TMI Blog2010 (1) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant H.B.S. Gill for the Respondent ORDER I.P. Bansal, Judicial Member:- 1. This is an appeal filed by the assessee. It is directed against the order passed by CIT dt. 1st July, 2008 under the provisions of s. 263 of IT Act, 1961 (Act). Grounds of appeal read as under:- "1. That the learned CIT has grossly erred in law and on facts and in the circumstances of the appellant's case in invoking the provisions of s. 263 of the IT Act. 1.1 The order passed by the learned CIT is bad in law and on the facts and in the circumstances of the appellants case and is prayed to be quashed. 1.2 The learned CIT ought to have appreciated that the order passed by the learned AO under s. 143(3) was neither erroneous nor prejudicial to the interest of Revenue. 2. That the learned CIT has grossly erred in law and on facts of the appellant's case in holding that the advertisement expenses incurred by the appellant are attributable to contract activity and has to be allocated to the contract and not to be allowed as revenue expenditure especially when the same were allowed by the learned AO after due examination of the matter. 3. The appellant craves le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to show cause notice it was submitted by the assessee vide letters dt. 12th and 19th June, 2008 that assessee had successfully bid in auction by DDA on 15th Dec., 2003 for a commercial plot on leasehold basis which was to be used as shopping mall at Vasant Kunj. For that purpose a perpetual lease was executed on 4th Oct., 2004, however, all other actions of getting the complete rights in the land were taken much earlier. It was submitted that the advertisement and publicity activities relating to shopping mall were made much earlier because real estate business demand such type of advertisements and publicity as a prudential activity in order to attract prospective clients/customers and those activities start soon after acquisition of land. Reference was made to the various decisions of Hon'ble Supreme Court and High Courts which were relied upon by the assessee during the course of assessment proceedings to contend that in the case of real estate business, when the assessee acquires the immovable property either by purchase or by any other manner, it is said that the business of the assessee has cdmmenced. 6. On the issue regarding advances taken for purchase of land, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year. Therefore, learned CIT held that the AO's order allowing advertisement expenses is erroneous, as AO did not inquire into such aspects. 9. Further noticing from statement of account of M/s DLF Universal Ltd., learned CIT observed that assessee had raised fresh loans amounting to Rs. 11,92,13,195 which were squared up during the year and the submissions of assessee in this regard were that the assessee had paid an advance of Rs. 1,62,53,00,050 for purchase of land from DDA which was reflected under the head "current assets" as on 31st March, 2004. On execution of lease deed, the said amount representing the advance for purchase of land was transferred from "current assets" to "leasehold land account" under the fixed assets and the information relating to name, address, PAN and income-tax particulars is available in the assessment record. Learned CIT observed that this aspect was also not examined by the AO, which is regarding squaring up of the account. Thereafter learned CIT observed that assessment record reveals that assessment proceedings were started on 4th Oct., 2007 and those were completed on 30th Nov., 2007 without making proper enquiries i.e. in a hasty manner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 the assessee got the perpetual leasehold rights on the said land and reference was made to para 4 of the lease deed. On 18th March, 2004 the balance amount of 75 per cent was paid. Thus, it was submitted that entire consideration of land was paid by 18th March, 2004 which falls within the financial year related to relevant assessment year and only the execution of lease deed was done in asst. yr. 2005-06. It was submitted that business is set up on completion of first activity i.e. acquisition of land and any expenditure shown thereafter is allowable is revenue expenditure and reference was made to the following decisions to contend that there is no infirmity in the order of AO vide which such expenditures were allowed on completion of first activity i.e. acquisition of land by the assessee:- 1. CIT vs. Hughes Escorts Communications Ltd. (2007) 213 CTR (Del) 45 : (2009) 311 ITR 253 (Del). 2. CIT vs. L.G. Electronics (India) Ltd. (2005) 199 CTR (Del) 205 : (2006) 282 ITR 545 (Del). 3. CIT vs. Club Resorts (P) Ltd. (2006) 203 CTR (Mad) 587 : (2006) 287 ITR 552 (Mad). 4. CIT vs. Herbalife International Ind. (2008) 297 ITR 303 (Del). SLP dismissed by Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s need not starts simultaneously nor commence business. The business would commence when the activity which is first in point of time and which must necessarily proceed the other activity is started. Referring to this decision it was submitted that the company is involved in the second category during the year under consideration i.e. development of property, therefore, it can be said that assessee has commenced its business. It was submitted that once the business is set up all expenses are allowable as bona fide expenses and for this proposition reliance was placed on the decision of Hon'ble Delhi High Court in the case of CIT us. E Funds International India (2007) 162 Taxman (Del) 1 and CIT vs. Club Resorts (P) Ltd. (supra). 13. Referring to above reply submitted to the AO it was submitted that the question regarding allowability or otherwise of advertisement expenses was enquired into by the AO. The necessary facts were submitted to the AO along with legal propositions and AO being satisfied has admitted the claim of the assessee. Thus, it was submitted that the order of AO cannot be said to be either erroneous or prejudicial to the interest of Revenue as the matters sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding so their Lordships of Delhi High Court have considered the decision of Gee Vee Enterprises (supra) relied upon by CIT for invoking powers under s. 263. Thus, it was submitted by learned Authorised Representative that the order passed by learned CIT under s. 263 should be quashed. 16. On the other hand, it was submitted by learned Departmental Representative that learned CIT was right in invoking provisions of s. 263 as assessment was framed in undue haste. He submitted that, as pointed out by CIT, the assessment proceedings were started on 4th Oct., 2007 and were completed on 30th Nov., 2007 without making proper enquiries. Relying on the decisions of Hon'ble Karnataka High Court and Hon'ble Delhi High Court as relied upon by CIT, it was submitted by learned CIT (Departmental Representative) that order of CIT under s. 263 should be held valid. On merits, it was submitted by learned CIT (Departmental Representative) that assessee could not support its case and, therefore, CIT was right in observing that these additions were to be made. 17. We have carefully considered the rival submissions in the light of material placed before us. The law regarding applicability or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding advertisement and publicity a question was put by the AO to the assessee and a detailed reply was submitted along with necessary details and in such a situation, where the AO has enquired into an issue and being satisfied not made any addition, there is no requirement in law to make a detailed discussion of that issue in the assessment order passed by the AO and such proposition of law is stated by Full Bench decision of Hon'ble High Court in the decision of CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB) which was later on followed and described by Hon'ble Delhi High Court in the case of CIT vs. Eicher Ltd. (2007) 213 CTR (Del) 57 : (2007) 294 ITR 310 (Del). From the help of material placed on record it has been demonstrated by the learned Authorised Representative of the assessee that an enquiry was put by the AO and detailed reply was given and after being satisfied the AO had accepted the claim of the assessee. The view adopted by AO also cannot be described to be impossible view because with the help of decisions of jurisdictional High Court it has been demonstrated by learned Authorised Representative that in a case where ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lands and gardens into proper shape and set up the appurtenant services so that ultimately the property can be given out on leave and license basis and the third business activity is actually to gave out on lease or on leave and license basis and in a case where property is acquired on a particular date and some type of activity i.e. alternations and additions was being carried out and it was held that at any rate from 1st Oct., 1964 when the company carrying on the second category of its business had commenced its business activity and it was held that expenses incurred by assessee from the date of acquisition of land till the end of the assessment year were to be held to be business expenditure. Thus, the expenditures incurred by the assessee starting from second category till the end of the financial year were hold to be business expenditures. 20. Hon'ble Delhi High Court in the case of CIT vs. Hughes Escorts Communications Ltd. (supra) in a case where assessee company was incorporative with the object of setting up satellite business communication systems had placed a project order dt. 28th July, 1994 with a foreign company for a purchase of a very small aperture termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that disallowance was not warranted. 24. In the case of CIT vs. Whirlpool of India Ltd. (supra) the assessee employed certain staff with respect to its business and also purchased computers and these expenses were claimed on the ground that the business was set up w.e.f. 1st Nov., 1995 when it paid salary to employees through two other companies and incurred petty expenses through them; the AO did not accept such submission of the assessee and held that the business can be said to have been set up only w.e.f. 1st Feb., 1996 when the bank account was opened. It was held that the Tribunal was right in holding that business was set up on 1st Nov., 1995. 25. If the facts of the present case are viewed from the abovementioned legal proposition then it will be clear that the business of the assessee was set up with the acquisition of land which even according to lease deed was acquired w.e.f. 22 Dec., 2003. The genuineness of lease deed cannot be doubted as the same is executed between the assessee and President of India through Administration Office of DDA. A question was raised by the AO and reply was given by the assessee to contend that advertisement and publicity expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities from 1-4-2003 to 31-3-2005 Date Particulars Dr. Cr. Balance 12.12.2003 Ch. No. 627131 - 10,00,000 10,00,000 Cr. 15.12.2003 Ch. No. 627136 - 40,54,00,000 40,64,00,000 Cr. 18.03.2004 Ch. No. 400098 - 1,21,89,00,000 1,62,53,00,000 Cr. 30.06.2004 Paid to DDA on our behalf - 13,195 1,62,53,13,195 Cr. 29.06.2004 Ch. No. 400262 - 1,50,000 1,62,54,63,195 Cr. 27.07.2004 Ch. No. 400291 - 1,50,000 1,62,56,13,195 18.08.2004 Ch. No. 400336 - 9,00,000 1,62,65,13,195 Cr. 23.08.2004 Ch. No. 400342 - 11,32,00,000 1,73,97,13,195 Cr. 27.08.2004 Ch. No. 400349 - 2,00,000 1,73,99,13,195 Cr. 10.09.2004 Ch. No. 400384 - 9,00,000 1,74,08,13,195 Cr. 30.09.2004 Ch. No. 400419 - 14,00,000 1,74,22,13,195 Cr. 06.10.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment in hasty manner without making proper enquiry but that assumption of learned CIT is not correct as when an issue has been raised and a proper reply of the same is given then it cannot be presumed that either the issue has been dealt in haste and without making enquiry unless it is demonstrated that after raising the query and after replies and details being placed on record the decision taken was incorrect. In any case in present case it is not a case where no enquiry was made by the AO and at best, it can be the case of the Department that it is a case of inadequate enquiry. Here also this position of law has been clarified by Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto Ltd. (supra), wherein their Lordships have held that if there was any enquiry, even inadequate, that would not by itself give occasion to CIT to pass orders under s. 263 of the Act merely because he has different opinion in the matter. It is further observed that it is only in the case of "lack of enquiry" that such a course of action would be open and while holding so their Lordships have considered the earlier decision of Hon'ble Delhi High Court in the case of Gee Vee Enterprises ..... X X X X Extracts X X X X X X X X Extracts X X X X
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