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2015 (6) TMI 607 - ITAT KOLKATA

2015 (6) TMI 607 - ITAT KOLKATA - TMI - Revision u/s 263 - Doctrine of merger - development agreement entered into by the assessee with Godrej Waterside Properties Pvt. Ltd., the capital gain has arisen to the assessee during the impugned assessment year in the opinion of the CIT, assessing officer erroneously not assessed the capital gain during the impugned assessment year in respect of transaction under the said development agreement - Held that:- It so far as the issue no.1 is concerned, the .....

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to tax in the impugned assessment year. Thus it is a case where the Assessing Officer has examined the issue by making enquiry 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 c .....

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gly 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 depreciation on the actual cost/ written down value of the fixed assets of the IT Park Undertaking had been claimed and allowed in the income tax assessments of the asse .....

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t provisions of section 50 are applicable since the capital assets transferred was integral part of the depreciable asset.The CIT by exercise his jurisdiction under sect ion 263 in respect of the issue of depreciation, in our opinion, exceeded his jurisdiction which has no leg to stand. Even otherwise also, the issue relating to depreciation claimed in respect of the Information Technology Park Building known as “Infinity Thinktank” situated at Plot A/3, Block GP, Sector-5, Salt Lake City, Kolka .....

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power of CIT under section 263 that if the order could have been rectified under section 154, CIT could have not exercised the jurisdiction under sect ion 263. This is a fact 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 w .....

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s 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 Commi .....

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lity as well as on merit. 3. Brief fact s of the case are that the original assessment under sect ion 143(3) of the Income Tax Act, 1961 was completed on 31.12.2000 which was subsequently re-opened by recording the following reasons to believe:- It was seen that as per Note B-8 of Schedule P of the accounts contained in the annual report for the y ear ending 31.03.2007, the assessee company entered into development agreement with Godrej Waterside Properties P. Ltd. during the year ending 31.3.20 .....

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shall be entitled to the 39% of the total built up area as well as parking area . Schedule F in respect of fixed assets shows leasehold land at ₹ 1,89,74,418/-. Schedule E in respect of liabilities reflects Joint Development deposit at ₹ 5 crore. It is thus apparent that there was transfer of the land, being capital asset during the year ending 31.3.2007 relevant to AY 2007-08 and the resultant capital gain is assessabl e in AY 2007-08 as per decision of various courts in respect of .....

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. 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 assessabl e would .....

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t ₹ 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 Townships Authority, no capital gain accrues or arise .....

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ide Properties Pvt. Ltd. for the purpose of carrying out of the construction of the I.T .Project. It was agreed that for consideration for providing land by the assessee company towards the development of I.T. Project by the Godrej Waterside Properties Pvt. Ltd. and after completion of I.T Project, 39% out of total constructed area of I.T. Project together with amenities and therein shall belong to assessee company and balance 61% constructed area with facilities shall belong to the Godrej Water .....

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sions of section 2(47)(v) of the I.T. Act any, transaction involving allowing of possession to be taken over or retained in part-performance of a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of section 2(47)(v). In order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration, it should be in writing; it should be signed by the transferor; it should pertain to transfer of .....

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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 pe .....

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, the order passed u/s 147/143(3) on 30.03.2013 for A.Y. 2007-08 appears to be erroneous in so far as it is prejudicial to the interests of revenue. Therefore, it is proposed to take up above assessment order u/s 147/143(3) dated 30.03.2013 for revision u/s 263 of the I.T. Act, 1,961. Your case is fixed for hearing u/s 263 of the I.T. Act, 1961 on 27.02.2015 at 12.00 noon for this purpose. In case of failure to respond to this notice, decision may be taken on merits of the case . 4. From the sai .....

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ent agreement which assessee entered into with Godrej Waterside properties P Ltd., and also that the Assessing Officer has wrongly allowed excess depreciation of ₹ 3,03,21,882/- considering the current assets as fixed asset s. The assessee vide its letter dated 04.03.2015 objected to the proceeding being initiated under section 263 both on legal grounds as well as on merit s stating that the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the r .....

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ese issues relating to the chargeability of the capital gains during the impugned assessment year as well as allowance of the depreciation to the assessee and directed the Assessing Officer to complete the assessment de novo. 5. Ld. A.R. before us submitted that the proceeding under section 263 has been initiated by the CIT. The main reasons for which the assessment order was held to be erroneous - (1) That the Company during the financial year 2006-07 entered into an agreement with M/s. Godrej .....

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e 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 .....

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nd maintaining information Technology Parks. The Company set up its first IT Park known and titled as Infinity Think Tank at Plot A/3, Block GP, Salt Lake Electronic Complex, Sector-V, Kolkata-700 091. The said park consisted of two Towers. The development of the said IT Park commenced in and around 1996-97 and proceeded in phases over the years. The first Tower was developed and construction was completed in financial year 2000-01. Construction and development of the second Tower which progress .....

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amp; machineries installed inter alia included central air conditioning plant, elevators, fi re fighting equipment s, building automation system, security systems, electrical and cabling high speed data cables, electrical sub-stations, DG backups, etc. The assessee regularly derived income from the occupants for use of the services and service charges received have always been assessed as business income of the assessee. Since the assessee continued to own these plants and equipment s and the co .....

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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, .....

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#8377; 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 well as 31.03.2007. The assessment under section 143(3) was completed for the impugned assessment year on 31.12.2009. In this assessment, the Assessing Officer took into account all the relevant fact s concerning the cost of construction which the assessee had incurred on construction of the IT Park and the depreciation claimed thereon from .....

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lding block in conformity with section 50 of the Act and on the resultant reduced written down value the depreciation was claimed. The Assessing Officer held that the proportionate written down value of the office block was required to be reduced from the gross sale consideration to arrive at short-term capital gains which in his opinion was liable to be assessed. The Assessing Officer accordingly assessed ₹ 1,50,26,623/- under the head short-term capital gains on sale of depreciable asset .....

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order was decided by the CIT(Appeals)-I, Kolkata on 20.08.2010. While deleting the addition on account of short-term capital gain on sale of depreciable assets, the CIT(Appeals) besides the said relief, vide his order also allowed relief on other issues. Against the relief allowed on other issues, second appeal was preferred but no second appeal was filed by the CIT on the relief allowed by the CIT(Appeals) holding no addition on account of sale of depreciable asset was warranted. Our contention .....

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tended 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 suppor .....

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heet concluded that the assessee was liable to be assessed under the head capital gains in respect of the said development agreement and since the capital gains was not so assessed in the order under section 143(3), he formed his reasons to believe that income chargeable to tax for the assessment year 2007-08 had escaped assessment. The assessee objected to the reopening vide its letter dated 17.02.2012. The Assessing Officer vide order dated 21.02.2012 disposed of the objection raised by the as .....

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s available at pages 188 to 208 of the paper book, passed the assessment order on 30.03.2013 in which he did not assess the capital gains since he was fully satisfied that transfer of capital asset did not take place in the relevant year and hence no capital gain was legally chargeable to tax in assessment year 2007-08. Our attention was drawn to the various submissions made by the assessee during the course of hearing. The assessee brought to the attention of the Assessing Officer that the deve .....

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confirmation of these facts from Godrej Properties Ltd. and Godrej Waterside Properties Pvt. Limited. 11. The assessee has also submitted various 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 developme .....

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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 order as erroneous for the reason that no capital gain was assessed though in terms of section 2(47) of the Act, the capital gain was chargeable in that yea .....

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ain was legally chargeable to tax in the assessment year 2007-08. The Assessing Officer had also perused the fact that the development agreement was executed by the assessee in July, 2005 and the development work had also commenced thereafter. The Assessing Officer was satisfied that the capital gain ultimately offered in the later years was much higher than the capital gains that would have been legally chargeable if assessed in assessment year 2007-08. It was also submitted that subject to pas .....

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sfer of the leasehold land in assessment years 2011-012 and 2012-13, and finality of these order is not disturbed then it would be entirely erroneous for the supervisory tax authority to hold that the same income was chargeable to tax in assessment year 2007-08 as well. Moreover, once the assessing authorities assessed the capital gains on transfer of the same capital asset in assessment year 2011-12 and 2012-13 then it leads to only one conclusion that on the issue of taxability and the year of .....

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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 l .....

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v) Hari Corporation Trading Co.-vs.-CIT(263 ITR 437) (P&H HC); (v) Siddh International -vs. - CIT (32 SOT 14) (Ahd. ITAT); (vi) Gita Chowdhury-vs.-CIT (ITA No. 704/Kol/2014)(Kol. ITAT); (vii) Sari ta Kanodia -vs.- CIT (ITA No. 705/Kol/2014)(Kol. ITAT). 13. In respect of the decision referred to by the CIT it was pointed out that the CIT s reliance on the judicial decisions cited in the order is al so inappropriate because most of the decisions were rendered prior to the decision of the Hon b .....

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risdiction. In this case, the issue concerning allowance of depreciation was the subject matter of regular assessment. The Assessing officer had allowed the depreciation in the original assessment, which was completed in 2009. In this assessment, the Assessing officer had allowed the depreciation after carrying out adjustment in the written down value of the building block. In the circumstances even if there was alleged error of allowing depreciation, it was committed in the original order and, .....

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he CIT after examination of assessee s contention had categorically held that the constructed area which the assessee sold during the relevant year to Shri Mamta Agarwal was forming part of the block of depreciable asset and, therefore, capital gain could not be assessed under section 50 because there 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(Appe .....

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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 s .....

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on that basis it was contended that the CIT has incorrectly alleged that the depreciation has been claimed in respect of the building which was received under the Joint development Agreement with Godrej properties Limited and, therefore, it has to be treated as current asset s. This finding clearly shows that the CIT has not even applied his mind to the jurisdictional facts. As is evident from records, the building under the development agreement with Godrej Waterside properties Limited was not .....

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essee in respect of this building were discussed in the order under sect ion 143(3) and, therefore, the CIT could not confuse the claim of depreciation on the existing building with the building which was yet to be constructed by the Godrej Waterside properties Limited. Thus it was contended that since the CIT s order was entirely based on wrong appreciation of facts, the order passed by the ld. CIT be set aside. 18. Ld. D.R., on the other hand, relied on the order of CIT and contended that sinc .....

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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 26.03.20 .....

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d at Plot A/3, Block GP, Salt Lake Electronic Complex, Sector-V, Salt Lake City, Kolkata-700 091 The undisputed facts placed before us are that the assessee is a Company engaged in the business of developing, operating and maintaining civil infrastructures to use Information Technology and Information Technology Cable services. The assessee is engaged in the business of developing, operating and maintaining IT Parks and other civil infrastructures since late 1990 s. In connection with the busine .....

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-8 of Schedule P of the accounts contained in the annual report for the y ear ending 31.03.2007, the assessee company entered into development agreement with Godrej Waterside Properties P. Ltd. during the year ending 31.3.2007 for development of its land and the developer had to bear all the costs and the assessee will get 39% of the total built up area as well as parking area. The Note B-8 is reproduced below- The company has entered into development agreement with Godrej Waterside Properties P .....

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nt that there was transfer of the land, being capital asset during the year ending 31.3.2007 relevant to AY 2007-08 and the resultant capital gain is assessabl e in AY 2007-08 as per decision of various courts in respect of development agreements. As per information available from newsletter of the assessee company dated 4.4.2011, the total area of space in Tower 1 is 6,15,557 sft. And that in the Tower 2 is 12,40,180 sft. The grand total being 18,55,847 s.ft. assessee s share receivable of 39% .....

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45,36,17,590/-. 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 incom .....

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ental costs envisaged in the agreement and upon completion of construction, the assessee would be entitled to 39% of the total built-up area as well as parking area. The Assessing Officer, in the recorded reasons, further stated that Schedule E of the financial statement s was in respect of liabilities reflected Joint Development Deposit at ₹ 5 crores. Referring to these information available in the audited account s for the year ended 31.03.2007, the Assessing officer observed that there .....

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the Act. 21. The re-assessment proceedings were al so initiated on appraisal of facts, which were available on the assessment record during the impugned assessment year. We noted that the assessee when filed a writ petition before the Hon ble Calcutta High Court, the Hon ble High Court dismissed the writ petition as none appeared on behalf of the petitioner and also on behalf of the respondent. The Assessing Officer was satisfied if the contention of the assessee that no capital gain was assess .....

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on the two issues 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 .....

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ing 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 sub-section, - (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) an order of assessment made by the Assistant Commissioner or Deputy Director or the Income-tax Officer on the basis of the directions issued by the Joint Commission .....

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vailable at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two yea .....

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the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 22. From the perusal of the aforesaid section, it is apparent that there are four main features of the power of revision to be exercised u/s 263 by the Commissioner of Income-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under .....

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t 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 or .....

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nditions is absent, the order passed by the CIT by invoking the provisions of section 263 will not be legal. The term erroneous has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the Assessing Officer cannot be said to be an error. An order can be said to be erroneous if there is an incorrect assumption of fact or incorrect application of law in the order passed by the Assessing Officer. If the Assessing Officer after ma .....

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of any proceedings under this Act. The word record is very important, because on the basis of the record of the proceedings the CIT will form an opinion that the order passed is erroneous as well as prejudicial to the interest of the Revenue and once he forms an opinion, he has to give an opportunity to the assessee of being heard and after making or causing the enquiry he can pass an order. Moreover the inquiry is conducted once the CIT forms an opinion on the basis of record that the order pas .....

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Once the record is examined and the CIT on the basis of examination of the record forms an opinion that the order is erroneous and prejudicial to the 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 examin .....

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al 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 the fact s as narrated by us in the preceding paragraph as regard to the fi rst issue, we noted that the Assessing Officer has duly considered this issue while fr .....

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nder sect ion 148 was issued only on the same reason as escapement of capital gain in relation to the assessee s development rights in the said leasehold property being Plot No. 5, Block DP, Sector-V, Salt Lake City, Kolkata. The Assessing Officer took the view that no capital gain accrues or arises to the assessee in assessment year 2007-08 by examining the following submissions of the assessee as appearing at page 2-3 of the assessment order:- The assessee company had entered into development .....

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tion will be 39% of the built up area including car parking area. The land on which the IT Park was required to develop by Godrej was a leasehold land and the assessee was only holding the leasehold interest in the land. According to the submission by the A/R, leasehold interest in the land was never transferred when the development agreements were entered into. The developer was only granted a license to carry out its obligations under the Development Agreement and that the assessee never parte .....

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ect 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 va .....

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he asses see in the AY 2007- 08 . 27. Even we noted in this regard that the Assessing Officer made a detailed note why the capital gains in relation to the assessee s development rights are not chargeable to tax in the impugned assessment year, the copy of the said note is available at pages 220 to 226 of the paper book, which were obtained by the assessee by taking the inspection on 12.05.2015, the relevant note is reproduced as under:- I. In this case, my predecessor had initiated reassessment .....

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ntered into a Development Agreement with Godrej Waterside Properties Pvt. Ltd in respect or assessee's leasehold land at Salt Lake, Sector V, Kolkata. In terms of the said Development Agreement, the Developer was to incur all developmental costs up to completion of the construction. In consideration of assessee granting development rights in the land: the assessee was entitled to 39% of the total built up area and par king spaces. From the information available from the assessee's Newsle .....

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eding was initiated by my predecessor by issuing notice u/s. 148 dated 30.09.2011. 2. The assessee filed objections to the reasons recorded but these objections were rejected by my predecessor for the reasons discussed in his order dated 21.02.2012. The assessee thereafter filed a writ petition before the Kolkata high Court challenging 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 a .....

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sessment 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 ente .....

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isitioned, The assessee was asked to furnish its explanations as to whether at any time it had offered the income by way of capital gains in respect of its Development Agreement with Godrej Waterside Properties Pvt. Ltd. The assessee explained that in terms of the Development Agreement, it had granted only a licence to Godrej Waterside Properties Pvt. Ltd and Godrej Properties I. td permitting them to enter upon the leasehold premises to undertake development or IT Park in conformity with the sa .....

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ivered and at that Stage only the transfer of the capital asset was completed. The capital gains therefore crystalized at that time because the consideration for transfer came into existence and the same was paid to the as sessee in these two years. The assessee clarified that only receipt of the consideration, it was able to compute its tax liability and pay the tax on the resultant capital gains in the AYs 2011-12 & 2012-13 respectively. Copies of the tax re turns for these two years were .....

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use 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 th .....

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he consideration for transfer of 61% of assessee's interest in leasehold and was cost of 39% of the constructed space. The facts on record however showed that in 2005 or 2007 when the Agreements were entered into by the assessee, the consideration in kind did not even exist, The developer had not even incurred any significant cost for development of the IT Park. Based on mere promise to perform an agreement it could not be held that income on account of capital gains accrued. From the inform .....

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assessee, there was no definitive quantification of the area that could be developed or constructed on the leasehold land. The agreements between the assessee and Godrej nowhere spelt out the exact area that was constructible in terms of the Development Agreement. In absence of the final quantification of the area constructible; it was not possible to ascertain in monetary terms the consideration for transfer and consequently it was also not possible to assess the capital gains. From the informa .....

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closed. The facts on record therefore, suggest tht till 2011, even the area coming to assessee s allocation was not fully quantifiable. It therefore, appeared even from the reasons recorded that till April 2011, there was no certainty about the area that was to be delivered to the assessee in terms of the development agreement. It was only after completion of IT Project and delivery of assessee s share therein the computational provisions of IT Act became applicable. In absence of the final quan .....

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ear, 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 .....

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m the discussion in the foregoing paras therefore it appeared that the assessee though entered into development agreement with Godrej Properties Ltd initially and thereafter with Godrej Waterside Properties Pvt, Ltd it never ceased to be in control or its land, The assessee along with the developer jointly remained in control and management of the land and the project. At the time when the agreement was entered there was no finality with regard to total constructible area which was to accrue to .....

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came only in FYs 2010-11 & 2011-12. It was only at that point of time was possible to determine with certainty the costs incurred by the developer, based on which the income by way of capital gain could be assessed. In the background of the fact that in FY 2006-07 the cost of construction was not even incurred and the constructed space did not exist, the determination or quantification of consideration would be an act of abstract estimation which is neither practical nor permitted by the Ac .....

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ration the fair market value of 61% of the assessee s leasehold rights in land and but not taking into consideration 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 opi .....

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struction 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 consideration then I will have to allow discounting or the construction cost to arrive at the present value of the consideration. This will result in substantial reduction in the capital g .....

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t or the contention that capital gain is assessable in the y ear in which consideration is actually received. decision of the Madras High Court in the case of CIT Vs. K. Jeelani Basha 256 ITR 282 (Madras) is relevant In this case the assessee had agreed to sell its land for a consideration of ₹ 57 crores which was to be paid within the time prescribed in the agreement. The transferee was able to pay only ₹ 22 lacs and in consideration thereof the assessee parted with only one third o .....

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the High Court held that capital gain can only be assessed in the year in which the consideration is actually received. In the assessee s case, the consideration in the form of 39% of the constructed area was delivered to the assessee in AY 2011-12 & 2012-13 and in the same year the assessee delivered possession of the developer s allocation to the dev eloper. Accordingly applying the ratio laid down in the decision of the Madras High Court, I am of the opinion that the assessment of capita .....

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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 d .....

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2012-13 being years in which the consideration was actually received. For these reasons, total income as shown by the assessee in its return for AY 2007-08 is accepted. However, AYs 2011-12 & 2012-13 may be scrutinized so that long term capital gain income can be assessed on more scientific basis after obtaining all relevant evidence, facts and materials from the assessee s possession as also from the developer. 11. Moreover, it is also submitted by the assessee vide its letter dated 21.903 .....

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he market value of the leasehold interest in land as existing on the date of the agreement. The fair market value of the leasehold interest in land could be assessed and determined only with reference to the Gazette Notification of West Bengal Govt. According to which the fair market value of 61% of our leasehold interest was only ₹ 6.15 crores. In fact, the said method of de termination of the consideration is now statutorily incorporation in provisions of section 50D of the IT Act which .....

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nstruction area 18,55,843 sq. ft. Allotted portion to the assessee (39%) 7,21,640 sq.ft. Allotted portion w.r.t. Tower-1 2,57,786 sq.ft. Allotted portion w.r.t. Tower-II 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, .....

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d (ref. Letter of A.P. Gomes Adv. Dated 02.04.2013), assessment order has been issued to the assessee and served upon it on 03.04.2013. 14. While passing the order for the AY 2007-08, discussion with ld. JCIT, Range-2, Kolkata had been made time to time . 28. From this we noted that so far as the issue no.1 is concerned, the Assessing officer has after examining the submissions of the assessee as well as making the enquiry on this issue taken a conscious decision. From the finding of the assessm .....

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on 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. 29. 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 as .....

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f the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income Tax Officer on being satisfied with the explanation of the assessee. This decision of the Income 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 hi .....

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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 pas .....

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AO to hold another investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee s submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inquiry only on the .....

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i Foundation, 357 ITR 388 (Del.), the Hon ble Delhi High Court has held as under:- Revisionary power under section 263 is conferred by the Act on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question/issue a .....

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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-requisi .....

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not be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. .....

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hich the commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the assessing officer is unsustainable in law. Where a sum not earned by a person is assessed as income in his hands on his so offering the order passed by the assessing officer accepting the same without application of mind as such will be erroneous and prejudicial to the interest of revenue. In the case of CIT vs. R.K. Construction Co., Hon ble .....

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tion was put to many of these sub-contractors as to the variation in their signatures. Similarly, no question was put to them for the reasons of discounting with the Shroff. It is the stand of the assessee right from the beginning that all these sub-contractors were mainly working for the assessee and they did not have any office set up and since they were working for the assessee, they have used assessee s address for correspondence, especially with the Government for timely communication. Thes .....

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ce 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 t .....

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actors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on .....

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ribunal and hence, the appeal filed by the Revenue deserves to be dismissed. - CIT vs. Arvind Jewellers (2002) 177 CTR (Guj) 546 : (2003) 259 ITR 502 (Guj) and Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) relied on). 35. Hon ble Supreme Court in the case of CIT vs. Max India Limited, 295 ITR 282 (SC) has held as under:- The phrase prejudicial to the interests of the Revenue in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the ex .....

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to the Revenue, unless the view taken by the Assessing 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 fo .....

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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 and explanation, the ITO has come to a definite conclusion. The CIT did not agree with the conclusion reached by the ITO. Sec. 263 does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to .....

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3 ITR 83 (SC) followed. 38. In the case of Income-tax Officer v. DG Housing Projects Ltd. 343 ITR 329 (Del), Delhi High Court has held as under:- A finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Incometax Act, 1961. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. In such matters, to remand the matt .....

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t after recording reasons hold that the order is erroneous. A distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry ; as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In the latter cases, the Commissioner has to examine the order or the decisio .....

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g 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 i .....

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less the decision is held to be erroneous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete .....

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sioner took the view that the accounting practice followed by the assessee to debit the entire cost of tools and dies in the year of installation was not correct and he remitted the case to the Assessing Officer for re-examination. The Tribunal allowed the claim of the assessee. On appeal : _Held,_ dismissing the appeal, (i) that the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee. Such decision of the Assessing Officer could not be held to be erroneou .....

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ot. Therefore, it could not be said that it was a case of lack of inquiry. The accounting practice followed for a number of years had the approval of the income-tax authorities. Even 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 .....

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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 Information Technology park Building known as Infinity Thinktank situated at Plot No. A-3, Block GP, Sector-V, Salt lake City, Kolkata, on .....

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in financial year 2005-06 relevant to assessment year 2006-07. The said IT Park building is operated and maintained by the assessee as and by way of Information Technology Park. The said IT Park has been approved as an Industrial Park by the CBDT under Section 80IA(4) and the relevant notification given in the paper book at page 273. Part of the IT Park has been leased out on long term basis by collecting lump sum lease premium. However, majority of the area in the IT Park has been leased out o .....

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sment year 2002-03 and onwards. 40.1. The assessments for the assessment year 2004-05 and 2005-06 were completed under section 143(3) of the Act, wherein the depreciation on the fixed asset s of the IT Park Undertaking including IT Park Building was allowed by the AO after discussion. There were disputes with regard to calculation of depreciation and the assessee s claim for depreciation on fixed assets of the IT Park Undertaking including the IT Park Building, which was subsequently allowed by .....

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.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 depreciati .....

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4,200/-] as sale proceeds received on transfer of 6972 sq. ft. Area and accordingly determined the WDV of the building block attributable to such area at ₹ 1,77,42,577/-. The Assessing officer thus assessed ₹ 1,50,26,623/- as short-term capital gain. 41. The assessee went in appeal before the CIT(Appeals), who deleted the addition made by the Assessing Officer. CIT(Appeal s) held that refundable deposit of ₹ 86,74,200/- was assessee s liability and could not be taken into accou .....

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his case. The Assessing Officer has himself stated in the order that the capital asset in question is a depreciable asset. I, therefore, agree with the A/R that if provision of section 50 of the Income Tax Act, 1961 are applied (which in this case is applicable) there will be no amount of capital gain chargeable to tax as computed by the Assessing Officer . Thus CIT(Appeals) in his order had specifically dealt with the nature of the IT Park building and having found that the said IT Park buildin .....

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ed that the opening written down value of the building as on 1.4.2006 was ₹ 32,60,17,820/- and if the same was considered in the light of section 43(6)/50, no capital gain arose to the assessee. The relevant finding has been given by the Tribunal in Para 10, which reads as under:- We agree with the ld. A/R that if the D/R s contention 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 p .....

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f 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 .....

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tion, in our opinion, exceeded his jurisdiction which has no leg to stand. Even otherwise also, the issue relating to depreciation claimed in respect of the Information Technology Park Building known as Infinity Thinktank situated at Plot A/3, Block GP, Sector-5, Salt Lake City, Kolkata was duly discussed in the order passed under section 143(3). The said order got merged with the order of the CIT(A), CIT does not have any jurisdiction to initiate the proceeding u/s 263. We therefore quash the o .....

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ed laws in view of the decisions of Mumbai High court in the case of CIT -vs. - Jetairways 331 ITR 236( Bom), Rajasthan High court in the case of CIT Vs. Devendra Gupta 336 ITR 59 (Raj.) and that of Delhi High court in the case of Ranbaxy Laboratories Ltd Vs. CIT 336 ITR 136 (Delhi) that no addition can be made in the order passed u/s 147 r.w.s. 143(3) unless the addition has been made in respect of the escaped assessment for which the reasons were recorded for the reopening of the assessment. 4 .....

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n 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 .....

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s of appeal challenging the order of Principal Commissioner of Income Tax-I, Kolkata passed under section 263 of the Income Tax Act dated 20.03.2015 both on legal as well as merit. 47. In this case, we noted that the Principal CIT has issued show-cause notice to the assessee under section 263 in respect of the two issues, one issue relates to the allowing of donation amounting to ₹ 97,57,650/- under the head general expenses amounting to ₹ 16,49,04,595/-, while in the opinion of the .....

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g Officer to complete the assessment de novo. So far as the issue relating to the allowing excess depreciation considering the current asset s as fixed assets, both the parties agreed that the issue is same as has been taken while revising the issue for the assessment year 2007-08. We have already quashed the order of Principal CIT on this issue for the assessment year 2007-08 in the preceding paragraph 43. Respect fully following our aforesaid order, we quash the order of Principal CIT passed u .....

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