Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2015 (6) TMI 607

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ry on the basis of which the CIT invoked jurisdiction under section 263. It is not a case of lack of enquiry on the part of Assessing Officer the Assessing Officer after making enquiries allowed the claim of the assessee on that issue. It is not necessary that the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding in this regard.If the Assessing Officer has not discussed the inquiry made by him in the case of assessee in respect of which, he issued show-cause to assessee, we cannot say that order is erroneous as the Assessing Officer has not made any inquiry into the matter. The assessee cannot dictate the Assessing Officer what should he incorporate in the assessment order and how he should draft the assessment order. - Decided in favour of assessee. Assessing Officer has wrongly allowed excess depreciation of ₹ 3,03,21,882/- considering the current assets as fixed assets - Held that:- The rent and the maintenance charges recovered from the short term lessees is also assessed as business income of the assessee. The income earned by the assessee is regularly assessed under the head business. The .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... essing Officer was erroneous as well as prejudicial to the interest of the revenue. Thus therefore, confirm the order of Principal CIT passed under section 263 on this issue and accordingly modify the order of CIT by holding that the assessment is set aside on the issue of allowing donation to the assessee and accordingly direct the Assessing Officer to examine the issue do novo. - Decided in favour of revenue for statistical purposes. - I.T.A. Nos. 413 & 414/KOL/ 2015 - - - Dated:- 9-6-2015 - Shri P.K. Bansal and Shri Mahavir Singh,JJ For the Petitioner:Shri D.S. Damle, FCA, For the Respondent:Smt. Suchismita Palai, JCIT, Sr. D.R. ORDER Per P.K. Bansal: Both these appeals have been filed by the assessee against the order of Principal Commissioner of Income Tax-I, Kolkata passed under sect ion 263 of the Income Tax Act dated 26.03.2015 and 20.03.2015 for the assessment years 2007-08 and 2010-11 respectively. The issues in both the appeals are common therefore we have decided to dispose of these appeal s by this common order for the sake of convenience. 2. ITA No. 413/Kol/2015 (Assessment Year : 2007-2008) The assessee in this case has taken as m .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 377; 245,36,17,590/-. The proportionate cost of land to the assessee is ₹ 1,89,74,418/- x 61% = ₹ 1,15,74,390/-. The assessee is entitled to benefit of indexation. Even then the long term capital gain assessabl e would not be less than ₹ 225 crore, on which tax payable is at the rate of 20% plus surcharge / EC etc. But the assessee company has not disclosed any capital gain in the return. No capital gain was assessed either. In view of the above, there was reason to believe that income chargeable to tax for the AY 2007-08 has escaped assessment within the meaning of section 147 . Assessment under sect ion 143(3) read with section 147 was completed vide order dated 30.03.2013 determining the book profit at ₹ 1,99,42,048/- under section 115JB of the Income Tax Act. In the said assessment, the Assessing Officer did not make any addition on account of the capital gain but took the view that no income has accrued or arisen to the assessee in the assessment year 2007-08 by observing as under:- Considering and verifying all the submission filed by the assessee and information collected from Godrej Properties Limited and Nabadiganta Industrial T .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ) read with section 45 which indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. The year of chargeability is the year in which the contract is executed. Section 2(47(v) had been enacted and in such cases, even entering into such a contract could amount to transfer from the date of the agreement itself. Therefore, if on a bare reading of a contract in its entirety, an Assessing Officer comes to the conclusion that in the guise of agreement for sale, a Development Agreement is contemplated, under which the developer applies for permissions from various authorities, either under power of attorney or otherwise and in the name of the assessee, then the Assessing Officer is entitled to take the date of contract as the date of transfer in view of section 2(47) (v). Therefore, the decision taken by the Assessing officer on this issue is not as per the provisions of law. The Assessing officer has wrongly allowed excess depreciation of ₹ 3,03,21,882/considering the current assets as fixed assets. In view of the above facts, the or .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... held to be erroneous (1) That the Company during the financial year 2006-07 entered into an agreement with M/s. Godrej Waterside Properties Pvt. Ltd. for development of company s leasehold property in terms of which said company was to provide 39% of the constructed area free of cost and the capital gains in respect of the said transaction was declared by the company in the assessment years 2011-12 and 2012-13. In view of the provisions of sect ion 2, sub-section 47(v) read with section 53A of the Transfer of Property Act, the transfer of the capital asset took place in assessment year 2007-08 and, therefore, the capital gain on grant of development right was chargeable in assessment year 2007-08 whereas the Assessing Officer accepted the company s contention that it was chargeable in financial years 2010-11 and 2011-12. And; (2) The Assessing officer wrongly allowed excess depreciation of ₹ 3,03,21,882/- considering the current assets as fixed assets. 6. It was submitted that the order passed under section 147 read with sect ion 143(3) dated 30.03.2013 is not erroneous as well as prejudicial to the interest of the revenue. The jurisdiction under section .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Park was always allowed under section 32 of the Act. In the income tax assessment under sect ion 143(3) for assessment year 2004-05 and onwards the depreciation claimed was allowed by the Assessing Officer after making thorough discussion with regard to the nature of the business conducted by the company. 7. It was further submitted that the assessee had obtained land parcel son lease from West Bengal Electronic Industrial Development Corporation. It includes a plot of land admeasuring 5.5978 acres situated at Block DP/5, Sector-5, Salt Lake, Kolkata. The assessee decided to develop the said leasehold land through a joint venture with Godrej Group who had expertise in development of IT Park and accordingly, the Company entered into a development agreement with Godrej Properties Limited granting the said company development rights in respect of the said land. For this our attention was drawn to page 92 to 119 of the paper book. In pursuance with the said development agreement, the assessee had received security deposit of ₹ 500 lacs. The receipt had duly been accounted for in the books of the assessee and shown in the audited balance-sheet for the year as on 31.03.2006 as w .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... which is available at pages 79 to 85 of the paper book. Our attention was drawn towards the order of ITAT dated 08.09.2011 in ITA No. 2221/Kol/2010 copy of which is available at page 86 to 90 of the paper book. Subsequently the Assessing Officer initiated the reassessment proceedings under section 147 by issuing notice under sect ion 148 of the Act for the reasons recorded. Our attention was drawn towards page 91 of the paper book, it was contended that from the reasons recorded, it is apparent that the assessing Officer initiated reassessment proceedings for the same reason for which the order under sect ion 147/ 143(3) is considered to be erroneous by the CIT. 9. The Assessing Officer in the recorded reasons referred to the development agreement with Godrej Waterside Properties Pvt. Ltd. in terms of which the developer was to provide 39% of the total saleable area to the assessee as a consideration. The Assessing officer in support of the reasons relied on the Note No. B/8 of Schedule P of the Annual Accounts for the year ended 31.03.2007 for which our attention is drawn to page 59, Note No. 5. This note provided the detail s of assessee s agreement with Godrej Waterside Prope .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... us decisions before the Assessing Officer that no capital gain was chargeable to tax until the agreement was performed and consideration was delivered. It was contended that it is a fact that before passing the impugned order dated 30.03.2013, the assessing officer had thoroughly examined the issue of the taxability of the gains arising from the development of land in all its perspectives. The Assessing officer has duly considered all the legal provisions as well as the relevant documentary evidences which were gathered by him during the course of the re-assessment proceedings and then he took a conscious decision that no capital gain legally chargeable to tax in the impugned assessment year. Therefore, it was contended that once the Assessing officer had conducted enquiries as the circumstances demanded, had applied his mind and then came to a conscious decision by following one of the courses legally permissible then in proceedings under section 263 the CIT cannot hold the assessment order to be erroneous on the same issue by invoking the jurisdiction under section 263. Our attention towards the show-cause notice it was pointed out that the first instance considers the assessment .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... g officer after due deliberation of all material facts and applicable legal provisions, cannot be termed to be erroneous merely because the Assessing Officer has not followed the view taken by the CIT. Our attention was drawn in the decision of the Hon ble Supreme Court in the case of Malabar Industrial Company vs.- CIT reported in 243 ITR 83). Reliance was also placed in this regard on the following decisions:- (i) CIT vs.- Max India Limited [295 ITR 282](SC); (ii) Cit vs.- Grasim Industries Limited (226 Taxman 165 (Bom. HC); (iii) CIT vs.- Sunbeam Auto Ltd. (332 ITR 167) (Del. HC); (iv) CIT vs.- J.L. Morrision (I) Ltd. (366 ITR 593 (Cal. HC). 12. Our attention was also drawn towards the following decisions in support of the proposition of law that where the Assessing Officer has examined the relevant issue in the assessment proceedings by gathering relevant material, by making necessary inquiries and after applying his mind then the CIT cannot exercise revisionary powers under sect ion 263 merely because in CIT s opinion another view is permissible:- (i) CIT vs.- Gabriel India Limited [332 ITR 167 (Bom. HC)]; (ii) CIT vs.- J.L. Morrision (I) Ltd. (359 I .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... was a positive written down value of the building block. The Tribunal has duly taken note of this finding and thereafter uphold the order of CIT(Appeal s). The Tribunal also noted that the CIT(Appeal s) s finding that the space sold was part of depreciable asset was not contested in appeal by the Revenue. Thus it is quite evident that the nature of the building block as fixed and depreciable asset was considered and decided by the appellate authorities and thus there being merger of the assessment order with the order of the CIT(Appeals) as well as that of the ITAT and, therefore, in terms of clause (c) of proviso to section 263, the CIT did not have jurisdiction to revise the assessment on that issue. 16. It was further submitted that the same building has been used by the assessee for the purposes of earning business income in the earlier years. Even during the year under consideration the income derived from the use of the building as also from operation and maintenance of IT Park has been assessed as business income. But for the use of IT Park building the assessee could not have earned the business income. The assessee was the owner of the building. As such all conditions .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... d by the Assessing Officer to the assessee. 19. We have heard the rival submissions and carefully considered the same along with the order of tax authorities below. We have also gone through the cases cited before us. In this case, we noted that the CIT passed the order under section 263 dated 26.03.2015. By passing the said order the CIT set aside the assessment order passed by the Assessing Officer on 30.03.2013 under section 143(3) read with section 147 as jurisdiction under sect ion 263 has been invoked by the CIT in respect of the said order. The CIT vide his order under section 263 dated 26.03.2015 set aside the assessment on limited issues for which the so cause notice was given to the assessee and directed the Assessing Officer to pass the order with regard to these two issues namely; - (1) assessment of the capital gain in relation to the assessee s development rights in respect of its leasehold property being Plot no. 5, Block DP, Sector-V, Salt Lake City, Kolkata-700 091; and (2) depreciation claimed in respect of the Information Technology Park known as Infinity Think Tank situated at Plot A/3, Block GP, Salt Lake Electronic Complex, Sector-V, Salt Lake City, Kolk .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ng 18,55,847 s.ft. assessee s share receivable of 39% = 7,23,781 sft. In the case of the assessee company which dev eloped and sub-leased similar IT building in Salt lake, Sector-V, the admitted rate of cost of construction of area sold in FY 2007-08 is ₹ 3,390/- per sq.ft. vide assessment records of the assessee company for the AY 2007-08. On the same basis, the sale consideration for 61% of the land of assessee (39% of proportionate land in retained by assessee along with constructed area) is 7,23,781 sft. X ₹ 3,390/-/sft. = ₹ 245,36,17,590/-. The proportionate cost of land to the assessee is ₹ 1,89,74,418/- x 61% = ₹ 1,15,74,390/-. The assessee is entitled to benefit of indexation. Even then the long term capital gain assessable would not be less than ₹ 225 crore, on which tax payable is at the rate of 20% plus surcharge / EC etc. But the assessee company has not disclosed any capital gain in the return. No capital gain was assessed either. In view of the above, there was reason to believe that income chargeable to tax for the AY 2007-08 has escaped assessment within the meaning of section 147 . The reasons recorded were .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... as mentioned hereinabove and ultimately passed the order under sect ion 263 vide order dated 26.03.2015. Now the question before us is whether the order passed by the CIT under section 263 is within the four corners of power as is envisaged on him under the Income Tax Act, 1961. Before deciding the issue whether the order passed by the CIT lays down under section 263, it is necessary to discuss the provision of sect ion 263 which empowers the CIT to revise the assessment order under section 263, which reads as under:- 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This consideration having regard to the language of section 263 apparently is a consideration which he exercises by calling for and examining the record available at this stage. There is no question of the assessee to appear and make submission. Thirdly, if after calling for and examining the records the Commissioner considers that the order of the Assessing Officer is erroneous in so far it is prejudicial to the interest of the Revenue, he is bound to give an opportunity to the assessee of being heard and after making or causing to be made such enquiry as he may deem fit, pass such order thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling assessment and directing a fresh assessment. This empowers the C.I.T. to cause or make such enquiries as he deems necessary. Fourthly the C.I.T. u/s 263 can enhance or modify the assessment. 23. It is a se .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e interest of the Revenue, he is empowered after giving the opportunity to the assessee, to make such enquiry as he may deem necessary. Therefore, the enquiry to be conducted by the CIT is an act once the CIT arrives at a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue after examining the record. Thus enquiry precedes the record and the material collected during the course of the enquiry cannot be the part of the record of the proceedings when the CIT forms an opinion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 25. From the show-cause notice as pointed out by us earlier, it is apparent that the CIT has invoked his jurisdiction under section 263 with regard to the following two issues- (i ) assessment of capital gains in relation to assessee s development rights in respect of its leasehold property being Plot No. 5, Block DP, Sector-V, Salt Lake City, Kolkata; and (2) depreciation claimed in respect of Information Technology Park Building known as Infinity Thinktank situated at Plot A-3, Block GP, Sector-V, Salt Lake City, Kolkata. 26. From th .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ossession is delivered and received by the assessee from the dev eloper. The A/R had also mentioned that transfer of its rights was complete only when the physical possession of the assessee's allocation in the built up area in Tower-I and Tower- II of the project was delivered by the developer in A.Ys. 2011-12 2012-13 respectively. The assessee further submitted that the income by way of capital gains accrued from the said development agreements were offered to tax in the Assessment years 2011-12 and AY 2012-13 taking full value of consideration at ₹ 34.96 crore and ₹ 63.60 crore respectively. The assessee alternatively claimed that in case the assessment is done in AY 2007-08, it should have been done on the basis of fair market value of the leasehold right in the leasehold land. If the said fair market value, as per Gazette Notification of Govt. of west Bengal for leasehold transfer of right in leasehold land, is considered then consideration of 61% transfer of leasehold right will come to ₹ 6.15 crore only. Considering and verifying all the submission filed by the assessee and information collected from Godrej Properties Limited and Nabadiganta Ind .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... allenging the reopening of assessment for AY 2007-08. The Hon ble Calcutta High Court Admitted assessee s writ petition and has directed the Income Tax Department to file affidavit in reply. However, no stay of assessment proceeding was granted by the High Court. In tits order dated 01.10.2012 in WP No. 537 of 2012, the Hon ble High Court permitted the AO to proceed with the reassessment u/s 147 on the condition that final order should not be passed without the leave of the court. By another order dated 03.01.2013, the interim order earlier passed on 01.10.2012 was ordered to remain in force till 01.04.2013. 3. In terms of the leave granted by the High Court, reassessment proceedings were continued and the assessee was asked to furnish its explanation and documents in support of its plea that capital gains chargeable to tax did not accrue or arise in AY 2007-08. The case was listed for hearing from time to time and the same was discussed with the representatives of the assessee on various dates. In order to verify the basic jurisdictional bets, letters were sent la Godrej Properties Ltd and Godrej Waterside Properties Pvt. Ltd with whom the assessee entered into Agreements on .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... tion so that the development or the IT project could be undertaken. Clause 7 further provided that the assessee would ensure the sanction of the building plan and it was also liable to bar and pay all costs and expenses till the original sanction of the building plan for the IT Project. Clause 8 of the Agreement required the assessee to sing and execute throughout nthe course of development all papers and documents necessary for obtaining approval and permission for undertaking development of IT Project. The assessee therefore claimed that it was not a case that the property belonging to the assessee was under complete and full control and management of the developer and the assessee ceased to have any control over its leaseuhold land at Salt Lake. The assessee continued to be involved in the management and control of the IT Project jointly with the developer. It was the assessee s case that for determination of income by way of capital gains, existence of consideration and its quantification in monetary terms was an essential prerequisite. In this case the consideration for transfer of 61% of assessee's interest in leasehold and was cost of 39% of the constructed space. The fa .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e constructed which was not even ascertained in AY 2007-08, it was not possible to determine and assessee s income by way of capital gains. My predecessor recorded his reasons to believe and quantified the amount of income alleged to have escaped assessment on the basis of information which became available in April 2011, i. e. more than 4 years from the end of the relevant previous year. As such based on the events which occurred much after the close of the previous year, it was not correct to hold that income had escaped assessment in the earlier year. 6. As regards delivery of possession of land to the developer the assessee contended that it had only given license to enter upon the leasehold land to carry out the development obligations under agreement. In the letters addressed to Godrej Waterside Properties Pvt. Ltd, the developer was specifically asked to furnish the date/s on which the possession ofhe land was delivered, In response, the assessee filed reply. 7. From this reply, it appeared that even the developer in its reply admitted that legal possession of the property was never received by Godrej Waterside Properties Pvt. Lid but it was only allowed to carry .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ideration cost of construction of the area coming to assessee s share. Since the land in question was leasehold land and is not freely transferable in view of restrictions placed by the Govt. of West Bengal, fair market value of the leasehold interest would be also highly depressed and based on such value the capital gains cannot be assessed. In view of the above discussion, I am of the opinion that on the facts and circumstances of the present case, it would be most appropriate that the capital gains be assessed in years in which the consideration for transfer of development rights was actually delivered by the developer. If the capital gain is assessed in the years or receipt of the consideration then the quantification of capital gain can be done with most certainty because till then it will be possible to assess the correct amount of capital gains with reference to cost of construction actually incurred by the developer. The facts on record shows that the cost or construction was incurred by the developer much later than FY 2006-07 and major portion or the construction cost was incurred during FYs 2009-10 2010-11. In the circumstances if one has to resort to estimation of the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ikas Behel (132 TTJ 229) In this case, the assessee was one of the owners of land which was acquired in 1990. On 31.10.2000 the co-owners entered into a development agreemne, in terms of which the owners were to receive 32.5% of the constructed space. The construction started on 07.11.2000 and completed on 02.06.2004. Assessee s share in the constructed space was delivered on completed in 2004. In the same year the assessee sold part of the constructed space out of the owner s allocation share and the capital gains was returned in AY 2005-06. The AO assessed the capital gain as short term whereas the assesese claimed the same to be long term in nature. The Tribunal held the gain to be long term in nature. However, what is material to note from the facts discussed in this decision is that it was never the case of the department nor the Tribunal held that capital gains should was assessable in AY 2001-02 although the development agreement was executed on 31.10.2000 and the construction began on 07.11.2000. The fact discussed in the decision of the Tribunal, therefore, shows the capital gain was held assessable only in the year in which the consideration was actually received by the a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 4,63,854 sq.ft. No. of allotted car parking w.r.t. Tower-I 183 No. of allotted car parking w.r.t. Tower-II 375 Details of capital gain Cost of constructed area Cost of car parking area Total Cost Capital gain shown Tower-I 32,22,32,500 2,74,50,000 34,96,82,500 33,21,91,886 Tower-II 57,98,17,500 5,62,50,000 63,60,67,500 60,04,98,920 As such any assessment with reference to FMV of ₹ 6.15 crores will only reduce the company s overall tax liability. 12. Considering discussion as in foregoing para 1 to 11, capital gain as shown by the assessee in AYs 2011-12 2012-13 in respect of alleged transfer of development rights on leasehold land is accepted. Order for the AY 2007-08 is completed on income as assessed earlier. 13. Since W.P. is dismissed by .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ncome Tax Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the disallowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income Tax Officer to re-examine the matter. That was not permissibl e. The Tribunal was justified in setting aside the order passed by the Commissioner of Income Tax under section 263 . 30. Similar view has been taken by the Hon ble Allahabad High Court in the case of CIT vs.- Mahender Kumar Bansal, 297 ITR 099 in which respectfully following the decision of Allahabad High Court in the case of CIT vs.- Goyal Private Family Specific Trust, 171 ITR 698 (Alld.) has held under para no. 12 as under:- As held by this Court in the case of Goyal Private Family Specific Trust (supra), we are of the considered opinion that merely because the ITO had not written lengthy order, it would not establish that the assessment order passe .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the Assessing Officer as is apparent from assessment order on this issue on which CIT invoked jurisdiction under section 263. It is not the case of ld. D.R. that the views taken by Assessing Officer are unsustainable in law. 34. It is a settled law that if the AO has taken one of the possible views, it cannot be said that there is an error in the order passed unless and until the view taken by the AO is unsustainable in law. The said view has been taken by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) wherein their lordships has held as under :- The pre-requisite to the exercise of jurisdiction by the Commissioner under section 263 is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the revenue. The commissioner has to be satisfied of twin conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) is prejudicial to the interests of the revenue. If one of them is absent- if the order of the Assessing office is erroneous but is not prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision ca .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ent for timely communication. These persons are eligible under s. 44AD to file their returns under presumptive scheme of taxation. All these persons were produced before the AO in revision proceedings and no question was put to them though their statements on oath were recorded. All these persons have confirmed in revision proceedings that the money was not returned by them to any person and was used for their personal benefit. The payments were made to these persons by banking channels and tax was deducted at source in accordance with law. The assessee has also given complete details with respect to labour expenses called for in assessment proceedings. These details were duly verified by the AO with the books and records. No adverse observation was made by the AO and hence, no addition was made in the regular assessment. The AO has also randomly selected two labourers and examined them and their statements were recorded under s. 131. Since all necessary details were furnished by the assessee, there was no reason for the CIT to invoke the revisional jurisdiction under s. 263. The CIT has not stopped merely by issuance of notice under s. 263. Once compliance is made, he went on issu .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... sing Officer is unsustainable in law. 36. In CIT vs. Ratlam Coal Ash Co., 171 ITR 141 (MP), Madhya Pradesh High Court has held as under:- It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in the return without making any enquiries in the circumstances of the case, the CIT would be justified in holding the order of the ITO to be erroneous. In the instant case, however, the Tribunal has found that the assessee had furnished all the requisite information and that the ITO, considering all the facts, had completed the assessment. The Tribunal further held that in the circumstances of the case, it could not be held that the ITO had made assessment without making proper enquiries. In view of these findings, the Tribunal was justified in law in reversing the order passed by the CIT. 37. In CIT vs. Arvind Jewellers, 259 ITR 502 (Guj), Hon ble Gujrat High Court has held as under:- It is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanation in pursuance of the notices issued under s. 142(1) as well as s. 143(2) and after considering those materials an .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 39. In the case of Commissioner of Income-tax v. Sunbeam Auto Ltd. 332 ITR 167(Del), Hon ble Delhi High court has taken following view:- The Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc. Whether there was application of mind before allowing the expenditure in question has to be seen. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. An order cannot be termed erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, it cannot be branded as erroneous by the Commissioner simply because, according to .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n for future assessment years, the very same accounting practice was accepted. (ii) That the dies were components of the machines. They needed constant replacement, as their life was not more than a year. The assessee also explained that since the parts were manufactured for the automobile industry, which had to work on complete accuracy at high speed for a longer period, replacement of the parts at short intervals becomes imperative to retain the accuracy. With the replacement of tools and dies no new asset comes into existence nor was their benefit of enduring nature. They did not even enhance the life of the existing machine of which the tools and dies were only parts. Therefore, the view taken by the Assessing Officer was one of the possible views and the assessment order passed by him could not be held to be prejudicial to the interests of the Revenue. The opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Commissioner to vary that opinion and ask for fresh inquiry . 40. Now coming to the second issue, which relates to depreciation claimed by the assessee in respect of Informati .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 8377; 4,17,62,205/-. Book profit was declared at ₹ 1,99,42,050/-. Along with the return, the assessee filed the audited accounts for the impugned assessment year. The assessment under section 143(3) was completed vide order dated 31.12.2009 at a total income of ₹ 1,50,26,623/-. During the impugned assessment year, the assessee had granted 6972 sq.ft. of the developed space on long term lease and received lump sum premium of ₹ 2,40,95,000/-. Besides the assessee also received refundable deposit s of ₹ 86,74,200/-. The Assessing Officer had taken both the sums together as the sale price of the office space. The Assessing Officer noted that in arriving at the WDV of the building block for claiming depreciation, the lumpsum premium of ₹ 2,40,95,000/- was reduced from the opening WDV and on the resultant reduced WDV depreciation under section 32 was computed and claimed. The Assessing Officer, however, held that the assessee should have offered the gain realized on granting long term lease of office space after deducting proportionate WDV included in the opening WDV relatable to transfer area. The Assessing Officer, therefore, considered ₹ 3,27,69,200 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ion is accepted in that case the WDV attributable to the portions sub-leased by the assessee will be affected but CIT(A) has directed the AO to reduce the sale proceeds of ₹ 2,49,95,000/- out of opening WDV of ₹ 32,60,17,820/- which was brought forward from earlier years. It is a fact that the department has not disputed the said part of order of CIT(A). It is not in dispute that space constructed by the assessee in the said towers has been considered as block of assets in respect of which depreciation has been allowed to assessee in the past assessment y ears . 43. Thus the ITAT dismissed the departmental appeal. We noted from the finding of the CIT(Appals) and the ITAT that both the appellate authorities had considered the nature of IT Park building and took the view that the IT Park building had consistently been considered by the Department to be part of the building block on which depreciation was allowed and in that view of the matter decided the question of determination of income assessed in the AO s order under the head short-term capital gains . The ITAT s order was passed on 08.09.2011, while the CIT(Appeals) passed his order on 20.08.2010. Show cause n .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ting aside assessment. While making assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be a touchstone of the assessment order passed by him, the CIT cannot substitute his view in place of finding of the Assessing Officer until and unless the view taken by the Assessing Officer is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R., which may prove that the decision taken by the Assessing Officer is not sustainable in law. The order passed by Principal CIT is illegal without jurisdiction on these issues. So far as these issues are concerned, the order passed by the Principal CIT cannot be sustained if such type of order is sustained then this will permit the illegality to continue and the subsequent actions carried out on the illegal order are al so illegal. We, therefore, quash the order passed by the Principal CIT under section 263 of the Act. 46 . ITA No. 414/Kol/2015 (Assessment Year : 2010-2011 ) In this case al so, the assessee has taken as many as eight grounds of appeal challenging the order of Principal Commissioner of Income Tax-I, Kolkata passed under section 263 of the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... that the order passed by the Assessing Officer on this issue was erroneous as the Assessing Officer has incorrectly allowed the deduction in respect of the donation amounting to ₹ 92,57,650/-. This is not a case where the Assessing Officer after considering the submission of the assessee has taken a particular view which is sustainable in law or there can be two views about the allowance of deduction in respect of the donation. This submission of the ld. A.R. that it was a pure mistake apparent from record itself proves that the order passed on this issue by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue. Even the ld. A.R. has not raised any plea that this issue has been examined by the Assessing Officer. On that count also, we find that there was totally lack of enquiry on the part of the Assessing Officer. We, therefore, confirm the order of Principal CIT passed under section 263 on this issue and accordingly modify the order of CIT by holding that the assessment is set aside on the issue of allowing donation to the assessee and accordingly direct the Assessing Officer to examine the issue relating to the deduction of donation clai .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates