M/s Information Technology Park Limited, Bangalore v. ITO, Bangalore

CO 40/BANG/2011 | 2004-2005
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 4021123 RSA 2011
Assessee PAN AAACI7042R
Bench Bangalore
Appeal Number CO 40/BANG/2011
Duration Of Justice 4 month(s) 9 day(s)
Appellant M/s Information Technology Park Limited, Bangalore
Respondent ITO, Bangalore
Appeal Type Cross Objection
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-11-2011
Date Of Final Hearing 21-11-2011
Next Hearing Date 21-11-2011
Assessment Year 2004-2005
Appeal Filed On 21-07-2011
Judgment Text
PAGE 1 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR VICE PRESIDENT AND SHRI GEORGE GEORGE K J.M ITA NOS.1147 TO 1152/BANG/2010 (ASSESSMENT YEARS 1999-00 TO 2004-05) THE INCOME TAX OFFICER WARD-11(2) BANGALORE. - APPELLANT VS M/S INFORMATION TECHNOLOGY PARK LTD. ITPL WHITEFILED ROAD BANGALORE. - RESPONDENT PAN : AAACI 7042R C.O.NOS.35 TO 40/BANG/2011 (ASST. YEARS 1999-00 TO 2004-05) (BY ASSESSEE) DATE OF HEARING : 21/11/2011 DATE OF PRONOUNCEMENT : 30/11/2011 REVENUE BY : SMT. PREETHI GARG CIT ASSESSEE BY : SHRI AJAY ROTTI C.A. ORD ER PER BENCH : THE APPEALS FILED BY THE DEPARTMENT AND THE CROSS OBJECTIONS PREFERRED BY THE ASSESSEE ARISE OUT OF TH E CONSOLIDATED ORDER OF CIT(A)-I BANGALORE DATED 23.7.2010. THE RELEVANT ASST. YEARS ARE 1999-2000 TO 2004-05. PAGE 2 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 2 2. SINCE THESE APPEALS AND CROSS OBJECTIONS ARE RE LATING TO THE SAME ASSESSEE THEY ARE DISPOSED OF BY THIS CONSO LIDATED ORDER. 3. IN REVENUES APPEAL THE SOLITARY ISSUE THAT IS RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLA IM OF THE ASSESSEE THAT ITS INCOME FROM LEASE RENTALS IS TAXABLE UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPER TY AND ALLOWING DEPRECIATION ON SUCH BUILDINGS. 4. IN ASSESSEES CROSS OBJECTION THE FOLLOWING IS SUES ARISE FOR ADJUDICATION :- I) THE APPEALS FILED BY THE REVENUE BEFORE THE TRIBUNAL ARE TIME BARRED AND SHOULD BE STRUCK DOWN AS INVALID. II) THE CIT(A) HAS ERRED IN UPHOLDING THE REOPENING OF ASSESSMENT FOR ASST. YEARS 1999-2000 TO 2002-03. III) WHETHER THE CIT(A) IS JUSTIFIED IN UPHOLDING THE AOS FINDING THAT INTEREST RECEIVED FROM SURPLUS FUNDS IS INCOME FROM OTHER SOURCE AS AGAINST BUSINESS INCOME. ITA NOS.1147 TO 1152 (REVENUES APPEALS) 5. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OPERATING AND MAINTENANCE OF A TECH NOLOGY PARK. IN COMPLETING THE ASSESSMENT FOR THE ASST. YEARS 1999- 2000 TO 2004-05 THE AO TREATED THE LEASE RENTALS RECEIVED BY THE ASS ESSEE COMPANY AS INCOME FROM HOUSE PROPERTY AS AGAINST BUSINESS IN COME CLAIMED BY THE ASSESSEE. THE RELATED DISALLOWANCES WERE ALSO MADE BY THE AO. PAGE 3 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 3 5.1 AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE COMPANY CONTESTED THE ISSUE BEFORE THE FIRST APPELLATE AUTH ORITY. 5.2 THE CIT(A) FOLLOWING HIS ORDER IN THE CASE OF GOLF LINK SOFTWARE PARK (P) LTD. (ITA NO. 269/DC-11(3)/CIT(A) -I/07-08 DATED 12.10.2009) DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY HOLDING THAT THE RENTAL INCOME AND MAINTENANCE CHARGES ARE INCOM E TO BE ASSESSED UNDER THE HEAD BUSINESS AND NOT AS INCOME FROM H OUSE PROPERTY. BY TREATING THE RENTAL INCOME AS INCOME FROM BUSINESS THE RELATED EXPENDITURE SUCH AS MUNICIPAL TAX AND DEPRECIATION WAS ALLOWED AS DEDUCTIONS. THE RELEVANT FINDING OF THE CIT(A) REA DS AS FOLLOWS:- 22. I HAVE CONSIDERED THE ABOVE. UNDER SIMILAR FACTS AND CIRCUMSTANCES IN THE CASE OF GOLF LINK SOFTWARE PARK (P) LTD. (ITA NO. 269/DC- 11(3)/CIT(A)-I/07-08 DATED 12.10.2009) I HAVE HELD THE RENTAL INCOME AND MAINTENANCE CHARGES AS INCOME FROM BUSINESS FOLLOWING THE DECISION OF ITAT IN THE CASE OF GLOBAL TECH PARK (P) LTD. V ACIT (DT.30.06.2008)(2008) 119 TTJ (BANG) 421. IN VIEW OF THE ABOVE THE AO IS DIRECTED TO TREAT THE INCOME FROM LEASE RENT UNDER THE HEAD BUSINESS AND ALLOW THE CLAIM OF EXPENDITURE INCURRED FOR PAYMENT OF MUNICIPAL TAXES AND DEPRECIATION AS ALLOWABLE DEDUCTIONS. GROUNDS OF APPEAL ARE DECIDED IN FAVOUR OF THE APPELLANT. 5.3 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFOR E US. PAGE 4 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 4 5.4 THE LEARNED DR RELIED ON THE FINDING OF THE A .O. 5.5 THE LEARNED AR ON THE OTHER HAND SUBMITTED T HAT THE ISSUE IN QUESTION IS DIRECTLY COVERED BY THE ORDERS O F THE TRIBUNAL IN THE CASES OF GLOBAL TECH PARK (P) LTD. V ACIT 119 TTJ 4 21 AND DCIT V GOLFLINK SOFTWARE PARK P LTD. (ITA NOS.40 41 52 & 53/BANG/2010). THE ASSESSEE HAS ALSO FILED A PAPER BOOK CONTAINING 88 PAGES CONSISTING INTER ALIA OF THE WRITTEN SUBMISSIONS VARIOUS ORDE RS OF THE TRIBUNAL COPY OF MEMORANDUM OF ASSOCIATION ETC. 5.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. NO DOUBT THE ASSESSEE HAD DEV ELOPED A TECHNOLOGY PARK WHEREIN SIZEABLE ILLUSTRIOUS GIANTS HAVE ESTAB LISHED THEIR HUBS. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAD LE T OUT ITS BUILDINGS ON RENTAL BASIS AND ALSO CARRYING ON A COMPLEX COMMERCI AL ACTIVITY OF SETTING UP A SOFTWARE TECHNOLOGY PARK BACKED WITH VA RIOUS AMENITIES. THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE LESSEE S IS NOT FOR MERE USE OF THE PROPERTY SIMPLICITOR BUT FOR THE USE OF P ROPERTY ALONG WITH OTHER AMENITIES AND FACILITIES. THE AGREEMENT DESC RIBED AS A LEASE AGREEMENT CANNOT BE VIEWED IN ISOLATION. IT HAS TO BE VIEWED ALONG WITH THE SERVICE AGREEMENT. AN EXTRACT OF THE MAIN OBJE CTS OF THE COMPANY IN THE MEMORANDUM OF ASSOCIATION (MOA) ARE PROVID ED BELOW WHICH INDICATES THAT THE COMPANY HAS BEEN FORMED WITH THE INTENTION OF COMMERCIALLY EXPLOITING THE PROPERTY BY DEVELOPING AN D MAINTAINING A TECHNOLOGY PARK. PAGE 5 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 5 TO ESTABLISH AND MAINTAIN INFORMATION TECHNOLOGY PA RK WITH FACTORIES COMMERCIAL OFFICERS RESIDENTIAL CO MPLEXES AND OTHER ALLIED FACILITIES AND AMENITIES SUCH AS G ARDENS SWIMMING POOLS INTERNAL ROADS SATELLITE COMMUNICA TION FACILITIES SHOPS ETC. ON THE LAND TO BE ALLOTTED N EAR BANGALORE BY THE GOVERNMENT OF KARNATAKA. A COPY OF THE MOA IS ATTACHED AT PAGE 41 OF THE PA PER BOOK FILED BY THE ASSESSEE FOR REFERENCE. 5.7 THE CENTRAL BOARD OF DIRECT TAXES AND THE MINI STRY OF COMMERCE REQUIRE THE TECHNOLOGY PARK TO SPEND SIGNIF ICANT EXPENDITURE ON AMENITIES [INFRASTRUCTURE DEVELOPMENT] TO BE P ROVIDED ALONG WITH BUILT UP SPACE. THIS SHOWCASES THE FACT THAT THE C OMPANY IS ENGAGED IN A COMPLEX COMMERCIAL ACTIVITY OF RUNNING A TECHNOLOG Y PARK WHICH INCLUDES PROVISION OF SPACE AND PROVISION OF FACILI TIES/AMENITIES BOTH ACTIVITIES BEING INTERCONNECTED. 5.8 THE INDENTURE OF SALE DEED BETWEEN KARNATAKA I NDUSTRIAL AREAS DEVELOPMENT BOARD AND INFORMATION TECHNOLOGY P ARK LIMITED FOR TRANSFER OF LAND PROVIDES THAT THE LAND WILL BE TRA NSFERRED TO ITPL FOR THE PURPOSE OF ESTABLISHING A TECHNOLOGY PARK WHICH INCLUDES PROVISION OF BUILDING SPACE ALONG WITH OTHER INFRASTRUCTURE F ACILITIES. THIS CLEARLY ESTABLISHES THE FACT THAT THE ENTIRE PURPOSE OF THE PROJECT WAS NOT A MERE INVESTMENT IN PROPERTY BUT BEARS THE CHARACTER OF A LARGER COMMERCIAL ACTIVITY. 5.9 SECTION 80-IA OF THE ACT AND THE INDUSTRIAL PA RK SCHEME RECOGNIZE AND LAYS EMPHASIS ON THE FACT THAT INCOME FROM DEVELOPING PAGE 6 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 6 DEVELOPING AND OPERATING OR MAINTAINING OR OPERATI NG AN INDUSTRIAL PARK CONSTITUTES A BUSINESS ACTIVITY. ACCORDINGLY SUCH A CTIVITY CAN IPSO FACTO GIVE RISE ONLY TO BUSINESS INCOME UNDER THE ACT. 5.10 THE BANGALORE TRIBUNAL IN THE CASE OF GLOBAL TECH PARK (P) LTD. V ACIT 119 TTJ 421 HAS UPHELD THE PRINCIPLE TH AT LEASE RENTAL INCOME ARISING FROM A COMPLEX COMMERCIAL ACTIVITY WI LL BE CLASSIFIED AS INCOME FROM BUSINESS AS AGAINST INCOME FROM HOUS E PROPERTY. THE BANGALORE TRIBUNAL HAS HELD AS FOLLOWS:- WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS INCORPORATED WITH THE SOLE INTENTION OF DEVELOPING TECHNOLOGY PARK FOR WHICH IT OBTAINED LEASEHOLD LAND FROM THE KARNATAKA INDUSTRIAL DEVELOPMENT CORPORATION AN D ALSO OBTAINED LOAN FROM UNION BANK OF INDIA FOR CONSTRUC TING SUPERSTRUCTURE THEREON WHICH COULD NOT BE CONSIDERE D AS INVESTMENT IN A PROPERTY FOR EARNING RENTAL INCOME O NLY.. IN OTHER WORDS IF THE PROPERTY IS TAKEN ON LEASE THEREAFTER DEVELOPED ON LEASE IS PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE AS AN OWNER THEN THE INCO ME HAS TO BE TREATED AS BUSINESS INCOME . THE ACTIVITY WAS DONE BY THE ASSESSEE AS A BUSINESS VENTURE AND WAS I N ACCORDANCE WITH THE MAIN OBJECT OF THE COMPANY.. THE ASSESSEE IS PROVIDING WARD AND WATCH MAINTENANCE O F COMMON AREA MAINTENANCE OF LIGHT IN THE COMMON ARE A SUPPLY OF WATER PROVIDING LIFT INSTALLATION OF EL ECTRIC TRANSFORMER POWER TO THE LESSEES PROVIDING GENERA TOR OVERHEAD WATER TANKS MAINTENANCE OF DRAINAGE ETC. CLEARLY ESTABLISH THAT THE ENTIRE ACTIVITY IS IN OR GANIZED MANNER TO EARN PROFIT OUT OF INVESTMENT MADE BY THE ASSESSEE AS A COMMERCIAL VENTURE. (EMPHASIS APPLIED). 5.11 THE BANGALORE TRIBUNAL IN THE CASE OF DCIT V M/S GOLFLINK SOFTWARE PARK P LTD. (ITA NOS.40 41 52 & 53/BANG/2 010) HAS HELD PAGE 7 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 7 THAT LEASE RENTAL INCOME ARISING FROM A COMPLEX COM MERCIAL ACTIVITY WILL BE CLASSIFIED AS INCOME FROM BUSINESS. THE BANGA LORE TRIBUNAL HAS RELIED UPON THE DECISION IN THE CASE OF GLOBAL TECH PARK (P) LTD. V ACIT. 5.12 IN THE LIGHT OF THE AFORESAID REASONING WE A FFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 5.13 IN THE RESULT THE APPEALS FILED BY THE REVENU E ARE DISMISSED. C.O.NOS. 35 TO 40/BANG/2011 (BY ASSESSEE) 6. THE FIRST GROUND IN THE CROSS OBJECTION IS THAT THE REVENUES APPEAL BEFORE THE TRIBUNAL IS TIME BARRED AND SHOULD BE STRUCK DOWN AS INVALID. 6.1 IT IS A CASE OF THE ASSESSEE THAT AS PER SECTI ON 253 OF THE ACT EVERY APPEAL SHALL BE FILED WITHIN SIXTY DAYS FR OM THE DATE ON WHICH THE ORDER SOUGHT TO BE APPEALED AGAINST IS CO MMUNICATED TO THE ASSESSEE OR TO THE COMMISSIONER. IN THE INSTANT CA SE IT IS SUBMITTED THAT IN REVENUES FORM 36A IT IS CLEARLY MENTIONED THAT THE ORDER SOUGHT TO BE APPEALED AGAINST WAS COMMUNICATED TO T HE REVENUE AUTHORITIES ON 10 TH AUGUST 2010 AND THE APPEAL WAS FILED ON 14 TH OCTOBER 2010 WHICH IS BEYOND THE STIPULATED PERIO D OF SIXTY DAYS FROM THE DATE ON WHICH THE ORDER SOUGHT TO BE APPEA LED AGAINST WAS COMMUNICATED TO THE REVENUE AUTHORITIES. PAGE 8 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 8 6.2 THE LEARNED DR ON THE OTHER HAND SUBMITTED T HAT THE DATE OF RECEIPT OF IMPUGNED ORDER BY THE REVENUE AUT HORITIES IS WRONGLY MENTIONED AS 10/8/2010 IN THE FORM NO.36A. IT WAS SUBMITTED THAT THE CORRECT DATE OF RECEIVING THE IMPUGNED ORDER OF THE CIT(A) BY THE REVENUE AUTHORITIES IS 17.8.2010 AND RECKONING SIXT Y DAYS FROM 17.8.2010 THE APPEAL OF THE REVENUE WAS FILED WITH IN THE STIPULATED PERIOD OF SIXTY DAYS. 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE AUTHORIZATION OF THE ADMIN ISTRATIVE COMMISSIONER TO FILE THE APPEAL IS ON RECORD WHERE IN IT IS CLEARLY MENTIONED THAT THE IMPUGNED ORDER OF THE CIT(A) WAS RECEIVED BY THE REVENUE ON 17.8.2010 AND HENCE WE HOLD THAT THE AP PEAL FILED BY THE REVENUE IS WITHIN THE STIPULATED PERIOD OF SIXTY DAYS . THEREFORE THE FIRST GROUND RAISED BY THE ASSESSEE IN THE CROSS OBJ ECTION IS DISMISSED. 7. THE SECOND GROUND RAISED IN THE CROSS OBJECTION IS WITH REGARD TO REOPENING OF ASSESSMENTS FOR ASST. YEAR 19 99-2000 TO 2002- 03. 7.1 ASSESMENTS FOR 1999-2000 TO 2002-03 WERE COMPL ETED U/S 143 RWS 147 OF THE ACT. THE REOPENING OF ASSES SMENTS WAS AFFIRMED BY THE FIRST APPELLATE AUTHORITY IN THE IMPU GNED ORDER. 7.2 AGGRIEVED THE ASSESSEE IS IN CROSS OBJECTION BEFORE US. 7.3 IT IS SUBMITTED THAT THE ORDER PASSED U/S 143( 3) RWS 147 OF THE ACT BE STRUCK DOWN AS INVALID NULL AND VOID AB INITIO AS THE PAGE 9 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 9 JURISDICTIONAL CONDITION PRECEDENT FOR A VALID ASSU MPTION OF JURISDICTION U/S 148 WERE NOT FULFILLED. IT WAS SUBMITTED THAT FROM THE DATE OF FILING OF THE RETURN UP TO THE DATE OF ISSUANCE OF NOTICE U/S 148 NO NEW EVIDENCE/FACT HAS COME TO THE NOTICE OF THE AO WHIC H CAN JUSTIFY INITIATION OF REASSESSMENT PROCEEDINGS. IT IS CON TENDED THAT THE AO IN THE GUISE OF REOPENING OF THE ASSESSMENT HAS ACTUAL LY TRIED TO DO A REGULAR ASSESSMENT WHICH WAS OTHERWISE TIME BARRED BY VIRTUE OF SECTION 143(2) OF THE ACT. IT WAS FURTHER SUBMITTE D THAT THE AO IS EMPOWERED UNDER THE ACT TO DO A REASSESSMENT U/S 14 7 OF THE ACT ONLY IF HE HAS REASON TO BELIEVE THAT ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. REFERRING TO EXPLANATION 2(B ) TO SECTION 147 OF THE ACT IT WAS SUBMITTED THAT WHEN A RETURN OF INC OME HAS BEEN FILED BY THE ASSESSEE AND NO ASSESSMENT HAS BEEN MADE THE AO IN ORDER TO INITIATE REASSESSMENT PROCEEDINGS IT HAS TO BE NOT ICED BY THE AO ON THE BASIS OF FRESH FACTS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. FOR THE ABOVE PROPOSITION RELIANCE WA S PLACED ON THE FOLLOWING JUDGEMENTS OF THE HIGH COURTS AND ORDERS OF THE TRIBUNAL:- CIT V BATRA BHATTA CO. (2008) 220 CTR 53 (DEL.); STATE BANK OF INDORE V ITAT & OTHER (2000) 200 CTR 380 (MP); & MITUSUI MARUBENI CORPN. V DDIT (2007) 298 ITR 283 (DELHI) (AT) 7.4 THE LEARNED DR SUPPORTED THE CONCLUSION OF THE FIRST APPELLATE AUTHORITY. PAGE 10 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 10 7.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE RELEVANT PROVISIONS NAMEL Y SECTION 147 READS AS FOLLOWS:- IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPE D ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION OR RE COMPUTED THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE AS THE CASE MAY BE FOR THE ASSESSMENT YEAR CONCERN ED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR). PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1.---------------- EXPLANATION 2. FOR THE PURPOSE OF THIS SECTION T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT NAMELY :- (A) -------- (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICE BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS DEDUCTION ALLOWANCE OR RELIEF IN THE RETURN; (C) ---------- PAGE 11 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 11 PROVISO TO SECTION 147 HAS NO APPLICATION TO THE FA CTS OF THIS CASE SINCE NO ASSESSMENT U/S 143(3) OF THE ACT HAS BEEN COMPLE TED PRIOR TO THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. READING THE ABOVE PROVISION IT IS CLEAR THAT THE AO SHOULD HAVE REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND SUBJECT TO THE PR OVISIONS OF SECTION 148 TO 153 HE CAN ASSESS OR REASSESS SUCH INCOME. THE AO IN HIS REMAND REPORT TO THE FIRST APPELLATE AUTHORITY HAD LISTED OUT THE REASONS RECORDED FOR THE VARIOUS ASST. YEARS IN QUES TION. THE REASONS RECORDED FOR ALL THE ASST. YEARS CONCERNED CLEARLY SP ELLS OUT THAT THERE IS UNDERSTATEMENT OF INCOME BY CHANGING THE HEAD OF INCOME FROM HOUSE PROPERTY TO BUSINESS BY CLAIMING EXCESSIVE DEPRECIATION AND CAPITAL LOSS. IT IS ALSO STATED THAT INTEREST INCO ME FROM BANK DEPOSITS WERE SHOWN UNDER THE HEAD BUSINESS WHEREAS IT IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. 7.6 THE EXPRESSION REASON TO BELIEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFI CER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOM E HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY L EGAL EVIDENCE OR CONCLUSION. WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE S TAGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER THERE WAS RELEV ANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED THE REQ UISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIVELY PROVE ESCAPEMENT OF INCOME IS NOT PAGE 12 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 12 THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN THE REALM OF THE SUBJECTIVE SATISF ACTION OF THE ASSESSING OFFICER. FOR THE ABOVE PROPOSITION WE RELY ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT V RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500. 7.7 THE HONBLE SUPREME COURT IN THE CASE CITED SU PRA (291 ITR 500 AT 512) HELD IN OTHER WORDS IF THE AO FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSES SMENT IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS HOWE VER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE F ALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. IT WAS FURTHER HELD BY THE HONBLE SUPREME COURT T HAT SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFI LLED THE AO IS FREE TO INITIATE PROCEEDINGS U/S 147 AND FAILURE TO TAKE STEPS U/S 143(3) WILL NOT RENDER THE AO POWERLESS TO INITIATE REASSESSMEN T PROCEEDINGS EVEN WHEN INTIMATION U/S 143(1) HAD BEEN ISSUED. 7.8 IN THE INSTANT CASE THE AO HAS DERIVED TANGIB LE INFORMATION WHILE COMPLETING THE ASSESSMENT FOR ASS T. YEAR 2003-04 U/S 143(3) OF THE ACT THAT INCOME HAS ESCAPED ASSES SMENT FOR THE PREVIOUS ASST. YEARS. THUS ENQUIRY AND ASSESSMENT OF THE SUBSEQUENT ASST. YEAR ACTED AS TANGIBLE AND CREDIBLE INFORMATIO N TO FORM THE BASIS FOR BELIEF THAT INCOME HAS ESCAPED ASSESSMENT FOR T HE CONCERNED ASST. YEARS 1999-2000 TO 2002-03 SINCE NO SCRUTINY ASSESSM ENT WAS DONE PRIOR TO THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. RELIANCE PLACED BY PAGE 13 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 13 THE ASSESSEE ON THE JUDGEMENTS OF THE HIGH COURTS O F DELHI & MADHYA PRADESH (321 ITR 526 (DEL.) & 152 TAXMAN 196 (MP) A ND ORDER OF THE TRIBUNAL (110 ITD 535) ARE DISTINGUISHABLE ON FACTS AND THE SAME HAS BEEN CORRECTLY DISTINGUISHED BY THE FIRST APPELLATE AUTHORITY IN PARAS 8 9 AND 10 OF THE IMPUGNED ORDER. THE DISTINGUISHING FEATURES POINTED OUT BY THE FIRST APPELLATE AUTHORITY ARE JUSTIFIED AN D CORRECT. FOR THE ABOVE SAID REASONS WE DISMISS GROUND NO.3 RAISED I N THE CROSS OBJECTIONS FILED BY THE ASSESSEE FOR THE ASST. YEARS 1999-2000 TO 2002-03. IT IS ORDERED ACCORDINGLY. 8. THE ASSESSEES LAST CROSS OBJECTION FOR ALL THE AYS UNDER CHALLENGE BEING THAT THE LD. CIT (A) ERRED IN UPHOL DING THE FACT THAT THE INTEREST RECEIVED FROM SURPLUS FUNDS WAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. IT WAS SUBMITTED BY THE LD. A R THAT: (I) THE INTEREST INCOME EARNED BY THE ASSESSEE WAS FROM SURPLUS FUNDS NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF BUSINESS; THAT THE FUNDS AVAILABLE WITH THE ASSESSEE PRIOR TO UTILIZATION FOR ACTUAL BUSINESS PURPOSES WERE INCIDENTAL TO THE BUSINESS ACTIVITY AND INTEREST ON SUCH FUNDS SHOULD BE REGARDED AS INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION; (II) THAT THE ASSESSEE WAS ENGAGED IN INFRASTRUCTURE DEVELOPMENT AND PROVISION FOR SERVICES WHICH REQUIRES A GREAT DEAL OF CAPITAL INVESTMENTS; THAT THE ASSESSEE HAD TO MAINTAIN SURPLUS FUNDS FOR ITS BUSINESS NEEDS AND THERE WAS A TIME LAG BETWEEN RECEIPT/GENERATION OF FUNDS AND ITS DISBURSEMENT; PAGE 14 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 14 AND THAT INSTEAD OF KEEPING THE AMOUNT IDLE THE ASSESSEE HELD THE FUNDS IN A BANK AND HENCE SUCH FUNDS MAY BE SAID TO BE INCIDENTAL TO THE BUSINESS OF THE ASSESSEE; RELIES ON THE CASE LAWS : (A) CIT V. PARAMOUNT PREMISES (P) LTD. - (1991) 190 ITR 259 (BOM)& (B) CIT V. LOK HOLDINGS (2010) 189 TAXMAN 452 (BOM) 8.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. A R ON THE ISSUE AND ALSO THE CASE LAWS RELIED ON B Y THE ASSESSEE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPING OPERATING AND MAINTAINING AN INDUSTRIAL PARK AND NOT A FINANCIAL CONSULTANCY LIKE CHIT FUNDS. ADMITTEDLY THE ASSESSEE HAD SURPLUS FUNDS I N ITS KITTY WHICH IT WANTED TO EARN INTEREST ON SUCH FUNDS AND THUS IT HAD DEPOSITED IN THE BANK FOR SPECIFIED PERIOD WITH A SOLE INTENTION OF EARNING INTEREST WHICH CANNOT BE CATEGORIZED AS INCOME FROM BUSINESS BUT CLEARLY FROM OTHER SOURCES. THE ASSESSEE IN ITS WRITTEN SUBMISSION C ONCEDED THAT THE INTEREST INCOME EARNED BY IT WAS FROM SURPLUS FUNDS NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF BUSINESS. IT MAKES ABU NDANTLY CLEAR THAT THE SOLE INTENTION OF THE ASSESSEE WAS TO EARN INTE REST FROM ITS SURPLUS FUNDS AND THUS SUCH SURPLUS FUNDS CANNOT BE CLASSIF IED AS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. BUSINESS HAS BEEN DEFINED BY SECTION 2(13) AS INCL UDING ANY TRADE COMMERCE MANUFACTURE OR ANY ADVENTURE O R CONCERN IN THE NATURE OF TRADE COMMERCE OR MANUFACTURE. THIS DE FINITION IS INCLUSIVE PAGE 15 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 15 AND NOT EXHAUSTIVE AND THE WORDS USED IN THE DEFIN ITION ARE WIDE. BUT IT IS ONLY SOME REAL SUBSTANTIAL AND SYSTEMATIC OR ORGANIZED COURSE OF ACTIVITY OR CONDUCT WITH A SET PURPOSE THAT CONSTIT UTES BUSINESS (SEE NARAIN SWADESHI WEAVING MILLS V CEPT (1954) 26 ITR 765 (SC). IF INTEREST INCOME IS EARNED AS A PART OF SUCH SYSTEMA TIC OR ORGANIZED COURSE OF ACTIVITY OR CONDUCT WITH A SET PURPOSE T HE INTEREST YIELD IS BUSINESS INCOME ASSESSABLE UNDER SECTION 28. IF NO T THE INTERET INCOME IS ASSESSABLE UNDER SECTION 56. THE HONBLE APEX C OURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V CIT 227 ITR 172 HAD RULED THAT INTEREST DERIVED BY THE ASSESSEE PRIOR T O COMMENCEMENT OF ITS BUSINESS FROM THE BORROWED FUNDS WHICH WERE T O BE UTILIZED FOR SETTING UP THE FACTORY OF THE COMPANY BUT WERE INVEST ED IN SHORT TERM DEPOSITS WITH BANKS WOULD BE CHARGEABLE TO TAX UND ER THE HEAD INCOME FROM OTHER SOURCES. THIS VIEW WAS FOLLOWED IN CIT V COROMANDAL CEMENTS LTD. 234 ITR 412 (SC). 8.2 WITH DUE RESPECTS WE HAVE PERUSED THE CASE L AWS ON WHICH THE ASSESSEE HAS PLACED ITS RELIANCE. (I) THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT V. PARAMOUNT PREMISES (P) LTD WAS THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION A ND DURING THE RELEVANT PERIOD UNDER DISPUTE THE ASSESSEE RECEIVE D DEPOSITS FROM SOME OF THE PROSPECTIVE PURCHASERS WHILE THE WORK O F CONSTRUCTION WAS UNDER-WAY. THE AMOUNTS SO RECEIVED AS DEPOSITS BY TH E ASSESSEE WERE SUBSTANTIAL AND THE IDLE AMOUNTS WITH IT WERE DEPOS ITED WITH THE BANK PAGE 16 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 16 OR GIVEN ON TEMPORARY LOANS UNTIL SUCH TIME AS THEY W ERE REQUIRED FOR CONSTRUCTION. THE ASSESSEE WAS ALSO REQUIRED TO GI VE A GUARANTEE TO THE BANK IN RESPECT OF THE LAND TAKEN ON LEASE FOR CONS TRUCTION WORK. FOR THAT PURPOSE CERTAIN AMOUNTS WERE KEPT IN FDS ON WH ICH THE ASSESSEE EARNED INTEREST. IN THESE CIRCUMSTANCES THE TRIBU NAL HAD GIVEN A FINDING THAT THE ENTIRE INTEREST SPRANG FROM THE BU SINESS ACTIVITY OF THE ASSESSEE AND DID NOT ARISE OUT OF ANY INDEPENDEN T ACTIVITY. AGGRIEVED THE REVENUE TOOK UP THE ISSUE BEFORE THE HONBLE COURT BY MEANS OF A REFERENCE APPLICATION WHICH HAS BEEN REJ ECTED BY THE HONBLE COURT. IN THIS REGARD WE WOULD LIKE TO REITERATE THAT THE PRESENT ASSESSEE HAD DEPOSITED THE SURPLUS FUNDS LYING AT IT S KITTY IN THE BANK. THE ASSESSEE HAD BROUGHT ON RECORD ANY JUSTIFICATION TO EVEN REMOTELY SUGGEST THAT IT WAS REQUIRED TO GIVE A GUARANTEE TO THE BANK IN RESPECT OF THE LAND TAKEN ON LEASE FOR CONSTRUCTION WORK OR MAINTENANCE OF THE PARK AND SO ON. ON ITS OWN ACCORD IT HAD CONCEDED THAT IT HAD DEPOSITED ONLY THE SURPLUS AMOUNTS AND NOTHING ELSE. IN THAT EVENT THE ASSESSEE CANNOT TAKE REFUGE IN THE FINDING OF THE BOMBAY HIGH COURT WHICH IS IN OUR CONSIDERED VIEW ON A DIFFERENT FOOTING. (II) SIMILARLY YET ANOTHER RULING OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT V. LOK HOLDINGS CANNO T COME TO THE PRESENT ASSESSEES RESCUE THE ISSUE BEFORE THE HON BLE COURT WAS ALMOST SIMILAR AND IDENTICAL TO THAT OF THE ISSUE WHICH WAS CONSIDERED PAGE 17 OF 17 ITA NOS.1147 TO 1152/BANG/2010 & C.O.NOS.35 TO 40/BANG/201 1 17 BY THE COURT IN THE CASE OF CIT V. PARAMOUNT PREMISE S (P) LTD CITED SUPRA. 8.3 AS MENTIONED EARLIER THE INTEREST INCOME IS E ARNED FROM FIXED DEPOSITS PLACED WITH DIFFERENT BANKS. THE D IRECT AND THE PROXIMATE SOURCE FOR EARNING THE INTEREST INCOME IS THE FIXED DEPOSITS KEPT IN THE BANK AND NOT IN THE COURSE OF AND AS PA RT OF BUSINESS. THEREFORE THE AO HAS CORRECTLY FIXED THE INTEREST I NCOME UNDER THE HEAD INCOME FROM OTHER SOURCES 8.4 IN THE RESULT THE LAST GROUND RAISED IN THE CR OSS OBJECTION BY THE ASSESSEE IS DISMISSED. 9. IN THE RESULT THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISSE D. THE ORDER PRONOUNCED ON THE 30 TH DAY OF NOVEMBER 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR ITAT BANGALORE.