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Judgment
Ms. Sonia Gokani, J.—Petitioner has challenged, by way of this writ petition, the notice of reopening dt. 1st Oct., 2009 issued under s. 148 of the IT Act, 1961 (hereinafter referred to as "the Act") along with preliminary order dt. 8th Dec., 2010 for proceeding and completing the reassessment proceedings. Briefly to state the facts :
1.1 Petitioner-company is engaged in the field of construction activities i.e. building and development of housing projects as well as developing the industrial parks. The petitioner-company is regularly assessed to tax by the ITO. For the asst. yr. 2005-06, after scrutiny assessment under s. 143(3) vide order dt. 22nd Feb., 2007 issue of deduction under ss. 80-IA(4)(iii) and 80-IB(10) for processing taxability under s. 115JB of the Act was finalized. In appeal before the CIT(A) and before the Tribunal also, all these issues were decided on merits.
It is averred that respondents sought to reopen the assessment, as could be seen from the communication dt. 1st Oct., 2009 made under s. 148 r/w s. 147 of the Act for the asst. yr. 2005-06 mainly on the ground that the petitioner''s industrial park was not notified by the CBDT till the end of relevant year, and therefore, deduction made available under s. 80-IA(4)(iii) of sum of Rs. 2,83,81,688 was wrongly claimed and granted.
2.1 The reasons for reopening also have been furnished which are accorded on 24th Sept., 2009 and they read as under :
As per para 5 of the letter of approval of the Investment Promotion & Infrastructure Development Cell, Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India dt. 5th Nov., 2004, following conditions in para 9 of the Industrial Park Scheme, 2002 may particularly be noted for suitable compliance :
(i) The income tax benefits under sub-s. (4)(iii) of s. 80-IA of the IT Act, 1961 will be available only after the proposed number of industrial units in para 1 (vii) of this approval letter, are located in the industrial park.
(ii)..........
In the para 1(viii) the assessee proposed to set up 30 industrial undertakings whereas as per note No. 5 filed with the return of income, the assessee during the year sold or entered MoU for sale of 9 undertakings only. The industrial park did not commence during the year and there were no construction or manufacturing activities by any undertaking during the year.
Perusal of the records further revealed that the assessee''s industrial park has not been notified by the CBDT till the end of the relevant year. In view of these facts, the deduction of Rs. 2,83,81,688 claimed under s. 80-IA(4)(iii) has been wrongly claimed.
Therefore, I am of the opinion that income of Rs. 2,83,81,688 chargeable to tax has escaped assessment.
After furnishing reasons for reopening of the assessment vide communication dt. 29th Nov., 2010, the assessee was requested to furnish further details by the Dy. CIT in the following manner :
Why the deduction of Rs. 2,83,81,688 under s. 80-IA(4) be not disallowed in the absence of notification from the Board as well as the fact that as on 31st March, 2005, and also the fact that as per para 5 of the letter of approval of the Investment Promotion & Infrastructure Development Cell, Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India dt. 5th Nov., 2004, following conditions in para 9 of the Industrial Park Scheme, 2002 may particularly be noted for suitable compliance :
(i) The income tax benefits under sub-s. (4)(iii) of s. 80-IA of the IT Act, 1961 will be available only after the proposed number of industrial units in para 1(vii) of this approval letter, are located in the industrial park.
(ii)......
(iii).....
In the para 1(vii) the your company had proposed to set up 30 industrial undertakings whereas as per note No. 5 filed with the return of income, the assessee during the year sold or entered MoU for sale of 9 undertakings only. The Industrial park did not commence during the year and there were no construction or manufacturing activities by any undertaking during the year.
As seen from the records that you have claimed deduction under s. 80-IB(10) in respect of housing projects, the plots of which are owned by other companies and the BU certificate has also been received in the names of such companies. Give complete justification of deduction under s. 80-IB(10) in respect of each project.
Assessee raised objections to the reassessment proceedings emphasizing therein that for the asst. yr. 2005-06, assessee had filed return of income, declaring total loss of Rs. 67,45,092, where the assessee-company had claimed deduction under s. 80-IA(4)(iii) for an amount of Rs. 2,83,81,688 and deduction under s. 80-IB(10) of the Act for an amount of Rs. 8,05,36,675. The scrutiny assessment was finalized under s. 143(3) of the Act on 22nd Feb., 2007, determining total income at Rs. 6,57,743, after allowing deduction under s. 80-IA(4)(iii) and s. 80-IA(10) of the Act. The loss denied to be carried forward was to the tune of Rs. 67,45,092. It is also further stated that the assessment of income was finalized while assessing income of Rs. 10,18,01,672 under s. 115JB of the Act, as the tax payable under MAT provision was higher than the tax calculated under regular provision of then Act, 1961.
It has been emphasized that there is no failure on the part of assessee to disclose truly and fully any material facts necessary for the assessment of income for the year under consideration. It is further mentioned in the said objection by the assessee that the approval for development of an industrial park has been granted by the Ministry of Commerce & Industry, Government of India. Assessee had developed and executed industrial park as per the approval granted by the Ministry of Commerce & Industry under r. 18C of the IT Rules, 1962. It is obligatory on the part of CBDT to issue notification and there is no procedure for the assessee to make any application to the CBDT for issuance of the notification. It is also further submitted by the petitioner-company that the deduction under s. 80-IA(4)(iii) is available to the undertakings which develop industrial park as per approval granted under the Industrial Park Scheme, 2002 by the Ministry of Commerce & Industry, Govt. of India; which has been granted in the instant case on 5th Nov., 2004 for setting up 30 units. The approval granted by the Government of India, Ministry of Commerce & Industry, in para 5, states thus :
Para--5 Following conditions in para 9 of the Industrial Park Scheme, 2002 may particularly be noted for suitable compliance :
(i) The income tax benefits under sub-s. (4)(iii) of s. 80-IA of the IT Act, 1961 will be available only after the proposed number of industrial units mentioned in para (vii) of this approval letter (30 units) are located in the industrial park.
The petitioner-company developed total 48 industrial plots with common facilities and infrastructure. They have been sold as 32 units to 32 parties for setting up their industrial units in the said industrial park. The only obligation of the company as averred in the petition is to develop an industrial park with common facilities and infrastructural facilities, as the assessee-company is engaged in the business of development of industrial parks pursuant to the Industrial Park Scheme, 2002, as per the approval granted by the Ministry of Commerce & Industry vide its letter dt. 5th Nov., 2004. In short, the petitioner-assessee contended that all the requisite criteria for availing the benefit under s. 80-IA(4)(iii) of the Act are duly fulfilled by the petitioner and it has in turn made the petitioner eligible for the deductions. Accordingly, request is made to drop the proceedings under s. 147 of the Act on all the grounds mentioned hereinabove.
The said objections have been dealt with at length by the AO vide its order dt. 8th Dec., 2010 while disposing of the objections raised against the reasons recorded for reopening the assessment of the petitioner-company for the year under consideration. The impugned order is also challenged along with notice of reassessment.
On due service of notice, Dy. CIT, Circle-IV, Ahmadabad has filed an affidavit-in-reply urging, inter alia, that the petition is preferred at a prematured stage in as much as there is an alternative efficacious remedy available with the petitioner, since the notice had been issued within 4 years from the end of the relevant assessment year. It is also denied that there was a mere change of opinion after the regular assessment order. Assessee was called upon to state as to how deduction under s. 80-IA(4) was claimed in excess of the income. The industrial parks had not been notified under the CBDT in as much as the industrial parks did not commence during the year under consideration and even construction activity was not undertaken during the relevant year. Out of 32 units proposed to be set up, only 4 units have been set up. It could be noted that the assessee, during the year under consideration, sold and entered into MoU for sale of only 9 undertakings. The industrial park since did not commence during the year and with there being no construction or manufacturing activities undertaken by any of the undertakings during the relevant year and the same also did not get notified by the board, till end of the relevant year, there is no entitlement of the petitioner for deduction and that amount escaped the assessment.
Affidavit-in-rejoinder is also filed by the petitioner-company. Without dilating further the grounds which have been raised in affidavit-in-rejoinder, it can be stated that they are more or less the same submitted while objecting to the reasons recorded for reopening of the assessment crux of which is that the petitioner fulfilled its part of obligation and the rest was not in its hand nor was deduction available to petitioner dependent on occurrence of those events.
Heard learned counsel Mr. R.K. Patel appearing for the assessee-company and learned senior counsel Mr. Manish Bhatt for the Department. With their able assistance, entire material placed before us has been thoroughly considered and on the basis thereof, this petition is being allowed for the reasons to be followed hereinafter.
10.1 As can be noted from the material adduced by both the sides, the petitioner-Company is engaged in business of building and development of housing project as well as developing industrial parks.
10.2 For the asst. yr. 2005-06, return was filed by the Company on 25th Oct., 2005 declaring total loss of Rs. 67,45,092. Petitioner filed revised return on 3rd Jan., 2006 declaring the same amount of loss and also computing the book profit under s. 115JB of the Act at Rs. 10,18,01,672 and paid tax on MAT income. Assessment was finalized in February 2007 where, its income was assessed to Rs. 10,18,01,672 under s. 115JB of the Act as the tax payable under MAT provision was higher than the tax calculated under regular provisions of the IT Act. This assessment order was challenged before CIT(A) which confirmed partly the view of the AO and on the issue of taxability under s. 115JB, it confirmed the AO''s findings. CIT(A)''s order was further carried in appeal before the Tribunal and after elaborately dealing with the scheme of the IT Act, it held that the petitioner could not be allowed deduction under s. 80-IB while computing the book profit under s. 115JB of the Act as the ''book profit'' and ''total income'' have to be computed independently. While arriving at such findings, adjudicating authorities extensively dealt with the various claims made by the petitioner company which included the loss as also exemption of profit available under s. 80-IB(10) of the Act.
10.3 It is noted in the notice of reopening that s. 80-IA is applicable to the undertaking which develops, develops & operates; and maintains & operates industrial park notified by the Central Government to accordance with Scheme framed and notified by the Government beginning on 1st April, 1997 and ending on 31st March, 2006. Ministry of Industries of Central Government is required to approve the same and on its so doing, the CBDT is required to notify industrial parks for the benefit under s. 80-IA. For want of notification issued on CBDT for Industrial Park Scheme, 2002, benefit availed to the petitioner under s. 80-IA(4)(iii) is seriously questioned, holding the same to have been availed wrongly.
As the central issue concerns non-issuance of notification by CBDT, leading to conclusion of reopening of assessment, it is required to be mentioned here that in case of this very assessee in Special Civil Appln. No. 15962 of 2010, reported in Ganesh Housing Corporation Ltd. vs. Padam Singh, Under secretary (2011) 244 CTR (Guj) 194 : (2011) 61 DTR (Guj) 1 : (2011) 339 ITR 441 (Guj), this Bench had an occasion to deal with the challenge to withdrawal of the approval of the industrial park developed by the petitioner by the respondents therein. A direction was also sought by the petitioner-Ganesh Housing Corporation Ltd. for notifying the said industrial park under r. 18C of the IT Rules, 1962. In that case, the petitioner had applied for setting up of an industrial park in the nature of Pharmaceutical Park in terms of the Industrial Park Scheme, 2002 which was completed before 31st March, 2006 in accordance with approval granted by the ministry on 5th Nov., 2004. According to the petitioner, the entire development work was completed before stipulated time and the pharmaceutical park proposed by the petitioner was approved by the ministry, which envisaged 32 sub-plots on which pharmaceutical industries were to be located. Although, all the sub-plots were sold to different pharmaceutical companies; the petitioner was permitted to develop infrastructural facilities for minimum 30 units and the last date for implementation of the Scheme was 31st March, 2006 for those companies which provide such industrial parks at the relevant date, the tax benefit under s. 80-IA(4)(iii) was available and such deduction was claimed for asst. yr. 2005-06 and after scrutiny assessment, the same was allowed, however, when in subsequent year such benefit was claimed, the State did not notify the park in terms of sub-r. (2) of r. 18C of the rules despite the petitioner having developed such a park and having completed all the developmental works within the stipulated period i.e., 31st March, 2006. After considering elaborate submissions of both the sides, that petition came to be allowed vide order dt. 10th Aug., 2011. The impugned notice was quashed directing the respondents to take consequential steps for issuance of the notification in terms of r. 18C(4) of the IT Rules, 1962 with respect to the said industrial park, by holding thus--
Having thus heard learned counsel for the parties, we would like to record relevant provisions of the Scheme and other connected documents. The said Scheme was formulated in exercise of powers under cl. (iii) of sub-s. (4) of s. 80-IA of the IT Act, 1961. It was called, "Industrial Park Scheme, 2002". Clause (2)(f) of the Scheme defines the term "Infrastructure development" as follows :
(2)(f) "infrastructure development" includes, roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning and such other facilities as are for common use for Industrial activity which are identified and are provided on commercial terms''.
Clause 2(h) of the Scheme defines the term "Undertaking" as under :
''(2)(h) "undertaking" means any undertaking which is engaged in the business of developing, developing and operating or maintaining and operating an industrial park notified by the Central Government in accordance with this Scheme''.
Clause 2(1) defines term "unit" as under :
''(2)(i) "unit" means any separate and distinct entity for the purpose of one or more state or central tax laws.''
Clause 3 of the Scheme provides for period of operation of the scheme and reads as under :
''3. Period of operation of the Scheme.--This Scheme shall be applicable for any undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st day of April, 1997 and ending on the 31st March, 2006. In a case, where an undertaking develops and Industrial Park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such Industrial Park to another undertaking (transferee undertaking), the benefits shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years in a manner as if the operation and maintenance were not so transferred to the transferee undertaking.''
Clause 4 of the Scheme pertains to objectives of the industrial park. The purpose of objectives of infrastructural industrial park is provided in sub-cl. (b) thereof reads as under :
''4. Objectives of the industrial park--Any project, being an industrial park, shall aim at setting up of--
(a)...............
(b) an industrial park for development of infrastructural facilities or built up space with common facilities in any area allotted or earmarked for the purposes of industrial use specified in explanation to para 6 sub-cl. (c)''.
Explanation to para 6 sub-cl. (c) of the Scheme provides that for the purpose of this clause, the Industrial use shall include any activity defined in the National Industrial Classification 1987 Code; except certain industries excluded therein.
We may notice that cls. (5) and (6) of the said Scheme pertain to automatic approval and criteria for automatic approval of such industrial parks. Whereas, cl. (7) pertains to non automatic approval. We are, however, not directly concerned with such niceties, except for recording that in cases of an industrial park referred to in cl. (b) of para 4 viz., industrial park for development of infrastructural facilities, the minimum number of units to be provided in such Park is 30.
Clause (8) of the Scheme pertains to withdrawal of approval and reads as under:
''8. Withdrawal of approval--The Central Government may withdraw the approval given to an undertaking under this Scheme when such undertaking fails to comply with any of the conditions of grant of approval :
Provided that before withdrawal of approval, the undertaking being industrial park, shall be given an opportunity of being heard.''
Clause (9) of the Scheme pertains to general conditions. Relevant conditions thereof are the following :
''9. General conditions--(1)...............
(2) The tax benefits under the Act can be availed only after the number of units indicated in the application, are located in the Industrial Park.
(3)...............
(4)...............
(5) Every undertaking, which has been granted approval shall continue to furnish to the Central Government on 1st January and 1st July of every year, a report in the form number IPS- II during the period in which the benefits under the Act are to be availed.''
Form IPS-I under the said Scheme provides for Model Application Form for setting up Industrial Parks/Model Town, etc. Paragraph 4 of the said form pertains to details pertaining to location, area, proposed activities, proposed investment, etc., in such proposed industrial park. Paragraph 4 reads as under :
"4
I.
Proposed location of the Industrial model town/ industrial park/growth centre
Address :
State
Pin Code
Fax
II
Proposed area of industrial model town/industrial park/growth centre (in acres/sq. mtrs. Specify)
III
Proposed allocable area of industrial model town/industrial park/growth centre (in acres/sq. mtrs. Specify)
IV
Proposed activities [please specify item codes as defined under the National Industrial Classification of all Economic Activity (NIC), 1987]
V
Proposed percentage of allocable area earmarked for industrial use;
VI
Proposed No. of Industrial units
VII
(a) Total Investment proposed (amount in rupees)
(b) Proposed investment on built-up space for industrial use (if applicable) (amount in Rs.)
(c) Proposed investment on infrastructure development [including (b)] (amount in rupees)
(d) Percentage of (c) to (a);
IX
Total foreign equity proposed (amount in rupees)
X
*Expected/actual date of commencement of industrial model town/industrial park/growth center.
The "Expected/actual date of commencement of industrial model town/ industrial park/growth centre" denotes the date when all the infrastructural facilities for the proposed number of industrial units have been provided. If the park is proposed to be developed in phases, the details information on the same may be also suitably mentioned along with the application."
In terms of para 9(5) of the Scheme, the developer has to submit 6 monthly progress reports. Form IPS-II prescribes proforma for such reports. Paragraph 5 thereof, inter alia, pertains to number of industrial units in the project; para 7 requires developer to indicate briefly the effective steps taken towards implementation eg., installation of common facilities, number of units sold or leased, number of units commencing the industrial activity.
Having taken note of the provisions of the Scheme and other related documents, we may also, at this stage, take note of r. 18C of the IT Rules, 1962 which pertains to Eligibility of Industrial Parks and Special Economic Zones for benefits under s. 80-IA(4)(iii). The said r. 18C of the Rules read as under :
''18C Eligibility of Industrial Parks and Special Economic Zones for benefits under s. 80-IA(4)(iii).--(1) The undertaking shall begin to operate an industrial park during the period beginning on the 1st day of April 1997 and ending on the 31st March, 2002.
(1A) The undertaking shall begin to develop or develop and operate or maintain and operate a special economic zone any time during the period beginning on the 1st day of April 2001 and ending on 31st March, 2006.
(2) The undertaking shall be duly approved by the Ministry of Commerce and Industry in the Central Government under the scheme for Industrial Park or Special Economic Zones notified by that Ministry.
(3) The undertaking shall continue to fulfill the conditions envisaged in the scheme.
(4) On approval under sub-r. (2), the CBDT, shall notify industrial parks for benefits under s. 80-IA.''
From the Scheme, we have noticed that "an undertaking" is defined to mean, "any undertaking which is engaged in the business of developing, developing and operating or maintaining and operating an industrial park notified by the Central Government in accordance with the Scheme." The undertaking, thus to be notified by the Central Government in accordance with the Scheme, falls in three different categories viz., (a) those engaged in the business of developing; (b) those engaged in the business of developing and operating; and (c) those engaged in the business of maintaining and operating an industrial park. These three categories are thus separate and distinct. Admittedly, the petitioner approached the Central Government with a proposal for developing an Industrial Park providing infrastructural facilities for Pharmaceutical industries. The petitioner, thus made a proposal to the Government with a scheme for development of an Industrial Park for Pharmaceutical industries. The application of the petitioner and the approval granted by the Government, therefore, has to be seen as one granting permission to the petitioner for developing an industrial park by providing infrastructural facilities. The petitioner had not applied for, nor was it granted, permission for developing and operating the Industrial Park, or for maintaining and operating such a Park. In view of this, one has to ascertain what exactly were requirements which the petitioner was to fulfill. Sec. 80-IA(4)(iii) of the IT Act, 1961; as applicable at the relevant time, read as under :
''80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprise engaged in infrastructure development, etc.
(1)..........
(iii) Any undertaking which develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006.
Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-s. (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking.''
Under the Scheme, the petitioner as an undertaking engaged in the business of developing an Industrial Park, was required to fulfil the general conditions on which such approval was granted. Clause 9 of the Scheme, as already noted, provides such general conditions. Sub-cl. (2) of cl. 9 requires that the tax benefits under the Act can be availed only after the number of units indicated in the application are located in the Industrial Park. Sub-cl. (5) of cl. 9 further requires the developer to submit six monthly progress report.
Much has been argued by the counsel for the respondents with respect to such requirements. They have tried to link the application form in format IPS-I, which is appended to the said Scheme, to contend that the petitioner was required not only to develop an industrial park but also had to ensure that all units put up their industries and start their manufacturing activities as well.
We, however, look at the requirements of the Scheme differently. Sub-cl. (2) of cl. 9 required the petitioner before availing the tax benefits to ensure that all units indicated in the application are located in the Industrial Park. As noted earlier, term "unit" has been defined in definition cl. 2(i) to mean, "any separate and distinct entity for the purpose of one or more state or central tax laws."
The question arises--Did the petitioner fulfill this requirement ? For this purpose, we may note that the entire infrastructural facilities were created by the petitioner before the last date envisaged under the Scheme by providing various facilities such as roads, drainage, electricity, lights, water, etc. The entire plot on which the Industrial Park was located was further sub-divided into several plots. The petitioner had in fact sold all 32 plots to different units before 31st March, 2006. These assertions of the petitioner are not seriously disputed by the respondents. Even the impugned show-cause notice is not based on non-fulfillment of above requirements. We, therefore, proceed on the premise that considerably had taken these steps before 31st March, 2006 in furtherance of implementation of the Scheme. To our mind, under the Scheme, the petitioner had fulfilled all the requirements for availing the tax benefits. The petitioner was required to develop the infrastructural facilities. In short, the petitioner was required to set-up an Industrial park with all infrastructural facilities to enable the pharmaceutical industries to setup their units on the plots so allotted. Term "locate" used in sub-cl. (2) of cl. 9 of the Scheme must be viewed from the angle of having allocated the plots to the producing industries.
In the Advanced Law Lexicon by P. Ramanatha Aiyar (2009 Edition), while explaining the term "Locate", it is stated that according to the context the word may be employed as meaning : To ascertain and determine the place of; to state the locality of; to designate the site or place of; to determine the situation or limits. So according to the context it may mean to direct, or to lead to; to fix in place; to select or determine the bounds or place; to set in a particular spot or position; as applied to land, to select, survey, and settle the boundaries of a particular tract of land, or to designate a particular portion of land by limits.
Similarly, in Black''s Law Dictionary, the term "location" has been explained as to mean, "the specific place or position of a person or things; the act or process of locating". In context of real estate to mean, "the designation of the boundaries of a particular piece of land, either on the record or on the land itself."
On part of the petitioner, therefore, the requirement was to ensure that before claiming the tax benefit, units indicated in the application are located in the Industrial Park. It is not in dispute that the petitioner in addition to developing the entire park by providing infrastructure, sub divided the plots into smaller units, sold the plots to individual industries and such industries were allocated specific plots for such purpose. The requirement of ensuring that the industries, as indicated in the application approved, by the Government were located before the last date prescribed, was thus fulfilled.
Counsel for the respondents, however, relied on forms of declaration annexed along with the Scheme to contend that the requirement went much beyond and the petitioner was required to ensure that such industries must set up their units on the plots so allotted. To our mind, such requirement can neither be read in the Scheme nor can it be fastened on the petitioner in any other manner. The petitioner was a developer of the Industrial Park. The duty and responsibility of the petitioner, to be able to claim tax deductions, was to set-up an industrial park by providing necessary infrastructural facilities. We have seen that the development of such a park would require providing of all infrastructural facilities; sub plotting the entire plot and also ensuring that the number of units indicated in the application are sold to the intending industries. In short, the duty and responsibility of the petitioner was to ensure that the industrial activity is facilitated on the Industrial Park so developed by it. It was thereafter not responsible to ensure that industries do in fact set-up their units and commence production activities on such units--that too before the last date envisaged in the Scheme. To our mind, such responsibility fastened on the petitioner is not borne out from the Scheme. The duty and responsibility of the petitioner was to provide infrastructural facilities which would be a catalyst for industrial growth by enabling the intending industries to set-up their industry in such a Park. Such manufacturing units or the intending industries were in no way under the control of the petitioner. There can be variety of reasons why such industries may not be able to start their units, such as, non-availability of funds for setting up of the units, pending approval and clearances from the Government and other agencies and such similar reasons which can be attributed only to the intending industries and not to the petitioner. In fact, the scheme requires that the petitioner not only fulfil but continue to fulfil all conditions of approval assessing the period when the tax benefit is available. If we accept the strict requirements insisted by the respondents, it would mean that not only number of industrial units indicated in the application for approval of Industrial Park must be operational on the last date of expiry of the Scheme, they must continue to operate till the petitioner avails of all the tax benefits. In a given situation, it may happen that the number of units, after initially coming into existence, may have to be closed down for variety of reasons such as non-availability of market for their product or non-availability of raw materials, or even labour problems. Would in such a case the petitioner be denied tax benefits ? To our mind, the answer has to be empathetically in the negative.
In this regard, we may refer to the decision of the Bombay High Court relied by the learned counsel for the petitioner in the case of Commissioner of Income Tax Vs. ABG Heavy Industries Ltd., , wherein, the Bombay High Court was examining the eligibility of an assessee to deductions under s. 80-IA of the Act in terms of the policy of the Government to encourage private sector participation in development of infrastructural facilities. In this context, the Bombay High Court observed as under :
''19. The obligations which have been assumed by the assessee under the terms of the contract are obligations involving the development of an infrastructure facility. Sec. 80-IA of the Act essentially contemplated a deduction in a situation where an enterprise carried on the business of developing, maintaining and operating an infrastructure facility. A port was defined to be included within the purview of the expression infrastructure facility''. The obligations which the assessee assumed under the terms of the contract were not merely for supply and installation of the cranes, but involved a continuous obligation right from the supply of the cranes to the installation, testing, commissioning, operation and maintenance of the cranes for a term of ten years which the cranes were to vest in JNPT free of cost An assessee did not have to develop the entire port in order to qualify for a deduction under s. 80-IA. Parliament did not legislate a condition impossible of compliance. A port is defined to be an infrastructure facility and the circular of the Board clarified that a structure for loading, unloading, storage, etc., at a port would qualify for deduction under s. 80-IA. The condition of a certificate from the Port Authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfilment of the lease of ten years, there was a vesting in the JNPT free of cost.''
(Underline, italicised in print, supplied by us)
We may notice that in the present case, there are no allegations that the plots were not actually sold by the petitioner before the last date envisaged under the Scheme i.e., 31st March, 2006. There is no allegation that infrastructural facilities were not provided because of which industrial units of the industries which purchased such plots could not be set-up. It is also not an allegation of the respondents that the petitioner had only shown Benami sale of the plots and had indirectly held on to such property for profiteering at a future date, only seeking to derive the benefit of price escalation in real estate. That being the situation, to our mind as per the Scheme, what was required to be done by the petitioner was to provide for infrastructural facilities before the last date envisaged under the Scheme. Thereafter, there was no obligation on the part of the petitioner to ensure that industrial units on such plots must also come into existence and commence their production activities.
In view of above conclusion, we are of the opinion that the petitioner has made out a case for interference even at this stage. We are conscious that the petitioner has approached the Court at a stage where Government has issued a show-cause notice calling upon the petitioner to answer to certain queries. However, the proposal to withdraw the approval is only on the basis that the industries had not commenced production even during the grace period. This allegation is based on premise that as per the respondents, out of thirty two units envisaged in the Park, only four had been set-up and none of them were functional on the date of the visit by the AO. We are conscious that ordinarily Courts do not encourage litigation at the show-cause notice stage. Under normal circumstances, we would also have insisted that the petitioner should appear before the authorities and reply to the show-cause notice and would have permitted the authorities to pass final order in accordance with'' law. However, in the present case, the entire show-cause notice is based on premise which we do not find legally sustainable. Under the circumstances, we are inclined to interfere at this stage. No useful purpose would be served in driving the petitioner to a long drawn litigation in the form of replies, orders and appeals.
We may, however before closing, dispose of couple of peripheral issues raised on behalf of the petitioner. It was contended that the show-cause notice is based on the opinion of the CBDT and that the Ministry cannot be guided by such opinion, and that therefore, the show-cause notice was bad in law. We are, however, of the opinion that simply because the CBDT brought certain issues to the notice of the Ministry, that by itself would not mean that the Ministry was being guided or governed by the CBDT''s opinion or that issuance of show cause notice on the basis of information provided by CBDT would be without jurisdiction.
Counsel for the petitioner had further argued that once the undertaking is approved by the Ministry of Commerce under the Scheme for Industrial Park, CBDT had necessarily to notify such industrial park for the benefits under s. 80-IA of the Act. Heavy reliance was also placed on sub-r. (3) of r. 18C of the IT Rules, 1962 which prevailed at the relevant time. On the other hand, counsel for the Revenue had contended that it was open for the CBDT to examine whether the assessee had fulfilled the requirements under the Scheme before issuance of any such notification. To our mind, in the present case, this issue has become one of academic interest. We, therefore, leave this question open.
In the result, the impugned Notice dt. 16th Feb., 2009 is quashed. Consequently, the respondents, and in particular, the respondent No. 2 shall take consequential steps to ensure that necessary notification in terms of r. 18C (4) of the IT Rules, 1962; as prevalent at the relevant time, is issued by the CBDT with respect to the petitioner''s Industrial Park.
Direct service is permitted.
As held hereinabove, only on scrutiny assessment the total income of the petitioner was determined after allowing deductions under s. 80-IA(4)(iii) and s. 80-IA(10) and the assessment was finalized, assessing the income at Rs. 10,18,01,672, this matter was also carried right upto the Tribunal. There being nothing on record to point out any new material justifying issuance of the notice for reassessment; the notice for reopening within the period of four years from the end of the relevant assessment year is not found sustainable. It is also required to be noted that while disposing of the objections, it was harped upon the AO that the mandated condition for availing the benefit under s. 80-IA(4)(iii) was to have an Industrial park notified by the CBDT and the factum of not possessing the CBDT notification was not brought on the record by the assessee. This failure is also attributed to the assessee company for not disclosing fully and truly. This very basis; as mentioned hereinabove, is not sustainable in wake of clear direction by this Bench to the Union of India for issuance of such notification and this very edifice on which this reopening is based, has been demolished.
12.1 There is thus, an additional potent reason for the Court to quash and set aside the impugned notice. As mentioned in Special Civil Appln. No. 15962 of 2010 in case of this very assessee, the very issue on the basis of which assessment is sought to be reopened has been threadbare examined by this Bench and those questions are adjudicated in favour of the petitioner-assessee where not only it has been found entitled to deduction under s. 80-IA(4)(iii) but there is a specific direction also issued to the Union of India for issuance of the notification in terms of r. 18C(4) of the IT Rules, 1962.
12.2 It is needed to be mentioned here further that essentially only one reason is given while reopening the assessment. It is contended by learned counsel Mr. Bhatt that other income also are noticed to have escaped assessment as was noticed during the course of reassessment. Both the sides have argued on this aspect as to whether, if the income which he has initially formed a reason to believe has escaped assessment, in fact did not escape assessment and his notice falls on that particular ground, whether additional grounds are available to him for other income which do not find place in the notice or not. Reliance is also placed by the learned counsel of the petitioner on the judgments of Bombay High Court in case of The Commissioner of Income Tax-5 Vs. Jet Airways (I) Limited, ; and of Delhi High Court in case of Ranbaxy Laboratories Limited Vs. Commissioner of Income Tax, .
The issue here is essentially and centrally the one which had been examined and discussed elaborately. Moreover, as noted hereinabove, by virtue of the decision of this Court, the very edifice of reopening is completely gone. Notice for reopening itself is therefore required to be quashed. If notice was held valid and assessment permitted in which additions other than those for which notice was issued could have been made or not is an issue not arising in this petition and we would therefore not like to comment upon the same. In the aforementioned background, notice for reopening; even though issued within four years from the end of the relevant assessment year and in spite of the AO having wide powers under s. 147 of the Act (in post amendment period-w.e.f. 1st April, 1989) overwhelmingly, the factual matrix and the decision of this Court would not permit such a notice to continue, and resultantly, the impugned notice dt. 1st Oct.. 2009 issued under s. 148 of the IT Act, 1961 and all consequential proceedings are hereby set aside and are quashed. Petition stands allowed in terms thereof with no order as to costs.