TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 330
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....7,127/- as the same belonged to M/s THDC Ltd. and offered to tax by said company, who is also assessed to tax by the same officer under the same CIT. (b)He failed to appreciate that the appellant was not the owner of garages and hence the consideration for garages was rightly reduced from the total sale consideration of the property while arriving at the capital gain/(loss) assessable in the hands of appellant. (iii)(a)The learned CIT erred in holding that the appellant was not justified in reducing unexpired lease rent of Rs. 1,49,12,928/- from the total sale consideration of the property while working out the capital gain/loss from sale of property. (b)He failed to appreciate that cost of asset is deductible while arriving at capital gains and accordingly the appellant rightly reduced the cost of land i.e. unexpired lease rent of Rs. 1,49,12,928 from the sale consideration to arrive at taxable capital gains. He failed to appreciate that the appellant had taken the land on lease from Nelco Ltd. which further enabled it to effect construction thereon and as such the license fee was paid towards lease of land on which construction was effected through independent contract. &nbs....
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....11,21.11.2011,09.01.2012,06.02.2012,06.12.2012) the assessee requested for adjournment. On two or three occasions the bench did not function. The assessee has filed written submissions on 16.07.2012 and they have been placed on record. On 16.12.2014 the bench did not function and matter was adjourned to 03.02.2015.On that day an adjournment application was again filed on behalf of the assessee stating that the person looking after the appeal was not in town. One of the juniors appearing on behalf of assessee was not in a position to explain anything except stating that matter could not be argued on that day. In these circumstances, we have been compelled to decide the case taking in to consideration he material available on record. 2.The assessment, for the year under appeal, was made vide order u/s.143(3) dated15.12.2006 by the Assessing Officer(AO)accepting the loss of the assessee at Rs. 8,75,03,000/-,as shown by it in its return. During the relevant year, the assessee had shown income from house property, loss from business and loss from long term capital loss (LTCL).Perusal of the assessment records for the relevant period revealed that the LTCL shown from sale of the propert....
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....ile the interest amount claimed at different places and also furnish bas is of such bifurcation. From the ledger a/c. of interest to HDFC loan i t is found that the amounts debited through journal entry on various dates include repayments were principle and interest EMI . I t means that what was claimed as interest included principal amount also. Please furnish necessary clarification in this respect . Secondly, while secured loans of Rs. 17 crores and RS.9.425 crores were taken in earlier years, i t appears that new secured Loan of Rs .55.70 crores was also incur red from HSBC during this year . The A.O. has not examined the purpose for which this new se cured loan has been taken and whether the interest relatable thereto was rightly claimed as business expenditure during this year. Please co- relate the loans with the purposes and furnish justification of the claim made as per the statement of computation of total income. iii ) You have shown license fees from various parties of Rs .2,23,09,011/ - against which fol lowing expenses have been claimed showing a loss of Rs. 3,33,60,685/ - : - a) Proportionate license fees written off Rs. 2,37,11,188/ - b) Loan processing f....
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.... subsequently on 25th September, 2008 mentioning such other issues on account of which the assessment order was considered to be, prima facie, erroneous and as much as prejudicial to the interest of revenue. Vide the aforesaid notices, the assessee was asked to state as to why the assessment order dated 15.12.2006 be not set aside, enhanced or suitably modified. The assessee in its reply stated that the assessee and M/s. Nelco Ltd.(NL)entered into an agreement dated 15.11. 1999 wherein NL leased land owned by it for a period of 11 years, that thereafter it entered into a construction agreement, dated 16.11.1999,with M/s. Tata Housing Development Co. Ltd. (THDC) for a sum of Rs. 25,90,22,500/-,that it sold the 2nd floor flat of building styled as Technopolis Knowledge Park(TKP)on 12.1.2004,that as per the agreement entered into between NL,THDC on one hand and Vishindas Holaram ,a partnership firm as the other party for a consideration of Rs. 27,60,27,127/ ,that the agreement was for the sale of office premises Nos. 1 to 16 together with the right to use open car parking space Nos. 4 to 16 and covered parking space Nos. B1, B2, B3, B18, B13 to B17 and 68 to 86.As regards excluding a....
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....e same, the assessee filed clarification, vide letter dated 12.08.2008,as to what was the proportionate share in the parking spaces and whether they were separate from the garages sold. It was stated that garages meant basement parking and as such covered parking area as against open car parks which meant parking area allotted to vehicles in the open spaces surrounding the building, that the open car parking spaces were not paid for, that the price of Rs. 25,90,22,500/-paid as per para 5 of the agreement dated 16.11.1999 with THDC for development of the property was purely towards the cost of construction and was arrived at by calculating the rate of Rs. 5,500/- per Sq. ft. and multiplying the same to the super built up area of 47,095 sq. ft. of the 2nd floor of the building. According to the assessee, the said cost did not include any further cost of open car park. Vide item (iv) of the notice u/s.263 dated 25.09. 2008 the assessee was asked to specify the car parking spaces for which the service charges as per the agreement with the tenants were being received which was being shown as rental income by it. Vide item (v)of the said notice u/s.263 of the Act, it was also pointed out....
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....ncluded Rs. 1,35,000/- for car parks, that the assessee had not been able to reply to make clear as what happened to the parking spaces which the assessee was entitled to as per the agreement, that the agreement did not distinguish between open car parking spaces/covered car parking spaces, that if the 2nd floor of the building which was entirety owned by the assessee was the subject matter of the sale agreement dated 12.1.2004 and the assessee was not left with any car parking spaces pursuant to the sale agreement then the only presumption was that the share of proportionate number of the parking spaces as per the agreement and entitlement only had been transferred. He further observed that during the course of hearing, the assessee had submitted a certificate from THDC stating that THDC was the owner of 41 garages at TKP which were sold on 12.01.2004.The CIT was of the opinion that such a certificate could not be accepted unless it was accompanied with necessary documents. So, he held that the assessee was not justified in excluding the cost of 41 garages for which the value was estimated at the rate of Rs. 3 lakhs each with the total amount at Rs. 123 lakhs, that the basis of th....
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....ts later on showed that the tripartite agreement of joint venture including the assessee was not acted upon in true letter and spirit treating the assessee as an independent entity, that any loss having arisen out of surrender of rights in the said premises could not be treated as a bonafide loss. To put it differently, the CIT held that the assessee was supposed to have received the entire sale consideration of Rs. 27, 60, 27,127/- as per the sale agreement dated 12.01.2004 and settling for any lesser amount under any arrangement with THDC and NL was only an internal affair and should not affect the taxability of the capital gains on transfer. Accordingly, he held that the assessment order dated 15.12.2006 was erroneous and in so far as it was prejudicial to the interest of revenue. He directed the AO to work out the capital gains adopting the sale consideration at Rs. 27.60 Crores and the cost of the property at Rs. 25,90,22,500/-,subject to allowing benefit of indexation. 6.With regard to Computation of income from House Property, the CIT observed that as per the statement of total income the assessee had claimed interest paid to HDFC loan of Rs. 1,40, 29,924/- in respect of th....
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....ssion the assessee had written off proportionate license fee of Rs. 2.37Crores.On being asked to explain the transaction,the assessee filed copies of the tripartite agreements entered between THDC,NL and it.Vide letters dated 2.7.2008, 23.10.2008 and 14.10.2008,the assessee made submissions in this regard. It was argued that in the supplemental agreement entered into by the assessee with TDHC,on12.03.2004,the net sale consideration of Rs. 26,37,27,127/- was transferred, that the necessary documents in this regard had been furnished before the AO, that the facts relating to reducing the unexpired lease rent of Rs. 1,49,12,928/-from the sale price arrived at the taxable capital gains had also been submitted before the AO vide letter dated 15.12.2006,that the assessee had not claimed the benefit of set off of unabsorbed capital loss in the subsequent years. In support of the same, a copy of return for A.Y.2007-08 was enclosed. 8.After perusal of the agreements, the CIT observed that all the agreements were dtd. 01.03.2001except the supplemental agreements each dated 5.03.2001,that same were in respect of some of the premises, that parties to the agreement were NL and THDC, that the s....
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....n the aforesaid paras on each of the issues dealt with. However, the AO was directed to allow adequate opportunity to the assessee of being heard in the matter. 9.As stated earlier, we are deciding the matter after considering the material available on record. Before us, the Departmental Representative supported the order of the CIT. In our opinion, here, it would be useful to deliberate upon the principles governing the provisions of section 263 of the Act. We can summarise the principles as under: 9.1.The Department has no right to appeal against the order of the AO.It is in these circumstances that power of revision were conferred on the CIT u/s. 263 of the Act with a view to correct the orders of the AO. Courts are of the opinion that whether or not exercise of revisional jurisdiction was called for is a question of law, on a given fact situation. 9.2.There are different aspects of the corrective power conferred by the provisions of the Act for application in different situation. Distinction between the power to reopen an assessment and the appellate or revisional power or the power to rectify have been reckoned by the courts. Provisions of one section cannot replace the oth....
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.... on tangible materials on record, is impermissible rendering the resultant order void. 9.7.Initial words of section 263 any proceedings under the Act are of immense signification. The use of the words 'any order passed therein by the AO' also has its importance. Section 263 uses the words 'pass such order thereon as the circumstances of the case justify, including......'The word 'proceedings' hence, is a wider term compared to the word assessment. The word assessment has been used only after the word including towards the end of section 263 and in the earlier part of section 263,the only word used is proceedings. Hence, any proceedings in which an order is passed dropping penalty, is very much an order in any proceeding and thus, the order would come under the exercise of revisional jurisdiction of section 263. 9.8.Deciding the issue of justification with regard to revisionary order of the CIT what is to be seen as to whether there was application of mind before allowing the expenditure/deduction .If there was an inquiry ,even inadequate that would not by itself give occasion to the CIT to pass orders u/s.263 merely because he has a different opinion in the matter. In short only ....
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....at before passing the final order under that section, the CIT must necessarily and in all cases record final conclusions about the points in controversy before him. It is expected from the CIT that he should record final conclusions, which he thinks proper if he is to settle the assessment finally. But, if he does not settle the assessment finally and prefers to direct the AO to make an order for fresh assessment, it is proper that he does not express any final conclusions and recordes only prima facie conclusions at which he has arrived with reference to the facts of the case. In short, if an assessment is to be freshly made by the AO, the only proper course for him is not to express any final opinion as regards the controversial points. 9.14.It is not a requirement of section 263 of the Act that the CIT should record a final conclusion on the taxability of amounts. 9.15.Act had earmarked duties of various authorities and they are required to perform them. So, an order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous. Holding an order erroneous and prejudicial to reveneue is the duty of the CIT and he and only he can decide it. He cann....
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....h assessment were called for. 9.18.There is no bar in section 263 of the Act restricting the power of the CIT to revise only original orders issued by the AO. In fact, any proceedings by the AO, whether they be original assessment or revised assessment proceedings u/s.147 or even a rectification order u/s.154,could be revised in exercise of powers u/s.263. 9.19.Similarly his power is not limited only to the material which was available before the AO. In order to protect the interests of the revenue, the CIT is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. 9.20.If a query was raised during the course of the scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. 9.21.As per the provisions of section 263(2) of the Act no order shall be made under sub-section (1) of section 263,after the expiry of two years from the end of the financial yea....
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.... with the AO on matters relating to deductions allowable under the statute .All such situations, as aforesaid, may render the order of the AO wrong or erroneous as commonly understood. Such situations, however, would not be facets of an 'erroneous' decision. Judicial opinion is unanimous that the expression as appearing in section 263 must be confined to jurisdictional errors. Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid. An order cannot be termed as erroneous, unless it is not in accordance with law. The section does not visualise a case of substitution of judgment of the CIT for that of an AO, who passed the order, unless the decision of the subordinate officer is held to be erroneous. 23(vi) When the AO takes a view but the view is not correct and is erroneous according to the findings recorded by the CIT, with the finding that the order passed by the AO was prejudicial to the interests of the revenue, then the order of the CIT cannot be set aside on the ground that the two views were possible or probable. It would be incorrect to state as a broad proposition that an order of the AO cannot be erroneous, if the AO has taken o....
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.... If fresh assessment is thereafter ordered by the revisional authority, the only proper course for the CIT would be to desist from expressing any final opinion on controversial points. 9.24(i).The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the AO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. 24(ii).The expression 'prejudicial to the interests of the revenue is of wide import and is not confined to loss of tax. But, it means that due to an erroneous order of the AO, Department is losing tax lawfully payable by a person it would be certainly prejudicial to the interests of the revenue. 24(iii).The expression 'resulted into an order which is prejudicial to the interests of the Revenue' in the notice issued by the CIT has to be held to be sufficient for the purpose of invoking the power u/s. 263 of the Act .Absence of word 'erroneous' in the notice does not invalidate the proceedings. 9.25(i) Where in response to the notice issued by the CIT u/s.263 of the Act, the CIT does not examine ....
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....on that the estimate made by the officer concerned is on the lower side and left to the CIT he would have estimated the turnover at a higher figure than the one determined by the AO. That would not vest the CIT with power to re-examine the accounts and determine the turnover himself at a higher figure. 26(v) Where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else, who would have been assessed for a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the Revenue and in such a situation, the CIT has ample justification to exercise his revisional power to cancel the assessment and initiate proceedings for assessment against some other assessee who, according to the Department, is liable for the income thereof. 26(vi).In search and seizure cases if the assessee shows lesser income than the admitted income and the AO does not discusses as to how and why the returned income was accepted against the surrendered income his order falls under the category of erroneous and prejudicial to revenue. In such matter the assessee is required to....
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....tiate revisionary proceedings. 26 (xii) If an assessee makes a claim for deduction of payment twice and it was corrected by the CIT it cannot held that such an order is beyond his revisional jurisdiction. Similar objection of the audit party will not in any manner affect his powers, nor the fact that the error could be rectified by the AO or he could have taken resort to reassessment provision. 26(xiii) Without anything more, mere submission of a letter by an assessee to the AO, giving bifurcation of an account does not necessarily mean that proper verification and investigation was done and accepted by the AO. The averments made in the letter have to be verified and then accepted or rejected. If the AO keeps a letter on record and does not carry out necessary investigations which are per se required to verify the correctness of the averments, there is an error in the sense that the AO has failed to carry out the requisite enquiry which can be rectified in a revision. In such a situation, the CIT has to pass an order u/s.263 of the Act after hearing the assessee. The contentions and issues raised by the assessee have to be dealt with by the CIT who has to examine whether the issu....
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....t had filed the copies of the documents that were filed by it before the AO or the CIT. The assessee has referred to more than a dozen of cases. What is the relevance of the case laws and they are relevant to facts of the case has not been explained by the assessee though it has filed a paper book containing 156 pages. We are of the opinion that every case has its peculiar facts and until and unless it is not proved as to how the facts of both the case are identical, they should not be compared. Only on the basis of some observation passed by the Hon'ble court with regard to peculiar circumstances of the case it cannot be said that issue is settled in favour of the assessee by a particular decision. In the cases relied upon by the assessee certain principles have been enumerated regarding revisionary powers of the CIT, but that does not ipso facto prove that same are applicable to the facts of the instant case. We find that three issues were taken up by the CIT, while revising the order of the AO determination of capital gains, computation of income from House Property and treatment of proportionate License fee written off. We find that the CIT has not only mentioned as to h....