESPONSE TO NOTICE U/S 153A(1)(A) OF THE ACT. IN THE COURSE OF THE SUBSEQU ENT ASSESSMENT PROCEEDINGS, ASSESSEE QUANTIFIED THE CLAIM FOR THE RESPEC TIVE ASSESSMENT YEARS AND ALSO FILED COPIES OF THE AGREEMENTS WITH THE CUSTOM ERS WHICH CONTAINED THE RELEVANT CLAUSES PERMITTING RETENTION OF A PORTION OF THE CONTRACT VALUE. IT IS POINTED OUT THAT STRICTLY SPEAKING THE JUDGEMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) IS NOT APPL ICABLE IN THE PRESENT CASE AS NO FRESH CLAIM WAS MADE IN THE ASSESSMENT PROCEEDINGS, BUT IT IS A CASE WHERE A CLAIM PUT-FORTH IN THE RETURN OF INCOME WAS ONLY QUA NTIFIED DURING ASSESSMENT PROCEEDINGS AND THUS THE ASSESSING OFFICER OUGHT TO HAVE ENTERTAINED THE IMPUGNED CLAIM. ALTERNATIVELY, IT IS CONTENDED THAT THE CIT(A) ENJOYS PLENARY POWERS OF THE ASSESSING OFFICER, AND FOLLOWING THE JUDG MENT OF THE HON'BLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF IND IA LTD. VS. CIT, (1991) 187 ITR 688, THE CLAIM SHOULD HAVE BEEN ENTERTAINED BY H IM AS THE COMPLETE FACTS WERE ON RECORD. IN THIS CONTEXT, THE LEARNED COUNSEL REFERRED TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF JAIN I RRIGATION SYSTEMS LTD. VIDE ITA NO.1319/PN/2009 DATED 30.01.2012 WHEREIN THE IM PORT OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE ( INDIA) LTD. (SUPRA) HAS BEEN EXPLAINED ON THE BASIS OF THE JUDGMENT OF THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAI PARABOLIC SPRINGS LTD., (2008) 306 ITR 42 (DEL), IN THE FOLLOWING WORDS :- 78 '5. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. IN OUR VIEW, THE PLEA OF THE ASSESSEE IS WELL-REASONED, INASMUCH AS THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) DOES NOT IMPINGE ON THE POWERS OF THE APPELLATE AUTHORITIES TO ENTERTAIN A FRESH CLA IM WHICH WAS HITHERTO NOT PREFERRED BY THE ASSESSEE IN THE RETURN OF INCOME. IN FACT, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. JAI PARABOLIC SPRIN GS LTD. 306 ITR 42 (DEL) SUPPORTS THE PROPOSITION THAT THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) WAS LIMITED TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN CLAIM FOR DEDUCTION OTHERWISE T HAN BY A REVISED RETURN AND DOES NOT PUT FETTERS ON SUCH POWERS OF THE APPELLATE AU THORITIES.' 16. ON THE BASIS OF AFORESAID, IT IS SOUGHT TO BE MADE OUT THAT THE CLAIM OF THE ASSESSEE OUGHT TO HAVE BEEN ENTERTAINED BY THE LOWER AU THORITIES AND DECIDED ON ITS MERITS. 17. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE APPEARING FOR THE REVENUE HAS CONTENDED THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN NOT ENTERTAINING THE IMPUGNED CLAIM AS IT WAS A FRESH CLAI M MADE ONLY DURING THE ASSESSMENT PROCEEDINGS AND NOT IN THE RETURN OF INCOME. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) OPIN ED THAT A FRESH CLAIM OF THE ASSESSEE CAN BE ENTERTAINED AT THE TIME OF ASSESSMENT ONLY IF IT IS MADE BY WAY OF A REVISED RETURN OF INCOME; AND, THE AFORESAID PRO POSITION HAS BEEN INVOKED BY THE INCOME-TAX AUTHORITIES IN THE PRESENT CASE TO D ENY ASSESSEE'S CLAIM FOR EXCLUSION OF INCOME ON ACCOUNT OF RETENTION MONEY, A CLAIM WHICH WAS MADE DURING THE ASSESSMENT PROCEEDINGS. 19. FACTUALLY SPEAKING, WE FIND THAT IN TERMS OF A CO MMUNICATION DATED 14.09.2009 FILED ALONG WITH THE RETURN OF INCOME FI LED IN RESPONSE TO NOTICE ISSUED U/S 153A(1)(A) OF THE ACT, ASSESSEE INTER-ALIA, STAT ED AS UNDER :- 'THE BUSINESS OF OUR COMPANY IS TO EXECUTE CONSTRUCTION CONTRACTS. IN RESPECT OF SOME OF THE CONTRACTS EXECUTED BY THE COMPANY THER E IS A CLAUSE IN THE CONTRACT WHICH ENTITLES THE CUSTOMER TO RETAIN BETWEE N 5% TO 10% OF CONTRACT VALUE TILL THE COMPLETION OF DEFECT LIABILITY PERIO D CONTAINED IN THE CONTRACT WHICH IS GENERALLY BETWEEN 12 TO 24 MONTHS AFTER THE COMPLETION OF THE CONSTRUCTION. INADVERTENTLY IN THE ORIGINAL RETURN F ILED THIS AMOUNT WAS NOT EXCLUDED WHILE COMPUTING THE TOTAL INCOME. IN THE SH ORT SPAN OF TIME ALLOWED TO US TO FILE THE RETURN U/S. 153A, THE EXACT QUANTIF ICATION OF THE RETENTION MONEY COULD NOT BE WORKED OUT. HENCE WE WILL SUBMIT THE DETAILS THEREOF LATER. BUT FOR THE TIME BEING, WE SUBMIT THAT THE RETENTION MONEY IN THE VARIOUS CONTRACTS IS NOT TAXABLE IN VIEW OF THE VARIOUS DECISIO NS INCLUDING THE DECISIONS CITED BELOW WHEREIN IT IS HELD THAT THE TAXABILITY O F THIS AMOUNT IS TO BE CONSIDERED IN THE YEAR IN WHICH THIS AMOUNT IS DUE TO THE ASSESSEE FROM THE CONTRACTEE. (A) CIT V ASSOCIATED CABLES P. LTD. (2006) 286 ITR 596 (BOM.) (B) DCIT V SPIRAX MARSHALL LTD. (2007) 109 TTJ (PUNE) 593 (C) NATIONAL HEAVY ENGG. CO. OP. L TD. V DCIT (2007) 105 ITD 485 (PUNE) INADVERTENTLY, IN THE ORIGINAL RETURN OF INCOME THI S AMOUNT WAS NOT CLAIMED AS DEDUCTION. WE REQUEST YOUR HONOUR TO KINDLY GRANT US APPROPRIATE DEDUCTION WHILE COMPLETING ASSESSMENT. WE SHALL SUBMIT THE NECESSARY DETAILS AND QUANTIFICATION OF CLAIM DURING THE COURSE OF ASSESSMENT .' 79 20. THE AFORESAID NOTE CLEARLY DEPICTS THE CLAIM OF T HE ASSESSEE TO THE EFFECT THAT THE RETENTION MONEY IN VARIOUS CONTRACTS RETAINE D/DEDUCTED BY THE CUSTOMERS IS NOT TAXABLE; AND, VARIOUS CASE LAWS HAVE AL SO BEEN CITED, INCLUDING THAT OF THE HON'BLE JURISDICTIONAL HIGH COURT OF BOM BAY IN ASSOCIATED CABLES (P) LTD. (SUPRA) IN SUPPORT OF THE SAID PROPOSITION. OF COURSE, THE CLAIM WAS NOT REFLECTED IN THE ACTUAL COMPUTATION OF INCOME IN TH E ABSENCE OF ITS QUANTIFICATION. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, ASSESSEE NOT ONLY QUANTIFIED ITS CLAIM YEAR-WISE BUT ALSO EXPLAINED THE FACTUAL MATRIX OF THE CLAIM BASED ON THE RELEVANT CLAUSES OF THE CONTRACTS WITH VAR IOUS CONTRACTEES/CUSTOMERS, AS IS EVIDENT FROM COPY OF ASSESSEE'S COMMUNICATION TO THE ASSESSING OFFICER PLACED IN THE PAPER BOOK AT PA GES 3-6. IN THIS FACTUAL BACKGROUND, CAN IT BE SAID THAT THE ASSESSEE MADE A FRESH CLAIM DURING THE ASSESSMENT PROCEEDINGS SO AS TO FALL WITHIN THE PURVIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE ( INDIA) LTD. (SUPRA)? IN OUR VIEW, THE FACT SITUATION IN THE PRESENT CASE IS QUALITA TIVELY DIFFERENT THAN THAT CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD. (SUPRA). OSTENSIBLY, THE ASSESSEE COMPANY MADE A CLAIM FOR EXCLUDING INCOME ON ACCOUNT OF RETENTION MONEY IN THE RETURN OF INCO ME ITSELF, THOUGH THE QUANTIFICATION WAS ABSENT, AND THE ACTUAL QUANTIFICA TION OF SUCH CLAIM WAS MADE DURING THE ASSESSMENT PROCEEDINGS; THUS, SUBSTANTIVELY SPEAKING IT CANNOT BE SAID THAT ASSESSEE MADE A NEW CLAIM DURING ASSE SSMENT PROCEEDINGS WHICH WAS NOT MADE IN THE RETURN OF INCOME. CONSIDERI NG THE ABOVE FACT SITUATION, IN OUR VIEW, THE CIT(A) ERRED IN UPHOLDIN G THE ACTION OF THE ASSESSING OFFICER IN REFUSING TO ENTERTAIN THE IMPUGNED CLAIM BASED ON THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (IND IA) LTD. (SUPRA). 21. IN ANY CASE, THE JUDGEMENT OF THE HON'BLE SUPREM E COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) DOES NOT IMPINGE ON THE POWERS OF APPELLATE AUTHORITIES TO ENTERTAIN A FRESH CLAIM WHICH WAS HITHE RTO NOT PREFERRED BY THE ASSESSEE IN THE RETURN OF INCOME, AS EXPLAINED BY THE HO N'BLE DELHI HIGH COURT IN THE CASE OF JAI PARABOLIC SPRINGS LTD. (SUPRA). ACC ORDINGLY, THERE WAS NO IMPEDIMENT FOR THE CIT(A) TO HAVE ENTERTAINED THE I MPUGNED CLAIM ESPECIALLY WHEN THE REQUIRED FACTS TO ADJUDICATE THE CONTROVER SY WERE ALREADY ON RECORD. 22. THUS, CONSIDERED IN THE AFORESAID LIGHT, WE FIND N O JUSTIFICATION FOR THE REVENUE TO REJECT ASSESSEE'S IMPUGNED CLAIM FOR ASSESSMENT Y EARS 2007-08 AND 2008-09 ON THE GROUND THAT THE CLAIM WAS MADE BY WAY OF A LETTER DURING THE COURSE OF ASSESSMENTS AND NOT IN THE RETURN OF INCOME . 23. THE THIRD OBJECTION WHICH HAS BEEN RAISED BY THE REVENUE IS IN TERMS OF A DISCUSSION MADE BY THE CIT(A) IN PARA 3.6 OF THE IMPUG NED ORDER. ACCORDING TO THE CIT(A), IF THE CLAIM FOR EXCLUDING RETENTION MO NEY WAS ENTERTAINED AND ALLOWED, IT WOULD RESULT IN THE DETERMINATION OF TOT AL INCOME AT A FIGURE BELOW THE INCOME ORIGINALLY RETURNED/ASSESSED AND THUS THE SAME WAS NOT PERMISSIBLE. THIS OBJECTION OF THE REVENUE, IN OUR VIE W IS NO BAR TO ENTERTAIN THE AFORESAID CLAIM, KEEPING IN MIND THE RATIO OF TH E JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHELLY PRODUCTS & ANR., (2003) 261 ITR 367 (SC) AND ALSO THE JUDGEMENT OF THE HON'BLE GUJA RAT HIGH COURT IN THE CASE OF GUJARAT GAS CO. LTD. VS. CIT, 245 ITR 54 (GUJ). 24. ON THE BASIS OF THE AFORESAID DISCUSSION, IN CONCLUSIO N WE HOLD THAT IN SO FAR AS THE ASSESSMENT YEARS 2007-08 AND 2008-09 ARE CONCERNED , THE CLAIM OF THE ASSESSEE FOR EXCLUSION OF INCOME ON ACCOUNT RETENTION MO NEY WITHHELD BY CONTRACTEES/CUSTOMERS HAS BEEN WRONGLY REJECTED BY THE LOWER AUTHORITIES. 53. SINCE THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR WAS PENDING ON THE DATA OF SEARCH, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL CITED (SUPRA) WE HO LD THAT THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM MADE U/S.80IA(4) OF THE I.T ACT MERELY BECAUSE 80 THE ASSESSEE HAD NOT MADE THE CLAIM IN THE ORIGINAL RET URN. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GRO UNDS RAISED BY THE ASSESSE ARE ALLOWED. 131. IDENTICAL ISSUE HAS ALSO BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHETH DEVELOPERS (P) LTD.(SUPRA) WHE REIN THE HONBLE BOMBAY HIGH COURT FOLLOWING THE DECISION IN THE CASE OF PR ITHVI BROKERS AND SHAREHOLDERS (P) LTD. REPORTED IN 23 TAXMANN.COM 23 H AS HELD THAT ASSESSEE CAN MAKE A FRESH CLAIM BEFORE THE APPELLATE AUTH ORITIES EVEN IF THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME FILED BEFORE THE ASSESSING OFFICER. THEREFORE, THE ISSUE REGARDING A NEW CLAIM IS ALSO DE CIDED IN FAVOUR OF THE ASSESSEE. 132. NOW COMING TO THE ALLOWABILITY OF DEDUCTION U/S.80IA(4) ON THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARCH IS C ONCERNED WE FIND THE SAME ISSUE HAS ALSO TO BE DECIDED IN FAVOUR OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSEE COMPANY HAS DEBITED NON GENUINE EXPENDITURE IN ITS BOOKS OF ACCOUNT AND GENERATED CASH, A FACT WHICH HAS BEEN ACCEPTED BY THE AO IN THE ASSESSMENT ORDER. THER EFORE, THE CONTENTION RAISED BY THE REVENUE IN THE GROUNDS OF APPE AL THAT THE ADDITION ON ACCOUNT OF EXPENSES FROM UNEXPLAINED SOURCES ATTRACTS PROVISIONS OF SECTION 69C AND THEREFORE THE ASSESSEES IN COME IS NOT INCOME FROM BUSINESS OF UNDERTAKING REFERRED TO IN SECTION 80IA(4) IN OUR OPINION IS INCORRECT. THE AO IN THE ASSESSMENT ORDER HA S ACCEPTED THAT THE ASSESSEE COMPANY HAS DEBITED NON GENUINE EXPENDITURE IN ITS B OOKS OF ACCOUNT. THEREFORE, ONCE THE NON GENUINE EXPENDITURE IS DISALLOWED CORRESPONDINGLY THE BUSINESS INCOME OF THE ASSESSEE INCREASED O N ACCOUNT OF DISALLOWANCE OF SUCH EXPENDITURE. THEREFORE, IN THAT EVEN T, THE DEDUCTION U/S.80IA(4) HAS TO INCREASE CORRESPONDINGLY. THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ON THIS ISS UE SUPPORT THE CASE OF THE ASSESSEE WHERE IT HAS BEEN HELD THAT IF THE INCOME GOES UP BECAUSE OF THE ADDITION MADE IN THE ASSESSMENT, THE DED UCTION U/S.10A 81 OR CHAPTER VIA AS THE CASE MAY BE, SHALL BE GRANTED ON SUCH ENHANCED INCOME. 133. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE O F GEM PLUS JEWELLERY INDIA LTD. REPORTED IN 333 ITR 175 HAS OBSERVED AS UNDER ; 11. FOR THE PURPOSES OF THE APPEAL IT IS NECESSARY TO REFER TO THE ADMITTED POSITION WHICH IS THAT THE ASSESSEE HAD DEPOSITED BOTH THE EMPLOYER'S AND THE EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND AND ES IC, THOUGH BEYOND THE DUE DATE INCLUDING THE GRACE PERIOD. THE ASSESSING OFFI CER ADDED THESE PAYMENTS TO THE TOTAL INCOME OF THE ASSESSEE AND MADE AN ADDITION IN THE AMOUNT OF RS.71.59 LACS. HOWEVER, FOR THE DEDUCTION U NDER SECTION 10A, THE ADDITION MADE ON ACCOUNT OF THE EMPLOYEES' CONTRIBUT ION WAS IGNORED IN CALCULATING THE PROFITS ELIGIBLE FOR DEDUCTION ON TH E GROUND THAT THESE RECEIPTS WERE NOT GENERATED OUT OF THE MANUFACTURING ACTIVIT Y OF THE ASSESSEE COMPANY. 12. BY REASON OF THE JUDGMENT OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX V. ALOM EXTRUSIONS LIMITED4 THE EMPLOYER'S CONTRIBUTION WAS LIABLE TO BE ALLOWED, SINCE IT WAS DEPOSITED BY THE DU E DATE FOR THE FILING OF THE RETURN. THE PECULIAR POSITION, HOWEVER, AS IT OBTAIN S IN THE PRESENT CASE ARISES OUT OF THE FACT THAT THE DISALLOWANCE WHICH WAS EFFEC TED BY THE ASSESSING OFFICER HAS NOT, THE COURT IS INFORMED, BEEN CHALLENG ED BY THE ASSESSEE. AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULAT ED BY THE REVENUE PROCEEDS ON THE BASIS THAT THE ASSESSED INCOME WAS ENHANCED DUE TO THE DISALLOWANCE OF THE EMPLOYER'S AS WELL AS THE EMPLOYEES' CONTRIBUTION T OWARDS PROVIDENT FUND /ESIC AND THE ONLY QUESTION WHICH IS CANVASSED ON BEHA LF OF THE REVENUE IS WHETHER ON THAT BASIS THE TRIBUNAL WAS JUSTIFIED IN DI RECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A. O N THIS POSITION, IN THE PRESENT CASE IT CANNOT BE DISPUTED THAT THE NET CONSEQU ENCE OF THE DISALLOWANCE OF THE EMPLOYER'S AND THE EMPLOYEE'S CONT RIBUTION IS THAT THE BUSINESS PROFITS HAVE TO THAT EXTENT BEEN ENHANCED. THE RE WAS, AS WE HAVE ALREADY NOTED, AN ADD BACK BY THE ASSESSING OFFICER TO THE INCOME. ALL PROFITS OF THE 4 (2009) 319 ITR 306 UNIT OF THE ASSESSEE HAVE BEE N DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES PAID BY THE ASS ESSEE, IT HAS NOT BEEN DISPUTED, RELATE TO THE MANUFACTURING ACTIVITY. THE DISALLOWANCE OF THE PROVIDENT FUND/ ESIC PAYMENTS HAS BEEN MADE BECAUSE O F THE STATUTORY PROVISIONS - SECTION 43B IN THE CASE OF THE EMPLOYER'S CONTRIBUTION AND SECTION 36(V) READ WITH SECTION 2(24)(X) IN THE CASE OF THE EMPLOYEE'S CONTRIBUTION WHICH HAS BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE. THE PLAIN CONSEQUENCE OF THE DISALLOWANCE AND THE ADD BACK THA T HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINESS PROFITS OF T HE ASSESSEE. THE CONTENTION OF THE REVENUE THAT IN COMPUTING THE DED UCTION UNDER SECTION 10A THE ADDITION MADE ON ACCOUNT OF THE DISALLOWANCE OF THE PROVIDENT FUND / ESIC PAYMENTS OUGHT TO BE IGNORED CANNOT BE ACCEPTED . NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE, THE PLAIN CONSEQUEN CE OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MUST FOLLOW. THE SECOND QUE STION SHALL ACCORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 134. SIMILARLY, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHETH DEVELOPERS (P) LTD. VIDE ITA NO.3724/2010 ORDER DA TED 27-07-2012 HAS HELD AS UNDER : 82 2. THE APPELLANT HAS FORMULATED THE FOLLOWING QUESTIONS OF LAW FOR CONSIDERATION OF THIS COURT. (1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT DEDUCTIONS U/S. 80IB (10) HAS TO BE ALLOWED FROM THE INCOME COMPUTED AS UNDISCLOSED INC OME U/S. 69A OF THE INCOME TAX ACT, 1961? (2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN ALLOWING THE CLAIM OF DEDUC TION U/S. 80IB(10) WHERE NO SUCH CLAIM IS MADE BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE BLOCK PERIOD? 3. THE APPEAL IS ADMITTED ON QUESTION (1) AND (2). 4. AT THE INSTANCE OF THE ADVOCATES FOR THE APPELLANT AND THE RESPONDENT THE APPEAL IS TAKEN UP FOR FINAL DISPOSAL. 5. SO FAR AS QUESTION (2) IS CONCERNED, IT IS AN ADMITTE D POSITION BETWEEN THE PARTIES THAT THE SAME STANDS COVERED IN FAVOUR OF THE RESPONDENT-ASSESSEE AND AGAINST THE APPELLANT REVENUE BY VIRTUE OF THE O RDER OF THIS COURT IN CIT V. PRUTHVI BROKERS & SHAREHOLDERS (P.) LTD. [2012] 23 TAXMANN.COM 23. IN THE ABOVE CASE IT HAS BEEN HELD THAT A FRESH CLAIM COU LD BE URGED BEFORE THE APPELLATE AUTHORITIES EVEN IF THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME FILED BEFORE THE ASSESSING OFFICER. 6. THE FACTS RELEVANT FOR THE PURPOSE OF QUESTION (1) A RE BRIEFLY AS UNDER: ( A ) THE RESPONDENT-ASSESSEE CARRIES ON BUSINESS AS BUILDERS IN MUMBAI AND THANE. ON 21/2/2002, THE INCOME TAX DEPARTMENT CARRIED OUT SEARCH OPERATION UNDER SECTION 132 OF THE SAID ACT CO VERING THE RESIDENTIAL AND BUSINESS PREMISES BELONGING TO THE RESPON DENT- ASSESSEES GROUP. DURING THE COURSE OF THE SEARCH PROCEEDI NGS THE RESPONDENTS DIRECTOR DECLARED THE UNDISCLOSED INCOME OF THE GROUP AT RS. 7.00 CRORES FOR THE BLOCK PERIOD. HOWEVER, IN THE RETURN FILED FOR THE BLOCK PERIOD 1/4/1995 TO 21/1/2002, THE RESPONDENT SH OWED ITS UNDISCLOSED INCOME AT RS. 3.50 CRORES. THE ASSESSING OFFICE R WHILE ASSESSING THE RESPONDENT FOR THE BLOCK PERIOD BY ORDER D ATED 30/4/2004 COMPUTED THE UNDISCLOSED INCOME FOR THE BLO CK PERIOD AT RS. 7.68 CRORES. ( B ) IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS) (HEREINAFTER REFERRED TO AS THE CIT(A)) THE RESPOND ENT CONTENDED THAT THE UNDISCLOSED INCOME WAS DECLARED AT RS. 7.00 CRORES O NLY BECAUSE AT THE TIME OF MAKING THE STATEMENT THE DIRECTOR OF RESP ONDENT WAS UNAWARE THAT DEDUCTION UNDER SECTION 80IB WOULD BE AVAILABLE IN RESPECT OF RESPONDENTS HOUSING PROJECTS. THE CIT(A) B Y ORDER DATED 17/8/2004 FOUND ON FACTS THAT THE RESPONDENT WAS ENTIT LED TO BENEFIT OF SECTION 80IB OF THE SAID ACT. FURTHER, CIT(A) HELD T HAT IN TERMS OF CLAUSE (A) OF THE EXPLANATION TO SECTION 158(BB)( 1) OF THE SAID ACT PROVIDES THAT UNDISCLOSED INCOME FOR THE BLOCK PERIOD IS TO BE COMPUTED AFTER APPLYING THE RELEVANT PROVISIONS OF THE SAID ACT . THIS WOULD INCLUDE THE PROVISIONS OF CHAPTER VIA OF THE SAID ACT . SECTION 80IB IS A PART OF CHAPTER VIA OF THE SAID ACT. ON EXAMINATION OF THE EVIDENCE THE CIT(A) HELD THAT THE RESPONDENT WAS ENTITLED TO THE B ENEFIT OF SECTION 80IB OF THE SAID ACT AND DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE TAX PAYABLE FOR THE BLOCK PERIOD 1/4/1995 TO 21/2/2 002 UNDER SECTION 158BB OF THE SAID ACT AFTER GIVING THE BENEFIT OF SE CTION 80IB OF THE SAID ACT. 83 ( C ) ON APPEAL BY THE REVENUE THE TRIBUNAL BY ORDER D ATED 12/10/2009 UPHELD THE ORDER OF THE CIT(A).ON MERITS, THE TRIBUN AL HELD THAT THE BENEFIT OF DEDUCTION UNDER SECTION 80IB OF THE SAID ACT WOULD BE AVAILABLE IN RESPECT OF UNDISCLOSED INCOME WHICH IS BEI NG OFFERED TO TAX FOR BLOCK PERIOD UNDER CHAPTER XIVB OF THE SAID ACT IN VIEW OF RETROSPECTIVE AMENDMENT TO THE EXPLANATION TO SUB SECT ION (1) OF SECTION 158BB OF THE SAID ACT. THE TRIBUNAL RELIED U PON THE DECISION OF THE MADRAS HIGH COURT IN THE MATTER OF ANBU TEXTILES V. ASSTT . CIT [2003] 262 ITR 684. 7. MR. VIMAL GUPTA, COUNSEL FOR THE APPELLANT SUBMITS T HAT THE ORDER OF THE TRIBUNAL IS UNSUSTAINABLE AS BENEFIT OF THE DEDUCTION U NDER CHAPTER VIA OF THE ACT CANNOT BE EXTENDED TO AN ASSESSEE WHO HAS NOT ORIGIN ALLY DISCLOSED HIS INCOME BUT SEEKS ITS BENEFIT WHILE FILING A BLOCK RETU RN UNDER CHAPTER XIV B OF THE SAID ACT SUBSEQUENT TO THE SEARCH UNDER THE SAID AC T. IN SUPPORT OF THE ABOVE RELIANCE WAS PLACED UPON THE DECISION OF THE GU JRAT HIGH COURT IN THE MATTER OF FAKIR MOHMED HAJI HASAN V. CIT [2001] 247 ITR 290. IN THE ABOVE CASE UNEXPLAINED GOLD VALUED AT RS. 48.72 LACS FOUND IN POSSESSION OF THE PARTY WAS ADDED TO THE PARTYS INCOME UNDER SECTION 69, 69A , 69B AND 69C OF THE ACT. AS THE UNEXPLAINED GOLD WAS CONFISCATED THE ASSESSEE SOUGHT A DEDUCTION ON ACCOUNT OF CONFISCATION OF GOLD AS A LOSS. THE COURT HE LD THAT SUCH UNDISCLOSED /UNEXPLAINED AMOUNTS DID NOT FALL UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THEREFORE, NO DEDUCTION IS AVA ILABLE. ON THE BASIS OF THE ABOVE DECISION, IT IS THE CONTENTION OF MR. GUPTA THAT NO DEDUCTION UNDER SECTION 80IB OF THE SAID ACT CAN BE MADE AVAILABLE T O THE RESPONDENT WHILE COMPUTING THE TAX PAYABLE UNDER CHAPTER XIVB OF THE SAID ACT FOR THE BLOCK PERIOD 1/4/1995 TO 21/2/2002. 8. AS AGAINST THE ABOVE, MR. PARDIWALA, SENIOR COUNSEL FOR THE RESPONDENT STATES THAT THE DECISION OF THE GUJRAT HIGH COURT IN THE MATTER OF FAKIR MOHMED HAJI HASAN ( SUPRA ) IS INAPPLICABLE TO THE PRESENT FACTS. IN THE PRESENT FACTS NO QUESTION OF APPLICATION OF SECTION 68, 69 AND 69A 69 B AND 69C OF THE SAID ACT ARISES AS THE SAME HAS NOT BEEN INVOKED BY THE APPELLAN T- REVENUE. FURTHER THE AMOUNT OF UNDISCLOSED INCOME WAS NEITHER IN THE NATURE OF UNEXPLAINED INVESTMENT NOR UNEXPLAINED MONEY, EXPENSES OR INVESTME NT WHICH WERE NOT FULLY DISCLOSED. IT IS AN ADMITTED POSITION BETWEEN THE PARTIES AS REFLECTED EVEN IN THE ORDER THE ASSESSING OFFICER THAT UNDISCLOSED INCOM E WAS IN FACT RECEIVED BY THE RESPONDENT IN THE COURSE OF CARRYING ON ITS BU SINESS ACTIVITIES AS A BUILDER. THE SAME WAS RETURNED BY THE RESPONDENT AS IN COME ARISING FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THE SAME WA S ACCEPTED BY THE DEPARTMENT. IT WAS FURTHER SUBMITTED THAT THE TRIBUNA L WAS CORRECT IN HOLDING THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT TO THE E XPLANATION TO SECTION 158BB(1) OF THE SAID ACT, THE DEDUCTION UNDER SECTIO N 80IBOF THE SAID ACT (WHICH IS ADMITTEDLY A PART OF CHAPTER VIB OF THE SAI D ACT) IS TO BE ALLOWED FOR DETERMINING THE UNDISCLOSED INCOME UNDER CHAPTER XIVB OF THE SAID ACT. 9. BEFORE CONSIDERING THE RIVAL SUBMISSIONS, IT WOULD BE CO NVENIENT TO REPRODUCE THE AMENDED EXPLANATION TO SUB SECTION (1) OF SECTION 158BB OF THE SAID ACT WHICH READS AS UNDER: EXPLANATION- FOR THE PURPOSES OF DETERMINATION OF UN DISCLOSED INCOME- ( A ) THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR SHALL , FOR THE PURPOSE OF AGGREGATION, BE TAKEN AS THE TOTAL INCOME OR LOSS C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF [THIS ACT] WITHOUT G IVING EFFECT TO SET OFF BROUGHT FORWARD LOSSES UNDER CHAPTER-VI OR UNABSOR BED DEPRECIATION UNDER SUB-SECTION (2) OF SECTION 32; 84 [PROVIDED THAT IN COMPUTING DEDUCTIONS UNDER CHAPTER VI-A FOR THE PURPOSES OF THE SAID AGGREGATION, EFFECT SHALL BE GIVEN TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORBED D EPRECIATION UNDER SUB-SECTION (2) OF SECTION 32;] IT WOULD BE PERTINENT TO NOTE THAT THE WORDS THIS AC T IN PARENTHESIS WERE SUBSTITUTED BY THE FINANCE ACT OF 2002 WITH RETR OSPECTIVE EFFECT FROM 1/7/1975. PRIOR TO THE ABOVE AMENDMENT THE WOR DS WERE CHAPTER IV. FURTHER THE PROVISO WAS ALSO ADDED TO TH E EXPLANATION BY THE FINANCE ACT 2002. 10. CHAPTER XIVB OF THE SAID ACT PROVIDES FOR SPECIAL PROC EDURE FOR ASSESSMENT OF SEARCH CASES AND IS CONTAINED IN SECTION 158 B TO SECTION 158BI OF THE SAID ACT. FURTHER, THIS CHAPTER APPLIES ONLY IN CASES OF SEARCH INITIATED BEFORE 31/5/2003.IN THIS CASE, THE SEARCH TOOK PLACE I N 2002 AND THEREFORE, THE PRESENT CASE IS GOVERNED BY CHAPTER XIVB OF THE SAID AC T. SECTION 158BB OF CHAPTER XIVB OF THE ACT DEALS WITH COMPUTATION OF UN DISCLOSED INCOME OF THE BLOCK PERIOD. THE ABOVE EXPLANATION TO SUB SECTION (1 ) OF SECTION 158BB OF THE ACT WAS AMENDED BY THE FINANCE ACT, 2002 WITH RETROSP ECTIVE EFFECT FROM 1/7/1995. PRIOR TO THE AMENDMENT, ACCORDING TO THE EXPLANATION THE TOTAL INCOME OR LOSS WAS TO BE COMPUTED IN ACCORDANCE WITH C HAPTER IV OF THE SAID ACT. CONSEQUENT TO THE AMENDMENT BY FINANCE ACT, 200 2 WITH RETROSPECTIVE EFFECT FROM 1/7/1995 THE TOTAL INCOME OR LOSS HAS TO B E COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT I.E. THE SAI D ACT. CONSEQUENTLY, WITH EFFECT FROM 1/7/1995 THE TOTAL INCOME/LOSS FOR THE BL OCK PERIOD HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE SAID ACT AND THE SAME WOULD INCLUDE CHAPTER VI-A OF THE SAID ACT. SECTION 80IB OF THE SAID ACT IS A PART OF CHAPTER VIA OF THE ACT. IN VIEW OF THE ABOVE, WH ILE COMPUTING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD THE RESPONDENT -ASSESSEE IS ENTITLED TO CLAIM DEDUCTION FROM ITS INCOME UNDER SECTION 80IB O F THE ACT. IN FACT, TO THE SAME EFFECT IS THE DECISION OF THE MADRAS HIGH COURT IN THE MATTER OF ANBU TEXTILES ( SUPRA ). 11. THE FURTHER CASE OF THE APPELLANT-REVENUE THAT IN VIEW OF SECTION 69A OF THE SAID ACT THE BENEFIT OF DEDUCTION UNDER CHAPTER VIA OF THE SAID ACT WOULD NOT BE AVAILABLE TO THE RESPONDENT-ASSESSEE IS NOT WELL F OUNDED. IN THE PRESENT FACTS IT IS NOT THE CASE OF THE REVENUE THAT THE MONE Y FOUND IN POSSESSION OF THE RESPONDENT ASSESSEE COULD NOT BE EXPLAINED AND/OR ITS SOUR CE COULD NOT BE EXPLAINED TO THE SATISFACTION OF THE ASSESSING OFFICER. IN THE PRESENT CASE UNDISCLOSED INCOME FOUND IN THE FORM OF CASH WAS EXPLA INED AS HAVING BEEN ACQUIRED WHILE CARRYING ON BUSINESS AS A BUILDER AND TH IS EXPLANATION WAS ACCEPTED BY THE ASSESSING OFFICER BY HAVING ASSESSED THE UN DISCLOSED INCOME FOR THE BLOCK PERIOD AS INCOME FROM PROFITS AND GAIN S OF BUSINESS OR PROFESSION. THEREFORE, THE RELIANCE BY THE REVENUE UPON THE DEC ISION OF THE GUJRAT HIGH COURT IN THE MATTER OF FAKIR MOHMED HAJI HASAN ( SUPRA ) IS NOT CORRECT AS THE FACTS OF THAT CASE ARE COMPLETELY DISTINGUISHABLE FROM THE PRESENT FACTS. IN THE PRESENT CASE, NO QUESTION OF APPLICATION OF SECTION 68 ,69 AND 69A, 69B AND 69C OF THE SAID ACT ARISES AS THE SAME HAS NOT BEEN INVOKED BY THE DEPARTMENT. IT IS AN ADMITTED POSITION BETWEEN THE PARTIES AS REFLECT ED EVEN IN THE ORDER THE ASSESSING OFFICER THAT UNDISCLOSED INCOME WAS IN FACT RECE IVED BY THE RESPONDENT IN THE COURSE OF CARRYING OUT ITS BUSINESS A CTIVITIES AS A BUILDER. THE SAME WAS RETURNED BY THE RESPONDENT AS INCOME ARISING FR OM PROFITS AND GAINS OF BUSINESS OR PROFESSION AND THE SAME WAS ACCEPTED BY THE DEPARTMENT UNLIKE IN THE MATTER OF FAKIR MOHMAD HAJI HASAN ( SUPRA ). 12. IN VIEW OF THE ABOVE THE ORDER DATED 12/10/2009 O F THE TRIBUNAL CANNOT BE FAULTED. THEREFORE, QUESTION (1) ABOVE IS ANSWERED IN THE AFFIRMATIVE IN FAVOUR OF THE RESPONDENT-ASSESSEE AND AGAINST THE APPELLA NT-REVENUE. QUESTION 85 (2) IS ANSWERED IN THE AFFIRMATIVE IN FAVOUR OF THE R ESPONDENT-ASSESSEE AND AGAINST THE APPELLANT-REVENUE. 135. WE FIND THE PUNE BENCH OF THE TRIBUNAL FOLLOWING THE AB OVE 2 DECISIONS IN THE CASE OF MALPANI ESTATES (SUPRA) HAS HELD AS UNDER : 17. IN-FACT, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHETH DEVELOPERS (P) LTD. (SUPRA) WAS CONSIDERING THE CLAIM OF DEDUCTIO N U/S 80IB(10) OF THE ACT IN RELATION TO THE UNDISCLOSED INCOME DECLARED CONSEQU ENT TO THE SEARCH ACTION. IN THE CASE BEFORE THE HONBLE HIGH COURT, IT WAS FAC TUALLY EMERGING THAT UNDISCLOSED INCOME WAS EARNED BY THE ASSESSEE IN THE COURSE OF CARRYING ON HIS BUSINESS ACTIVITY OF A BUILDER AND THE SAME WAS ACCEPT ED BY THE DEPARTMENT, BUT THE CLAIM OF THE DEDUCTION U/S 80IB(10) WAS DENIE D IN RELATION TO SUCH INCOME. HOWEVER, THE CLAIM WAS UPHELD BY THE HONBLE BOMBAY HIGH COURT. IN THE PRESENT CASE, FACTUALLY, THERE IS NO MATERIAL TO N EGATE THE ASSERTION OF THE ASSESSEE, WHICH ARE BORNE OUT OF THE MATERIAL ON RECORD , THAT THE ADDITIONAL INCOME IN QUESTION HAS BEEN RECEIVED IN THE COURSE OF CARRYING ON ITS BUSINESS ACTIVITY OF DEVELOPING THE HOUSING PROJECT, THE CRE ST AT PIMPLE SAUDAGAR, PUNE, WHICH IS ELIGIBLE FOR SECTION 80IB(10) BENEFITS. THEREFORE, IN TERMS OF THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHETH DEVELOPERS (P) LTD. (SUPRA), THE CLAIM OF THE A SSESSEE IS JUSTIFIED. 18. IN-FACT, ONCE IT IS FACTUALLY EXPLICIT THAT THE ADDITIONAL INCOME IN QUESTION IS DERIVED FROM THE HOUSING PROJECT, THE CREST AT PI MPLE SAUDAGAR, PUNE, WHICH IS ELIGIBLE FOR SECTION 80IB(10) BENEFITS, SUCH A N INCOME MERELY GOES TO ENHANCE THE BUSINESS INCOME DERIVED FROM THE ELIGIBL E HOUSING PROJECT AND SHALL BE ENTITLED FOR SECTION 80IB(10) BENEFITS, EVEN AS PER THE RATIO OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA). 19. IN THE RESULT, ON THE BASIS OF THE AFORESAID LEGAL POSITION AND THE MATERIAL AND EVIDENCE ON RECORD, ASSESSEE IS ELIGIBLE FOR DEDUCT ION U/S 80IB(10) OF THE ACT IN RELATION TO IMPUGNED ADDITIONAL INCOME OFFER ED IN A STATEMENT U/S 132(4) OF THE ACT IN THE COURSE OF SEARCH AND SUBSEQUEN TLY DECLARED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 153A(1)(A) OF THE ACT. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IS ALLOW ED. 136. IN VIEW OF THE ABOVE DECISIONS CITED (SUPRA) , THE ASS ESSEE, IN OUR OPINION IS ALSO ENTITLED TO DEDUCTION U/S.80IA(4) ON THE AD DITIONAL INCOME. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REAS ONING GIVEN BY THE CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN HIS ORDER. ACC ORDINGLY, THE SAME IS UPHELD. HOWEVER, AS PER THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE, THERE SEEMS TO BE SOME CALCULATION ERROR WHILE COMPUTING THE DEDUCTION U/S.80IA(4). WE, THEREFORE, DIRECT THE AO TO REC OMPUTE THE CORRECT DEDUCTION AS PER LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROU ND RAISED BY THE 86 REVENUE IS ACCORDINGLY DISMISSED. 137. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING ADDITIONAL DEPRECIATION OF RS. 29,23,912/- AT HIGHER RATE OF 80% FOR CIVIL WORK FOUNDATION AND RELATED L ABOUR COST OF THE WINDMILL. 138. FACTS OF THE CASE, IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE COMPANY HAS ERECTED WINDMILL S. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE SUCH AS DETAILS OF ERECTION, CIVIL WORK FOR IT, LABOUR CHARGES FOR ERECTION AND INSTALLATION ETC . THE AO NOTED THAT THE ASSESEE HAS CLAIMED DEPRECIATION ON ENTIRE EXPE NDITURE ON ACCOUNT OF PURCHASE AND ITS INSTALLATION. ACCORDING TO TH E AO HIGHER RATE OF DEPRECIATION IS ALLOWABLE ONLY ON WINDMILLS WHEREAS THE ASS ESSEE HAS CLAIMED DEPRECIATION AT HIGHER RATE ON EACH AND EVERY RU PEE INCURRED TOWARDS WINDMILL INCLUDING CIVIL CONSTRUCTION AND OTHER EXPENS ES TO ERECT WINDMILL. HE, THEREFORE, ASKED THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF HIGHER DEPRECIATION ON SUCH ASSETS. THE ASSESSEE SUBMIT TED THAT THERE IS NO CIVIL WORK FOR WINDMILL AND THE CIVIL WORK IS FOR FOUNDATION UP ON WHICH THE WINDMILL STANDS, THEREFORE, SUCH FOUNDATION CANNOT BE S EPARATED FROM THE WINDMILL AND DEPRECIATION IS ALLOWABLE IN FULL. 139. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. RELYING ON THE DECISION OF THE PUNE BENCH OF T HE TRIBUNAL IN THE CASE OF POONAWALLA FINVEST & AGRO (P) LTD. REPORTED IN 11 8 TTJ 68 DISALLOWED COST OF DEPRECIATION ON RS.29,23,912/-. SIMILARLY RS.15,92,976/- FOR A.Y. 2008-09, RS.3,51,621/- FOR A.Y. 2009-10 AND RS.6,73,517/- FOR A.Y. 2010-11 WAS DISALLOWED BY THE AO. 87 140. IN APPEAL THE LD.CIT(A) FOLLOWING HIS DECISION IN THE CASE OF M/S. CHHAPALKAR BROTHERS FOR A.Y. 2008-09 DETERMINED THE VARIO US COMPONENTS WHICH GO TO MAKE UP THE CASE OF THE WINDMILL, THE DETAILS O F WHICH ARE AS UNDER : 141. ACCORDINGLY, HE DIRECTED THE AO TO RECOMPUTE THE D EPRECIATION AS PER PARA 48 AND 49 OF HIS ORDER WHICH READ AS UNDER : 48. THEREAFTER I HAD DIRECTED THE ASSESSING OFFICER IN THE ABOVE REFERRED ORDER TO RECOMPUTED THE DEPRECIATION ACCORDING TO T HE FOLLOWING : I) COST OF NEW WINDMILL WILL BE INCLUSIVE OF ALL ITE MS MENTIONED AT 1 TO 5 ABOVE. II) COST OF POWER EVACUATION FACILITY AND INFRASTRUC TURE WILL BE APPORTIONED BETWEEN THE RATES APPLICABLE TO BUILDING/ROADS AND W INDMILL IN 60 : 40 RATIO. III) COST OF OTHER MISCELLANEOUS EXPENSES WILL BE APPOR TIONED ON PRORATA BASIS BETWEEN WINDMILL AND INFRASTRUCTURE FACILITIES. 49. IT WAS SUBMITTED BY THE APPELLANT THAT THE DET AILS OF SEPARATE COST OF FOUNDATION WERE NOT AVAILABLE WITH THEM. HOWEVER, THEY HAVE PROVIDED ME WITH A COPY OF ESTIMATE FOR CONSTRUCTION OF THE TUBUL AR FOUNDATION WHICH INCLUDES THE CIVIL WORK, ANCILLARY WORK, COST OF MATE RIAL USED AND THE MARGINS TAKEN BY THE SUPPLIER SUZLON IN RESPECT OF VALUATION DONE BY THE DVO AS ON 31/03/2006. I DIRECT THE ASSESSING OFFICER TO ADOPT TH AT SUM AS COST WHICH THE ESTIMATE BEARD TO THE TOTAL COST OF ONE WINDMILL AND ALLOW THE SAME AS COST OF FOUNDATION TO BE INCLUDED IN THE COST OF PLANT AND M ACHINERY. THE ASSESSING OFFICER IS ALSO DIRECTED TO FIND OUT THE COST OF ITEMS AT SR.NOS. 6 AND 7 OF THE SR.NO. PARTICULARS 1. COST OF WIND TURBINE GENERATOR 2. A) COST OF COMPONENT & ACCESSORY (COPPER WOUND WITH ACCESSORIES ) B) COST OF COMPONENT FOR GENERATION OF ELECTRICITY SUPPL Y OF ROTOR BLADES C) ELECTRICAL ITEMS, COMPONENTS OF RE DEVICE 3. COST OF TUBULAR TOWER 4. COST OF WORK INCLUDING FOUNDATION WORK 5. LABOUR RELATED COST A) INSTALLATION OF WINDMILL B) INSTALLATION OF ELECTRICAL LINE FOR POWER TRANSMISSION AND METER C) FINAL TESTING AND COMMISSIONING 6. REIMBURSEMENT OF POWER EVACUATION FACILITY AND CREAT ION OF INFRASTRUCTURE 7. MISCELLANEOUS A) PROCESSING CHARGES B) INTEREST OF LOAN CAPITALIZED UPTO 17/01/2008 C) PROFESSIONAL FEES D) REGISTRATION FEES E) SUBSTATION CHARGES F) FRANKING CHARGES G) MEDA OR EQUIVALENT CHARGES 88 ABOVE TABLE. THE APPELLANT IS DIRECTED TO PROVIDE THE COST ATTRIBUTABLE TO THESE ITEMS FOR THE PURPOSE OF ALLOCATION. IN CASE THE APPE LLANT IS UNABLE TO PROVIDE THESE DETAILS IN RESPECT OF SUPPLY OF WINDMILL BY ENERC ON, THE ASSESSING OFFICER WILL APPLY THE SAME RATIO AS THESE ITEMS BEAR TO TOTAL COST OF A SUZLON WINDMILL. THE APPEAL ON THIS GROUND IS PARTIALLY ALLOWED. 142. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 143. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPO RTED THE ORDER OF THE AO. 144. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. J-SONS FOU NDRY PVT. LTD. VIDE ITA NO.2349/PN/2012 ORDER DATED 28-01-2014 SUBMIT TED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE DIRECTIONS GIVEN BY T HE CIT(A) FOR COMPUTING THE DEPRECIATION ON WINDMILL HAS BEEN UPHELD AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. HE ACCORDING LY SUBMITTED THAT THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 145. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES. WE FIND IN THE CASE OF J-SONS FOUNDRY PVT. LTD. (SUPRA) THE CIT(A) FOLLOWING HIS DECISION IN THE CASE OF M/S. CHAPHALKAR BROTHERS HAD GIVEN IDENTICAL DIRECTION TO THE AO FOR COMPUTATION OF DEPRECIATION OF VAR IOUS COMPONENTS OF WINDMILL WHEREIN HIGHER RATE OF DEPRECIATION AT 80% WAS ALLO WED ON THE COST OF FOUNDATION AS WELL AS COST INCURRED ON ERECTION OF THE WINDMILL. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 5 OF THE ORDER READS AS UNDER : 5. IN SUM AND SUBSTANCE THE TRIBUNAL UPHELD THE ACTI ON OF THE ASSESSING OFFICER TO RESTRICT THE DEPRECIATION @ 10% ON SOME IT EMS BUT ALLOWED THE DEPRECIATION @ 80% ON THE COST OF FOUNDATION AS WELL AS COST INCURRED ON ERECTION AND COMMISSIONING OF THE WIND MILL. THE TRIB UNAL ALSO HELD THAT COST INCURRED ON INSTALLATION OF WIND MILL IS AN INTEGRAL PART OF THE WIND MILL AND THE ASSESSEE SHOULD BE ALLOWED DEPRECIATION @ 80% ON THE COST OF FOUNDATION AS WELL AS ON ERECTION AND COMMISSIONING. AS THE ISSUE IS CONSEQUENTIAL IN THIS YEAR VIS--VIS THE ALLOCATION MADE BY THE LD. CIT(A ), WE FIND NO REASON TO TAKE DIFFERENT VIEW. ACCORDINGLY, CONFIRM THE ORDER OF T HE LD. CIT(A) TO THE EXTENT OF ALLOCATION OF THE EXPENDITURE AND RATE OF DEPRECIAT ION ON FOUNDATION, ERECTION AND COMMISSIONING EXPENDITURE. GROUND NOS. 1 & 2 ARE D ISMISSED. 89 146. IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF J-SONS FOUNDRY PVT. LTD. (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A ) ALLOWING HIGHER DEPRECIATION @80% ON CIVIL WORK FOUNDATION AND RELAT ED LABOUR COST OF WINDMILL. GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 147. GROUND OF APPEAL NO, 4 BY THE REVENUE READS AS UNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN GIVING RELIEF OF RS. 75,00,000/- TO THE ASSESSEE ON ACCOUNT OF ADDITION OF EXPENSES MADE BY CHEQUE. 148. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE DU RING THE COURSE OF APPEAL PROCEEDINGS BEFORE THE CIT(A) STATED THAT THERE A RE INSTANCES OF DOUBLE ADDITION IN AS MUCH AS CERTAIN PAYMENTS MADE BY C HEQUES HAVE BEEN INCLUDED AGAIN IN THE BHAT DOCUMENTS TO ARRIVE AT FIGURE OF RS.43.8364 CRORES. IT WAS ARGUED THAT AMOUNTS PAID BY CHEQUE BY MAHALAXMI CONSTRUCTION CORPORATION LTD. RS.2.50 CRORES. B. T. PATIL AND SONS RS.1.50 CRORES AND A.B. RS.2 CRORES WHICH HAVE BEEN RECORDED AGAINST RESPECTIVE PARTIES IN THE REGULAR BOOKS OF ACCOUN TS HAS BEEN INADVERTENTLY INCLUDED IN DISCLOSURE. IF THESE AMOUNTS AR E EXCLUDED THEN THE DISCLOSURE WOULD BE ONLY RS.37.8364 CRORES. IT WAS POINTED OUT THAT IT HAD PAID AN AMOUNT OF RS.1.50 CRORES TO GOOFY GRAPHICS O N 28-07-2006 AND FURTHER AMOUNT OF RS.50 LAKHS EACH ON 16-07-2007 AN D 21-07-2007. THESE AMOUNTS ARE CONSIDERED IN THE BHAT DOCUMENTS AS PRE TENDER AMOUNTS. SUBSEQUENTLY REPAYMENTS WERE MADE BY CHEQU E ON 30-01-2008 AND 29-04-2008 BY GOOFY GRAPHICS TO THE ASSESSEE ON ACCOUNT OF REVERSAL OF PAYMENTS, RS.2 CRORES ON 05-03-2008 AND RS. 1 CRORE ON 29-04-2 008. IT WAS STATED THAT THESE TRANSACTIONS ARE INCLUDED IN COMP UTATION ON PAGES 38 AND 29 WHICH IS THE BASIS FOR MAKING THE AFORESAID DECLA RATION. IT WAS POINTED OUT THAT THE PAYMENTS MADE BY B.T. PATIL AND SO NS AND AN ENTITY GOING BY THE NAME AB AGGREGATING TO RS.5 CRORES SHOU LD BE EXCLUDED FROM UNEXPLAINED EXPENSES. 90 149. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED AN AMOUNT OF RS.75 LAKHS BY OBSERVING AS UNDER : 71. I HAVE GIVEN A CONSIDERATION TO THE APPELLANT' S CONTENTIONS AND EXAMINED THE CONTENTS OF THE RELEVANT PAGES FROM THE BHAT DOCUMENTS VERY MINUTELY. THE DATE OF TENDER IS 11/09/2006. PAGE NO. 34 SHOWS THAT AN AMOUNT OF RS. 13.3763 CRORES WAS PAID TO SEVERAL PERSONS ON OR B EFORE 16-06-2007 ON THIS PAGE, THE AMOUNT PAID BY B T PATIL AND SONS IS SHO WN AT RS. 3 CRORES WITH THE NARRATION 'CHEQUE AND CASH'. THE AMOUNT PAID BY THE APPELLANT IS SHOWN AT RS.3 CRORES AND BY AB AT RS.2 CRORES. NO NARRATION IS GI VEN AGAINST THE PAYMENTS OF MAHALAXMI CONSTRUCTION CORPORATION AND AB . THERE IS NO REASON TO IMPUTE THAT THE NARRATION 'CHEQUE AND CASH' APPEA RING AGAINST B T PATIL AND SONS WILL BE VALID FOR MAHALAXMI CONSTRUCTION CORPORA TION LTD. AND AB AS WELL. PAGES NO. 38 AND 18 CONTAINS NARRATION OF THE 'PRE-TE NDER AMOUNT OF RS. 1.50 CRORES PAID TO KALE. IF THE APPELLANT'S CLAIM THAT CH EQUE PAYMENTS IN PRE-TENDER AMOUNTS ARE INCLUDED IN THE UNEXPLAINED EXPENSES IS COR RECT THEN, THE PRE- TENDER AMOUNT SHOULD HAVE BEEN WRITTEN AS RS. 5 CRORE S BEING THE AMOUNT PAID BY MAHALAXMI CONSTRUCTION CORPORATION LTD., B T PATI L AND SONS AND AB, PRIOR TO THE TENDER DATE. THE APPELLANT HAS PROVIDED A COP Y OF ACCOUNT OF GOOFY GRAPHICS WITH MAHALAXMI CONSTRUCTION CORPORATION LTD. THIS SHOWS THAT A LOAN OF RS.1.50 CRORES WAS ADVANCED TO GOOFY GRAPHICS ON 28/ 07/2006 AND FURTHER PAYMENTS OF LOAN WERE MADE ON 16/07/2007 AND 21/07/2 007 OF SUMS OF RS. 50 LAKHS EACH, AGGREGATING TO RS.2.50 CRORES IN ALL. THESE AMOUNTS WERE REPAID BY GOOFY GRAPHICS ON 30/01/2008 (RS. 1. 50 CRORES) AND ON 25/03/2008 (RS.1 CRORE). PAGE NO. 27 OF THE BHAT DOCUMENTS CONTAIN TH E NARRATION 'CQ CONVERT' AGAINST THESE ENTRIES WITH FURTHER NARRATION OF 'PAID 20000 ON 05/03/2008' AGAINST THE ENTRY OF 30/01/2008 AND 'PAID 10000' AGA INST ENTRY OF 29/04/2008. PAGES NO. 18 AND 38 HAS ENTRIES PAID TO KA LE OF RS. 2 CORES ON 05/03/2008 AND RS.1 CRORES ON 29/04/2008. THESE ENTRIE S ARE MARKED AGAINST MAHALAXMI CONSTRUCTION CORPORATION LTD. ON SAME DATE S ON PAGE 37. ALTHOUGH IT APPEARS THAT THERE IS A CONNECTION BETWEEN THE UN EXPLAINED EXPENSES AND CHEQUES REVERSED, A CLOSER SCRUTINY SHOWS THAT THIS MAY NO T BE CORRECT. IF THE CONTENTION OF THE APPELLANT IS CORRECT THEN, PAGES NO . 38, 39 AND 18 OF BHAT DOCUMENTS SHOULD CONTAIN ENTRIES OF CHEQUE PAYMENTS MAD E BY MAHALAXMI CONSTRUCTION CORPORATION LTD. ON 28/07/2006, 16/07/2 007 AND 21/07/2007: HOWEVER, THIS IS NOT THE CASE. THIS IMPLIES THAT CHEQUE PAYMENTS MADE BY THE APPELLANT TO GOOFY GRAPHICS ARE NOT SHOWN AS EXPENSES IN THE BHAT DOCUMENTS THOUGH THEY HAVE BEEN RECORDED AS HAVING BEEN PAID B Y THE APPELLANT. THEREFORE, THERE CANNOT BE A DUAL ADDITION OF THE SA ME AMOUNT. 72. SIMILARLY, THE APPELLANT HAS PROVIDED ME WITH A COPY OF SHATMURTI REALITY PVT. LTD. WITH GOOFY GRAPHICS. THIS IS A RUNNING ACCOU NT THAT SHATMURTI REALITY PVT. LTD. HAD WITH GOOFY GRAPHICS BELONGING TO SHRI KALE. ON 28/07/2006 THERE ARE ENTRIES OF RS. 1.5 CRORES AND RS. 50 LAKHS GIVEN AS LOAN BY SHATMURTI REALITY PVT. LTD. TO GOOFY GRAPHICS. HOWEVER, THESE AMOUNTS DO NOT APPEAR IN THE PRE- TENDER AMOUNT ON PAGES NO. 38 AND 18 WHICH, AS MENTIO NED EARLIER, ONLY SHOWS AN AMOUNT OF RS.1.5 CRORES AS PRE-TENDER AMOUNTS PAID T O SHRI KALE. EVEN THE CONTRA ENTRY PERTAINING TO REVERSAL OF RS.2 CRORES, AL LEGEDLY PAID BY AB, IS NOT EVIDENT FROM THE SEIZED PAPER. 73. THUS, HOW THAT AMOUNT PAID BY CHEQUES HAS BEEN REV ERSED IS NOT EASILY EVIDENT FROM CONTENTS OF THE BHAT DOCUMENTS. IN THIS CONTEXT, THE FOLLOWING OBSERVATION OF THE HON 'BLE BOMBAY HIGH COURT CONCER NING RULE OF EVIDENCE IN THE CASE OF J. S. PARKAR V. V. B. PALEKAR [1974] 94 ITR 616 (BOM.) APPROVED IN CHUHARMAL V. CIT [1988] 172 ITR 250 (SC) ARE RELEVA NT AND WHICH WILL BE APPLIED IN DECIDING THIS ISSUE 91 IF ONE WERE TO INDULGE IN THE REALM OF POSSIBILITIES, EVERY CIRCUMSTANCE, EVERY FACT, EVERY INSTANCE IS PREGNANT WITH VARIETY OF POSSIB ILITIES. HOWEVER, A COURT OR TRIBUNAL OR A STATUTORY BODY INVESTED WITH THE DU TY AND OBLIGATION TO WEIGH THE MATERIALS BEFORE IT AND RECORD FINDINGS WITH REGA RD TO THE CONTROVERSIES- QUESTIONS, IS REQUIRED TO WEIGH SUCH MATERIALS ON THE T EST OF PROBABILITIES RATHER THAN ON THE TEST OF REMOTE POSSIBILITIES. IT IS THE MATERIAL ON THE RECORD, AND THAT MATERIAL ALONE, WHICH CAN AFFORD GUIDELINE S FOR THE QUASI-JUDICIAL AUTHORITY LIKE THE INCOME-TAX TRIBUNAL TO ARRIVE AT ITS CONCLUSION. WHILE IT IS NOT PERMISSIBLE FOR HIM TO SPECULATE AND CONJECTURE AGAINST THE ASSESSEE, IT IS NOT ALSO POSSIBLE FOR HIM TO INDULGE IN THE REALM OF REMOT E POSSIBILITIES IN HIS FAVOUR WITHOUT FINDING ANY BASIS FOR ANY SUCH CONTINGE NCY FROM THE MATERIAL IN HIS POSSESSION. 74. THE SEIZED DOCUMENTS, REVEAL THAT B T PATIL HAD MADE PAYMENT OF RS.1.5 CRORES IN CHEQUE PRIOR TO 14/04/2007. PAGE NO. 18 DO ES SHOW THAT THE TOTAL AMOUNT EXPENDED IS REDUCED BY AN AMOUNT OF RS.1.50 CR ORES. SINCE WE ARE RELYING ENTIRELY ON THE CONTENTS OF THE BHAT DOCUMEN TS TO DRAW AN INFERENCE OF UNACCOUNTED EXPENSES, IT WILL REASONABLE TO ASSUME THAT THE REDUCTION ON ACCOUNT OF PAYMENTS MADE TO SHRI KALE IS ON ACCOUNT O F CASH ENTRIES WHICH MIGHT HAVE CROSSED OUT THE CHEQUE ENTRIES FOR PAYMENT S MADE BY B T PATIL AND SONS. SINCE THE SEIZED DOCUMENTS DO NOT SHOW THE PRETEN DER AMOUNT TO BE MORE THAN RS. 1.50 CRORES, IT CANNOT BE INFERRED THAT THE AMOUNTS PAID BY CHEQUE BY THE APPELLANT AND AB ARE ALSO INCLUDED IN TOTAL PAYMENT OF RS. 43.8364 CRORES. THE APPELLANT'S SHARE OF THIS SUM WIL L BE RS. 75 LAKHS. HENCE, I HOLD THAT THE APPELLANT IS ENTITLED TO A RELIEF OF R S.75 LAKHS ON ACCOUNT OF TOTAL ADDITION OF EXPENSES MADE BY CHEQUE. 150. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 151. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE FINDING GIVEN BY THE LD.CIT(A) T HAT THE SEIZED DOCUMENTS REVEAL PAYMENT OF RS.1.5 CRORES IN CHEQUE PRIOR TO 14-04-2007 BY B.T. PATIL AND THE SHARE OF THE ASSESSEE IN THE SAID A MOUNT IS RS. 75 LAKHS FOR WHICH THE ASSESSEE IS ENTITLED TO A RELIEF OF RS.7 5 LAKHS ON ACCOUNT OF PAYABLE OF EXPENSES MADE BY THE CHEQUE IS NO T BASED ON ANY COGENT EVIDENCE AND PROPER APPRECIATION OF FACTS. ON A P OINTED QUERY BY THE BENCH DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE WAS ALSO UNABLE TO CLARIFY AS TO HOW THIS DEDUCTION/RELIEF WAS JUSTIFIED ON THE BASIS OF NOTINGS ONLY ON THE LOOSE PAPER. IN VIEW OF THE ABOVE, THE ORDER OF THE LD.CIT(A) ON THIS ISSUE IS SET ASIDE AND THE G ROUND RAISED BY THE REVENUE IS ALLOWED. 92 152. GROUNDS OF APPEAL NO.5 AND 6 BY THE REVENUE BEING G ENERAL IN NATURE ARE DISMISSED. ITA NO.2575/PN/2012 (BY ASSESSEE) (A.Y. 2008-09) : 153. GROUND OF APPEAL NO.1 AND 6 BY THE ASSESSEE BEING GENERAL IN NATU RE ARE DISMISSED. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND OF APPEAL NO.5 FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 154. GROUND OF APPEAL NO. 2 TO 2.6 BY THE ASSESSEE RELATE TO ADDITION OF RS.14,55,04,497 ON ACCOUNT OF DISALLOWABLE EXPENSES AS PER S EIZED PAPERS IN RESPECT OF GHODZARI PROJECT WHICH HAS BEEN CONFIRMED BY THE CIT(A ). 155. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN DS BY THE ASSESSEE ARE IDENTICAL TO GROUNDS OF APPEAL NO.2 TO 2.6 IN ITA NO.2574/PN/2012 FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN DISM ISSED IN THE PRECEEDING PARAGRAPHS. FOLLOWING THE SAME REASONINGS, THE ABOVE G ROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 156. GROUND OF APPEAL NO.3 TO 3.1 BY THE ASSESSEE RELATES TO THE ORDER OF THE CIT(A) IN ALLOWING DEPRECIATION OF POWER EVACUATION FACILITY AND INFRASTRUCTURE COST AT THE RATE APPLICABLE TO THE BUILDING AS AGAINST 60% CLAIMED BY THE ASSESSEE. 157. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN D IS IDENTICAL TO THE GROUNDS OF APPEAL NO.4 TO 5 IN ITA NO.2574/PN/2012 FOR A.Y. 2007-08 . WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISE D BY THE ASSESSEE HAVE BEEN DISMISSED. FOLLOWING THE SAME REASONINGS, THE ABO VE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 93 158. THE ASSESSEE HAS ALSO TAKEN AN ADDITIONAL GROUND W HICH READS AS UNDER : THE APPELLANT SUBMITS THAT THE DEDUCTION U/S.80IA(4) SHOULD BE CORRECTLY ALLOWED ON ADDITIONS FINALLY SUSTAINED. 159. AFTER HEARING BOTH SIDES, WE FIND, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS IDENTICAL TO THE ADDITIONAL GROUND RAISED BY T HE ASSESSEE FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISSUE AND TH E ADDITIONAL GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED FOR STAT ISTICAL PURPOSES. FOLLOWING THE SAME REASONINGS THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. ITA NO.54/PN/2013 (BY REVENUE) (A.Y. 2008-09) : 160. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ADDITIONAL DEPRECIATIO N OF RS.15,92,976/- AT HIGHER RATE OF 80% FOR CIVIL WORK FOUNDATION AND RE LATED LABOUR COST OF THE WINDMILL. 161. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN D RAISED BY THE REVENUE IS IDENTICAL TO THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IN ITA NO.53/PN/2013 FOR A.Y. 2007-08. WE HAVE ALREADY DECID ED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSE D. FOLLOWING THE SAME REASONINGS, THIS GROUND BY THE REVENUE IS DISMISSED. 162. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 8175 00/ - ON ACCOUNT OF UNACCOUNTED EXPENDITURE INCURRED BY THE ASSESSEE ON THE BASIS OF PAPER SEIZED FROM THE RESIDENCE OF SHRI. D A BHAT. 163. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD FAILED TO CONSIDER VARIOUS EXPENSES INCURRED AS APPEARING AT PAGES 1 TO 5 AND 7 OF THE SEIZED PAPERS AGGREGATING RS.94,17,652/-. AFTER CONSIDERING THE E XPLANATION OF 94 THE ASSESSEE THAT THE JEUR TUNNEL PROJECT WAS JOINTLY EXECUTED BY THE ASSESSEE AND M/S. B.T. PATIL AND SONS, THE AO ADDED 50% OF SUCH EXPENSES BEING THE ASSESSEES SHARE AMOUNTING TO RS.21 ,24,250/- U/S.69C IN A.YRS. 2008-09 AND 2009-10. IN RESPECT OF THE BALANCE AMOUNT OF RS.49,89,652/- THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THAT THESE PAPERS DID NOT BEAR DATES AND HE NCE DID NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION. HE THEREFORE HELD 50% OF THE ABOVE SUM, I.E. RS.24,94,826/- TO BE INCURRED IN A.Y. 2010-11 AND ACCOR DINGLY TAXED THE SAME. 164. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT PAGE 7 OF THE SEIZED PAPER CLEARLY SHOWS THE CALCULATION OF BANK GUARANTEE COST AND DOES NOT HAVE ANY FINANCIAL IMPLICATION. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE SUBMITTED THAT SET OFF OF THE ADDITIONS MADE ABOVE BE GIVE N AGAINST THE ADDITIONAL INCOME DECLARED ON ACCOUNT OF OMISSION AND MISTA KE AND WHICH IS SHOWN AS CONTINGENCY IN SOURCE AND APPLICATION STATEMENT. 165. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E, THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 68. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. AS NOTED EARLIER, THESE EXPENSES ARE RECORDED IN PAGES 1 TO 5 AN D 7 OF THE BHAT DOCUMENTS. THE TOTAL AMOUNT OF UNACCOUNTED EXPENSES A S PER THE ASSESSING OFFICER IS RS. 94,17,652/ - OUT OF WHICH 50% I.E. RS.4 6,19,076/- HAS BEEN ADDED IN VARIOUS ASSESSMENT YEARS AS MENTIONED ABOVE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD CERTAIN OBJECT IONS WHEN CONFRONTED WITH THE PROPOSAL TO MAKE THE ADDITIONS. THESE OBJECT IONS WERE (I) IN THE ABSENCE OF DATES AGAINST THE ENTRIES SHOWN I N THESE PAPERS IT WAS NOT POSSIBLE FOR THEM TO VERIFY THE ENTRIES WITH THE ENTRIES IN THE BOOKS OF ACCOUNT. HENCE IT WAS PUT THAT THEORETICAL ENTRIES CO ULD PERTAIN TO A PERIOD EVEN PRIOR TO 01/04/2002. (II) EXPENSES ON PAGES 4 AND 5 ON PROJECTS WERE NOT AC TUALLY INCURRED. (III) THE APPELLANT DOES NOT CONCUR WITH THE NOTINGS ON LOOSE PAPERS AND DIARIES FROM SHRI D A BHAT'S RESIDENCE. (IV) PAGE NO. 7 IS AN ESTIMATION OF COST WHICH DO NOT HAVE ANY FINAL IMPLICATION. 95 69. I HAVE GONE THROUGH THE CONTENTS OF PAGES NO. 1 T O 5 AND 7 OF THE SEIZED MATERIAL. PAGE NO. 1 IS A SUMMARY OF PAYMENTS MADE TO VARIOUS PERSONS, THE TOTAL OF WHICH IS RS. 3.35 LAKHS. PAGE NO. 2 IS AGAIN A SUMMARY OF PAYMENTS MADE TO VARIOUS PERSONS AGGREGATING TO RS.2.95 LAKHS. PAGE NO.3 SHOWS VARIOUS EXPENSES INCURRED IN HOTEL, GOLD PURCHASES, PLYW OOD PURCHASE, MOBILE BILLS OF NAVEEN, DYNAPAC LIST ETC. WHICH AGGREGATE TO RS.12,94,772/-. PAGE NO. 4 CONTAINS DETAILS OF EXPENSES INCURRED BY BOTH MAHALAXMI CONSTRUCTION CORPORATION LTD. AND B T PATIL AND SONS AND THE RECE IVABLE POSITION AS ON 11/07/2007. THE CONTENTS ON PAGE NO. 5 ARE DETAILS OF VARIOUS EXPENSES INCLUDING THOSE WHICH ARE WRITTEN AS 'K' EXPENSES. THE TOTAL OF 'K' EXPENSES IS RS. 26,13,500/- WHICH IS INCURRED ON VARIOUS DATES BET WEEN 26/12/2008 TO 24/01/2009. PAGE NO. 7 CONTAINS WORKING OF INTEREST P AYMENT ON PURCHASE OF TENDER DOCUMENTS, BANK GUARANTEES FOR EMDS, FDS TO BE K EPT FOR EMDS AND EMDS REQUIRED FOR PROCURING MOBILIZATION ADVANCES. IT APPEARS THAT THIS IS A WORKING OR ESTIMATE OF MONEY REQUIRED BY MAHALAXMI C ONSTRUCTION CORPORATION LTD. AND B T PATIL AND SONS FOR GIVING V ARIOUS BANK GUARANTEES AND MEETING EMD REQUIREMENTS. IN FACT, THE WORD 'OFFICIA L' IS ALSO MENTIONED AGAINST THESE WORKINGS. IN MY OPINION, THE CONTENTS OF PAGE 7 DO NOT REFLECT THE UNACCOUNTED EXPENSES OF THE APPELLANT AND THE ASSESSING O FFICER IS DIRECTED TO REDUCE THIS SUM FROM THE TOTAL FOR ASSESSMENT YEAR 2010-1 1 AND THEREAFTER WORK OUT THE EXPENSES INCURRED ON THE BASIS OF THESE PAP ERS. THE CONTENTION OF THE APPELLANT REGARDING ALLOWING A SET OFF OF THESE E XPENSES FROM AMOUNTS DECLARED ON ACCOUNT OF OMISSIONS AND MISTAKES SHOWN AS CON TINGENCY IS ACCEPTED AND THE ASSESSING OFFICER IS DIRECTED TO ACCOU NT FOR THESE EXPENSES IN SOURCE AND APPLICATION FOR THE RELEVANT ASSESSMENT YEA R AND TAX THE AMOUNT ONLY IF NO SOURCE IS AVAILABLE. 166. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 167. THE LD. CIT DR STRONGLY OBJECTED TO THE ORDER O F THE CIT(A) IN DELETING THE ADDITION. SHE SUBMITTED THAT THE SEIZED PAPE RS CLEARLY SHOW THE ACTUAL PAYMENTS WITH DATES FOR WHICH THE AO MADE AD DITION U/S.69C OF THE I.T. ACT. THE PAPERS WERE FOUND IN THE POSSESSIO N OF SHRI D.A. BHAT, A RESPONSIBLE PERSON OF THE ASSESSEE. ONLY UPON A STAT EMENT THAT OTHER PAPERS WHICH ARE WITHOUT DATE PERTAINS TO THE PERIOD BE YOND THE PERIOD UNDER CONSIDERATION IS NOT SUFFICIENT. THE ASSESSEE SHOULD HAVE PROVED BEYOND DOUBT THAT THE PAPERS DID NOT PERTAIN TO THE P ERIOD UNDER CONSIDERATION, THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DELET ING THE ADDITION MADE BY THE AO. 168. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAN D WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE HAS DECLARED ADDITIONAL 96 INCOME OF RS.1,86,04,479/- IN MAHALAXMI INFRA PROJECTS LTD., AN D R.D.S. CONSTRUCTION COMPANY AS CONTINGENCY IN TOTAL DECLARATION OF RS.31 CRORES. THE ASSESSEE ALSO REQUESTED IN THAT STATEMENT THAT IF A NY FURTHER ADDITION IS MADE THE SET OFF BE GIVEN AGAINST THE SAID CONTINGENCY . HE SUBMITTED THAT IT WAS CLEARLY BROUGHT TO THE NOTICE OF THE LOWER A UTHORITIES THAT THE ASSESSEE HAD THE SOURCE OF MAKING THESE EXPENSES. THE CIT(A) HAS ONLY DIRECTED THE AO TO VERIFY THE SOURCE AND APPLICATION STA TEMENT AND IN CASE THE SOURCE IS AVAILABLE, ADDITION WAS DIRECTED TO BE DELETED . HE ACCORDINGLY SUBMITTED THAT IF THE SOURCE IS AVAILABLE FOR INCURRING THES E EXPENSES, THERE IS NO REASON TO MAKE THE ADDITION. ACCORDINGLY, THE DIREC TION OF THE LD.CIT(A) IS JUSTIFIED. 169. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE INSTANT CASE THE AO MADE AN ADDITION ON THE BASIS OF CERTAIN DOCUMENTS SEIZED FROM THE RESIDENCE OF SHRI D.A. BHAT AS PER PAGES 1 TO 5 AND 7 WHICH CONTAIN CERTAIN EXPEND ITURE TOTALING TO RS.94,17,652/-. IT WAS ALSO NOTED BY THE AO THAT THE AS SESSEE HAS NOT CONSIDERED THE SAME WHILE WORKING OUT THE UNACCOUNTED IN COME. ACCORDINGLY, THE AO HELD THAT 50% OF SUCH EXPENDITURE BE LONGS TO THE ASSESSEE. SINCE THE PAPERS CONTAIN AMOUNT WITH DATES A N AMOUNT OF RS.8,17,500/- RELATING TO THE IMPUGNED ASSESSMENT YEAR WA S ADDED BY THE AO. WE FIND THE LD.CIT(A) DIRECTED THE AO TO VERIFY THE SOU RCE AND APPLICATION STATEMENT AND IN CASE THE SOURCE IS AVAILABLE T HEN TO DELETE THE ADDITION. WE DO NOT FIND ANY MERIT IN THE ABOVE LOGIC OF THE LD.CIT(A). ADMITTEDLY, THE PAPERS CONTAINING CERTAIN EXPENDITURE WITH DATES MENTIONED THEREIN ARE NOT CONSIDERED BY THE ASSESSEE W HILE WORKING OUT THE UNACCOUNTED INCOME. DURING THE HEARING BEFORE US, TH E LD. COUNSEL FOR THE ASSESSEE WAS ALSO NOT IN A POSITION TO CLARIFY THE BASIS OF DELETION MADE BY THE CIT(A) AND JUSTIFY SUCH DELETION. IN VIEW OF THE ABOVE WE 97 REVERSE THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GR OUND RAISED BY THE REVENUE IS ALLOWED. 170. GROUND OF APPEAL NO.3A AND 3B BY THE REVENUE READ AS UNDER : 3. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 80IA(4 ) OF RS. 24,03,21,259/- WHICH WAS EARLIER CONFIRMED BY THE LD. CIT(A) AS WELL AS THE HON'BLE ITAT FOR A.Y. 2004-05 AND 2005-06 AS THE ASSESSEE IS ONLY A WORK C ONTRACTOR AND NOT A DEVELOPER AS PER THE EXPLANATION BELOW 80IA(13). B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 80I A(4) OF RS. 67,33,791/- WHICH IS THE ADDITIONAL INCOME DECLARED DURING THE C OURSE OF SEARCH PROCEEDINGS, ON ACCOUNT OF EXPENSES FORM UNEXPLAINED SOURCES WHICH ATTRACT PROVISION OF S. 69C OF THE INCOME TAX ACT WHICH IS NO T AN INCOME FROM THE BUSINESS OF UNDERTAKING REFERRED TO IN SEC. 80IA(4). 171. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROU NDS BY THE REVENUE ARE IDENTICAL TO GROUND OF APPEAL NO.2A AND 2B BY THE REVENUE IN ITA NO.53/P/2013 FOR A.Y. 2007-08. WE HAVE ALREADY DECI DED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSE D. FOLLOWING THE SAME REASONINGS, THE ABOVE GROUNDS BY THE REVENUE ARE DISMISSE D. ITA NO.2576/PN/2012 (BY ASSESSEE) (A.Y. 2009-10) : 172. GROUNDS OF APPEAL NO.1 AND 8 BY THE ASSESSEE BEING GENERAL IN NATURE ARE DISMISSED. GROUND OF APPEAL NO.2 WAS NOT PR ESSED BY THE ASSESSEE FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE H AS NO OBJECTION FOR THE SAME. ACCORDINGLY, THE SAID GROUND IS DISMISSED AS NOT PRESSE D. 173. GROUND OF APPEAL NO.3 AND 3.1 BY THE ASSESSEE READS AS UNDER : 3] THE LD.CIT(A) ERRED IN CONFIRMING AN ADDITION O F RS.58,85,436/- ON ACCOUNT OF UNDERVALUATION OF WIP. 3.1] THE LD.CIT(A) FAILED TO APPRECIATE THAT AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE MATERIAL PURCHASED BY THE ASESSEE WAS EXPENSED OUT IN THE BOOKS BY THE ASSESSEE AND HENCE, THERE WAS NO REASON TO INCLUDE THE SAME IN THE CLOSING WIP. 98 174. AFTER HEARING BOTH THE SIDES, WE FIND THE FACTS REGARD ING ADDITION OF WORK-IN-PROGRESS IN DIFFERENT ASSESSMENT YEAR HAS ALREADY BEEN NARRATED WHILE DECIDING ITA NO.2572/PN/2012 FILED BY THE ASSESSEE. TH E FINDING OF THE LD.CIT(A) ON THIS ISSUE FOR A.Y. 2006-07, 2007-08 AND 2010-11 ARE ALREADY REPRODUCED AT PARA 32 OF THIS ORDER. IN THE P RECEEDING YEAR THE ADDITION OF RS.7,07,195/- ON ACCOUNT OF UNDERVALUATION OF WOR K-IN- PROGRESS WAS DELETED ON THE BASIS OF THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION/ ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA) ON THE GROUND THAT THE ASSE SSMENT WAS COMPLETED U/S.143(3) AND NO INCRIMINATING MATERIAL WAS FOUND E ITHER DURING THE COURSE OF SEARCH OR DURING 153A PROCEEDINGS. HOWEVER, THE SAID DECISION IS NOT APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR AS THE ASSESSMENT HAD NOT BEEN COMPLETED FOR THE A.Y. 2009-10 WHEN THE SEARCH TOOK PLACE AND THE SAME WAS PENDING. THE LD. COUNSEL FO R THE ASSESSEE WAS UNABLE TO EXPLAIN THE NON CONSIDERATION OF WORK-IN-PR OGRESS IN THE FINAL ACCOUNTS. IN VIEW OF THE ABOVE AND IN VIEW OF THE DET AILED REASONING GIVEN BY THE LD.CIT(A) WHILE CONFIRMING THE ADDITION OF RS.58,45 ,436/- ON ACCOUNT OF UNDERVALUATION OF WORK-IN-PROGRESS WE FIND NO INFIRMITY IN THE SAME. GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY DISMISSED. 175. GROUNDS OF APPEAL NO.4 AND 5 BY THE ASSESSEE READ AS UNDER : 4] THE LEARNED CIT(A) ERRED IN HOLDING THAT 60% OF THE COST OF POWER EVACUATION FACILITY AND INFRASTRUCTURE COST WOULD BE ENTITLED TO DEPRECIATION AT THE RATE APPLICABLE TO BUILDING AND NOT AT THE RATE APPLICABLE TO WINDMILL. 4.1] THE LD.CIT(A) FAILED TO APPRECIATE THAT THE EX PENDITURE ON POWER EVACUATION FACILITY AND INFRASTRUCTURE COST WAS PART A ND PARCEL OF WINDMILL AND HENCE, THE ENTIRE EXPENDITURE WAS ENTITLED TO DEPREC IATION AT A HIGHER RATE WHICH WAS AVAILABLE TO WINDMILL. 5] THE LD.CIT(A) ERRED IN DIRECTING TO APPORTION TH E OTHER MISC. EXPENSES BETWEEN WINDMILL COST AND INFRASTRUCTURE COST WITHOUT APPRECIATING THAT ALL THE EXPENSES INCURRED BY THE ASSESSEE WERE RELATING TO WINDMI LL AND THEREFORE, ALL SUCH MISC. EXPENSES SHOULD HAVE BEEN ALLOWED DEPRECIATIO N AT THE RATE APPLICABLE TO WINDMILL. 99 176. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN DS ARE IDENTICAL TO THE GROUNDS OF APPEAL NO.4 AND 5 IN ITA NO.2574/PN/2 012 FILED BY THE ASSESSEE FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE IS SUE AND THE GROUND RAISED BY THE ASSESSEE HAVE BEEN DISMISSED. FOLLO WING THE SAME REASONING, THE ABOVE GROUNDS BY THE ASSESSEE ARE DISMISSED. 177. GROUND OF APPEAL NO.6 BY THE ASSESSEE READS AS UNDER : 6] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE IN TEREST U/S.234A WAS LEVIABLE FOR THE PERIOD FROM 31-10-2009 TO 20-07-20 10 WITHOUT APPRECIATING THAT AS PER LAW, NO INTEREST WAS LEVIABLE FOR THAT PER IOD. 178. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE D URING APPEAL PROCEEDINGS BEFORE THE CIT(A) CHALLENGED THE LEVY OF INTERES T U/S.234A FOR THE PERIOD FROM 31-10-2009 ON 20-07-2010 ON THE GROUN D THAT THE SEARCH ACTION WAS CONDUCTED ON 23-09-2009 AND AS ON THE DAT E OF SEARCH, THE DUE DATE FOR FILING THE RETURN FOR A.Y. 2009-10 U/S.139(1) DID NOT EXPIRE. FURTHER, THE ASSESSEE HAD FILED ITS RETURN OF INCOME IN RES PONSE TO NOTICE U/S.153A ON 20-07-2010. IT WAS ARGUED THAT AS PER PR OVISIONS OF SECTION 153A(1)(A) A RETURN FILED IN RESPONSE TO NOTICE U/S.153A IS T O BE TREATED AS RETURN FILED U/S.139(1) AND THAT THE DUE DATE OF FILING RETURN U/S.139(1) GETS SHIFTED TO THE DATE PRESCRIBED IN THE NOTICE U/S.153A. 179. HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE ARGUMENTS AD VANCED BY THE ASSESSEE. HE OBSERVED THAT THERE IS NOTHING IN SECTION 153A OR 139 WHICH ALLOWS THE AO TO EXTEND THE TIME LIMIT FOR FILING OF INCOME -TAX RETURNS DURING THE REGULAR COURSE. ACCORDING TO THE C IT(A), IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED, THEN EVEN IF THE ASSESSEE DID NOT FILE THE RETURN OF INCOME FOR ANY OF THE 6 YEARS CONTEMPLAT ED U/S.153A OR 153C, THE TIME LIMIT FOR FILING OF RETURN OF INCOME FOR ALL THOSE Y EARS WOULD BE AUTOMATICALLY EXTENDED AND THE SAME WOULD HAVE TO B E CONSIDERED AS RETURN FILED U/S.139 AND THEREFORE ALL NATURAL CONSEQUENCES UNDER THE ACT INCLUDING THE PROVISIONS OF CARRY FORWARD AND SET OFF OF VARIO US TYPES OF 100 LOSSES AND COMPUTATION OF INTEREST PAYABLE U/S.234A, 234B, 234C AND 234D WOULD BECOME APPLICABLE. IT WOULD LEAVE NO DISTINCTION BETWEEN THE NON-FILER AND A REGULAR FILER OF RETURN AND WOULD RESULT IN ALLO WING PRESCRIBED BENEFITS TO A DELINQUENT ASSESSEE. HE ACCORDIN GLY HELD THAT IN RESPECT OF THE A.Y. 2009-10 THE ASSESSEE SHOULD HAVE FILED THE RETURN OF INCOME ON OR BEFORE 31-10-2009. SINCE THIS WAS NOT DONE THE ASSESSEE WAS LIABLE TO PAY INTEREST U/S.234A. HE ACCORDINGLY DISMISSE D THE GROUNDS RAISED BY THE ASSESSEE. 180. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 181. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WH EN THE SEARCH TOOK PLACE ON 23-09-2009 THE DUE DATE FOR FILING OF THE RE TURN U/S.139(1) HAD NOT EXPIRED. THE ASSESSEE IN RESPONSE TO NOTICE U/S .153A FILED HIS RETURN OF INCOME ON 21-07-2010. HE SUBMITTED THAT AFTER THE SEARCH THE ASSESSEE IS REQUIRED TO FILE RETURN U/S.153A ONLY. HENCE, THERE IS NO QUESTION OF FILING ANY RETURN U/S.139(1). THEREFORE, THERE IS NO DELAY IN FILING THE RETURN AND THEREFORE LEVY OF INTEREST U/S.234A IS NOT JUSTIFIED AT ALL. HE SUBMITTED THAT AS PER THE PROVISIONS OF SUB-SECT ION (3) OF SECTION 234A THE INTEREST CAN BE LEVIED FOR THE DEFAULT IN NOT FILING THE RETURN U/S.153A WITHIN THE TIME LIMIT PRESCRIBED IN THE SECTION. THE REFORE, WHEN THE NOTICE U/S.153A WAS SERVED ON THE ASSESSEE ON 06- 07-2010 ASKING THE ASSESSEE TO FURNISH THE RETURN OF INCOME WITHIN 30 DAYS FR OM THE RECEIPT OF NOTICE AND WHEN THE ASSESSEE HAS FILED ITS RETURN OF INCOM E ON 21-07- 2010, I.E. WITHIN THE PRESCRIBED PERIOD OF 30 DAYS, THEREFORE , THERE IS NO JUSTIFICATION FOR LEVY OF INTEREST U/S.234A. 182. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE AO AND CIT(A). 101 183. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VAR IOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE IN THE INSTANT CASE IS LEVY OF INTEREST U/S.234A OF THE I.T. ACT FOR THE PERIOD FROM 31-10-2009 T O 20-07-2010 BY THE AO WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE S UBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ON THE DATE OF THE SE ARCH ON 23-09-2009 THE DUE DATE FOR FILING OF THE RETURN U/S.139(1) HAS NOT EX PIRED. SINCE THE SEARCH HAS TAKEN PLACE THE ASSESSEE WAS PRECLUDED FROM FILING RETURN U/S.139(1). THE ASSESSEE IN RESPONSE TO NOTICE U/S.153A SE RVED ON HIM ON 24-06-2010 HAS FILED THE RETURN ON 21-07-2010 WHICH IS W ITHIN THE PERIOD OF 30 DAYS WHICH IS GRANTED BY THE AO. THEREFORE, THERE IS NO QUESTION OF LEVY OF ANY INTEREST U/S.234A. 184. WE FIND THE PROVISIONS OF SECTION 153A READ AS UNDER : 153A. [(1)] NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 1 32A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL ( A ) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH W ITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE ( B ), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MA NNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PRO VISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN W ERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; ( B ) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IM MEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS Y EAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. . . . . . . . . . . . . . . . . 185. WE FIND THE PROVISIONS OF SECTION 234A (3) READ AS UNDER : (3) WHERE THE RETURN OF INCOME FOR ANY ASSESSMENT YEA R, REQUIRED BY A NOTICE UNDER SECTION 148 [OR SECTION 153A] ISSUED [AFTER THE DETERMINATION OF INCOME UNDER SUB-SECTION (1) OF SECTION 143 OR] AFTER THE COM PLETION OF AN ASSESSMENT UNDER SUB- SECTION (3) OF SECTION 143 OR SECTION 144 OR SECTION 147, IS FURNISHED AFTER THE EXPIRY OF THE TIME ALLOWED UNDER SUCH NOTI CE, OR IS NOT FURNISHED, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RAT E OF [ONE] PER CENT, FOR 102 EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERI OD COMMENCING ON THE DAY IMMEDIATELY FOLLOWING THE EXPIRY OF THE TIME AL LOWED AS AFORESAID, AND,- (A) WHERE THE RETURN IS FURNISHED AFTER THE EXPIRY OF TH E TIME AFORESAID, ENDING ON THE DATE OF FURNISHING THE RETURN; OR (B) WHERE NO RETURN HAS BEEN FURNISHED, ENDING ON THE DA TE OF COMPLETION OF THE RE-ASSESSMENT OR RE- COMPUTATION UNDER SECTION 147[ OR REASSESSMENT UNDER SECTION 153A], ON THE AMOUNT BY WHICH THE TAX ON THE TOTAL INCOME DETERMINED ON THE BASIS OF SUCH RE-ASSESSMENT OR RE-COMPUTATION EXCEEDS THE TAX ON T HE TOTAL INCOME DETERMINED [UNDER SUB- SECTION (1) OF SECTION 143 OR] ON THE BASIS OF THE EARLIER ASSESSMENT AFORESAID. 186. WE FURTHER FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION REPORTED IN (2015) 93 CCH 0048 (MUMBAI HC) AT PARA 22 OF THE ORDER HAS OBSERVED AS UNDER : 22. A BARE PERUSAL THEREOF WOULD INDICATE AS TO HOW A NON OBSTANTE CLAUSE HAS BEEN INSERTED AND WITH A DEFINED INTENT. ONE WOULD F IND THAT IN SECTION 139 OF THE IT ACT, THE RETURN OF INCOME IS CONTEMPLATED. THESE PROVISIONS FALL IN CHAPTER XIV ENTITLED 'PROCEDURE FOR ASSESSMENT'. SECTI ON 139 DEALS WITH RETURN OF INCOME WHEREAS SECTION 140 STATES THAT SUCH R ETURN HAS TO BE VERIFIED. SECTION 147 WHICH ALSO FALLS WITHIN THIS CHA PTER DEALS WITH INCOME ESCAPING ASSESSMENT AND SECTION 148 PROVIDES FOR ISSUANCE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT. SECTION 149 SETS OUT A TIME LIMIT FOR NOTICE. THEN, APPEAR SECTIONS 149, 151 AND 153 WHICH, INTER-A LIA, DEAL WITH TIME LIMIT, SANCTION FOR ISSUE AND TIME LIMIT FOR COMPLETION OF ASS ESSMENTS AND REASSESSMENTS. ALL THESE ARE BROUGHT IN SECTION 153A AND SP ECIFICALLY MENTIONED WITH AN INTENT TO BRING THEM WITHIN THE N ON OBSTANTE CLAUSE. NOTWITHSTANDING ANYTHING CONTAINED IN THESE PROVISIONS WHERE SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHE R DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 31ST DAY OF MAY, 2003, THAT THE ASSESSING OFFICER IS IN A POSITION TO AND MANDATED TO ISSUE NOTICE WITHIN THE MEANING OF SUB-SECTION (1) OF SECTION 153A. THAT IS BEC AUSE THE PRECEDING CHAPTER, NAMELY, CHAPTER XIII WITHIN WHICH THE POWE RS OF SEARCH AND SEIZURE AND POWERS TO REQUISITION BOOKS OF ACCOUNT ARE SPELT OU T ENABLE THE REVENUE TO TAKE CARE OF CASES WHERE IT EFFECTS A SEARCH AND SEIZURE . THAT SEARCH AND SEIZURE IS EFFECTED AND AFTER THE SAME IS EFFECTED BOOK S OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUAB LE ARTICLE OR THING IS FOUND AS A RESULT THEREOF THAT NOTWITHSTANDING ANYTHING AND WITHIN THE MEANING OF THE ABOVE PROVISIONS HAVING BEEN CONCLUDED, IT IS OPEN FOR THE REVENUE TO MAKE AN ASSESSMENT. IT IS ALSO OPEN TO THE REVENUE TO MA KE A REASSESSMENT IN CASES WHERE IT EXERCISES THE POWERS TO REQUISITION BOOKS O F ACCOUNT ETC. THIS IS BECAUSE IT IS OF THE VIEW THAT THE BOOKS OF ACCOUNT AR E REQUIRED TO BE SUMMONED OR TAKEN INTO CUSTODY. IT, THEREFORE, ISSUES A SUMMONS IN THAT REGARD. IT MAY ALSO REQUISITION THE BOOKS OF ACCOUNT O R OTHER DOCUMENTS FOR THAT MIGHT BE USEFUL AND OR ANY ASSETS REPRESENTING WITH HOLDING OR PART INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BE EN DISCLOSED FOR THE PURPOSE OF THE INDIAN INCOME TAX ACT, 1922 OR THE IN COME TAX ACT OF 1961 BY ANY PERSON FROM WHOSE POSSESSION OR CONTROL THEY HAVE BEE N TAKEN INTO CUSTODY. THIS IS WHEN THE AUTHORITIES HAVE REASON TO BE LIEVE THAT SUCH POWERS NEED TO BE EXERCISED. THEREFORE, THE FETTERS AND WHIC H ARE TO BE FOUND IN OTHER PROVISIONS ARE REMOVED AND A NOTICE OF ASSESSMENT IN SUCH CASES IS THEN ISSUED. 103 THAT IS MANDATED BY SUB-SECTION (1) OF SECTION 153A. IT IS NOT ONLY THE ISSUANCE OF THE NOTICE BUT ASSESSMENT OR REASSESSMENT OF TOTAL INCO ME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION HAS TO BE MADE. 187. A COMBINED READING OF THE ABOVE PROVISIONS AS WELL AS THE DECISION CITED (SUPRA) INDICATES THAT A NON-OBSTANTE CLAUSE HAS BE EN INSERTED AND WITH A DEFINED INTENT. IN OUR OPINION, ONCE THE SEARCH TAK ES PLACE ON A PERSON AND THE DUE DATE FOR FILING OF THE RETURN U/S.139(1 ) HAS NOT EXPIRED HE CAN FILE THE RETURN ONLY AFTER THE ISSUE OF NOTICE U/S .153A. HE IS NOT REQUIRED TO FILE THE RETURN U/S.139(1). THEREFORE, THE AUTHORIT IES BELOW ARE NOT JUSTIFIED IN LEVYING INTEREST U/S.234A OF THE I.T. ACT FOR A PERIOD FROM 31-10-2009 TO 20-07-2010. THE GROUND RAISED BY THE A SSESSEE IS ACCORDINGLY ALLOWED. 188. GROUND OF APPEAL NO.7 BY THE ASSESSEE READS AS UNDER : 7] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CA SH SEIZED OF RS.2,05,00,000/- SHOULD BE APPORTIONED TOWARDS THE TA X LIABILITY OF THE ASSESSEE FROM MARCH 2011, I.E., THE DATE OF APPROPRIATI ON OF CASH BY THE DEPARTMENT AND NOT FROM THE DATE OF SEIZURE OF CASH I .E. 17-11-2009 FOR THE PURPOSES OF DETERMINING THE INTEREST PAYABLE U/S.234B. 189. AFTER HEARING BOTH THE SIDES, WE FIND AN AMOUNT OF RS.2 ,05,00,000/- WAS SEIZED AT THE TIME OF SEARCH. THE AO APPORTIONED T HE CASH SEIZED IN MARCH 2011 AND LEVIED INTEREST U/S.234B TILL THE SAID DATE. 190. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE AO HA D NOT APPRECIATED THAT THE CASH WAS SEIZED ON 12-10-2009 AN D HENCE THE CREDIT SHOULD HAVE BEEN GIVEN FROM THIS DATE. HOWEVER, THE CIT(A ) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT CREDIT CAN NOT BE GIVEN FROM THE DATE OF SEIZURE OF CASH. ACCORDING TO HIM, UNTIL AND U NLESS THE QUANTUM OF TAX PAYABLE IS DETERMINED AND THE ASSESSEE S PECIFICALLY REQUESTS THE DEPARTMENT TO APPROPRIATE THE CASH SEIZE D TOWARDS MEETING OF SUCH LIABILITY IT CANNOT BE STATED THAT CASH WAS AVAILABLE WITH THE DEPARTMENT FOR APPROPRIATION TOWARDS TAXES DUE. THE AS SESSEE HAS NOT 104 SHOWN THE INSTANCE WHERE IT HAD REQUESTED THE DEPARTM ENT FOR APPROPRIATION OF THE SEIZED CASH TOWARDS TAXES DUE. HE ACCORDINGLY HELD THAT INTEREST U/S.234B HAS BEEN CORRECTLY CHARGED AND COMPUTED BY THE AO. 191. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 192. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. THE MANNER OF APPLICATION OF ASSETS SEIZED U/S.132 OR REQUISITIONED UNDER 132A IS PRESCRIBED U/S.132B OF THE I.T . ACT. AS PER THE SAID PROVISIONS IF THE ASSET CONSISTS SOLELY OF MONEY OR PARTLY OF MONEY AND PARTLY OF OTHER ASSETS THE AO MAY APPLY SUCH MON EY IN THE DISCHARGE OF THE LIABILITIES REFERRED TO IN CLAUSE (I) OF SECTION 132B(I) AND THE ASSESSEE SHALL BE DISCHARGED OF SUCH LIABILITY TO THE EXTENT OF MONEY SO APPLIED. IN THE INSTANT CASE, THE MONEY SO SEIZED WAS KEPT IN THE P D ACCOUNT OF THE CIT. THE ASSESSEE VIDE LETTER DATED 30-03-2010, ADDRES SED TO THE AO, A COPY OF WHICH IS PLACED AT PAGE 261 OF THE PAPER BOOK HA S REQUESTED THE DEPARTMENT FOR APPROPRIATION OF THE SEIZED CASH TOWARDS ADVANCE TAX FOR A.Y. 2010-11. UNDER THESE CIRCUMSTANCES, WE ARE OF THE C ONSIDERED OPINION THAT SUCH CASH SO SEIZED CAN ONLY BE APPROPRIAT ED TOWARDS ADVANCE TAX FOR A.Y. 2010-11. THE AO IS DIRECTED TO GIVE C REDIT OF THE SEIZED CASH TOWARDS ADVANCE TAX FOR A.Y. 2010-11 ONLY AND NOT FOR A.Y. 2008-09 AS REQUESTED BY THE ASSESSEE. THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PUSHPENDRA SUBHAS CHANDRA R EPORTED IN 37 CCH 127 AND RELIED ON BY LD. COUNSEL FOR THE ASSESSEE ALSO SPEAKS OF THE SAME, I.E. FROM THE DATE OF REQUEST MADE BY THE ASSESSEE TO THE AO FOR TREATMENT OF THE CASH SEIZED. THE GROUND RAISED BY THE ASSESSEE ON THIS 105 ISSUE IS ACCORDINGLY DISMISSED. ITA NO.55/PN/2013 (BY REVENUE) (A.Y. 2009-10) : 193. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER ; 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ADDITIONAL DEPRECIATIO N AT HIGHER RATE OF 80% FOR CIVIL WORK FOUNDATION AND RELATED LABOUR COST OF THE WINDMILL. 194. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN D FILED BY THE REVENUE IS IDENTICAL TO THE GROUND OF APPEAL NO.3 IN ITA NO .53/PN/2013 FILED BY THE REVENUE FOR A.Y. 2007-08. WE HAVE ALREADY DEC IDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN ALLOWED. FOLLOWING THE SAME REASONING, THIS GROUND BY THE REVENUE IS ALLOWED. 195. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS, 1320675 0/ - (CORRECT FIGURE RS.13,06,750/-) ON ACCOUNT OF UNACCOUNTED EXPENDITURE INCURRED BY T HE ASSESSEE ON THE BASIS OF PAPER SEIZED FROM THE RESIDENCE OF SHRI. D A BHAT. 196. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN D IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.54/PN/2013 FILED BY THE RE VENUE FOR A.Y. 2008-09. WE HAVE ALREADY DECIDED THE ISSUE AND THE GRO UND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING THE SAME REASONING , THIS GROUND BY THE REVENUE IS DISMISSED. 197. GROUNDS OF APPEAL NO.3A AND 3B BY THE REVENUE READS AS UNDER : 3. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC, 80IA(4 ) OF RS. 156630732/ - WHICH WAS EARLIER CONFIRMED BY THE LD. CIT(A) AS WELL AS THE HON'BLE ITAT FOR AY. 2004-05 AND 2005-06 AS THE ASSESSEE IS ONLY A WORK CO NTRACTOR AND NOT A DEVELOPER AS PER THE EXPLANATION BELOW 80IA(13). B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 80IA(4) OF RS. 83199954/- WHICH IS THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARC H PROCEEDINGS, ON ACCOUNT OF EXPENSES FORM UNEXPLAINED SOURCES WHICH ATTR ACT PROVISION OF S. 69C OF THE INCOME TAX ACT WHICH IS NOT AN INCOME FRO M THE BUSINESS OF UNDERTAKING REFERRED TO IN SEC. 80IA(4). 106 198. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN D IS IDENTICAL TO GROUND OF APPEAL NO.2A AND 2B FILED BY THE REVENUE IN ITA NO.53/PN/2 013 FILED BY THE REVENUE FOR A.Y. 2007-08. WE HAVE ALREADY DEC IDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN ALLOWED. FOLLOWING THE SAME REASONING, THIS GROUND BY THE REVENUE IS ALLOWED. 199. GROUNDS OF APPEAL NO.4 AND 5 BEING GENERAL IN NATURE ARE DISMISSED . ITA NO.2577/PN/2012 (BY ASSESSEE) (A.Y. 2010-11) : 200. GROUNDS OF APPEAL NO.1 AND 7 BY THE ASSESSEE BEING GENERAL IN NATURE ARE DISMISSED. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING DID NOT PRESS GROUNDS OF APPEAL NO.2 AND 6 FOR WH ICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDING LY, THE ABOVE 2 GROUNDS BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 201. IN GROUNDS OF APPEAL NO.3 TO 3.2 THE ASSESSEE HAS C HALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.70,57,702/- MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY U/S.41(1) IN RESPEC T OF CREDITORS OUTSTANDING FOR A PERIOD OF MORE THAN 3 YEARS. 202. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN DS BY THE ASSESSEE ARE IDENTICAL TO GROUND OF APPEAL NO.3 IN ITA NO.2 574/PN/2012 FOR A.Y. 2007-08. THE FACTS AND SUBMISSIONS ARE ALREADY ME NTIONED THEREIN. WE HAVE ALREADY DECIDED THE ISSUE AND THE GRO UND RAISED BY THE ASSESSEE ON THIS ISSUE HAS BEEN ALLOWED. FOLLOWING THE SAM E REASONINGS THE ABOVE GROUNDS BY THE ASSESSEE ARE ALLOWED. 203. GROUNDS OF APPEAL NO.4 TO 5 BY THE ASSESSEE READ AS UNDER : 4] THE LEARNED CIT(A) ERRED IN HOLDING THAT 60% O F THE COST OF POWER EVACUATION FACILITY AND INFRASTRUCTURE COST WOULD BE ENTITLED TO DEPRECIATION AT THE RATE APPLICABLE TO BUILDING AND NOT AT THE RATE APPLICABLE TO WINDMILL. 107 4.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE EXPENDITURE ON POWER EVACUATION FACILITY AND INFRASTRUCTURE COST WAS PART A ND PARCEL OF WINDMILL AND HENCE, THE ENTIRE EXPENDITURE WAS ENTITLED TO DEPREC IATION AT A HIGHER RATE WHICH WAS AVAILABLE TO WINDMILL. 5] THE LEARNED CIT(A) ERRED IN DIRECTING TO APPORT ION THE OTHER MISC. EXPENSES BETWEEN WINDMILL COST AND INFRASTRUCTURE COST W ITHOUT APPRECIATING THAT ALL THE EXPENSES INCURRED BY THE ASSESSEE WERE RELAT ING TO WINDMILL AND THEREFORE, ALL SUCH MISC. EXPENSES SHOULD HAVE BEEN ALL OWED DEPRECIATION AT THE RATE APPLICABLE TO WINDMILL. 204. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN DS ARE IDENTICAL TO GROUND OF APPEAL NO.4 IN ITA NO.2574/PN/2012 FOR A.Y. 2 007-08. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED B Y THE ASSESSEE HAVE BEEN DISMISSED. FOLLOWING THE SAME REASONINGS, THE AB OVE GROUNDS BY THE ASSESSEE ARE DISMISSED. ITA NO.56/PN/2013 (BY REVENUE) (A.Y. 2010-11) : 205. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING THE ADDITIONAL DEPRECIA TION AT HIGHER RATE OF 80% FOR CIVIL WORK FOUNDATION AND RELATED LABOUR COST OF THE WINDMILL. 206. AFTER HEARING BOTH THE SIDES WE FIND THIS GROUND BY THE REVENUE IS IDENTICAL TO GROUND OF APPEAL NO.3 IN ITA NO.53/PN/2013 FILED BY THE REVENUE FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISS UE AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE HAS BEEN DIS MISSED. FOLLOWING THE SAME REASONING THIS GROUND BY THE REVENUE IS DISMISSED. 207. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.2494826/ - ON ACCOUNT OF UNACCOUNTED EXPENDITURE INCURRED BY THE ASSESSEE ON THE BASIS OF PAPER SEIZED FROM THE RESIDENCE OF SHRI. D A BHAT. 208. AFTER HEARING BOTH THE SIDES WE FIND THIS GROUND BY T HE REVENUE IS IDENTICAL TO GROUND OF APPEAL NO.2 IN ITA NO.54/PN/2013 FILED BY THE REVENUE FOR A.Y. 2008-09. WE HAVE ALREADY DECIDED THE ISS UE AND THE 108 GROUND RAISED BY THE REVENUE ON THIS ISSUE HAS BEEN ALLO WED. FOLLOWING SIMILAR REASONINGS THIS GROUND BY THE REVENUE IS ALLOWED. 209. GROUND OF APPEAL NO.3A AND 3B BY THE REVENUE READ AS UNDER : 3. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 801A(4 ) OF RS. 244532117/- WHICH WAS EARLIER CONFIRMED BY THE LD. CIT(A) AS WELL AS THE HON'BLE ITAT FOR A.Y. 2004-05 AND 2005-06 AS THE ASSESSEE IS ONLY A WORK C ONTRACTOR AND NOT A DEVELOPER AS PER THE EXPLANATION BELOW 801A(13). B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SEC. 801A(4) OF RS. 152787220/- WHICH IS THE ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARCH PROCEEDINGS, ON ACCOUNT OF EXPENSES FROM UNEXPLAINED SOURCES WHICH ATTR ACT PROVISION OF S. 69C OF THE INCOME TAX ACT WHICH IS NOT AN INCOME FRO M THE BUSINESS OF UNDERTAKING REFERRED TO IN SEC. 801A(4). 210. AFTER HEARING BOTH THE SIDES WE FIND THIS GROUND BY T HE REVENUE IS IDENTICAL TO GROUND OF APPEAL NO.2A AND 2B IN ITA NO.53/PN /2013 FILED BY THE REVENUE FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED T HE ISSUE AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE HAS BEEN DIS MISSED. FOLLOWING THE SAME REASONING THIS GROUND BY THE REVENUE IS DISMISSED. 211. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS UNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CASH FOUND IN LOCKER AS PROJECTED UNEXPENDED EXPENSES RELATING TO GHODZAR PROJECT, ALREADY ADMITTE D AS ADDITIONAL INCOME. 212. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COUR SE OF SEARCH ACTION CONDUCTED U/S.132 ON 23-09-2004 AT THE OFFICE PRE MISES OF THE ASSESSEE COMPANY, AN AMOUNT OF RS.2,05,00,000/- WAS FOUND FROM THE LOCKER MAINTAINED BY THE ASSESSEE AT BANK OF INDIA, LAXM IPURI MAIN BRANCH WHICH WAS OWNED BY SHRI R.D. SHINDE AND SMT. VEENA R. SHINDE JOINTLY. WHEN QUESTIONED ABOUT THE SOURCE OF THE SAID C ASH IT WAS STATED BY SHRI R.D. SHINDE THAT THIS CASH AMOUNT OF RS.2.05 CRORES IS KEPT SEPARATELY FOR THE PURPOSE OF PROJECTED EXPENDITURE OF GHODZARI PROJECT AND THIS AMOUNT IS NOT YET EXPENDED. IT WAS STATED BY HIM THAT THIS UNACCOUNTED CASH OF RS.2.05 CRORES IS PART OF ADDITIONAL INC OME DECLARED 109 OF RS.21,91,82,000/- IN RESPECT OF PROJECTED BUSINESS EXPENSES OF GHO DZARI PROJECT AND ALREADY COVERED IN TOTAL DECLARATION OF RS.31 CRORES M ADE IN THE STATEMENT RECORDED U/S.132(4) OF THE I.T. ACT. IT WAS ALS O STATED BY HIM THAT THIS UNACCOUNTED CASH IS GENERATED BY INFLATING VARIO US BUSINESS EXPENSES. 213. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID CASH OF RS.2.05 CRORES SHOULD NOT BE TREATED AS ITS ADDITIONAL INCOME. IT WAS EXPLAINED BY THE ASSESSEE THAT SINCE IT HAS ALREADY BEEN EXPLAINED THAT THE SAID CASH RE LATES TO GHODZARI PROJECT AND WAS ADMITTED AS ADDITIONAL INCOME AND THE SO URCE HAS ALREADY BEEN EXPLAINED, THEREFORE, NO ADDITION IS REQUIRED. 214. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT SPEED MONEY PAYMENTS WERE ALREADY MADE A ND HENCE THERE COULD NOT BE ANY PROJECTED EXPENSES. HE HELD THAT SINC E THE UNACCOUNTED FUNDS WERE ALREADY UTILIZED, THESE COULD NOT BE THE SOURCE OF CASH FOUND IN THE LOCKER. HE ACCORDINGLY MADE ADDITION OF RS.2.05 CRORES TO THE TOTAL INCOME OF THE ASSESSEE U/S.69A OF THE I.T. ACT. 215. BEFORE CIT(A) IT WAS SUBMITTED THAT THE CASH FOUND ST OOD EXPLAINED AS THE SAME WAS REFLECTED IN THE SOURCE AND APPLICATION S TATEMENT WHILE WORKING OUT UNDISCLOSED INCOME OF RS.24.71 CRORES IN ITS HAN DS. IT WAS POINTED OUT THAT THE AO HAD ALREADY TAXED THE ENTIRE G HODZARI PROJECT EXPENSES AND TAXING THE CASH FOUND HAD RESULTED IN DOUB LE ADDITION OF THE SAID AMOUNT. 216. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DIRECTED THE AO TO VERIFY THE SOURCE AND APPLICATION STA TEMENT ON THE BASIS OF WHICH UNDISCLOSED INCOME HAS BEEN OFFERED AND IN CASE TH ERE IS NO SURPLUS AVAILABLE THEN THE ENTIRE AMOUNT WILL BE TAXED AS U NEXPLAINED 110 CASH FOUND. THE RELEVANT OBSERVATION OF THE CIT(A) AT PAR A 79 AND 80 OF THE ORDER READS AS UNDER : 79. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER HAS MADE THIS ADDITION ON THE GROUND THAT SINCE THE SPE ED MONEY PAYMENTS WERE ALREADY MADE AND THE ASSESSEE HAS NOT MADE ANY DECL ARATION OF AN AMOUNT OVER AND ABOVE THE MONEY ALREADY EXPENSED OUT , THE SOURCE OF RS. 2.05 CRORES FOUND IN THE COURSE OF SEARCH AND SEIZURE WAS UNE XPLAINED. IN APPELLATE PROCEEDINGS, THE ASSESSEE HAS GIVEN A CHART SHOWING THE SOURCE AND APPLICATION OF MONEY WHILE WORKING OUT THE DISCLOSURE OF UNDISCLOSE D INCOME OF' 24.17 CRORES. THE ASSESSEE HAS TRIED TO IMPLY THAT SUFFICIENT AM OUNT OF CASH WAS AVAILABLE ON THE WORKING GIVEN BY HIM WHICH WAS SUFFI CIENT TO EXPLAIN THE EXISTENCE OF RS. 2.05 CRORES IN THE LOCKER. THE APPEL LANT POINTED OUT THAT IT HAD MADE A DISCLOSURE OF ALMOST RS.31 CRORES IN AGGREGATE BE TWEEN ITSELF AND M/S. R D S CONSTRUCTION COMPANY. 80. I HAVE GONE THROUGH THE CONTENTS OF THE CHART WH ICH SHOWS THE SOURCE AND APPLICATION OF FUNDS. WHILE IT IS CORRECT THAT THE SOU RCE AND APPLICATION METHOD WILL BRING OUT WHETHER A CERTAIN AMOUNT OF UNEXPLAI NED EXPENSE OUT OF DECLARATION IS AVAILABLE TO EXPLAIN THE CASH FOUND IN THE LOCKER AT LAXMIPURI, THE SAME WILL HAVE TO BE REWORKED UPON GIVING EFFECT TO THIS ORDER. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO PREPARE THE SOURCE A ND APPLICATION STATEMENT IN RESPECT OF THE UNDISCLOSED INCOME IN THE F ORM OF INFLATION OF CONSTRUCTION EXPENSES AND ADDITIONS MADE. THEREAFTER, THE SAME SHALL BE APPLIED AS PER THE DETAILS FOUND DURING THE COURSE OF SEARCH AT VARIOUS PLACES (SHRI R SHINDE'S PLACE, SHRI BHAT'S PLACE ETC.). THE ASSESSING OFFICER SHALL ALSO TAKE INTO ACCOUNT THE APPLICATION AS PER ADDITIONS MA DE IN ASSESSMENT AND CONFIRMED VIDE THIS ORDER. IF THERE IS ANY SURPLUS REM AINING AFTER COMPARING THE SOURCE AND APPLICATION OF INCOME THEN, THE SAME S HALL BE APPROPRIATED TOWARDS CASH FOUND IN THE RESIDENTIAL PRE MISES AND IN THE LOCKER. IN CASE THERE IS NO SURPLUS AVAILABLE THEN, THE ENTIRE AMO UNT WILL BE TAXED AS UNEXPLAINED CASH FOUND. FOR STATISTICAL PURPOSES, THIS G ROUND OF APPEAL IS ALLOWED. 217. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 218. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE CIT(A). HE HAS ONLY GIVEN A DIRECTION TO THE AO TO VERIFY THE CASH FLOW STATEMENT AND IF THE SOURCE IS AVAILABLE THEN TO DELETE THE ADDITION AND IN CASE THE ASSESSEE IS UNABLE TO EXPLAIN THE SOURCE , TO MAKE THE ADDITION. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDIN GLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 111 219. GROUND OF APPEAL NO.5 BY THE REVENUE READS AS UNDER : 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S. 801A ON A CCOUNT ON WINDMILL OF RS. 10772594/ - . 220. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT WHILE MAKING THE C LAIM OF DEDUCTION UNDER SECTION 80IA(4)(IV), THE ASSESSEE HAD IGNORE D THE PROVISIONS OF 80IA(5) WHICH PROVIDED THAT THE PROFIT AND GAIN OF ELIGIBLE BUSINESS SHOULD BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WE RE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YE AR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSM ENT YEAR UPTO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. IT IS MENTIONED IN THE ORDER THAT THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION AND IN THE YEAR OF INSTALLATION OF WIND MILL THE UNABSORBED DEPRECIATION OF WINDMILL WAS CLAIMED AND ALLOWE D AGAINST PROFIT OF SUCH OTHER BUSINESS. FURTHER THE ASSESS EE HAD SHOWN PROFIT FROM WINDMILL FOR SUBSEQUENT YEARS. THE ASSESSING OFFICER REWORKED THE MANUFACTURING AND PROFIT AND LOSS ACCOUNT IN RESPECT OF WINDMILL AS PER PROVISIONS OF SECTION 80IA(5). HE OBSERVED TH AT AS PER THIS WORKING THAT EVEN AT THE END OF THE ASSESSMEN T YEAR UNDER CONSIDERATION, THERE WAS UNABSORBED DEPRECIATION OF RS.15,1 5,28,827/-. BASED ON THE ABOVE OBSERVATION, THE CLAIM OF DEDUCTION U NDER SECTION 80IA WAS REJECTED AND THE SUM OF RS.1,07,72,594/- WAS BROUGHT TO TAX. 221. BEFORE CIT(A) IT WAS SUBMITTED THAT IT HAD INSTALLED TWO WINDMILLS IN A.Y. 2006-07 AND ONE IN A.Y. 2007-08 WHICH WAS ENTITLED FOR DEDUCTION U/S.80IA(4)(IV)(A) FROM A.Y. 2006-07, WHICH WAS FIRST YEAR OF GENER ATION OF POWER. IT HAD SET OFF LOSS FROM WINDMILL AGAINST THE PROFIT O F CONSTRUCTION ACTIVITY FOR 4 YEARS TILL A.Y. 2009-10. WHEN THE OPERATION OF WINDMILL ACTIVITY RESULTED IN PROFIT OF RS.1,07,72,594/- FOR THE FIRST TIME , IT HAD 112 CLAIMED DEDUCTION IN A.Y. 2010-11. YEARWISE DETAILS OF PROFIT /LOSS FROM WINDMILL ACTIVITY PRODUCED DURING ASSESSMENT PROCEEDINGS W ERE NOT CONSIDERED BY THE ASSESSING OFFICER. THE INITIAL ASSESSMENT YEAR IN THE CASE OF ELIGIBLE UNDERTAKING IS THE FIRST YEAR OF CLAIM OF DEDUCTION A ND NOT THE FIRST YEAR OF OPERATION OF THE UNDERTAKING. THE FICTION OF NOTIONAL CARRY FORWARD OF LOSSES U/S.80IA(5) DOES EXIST BUT OPERATES ONL Y FROM INITIAL ASSESSMENT YEAR, I.E. THE FIRST YEAR OF CLAIM AND THEREAFT ER AND IS NOT APPLICABLE FROM EARLIER YEARS. IN SUPPORT OF ITS CLAIM THE A SSESSEE RELIED ON THE FOLLOWING DECISIONS : 1. VELAYUDHASWAMI SPINNING MILLS VS. ACIT 38 DTR 57 2. POONAWALLA ESTATE STUD & AGRO FARM (P) LTD. VS. ACIT (2011) 136 TTJ 236 (PUNE) 222. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UNDER : I HAVE GIVEN CAREFUL CONSIDERATION TO THE CONTENTIO NS OF THE APPELLANT. A SIMILAR ISSUE HAD COME UP IN APPEAL BEFORE ME IN THE C ASE OF M/S. PREETAM ENTERPRISES WHEREIN THE HONOURABLE ITAT, PUNE BENCH A BENCH IN ITA NO.544, 545 AND 613/PN/2009 DATED 29-04-2011 IN ITS CASE FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07, HAD ALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4)(IV)(A). THE RELEVANT PORTION OF THE ITA TS ORDER IS REPRODUCED BELOW : 2.1 WE ALSO FIND THAT IN THE CASE OF VELAYUDHASWAMY SP INNING MILLS (P) LTD. VS. ACIT (2010) 231 CTR (MAD) 368 HONBLE M ADRAS HIGH COURT HAS HELD THAT LOSSES AND DEPRECIATION OF THE YEARS EARLI ER TO THE INITIAL ASSESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST THE PROFITS OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS FOR COMPUTI NG THE DEDUCTION U/S.80IA. FOLLOWING THIS JUDGMENT OF HONBLE MADRAS H IGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS EN TITLED TO CLAIM FOR DEDUCTION U/S.80IA(4)(IV)(A) OF THE ACT. 85. THUS, IN VIEW OF THE IDENTICAL FACTS AND CIRCUMSTA NCES, DECISION OF THE HONBLE ITAT REPRODUCED ABOVE IS APPLICABLE TO THE I NSTANT CASE ALSO. THE DISALLOWANCES MADE FOR THE ASSESSMENT YEARS UNDER APPEAL A RE THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. 223. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 113 224. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN CASE OF THE SISTER CONCERN OF THE A SSESSEE NAMELY ACIT CENTRAL CIRCLE, KOLHAPUR VS. R.D.S. CONSTRUCTION PVT. LTD. AND VICE VERSA IN ITA NOS. 377 TO 383/PN/2013 AND ITA NOS. 2578 TO 2581/PN/2012 FOR A.YRS. 2007-08 TO 2010-11 ORDER DATED 06-11-2015. WE FIND THE TRIBUNAL AT PARA 135 AND 136 OF THE ORDER HA S DISCUSSED THE ISSUE AND THE GROUND RAISED BY THE REVENUE ON THIS ISS UE WAS DISMISSED. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER : 135. AFTER HEARING BOTH THE SIDES, WE FIND THE ISSUE AS TO WHETHER INITIAL ASSESSMENT YEAR U/S.80IA(5) MEANS YEAR OF INSTALLATION OF WINDMILL OR YEAR IN WHICH THE CLAIM OF DEDUCTION U/S.80IA IS FIRST MADE HA S BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALLA ESTATE STUD & AGRO FARM PVT. LTD.(SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER : 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE FACTUAL MATRIX OF THE CASE AND ORDERS OF THE REVENUE AND THE PAPER BOOK. W E HAVE ALSO EXAMINED THE LEGAL POSITION ON THE MATTER. BEFORE ADJUDICATING TH E ISSUE IN QUESTION, IT IS NECESSARY TO EXAMINE THE SCOPE OF THE PROVISIONS RELATIN G TO THE INITIAL ASSESSMENT YEAR : '80-IA. DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT, ETC.(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING OR AN ENTERPR ISE REFERRED TO IN SUB-S. (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISION S OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO HUNDRED PER C ENT OF PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR THE FIRST FIVE ASSESSMENT YEA RS COMMENCING AT ANY TIME DURING THE PERIODS AS SPECIFIED IN SUB-S. (2) A ND THEREAFTER, TWENTY- FIVE PER CENT OF THE PROFITS AND GAINS FOR FURTHER FI VE ASSESSMENT YEARS : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, THE PROVI SIONS OF THIS SUB- SECTION SHALL HAVE EFFECT AS IF FOR THE WORDS TWENTY-F IVE PER CENT; THE WORDS THIRTY PER CENT HAD BEEN SUBSTITUTED. (2) THE DEDUCTION SPECIFIED IN SUB-S. (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PA RK OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER : PROVIDED THAT WHERE THE ASSESSEE BEGINS OPERATING AND MA INTAINING ANY INFRASTRUCTURE FACILITY REFERRED TO IN CL. (B) OF EX PLANATION TO CL. (I) OF SUB-S. (4), THE PROVISIONS OF THIS SUB-SECTION SHALL HAVE EFFECT AS I F FOR THE WORDS FIFTEEN YEARS, THE WORDS TWENTY YEARS HAD BEEN SUBSTITUTED... ............' 114 14. FROM THE ABOVE PROVISIONS OF SUB-S. (2) OF S. 80-IA OF THE ACT, IT IS EVIDENT THAT THE ASSESSEE IS GRANTED THE OPTION TO SELECT INI TIAL ASSESSMENT YEAR I.E., FIRST ASSESSMENT YEAR OF THE ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS. STARTING ASSESSMENT YEAR FOR COUNTING TH E DURATION OF FIFTEEN YEARS IS ALSO PROVIDED IN THE SAID SUB-SECTION. AS PER THE SE PROVISIONS, THE ASSESSEE IS NOT ALLOWED TO JUMP THE ASSESSMENT YEAR ONCE AN INITIAL ASSESSMENT YEAR IS OPTED. THEREFORE, WE FIND NO FAULT WITH THE ASSESSEE IN SELECTING THE ASST. YR. 2004-05 AS THE INITIAL ASSESSMENT YEAR. IN THIS REG ARD I.E., ON THE ISSUE OF ASSESSEES OPTION TO SELECT THE INITIAL ASSESSMENT YEAR, WE HAVE PERUSED THE CITATIONS RELIED UPON BY THE ASSESSEES COUNSEL. THE CONCL USION BY THE TRIBUNAL MUMBAI BENCH DECISION IN ITA NO. 4620/MUM/2007 (ASST. YR. 2004-05) IN THE CASE OF DY. CIT VS. USHDEV INTERNATIONAL LTD., IS STRAIG HT ON THIS ISSUE OF INITIAL ASSESSMENT YEAR AND THE OPTION TO THE ASSESSEE AND THE HEL D PORTION OF THE DECISION READS AS UNDER : 'IN VIEW OF THE ABOVE LEARNED CIT(A)S ORDER TO THE EXTENT OF HOLDING THAT INITIAL ASSESSMENT YEAR AND SUBSEQUENT SUCCEEDING ASSESSMENT YEARS CAN ONLY BE CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION UND ER S. 80-IA. COMING TO THE FACTS OF THE CASE, HOWEVER, AS SEEN FROM THE SCHEDUL E OF DETAILS AVAILABLE IN THE LEARNED CIT(A)S ORDER THE ASSESSEE HAS INCURRED LOSSES IN THE ASST. YRS. 1997-98 AND 1998-99 ONLY. SUBSEQUENTLY IN ALL THE YE ARS THERE WERE PROFITS TILL ASST. YR. 2004-05. IT IS NOT CLEAR WHETHER THE ASSESSEE HA S CLAIMED ANY DEDUCTION IN EARLIER YEARS UNDER S. 80-IA. THIS BEING THE 8TH YEAR OF STARTING THE PROJECT, ASSESSEE WOULD BE LEFT WITH ONLY ANOTHER 7 YEA RS OF CLAIM OUT OF THE 10 YEARS AVAILABLE TO THE ASSESSEE. CONSIDERING THIS WE ARE O F THE OPINION THAT THE INITIAL ASSESSMENT YEAR IS TO BE DETERMINED ON THE BASIS O F THE YEAR THE ASSESSEE CHOOSE TO CLAIM THE DEDUCTION FOR THE FIRST TIME..... ...' 15. WHEN THE STATUTE HAVE GRANTED THE OPTION TO CHOO SE THE INITIAL ASSESSMENT YEAR AND WHEN THE ASSESSEE HAS SO CHOSEN THE CURRENT ASSESSMEN T YEAR AS THE INITIAL ASSESSMENT YEAR AND WHEN THE ASSESSEE ACCORDINGLY P AID THE TAXES ON THE PROFITS OF THE WINDMILL ACTIVITY IN THE EARLIER YEARS AS PER THE STATUTE, THE AOS DECISION TO THRUST THE INITIAL ASSESSMENT YEAR ON THE ASSESSEE IS NOT IN TUNE WITH THE PROVISIONS OF S. 80-IA(2) OF THE ACT. ACCORDI NGLY, WE ARE OF THE OPINION, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INITIA L ASSESSMENT YEAR FOR THE PURPOSES OF S. 80-IA(2) R/W S. 80-IA(5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING THE ELECTRICITY. THEREFORE, THE O RDER OF THE CIT(A) HAS TO BE REVERSED ON THIS ISSUE. IT IS CLEAR THAT THE INITIAL ASSE SSMENT YEAR FOR THE ABOVE PURPOSES WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION UNDER S. 80-IA(1) AFTER EXERCISING HIS OPTION AS PER THE PRO VISIONS OF S. 80-IA(2) OF THE ACT. CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION OF RS. 25,44,326 UNDER S. 80-IA IN RESPECT OF THE PROFITS FRO M THE WINDMILL ACTIVITY. ACCORDINGLY, THE CLARIFICATORY GROUND RAISED IS ALLOW ED. IN THE RESULT, ADJUDICATION OF THE GROUNDS 3 AND 4 RAISED IN THE APP EAL IS MERE ACADEMIC AND HENCE THEY ARE DISMISSED AS INFRUCTUOUS. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 136. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN ABSENCE OF ANY CONTRAR Y MATERIAL BROUGHT TO OUR NOTICE WE HOLD THAT THE PROVISIONS OF SECTION 80IA(5) ARE APPLICABLE ONLY FROM THE INITIAL ASSESSMENT YEAR, I.E. THE ASSESSMENT YEAR IN WHICH DEDUCTION U/S.80IA(4) WAS FIRST CLAIMED BY THE ASSESSEE AFTER EXERCI SING ITS OPTION AS PER THE PROVISIONS OF SECTION 80IA(2) OF THE ACT. THE ORDE R OF LD.CIT(A) IS ACCORDINGLY UPHELD AND THE GROUND RAISED BY THE REVE NUE IS ACCORDINGLY DISMISSED. 115 225. FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL ON THIS VERY ISSUE TO WHICH BOTH OF US ARE PARTIES, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 226. GROUNDS OF APPEAL NO.6 AND 7 BY THE REVENUE BEING G ENERAL IN NATURE ARE DISMISSED. 227. IN THE RESULT, ITA NO.2571/PN/2012 FILED BY THE ASSES SEE AND ITA NOS. 50 & 51/PN/2013 FILED BY THE REVENUE ARE DISMISSED A ND OTHER APPEALS FILED BY THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED AS INDICA TED. PRONOUNCED IN THE OPEN COURT ON 09-12-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 09 TH DECEMBER, 2015. LRH'K ' (!* + / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ ( ) , ' / THE CIT(A), KOLHAPUR 4. $ , ' / THE CIT, KOLHAPUR 5. ) ,,- , - , IQ.KS / DR, ITAT, A PUNE 6. 1 / GUARD FILE. / BY ORDER , // TRUE COPY // 34 , - / SR. PRIVATE SECRETARY -, IQ.KS / ITAT, PUNE
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