TMI Blog2016 (7) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... page 89, note on Labunum profitability it has been mentioned that profit for the F.Y. 2000-01 has been arrived on the basis of matching the revenue for the number of apartments sold in the F.Y. with the corresponding cost of the apartment and to support this factual contention, the assessee also enclosed a statement on profitability from Labunum Project which reveals that total sale value was of ₹ 174.99 crores whereas the Revenue recognised from sales was 171.10 crores resulting into understatement of sale receipts by ₹ 3.89 crores and this treat6metn given by the assessee was not in accordance with the well accepted principles of percentage of completion accounting method. Thus, these facts clearly establish the mistake apparently showing that there was failure on the part of the assessee to disclose all relevant facts necessary for assessment truly and fully for the period under assessment. Hence, the AO was well within his valid jurisdiction while issuing notice u/s 148 of the Act beyond four years for initiation of proceedings of reassessment u/s 147 of the Act. On the third issue, the ld. AR fairly submitted that after settlement of interest in respect of loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, then the sales value has to be recognise accordingly. In view of the above, we are of the considered opinion that the issue requires examination and verification at the end of the AO according to the percentage of completion method consistently and regularly followed by the assessee and accepted by the department. Therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee. Treatment to prior period interest as expenditure of the year under consideration - Held that:- The alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after deduction of tax at source and same amount was offered to tax by the recipient Gilt Facilities P. Ltd. From the copies of the agreement dated 16.8.1995 and correspondence between the assessee and M/s Gilt Facilities P. Ltd, it is clear that the issue of interest was raised and settled during F.Y. 2000-01 and the assessee paid interest to M/s Gilt Facilities P. Ltd as per computation agreed between them. However, from the copy of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (v) of section 2(47) of the Act as part performance of contract cannot be inferred. On the basis of above discussion, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order on this issue and thus we uphold the same. - ITA Nos. 3549/Del /2009 & 4847/Del/2009, CO No. 328/Del/2009 & 111/Del/2010 - - - Dated:- 15-6-2016 - Shri Chandra Mohan Garg, Judicial Member And Shri L. P. Sahu, Accountant Member For the Revenue : Smt. Sulekha Verma, CIT-DR For the Assessee : Shri Rohit Jain, Adv. Shri Sambhav Jain, CA ORDER Per Chandra Mohan Garg, Judicial Member These appeals by the Revenue and cross objections by the assessee are directed against the order of the CIT(A, dated 22/05/2009 for A.Ys 2001-02 and 2003-04. 2. First we shall take up the cross objections raised by the assessee. The assessee has raised similarly worded following grounds of appeal: 1. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the validity of the order of assessing officer passed under section 143(3) read with section 147 of the Income-tax Act, 1961 ( the Act ), without appreciating that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter obtaining approval of the appropriate authorities. In response to the said notice, the assessee filed return vide letter dated 27th November 2006, requesting the assessing officer to treat the return originally filed as return filed in response to notice under section 148 of the I.T. Act. In the aforesaid background facts, the assessee has challenged the validity of the reassessment order on the following four grounds: (a) The reassessment proceedings were initiated on a mere change of opinion, which is not permissible in law; (b) In terms of proviso to section 147 of the Act, proceedings under that section could be validly initiated beyond the period of four years from the end of the relevant year only if there was any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment. That being not so in the present case, the prerequisite condition for initiating reassessment proceedings, in terms of proviso to section 147 of the Act, were not fulfilled/satisfied; (c) The impugned reassessment proceedings were initiated u/s 147 of the Act without forming a reasonable belief that income of the appellant had escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) has held as under: The submissions of the A.R. of the appellant and the arguments made by the Assessing Officer in the course of appellate proceedings have carefully been considered. After careful consideration of the rival submissions, I agree with the arguments of the Assessing Officer that the validity of the notice under sectionT48 cannot be challenged at this stage. The conduct of the appellant in submitting all the relevant information and complying with all the requirements, the notices issued under section 148 / 143(2) and 142(1) have made it clear that he did not have any objection for re- opening the assessment proceedings at the initial stage. Subsequently also, no objection was taken in the course of assessment proceedings. However, the appellant had challenged the validity of the re-opening of the assessment proceedings only at the time of the filing of the appeal which is not only after thought and appeared to have been raised only for the sake of raising a ground of appeal. Even on the merit of the facts, I am of the view that AO has been justified in issuing the notice under section 148 of the Income Tax Act, 1961. Although the initial source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not challenged before the AO. The ld. AR also pointed out that in the present cases, the ld. CIT(A) failed to appreciate that the initiation of proceedings was barred by limitation prescribed in proviso to section 147 of the Act and consequently the assessment order was illegal and bad in law. The ld. AR reiterating his written submissions dated 28.10.2015 also contended that the reassessment proceedings were initiated by the AO on a mere change of opinion and there was no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment and thus the assessment order was illegal and bad in law. The ld. AR also pointed out that the first appellate authority was not correct in holding that the order passed by the AO was after independent application of mind without appreciating that reassessment proceedings were initiated on the opinion of audit party which is not permissible under law. The ld. AR read out all three points mentioned in the reasons recorded by the AO. The ld. AR lastly pointed out that reassessment proceedings were initiated by the AO without forming a reasonable belief that income of the assessee has escaped assessment whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that building is not a plant and even if it is to be construed as plant only that part of the building housing the auditorium and furniture and fittings found therein should be construed as plant and not the entire building. In this particular case, only sports facilities have been provided : he members. At most the equipment of sports may be considered for allowing depreciation as plant and machinery unless the assessee has separately claimed the depreciation on these equipments. Thus excess depreciation has been allowed at ₹ 1,37,71,043/-. Thus the income to the extent of ₹ 1,37,71,043/- has escaped assessment. 3. It is further seen from details filed during the course of assessment proceedings that the assessee sold apartments during the year. The total sale consideration has been shown at ₹ 174,99,49,491/-, However in the computation of income and profit and loss account the assessee company has considered sale proceeds only at ₹ 171,10,16,224/-. 3.1 The details in this regard filed during the course of assessment proceedings were examined. The assessee worked out the sale consideration on the basis of proportion of budgeted expenditure to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to disclose fully and truly all material facts. In the reasons recorded it was alleged that the assessee had wrongly claimed deprecation on golf course. In this regard the ld. AR pointed out that the assessee has shown golf course under the head assets in the audited financial statements and not as a part of building and as per tax audit report, depreciation on golf course was shown at Sl. No. 3 and rate of depreciation was 25%. The ld. AR also pointed out that the assessee furnished detailed break up of addition to golf course and vide letter filed on15.3.2004, the assessee certified that no depreciation has been claimed on the value of land on which golf course has been constructed. 14. On issue of understatement of sale consideration, the ld. AR pointed out that on account of sale of apartments, the AO is referring to the income from Laburnum Project undertaken by the assessee and profit from the said project was consistently been accounted as per percentage completion method. The ld. AR pointed out that vide Note No. 7, Revenue recognition Schedule XXI significant accounting policies of the audited accounts for the year ended on 31.3.200, the assessee clearly men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst proviso to section 147 of the Act, reopening of assessment is not permissible after expiry of four years from the end of relevant A.Y unless any income chargeable to tax has escaped assessment by the reason of failure to disclose fully and truly all material facts necessary for assessment. The ld. AR lastly alleged that the AO initiated reassessment proceedings only on the report of audit party of the department and without applying his mind he proceeded to initiate reassessment proceedings which is not a legal and fair approach. 17. Replying to the above, the ld. DR fairly accepted that original order of assessment was passed u/s 143(3) of the Act and notice u/s 148 of the Act was issued beyond the period of four years. He also vehemently pointed out that the AO can take permissible view when two treatments are permissible and one view has been taken by the assessee but when the claim is not systematic, then two-views theory will not apply and allegation of change of opinion cannot be made against the AO. The ld. DR pointed out that as per audited financial results of the assessee, in the Schedule forming part of the balance sheet [APB page 297] golf course has been shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessee has to make claim as prior period interest expenditure and tax auditor should mention this glaring fact in the report and on this count also, the income of the assessee escaped assessment for the relevant A.Y by the reason of failure of the assessee for not disclosing truly and fully all relevant material facts for its assessment. The ld. DR pointed out that the reassessment proceedings were not initiated only on the basis of audit report of the Revenue, but it was consequent to the assessment order for A.Y 2003-04 dated 28.2.2006 and due application of mind, the AO held that reassessment proceedings has to be initiated. 21. The ld. AR also placed rejoinder to the above submissions of the Revenue and contended that reasons recorded by the AO for reopening of assessment has to be read without any support and no supplementation or substitution or deletion therein or therefrom is permissible. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd Vs. ACIT 268 ITR 332 [Bom] to support this contention. The ld. AR also pointed out that there is no reference of subsequent assessment order for 2003-04 in the reasons rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing Co. of India Ltd 241 ITR 248 [Madras] and vehemently contended that after considering the ratio of its own decision in the case of Indian and Eastern Newspaper Society [supra], it was held that the audit report has to be construed as if relevant provision of law had been brought to ITO s notice, then the said report constituted information within the meaning of section 147(b) of the Act. She also contended that when audit party had merely pointed out a fact which had been overlooked by the AO, and this was not a case of information on a question of law, then reopening of case u/s 147(b) of the Act on the basis of factual information given by the internal audit party was valid in law. 24. The ld. CIT-DR placing reliance on the decision of Hon'ble Supreme Court in the case of Maharaj Kumar Kamal Singh Vs. CIT 35 ITR 1 [SC] contended that the assessee has accepted assessment order for A.Y 2003-04 dated 28.2.2006 and contended that subsequent orders of Hon'ble Supreme Court, Hon'ble High Court, Tribunal and Revenue authorities in assessee s own case was information within the meaning of section 34(1)(b) of the I.T. Act, 1922 which is a corresponding section of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs and issuance of notice u/s 147/148 of the Act was not valid. Thus, the same should be quashed. 27. On the other hand, the ld. DR reiterated her contentions as noted above and vehemently submitted that while the assessee is not disclosing basis of depreciation charged and claimed on golf course, not showing actual income from Labunum Project and not placing proper and true details about the interest charged, then it has to be held that the income of the assessee had escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. 28. On careful consideration of above, first of all we may point out that in the case of Som Dutt Builders Pvt. Ltd Vs. DCIT, 98 ITD 78 [Kol] ITAT Kolkata Bench C held that reopening of a case by the AO on the basis of substantial pointed out by the Revenue audit is permissible under law and change of opinion comes to rescue of assessee only where the AO has taken one of the permissible view at the time of original proceedings and a wrong appreciation of facts and law cannot be held as permissible view and that can always be changed for proper appreciation of law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er assessment. Hence, the AO was well within his valid jurisdiction while issuing notice u/s 148 of the Act beyond four years for initiation of proceedings of reassessment u/s 147 of the Act. 32. On the third issue, the ld. AR fairly submitted that after settlement of interest in respect of loan advanced by M/s Gilt Facilities P. Ltd, the amount of interest including ₹ 61,11,162/- was related to prior period and not for A.Y 2001- 02. As per the details filed during the assessment proceedings available at pages 31 to 45 of assessee s paper book, it is amply clear that on 16.4.2001, Gilt Facilities confirmed the calculation forwarded by the assessee that an amount of ₹ 1,28,74,844/- was accepted as due from the assessee to M/s Gilt Facilities P. Ltd as interest on surplus money lying with the assessee. This calculation undisputedly includes impugned amount which clearly shows that the interest amount of ₹ 61.11 lakhs was not related to A.Y 2001-02. In our considered opinion, from the correspondence copy of the agreement dated 16.8.1995 between the assessee and M/s Gilt Facilities P. Ltd it is clear that an agreement was entered with the said company and because t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he budget cost and only 90% sales have been charged in P L account. 3. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in treating prior period interest as expenditure of the year under consideration. 4. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in allowing depreciation @ 25% on Golf Course under the category of Plant and Machinery as against admissible @ 10% in case of building . Thus deleting the excess depreciation of ₹ 1,37,71,043/-. 4.1 The ld. CIT(A) has erred in treating golf course as plant. 5. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 41.82 crores being the capital gain on agreement to sale dated 17.3.2003. 5.1 The CIT(A) erred in holding that neither sale nor transfer of possession was complete when the agreement to sale was executed on 17.3.2003. 34. Grounds Nos. 1 and 4 of the Revenue are of general in nature which require no adjudication. Remaining effective grounds read as under: 2. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each period based on the construction progress. She further elaborated that in this situation construction cost and gross profit earned to date are accumulated in the asset account and progress billing are accumulated in a liability account. Therefore, the assessee did not properly follow the percentage completion method in letter and spirit. Therefore, there was suppression in recognition of revenue from sale in the Labunum Project. The ld. CIT-DR vehemently pointed out that the income offered to tax in subsequent year cannot demolish the allegation of suppression in recognition of revenue in the earlier year under consideration. 38. On careful consideration of above submissions, we are of the view that the ld. CIT-DR granted relief to the assessee only on this basis that the assessee is regularly following percentage completion method consistently from F.Y 1998-99 to 2002-03 regularly but he has not deliberated or adjudicated contention of the AO that in what manner the assessee considered 98% of the total revenue as chargeable to profit and loss account against the cost actually incurred till 31.3.2001. It is also pertinent to note that the AO has clearly mentioned that no ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble High Court of Delhi in the case of Shri Ram Pistons Ltd reported at 220 CTR 404 [Del]. The ld. AR also pointed out that the ld. CIT(A) rightly considered this fact that the entire amount of 1.28 crore was paid to Gilt Facilities P. Ltd Facilities after deducting TDS which was also deposited on 17.5.2001 and the recipient Gilt Facilities P. Ltd offered this amount to in its return of income in A.Y 2001-02 only. 40. On careful consideration of above submissions, we are of the view that the ld. CIT(A) has elaborately discussed facts and circumstances of the case at page 16 last operative para wherein it was noted that the alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after deduction of tax at source and same amount was offered to tax by the recipient Gilt Facilities P. Ltd. From the copies of the agreement dated 16.8.1995 and correspondence between the assessee and M/s Gilt Facilities P. Ltd, it is clear that the issue of interest was raised and settled during F.Y. 2000-01 and the assessee paid interest to M/s Gilt Facilities P. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that there was no basis for the ld. CIT(A) to treat the golf course as plant and machinery. Therefore, he was not justified in deleting the addition. 42. Replying to the above, the ld. AR pointed out that the ld. CIT(A) rightly held that benefit of ratio of decision of Anand Theatre [supra] rendered by Hon'ble Supreme Court is not available for the Revenue as present case is pertaining to golf course and not a theatre. The ld. AR supported the action of the ld. CIT(A). 43. On careful consideration of the above rival submissions we note that the ld. CIT(A) granted relief with following observations and conclusion: Rival contentions have carefully been considered After considering the rival submissions I find a substantial support in the contention of the Id. A.R. of the appellant. It is a fact that the Assessing Officer has misconceived the facts of the case to some extent. In fact, the appellant has not claimed depreciation (a). 25% on the concrete path, driveways, interconnecting roads constructing around play grounds in the Golf Court as recorded by the Assessing Officer in its assessment order. The Golf Course consist of the open land with so many levels w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the field of golf course as a plant. 45. In the second part of above operative para, the ld. CIT(A) held that the ratio of the decision of Hon'ble Supreme Court in the case of CIT Vs. Anand Theatre is not applicable and then jump to a conclusion that the business of the assessee is to invite players for playing the golf and charging the fee for that and thus the field so prepared was a business operated used by the assessee for carrying on its business of playing golf. In the last lines, without specifically pointing out as to whether the golf course that is a piece of land with many levels of undulation, holes, small ponds etc can be categorised as a plant and machinery and not as a building. The ld. CIT(A) jumped to a conclusion that the assessee s claim of depreciation @ 25% is allowed which is not a proper and justified approach for a quasi-judicial authority. We may point out that golf course has not been categorised in the schedule of depreciation and the main dispute between the assessee and the revenue is that the assessee is seeking to place the golf course in the category of plant and machinery whereas the Revenue wants to treat the same as building. 46. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Victory Aqua Farm Ltd 61 Taxmann.com 166 [SC] and plethora of decision to support the case of the assessee that golf course is a plant and machinery and it is not a building. Interestingly, no cited decision relied by both the parties are related to golf course. Therefore, facts regarding this issue have to be dealt in respect to golf course of 300 acres land and how it became plant and machinery attracting 25% depreciation. The AO has to examine these details to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order. Needless to say that the AO would examine all material facts on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od the facts and held that ITC Ltd obtained loan by mortgaging the land to various banks and this mistake was corrected by the AO by filing remand report to ld. CIT(A) wherein he fairly accepted that the documentary evidence in support of averment of the assessee that the assessee and the ITC Ltd, had actually mortgaged the land to various banks and financial institutions has been found to be correct. On this issue no other argument was placed by the parties. 51. On careful consideration of above rival submissions and perusal of the assessment order, first appellate order and all relevant material placed on record, we are of the considered view that in order to tax capital gain u/s 45 of the Act, there must be transfer of land or any other movable or immovable property as defined in section 2(47) of the Act. In the present case, the ld. CIT-DR could not controvert this fact that neither the sale deed was executed nor possession of the land was handed over to ITC Ltd and the land in question continues to be in complete control of the assessee. We are in agreement with the conclusion of the ld. CIT(A) that mere receipt of entire sale consideration as an advance does not make the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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