Wp/1360/2022 Of Saurashtra Infra Adn Power Pvt. Ltd v. Deputy Commissioner Of Income Tax Circle -3(3)(1) And 3 Other

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2023.01.0919:15:45+0530 THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1360 OF 2022 Saurashtra Infra & Power Pvt. Ltd.]having its corporate offce at ]65C, 6[th] Floor, Mittal Tower,]Nariman Point, Mumbai-400 021.]… PetitionerVersus1. Deputy Commissioner of Income-tax]Circle-3(3)(1), having his offce at]Room No.609, 6[th] foor,]Maharshi Karve Road,]Mumbai – 400 020.]]]2. Pr. Commissioner of Income-tax-3,]having his offce at Room No.629,]6[th] foor, AayaNar Bhavan,]M.K. Road, Mumbai – 400 020.]]3. The Assessing Offcer,]National Faceless Assessment Centre,]Delhi.]]4. Union of India,]through Ministry of Finance,]North BlocN, New Delhi – 110 001.]..Respondents**** Mr.V. Sridharan, Senior Advocate with Mr.B.V. Jhaveri, Mr.Sriram & Ms. Bhargavi Rawal, Advocate for petitioner. Mr.ANhileshwar Sharma with Ms.Shilpa Goel, Advocates forrespondents. ***** CORAM : DHIRAJ SINGH THAKUR &KAMAL KHATA, JJ. RESERVED ON : PRONOUNCED ON : 2[nd] JANUARY, 20239[th] JANUARY 2023 J U D G M E N T PER DHIRAJ SINGH THAKUR, J. 1.The present petition is fled, inter-alia, challengingthe notice, dated 26[th] March 2021, issued u/s. 148 of theIncome Tax Act, 1961 (‘the Act’), whereby thereassessment proceedings are sought to be initiatedagainst the petitioner for the assessment year 2015-16. 2.Briefy stated the material facts are as under : (a)The petitioner is a company engaged in thebusiness of infrastructure development andrunning a Container Freight Station. Return ofincome for the assessment year 2015-16 was fledon 30[th] September 2015 and declared booN proft u/s.115JB of the Act of Rs.8,72,54,012/-. Thepetitioner in its return claimed a deduction ofRs.10,24,27,306/- u/s. 80IA(4) of the Act. The case of the petitioner was selected for scrutiny forpurposes of verifcation of claim as regardsdeduction under Chapter VI-A of the Act. (b)A notice u/s. 143(2) of the Act dated 27[th] July2016 was issued and subsequently a notice u/s.142(1) dated 19[th] January 2017 was issued. (c)Reply dated 3[rd] May 2017 is stated to havebeen fled along with acNnowledgment of flingrevised Form 10CCB for A.Y. 2015-16 dated 27[th]April 2017 and un-audited accounts forinfrastructure unit on which deduction u/s.80IA(4)was claimed. A reply dated 22[nd] May 2017 alongwith note on large deduction claimed under ChapterVI-A and documents explaining the basis forclaiming deduction u/s. 80IA(4) of the Act was alsofled. Finally, the Assessing Offcer (‘AO’) passed theassessment order dated 12[th] June 2017. However,disallowed the deduction u/s. 80IA(4) of the Act tothe extent of Rs.4,17,247/- only. 3.A notice dated 26[th] March 2021 u/s. 148 of the Actwas issued for reopening the assessment for theassessment year 2015-16. Return of income was fled bythe petitioner on 3[rd] August 2021 in response to thenotice u/s. 148 of the Act. Reasons were sought forreopening of the assessment. Reasons were fnallyprovided vide letter dated 20[th] January 2022. The reasons recorded are reproduced hereunder : “Reasons of opening : ……. 2.The benefit of deduction isallowable to an assessee only for Eligible Businessspecified in section 80-IA viz., Infrastructure facilityor Telecommunication services which are definedand thus services defined in section 80-IA is only tobe treated as Eligible Business. Further,infrastructure facility is defined in two places in theAct, i.e., in Explanation under section 80-IA(4)(i)as well as in Explanation (d) to section 10(23F)and clause (d) of the Explanation of clause (viii) ofsub-section (1) of section 36. In 80-IA, other publicfacility as notified by Board was deleted videFinance Act, 2001 w.e.f. 1.4.2002. recorded are reproduced hereunder : “Reasons of opening : ……. 2.The benefit of deduction isallowable to an assessee only for Eligible Businessspecified in section 80-IA viz., Infrastructure facilityor Telecommunication services which are definedand thus services defined in section 80-IA is only tobe treated as Eligible Business. Further,infrastructure facility is defined in two places in theAct, i.e., in Explanation under section 80-IA(4)(i)as well as in Explanation (d) to section 10(23F)and clause (d) of the Explanation of clause (viii) ofsub-section (1) of section 36. In 80-IA, other publicfacility as notified by Board was deleted videFinance Act, 2001 w.e.f. 1.4.2002. Thus, Container Freight Station (CFS) isnot an eligible infrastructural facility as provided inExplanation to Section 80-IA(4) of the Act. As perBoards clarification dated 6[th] January 2011, inlandcontainer depots and container freight stations arenot ports located on any inland waterway, river orcanal and therefore they cannot be classified asinland ports for the purposes of section 80-IA(4). In the case, on perusal of the computationof income, it is seen that the assessee company hasclaimed deduction u/s. 80-IA of the Act of Rs.10,20,10,059/- whereas it is seen that theassessee company is running a CFS and as notedabove Container Freight Station (CFS) is not aneligible infrastructural facility as provided inExplanation to Section 80-IA(4) of the Act, theclaim of deduction by the assessee on this accountis not in order. This resulted in under-assessment ofincome by Rs.10,20,10,059/- and the same hasescaped assessment…….” 4.The reasons for reopening briefy stated was thatthe Container Freight Station (CFS) is not an eligibleinfrastructural facility as provided in Explanation toSection 80-IA(4) of the Act and that the claim ofdeduction of the assessee on this account was not inorder which had resulted in under-assessment of income by Rs.10,20,10,059/- and the same has escapedassessment. It was further stated in the reasons that theassessee had not disclosed full and true material facts inthe return which was fled, and therefore, the conditionspecifed in proviso to section 147 was fulflled. 5.Objections were fled against the reopening of theassessment by the petitioner, which too, came to berejected vide order, dated 10[th] March 2022. Hence, thepresent petition. 6.Counsel for the petitioner challenges the notice asalso the order impugned dated 10[th] March 2022 on theground that the notice u/s. 148 could not have beenissued as the jurisdictional conditions for invoNing thepowers u/s. 147 of the Act are not satisfed. 7.Counsel for the petitioner urged that since morethan four years have elapsed from the end of the relevantassessment year 2015-16, the notice impugned could nothave been issued unless the Assessing Offcer wassatisfed that there was a failure on the part of theassessee to truly and fully disclose all material factsnecessary for assessment for that assessment year. It wasurged that even the reasons recorded did not anywhereallege that there has been failure on the part of theassessee to disclose fully and truly the material factsleading to the income escaping assessment. 8.It was further urged that the petitioner had made afull disclosure about its claim during the scrutinyassessment as also fled a detailed note along withfull disclosure about its claim during the scrutinyassessment as also fled a detailed note along with requisite documents and also submitted the audit reportand Form 10CCB for the year ended 31[st] March 2015which was looNed into by the Assessing Offcer whileleading to the passing of the order of assessment dated10[th] March 2022. 8.It was further urged that the petitioner had made afull disclosure about its claim during the scrutinyassessment as also fled a detailed note along withfull disclosure about its claim during the scrutinyassessment as also fled a detailed note along with requisite documents and also submitted the audit reportand Form 10CCB for the year ended 31[st] March 2015which was looNed into by the Assessing Offcer whileleading to the passing of the order of assessment dated10[th] March 2022. 9.It was further stated that this Court inCommissioner of Income Tax-II, Thane Vs. ContinentalWarehousing Corporation (Nhava Sheva) Ltd.[1]hasalready settled that CFS is an inland port as it carriesout functions of warehousing, customs clearance andtransport of goods from its location to sea-port and vice-versa, and therefore, its income was eligible to deductionu/s. 80-IA(4) of the Act. It is stated that the SupremeCourt in Commissioner of Income Tax, Delhi-1 Vs.Container Corporation of India Ltd. [2]had dismissed theCivil Appeal fled by the Revenue, vide order, dated 24[th]April 2018. 10.Mr.ANhileshwar Sharma, learned counsel for the 1[2015] 58 taxmann.com 78 (Bombay)2[2018] 93 taxmann.com 31 (SC)2[2018] 93 taxmann.com 31 (SC) respondents has also, on the other hand, supported andbuttressed the stand of the Assessing Offcer that aContainer Freight Station (CFS) was not eligible fordeduction u/s. 80-IA(4) of the Act as a CFS was not aPort located on any inland waterway, river or canal, andtherefore, cannot be classifed as an inland port for thepurposes of section 80-IA(4) of the Act. 11.Admittedly, since the notice u/s. 148 was beingissued after the expiry of four years from the end of therelevant assessment year, no action could be taNen u/s.147, after expiry of the said period unless it could beshown that the income chargeable to tax had escapedassessment by reason of the failure on the part of theassessee, inter-alia, to disclose fully and truly all materialfacts necessary for the assessment for that assessmentyear. 12.In the present case, from the record, it is quite clearthat when the return fled by the petitioner was taNen upfor scrutiny assessment, information was called for by the Assessing Offcer. The petitioner, in response to thenotices so received, had submitted a note in regard to theclaim for deduction under Chapter VI-A which is onrecord. Extracts from the note so received submitted are reproduced hereunder : “……..The Assessee company has claimed deduction u/s80IA Rs.10.24 crores & deduction u/s 80G Rs.0.75 Lacs. The Deduction u/s 80IA is towards deductions in respectof ‘Profit from an enterprise engaged in the business ofinfrastructure development’. The Assessee Company, I..e,M/s. Saurashtra Infra and Power Pvt. Ltd. (Earlier knownas M/s. Saurashtra Container Pvt. Ltd.) is a registeredIndian company engaged in the business of running aContainer Freight Station (CFS) at Mundra Port. TheAssessee Company is providing customs bound facilitywhich includes warehousing for exim cargo & containeryard facility.” ……….. A Container Freight Station is an eligible infrastructurefacility for the purpose of deduction under section 80IA ofthe Income Tax Act, 1961 and a CFS is classified as an‘inlands ports’ for the purpose of claiming deductionunder section 80IA of the I.T. Act, 1961, the Assesseecompany has started claiming deduction u/s 80IA fromA.Y. 14-15 onwards. The Company has filed Form 10CCB for the abovededuction along with Audit Report and other documentson 30.09.2015. Form 10CCB along with Audit Report,Infrastructure Agreement and Customs Notification werealready filed vide Paper Book No.3 on 3[rd] May 2017.” 13.The reasons recorded by the Assessing Offcer do not at all elucidate as to what material was not disclosedfully and truly, failure of which had led to the incomeescaping assessment. 14.In Hindustan Lever Ltd. Vs. R.B. WadNar, Assistant The Company has filed Form 10CCB for the abovededuction along with Audit Report and other documentson 30.09.2015. Form 10CCB along with Audit Report,Infrastructure Agreement and Customs Notification werealready filed vide Paper Book No.3 on 3[rd] May 2017.” 13.The reasons recorded by the Assessing Offcer do not at all elucidate as to what material was not disclosedfully and truly, failure of which had led to the incomeescaping assessment. 14.In Hindustan Lever Ltd. Vs. R.B. WadNar, Assistant Commissioner of Income-Tax and Others[3], this Courtheld : “ …….The reasons recorded should be clear andunambiguous and should not suffer from anyvagueness. The reasons recorded must disclose hismind. The reasons are the manifestation of themind of the Assessing Officer. The reasons recordedshould be self-explanatory and should not keep theassessee guessing for the reasons. Reasons providethe link between conclusion and evidence. Thereasons recorded must be based on evidence. TheAssessing Officer, in the event of challenge to thereasons, must be able to justify the same based onmaterial available on record. He must disclose inthe reasons as to which fact or material was notdisclosed by the assessee fully and truly necessaryfor assessment of that assessment year, so as toestablish the vital link between the reasons andevidence. That vital link is the safeguard againstarbitrary reopening of the concluded assessment.” 15.On the other hand, it appears that the reassessment proceedings were started based upon anaudit objection raised by the offce of the Director General of Audit (Central) Mumbai highlighting the issue that 32004 ITR 332 Vol.268 Container Freight Station (CFS) was not an eligibleinfrastructural facility as provided in Explanation tosection 80IA(4) of the Act. What was stated in the audit objection is extracted hereinbelow : “….Container Freight Station (CFS) is not aneligible infrastructural facility as provided inExplanation to Section 80 IA (4) of the Act. As perBoards clarification dated 6[th] January 2011, inlandcontainer depots and container freight stations arenot ports located on any inland waterway, river orcanal and therefore they cannot be classified asinland ports for the purpose of section 80IA(4).The Supreme Court in [2015] 64 taxmann.com 34(SC) Commissioner of Income-tax V. ContinentalWarehousing Corporation (Nhava-Sheva) Ltd. hasgranted special leave petition against the ruling ofthe High Courts which held that CFS are eligibleinfrastructure facilities for deduction under thesection. In this case, assessment for A.Y. 2015-16 wascompleted after scrutiny assessing income atRs.11195175 after allowing 80IA deduction ofRs.102010059. It was seen that the assessee wasrunning a CFS for which the 80IA deduction wasallowed to him. This is against the law as theDepartment is in appeal in Supreme Court andallowing deduction after getting favourable grantof SLP amounts to taking two different stands. 16.It, thus, appears that the basis for initiation of reassessment was the objection by the Director Generalof Audit (Central) Mumbai and further that the Supreme Court had been pleased to entertain a Special LeavePetition against the judgment inContinentalWarehousing Corporation Ltd. (Supra). However, even that objection loses its substratum inview of the fact that the SLP preferred by the Revenue inthe case of Continental Warehousing Corporation Ltd.(Supra) has since been dismissed. For purposes of reference, this Court, in thecase of Continental Warehousing Corporation Ltd.(Supra) was considering the order passed by theTribunal which had held the assessee in that caseentitled to the beneft under section 80-IA(4) of theAct based upon the earlier view expressed by aSpecial Bench of the Tribunal as also the DelhiHigh Court in Container Corporation of India Ltd. (Supra). Court had been pleased to entertain a Special LeavePetition against the judgment inContinentalWarehousing Corporation Ltd. (Supra). However, even that objection loses its substratum inview of the fact that the SLP preferred by the Revenue inthe case of Continental Warehousing Corporation Ltd.(Supra) has since been dismissed. For purposes of reference, this Court, in thecase of Continental Warehousing Corporation Ltd.(Supra) was considering the order passed by theTribunal which had held the assessee in that caseentitled to the beneft under section 80-IA(4) of theAct based upon the earlier view expressed by aSpecial Bench of the Tribunal as also the DelhiHigh Court in Container Corporation of India Ltd. (Supra). The Special Bench had held that the case ofContainer Freight Station was similarly situate asthat of an Inland Container Depot (ICD) inasmuchas both carried out similar functions ofwarehousing, customs clearance and transport of goods from its location to sea-ports and vice-versa. This Court in Continental Warehousing Ltd.(Supra) upheld the view of the Tribunal. 17.In the present case, even the objections raised bythe Director General of Audit (Central) Mumbai leading tothe initiation of reassessment proceedings would notanymore furnish a sound basis for alleging that theincome had escaped assessment on account of a claimhaving been wrongly allowed under the said section. Bethat as it may, we have no hesitation in holding that thenotice impugned dated 26[th] March 2021 as also the orderdated 10[th] March 2022, rejecting the objections, areunsustainable in law and are accordingly quashed. 18.The Petition is allowed accordingly. No costs. [ KAMAL KHATA, J. ] [DHIRAJ SINGH THAKUR, J.]