M/s. Tamilnadu Industrial Development Corpn. Ltd., CHENNAI v. ACIT, CHENNAI

ITA 113/CHNY/2014 | 2009-2010
Pronouncement Date: 31-07-2014 | Result: Dismissed

Appeal Details

RSA Number 11321714 RSA 2014
Assessee PAN AADCT3409P
Bench Chennai
Appeal Number ITA 113/CHNY/2014
Duration Of Justice 6 month(s) 18 day(s)
Appellant M/s. Tamilnadu Industrial Development Corpn. Ltd., CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Date Of Final Hearing 11-06-2014
Next Hearing Date 11-06-2014
Assessment Year 2009-2010
Appeal Filed On 13-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH CHENNAI . ' $ % & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD JUDICIAL MEMBER ./I.T.A.NO. 113/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) M/S. TAMILNADU INDUSTRIAL DEVELOPMENT CORPORATION LTD. 19A RUCKMANI LAKSHMIPATHY ROAD EGMORE CHENNAI-600 008. VS ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE-III(1) CHENNAI-600 034. PAN: AADCT3409P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VIJAYARAGHAVAN ADVOCATE /RESPONDENT BY : MR. PRAMOD NANGIA CIT / DATE OF HEARING : 11 TH JUNE 2014 /DATE OF PRONOUNCEMENT : 31 ST JULY 2014 / O R D E R PER CHALLA NAGENDRA PRASAD JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX-III CHENNAI DATED 09.12.2013 FOR THE ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 263 OF THE ACT. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL:- 2. THE COMMISSIONER OF INCOME TAX ERRED IN ASSUMING JURISDICTION U/S.263 AND HOLDING THAT THE ASSESSMEN T ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE MERELY BECAUSE THE DECISION OF THE ASSESSING OFFICE R IS NOT INCONSONANCE WITH THE VIEW OF THE CIT. 2 ITA NO. 113/MDS/2014 2.1 THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT THE SCRUTINY ASSESSMENT WAS COMPLET ED U/S.143 (3) AFTER EXAMINING THE BOOKS OF ACCOUNT AN D CONSIDERING THE VARIOUS DETAILS FILED BEFORE THE AS SESS I NG OFFICER . THE CIT HAS ADMITTED IN ITS SHOW CAUSE NOTICE AT PA RA 2 THAT ALL THE DETAILS WAS AVAILABLE BEFORE ASSESSI NG OFFICER ON 7.12.2011 . 2 . 2 THE COMMISSIONER OF INCOME TAX OUGHT TO ' HAVE APPRECIATED THAT IF THE ASSESSING OFFICER HAS TAKEN ONE OF THE TWO POSSIBLE VIEWS IT CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . [MALABAR INDUSTRIAL CO. (VS) CIT 243 ITR 83 (SC)]. 3. THE COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT THE AMOUNT OF RS.1407.30 CRORES TOWARDS UPFRON T LEASE RENT RECEIVED BY THE APPELLANT AND PAID TO GOVERNM ENT ACCOUNT AS SALE CONSIDERATION CANNOT BE TREATED AS BEING EXPENSES U/S 37 SINCE IT IS A CAPITAL EXPENDITURE. SUCH ASSET HAS TO APPEAR IN THE BALANCE SHEET OF THE APPELLANT AND THE PROPORTIONATE LEASE INCOME SHOULD HAVE BEEN BROUGHT TO TAX AND REMITTED THE MATTER BACK TO THE FILE OF ASSESSI NG OFFICER TO REDO THE ASSESSMENT AS PER LAW . 3 . 1 THE COMMISSIONER OF INCOME TAX OUGHT TO HAVE APPRECIATED THAT THE LANDS UNDER CONSIDERATION WERE GIVEN BY THE GOVERNMENT OF TAMILNADU TO THE APPELLANT IN ORD ER TO DEVELOP A SPECIAL ECONOMIC ZONE FOR INFORMATION TEC HNOLOGY ENABLED SERVICES ALONG WITH INTEGRATED INTERNATIONA L CONVENTION CENTRE THROUGH JOINT VENTURE IN CHENNAI . THE G.O ALSO SPECIFIES THE AMOUNT TO BE GIVEN TO TAMILNADU GOVERNMENT FOR THE LAND ALIENATED TO TIDCO. THUS WH AT IS RETAINING BY TIDCO FROM OUT OF THE TRANSACTION WAS ONLY RS.5 . 50 CRORES WHICH IS ADMITTED IN THE RETURN OF INCOM E FILED BY THE APPELLANT. 3.2 THE COMMISSIONER OF INCOME TAX OUGHT TO HAVE APPRECIATED THAT EVEN IF THE TRANSFER OF THE LANDS FROM THE GOVERNMENT OF TAMILNADU TO THE APPELLANT WERE TO BE TREATED AS CAPITAL GAINS THEN THE COST OF ACQUISITION OF T HE ASSET FROM 3 ITA NO. 113/MDS/2014 GOVERNMENT OF TAMILNADU TO APPELLANT WOULD BE THE A MOUNT PAID BY TIDCO TO GOT VIZ . RS.1412.80 CRORES MINUS RS . 5.50 CRORES . I N EFFECT A SUM OF ` 5.50 CRORES WOULD BE TREATED AS SHORT TERM CAPITAL GAINS IN THE HANDS OF THE APPELL ANT AND THIS TREATMENT WOULD NOT MAKE ANY DIFFERENCE IN THE ASSE SSMENT OF THE SUM AND THERE WOULD BE NO LOSS OF REVENUE. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE COMPANY M/S. TAMILNADU INDUSTRIAL DEVELOPMENT CORPORATION LTD. (HEREINAFTER REFERRED TO AS TIDCO) FILED ITS ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2009-10 ON 30.09.2009 ADMITTING INCOME OF ` 69 20 07 360/- AND WAS REVISED ON 27.9.2010 ADMITTING INCOME OF ` 69 00 36 070/-. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSMENT WA S COMPLETED UNDER SECTION 143(3) OF THE ACT ON 30.12. 2011 DETERMINING INCOME AT ` 1 95 22 64 791/-. COUNSEL SUBMITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESS EE FURNISHED LEASE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. TRIL INFOPARK LTD. TO WHICH LAND WAS LEASED BY THE ASSESSEE. COUNSEL SUBMITS THAT THIS L AND WAS ORIGINALLY ALIENATED BY THE GOVERNMENT OF TAMIL NAD U TO THE ASSESSEE AND ASSESSEE IN TURN LEASED OUT THE LAND T O M/S. TRIL INFOPARK LTD. AND ASSESSEE OFFERED ` 5.5 CRORES AS REMUNERATION IN RESPECT OF LEASE TRANSACTION WITH M /S. TRIL 4 ITA NO. 113/MDS/2014 INFOPARK LTD. THOUGH THE ASSESSEE RECEIVED UPFRONT LEASE RENT OF ` 1412.80 CRORES. COUNSEL SUBMITS THAT EXCEPT ` 5.5 CRORES RETAINED BY THE ASSESSEE AS REMUNERATION BAL ANCE OF ` 1407.30 CRORES WAS PAYABLE TO THE GOVERNMENT OF TA MIL NADU OUT OF WHICH ` 1320.95 WAS PAID TO GOVERNMENT OF TAMIL NADU AND ` 86.95 CRORES WAS CONVERTED INTO TERM LOAN PAYABLE TO GOVERNMENT OF TAMIL NADU. COUNSEL SUBMIT S THAT ASSESSING OFFICER EXAMINED THE NATURE OF LEASE BETW EEN THE ASSESSEE TIDCO AND M/S. TRIL INFOPARK LTD.. THE ASS ESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143( 3) OF THE ACT ACCEPTING THE INCOME RETURNED BY THE ASSESS E. THEREFORE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. CO UNSEL FOR THE ASSESSEE REFERRING TO PAGE 3 OF THE PAPER BOOK FILED BEFORE US SUBMITS THAT TRANSACTION DETAILS BETWEEN THE ASSESSEE AND M/S. TRIL INFOPARK LTD. WITH REFERENCE TO LEASE AGREEMENTS WERE PLACED BEFORE THE ASSESSING OFFICER . THE COUNSEL SUBMITS THAT ASSESSING OFFICER HAS ARRIVED AT ONE OF THE POSSIBLE VIEWS AND THEREFORE COMMISSIONER OF IN COME 5 ITA NO. 113/MDS/2014 TAX IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX IN REVISING THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. DEPAR TMENTAL REPRESENTATIVE SUBMITS THAT ASSESSING OFFICER HAS N OT FORMED ANY OPINION AS HE HAS NOT GONE INTO THE DETA ILS OF TRANSACTIONS BETWEEN THE ASSESSEE AND M/S. TRIL INF OPARK LTD. AND IN THE ABSENCE OF ANY ENQUIRY WHATSOEVER IN THIS REGARD THE ORDER PASSED BY THE ASSESSING OFFICER U NDER SECTION 143(3) OF THE ACT IS CERTAINLY ERRONEOUS AN D PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND SUBMISSIONS MADE BEFORE US. THE ASSESSEE COMPAN Y TIDCO IS A PUBLIC SECTOR UNDERTAKING OF GOVERNMENT OF TAMIL NADU ENGAGED IN THE BUSINESS OF PROMOTION OF INDUST RIES IN TAMIL NADU. THE ASSESSEE LEASED OUT ` 25.27 ACRES OF LAND LOCATED AT SURVEY NO.2/38 & 2/31 MYLAPORE SAIDAPET TALUK CHENNAI TO M/S. TRIL INFOPARK LTD.. THIS LAND WAS O RIGINALLY 6 ITA NO. 113/MDS/2014 ALIENATED TO THE ASSESSEE BY GOVERNMENT OF TAMIL NA DU. THE ASSESSEE RECEIVED UPFRONT LEASE AMOUNT OF ` 1412.79 CRORES FROM M/S. TRIL INFOPARK LTD.. THE ASSESSEE HAS OFFERED ONLY ` 5.5 CRORES IN ITS PROFIT & LOSS ACCOUNT AND CLAIMED THAT BALANCE IS TO BE PAYABLE TO THE GOVERN MENT OF TAMIL NADU TOWARDS SALES CONSIDERATION. FROM THE P APER BOOK FILED BEFORE US IT APPEARS THAT ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT IT HAD RECEIVED U PFRONT LEASE RENT OF ` 1412.79 CRORES AND IT HAD PAID ` 1320.95 CRORES TO THE GOVERNMENT OF TAMIL NADU AND OUT OF B ALANCE OF ` 91.84 CRORES ` 86.34 CRORES WAS TREATED AS TERM LOAN FROM GOVERNMENT OF TAMIL NADU AND THE REMAINING BA LANCE OF ` 5.5 CRORES TREATED AS INCOME WAS ACCOUNTED AS SER VICE FEE OF THE ASSESSE. THE ASSESSING OFFICER WHILE COM PLETING THE ASSESSMENT ACCEPTED ` 5.5. CRORES AS INCOME OFFERED BY THE ASSESSEE AS ITS SERVICE FEE. THE ASSESSING OFFI CER DID NOT EXAMINE THE NATURE OF TRANSACTION BETWEEN THE ASSES SEE TIDCO AND M/S. TRIL INFOPARK LTD. AT ANY STAGE. I N THE CIRCUMSTANCES COMMISSIONER OF INCOME TAX ISSUED A SHOW CAUSE NOTICE INVOKING THE PROVISIONS OF SECTION 26 3 OF THE ACT OBSERVING AS UNDER:- 7 ITA NO. 113/MDS/2014 2. ON PERUSAL OF RECORDS IT IS SEEN THAT THE AS SESSEE HAS ENTERED INTO LEASE AGREEMENT WITH M/S.TRIL INFO PARK AND TRIL HAS PAID RS.1412.79 CRORES AS UPFRONT LEAS E RENT . THE ASSESSEE OFFERED ONLY RS.5.50 CRORES IN ITS PRO FIT AND LOSS ACCOUNT AND CLAIMED THE BALANCE AS BEING PAID TO GOVT.OF TAMILNADU TOWARDS SALES CONSIDERATION. T HE ASSESSEE HAD NOT SOLD THE LAND AND CONTINUES TO BE THE OWNER. THOUGH THE LAND HAS BEEN RECEIVED FROM GOVT. OF TAMILNADU ON 24/08/2007 WHETHER THE PROCEEDS CAN B E GIVEN TO GOT AND HOW THE PROCEEDS CAN BE TREATED A S SALES CONSIDERATION ETC HAS NOT BEEN CONSIDERED AT ALL BY THE ASSESSING OFFICER . THOUGH ALL THE DETAILS ARE AVAILABLE ON RECORDS VIDE LR . NO . ACD/A1/1T/A.Y.2009-10 DATED 07/1212011. 3. THEREFORE ON THE ABOVE ISSUES THE ASSESSMENT COMPLETED U/S 143(3) IS PROPOSED TO BE REVISED AND YOU ARE REQUESTED TO SHOW CAUSE WHY THE ASSESSMENT U/S.143 (3) DT . 30.12 . 2011 OF THE ACT SHOULD NOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND REVISED U/S 263 . IN THIS CONNECTION YOU ARE REQUESTED TO APPEAR BEFORE THE UNDERSIGNED ON 25.11.2013 AT 3.00 P.M. AT MY OFFICE IN THE ABOVE MENTIONED ADDRESS EITHER IN PERSON OR THROUGH A DULY AUTHORIZED REPRESENTATIVE ALONG WITH THE WRITTEN SUBMISSIONS IF ANY IN THE ABOVE MATTER AND ON FAILURE TO DO SO IT WILL BE PRESUMED THAT Y OU HAVE NO OBJECTION TO THE PROPOSAL FOR REVISION AND PROCE EDINGS FINALIZED. 6. THE ASSESSEE FILED REPLY DATED 22.11.2013 STATIN G THAT ASSESSMENT ORDER CANNOT BE REOPENED WHEN THERE IS N O JURISDICTIONAL ERROR IN THE ORDER. THE ORDER OF THE ASSESSING OFFICER CANNOT BE ALSO REVISED IF IT HAS BEEN PASSE D AFTER APPLICATION OF MIND AND MERELY BECAUSE OF THE OPINI ON OF THE COMMISSIONER OF INCOME TAX IS DIFFERENT FROM THAT O F THE ASSESSING OFFICER PROVISIONS OF SECTION 263 CANNOT BE 8 ITA NO. 113/MDS/2014 INVOKED. IT WAS THE CONTENTION THAT ALL THE DETAIL S WERE FURNISHED BEFORE THE ASSESSING OFFICER AND ON EXAM INATION OF ALL THESE DETAILS THE ASSESSING OFFICER HAS TAK EN ONE OF THE VIEWS POSSIBLE. IT WAS ALSO CONTENDED THAT EVEN IF THE TRANSFER OF LANDS FROM GOVERNMENT OF TAMIL NADU TO TIDCO WERE TO BE TREATED AS CAPITAL GAINS THEN THE COST OF ACQUISITION OF ASSET FROM GOVERNMENT OF TAMIL NADU TO TIDCO WOULD BE THE AMOUNT PAID BY TIDCO TO GOVERNME NT OF TAMIL NADU I.E. ` 1412.80 CRORES MINUS ` 5.5 CRORES AND IN EFFECT A SUM OF ` 5.5 CRORES WOULD BE TREATED AS SHORT TERM CAPITAL GAINS IN THE HANDS OF TIDCO AND THIS TREATM ENT WOULD NOT MAKE ANY DIFFERENCE IN THE ASSESSMENT AND THER E WOULD BE NO LOSS OF REVENUE. THE COMMISSIONER OF INCOME T AX PASSED ORDER UNDER SECTION 263 OF THE ACT ON 9.12. 2013 REJECTING THE SUBMISSIONS OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS EXAMINED THE DETAILS AND FORMED AN OPI NION ON THE TRANSACTION BETWEEN TIDCO AND M/S. TRIL INFOPAR K LTD. OBSERVING AS UNDER:- 3 . 2. 1 THE ASSESSEE ' S OBJE CTI ONS FO R INVOK I G PROVISION OF SECTION 263 OF T HE L T . ACT IS N OT VALID. T HE ASSESSEE HAS OFFERED O N LY RS.5 . 5 C R ORES AS REMUNERATION IN RESPECT OF THE LEA SE TR ANSACTION WIT H M/S.TRI L INFOPARK 9 ITA NO. 113/MDS/2014 L I M I TED T HO UGH T HE UPFRONT LEASE RENT REC EIVED IS RS . 1412 . 79 CRORES. T H E ASSEESSEE CLAIMED THAT T HE BALANCE OF ` 1407 . 30 (RS.1320 . 9 5 PA I D PL US RS . 86 .9 5 CONVERTED INTO TERM LOA N ) BEING P AI D TO GOVT ACCOUNT AS SALE CONSIDERA TI O N. IN FA CT THE A SS ESSEE HAD N O T SOLD THE I MPUGNED LAN D AND CONTINUE TO BE THE OWNER OF S U C H LAND . T H E SA L E C ON SIDERATION PAID T O ACQUIRE SUCH LAND C A NNOT BE TREATED AS BEING EXPENSE U / S 3 7 O F T HE ACT S I N C E IT IS A CAPITAL EXPENDITURE . SUCH AN A SSET HAS TO APPEAR IN THE BALANCE SH E E T O F M/S.TIDCD . THE PROPORT I ONATE L EASE INCOME S HOULD HAVE BEEN BROUGHT TO TAX IN T HE A S SESSMEN T ORDER U /S 143( 3 ) D ATED 30 / 12/2011 . HENCE IT HAS BEEN FELT THAT THE ORDER PRIMA FA CIE APPE A RED TO BE ERRO N EO U S AND P REJUDICIAL T O THE I NTEREST OF REVENUE. THE INVO KING O F P R OV I SIONS U /S 263 IS I N ORDE R RELYING ON THE DECISI O N S IN THE FOLLOWING CASES. A) IN THE C ASE OF M/S . ASHOK LEYLAN D LTD VS CIT (2003) 260 ITR599 (M AD ) THE MAD RAS HI G H COURT H EL D THAT ' 'IT WAS T H ERE F ORE N E C ESSARY FOR THE ASSESSING OFFICER TO HAVE EXAM INED I N D EPTH THE C LAIM OF THE ASSESSEE AND HIS FAILURE TO DO SO WAS NOT ONLY ERRONEOUS B UT ALS O PREJUDICIAL T O THE REVE N UE . THE COMM I SSIONER W A S / THEREFORE RIGHT IN EXERCISING HIS PO WER O F RE VISION U N DER SECTIO N 2 6 3 A ND DIRECTING THE ASSESS I NG OFFICER TO EXAMINE THA T A S PEC T T HOROUGHLY A ND I N ACC O RDAN C E WI TH LAW. B) I N T H E CA S E O F INDIAN TEXTILES VS COMMISSIONER O F INCOMETA X (1986)157ITRL12(MAD.) THE MA D RAS H I GH COURT HELD AS UNDER : ' THE I TO G AVE RE L IE F TO T HE AS SE SSEE I N RESPECT OF CERTAIN MATTERS WHIC H ACC ORDING T O TH E COMMISS I ON E R . W AS NOT JUSTIFI ED. ONCE THAT FINDING WAS REACHE D BY TH E CO MMISSIO N ER; TH E R E VISIO N AL JURISDIC T ION UNDER SECTION 263 COULD VALIDLY INVOKED BY TH E C OMMISSIO N ER .. ' C) I N TH E CA S E OF CI T VS KOHINOOR TOBACC O PRODUCTS P LTD (234 ITR 557) THE MADH YA PR ADE SH HI G H COU RT HA S H EL D A S U N D E R: ' ........... THIS FA I LURE ON THE PART OF THE AS SESSING OFFICER TO MAKE NECES S A RY ENQ UI RY RENDERED T H E ASSESSMENT ER R ONEOUS AND ALSO PREJU D ICIAL TO THE INTERESTS OF THE REVE N UE .. 1 1 10 ITA NO. 113/MDS/2014 D ) TH E ALLAHABAD HIGH COUR T DECISION I N THE CASE OF SWARUP VEGETABLE PR O D UCT S INDUSTRIES L TD. (187 ITR 412) WHEREIN IT WAS OBSER V ED AS : 'IT I S BEYOND DISPUTE THAT UNDER SECT IO N 263 OF THE INCOME TAX ACT 1 9 6 1 T HE C O M MISSIO N ER H A S POWER TO SET ASIDE THE ASSES S MENT ORDER AND SEND THE MATTE R F OR FRE SH ASSES SMEN T IF HE IS SATI S F I E D T HAT FUR TH ER E N QUIRY I S NECESSARY AND THAT THE ORDER OF INCOME TA X O F F I CER IS PR E JUDI C IAL TO T H E IN TE R ESTS OF T H E REVENUE . E) TH E H ON'B L E DE L HI HIGH COURT IN TH E CASE OF DUGGAL AND CO. (220 ITR 4 56 ) H AS HELD A S UNDER ( ALSO IN T HE CASE OF GEE VEE ENTERPRISES VS.ADDL. CIT ( 99 IT R 375) THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER B UT CALLS FOR FURTHER INQUIRY. IT IS INCUMBENT ON THE I NCOME TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATE D IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT AND THE WORD ERRONEOUS IN SECTIO N 263 OF THE INCOME TAX ACT 1961 INCLUDES THE FAILUR E TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUM ED TO BE CORRECT. 3.3 THE ASSESSEE IN HIS WRITTEN SUBMISSION FURNISHE D THE OBJECTION FOR REVISION UNDER SECTION 263 RELYING ON THE FOLLOWING CITATIONS UNDER THE PRESUMPTION THAT THE OBJECTION RAISED BY AUDIT WAS THE ROOT CAUSE OF ISSUE OF SHOW CAUSE NOTICE U/S.263 OF THE ACT. I) SIRPUR PAPER MILLS LTD. VS.CWT (1970) 77 ITR 6 II ) JE E W AN LAL L TD VS A DDL.CIT(19 7 7)108 ITR 407(CAL . ) 11 ITA NO. 113/MDS/2014 3 . 3.1 TH E ABOVE OBJECTIONS REQUIRE NO FURTHE R DISCUSSION SINCE THEY ARE RAISED U NDE R THE PRESU M PTION THAT THE PROVISIONS U/S 263 W A S INVOKED DUE TO AUDIT OBJECTION . 3 . 4 T H E A S S E SSE E AL ONG W IT H THE WRI T TEN SUBM I S SI ON FURNI SHED THE COPIES O F VARIOUS G . D S O F GOVT . OFTA M ILNADU WITH REGARD TO THIS TR ANSACTIO N . IT IS CONTENDED AS FOLLOWS: 'EV E N I F THE TRANSFE R OF THE LAN D S FROM GO VER NMENT OF TAMILNADU TO TIDCO WERE TO B E T R EATED AS C APIT A L GAIN THEN THE COST OF ACQUISITI O N OF THE ASSET FROM GOT TO TIDCD WOU L D B E TH E AMOUN T PAID BY TIDCO TO GOVT VI Z RS.141 2 . 80 CRORES WOULD BE TREATED AS SH O R T TER M C APITAL GA I N S IN THE H A ND S OF TIDCO A ND THIS TR EA TMENT WOULD NOT MAKE AN Y DIFFE RENCE AN D T H E R E WOUL D BE N O LOSS OF REV E N UE ' 3 . 4 . 1 . TH E ASSESSEE'S ABOVE OBJECT I ON IS N O T ACCEPTABLE AS THERE IS NO QUEST ION O F TREATING TH E ABOVE TRANSACTION AS S H ORT TERM C A PITAL GAINS BY THE FOLLOWING REASONS : A) I T IS STATED I N PARA NO:3 OF GO( S) NO 28 DATED 11/03/2010 AS 'THE GOVERNMENT ALSO D I RECTED T IDCO F OR COLLECTI N G THE UPFRONT LEASE RENT OF ` 1 3 2 6 . 42 CRORES FOR 2 5 . 2 7 ACRES OF LAND AT THE RA T E OF R S .12 0501- PER SQUARE FEET FROM THE JOINT VENTURE P A R TNER AND P A Y THE LAND V ALUE TO TH E GOVERNMENT AT THE RATE OF RS . 12 0 00/ - PER SQ . FT. T I DCO IS SUPPOSED TO RETAIN ` 501- PER S . FT I . E . RS.5 . 504 C R O RES ' . ACCORDING L Y TIDCO HAS PAID RS.1407.30 CR O RES(1320.95 CRORES PLUS 12% ESCALA T I ON CHARGES O F RS.86 . 95 CRORES CONVERTED AS LOAN ) TO THE GOVT OF TAMILNADU. ON PA YMENT O F T HE ENT I R E LAND VALUE TO T HE GOVT M/S . TID C O BEING A SEPARATE ENT I TY BECAME T HE ABSOLUTE OW NER OF THE LAND . B) O N A C AREFUL READING OF VA R IOUS GOS A ND REVISED LEASE DEED DATED 3/02 / 2 009 IT I S FOUND THAT THE ABOVE LANDS HAVE ONLY BE E N LEASED OUT TO M/S. TRIL INFOTEK P V T L TD BUT NO SAL E OR TRANSFER HAD TAKEN P L ACE. SOM E OF THE ILLUSTRATIVE PARAGRAPHS ARE G I V EN BELOW B(A ) AS PE R PARA 5 O F G . O(MS. ) NO.1 0 3 DATED 24/04/2007 ' .. TH E JO I NT VENTURE C O MPANY SHALL HAVE THE RIGHT ONLY TO LEASE THE BUILT UP SPACE ONLY UP T O T H E PERIOD OF L E ASE OF LAND GRANTED TO T H E JOINT VE N TURE COMPANY AND NO SALE OR TRAN S FE R IS PERMITTED' . B(B ) A S PER PARA 3 OF THE LEASE DEED DATED 3/02/2009 'THE LESSOR G R AN TS THE SCHED U LED PROPERTY ON LEASE TO THE LESSEE F OR A PERIOD OF 99 YEARS FROM 13 . 08 . 200 8 SUBJECT TO THE TERMS AND CONDITIONS AND THE LESSEE AGREES TO STRICTLY ABIDE BY T HE CONDITIONS STIP U LATED IN 12 ITA NO. 113/MDS/2014 THE LEASE DEED' B(C ) AS PER PARA 14 OF THE LEASE DEED DATED 03/02/2009 ' THE LESSE E S HA L L HAVE THE R I GHT TO USE THE SCHEDULED PROP E RTY FOR ESTABLISHING THE PRO J EC T I N T H E SCHEDULE D PROPERTY INCLUDING THE R IGHT TO SUB - I EASE/RENT THE BUILT UP SPACE / AREA UP T O THE PER I OD OF LEASE GRANTED TO THE LESSEE AND NO SALE OR TRANSFER IS PERMITTED . B(D ) AS PER PARA 24 OF THE LEASE DEED DATED 03/02/2009 ' ON THE EXP IR A TION O R DETERM I N ATION OF L EASE THE LESSEE AGR E ED TO Y I ELD AND DELIVER PEACEFUL VACA N T POSSESSIO N OF THE PREM I SES I N ITS ENTIRETY TOG E THER WITH ALL IMPROVEMENTS IF ANY D ONE THERETO WI T HOUT ANY CLA I M FOR COMPENSATION O N THAT ACCOUNT BY THE LESSEE T O THE LESSOR . FRO M THE ABOVE I T IS CLEAR T HAT M/S.T I DCO IS THE ABSOLUTE OWNER OF THE LA ND DURING THE LEASE PE RI OD . HE N CE IT CANNOT BE R EGARDED AS SALE OR TRANSFER R ESUL TING I N SHORT TERM CAPI T AL GAINS . 3 . 5 T HE A SSESSEE SU B M I TTED THA T THE BENE F I T DERIVED FROM THE TIDCO WAS ONL Y RS.5. 50 CR O R ES AND I T HA S BEEN RIGHTLY ASSES S ED BY THE A S S ESSING OFFICER AFTER CONSIDERING THE DETAIL S FU RNISHED B Y THE ASSE SS EE. 3.5 . 1 . THE ASSESSEE IN FAC T FURNISHE D THE DETAILS OF THE TRANSACTION DURING T HE COURSE OF S CRU T INY ASSESSMENT PROCEEDINGS . BUT THE ASSESSINQ OFFICER FAILED TO MA KE FURTHER EN Q UIRIES AND EXAMINE THE TAX LIABILITY A RISING OUT OF THE TRANSACTION. ASSESS EE H AS LEASE D OUT 25 . 27 ACRES OF LAND F OR RS.141 2 .80 CRORES FOR A PERIOD OF 99 YEARS FR O M 1 3/8/2008 . EVEN IF IT I S CONSIDERED IN THE M OST CONSERVATIVE WAY THE PROPO RTI O NATE LEASE AM O UNT FOR THE FINANCIAL YEAR 2008-0 9 IS ` 3 . 55 CRORES AND ` 14.27 CRORE S F R OM THE F I NANCIAL YEAR 2009-10 AS D ETAILED BE L OW: T OTAL L EASE AMOUNT FO R 99 YEARS (A ) R S . 1412 . 80 CRORES LEASE AMOUNT FOR ONE YEA R (A ) 199 =8 R S. 14 . 27 CRORES LEASE AMOUNT FOR 2008-09 R S . 9.05 CRORES F R OM 13/0 8/ 2008 TO 31/03/2009 ( B/366) X 23 2 A MO U NT AD MI TTED BY THE ASSESSEE AS SERV I CE CHARGES IN F.Y. 2008-09 R S .5 . 5 CRORES BALANCE LEASE AMOUNT ESCAPED ASSESSMENT IN F.Y. 2008-09 (AY 2009-10) ` 3.55 CRORES 13 ITA NO. 113/MDS/2014 IT HAS BEEN HELD BY THE APEX COURT IN THE CASE OF C IT VS MALABAR INDUSTRIAL CO. LTD THAT IF DUE TO AN ERRON EOUS ORDER OF THE ITO REVENUE IS LOSING TAX LAWFULLY PAYABLE BY PERSONS IT WILL BE CERTAINLY PREJUDICIAL TO THE INTEREST OF REVENUE . THE ASSESSING OFFICER FAILED TO EXAMINE THE REASONS WHY THE PROPE RTY LEASED OUT TO M/S.TRIL INFO PARK PVT LTD HAS NOT APPEARED IN THE BALANCE SHEET AND HOW THE VALUE OF THE LAND PAID TO THE GOVT HAS CLAIMED AS EXPENDITURE BEING CAPITAL IN NATURE. IN VIEW OF THE ABOVE REASONS IT IS CONCLUSIVE THAT THE ORDER DATED 30/12/2011 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 7. ON A PERUSAL OF THE ASSESSMENT ORDER PASSED UNDE R SECTION 143(3) AND ALSO THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF TH E ACT WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OF FICER FAILED TO MAKE ANY SORT OF ENQUIRIES IN RESPECT OF TAXABILITY OF THE LEASE RENT DERIVED BY THE ASSESSEE FROM M/S. TR IL INFOPARK LTD ON THE LAND ALIENATED BY THE GOVERNMEN T OF TAMIL NADU TO TIDCO WHICH IN TURN WAS LEASED OUT TO M/S. TRIL INFOPARK LTD. THE ASSESSING OFFICER HAS NOT G ONE INTO THE TRANSACTION AS RIGHTLY POINTED OUT BY THE COMMI SSIONER OF INCOME TAX AND IN THE ABSENCE OF ANY ENQUIRY WHATS OEVER BY THE ASSESSING OFFICER AND FORMING ANY OPINION O N THE TRANSACTION EXCEPT REQUIRING THE ASSESSEE TO FURNIS H DETAILS IN OUR VIEW THE ORDER PASSED BY THE ASSESSING OFFI CER IS 14 ITA NO. 113/MDS/2014 CERTAINLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. THE ASSESSING OFFICER SHOULD HAVE EXAMINED THE TRANSACTION IN DEPTH AS TO WHETHER THE LEASE TRANS ACTION BETWEEN THE ASSESSEE AND M/S. TRIL INFOPARK LTD AND LEASE RENT REPORTED BY THE ASSESSEE IS IN ACCORDANCE WIT H LAW AND STATUE AND SINCE HAS COMPLETELY FAILED TO EXAMINE T HESE TRANSACTIONS THE ORDER PASSED BY THE ASSESSING OFF ICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 8. AS OBSERVED BY THE COMMISSIONER OF INCOME TAX IN THE IMPUGNED ORDER THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. ASHOK LEYLAND LTD. VS. CIT (260 IT R 599) HELD AS UNDER:- ' 'IT WAS T H ERE F ORE N E C ESSARY FOR THE ASSESSING OFFICER TO HAVE EXAM INED I N D EPTH THE C LAIM OF THE ASSESSEE AND HIS FAILURE TO DO SO WAS NOT ONLY ERRONEOUS B UT ALS O PREJUDICIAL T O THE REVE N UE . THE COMM I SSIONER W A S / THEREFORE RIGHT IN EXERCISING HIS PO WER O F RE VISION U N DER SECTIO N 2 6 3 A ND DIRECTING THE ASSESS I NG OFFICER TO EXAMINE THA T A S PEC T T HOROUGHLY A ND I N ACC O RDAN C E WI TH LAW. 15 ITA NO. 113/MDS/2014 9. I N T H E CA S E O F INDIAN TEXTILES VS COMMISSIONER O F INCOME-TA X (1986)157 ITR 112 MAD.) THE MA D RAS H I GH COURT HELD AS UNDER : ' THE I TO G AVE RE L IE F TO T HE AS SE SSEE I N RESPECT OF CERTAIN MATTERS WHIC H ACC ORDING T O TH E COMMISS I ON E R W AS NOT JUSTIFI ED. ONCE THAT FINDING WAS REACHE D BY TH E CO MMISSIO N ER; TH E R E VISIO N AL JURISDIC T ION UNDER SECTION 263 COULD VALIDLY INVOKED BY TH E C OMMISSIO N ER .. ' 10. THE HONBLE MADHYA PRADESH HIGH COURT IN THE CA SE OF CIT VS KOHINOOR TOBACCO PRODUCTS P.LTD. (234 ITR 55 7) HELD AS UNDER:- ' ........ THIS FA I LURE ON THE PART OF THE AS SESSING OFFICER TO MAKE NECES S A RY ENQ UI RY RENDERED T H E ASSESSMENT ER R ONEOUS AND ALSO PREJU D ICIAL TO THE INTERESTS OF THE REVE N UE .. 11. TH E HONBLE ALLAHABAD HIGH COUR T I N THE CASE OF SWARUP VEGETABLE PR O D UCT S INDUSTRIES L TD. (187 ITR 412) OBSER V ED AS UNDER:- 'IT I S BEYOND DISPUTE THAT UNDER SECT IO N 263 OF THE INCOME TAX ACT 1 9 6 1 T HE C O M MISSIO N ER H A S POWER TO SET ASIDE THE ASSES S MENT ORDER AND SEND THE MATTE R F OR 16 ITA NO. 113/MDS/2014 FRE SH ASSES SMEN T IF HE IS SATI S F I E D T HAT FUR TH ER E N QUIRY I S NECESSARY AND THAT THE ORDER OF INCOME TA X O F F I CER IS PR E JUDI C IAL TO T H E IN TE R ESTS OF T H E REVENUE . 12. TH E H ON'B L E DE L HI HIGH COURT IN TH E CASE OF DUGGAL AND CO. (220 ITR 4 56 ) H AS HELD A S UNDER:- THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS INCUMBENT ON THE INCOME TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 OF THE INCOME TAX ACT 1961 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 13. IN VIEW OF THE ABOVE DECISIONS AND ALSO SINCE T HE ASSESSING OFFICER FAILED TO ENQUIRE INTO THE MATTER THOROUGHLY THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE CIRCUMSTANCES WE UPHOLD THE ORDER OF THE COMMI SSIONER OF INCOME TAX PASSED UNDER SECTION 263 OF THE ACT I N DIRECTING THE ASSESSING OFFICER TO COMPLETE THE ASS ESSMENT 17 ITA NO. 113/MDS/2014 AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING SUFFI CIENT OPPORTUNITY TO THE ASSESSEE. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY TH E 31 ST DAY OF JULY 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) . ( ' )* ) ACCOUNTANT MEMBER / JUDICIAL MEMBER/ ) ) /CHENNAI - /DATED 31 ST JULY 2014 SOMU /0 10 /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .