ETT Ltd (formerly known as Indian Express Multimedia Ltd), New Delhi v. CIT, Central-II, New Delhi

ITA 3341/DEL/2018 | 2013-2014
Pronouncement Date: 26-03-2019 | Result: Partly Allowed
Expert Summary: "Profit on sale of industrial park is eligible for deduction under section 80-IA Disallowance u/s 14A is not automatic whenever there is any kind of exempt income, it has to be viewed with regard to the nature of expenses debited and whether any expenditure can be calculated. The Commissioner can not rely on the judgement of the Assessing Officer without carrying out his own enquiry and without pointing out any legal or factual infirmity."

Appeal Details

RSA Number 334120114 RSA 2018
Assessee PAN AAACI2839Q
Bench Delhi
Appeal Number ITA 3341/DEL/2018
Duration Of Justice 10 month(s) 18 day(s)
Appellant ETT Ltd (formerly known as Indian Express Multimedia Ltd), New Delhi
Respondent CIT, Central-II, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2019
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-03-2019
Assessment Year 2013-2014
Appeal Filed On 08-05-2018
Judgment Text
FIT FOR PUBLICATION SD/- SD/- (AM) (JM) IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SH. AMIT SHUKLA JUDICIAL MEMBER AND SH. ANADEE NATH MISSHRA JUDICIAL MEMBER ITA NO. 3341/DEL/2018 ASSESSMENT YEAR: 2013-14 M/S. ETT L TD. (FORMERLY KNOWN AS INDIAN EXPRESS MULTIMEDIA LTD.) 17 HEMKUNT COLONY NEW DELHI -110048 PAN AAACI2839Q VS. COMMISSIONER OF INCOME TAX CENTRAL II NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. R. S. SINGHVI CA SH. SATYAJEET GOYAL CA V.K. SABHARWAL ADV. RESPONDENT BY MS. RACHNA SINGH CIT DR DATE OF HEARING: 13.09.2018 & 01.02.2019 DATE OF PRONOUNCEMENT: . O2 .201 9 ORDER PER AMIT SHUKLA JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 31.03.2018 PASSED U/S 263 BY LD. 2 COMMISSIONER OF INCOME TAX (CENTRAL)-II NEW DELHI FOR THE A. Y. 2013-14. 2. IN VARIOUS GROUNDS OF APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT PASSED U/S 263 CANCELLING THE ASSESSMENT ORDER DATED 10.08.2015 PASSED U/S 153 C/ 143 (3) FOR FRAMING FRESH ASSESSMENT ORDER ON THE ISSUES RAISED IN THE IMPUGNED ORDER. 3. THE BRIEF FACTS AND BACKGROUND OF THE CASE ARE THAT THE ASSESSEE HAD CONSTRUCTED AND DEVELOPED AN INFORMATION TECHNOLOGY PARK AT 15 & 16 SECTOR-16A NOIDA DISTRICT NOIDA. IT HAD APPLIED FOR CLAIM OF DEDUCTION U/S 80 IA WITH THE MINISTRY OF COMMERCE AND INDUSTRY IN SEPTEMBER 2005. THE SAID MINISTRY HAD GRANTED APPROVAL TO THE ASSESSEE COMPANY VIDE NOTIFICATION DATED 17.11.2006 WHEREBY IT WAS GRANTED 100% TAX EXEMPTION. FURTHER IT HAS RECEIVED APPROVALS IN TERMS OF INDUSTRIAL PARK SCHEME 2002 IN VIEW OF PROVISION OF SECTION 80 IA (4) (III). SINCE ASSESSEE COMPANY HAD FULFILLED ALL THE TERMS AND CONDITIONS AS LAID DOWN IN THE APPROVAL GRANTED BY THE GOVERNMENT OF INDIA FOR SETTING UP OF AN INDUSTRIAL PARK THEREFORE IT STARTED CLAIMING DEDUCTION 80 IA FROM THE ASSESSMENT YEARS 2008-09 ONWARDS AND NO SUCH DEDUCTION WAS CLAIM IN THE ASSESSMENT YEARS 2005-06 TO 2007-08. THE ASSESSMENTS U/S 143 (3) WERE COMPLETED RIGHT FROM THE ASSESSMENT YEAR 2008-09 TO 2013-14 WHEREBY ASSESSEES CLAIM FOR DEDUCTION U/S 80 IA WAS DULY ACCEPTED AFTER DETAIL SCRUTINY AND VERIFICATION BY THE RESPECTIVE ASSESSING OFFICERS. FOR THE YEAR UNDER CONSIDERATION ALSO ASSESSEE COMPANY HAS MADE A CLAIM OF DEDUCTION U/S 80 IA OF RS.161 37 41 713/- U/S 80 IA WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER VIDE ORDER DATED 3 10.08.2015 HOWEVER AFTER DISALLOWING DEDUCTION OF RS.56 420/- WHICH WAS 30% OF NET WATER CHARGES ON THE GROUND THAT SAME DID NOT RELATE TO THE BUSINESS OF THE ASSESSEE. ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.56 420/- AND UNDER BOOK PROFIT U/S 115 JB AT RS.44 35 247/-. 4. THEREAFTER THE LD. CIT IN HIS REVISIONARY JURISDICTION U/S 263 ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE 11.10.2017 MAINLY ON 3 COUNTS: - (I) THE ASSESSEE HAS SHOWN SUM OF RS.153 CRORES UNDER THE HEAD SALE OF INDUSTRIAL PARK (NET) IN THE STATEMENT OF ITS PROFIT AND LOSS AND HAS CLAIMED DEDUCTION US/ 80 IA; AND ASSESSING OFFICER HAS FAILED TO MAKE ANY ENQUIRY WITH REGARD TO SAID DEDUCTION. SINCE THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80 IA (4) (III) FOR OPERATING AND MAINTAINING THE INDUSTRIAL PARK THE ASSESSING OFFICER HAS ERRONEOUSLY ACCEPTED THE SALE OF INDUSTRIAL PARK ELIGIBLE FOR DEDUCTION U/S 80 IA. (II) THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.77 65 278/-ON WHICH ASSESSING OFFICER HAS FAILED TO MAKE ENQUIRY WITH REGARD TO THE EXPENSES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME FOR THE PURPOSE OF DISALLOWANCE U/S 14A. (III) THE ASSESSEE HAS SOLD ITS UNDERTAKING TO ITS 100% SUBSIDIARY M/S. NOIDA TOWERS PRIVATE LIMITED AND THUS PROVISIONS OF DOMESTIC TRANSFER PRICING WERE APPLICABLE WHICH HAS NOT BEEN SCRUTINIZED BY THE ASSESSING OFFICER. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE ASSESSEE FILED DETAILED SUBMISSIONS AND DOCUMENTS PLACED ON RECORD BEFORE ASSESSING OFFICER 4 ON VARIOUS DATES WHICH IS RUNNING INTO ALMOST 200 PAGES THE COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK FROM PAGES 4 TO 201 BEFORE US. HOWEVER THE LD. CIT WITHOUT GIVING ANY CREDIBLE REBUTTAL ON ASSESSEES SUBMISSIONS AND DOCUMENTS PLACED HAS MADE FOLLOWING OBSERVATIONS: - I HAVE PERUSED THE ASSESSMENT RECORDS AND SUBMISSIONS MADE BY THE ASSESSEE IN THIS CASE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.161 37 41 713/- U/S 80 IA FOR WHICH NO SUBSTANTIAL ENQUIRE/INVESTIGATION WAS CONDUCTED BY THE AO. ASSESSING OFFICER FAILED TO CONDUCT ENQUIRY/INVESTIGATION OF EXACT AMOUNT OF PROFIT EARNED ON SALE OF INDUSTRIAL PARK AND SUBSEQUENTLY ALLOWABILITY OF DEDUCTION U/S 80IA. EVERY ASSESSMENT YEAR IS A SEPARATE ASSESSMENT AND ASSESSING OFFICER EXAMINED THE CONDITION FOR ALLOWABILITY' DEDUCTION U/S 80IA INDEPENDENTLY IRRESPECTIVE OF THE FACT THAT ASSESSEE HAS PREVIOUSLY CLAIMED DEDUCTION U/S 80IA OR NOT IN THE INSTANT CASE AO HAS NOT AT ALL INITIATED THE REQUISITE ENQUIRY WITH REGARDS TO DEDUCTION CLAIMED U/S 80IA. IT WAS INCUMBENT ON THE AO TO HAVE NOTICED THE DISTINGUISHING FEATURE VIS-A-VIS THE PRECEDING YEAR TO THE EFFECT THAT WHILE DURING PRECEDING YEAR THE ASSESSEE RECEIVED ONLY RENTAL/MAINTENANCE RECEIPTS DURING THE YEAR UNDER REFERENCE THE WHOLE INFRASTRUCTURE FACILITY HAS BEEN SOLD OFF FOR A SUBSTANTIAL CONSIDERATION AND PROFIT IS CLAIMED EXEMPT. IT WAS THE DUTY OF THE AO TO MINUTELY EXAMINE THE ELIGIBILITY OF CLAIM AND TRUE ELIGIBLE QUANTUM OF EXEMPTION TO BE ALLOWED. AO COMPLETELY FAILED IN EXAMINING THIS ASPECT AND IN BRINGING ANY EVIDENCE ON RECORD IN THIS BEHALF. ASSESSEE HAS MADE SPECIFIED DOMESTIC TRANSACTION OF 5 RS.208 47 12 830/- WITH NOIDA TOWERS LTD. AND ASSESSEE HIMSELF ADMITTED THAT TRANSACTIONS WERE MADE MUCH HIGHER PRICE THEN PREVAILING CIRCLE RATE. IN THIS REGARD ASSESSING OFFICER FAILED TO CONDUCT REQUISITE ENQUIRY/INVESTIGATION TO FIND OUT THE -ARMS LENGTH PRICE OF THE TRANSACTION AND FAILED TO MAKE REFERENCE TO TPO WHICH WAS HE WAS SUPPOSED TO MAKE AS PER THE CBDT GUIDELINES INSTRUCTION NO 3/2003 AND SUBSEQUENT DIRECTIONS OF CBDT. CONDITION FOR REFERENCE TO TPO IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE BUT THE AO HAD PASSED ASSESSMENT ORDER WITHOUT REFERRING THE ISSUE OF SPECIFIED DOMESTIC TRANSACTION FOR DETERMINING ARMS LENGTH PRICE. THUS THE ACTION OF THE AO IN COMPLETING THE ASSESSMENT WITHOUT MAKING AN ENQUIRY THROUGH REFERENCE TO TPO AS PER CBDT GUIDELINES AND SUBSEQUENTLY ALLOWING DEDUCTION U/S 80IA MADE THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE AO ALSO FAILED TO EXAMINE APPLICABILITY OR OTHERWISE OF SEC. 80 IA (8). FURTHER THE AO HAD NOT CONDUCTED REQUISITE ENQUIRY/INVESTIGATION ON EXEMPT INCOME EARNED BY THE ASSESSEE AND APPLICABILITY OF THE PROVISION OF SECTION 14A OF THE IT ACT R.W.S. RULE 8D OF THE IT RULE. 6. AFTER DISCUSSING VARIOUS CASE LAWS LD. CIT HAS SET ASIDE THESE ISSUES BACK TO THE FILE OF THE ASSESSING OFFICER TO FRAME FRESH ASSESSMENT AFTER HOLDING AND OBSERVING AS UNDER :- I THUS HOLD THAT THE ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE BY THE ASSESSING OFFICER CENTRAL CIRCLE-16 NEW DELHI ON 10 08.2015 U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS THE SAID ASSESSMENT IS SET ASIDE 6 AND THE ASSESSMENT PROCEEDINGS ARE RESTORED HACK TO THE FILE OF THE ASSESSING OFFICER ON THE ISSUE OF EXAMINATION / VERIFICATION / ALLOWABILITY OF DEDUCTION U/S 80IA AND THE QUANTUM OF DEDUCTION U/S 801A IF AT ALL THE CLAIM ITSELF IS VALID AND APPLICABILITY OF SEC.L4A ON EXEMPT INCOME. THE AO IS DIRECTED TO FRAME THE ASSESSMENT AFRESH AS PER THE PROVISIONS OF THE INCOME TAX ACT AFTER DULY EXAMINING THE SPECIFIED DOMESTIC TRANSACTIONS THROUGH REFERENCE TO THE TPO AS PER BOARDS GUIDELINES AND CONSIDERING THE REPORT OF THE TPO ON RECEIPT OF ORDER U/S. 92 CA (3) OF THE IT ACT 1961 AND AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE. AO SHALL ALSO CONSIDER THE APPLICABILITY OR OTHERWISE OF SEC. 80IA (8) AS PER LAW. THE AO SHALL NOTE THAT NO OTHER ERROR/PREJUDICE TO THE INTEREST OF / THE REVENUE HAS BEEN NOTED BY THE UNDERSIGNED OR HAS BEEN CONFRONTED TO THE ASSESSEE AND THEREFORE THE/ A.O. IS DIRECTED TO RESTRICT HIMSELF WHILE FRAMING FRESH ASSESSMENT TO THE ISSUES DISCUSSED ABOVE AND CONSIDER THE SAME AS PER LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. BEFORE US LD. COUNSEL FOR THE ASSESSEE MR. R. S. SINGHVI FIRST OF ALL DREW OUR ATTENTION TO THE DETAILS OF THE ASSESSMENT HISTORY IN THE CASE OF THE ASSESSEE RIGHT FROM THE ASSESSMENT YEARS 2008-09 TO 2012-13 WHEREIN THE CLAIM OF DEDUCTION U/S 80 IA HAS BEEN ALLOWED. THE DETAILS OF SUCH ASSESSMENT GIVEN BY HIM ARE AS UNDER: - DETAIL OF PAST ASSESSMENTS OF DEDUCTION CLAIMED AND ALLOWED U/S 80IA. NO. ASST. YEAR INCOME AS PER ITR CLAIMED U/S 80 IA EXEMPTION ALLOWED U/S 80 IA MODE OF ASSESSMENT & DATE OF ORDER 1 2008-09 4 28 81 519/- 4 28 59 132/- 4 28 59 132/- U/S 143 (1) DATED 03.09.09 7 2 2009-10 9 67 17 690/- 9 67 07 521/- 9 67 07 521/- U/S 143 (3) DATED 20.12.11 3 2010-11 13 56 83 504/- 13 42 94 655/- 13 42 94 655/- U/S 143 (3) DATED 20.03.13 4 2011-12 10 96 07 770/- 10 66 71 593/- 10 66 71 593/- U/S 143 (3) DATED 20.11.13 5 2012-13 4 97 68 662/- 4 92 42 252/- 4 92 42 252/- U/S 143 (3) DATED 02.07.14 6 2013-14 1 61 37 41 713 / 161 36 85 293/ 161 36 293/- U/S 143 (3) DATED 10.08.15 8. AFTER REFERRING TO THE AFORESAID HISTORY HE SUBMITTED THAT IN ALL THE ASSESSMENT YEARS THE ASSESSEES CLAIM FOR DEDUCTION U/S 80 IA HAS BEEN SCRUTINIZED AFTER DUE VERIFICATION AND HAVE BEEN ALLOWED BY THE RESPECTIVE ASSESSING OFFICERS AND ALL THE SAID ASSESSMENTS HAD ATTAINED FINALITY. 9. THEREAFTER HE POINTED OUT THAT ONE OF THE MAIN ALLEGATIONS OF THE LD. CIT WITH RESPECT TO CLAIM OF DEDUCTION 80 IA IS THAT ASSESSING OFFICER HAS FAILED TO CONDUCT ANY ENQUIRY OR INVESTIGATION. SUCH AN OBSERVATION IS COMPLETELY DIVORCED FROM THE FACT BECAUSE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS RAISED VARIOUS QUERIES TO THE ASSESSEE SPECIFICALLY ON THE POINT OF CLAIM OF DEDUCTION U/S 80 IA TRANSFER/ SALE OF UNDERTAKING TO SUBSIDIARY AND AO HAS SPECIFICALLY EXAMINED THE TRANSFER PRICING REPORT SUBMITTED IN FORM 3 CEB. FIRST OF ALL HE DREW OUR ATTENTION TO COPY OF VARIOUS AUDIT REPORTS FILED WITH REGARD TO THE CLAIM OF DEDUCTION U/S 80 IA WHICH WERE IN THE FORM NO.10CCB AND THEN IN FORM NO. 3 CEB FOR SPECIFIED DOMESTIC TRANSACTION FORM NO. 29 B ETC. THIS HE POINTED OUT IS EVIDENT FROM LETTER DATED 22.09.2014 FILED BEFORE AO. 8 THEREAFTER HE ALSO DREW OUR ATTENTION TO REPLY DATED 23.07.2015 BEFORE AO WHEREIN THE ASSESSEE HAS GIVEN DETAILED JUSTIFICATION FOR CLAIM OF DEDUCTION U/S 80 IA WHICH WAS GIVEN IN THE FORM DETAILED NOTE THE COPY OF WHICH IS APPEARING AT PAGES 291 TO 318 OF THE PAPER BOOK. THEREAFTER VIDE LETTER DATED 29.07.2015 THE ASSESSEE HAD ALSO FILED COPY OF BUSINESS TRANSFER AGREEMENT FOR SALE OF THE UNDERTAKING ON SLUM SALE BASIS TO ITS 100% SUBSIDIARY M/S NOIDA TOWER PRIVATE LIMITED AND HAD ALSO FILED RELATED PART TRANSACTION (RPT) AS MENTIONED IN FORM NO.10 CCB. IT HAS ALSO FILED TRANSFER PRICING REPORT IN FORM NO. 3 CEB WHEREIN THE ENTIRE DETAIL OF DOMESTIC TRANSFER PRICING WITH THE RELATED PARTY WAS SHOWN TO JUSTIFY THE ALP OF THE TRANSACTION. FOR ASCERTAINING THE CORRECT MARKET VALUE OF THE PROPERTY OF THE UNDERTAKING WHICH WAS SOLD TO THE SUBSIDIARY ASSESSEE HAD ALSO FILED DETAILED VALUATION REPORT FROM THE GOVT. APPROVED VALUER. IT WAS AFTER EXAMINING THE ENTIRE DOCUMENTS WHICH WAS SUBMITTED IN RESPONSE TO VARIOUS QUERIES RAISED BY THE LD. ASSESSING OFFICER FROM TIME TO TIME SPECIFICALLY WITH REGARD TO THE CLAIM OF DEDUCTION U/S 80IA AO HAS ALLOWED MAJOR AMOUNT. IN VIEW OF THESE FACTS AND ASSESSMENT RECORDS THAT VARIOUS QUERIES WERE RAISED BY THE ASSESSING OFFICER ON THIS POINT AND HAD EXAMINED ALL THE DOCUMENTS FILED BEFORE HIM GOES TO SHOW THAT THE ASSESSING OFFICER HAS NOT ONLY CARRIED OUT THOROUGH ENQUIRY BUT HAS ALSO APPLIED HIS MIND BEFORE ALLOWING THE SUBSTANTIAL AMOUNT OF THE CLAIM. THUS IT CANNOT BE HELD THAT NO ENQUIRY AS WAS REQUIRED BY HIM HAS BEEN CONDUCTED BY HIM OR THERE IS NO APPLICATION OF MIND. 10. ON THE ISSUE OF CLAIM OF DEDUCTION U/S 14A LD. COUNSEL SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE 9 ASSESSEE HAS FILED THE DETAILS OF INVESTMENTS IN MUTUAL FUNDS AND ALSO DEMONSTRATED BEFORE THE ASSESSING OFFICER THAT MONEY RECEIVED FROM SALE CONSIDERATION FROM SALE OF INDUSTRIAL PARK WERE INVESTED IN MUTUAL FUNDS WHICH WAS EVIDENT FROM BANK STATEMENTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. ASSESSING OFFICER HAD EVEN DISCUSSED THE MATTER WITH THE VARIOUS REPRESENTATIVES OF THE ASSESSEE REGARDING THE RELATION OF EXPENDITURE INCURRED WITH REFERENCE TO THE INVESTMENT. IT WAS DULY CLARIFIED BEFORE THE ASSESSING OFFICER THAT INTEREST ON BANK LOAN AMOUNTING TO RS.1 79 46 655/- WAS ALREADY PAID BACK BEFORE MAKING THE INVESTMENTS AS THE BANK LOAN WAS FULLY PAID FROM THE SALE CONSIDERATION OF INDUSTRIAL PARK AND ONLY THE BALANCE AMOUNT WAS INVESTED IN MUTUAL FUNDS THEREFORE THERE WAS NO QUESTION OF DISALLOWANCE U/S 14A. IN SUPPORT SANCTION LETTER OF THE BANK LOAN ALONGWITH THE BANK LOAN STATEMENT AND DETAILS OF FINANCIAL EXPENSES WERE FILED BEFORE THE ASSESSING OFFICER. FURTHER MUTUAL FUNDS WERE INVESTED THROUGH CONSULTANT BROKER AND NO DIRECT OR INDIRECT EXPENDITURE WAS INCURRED ON THE DIVIDEND INCOME ON SUCH INVESTMENTS. THE ASSESSING OFFICER AFTER EXAMINING ALL THESE FACTS AND THE REQUISITE DETAILS AND DOCUMENTS PLACED ON RECORD HAS ACCEPTED THE ASSESSEES CONTENTION; AND THEREFORE TO SAY THAT NO ENQUIRY WAS MADE BY ASSESSING OFFICER BEFORE ACCEPTING THE ASSESSEES CLAIM IS BASELESS AND IS NOT MAINTAINABLE. IN ANY CASE EVEN IF ANY SUCH ADDITION WAS TO BE MADE THEN AFFECT WOULD HAVE BEEN NIL BECAUSE THE TAX EFFECT WOULD STILL BE NIL. ALL THE QUERIES AND THE LETTERS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE POINTED OUT BEFORE US. 11. MR. SINGHIVI ON THE BASIS OF MATERIAL AVAILABLE FROM THE ASSESSMENT RECORD FURTHER SUBMITTED THAT IF THE ASSESSING OFFICER HAD 10 CARRIED OUT DETAILED EXAMINATION AND VERIFICATION AND AFTER DUE DILIGENCE HAS PASSED THE ASSESSMENT ORDER THEN SAME CANNOT BE HELD TO BE ERRONEOUS ON THE GROUND OF LACK OF ANY ENQUIRY. EVEN THE LD. CIT HAS NOT POINTED OUT AS TO WHAT FURTHER ENQUIRY WAS REQUIRED TO BE DONE BY THE ASSESSING OFFICER; AND EVEN IF THERE WAS ANY ENQUIRY WHICH WAS LACKING THEN SAME SHOULD HAVE BEEN CONDUCTED BY CIT HIMSELF BEFORE COMING TO CONCLUSION THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO REVENUE. IN SUPPORT OF HIS CONTENTION THAT ONCE IN THE EARLIER YEAR CLAIM U/S 80 IA HAS BEEN ALLOWED THEN IN SUBSEQUENT YEAR IT CANNOT BE DISALLOWED HE STRONGLY RELIED THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. JYOTI FOUNDATION WAS REPORTED IN (2013) 357 ITR 388 . HE ALSO STRONGLY RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT PCIT VS. DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED ITA NO.705/DEL/2017 ORDER DATED 05.09.2017. HE FURTHER SUBMITTED THAT IF ASSESSING OFFICER AFTER MAKING PROPER AND DETAILED ENQUIRY HAS TAKEN VIEW THEN LD. COMMISSIONER CANNOT REVISED THE ASSESSMENT ORDER SO AS TO CONDUCT ENQUIRY ONCE AGAIN AND IN SUPPORT HE RELIED ON UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NIRAV MODI (2017) 390 ITR 292 . 12. ON THE LD. CIT OBSERVATION THAT ASSESSEE CLAIM FOR DEDUCTION U/S 80 IA 4 (III) CANNOT BE ALLOWED ON SALE OF ENTIRE UNDERTAKING WHICH HAS BEEN CLAIMED AS EXEMPTION HE SUBMITTED THAT FIRST OF ALL THERE IS NO BAR IN CLAIMING DEDUCTION ON THE PROFIT FROM THE SALE OF UNDERTAKING ELIGIBLE U/S 80 IA IN VIEW OF PROVISO BELOW CLAUSE (III) OF SUB SECTION (4) OF SECTION 80 IA; AND IN ANY CASE THIS ISSUE NOW STANDS SQUARELY COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PCIT VS. NILA BAURAT ENGINEERING LIMITED (2018) 256 11 TAXMAN 291 WHEREIN THE JUDGMENT OF HONBLE GUJARAT HIGH COURT (399 ITR 242) HAS BEEN CONFIRMED. IN THIS CASE EXACTLY SIMILAR ISSUES WERE INVOLVED AND IT WAS HELD BY THE HONBLE HIGH COURT THAT DEVELOPER WOULD NOT BE DENIED OF DEDUCTION U/S 80 IA ON THE PROFIT EARNED BY A FORM ACTIVITY DEVELOPING THE INFRASTRUCTURE FACILITY AND PROVISO DOES NOT DEPRIVE DEVELOPER EVEN AFTER THE FACILITY IS TRANSFERRED TO SOME OTHER. THUS ON THIS POINT ALSO THE VIEW TAKEN BY LD. CIT IS UNSUSTAINABLE. 13. COMING TO THE ISSUE OF REFERENCE TO THE TPO FOR SPECIFIED DOMESTIC TRANSACTION IN LINE OF CBDT GUIDELINES WHICH HAS BEEN REFERRED TO BY THE LD. CIT HE SUBMITTED THAT FIRST OF ALL THE CBDT LAID DOWN THE GUIDELINE FOR REFERENCE BY THE ASSESSING OFFICER TO THE TPO ONLY WHEN 3 CONDITIONS ARE NOT FULFILLED VIZ. I) TAXPAYER HAS NOT FILED ACCOUNTANTS REPORT U/S 92 E; II) TAXPAYER HAS NOT DECLARED OR MORE THAN INTERNATIONAL OR SPECIFIED DOMESTIC TRANSACTION; III) OR IN THE SAID REPORT WHERE THE TAXPAYER HAS DECLARED SUCH TRANSACTION BUT ACCOUNTANT HAS MADE CERTAIN UNQUALIFIED REMARKS THAT SUCH TRANSACTION DID NOT IMPACT THE INCOME OF THE TAXPAYER. HERE NONE OF THE CONDITIONS MENTIONED IN THE SAID GUIDELINE FOR MANDATORY REFERENCE BY THE ASSESSING OFFICER WHICH SHOULD HAVE BEEN MADE TO THE TPO HAS BEEN VIOLATED. IN FACT THE ASSESSING OFFICER HAS HIMSELF EXAMINED THE ENTIRE REPORT AND TRANSFER PRICING DOCUMENTATION AND HAVING SATISFIED WITH SUCH DOCUMENTS HE HAS ACCEPTED THE ALP OF THE TRANSACTION AND HENCE THERE WAS NO REQUIREMENT FOR REFERRING IT TO THE TPO. THUS NO ERROR HAS BEEN COMMITTED BY THE ASSESSING OFFICER FOR NOT MAKING THE REFERENCE TO THE TPO. LD. COUNSEL HAS ALSO REFERRED TO VARIOUS OTHER JUDGMENTS ON THE SCOPE OF REVISION U/S 263 AND WHAT IS THE LEGAL REQUIREMENT UNDER WHICH UNDER WHICH LD. CIT CAN SET ASIDE 12 / CANCEL THE ASSESSMENT ORDER. ACCORDINGLY HE SUBMITTED THAT THE IMPUGNED ORDER DESERVES TO BE QUASHED. 14. ON THE OTHER HAND THE LD. CIT DR HAS FILED HER WRITTEN SUBMISSIONS WHEREIN VARIOUS JUDGMENTS HAVE BEEN QUOTED IN SUPPORT OF THE FINDINGS GIVEN IN THE IMPUGNED ORDER OF LD. CIT TO CONTEND THAT ORDER IS NOT ONLY CORRECT IN LAW BUT ALSO IN FACTS. IN HER WRITTEN SUBMISSION SHE HAS QUOTED EXTENSIVELY FROM THE OBSERVATION OF LD. CIT WHICH HAVE BEEN QUOTED ABOVE BY US ALSO; AND FURTHER SUBMITTED THAT LD. CIT HAS MERELY DIRECTED TO FRAME FRESH ASSESSMENT ON THE SPECIFIC DIRECTIONS GIVEN BY HIM. THE JUDGMENTS RELIED BY HER WERE AS UNDER: - I. INCOME TAX OFFICER VS. DG HOUSING PROJECTS LTD. (DELHI HIGH COURT). II. COMMISSIONER OF INCOME-TAX VS. JAWAHAR BHATTACHAJEE (GUWAHATI) III. COMMISSIONER OF INCOME- TAX VS. MALABAR INDUSTRIAL CO. LTD. (SUPREME COURT OF INDIA) IV. COMMISSIONER OF INCOME-TAX VS. NAGESH KNITWEARS (P.) LTD. (HIGH COURT OF DELHI). V. ADDL. COMMISSIONER OF INCOME-TAX VS. GEE VEE ENTERPRISES (HIGH COURT OF DELHI). 15. AFTER REFERRING TO VARIOUS OBSERVATIONS OF THE LD CIT LD. CIT DR ALSO STRONGLY RELIED UPON THE NEWLY INSERTED EXPLANATION 2 TO SECTION 263 WHICH ENVISAGES THAT THE ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE IF THE ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. HERE IN THIS CASE THE ASSESSING OFFICER SHOULD HAVE REFERRED THE ENTIRE 13 SPECIFIED DOMESTIC TRANSACTION TO THE TPO SO AS TO EXAMINE THE CORRECT ARMS LENGTH PRICE OF THE SAME. THUS NON-REFERENCE OF SPECIFIED DOMESTIC TRANSACTION BY THE ASSESSING OFFICER TO THE TPO SHOWS THAT PROPER ENQUIRY AS REQUIRED HAS NOT BEEN DONE. SHE THUS STRONGLY RELIED ON THE ORDER OF THE LD. CIT. 16. AFTER THE HEARING WAS CONCLUDED AND AT THE STAGE OF DRAFT ORDER IT WAS FELT BY US THAT CERTAIN CLARIFICATION IS REQUIRED WITH RESPECT TO CBDT GUIDELINES FOR REFERRING THE MATTER TO THE TPOS IN CASE OF SPECIFIED DOMESTIC TRANSACTION. ACCORDINGLY THE CASE WAS RE- FIXED FOR HEARING. 17. IN THE SECOND ROUND OF HEARING LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON THE ISSUE OF TRANSFER PRICING OF SPECIFIED DOMESTIC TRANSACTION THE ASSESSEE HAD DULY DISCLOSED THE TRANSACTION FALLING UNDER SECTION 92BA AND IT WAS DULY REPORTED IN FORM NO.3CEB FURNISHED BEFORE THE ASSESSING OFFICER ALONG WITH VALUERS REPORT TO SUBSTANTIATE THE ARMS LENGTH PRICE OF THE SALE. THE ASSESSING OFFICER HAS DULY EXAMINED THE ISSUE OF DOMESTIC TRANSFER PRICING AND ALSO THE VALUERS REPORT VALUING THE FAIR MARKET PRICE OF THE SALE OF INDUSTRIAL PARK AND THEREAFTER HE HAS ACCEPTED THE SAME. HE POINTED OUT THAT EARLIER THERE WAS CBDT INSTRUCTION NO.3/2003 WHEREIN THERE WAS MANDATORY INSTRUCTION FOR ASSESSING OFFICER TO MAKE A REFERENCE TO THE TPO ONLY FOR THE INTERNATIONAL TRANSACTION U/S 92B. FURTHER HERE IN THIS CASE THE SELECTION OF SCRUTINY FOR ASSESSMENT WAS NOT ON THE BASIS OF ANY TP RISK PARAMETER. LD. CIT IN PARAGRAPH 4 OF HIS ORDER HAS REFERRED TO CBDT INSTRUCTION NO .3/2003 TO HOLD THAT ASSESSING OFFICER SHOULD HAVE MADE A REFERENCE TO THE TPO AS PER THE SAID GUIDELINES AND BY NOT FOLLOWING THE SAME HE HAS TERMED THE 14 ASSESSMENT ORDER AS ERRONEOUS. HE SUBMITTED THAT FIRST OF ALL FOLLOWING FACTS NEEDS TO BE CLARIFIED IN THE CASE OF THE ASSESSEE: - FIRSTLY THE APPELLANT COMPANY ONLY ENTERED INTO SPECIFIED DOMESTIC TRANSACTION DURING THE YEAR UNDER CONSIDERATION AS REFERRED TO U/S 92BA OF THE ACT. SECONDLY THE SPECIFIED DOMESTIC TRANSACTION OF SALE OF UNDERTAKING WAS DULY REPORTED IN FORM 3CEB OF THE ACT. LASTLY THE CASE WAS SELECTED FOR SCRUTINY U/S 143(3) ON NON-TP PARAMETER. THUS THE OBSERVATION OF THE LD. CIT IS MISCONCEIVED AND ERRONEOUS BECAUSE CBDT INSTRUCTION NO.3/2003 WAS ONLY APPLICABLE TO INTERNATIONAL TRANSACTION U/S.92B AND NOT TO SPECIFIED DOMESTIC TRANSACTION U/S.92BA. IN ANY CASE THE ASSESSMENT ORDER WAS PASSED ON 10.08.2015 AND AS ON DATE THAT THERE WAS NO CBDT INSTRUCTION OR GUIDELINES FOR REFERENCE FOR SPECIFIED DOMESTIC TRANSACTION TO THE TPO; HENCE THERE CANNOT BE ANY ALLEGATION OF ANY NON-COMPLIANCE OF CBDT INSTRUCTION BY THE ASSESSING OFFICER. HE FURTHER BROUGHT TO OUR NOTICE THAT CBDT HAD ISSUED ANOTHER INSTRUCTION NO.15/2015 DATED 16.10.2015 WHICH SUPERSEDED THE OLD INSTRUCTION NO.3/2003 WHICH TOO WAS APPLICABLE TO INTERNATIONAL TRANSACTION U/S.92B ONLY AND NOT TO SPECIFIED DOMESTIC TRANSACTION U/S.92BA. IN THIS INSTRUCTION CBDT HAS EXPLICITLY RECOGNIZED THE ABSENCE OF ANY INSTRUCTION WITH REFERENCE TO DOMESTIC TRANSACTION AS DEFINED U/S.92BA. FURTHER HE DREW OUR ATTENTION TO THE RELEVANT GUIDELINES OF THE CBDT IN THE INSTRUCTION NO.15/2015 WHEREIN CBDT HAS DIRECTED THAT IN CASE OF SPECIFIED DOMESTIC TRANSACTION U/S.92BA WHERE THE CASE HAS BEEN SELECTED ON NON TP PARAMETER AND THE DOMESTIC TRANSACTION HAS BEEN REPORTED IN 15 FORM NO.3CEB THE ASSESSING OFFICER IS NOT REQUIRED TO REFER THE ISSUE TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE. HENCE IN THESE CIRCUMSTANCES IT IS EVIDENT THAT AT THE TIME OF PASSING OF THE ASSESSMENT ORDER THERE WAS NO CBDT INSTRUCTION WITH REFERENCE TO SPECIFIED DOMESTIC TRANSACTION U/S.92BA AND THEREFORE ASSESSING OFFICER WAS NOT OBLIGED TO REFER THE MATTER TO THE TPO. IN ANY CASE WITHOUT PREJUDICE HE SUBMITTED THAT EVEN UNDER CBDT INSTRUCTION NO.3/2016 DATED 10 TH MARCH 2016 ALSO THE CONDITIONS PROVIDED FOR MAKING A REFERENCE TO THE TPO WAS NOT SATISFIED BECAUSE HERE IN THIS CASE ASSESSEE HAS FILED AN ACCOUNTANTS REPORT AND HAS DECLARED ALL THE TRANSACTION UNDERTAKEN AND THEREFORE ONCE ALL THESE TRANSACTIONS HAVE BEEN REPORTED ALONG WITH TRANSFER PRICING DOCUMENT THEN IT IS NOT NECESSARY THAT ASSESSING OFFICER SHOULD HAVE COMPULSORILY MADE REFERENCE TO THE TPO. THUS THERE HAS BEEN NO VIOLATION OF WHATSOEVER OF ANY INSTRUCTION OF CBDT AND ACCORDINGLY THE OBSERVATION OF THE LD. CIT IS WHOLLY ERRONEOUS. 18. IN COUNTER SUBMISSION LD. CIT-DR SUBMITTED THAT THE ARGUMENTS OF THE LEARNED COUNSEL CANNOT BE ACCEPTED FOR THE REASON THAT: RELIANCE IS BEING PLACED BY THE COUNSEL ON CIRCULAR OF 2003 THAT PERTAINED TO INTERNATIONAL TRANSACTIONS FOR THE SIMPLE REASON THAT AT THAT POINT IN THE TIME THE PROVISIONS OF SECTION 92CA (REFERENCE TO TPO) REFERRED TO ONLY AN INTERNATIONAL TRANSACTION. THE REFERENCE TO 'SPECIFIED DOMESTIC TRANSACTION' WAS INSERTED W.E.F. 01.04.2012 BY FINANCE BILL 2012. SO NATURALLY THIS CIRCULAR DOES NOT MAKE A REFERENCE TO DOMESTIC TRANSACTIONS. 16 TRANSFER PRICING REGULATIONS HAVE BEEN EXTENDED VIDE FINANCE ACT 2012 TO INCLUDE TRANSACTIONS ENTERED INTO WITH DOMESTIC RELATED PARTIES OR BY AN UNDERTAKING WITH OTHER UNDERTAKINGS OF THE SAME ENTITY FOR THE PURPOSES OF SECTION 40A CHAPTER VI-A AND SECTION 10AA. DOMESTIC TRANSFER PRICING PROVISIONS ARE APPLICABLE FROM ASSESSMENT YEAR 2013-14 ONWARDS. FURTHER INSTRUCTION NO.3/2016 IS AN AMENDMENT OF EARLIER CIRCULARS; THEREFORE THIS SHOULD BE READ IN THE EARLIER CIRCULAR. 19. DRAWING OUR ATTENTION TO THE CIRCULAR NO.3/2016 SHE SUBMITTED THAT FOR PROPER ADMINISTRATION OF TRANSFER PRICING ISSUES THE BOARD HAS DECIDED THAT THE ASSESSING OFFICER SHALL MAKE A REFERENCE TO THE TPO UNDER THE CIRCUMSTANCES LAID DOWN IN THE INSTRUCTION. THUS THE ASSESSING OFFICER HAS FAILED TO FOLLOW SUCH A MANDATE. IT IS AN UNDISPUTED FACT THAT THE TRANSACTION OF SALE OF INDUSTRIAL PARK WAS IN THE NATURE OF SPECIFIED DOMESTIC TRANSACTION DEFINED IN SECTION 92BA; AND AS PER THE CIRCULAR NO.3/2016 FOLLOWING CASES HAVE TO BE MANDATORY REFERRED TO THE TPO: - ALL CASES SELECTED FOR SCRUTINY EITHER UNDER THE COMPUTER ASSISTED SCRUTINY / SELECTION [CASS] SYSTEM OR UNDER THE COMPULSORY MANUAL SELECTION SYSTEM (IN ACCORDANCE WITH THE CBDT'S ANNUAL INSTRUCTIONS IN THIS REGARD -FOR EXAMPLE INSTRUCTION NO. 6/2014 FOR SELECTION IN F.Y 2014-15 AND INSTRUCTION NO. 8/2015 FOR SELECTION IN F.Y 2015- 16) ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS [IN RESPECT OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH] IF THE REASON OR ONE OF THE REASONS FOR SELECTION OF A CASE FOR SCRUTINY IS A TP RISK PARAMETER THEN THE CASE HAS TO BE MANDATORILY REFERRED 17 TO THE TPO BY THE AO AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT. WHERE THE TAXPAYER HAS NOT FILED THE ACCOUNTANT'S REPORT UNDER SECTION 92E OF THE ACT BUT THE INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS UNDERTAKEN BY IT COME TO THE NOTICE OF THE AO; WHERE THE TAXPAYER HAS NOT DECLARED ONE OR MORE INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION IN THE ACCOUNTANT'S REPORT FILED UNDER SECTION 92E OF THE ACT AND THE SAID TRANSACTION OR TRANSACTIONS COME TO THE NOTICE OF THE AO; AND WHERE THE TAXPAYER HAS DECLARED THE INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS IN THE ACCOUNTANT'S REPORT FILED UNDER SECTION 92E OF THE ACT BUT HAS MADE CERTAIN QUALIFYING REMARKS TO THE EFFECT THAT THE SAID TRANSACTIONS ARE NOT INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR THEY DO NOT IMPACT THE INCOME OF THE TAXPAYER. A CASE INVOLVING A TRANSFER PRICING ADJUSTMENT IN AN EARLIER ASSESSMENT YEAR THAT HAS BEEN FULLY OR PARTIALLY SET-ASIDE BY THE IT AT HIGH COURT OR SUPREME COURT ON THE ISSUE OF THE SAID ADJUSTMENT SHALL INVARIABLY BE REFERRED TO THE TPO FOR DETERMINATION OF THE ALP. AN IMPORTANT CAVEAT 3.7 FOR ADMINISTERING THE TRANSFER PRICING REGIME IN AN EFFICIENT MANNER IT IS CLARIFIED THAT THOUGH AO HAS THE POWER UNDER SECTION 92C TO DETERMINE THE ALP OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS DETERMINATION OF ALP SHOULD NOT BE CARRIED OUT AT ALL BY THE AO IN A CASE WHERE REFERENCE IS NOT MADE TO THE TPO. HOWEVER IN SUCH CASES THE AO MUST RECORD IN THE BODY OF THE ASSESSMENT ORDER THAT DUE TO THE BOARD'S INSTRUCTION ON THIS MATTER THE TRANSFER PRICING ISSUE HAS NOT BEEN EXAMINED AT ALL. 18 20. THUS IT IS CLEAR THAT ASSESSING OFFICER HAS NOT GONE THROUGH THIS STEP LAID DOWN BY THE CBDT CIRCULAR THEREFORE LD. PR.CIT HAS RIGHTLY HELD THAT ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SHE FURTHER SUBMITTED THAT OTHERWISE ALSO ASSESSING OFFICER IS NOT AN EXPERT OF DETERMINING THE ARMS LENGTH PRICE THEREFORE REFERENCE TO THE TPO SHOULD HAVE BEEN MADE; AND HENCE ASSESSING OFFICER HAS FAILED TO DISCHARGE HIS DUTY FOR MAKING A REFERENCE. THUS CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE THERE IS NO HARM TO THE ASSESSEE IF ASSESSING OFFICER REFERS THE MATTER TO THE TPO FOR DETERMINATION OF ARMS LENGTH PRICE OF THE SPECIFIED DOMESTIC TRANSACTION. DECISION 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER AND MATERIALS REFERRED TO BEFORE US AT THE TIME OF HEARING. IT IS TRITE POSITION OF LAW THAT LD. PCIT OR CIT MAY ASSUME REVISIONARY JURISDICTION U/S 263 ONLY IF HE CONSIDERS THAT ANY ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE . BOTH THE CONDITIONS SHOULD BE FULFILLED SIMULTANEOUSLY AND ARE NOT MUTUALLY EXCLUSIVELY TO EACH OTHER THAT IS THE ASSESSMENT ORDER THOUGH MAY BE PREJUDICIAL TO THE INTEREST OF REVENUE BUT IS NOT ERRONEOUS OR VICE-A- VERSA THEN CIT OR PCIT CANNOT CANCEL THE ASSESSMENT. ANOTHER SETTLED POSITION OF LAW IS THAT IF THE ASSESSING OFFICER AFTER DUE DILIGENCE AND ENQUIRY HAS REACHED TO A CONCLUSION AND HAS FORMED A PARTICULAR OPINION THEN ALSO LD. PCIT OR CIT CANNOT EXERCISE POWERS 19 U/S 263 TO FORM A DIFFERENT OPINION OR TAKE A DIVERGENT VIEW. THESE PRINCIPLES ARE WELL SETTLED BY THE JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LIMITED VS. CIT (2000) 243 ITR 83 ; AND CIT VS. MAX INDIA LIMITED (2007) 295 ITR 282 AND REITERATED BY VARIOUS COURTS. NOW IN THE LIGHT OF THE SETTLED PRINCIPLES WE HAVE TO SEE WHETHER THE LD. CIT WAS CORRECT IN LAW AND IN FACTS IN CANCELLING THE ASSESSMENT ORDER ON THE POINTS RAISED BY HIM IN IMPUGNED ORDER. AS DISCUSSED ABOVE THE ISSUES RAISED BY THE LD. CIT FOR CANCELING THE ASSESSMENT ORDER AND PASSING A FRESH ASSESSMENT ARE AS UNDER: - I. THE ASSESSING OFFICER HAS NOT CONDUCTED SUBSTANTIAL ENQUIRY OR INVESTIGATION WHILE ALLOWING THE CLAIM OF DEDUCTION OF RS.161 37 41 713/- U/S 80 IA AS HE HAS FAILED TO CONDUCT ENQUIRY OF EXACT AMOUNT OF PROFIT EARNED ON SALE OF INDUSTRIAL PARK AND SUBSEQUENTLY ALLOWABILITY OF DEDUCTION U/S 80 IA. II. ASSESSING OFFICER HAS FAILED TO EXAMINE THAT ASSESSEE HAS SHOWN SPECIFIED DOMESTIC TRANSACTION OF RS. 208 47 12 830/- WITH ITS SUBSIDIARY NOIDA TOWERS LIMITED AND THE TRANSACTION WAS AT HIGHER PRICE THAN THE PREVAILING CIRCLE RATE. III. ASSESSING OFFICER HAS FAILED TO CONDUCT REQUISITE ENQUIRY / INVESTIGATION TO DETERMINE THE ARMS LENGTH PRICE OF THE TRANSACTION BY NOT MAKING REFERENCE TO THE TPO WHICH HE WAS SUPPOSED TO MAKE AS PER THE CBDT GUIDELINES. IV. ASSESSING OFFICER HAS ALSO FILED TO EXAMINE APPLICABILITY OR OTHERWISE OF SECTION 80 IA (8). 20 V. ASSESSING OFFICER HAS NOT CONDUCTED REQUISITE ENQUIRY / INVESTIGATION ON EXEMPT INCOME EARNED BY ASSESSEE AND APPLICABILITY PROVISION OF SECTION 14A R/W RULE 8D. 22. NOW WE HAVE TO EXAMINE WHETHER ON THE FACTS AND MATERIAL AVAILABLE ON RECORD THE ASSESSING OFFICER HAS CONDUCTED REQUISITE ENQUIRY/ INVESTIGATION ON THE POINTS RAISED IN THE IMPUGNED ORDER OR NOT. WE HAVE ALREADY DISCUSSED THE FACTS AND BACKGROUND OF THE CASE HOWEVER IN A SUCCINCT MANNER WE WOULD LIKE TO BRIEFLY REITERATE THE RELEVANT FACTS. THE ASSESSEE HAD CONSTRUCTED AND DEVELOPED AN IT PARK AT NOIDA FOR WHICH IT WAS DULY GRANTED EXEMPTIONS IN TERMS OF SECTION 80 IA WITH MINISTRY OF COMMERCE AND INDUSTRY; AND UNDER THE INDUSTRIAL PARK SCHEME 2002 IT WAS DULY NOTIFIED THAT INDUSTRIAL PARK DEVELOPED BY THE ASSESSEE WAS ELIGIBLE 100% EXEMPTION U/S 80 IA. IT WAS NEVER IN DISPUTE ANY OF THE MAJOR CONDITIONS LAID DOWN UNDER THE NOTIFICATION ISSUED BY THE GOVERNMENT OF INDIA WAS EVER VIOLATED. SUCH PROPOSED CONDITIONS AND ACTUAL FULFILLMENT BY THE ASSESSEE AS BORNE OUT FROM THE SUBMISSIONS MADE BEFORE AO AND CIT WERE AS UNDER: - I. PROPOSED CONDITION: 90% OF THE ALLOCABLE AREA IS EARMARKED FOR INDUSTRIAL USE. THE PROPOSED INDUSTRIAL ACTIVITIES WERE DEFINED IN THE NOTIFICATION ITSELF. ACTUAL: 90.01% OF THE TOTAL AREA WAS FOR ALLOWED FOR INDUSTRIAL USE. II. PROPOSED CONDITION: INVESTMENT REQUIRED WAS MINIMUM OF RS.43 CRORES. ACTUAL: RS. 46.13 CRORES WERE INVESTED BY THE ASSESSEE COMPANY WHICH IS EVIDENT FROM THE BALANCE SHEET. 21 III. PROPOSED CONDITION: COMMENCEMENT OF IT PARK SHALL BE MADE ON OR BEFORE APRIL 2005. ACTUAL: IT WAS MUCH BEFORE APRIL 2005. IV. PROPOSED CONDITION: UNDER TAKING SHALL PROVIDE ALL INFRASTRUCTURE FACILITY FOR COMMON USE SUCH AS ROADS WATER SUPPLY AND SEWERAGE GENERATION AND DISTRIBUTION OF POWER AIR CONDITIONING ETC. ACTUAL: THE COMPANY WAS PROVIDING ALL THESE FACILITIES AT THE IT PARK WHICH ARE VERIFIABLE FROM THE BALANCE SHEET & PROFIT & LOSS ACCOUNT OF THE COMPANY. V. PROPOSED CONDITION: MINIMUM NUMBER OF INDUSTRIAL UNITS SHALL NOT BE LESS THAN FOUR. ACTUAL: TEN 23. IT IS FURTHER NOT IN DISPUTE THAT THE INITIAL ASSESSMENT YEAR FOR THE CLAIM MADE U/S 80IA WAS A.Y. 2008-09 AND UP TILL A.Y.2013-14 ASSESSEE WAS NOT ONLY FOUND TO BE ELIGIBLE FOR DEDUCTION U/S 80 IA BUT ALSO EXEMPTION WAS GIVEN BY THE RESPECTIVE ASSESSING OFFICERS MOSTLY UNDER SCRUTINY U/S 143 (3) AFTER DETAILED EXAMINATION AND VERIFICATION. THE STATUS OF ALL THE ASSESSMENT HAS ALREADY BEEN INCORPORATED ABOVE. FROM THE PERUSAL OF THE RECORDS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS SEEN THAT LD. ASSESSING OFFICER FROM TIME TO TIME HAS RAISED SEVERAL QUERIES TO EXAMINE THE CLAIM/ DEDUCTION U/S 80 IA WHICH IS EVIDENT FROM THE FACT THAT ASSESSEE HAD PLACED COPY OF AUDIT REPORT IN FORM NO. 10 CCB IN SUPPORT OF DEDUCTION U/S 80 IA ALONGWITH PAST ASSESSMENT HISTORY AND ORDERS FOR THE EARLIER ASSESSMENT YEARS WHEREIN THIS ISSUE HAS BEEN DISCUSSED AND ALLOWED BY THE RESPECTIVE ASSESSING OFFICERS. A 22 DETAILED JUSTIFICATION FOR DEDUCTION CLAIMED U/S 80 IA WHICH GIVES THE ENTIRE HISTORY AND BACKGROUND ALONGWITH ALL THE NOTIFICATION AND APPROVAL GRANTED BY VARIOUS GOVERNMENTAL AUTHORITIES. ALL THESE DOCUMENTS WERE PLACED BEFORE THE ASSESSING OFFICER IN RESPONSE TO QUERIES RAISED BY HIM. WITH REGARD TO SALE OF UNDERTAKING TO SUBSIDIARY OF THE ASSESSEE NAMELY M/S. NOIDA TOWERS PRIVATE LIMITED ASSESSEE HAS FILED THE BUSINESS TRANSFER AGREEMENT ENTERED FOR SALE OF UNDERTAKING DATED 12.03.2012 ALONGWITH THE VALUATION REPORT OF THE GOVT. APPROVED VALUER DATED 10.03.2012 WHEREIN THE VALUATION OF THE PROPERTY HAS BEEN DONE AS PER THE PREVAILING MARKET RATE AND THE VALUE OF THE ENTIRE PROPERTY WAS DETERMINED AT RS. 205 CRORES AND THE SAID VALUATION REPORT CONTAINS DRAWINGS PICTURES COMPARATIVE SALE INSTANCES AND VARIOUS SCHEDULES TO ARRIVE AT THE MARKET RATE. NOT ONLY THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS ALSO FILED DETAILED REPORT OF THE ACCOUNTANT REGARDING THE RELATED PARTY TRANSACTION UNDERTAKEN BY THE ASSESSEE WITH ITS SUBSIDIARY IN FORM NO. 3 CEB ALONGWITH THE TRANSFER PRICING DOCUMENT WHEREIN THE ENTIRE DETAILS OF THE SPECIFIED DOMESTIC TRANSACTION AND THE MANNER IN WHICH ARMS LENGTH PRICE HAS BEEN DETERMINED HAS BEEN PROVIDED. THUS ENTIRE TRANSFER PRICING DOCUMENT WAS FILED TO JUSTIFY ARMS LENGTH PRICE OF THE SALE OF INDUSTRIAL PARK ALONGWITH APPROVED VALUERS REPORT DETERMINING THE MARKET VALUE OF THE PROPERTY UNDER TRANSFER. AFTER CALLING FOR ALL THESE EVIDENCES AND EXAMINING THE ENTIRE FACTS BROUGHT ON RECORD THE LD. ASSESSING OFFICER HAS EXAMINED THE ALLOWABILITY OF CLAIM U/S 80 IA AND IN FACT HAS MADE PART DISALLOWANCE ON SUCH DEDUCTION. HENCE IT CANNOT BE HELD THAT ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY OR INVESTIGATED THE ISSUE WHICH HE WAS REQUIRED TO DO SO BEFORE ALLOWING THE CLAIM OF DEDUCTION U/S 80 IA OR 23 HAS ALLOWED WITHOUT EXAMINING THE ASSESSEES TRANSACTION WITH ITS SUBSIDIARY NOIDA TOWERS PRIVATE LIMITED. 24. ONE OF THE KEY ALLEGATIONS OF THE LD. CIT IS THAT ASSESSING OFFICER SHOULD HAVE MADE A REFERENCE TO THE TPO AS PER THE CBDT INSTRUCTION NO. 3/2003. FIRST OF ALL IT WOULD BE RELEVANT TO SEE WHETHER THERE WAS ANY SUCH INSTRUCTION ISSUED BY THE CBDT TO THE ASSESSING OFFICER FOR MAKING ANY REFERENCE TO THE TPO FOR SPECIFIED DOMESTIC TRANSACTION. FROM THE PERUSAL OF THE SAID INSTRUCTION NO. 3/2003 WHICH HAS BEEN PLACED BY THE LEARNED COUNSEL BEFORE US IT IS SEEN THAT GUIDELINES FOR REFERENCE TO THE TPO HAS BEEN MADE ONLY IN RESPECT OF DETERMINATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION U/S.92B. THERE IS NO WHISPER ABOUT SPECIFIED DOMESTIC TRANSACTION; FOR THE REASON THAT THERE WAS NO CONCEPT OF SPECIFIED DOMESTIC TRANSACTION UNDER THE INCOME TAX ACT WHEN SAID INSTRUCTION WAS ISSUED ON 20.05.2003. THE SPECIFIED DOMESTIC TRANSACTION FOR THE PURPOSE OF DETERMINATION OF ALP HAS BEEN BROUGHT IN THE STATUTE ONLY BY FINANCE ACT 2012. HENCE WE AGREE WITH THE LEARNED COUNSEL THAT HOLDING THE ASSESSMENT ORDER ERRONEOUS FOR THE REASON THAT ASSESSING OFFICER SHOULD HAVE MADE A REFERENCE TO THE TPO IN ACCORDANCE WITH CBDT INSTRUCTION NO. 3/2003 IS WHOLLY MISCONCEIVED AND MISINTERPRETATION. ONCE THERE WAS NO CBDT INSTRUCTION OR GUIDELINES FOR REFERENCE TO THE ISSUE INVOLVING SPECIFIED DOMESTIC INSTRUCTION TO THE TPO AT THE TIME OF PASSING THE ASSESSMENT ORDER THEN WHERE IS THE QUESTION OF ANY NON-COMPLIANCE OF CBDT INSTRUCTION BY THE ASSESSING OFFICER. 24 TILL THE PASSING OF THE ASSESSMENT ORDER ON 10.08.2015 ONLY CBDT INSTRUCTION NO.3/2003 DATED 20.05.2003 WAS APPLICABLE. FURTHER ANOTHER INSTRUCTION WAS ISSUED BY THE CBDT BEING INSTRUCTION NO.15/2015 DATED 16.10.2015 SUPERSEDING THE OLD INSTRUCTION NO. 3/2003 (WHICH TOO WAS AFTER THE PASSING OF THE ASSESSMENT ORDER) THERE ALSO THE GUIDELINES WERE ONLY WITH RESPECT TO INTERNATIONAL TRANSACTION U/S 92B AND NOT SPECIFIED DOMESTIC TRANSACTION. IN FACT IN PARAGRAPH 7 WITH REGARD TO THE APPLICABILITY OF THE SAID INSTRUCTION CBDT HAS MADE FOLLOWING REMARKS: - THE ABOVE GUIDANCE IS APPLICABLE ONLY TO TRANSFER PRICING PROVISIONS IN RESPECT OF INTERNATIONAL TRANSACTIONS. SIMILAR GUIDANCE IN RESPECT OF TRANSFER PRICING PROVISIONS PERTAINING TO SPECIFIED DOMESTIC TRANSACTIONS ARE UNDER CONSIDERATION OF THE CBDT. TILL SUCH TIME THE GUIDANCE PERTAINING TO SPECIFIED DOMESTIC TRANSACTIONS IS NOT ISSUED PARAGRAPH 3.5 OF THIS INSTRUCTION SHALL APPLY TO THE EFFECT THAT WHERE A CASE HAS BEEN SELECTED FOR SCRUTINY ON NON-TP PARAMETERS AND THE CASE ALSO INVOLVES SPECIFIED DOMESTIC TRANSACTIONS WITH AES THE CASE SHALL NOT BE REFERRED TO THE TPO IRRESPECTIVE OF THE VALUE OF THE SPECIFIED DOMESTIC TRANSACTION OR AGGREGATE VALUE OF ALL SPECIFIED DOMESTIC TRANSACTIONS. THE ONLY EXCEPTION TO THIS WOULD BE A CASE SELECTED FOR SCRUTINY ON NON-TP PARAMETERS WHERE THE AO COMES TO KNOW THAT THE TAXPAYER HAS ENTERED INTO SPECIFIED DOMESTIC TRANSACTION OR TRANSACTIONS BUT THE TAXPAYER HAS EITHER NOT FILED THE ACCOUNTANT'S REPORT UNDER SECTION 92E OF THE ACT OR HAS NOT DISCLOSED THE SAID SPECIFIED DOMESTIC TRANSACTION OR TRANSACTIONS 25 IN THE ACCOUNTANT'S REPORT FILED. IN SUCH EXCEPTIONAL SITUATIONS THE AO MAY REFER THE MATTER TO THE TPO AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE TAXPAYER. THUS EVEN AFTER THE COMPLETION OF THE ASSESSMENT THERE WAS NO SUCH GUIDELINE OR INSTRUCTION BY THE CBDT PERTAINING TO SPECIFIED DOMESTIC TRANSACTION. THIS CLARIFICATION BY THE CBDT MAKES IT ABUNDANTLY CLEAR THAT TILL THE PASSING OF THE ASSESSMENT ORDER THERE WAS NO SUCH GUIDELINE OR INSTRUCTION TO THE ASSESSING OFFICER FOR MAKING ANY REFERENCE TO THE TPO FOR SPECIFIED DOMESTIC TRANSACTION. ONCE THAT IS SO WE FAIL TO UNDERSTAND AS TO WHERE WAS THE VIOLATION OR CONTRAVENTION OF ANY CBDT INSTRUCTION BY THE ASSESSING OFFICER. HENCE IT WOULD BE INCORRECT TO ASCRIBE ANY DERELICTION ON THE PART OF THE ASSESSING OFFICER THAT HE HAS FAILED TO CONDUCT REQUISITE INQUIRY TO FIND OUT THE ARMS LENGTH PRICE FOR THE TRANSACTION BY FAILING TO MAKE REFERENCE TO THE TPO THAT HE WAS SUPPOSED TO MAKE AS PER THE CBDT GUIDELINES. THE OBSERVATION OF THE LD. CIT FOR HOLDING THE ASSESSMENT ORDER TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASON THAT THE ASSESSING OFFICER HAS NOT FOLLOWED THE CBDT INSTRUCTION NO.3/2003 CANNOT BE SUSTAINED AT ALL. 25. AS REGARD THE CBDT INSTRUCTION NO.3/2016 DATED 10.03.2016 FIRST OF ALL THIS INSTRUCTION WAS NOT APPLICABLE AT ALL AT THE TIME OF PASSING OF THE ASSESSMENT ORDER BECAUSE EARLIER AS STATED ABOVE CBDT IN ITS INSTRUCTION OF 2015 ITSELF HAS CLARIFIED THERE WAS NO SUCH GUIDELINES FOR MAKING A REFERENCE TO THE TPO WAS SPECIFIED DOMESTIC TRANSACTION. THE CONTENTION OF THE LD. CIT-DR THAT SUCH AN INSTRUCTION SHOULD BE READ INTO RETROSPECTIVELY I.E. PRIOR TO THE ISSUE OF SUCH INSTRUCTION CANNOT BE UPHELD FOR THE REASON THAT THE 26 ASSESSING OFFICER AT THE TIME OF PASSING THE ASSESSMENT HAS TO SEE THE INSTRUCTIONS AVAILABLE AT THE RELEVANT TIME AND HE CANNOT VISUALIZE THAT IN FUTURE SOME KIND OF GUIDELINE OR INSTRUCTION WOULD COME ON THE BASIS OF WHICH HE HAS MAKE THE ASSESSMENT. IF SUCH A PLEA IS ACCEPTED THEN IN WAKE OF EACH AND EVERY SUBSEQUENT INSTRUCTION ALL THE ASSESSMENT ORDERS CAN BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WHICH CANNOT BE PERMITTED UNDER LAW AND EQUITY. 26. OTHERWISE ALSO EVEN UNDER THE CBDT GUIDELINES ISSUED VIDE INSTRUCTION NO.3/2016 DATED 10.03.2016 WHICH HAS BEEN HARPED UPON BY THE LD. CIT DR WILL NOT CHANGE THE COMPLEXION OF THE CASE. FOR SAKE OF READY REFERENCE THE RELEVANT GUIDELINES ARE REPRODUCED HEREUNDER: - 3.1 THE POWER TO DETERMINE THE ARMS LENGTH PRICE (ALP) IN AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION IS CONTAINED IN SUB-SECTION (3) OF SECTION 92C. HOWEVER SECTION 92CA PROVIDES THAT WHERE THE ASSESSING OFFICER (AO) CONSIDERS IT NECESSARY OR EXPEDIENT SO TO DO HE MAY REFER THE COMPUTATION OF ALP IN RELATION TO AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION TO THE TPO. FOR PROPER ADMINISTRATION OF THE INCOME-TAX ACT THE BOARD HAS DECIDED THAT THE AO SHALL HENCEFORTH MAKE A REFERENCE TO THE TPO ONLY UNDER THE CIRCUMSTANCES LAID OUT IN THIS INSTRUCTION. 3.2 ALL CASES SELECTED FOR SCRUTINY EITHER UNDER THE COMPUTER ASSISTED SCRUTINY SELECTION [CASS] SYSTEM OR UNDER THE COMPULSORY MANUAL SELECTION SYSTEM (IN ACCORDANCE WITH THE CBDTS ANNUAL INSTRUCTIONS IN THIS REGARD - FOR EXAMPLE INSTRUCTION NO. 6/2014 FOR SELECTION IN F.Y 2014-15 AND INSTRUCTION NO. 8/2015 FOR SELECTION IN F.Y 2015-16) ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS [IN RESPECT OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH] HAVE TO BE 27 REFERRED TO THE TPO BY THE AO AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PRINCIPAL COMMISSIONER OF INCOME-TAX (PCIT) OR COMMISSIONER OF INCOME-TAX (CIT). THE FACT THAT A CASE HAS BEEN SELECTED FOR SCRUTINY ON A TP RISK PARAMETER BECOMES CLEAR FROM A PERUSAL OF THE REASONS FOR WHICH A PARTICULAR CASE HAS BEEN SELECTED AND THE SAME ARE INVARIABLY AVAILABLE WITH THE JURISDICTIONAL AO. THUS IF THE REASON OR ONE OF THE REASONS FOR SELECTION OF A CASE FOR SCRUTINY IS A TP RISK PARAMETER THEN THE CASE HAS TO BE MANDATORILY REFERRED TO THE TPO BY THE AO AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT. 3.3 CASES SELECTED FOR SCRUTINY ON NON-TRANSFER PRICING RISK PARAMETERS BUT ALSO HAVING INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS SHALL BE REFERRED TO TPOS ONLY IN THE FOLLOWING CIRCUMSTANCES: (A) WHERE THE AO COMES TO KNOW THAT THE TAXPAYER HAS ENTERED INTO INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH BUT THE TAXPAYER HAS EITHER NOT FILED THE ACCOUNTANTS REPORT UNDER SECTION 92E AT ALL OR HAS NOT DISCLOSED THE SAID TRANSACTIONS IN THE ACCOUNTANTS REPORT FILED; (B) WHERE THERE HAS BEEN A TRANSFER PRICING ADJUSTMENT OF RS. 10 CRORE OR MORE IN AN EARLIER ASSESSMENT YEAR AND SUCH ADJUSTMENT HAS BEEN UPHELD BY THE JUDICIAL AUTHORITIES OR IS PENDING IN APPEAL; AND (C) WHERE SEARCH AND SEIZURE OR SURVEY OPERATIONS HAVE BEEN CARRIED OUT UNDER THE PROVISIONS OF THE INCOME-TAX ACT AND FINDINGS REGARDING TRANSFER PRICING ISSUES IN RESPECT OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH HAVE BEEN RECORDED BY THE INVESTIGATION WING OR THE AO. 3.4 FOR CASES TO BE REFERRED BY THE AO TO THE TPO IN ACCORDANCE WITH PARAGRAPHS 3.2 AND 3.3 ABOVE IN RESPECT OF TRANSACTIONS HAVING THE FOLLOWING SITUATIONS THE AO MUST AS A JURISDICTIONAL REQUIREMENT RECORD HIS SATISFACTION THAT THERE IS AN INCOME OR A POTENTIAL OF AN INCOME ARISING AND/OR BEING AFFECTED ON DETERMINATION OF THE ALP OF AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION BEFORE SEEKING APPROVAL OF THE 28 PCIT OR CIT TO REFER THE MATTER TO THE TPO FOR DETERMINATION OF THE ALP: WHERE THE TAXPAYER HAS NOT FILED THE ACCOUNTANT'S REPORT UNDER SECTION 92E OF THE ACT BUT THE INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS UNDERTAKEN BY IT COME TO THE NOTICE OF THE AO; WHERE THE TAXPAYER HAS NOT DECLARED ONE OR MORE INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION IN THE ACCOUNTANT'S REPORT FILED UNDER SECTION 92E OF THE ACT AND THE SAID TRANSACTION OR TRANSACTIONS COME TO THE NOTICE OF THE AO; AND WHERE THE TAXPAYER HAS DECLARED THE INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS IN THE ACCOUNTANT'S REPORT FILED UNDER SECTION 92E OF THE ACT BUT HAS MADE CERTAIN QUALIFYING REMARKS TO THE EFFECT THAT THE SAID TRANSACTIONS ARE NOT INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR THEY DO NOT IMPACT THE INCOME OF THE TAXPAYER. IN THE ABOVE THREE SITUATIONS THE AO MUST PROVIDE AN OPPORTUNITY OF BEING HEARD TO THE TAXPAYER BEFORE RECORDING HIS SATISFACTION OR OTHERWISE. IN CASE NO OBJECTION IS RAISED BY THE TAXPAYER TO THE APPLICABILITY OF CHAPTER X [SECTIONS 92 TO 92F] OF THE ACT TO THESE THREE SITUATIONS THEN AO SHOULD REFER THE INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION TO THE TPO FOR DETERMINING THE ALP AFTER OBTAINING THE APPROVAL OF THE PCIT OR CIT. HOWEVER WHERE THE APPLICABILITY OF CHAPTER X [SECTIONS 92 TO 92F] TO THESE THREE SITUATIONS IS OBJECTED TO BY THE TAXPAYER THE AO MUST CONSIDER THE TAXPAYER'S OBJECTIONS AND PASS A SPEAKING ORDER SO AS TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. IF THE AO DECIDES IN THE SAID ORDER THAT THE TRANSACTION IN QUESTION NEEDS TO BE REFERRED TO THE TPO HE SHOULD MAKE A REFERENCE AFTER OBTAINING THE APPROVAL OF THE PCIT OR CIT. 3.5 IN ADDITION TO THE CASES TO BE REFERRED AS PER PARAGRAPHS 3.2 AND 3.3 A CASE INVOLVING A TRANSFER PRICING ADJUSTMENT IN AN EARLIER ASSESSMENT YEAR THAT HAS BEEN FULLY OR PARTIALLY SET-ASIDE 29 BY THE ITAT HIGH COURT OR SUPREME COURT ON THE ISSUE OF THE SAID ADJUSTMENT SHALL INVARIABLY BE REFERRED TO THE TPO FOR DETERMINATION OF THE ALP. [EMPHASIS ADDED IS OURS] 27. FROM THE BARE READING OF THE AFORESAID GUIDELINES IT IS SEEN THAT THE ASSESSING OFFICER CAN MAKE REFERENCE TO THE TPO ONLY UNDER THE SITUATION AND CIRCUMSTANCES LAID DOWN IN THE SAID INSTRUCTION. THUS THE KEY DETERMINATION FACTORS FOR MAKING A REFERENCE BY THE ASSESSING OFFICER TO THE TPO FOR THE DETERMINATION OF THE ALP OF INTERNATIONAL OR SPECIFIED DOMESTIC TRANSACTION HAVE BEEN PROVIDED IN PARA 3.2 AND 3.3. IT LAYS DOWN THAT IN ALL THE CASES WHICH ARE SELECTED FOR SCRUTINY ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS HAVE TO BE REFERRED TO THE TPO; AND IN CASES WHERE THOUGH NOT SELECTED UNDER SCRUTINY ON TRANSFER PRICING RISKS BUT IF ANY OF THE CIRCUMSTANCES MENTIONED THEREIN ARE FOUND BY THE AO THEN ALSO SAME HAS TO BE REFERRED TO TPO. BUT UNDER BOTH THE CONDITIONS THE AO AS JURISDICTIONAL REQUIREMENT MUST RECORD HIS SATISFACTION AND SEEK APPROVAL IN RESPECT OF TRANSACTIONS HAVING THE FOLLOWING CONDITIONS WHICH ARE: - FIRSTLY WHERE THE TAXPAYER HAS NOT FILED AUDIT REPORT U/S 92 E AND SUCH TRANSACTION COMES TO THE NOTICE OF THE ASSESSING OFFICER; SECONDLY TAXPAYER HAS NOT DECLARED THE SAID TRANSACTION IN THE ACCOUNTANTS REPORT U/S 92 E; THIRDLY BY THE TAXPAYER DECLARED THE TRANSACTION IN THE REPORT BUT THERE ARE QUALIFYING REMARKS BY THE ACCOUNTANT THAT THEY DO NOT IMPACT THE INCOME OF THE TAXPAYER; AND 30 LASTLY IF TRANSFER PRICING ADJUSTMENTS HAVE BEEN MADE IN THE EARLIER ASSESSMENT YEARS WHICH HAS BEEN FULLY OR PARTIALLY SET ASIDE BY THE COURTS. IT IS ONLY UNDER THE CIRCUMSTANCES MENTIONED IN THE CBDT GUIDELINES THE ASSESSING OFFICER CAN MAKE A REFERENCE TO THE TPO AND NOT OTHERWISE. IF SUCH CONDITIONS ARE FOUND TO EXIST THEN ONLY ASSESSING OFFICER AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE AND AFTER RECORDING SATISFACTION CAN REFER THE MATTER TO THE TPO FOR DETERMINING THE LP AFTER OBTAINING THE APPROVAL OF PCIT OR CIT. 28. IN THIS CASE THE ASSESSEE HAS FILED THE ACCOUNTANTS REPORT U/S 92 E AND THE REQUISITE AUDIT FORM NO.3 CEB AND IN SUCH REPORT ALP HAS BEEN JUSTIFIED. IT IS NOT THE CASE THAT ASSESSEE HAS NOT DECLARED ITS TRANSACTION AND IT WAS ONLY ASSESSING OFFICER WHO HAS NOTICED THE SAID TRANSACTION AND OR THERE IS ANY QUALIFYING REMARK BY THE ACCOUNTANT AND THEY DO NOT IMPACT THE INCOME TO THE ASSESSEE. FURTHER IT IS ALSO NOT THE CASE HERE THAT ANY TRANSFER PRICING ADJUSTMENT MADE IN THE EARLIER ASSESSMENT YEARS HAVE BEEN SET ASIDE BY THE COURTS. THUS WHEN SUCH CONDITIONS WERE NOT APPLICABLE AND THE LD. CIT HAS ALSO NOT SPECIFIED AS TO WHICH OF THE CONDITIONS LAID DOWN IN THE CBDT INSTRUCTIONS HAVE BEEN VIOLATED OR ASSESSING OFFICER HAS NOT FOLLOWED THE SAME THEN NO FAULT CAN BE FOUND IN THE AOS OPINION IN NOT MAKING REFERENCE TO THE TPO FOR THE SPECIFIED DOMESTIC TRANSACTION. CBDT INSTRUCTIONS HAVE BEEN ISSUED TO THE FIELD OFFICERS TO CURB AND CHECK THE BLANKET REFERENCE BEING MADE BY THE ASSESSING OFFICERS TO THE TPOS WITHOUT ANY SATISFACTION AND IN A MECHANICAL MANNER. CBDT HAS THUS CAUTIONED THAT REFERENCE TO THE TPO CANNOT BE DONE IN MECHANICAL MANNER WHENEVER THERE IS ANY 31 INTERNATIONAL TRANSACTION OR SPECIFYING DOMESTIC TRANSACTION. IF ALL THE REQUISITE DETAILS AND ACCOUNTANTS REPORT HAS BEEN FILED AND ASSESSING OFFICER WAS SATISFIED WITH SUCH REPORT THEN HE IS NOT SUPPOSED TO MAKE A REFERENCE TO THE TPO UNLESS THE CONDITIONS SPECIFIED FOR MAKING REFERENCE HAS BEEN SATISFIED. 29. FURTHER COMING TO THE ISSUE WHETHER SUCH PROFIT ON SALE OF THE INDUSTRIAL PARK IS ALLOWABLE AS DEDUCTION U/S 80 IA. SUB SECTION (1) OF SECTION 80 IA PROVIDES THAT WHERE THE GROSS INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAIN DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH ARE CONSIDERED TO BE AS ELIGIBLE ASSESSEE THEN SUBJECT TO THE PROVISIONS OF THIS SECTION THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION BE ALLOWED 100 % DEDUCTION OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR CONSECUTIVE TEN ASSESSMENT YEARS WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. SUB-SECTION (4) OF SECTION 80-IA IN TURN LAYS DOWN THE CONDITIONS UPON FULFILLMENT OF WHICH THE SAID SECTION WOULD APPLY. HERE CLAUSE (III) IS APPLICABLE WHERE THE DEDUCTION IS ALLOWED TO ANY ENTERPRISE OR TO ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK NOTIFIED BY THE CENTRAL GOVERNMENT. THE PROVISO BELOW CLAUSE (III) OF SUB SECTION (4) OF SECTION 80 IA READS AS UNDER: - PROVIDED IN THAT CASE WHERE AN UNDERTAKING DEVELOPS AN INDUSTRIAL PARK ON OR AFTER THE 1 ST DAY OF APRIL 1999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1 ST DAY OF APRIL 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE AS THE CASE MAY BE TO ANOTHER UNDERTAKING ( HEREAFTER IN THIS 32 SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING) THE DEDUCTION UNDER SUB SECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDER TAKING: 29. THE AFORESAID PROVISO IS AN ENABLING PROVISION BY DEEMING FICTION UPON TRANSFER OF ANY INDUSTRIAL PARK FOR OPERATION AND MAINTENANCE WHEREBY THE TRANSFEREE CAN CLAIM THE DEDUCTION FOR THE REMAINING PERIOD THAT IS THE TRANSFEREE STEPS INTO THE SHOES OF THE TRANSFEROR FOR THE LIMITED PURPOSE OF OPERATION AND MAINTENANCE OF THE INDUSTRIAL PARKS AND IS ELIGIBLE FOR DEDUCTION U/S 80 IA. CLAUSE (III) R/W THE AFORESAID PROVISO CLEARLY ENVISAGES THAT THERE IS A DEVELOPER WHO DEVELOPS AND OPERATES OR MAINTAINS THE INDUSTRIAL PARK AND OTHER IS A TRANSFEREE TO WHOM SUCH INDUSTRIAL PARK IS TRANSFERRED BY THE DEVELOPER FOR MAINTAINING AND OPERATING THE SAID INDUSTRIAL PARK. NOWHERE IS IT ENVISAGING THAT THE PERSON WHO HAS DEVELOPED THE INDUSTRIAL PARK; AND THE PERSON WHO IS LATER ON MAINTAINING OR OPERATING THE SAID INDUSTRIAL PARK EITHER WOULD BE DENIED OF THE DEDUCTION AFTER THE TRANSFER. THE DEVELOPER CANNOT BE DENIED OF THE DEDUCTION ON INCOME ARISING OUT OF SUCH DEVELOPMENT OR PROFITS DERIVED ON TRANSFER OF SUCH INDUSTRIAL PARK. THE PROVISO DOES NOT OPERATE TO DENY OR DEPRIVE THE DEVELOPER THE BENEFIT OR DEDUCTION EVEN AFTER DEVELOPMENT OF THE PARK AND THEREAFTER IS TRANSFERRED TO THE TRANSFEREE. FROM THE READING OF CLAUSE (III) IT QUITE OSTENSIBLE THAT THERE ARE FOLLOWING CATEGORIES OF PROFITS WHICH ARE CONTEMPLATED TO BE ELIGIBLE BENEFIT OF DEDUCTION U/S 80 IA VIZ.: - 33 I. PROFITS MADE BY AN ASSESSEE WHO DEVELOPS THE INDUSTRIAL PARK I.E. BUILD / CONSTRUCT AND SALE THE SAME. II. PROFITS MADE BY AN ASSESSEE WHO DEVELOPS AND OPERATES THE INDUSTRIAL PARK. IT CAN BE LEASE OUT FOR A PERIOD AND THEN SELL THE SAME. III. PROFITS MADE BY AN ASSESSEE WHO THOUGH MAY NOT HAVE CONSTRUCTED BUT MAINTAINS AND OPERATES THE INDUSTRIAL PARK. THERE IS NO CONDITION WHICH HAS BEEN LAID DOWN THAT IF AN INDUSTRIAL PARK DEVELOPED BY AN ASSESSEE WHICH IS BEING OPERATED BY HIM AND THEN SELL THE SAME TO ANOTHER PERSON THEN THE PROFITS DERIVED FROM SUCH SALE IS NOT ELIGIBLE FOR DEDUCTION U/S 80 IA. THIS PRECISE ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PCIT VS. NILA BAURAT ENGINEERING LIMITED (SUPRA) WHEREIN THEIR LORDSHIPS WERE DISCUSSING THE SIMILAR PROVISO APPEARING BELOW CLAUSE (I) OF SUB SECTION 4 OF SECTION 80 IA. THEIR LORDSHIPS AFTER DISCUSSING THE SIMILAR PROVISO OBSERVED AND HELD AS UNDER: - 5. AS PER THE PROVISO THUS WHERE ANY INFRASTRUCTURE FACILITY IS TRANSFERRED TO ANOTHER ENTERPRISE FOR THE PURPOSE OF OPERATING AND MAINTAINING SUCH FACILITY IN ACCORDANCE WITH THE AGREEMENT OF THE CENTRAL OR STATE GOVERNMENT OR THE LOCAL OR STATUTORY AUTHORITY THE SECTION WOULD APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD BE ENTITLED TO THE DEDUCTION HAD THE TRANSFER NOT TAKEN PLACE. 6. THE PROVISO TO SUB-SECTION (4) THUS MAKES AN ENABLING PROVISION PROVIDING A DEEMING FICTION WHEREBY UPON TRANSFER OF ANY INFRASTRUCTURE FACILITY FOR THE PURPOSE OF OPERATING AND MAINTAINING THE TRANSFEREE COULD CLAIM THE DEDUCTION FOR THE REMAINDER OF THE PERIOD. THE CRUCIAL WORDS HERE ARE 'THE TRANSFER 34 OF INFRASTRUCTURE FOR THE PURPOSE OF OPERATING AND MAINTAINING' AND THUS THE TRANSFEREE WHO WOULD NOW STEP IN THE SHOES OF THE TRANSFEROR FOR THE LIMITED PURPOSE OF OPERATION AND MAINTENANCE COULD CLAIM DEDUCTION ON THE PROFIT ELEMENT ARISING OUT OF SUCH ACTIVITY. WE MAY RECALL UNDER SUB-SECTION (4) OF SECTION 80IA OF THE ACT AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING OPERATING AND MAINTAINING INFRASTRUCTURE FACILITY WOULD BE ELIGIBLE FOR DEDUCTION. THUS THIS PROVISION ITSELF ENVISAGES THAT IN A GIVEN PROJECT THE DEVELOPER AND PERSON WHO MAINTAINS AND OPERATES MAY BE DIFFERENT. MERELY BECAUSE THE PERSON MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY IS DIFFERENT FROM THE ONE WHO DEVELOPED IT WOULD NOT DEPRIVE THE DEVELOPER THE DEDUCTION UNDER THE SAID SECTION ON THE INCOME ARISING OUT OF SUCH DEVELOPMENT. BY VIRTUE OF THE OPERATION OF THE PROVISO THE DEVELOPER WOULD NOT BE DERIVED OF THE BENEFIT OF DEDUCTION UNDER SUB-SECTION (1) OF SECTION 80 IA ON THE PROFIT EARNED BY IT FROM ITS ACTIVITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE PROVISO DOES NOT OPERATE AS TO DEPRIVING THE DEVELOPER OF THE BENEFIT OF THE DEDUCTION EVEN AFTER THE FACILITY IS TRANSFERRED FOR THE PURPOSE OF MAINTENANCE AND THAT DERIVED FROM THE ACTIVITY OF MAINTENANCE AND OPERATION THEREOF. 30. THE SLP AGAINST THE SAID JUDGMENT FILED REVENUE HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ORDER DATED 11.05.2018. ACCORDINGLY IT CANNOT BE HELD THAT UNDER THE LAW THE PROFIT EARNED ON SALE OF INDUSTRIAL PARK IS NOT ELIGIBLE FOR DEDUCTION U/S 80 IA. IN ANY CASE THIS VIEW IS WELL SUPPORTED BY THE JUDGMENT OF HONBLE SUPREME COURT AND NO CONTRARY DECISION HAS BEEN BROUGHT ON RECORD BY THE REVENUE. 31. ANOTHER ANGEL TO APPRAISE THIS ISSUE WHETHER PROFITS FROM SALE/TRANSFER OF ELIGIBLE BUSINESS TO ANY OTHER UNDERTAKING WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA CAN BE UNDERSTOOD FROM THE PROVISIONS OF SECTION 80IA (8). THIS SECTION PROVIDES THAT WHERE ANY 35 GOODS OR SERVICES HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE OR TO ANY ELIGIBLE BUSINESS THEN CONSIDERATION FOR SUCH TRANSFER SHOULD CORRESPOND TO THE MARKET VALUE OF SUCH GOODS AS ON THE DATE OF TRANSFER. IT PROVIDES THAT THE PROFITS AND GAINS FROM TRANSFER OR SALE OF THE ELIGIBLE BUSINESS SHOULD BE COMPUTED AS IF THE TRANSFER HAS BEEN MADE AT MARKET VALUE OF SUCH GOODS OR SERVICES. THIS PROVISION ITSELF CLARIFIES THAT PROFITS FROM TRANSFER OF THE ELIGIBLE BUSINESS IS A BUSINESS INCOME ELIGIBLE FOR DEDUCTION U/S 80 IA. IN FACT THIS PROVISION ENDORSES OUR VIEW THAT THE PROFITS FROM TRANSFER OF ELIGIBLE BUSINESS ARE ELIGIBLE FOR DEDUCTION U/S 80 IA. 32. FURTHER ONE VERY IMPORTANT FACT IN THIS CASE IS THAT ASSESSEE HAS SHOWN ENTIRE PROFIT FROM SALE OF INDUSTRIAL PROFIT AS BUSINESS INCOME AND ONCE SUCH BUSINESS INCOME HAS BEEN ACCEPTED AND NO ADVERSE COMMENT HAS BEEN GIVEN BY LD. CIT THEN SUCH A PROFIT ARISING FROM SALE OF INDUSTRIAL PARK OSTENSIBLY FALLS WITHIN SECTION 80 IA (4). HENCE THERE WAS NO LEGAL INFIRMITY BY ASSESSING OFFICER IN ALLOWING THE CLAIM OF DEDUCTION ON THE PROFITS EARNED FROM THE SALE OF INDUSTRIAL PARK. 33. IN SO FAR AS THE LD. CIT OBSERVING THAT ASSESSING OFFICER HAS FAILED TO EXAMINE APPLICABILITY OF SECTION 80 IA(8) IT IS SEEN THAT IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS EXAMINED THE APPROVED VALUERS REPORT WHO HAS GIVEN A DETAILED REPORT OF THE MARKET VALUE OF THE TRANSFER OF INDUSTRIAL PARK AND ALSO TRANSFER PRICING REPORT BY THE ACCOUNTANT HAS ALSO BEEN FURNISHED BY THE ASSESSEE. THUS WHEN TRANSFER PRICE IS CONSONANCE WITH THE FAIR MARKET PRICE THEN CONDITIONS OF THIS SECTION 36 GETS SATISFIED. HENCE APPLICABILITY OF SECTION 80IA (8) HAS BEEN EXAMINED BY THE ASSESSING OFFICER 34. NOW COMING TO THE ISSUE OF APPLICABILITY OF PROVISION OF SECTION 14A THE ASSESSEE BEFORE THE ASSESSING OFFICER HAS FILED ALL THE RELEVANT DETAILS FOR INVESTMENT MADE IN MUTUAL FUNDS ON WHICH ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.77 65 278/-. IT HAS ALSO BEEN BROUGHT ON RECORD BEFORE THE ASSESSING OFFICER THAT ENTIRE MONEY INVESTED IN THE MUTUAL FUNDS WERE OUT OF SALES CONSIDERATION RECEIVED FROM THE SALE OF INDUSTRIAL PARK AND THIS WAS SHOWN FROM THE BANK STATEMENTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BEFORE THE ASSESSING OFFICER THIS ISSUE WAS DISCUSSED THREAD BARE AND IT WAS SPECIFICALLY POINTED OUT THAT INTEREST ON BANK LOAN AMOUNTING TO RS.1 79 46 655/- RELATED TO THE PERIOD PRIOR TO MAKING OF THE INVESTMENT AND THE BANK LOAN WAS FULLY PAID FROM THE SALE CONSIDERATION OF THE INDUSTRIAL PARK I.E. BANK LOAN WAS FULLY PAID BEFORE MAKING THE INVESTMENT IN THE MUTUAL FUNDS. IN SUCH A SITUATION OSTENSIBLY NO INTEREST COULD HAVE BEEN DISALLOWED. THE CLOSING BALANCE OF CURRENT INVESTMENT WAS NIL AND NON-CURRENT INVESTMENT WAS ONLY RS. 83 509/- AT THE END OF THE YEAR. IT WAS ALSO STATED BEFORE THE ASSESSING OFFICER THAT NO DIRECT OR INDIRECT EXPENDITURE WAS INCURRED TO EARNED THE DIVIDEND INCOME. AFTER VERIFYING THESE FACTS ASSESSING OFFICER ACCEPTED THE ASSESSEES PLEA AND NO DISALLOWANCE WERE MADE. IN ANY CASE BEFORE TRIGGERING OF DISALLOWANCE U/S 14A IT IS AXIOMATIC THAT ASSESSEE MUST HAVE INCURRED EXPENDITURE IN RELATION TO THE EARNING OF EXEMPT INCOME AND SUCH EXPENDITURE HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT OR CLAIMED AS DEDUCTION. THE ASSESSING OFFICER IS THEN REQUIRED TO EXAMINE THE ASSESSEES CLAIM EITHER FOR THE EXPENDITURE ATTRIBUTABLE 37 FOR EARNING OF SUCH EXEMPT INCOME OR NO SUCH EXPENDITURE HAS BEEN INCURRED THEN HAVING REGARD ACCOUNTS TO THE ASSESSEE AO HAS TO HIS SATISFACTION WITH THE CORRECTNESS OF THE ASSESSEES CLAIM THAT NO EXPENDITURE HAVE INCURRED RELATION TO EARNING OF EXEMPTION OF INCOME. IF AO IS SATISFIED OR HAVING REGARD TO THE ACCOUNTS NO EXPENDITURE CAN BE ATTRIBUTED THEN NO DISALLOWANCE IS CALLED FOR. NOTHING HAS BEEN BROUGHT ON RECORD BY LD. CIT THAT SATISFACTION COULD HAVE BEEN ARRIVED HAVING REGARD TO THE ACCOUNTS MAINTAINED BY THE ASSESSEE THAT SOME DISALLOWANCE IS CALLED FOR. THERE IS NO WHISPER BY THE LD. CIT AS TO WHY DISALLOWANCE U/S 14 A WAS CALLED FOR ON THE FACTS OF THE CASE. THE DISALLOWANCE UNDER SECTION 14A IS NOT AUTOMATIC WHENEVER THERE IS ANY KIND OF EXEMPT INCOME. IT HAS TO BE SEEN WITH REGARD TO NATURE OF EXPENSES DEBITED AND WHETHER ANY EXPENDITURE CAN BE CALCULATED. THUS SIMPLE OBSERVATION THAT AO SHOULD HAVE EXAMINE THE APPLICABILITY OF 14A WITHOUT ANY SPECIFIC FINDING OR EXAMINATION OF FACTS AND MATERIAL ON RECORD LD. CIT CANNOT SET ASIDE THE ASSESSMENT. 35. THE REVISIONARY JURISDICTION U/S 263 CANNOT BE EXERCISED SIMPLY TO MAKE ROVING AND FISHING ENQUIRY. IT IS A WELL SETTLED LAW DECIDED BY THE VARIOUS COURTS IN THE JUDGMENTS RELIED UPON BY THE LD. COUNSEL THAT THE REVISIONARY AUTHORITY FIRST OF ALL SHOULD GIVE A FINDING AS TO HOW THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF SUCH AN AUTHORITY IS OF THE VIEW THAT THE ASSESSING OFFICER DID NOT MAKE ANY ENQUIRY THEN IT IS INCUMBENT UPON CIT TO SPECIFY AS TO WHAT KIND OF INQUIRY OR VERIFICATION HAS NOT BEEN DONE AND EVEN LD. CIT CAN ALSO CONDUCT SOME PRIMA-FACIE ENQUIRY HIMSELF OR THROUGH AO TO REACH TO A CONCLUSION OR INFERENCE THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO 38 FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SUCH AN ENQUIRY OR EXERCISE BY THE LD. CIT IS COMPLETELY LACKING IN THE PRESENT CASE. IF THE ASSESSING OFFICER HAS CARRIED OUT DETAILED ENQUIRY AND HAS EXAMINED ALL THE RECORDS CALLED UPON BY HIM AFTER RAISING QUERIES THEN LD. CIT WITHOUT POINTING OUT AS TO HOW SUCH AN ENQUIRY IS INADEQUATE OR NOT PROPER CANNOT SET ASIDE THE ASSESSMENT. EVEN THE FICTION CREATED BY EXPLANATION 2 TO SECTION 263 WHEREIN IT IS DEEMED THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IF THE ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN DONE. HERE IN THIS CASE WE HAVE ALREADY FOUND THAT ASSESSING OFFICER HAS MADE PROPER ENQUIRIES AND VERIFICATION AFTER CALLING FOR ALL THE RECORDS AND AFTER APPLYING HIS MIND HAS ALLOWED THE DEDUCTION IN ACCORDANCE WITH LAW. THE LD. CIT NOW CANNOT SIT ON THE JUDGMENT OF THE ASSESSING OFFICER WITHOUT POINTING OUT ANY LEGAL OR FACTUAL INFIRMITY OR WITHOUT CARRYING OUT HIS OWN ENQUIRY. HE SIMPLY CANNOT SET ASIDE THE ORDER OF THE ASSESSING OFFICER STATING THAT NO PROPER ENQUIRY HAS BEEN DONE. ACCORDINGLY IN VIEW OF OUR DISCUSSION AND FINDING GIVEN ABOVE WE SET ASIDE THE IMPUGNED ORDER OF LD. CIT PASSED U/S 263 AND UPHOLD THE ASSESSMENT ORDER DATED 11.08.2015. THE IMPUGNED ORDER THUS STANDS QUASHED. 36. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON .02.2019. SD/- (ANADEE NATH MISSHRA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER 25.2.2019 39 DATE:- .02.2019 *NEHA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 21/2/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 40 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: B: NEW DELHI) BEFORE SHRI AMIT SHUKLA JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA ACCOUNTANT MEMBER ITA NO.- 3341/DEL/2018 (ASSESSMENT YEAR: 2013-14) M/S. ETT LTD. (FORMERLY KNOWN AS INDIAN EXPRESS MULTIMEDIA LTD.) 17 HEMKUNT COLONY NEW DELHI PIN- 110048 VS. COMMISSIONER OF INCOME TAX CENTRAL II NEW DELHI PAN NO: AAACI2839Q APPELLANT RESPONDENT ASSESSEE BY : SHRI R. S. SINGHVI CA SHRI SATYAJEET GOYAL CA SHRI V.K. SABHARWAL ADV. SHRI DINESH KUMAR CA REVENUE BY : MS. RACHNA SINGH CIT DR ORDER (CONTINUED FROM PARAGRAPH 36 AT PAGE 38 OF ORDER OF ESTEEMED JUDICIAL MEMBER) PER: ANADEE NATH MISSHRA AM (37) I HAVE THE PERUSED THE ORDER AUTHORED BY ESTEEMED JUDICIAL MEMBER WHEREIN HE HAS PROPOSED TO ALLOW THE APPEAL OF THE ASSESSEE. I CONCUR FOR THE REASONS STATED IN THIS SEPARATE ORDER THAT THE IMPUGNED REVISION ORDER DATED 31.03.2018 PASSED U/S 263 OF INCOME TAX ACT 1961 (IT ACT FOR SHORT) DESERVES 41 TO BE QUASHED. THE GROUNDS OF APPEAL; AND THE PRAYER MADE BY THE ASSESSEE IN THIS APPEAL ARE AS FOLLOWS: 1. THAT THE ORDERS PASSED U/S 263 BY THE PR. CIT CENTRAL II ON 31.03.2018 WAS PERVERSE TO THE LAW AND TO FACTS OF THE CASE ON HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 10.08.2015 WAS PERVERSE TO THE LAW IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDERS PASSED BY THE PR. CIT(A) U/S 263 OF THE ACT WERE FURTHER NOT IN CONSONANCE OF THE PROVISIONS OF LAW CONTAINED U/S 263 OF THE INCOME TAX ACT 1961 AS THE SAME WERE PASSED ON HAVING BORROWED INFORMATION / REFERENCE PASSED UPON TO HIM BY THE JCIT. 3. THAT THE LD. PR. CIT(A) FAILED TO CONSIDER THAT THE ASSESSMENT ORDER AS COMPLETED BY THE ASSESSING OFFICER AFTER DUE PROCESS OF LAW AND ONLY AFTER TAKING INTO CONSIDERATION THE ENTIRE SUPPORTING EVIDENCE PRODUCED FILED AND PLACED UPON RECORDS BY THE APPELLANT COMPANY DURING ASSESSMENT PROCEEDINGS. 4. THAT THE ORDERS PASSED U/S 263 OF THE ACT FOR THE A.Y. 2013-14 IS NOT TENABLE MERELY BECAUSE OF HAVING DIFFERENCE OF OPINION BETWEEN THE LD. PR. CIT AND THE ASSESSING OFFICER WHILE ALLOWING THE CLAIM OF DEDUCTION TO THE APPELLANT COMPANY U/S 80-IA TO THE TUNE OF RS. 161 36 85 296/- WITHOUT APPRECIATING THAT THE SAME HAS ALREADY BEEN CONSIDERED AND ALLOWED IN THE PRECEDING YEARS. ALSO AFTER THOROUGH EXAMINATION AND VERIFICATION OF THE MATERIAL ADDUCED. 5. THAT THE ORDERS PASSED U/S 263 OF THE ACT IS FURTHER WRONG BECAUSE THE LD. PR. CIT HAS NOT LAWFULLY DRAWN HIS SATISFACTION ON THE BASIS OF EVIDENCE IF ANY BE COLLECTED OR PLACED UPON RECORDS PRIOR TO HOLD THAT THE ORDERS PASSED WERE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THAT WHILE HOLDING SO THAT THE ORDERS PASSED ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE THE SAME HAS NOT BEEN CORROBORATED WITH ANY EVIDENCE MATERIAL ON THE BASIS OF WHICH HE HAS HOLD SO. 7. THAT THE LD. PR. CIT HAS FURTHER NOT CONSIDERED AND RELIED UPON THE DOCUMENTS PRODUCED FILED AND PLACED BEFORE HIM INCLUDING THE JUDGMENTS RELIED UPON AS CITED BY THE APPELLANT COMPANY IN SUPPORT OF THEIR CONTENTION FOR CLAIMING AND ALLOW OF DEDUCTION U/S 80-IA OF THE ACT AS THE LD. PR. CIT HAS NOT COMMENTED UPON THEM EITHER WAY. 8. THAT THE ORDERS PASSED BY THE LD. PR. CIT U/S 263 WAS FURTHER PERVERSE TO THE LAW AND TO THE FACTS OF THE CASE AS THE ASSESSING OFFICER WAS NOT ANY MATERIAL EITHER COLLECTED OR EVER POSSESSED THAT THE TRANSFER OF BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF GOODS 42 THOUGH THE COGENT EVIDENCES HAVE BEEN ADDUCED BY THE APPELLANT COMPANY BEFORE THE ASSESSING OFFICER IN SUPPORT OF DEDUCTION CLAIMED U/S 80- IA OF THE ACT. 9. THAT THE LD. PR. CIT HAS ONLY ASSUMED THE JURISDICTION CONTAINED U/S 263 OF THE ACT ONLY ON THE BASIS OF HIS MERE PRESUMPTION AND GUESS WORK WITHOUT THE SUPPORT OF ANY MATERIAL THAT THE ORDERS PASSED BY THE ASSESSING OFFICER WERE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 10. THAT THE LD. PR. CIT HAS FAILED TO CONSIDER ALSO THE COPIES OF DOCUMENTS FILED AND PLACED UPON RECORDS BY THE APPELLANT COMPANY VIDE LETTER DATED 08.02.2018 THE COPIES OF WHICH WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER IN SUPPORT OF DEDUCTION CLAIMED U/S 80-IA OF THE ACT. 11. THAT THE LD. PR. CIT HAS FURTHER FAILED TO APPRECIATE THAT SINCE THE ENTIRE MATERIAL HAS BEEN PRODUCED IN SUPPORT OF THE DEDUCTION CLAIMED U/S 80-IA BEFORE THE CONCERNED ASSESSING OFFICER BY THE APPELLANT COMPANY AND THE SAME HAS BEEN TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER WHILE PASSING THE ORDER THEREFORE THE ORDER PASSED COULD NOT BE PRESUMED AND TO HAVE BEEN OPINED EITHER ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. 12. THAT THE APPELLANT COMPANY ASSAILS THEIR RIGHTS TO AMEND ALTER OR CHANGE ANY GROUNDS OF APPEAL OF ANY TIME EVEN DURING THE COURSE OF HEARING OF INSTANT APPEAL. PRAYER 1. THAT THE ORDERS PASSED U/S 263 BY THE LD. PR. CIT ON 31.03.2018 THEREBY SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 10.08.2015 THEREBY DIRECTING THE ASSESSING OFFICER FOR CONDUCTING DENOVO ENQUIRY WITH REGARD TO THE DEDUCTION ALLOWED U/S 80-IA OF THE INCOME TAX ACT 1961 TO THE APPELLANT COMPANY MAY PLEASE BE QUASHED AND THE ORDERS PASSED BY THE ASSESSING OFFICER ON 10.08.2015 MAY PLEASE BE RESTORED BACK. 1. THAT THE OTHER RELIEF WHICH THIS HONBLE COURSE MAY PLEASE BE DEEMS FIT AND PROPER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. (37.1.1) THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE TWO SIDES HAVE BEEN NARRATED BY THE ESTEEMED JUDICIAL MEMBER IN FOREGOING PARAGRAPHS 2 TO 20. THERE IS NO NEED TO REPEAT THEM. 43 (37.1.2) FOR READY REFERENCE THE ASSESSMENT ORDER DATED 10.08.2015 OF THE ASSESSING OFFICER (AO FOR SHORT) PASSED U/S 143(3) OF IT ACT IS REPRODUCED AS UNDER: RETURN OF INCOME DECLARING AN INCOME OF RS. NIL WAS FILED ON 28-09-2013 AND HAS ALSO FILED REVISED RETURN DECLARING AN INCOME RS. NIL ON 07-01-2014. THE RETURN WAS PROCESSED U/S 143(1) AT THE RETURNED INCOME. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. STATUTORY NOTICES U/S 143(2) & 142(1) WERE ISSUED ALONGWITH A DETAIL QUESTIONNAIRE. IN RESPONSE TO NOTICES SHRI VINOD SAHNI FCA AND SHRI VAIBHAV GUPTA CA AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY ATTENDED AND FURNISHED THE DETAILS AS CALLED FOR BOOKS OF ACCOUNT PRODUCED WHICH WERE PUT TO TEST CHECK. THE TOTAL INCOME OF THE ASSESSEE CONSTITUTES INCOME FROM BUSINESS AND PROFESSION AND INCOME FROM OTHER SOURCE. NATURE OF BUSINESS THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND DEVELOPING RUNNING AND MAINTENANCE OF IT PARKS. DISALLOWANCES FOR COMPUTING DEDUCTION U/S 80IA OF THE INCOME TAX ACT. THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S 80IA SINCE LAST FIVE YEARS AND THIS BEING THE 6 LH YEAR HAD FILED COMPUTATION AND JUSTIFICATION FOR THE SAME. THE ASSESSEE HAS ALSO FILED NOTIFICATION DATED 26.09.2006 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRIES WHERE BY THE GOVT. OF INDIA HAS APPROVED THE PROPOSAL OF THE ASSESSEE FOR SETTING UP AND INDUSTRIAL PARK IN TERMS OF INDUSTRIAL PARK SCHEME 2002. THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITION LAID DOWN U/S 80IA. HOWEVER IN COMPUTING THE TOTAL RECEIPTS ELIGIBLE FOR DEDUCTION THE ASSESSEE HAS INCLUDED WATER CHARGES RS. 56 420/- WHICH IS 30% OF NET WATER CHARGES RECEIVED (RS. 1 88 065). SINCE THE PARTIALLY WATER CHARGES ARE NOT THE RELATED TO BUSINESS OF THE ASSESSEE THE SAME DOES NOT QUALIFIED U/S 80IA OF THE I.T. ACT. KEEPING IN VIEW THE DETAILS FILED AND AFTER DISCUSSION WITH ASSESSEES REPRESENTATIVE TOTAL INCOME DECLARED BY THE ASSESSEE IS CALCULATED AS UNDER: GROSS TOTAL INCOME AS DECLARED BY ASSESSEE 1 61 37 41 713 LESS: - DEDUCTION U/S 80IA AS CLAIMED BY ASSESSEE. INCOME DISALLOWED FOR THE PURPOSE OF 80IA- PARKING CHARGES HENCE ALLOWABLE DEDUCTION U/S 80IA 1 61 37 41 713/- (-) 56 420/- 1.61 36 85 293/- 1 61 36 85 293/ - TOTAL INCOME 56 420/ - 44 ASSESSED U/S 143(3) OF THE I.T ACT AT TOTAL INCOME OF RS. 56 420/-. TAX ON RS. 56 420 @ 30% = RS. 16 926 EDUCATION CESS @ 3% = RS. 508 TOTAL TAX RS. 17 434/- CALCULATION OF MAT U/S 115JB BOOKS PROFIT RS. 44 35 247/- TAX ON BOOK PROFIT OF RS. 44 35 247 @ 19.05 % MAT CREDIT ALLOWED TO THE ASSESSEE IS RS. 8 27 703/- SINCE THE TAX ON BOOK PROFIT OF RS. 44 35 247/- U/S 115JB IS MORE THAN THE TAX ON REGULAR INCOME AS ASSESSED AT RS. 56 420/- ABOVE THE INCOME U/S 115JB IS ASSESSED. ISSUE DEMAND NOTICE U/S 156 OF THE ACT. GIVE CREDIT FOR PREPAID TAXES. (37.1.3) ALSO FOR READY REFERENCE THE IMPUGNED ORDER DATED 31.03.2018 OF THE LD. COMMISSIONER OF INCOME TAX CENTRAL-II NEW DELHI (LD. CIT FOR SHORT) PASSED U/S 263 OF IT ACT IS ALSO REPRODUCED AS UNDER: REVISION ORDER U/S 263 OF THE IT ACT 1961- IN RESPECT OF THE ASSESSMENT ORDERS PASSED U/S 143(3 ) OF THE IT ACT 1961 DATED 10.08.2015 FOR A.Y. 2013-14 THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 28.09.2013 DECLARING NIL INCOME AND HAS ALSO FILED REVISED RETURN DECLARING AN INCOME OF RS. NIL ON 07.01.2014. ASSESSMENT U/S 143(3) OF THE L.T. ACT WAS COMPLETED ON 10.08.2015 BY THE ASSESSING OFFICER CENTRAL CIRCLE-16 NEW DELHI AT AN INCOME OF RS. 56 420/- (TAXED ON BOOK PROFIT OF RS.44.35 247/- U/S 115JB). 2. ON EXAMINATION OF THE ASSESSMENT RECORDS IT WAS OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 153C/143(3) OF THE INCOME TAX ACT ON 10.08.2015 FOR THE YEAR UNDER CONSIDERATION IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE TO THE EXTENT THAT ASSESSMENT WAS COMPLETED WITHOUT PROPER EXAMINATION/VERIFICATION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT WITHOUT PROPER EXAMINATION/VERIFICATION OF ALLOWABILTY OF DEDUCTION U/S 80IA AND TRANSFER PRICING ISSUE. A SHOW CAUSE NOTICE AS PER THE PROVISIONS OF SECTION 263 OF THE IT ACT WAS ISSUED TO THE ASSESSEE ON 11.10.2017 TO FILE ITS SUBMISSIONS ON 07.11.2017 OBSERVING AS UNDER:- RS. 8 45 137/-. 45 IT IS SEEN THAT FROM THE RECORDS THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION OF RS. 161 CRORES UNDER SECTION 80IA OF THE ACT. THE ASSESSEE HAS SHOWN RS. 153 CRORES UNDER THE HEAD SALE OF INDUSTRIAL PARK (NET) ' IN THE STATEMENT OF ITS PROFIT AND LOSS AND HAS CLAIMED THE 801A DEDUCTION ON SUCH AMOUNT. THE AO HAS FAILED TO MAKE ENQUIRY WITH REGARD TO THE DEDUCTION UNDER SECTION 80IA AND ALLOWED THE CLAIM OF THE ASSESSEE. SECTION 80IA IS AVAILABLE IN RESPECT OF PROFIT AND GAINS DERIVED BY AN UNDERTAKING FROM ANY BUSINESS AS REFERRED U/S 80IA(4). THE ASSESSEE IN THE INSTANT CASE HAD CLAIMED THE DEDUCTION UNDER SECTION 80IA(4)(III) FOR OPERATING AND MAINTAINING THE INDUSTRIAL PARK THUS THE APPROACH OF AO ACCEPTING THE SALE OF INDUSTRIAL PARK AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA PRIMA FACIE APPEARS TO BE ERRONEOUS SO AS TO CAUSE PREJUDICE TO THE INTEREST OF REVENUE. IT IS SEEN THAT FROM THE RECORDS THAT THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS. 77 65 278/- DURING THE RELEVANT PREVIOUS YEAR. THE AO HAS FAILED TO MAKE ENQUIRY WITH REGARD TO THE EXPENSES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME EVEN THE SAME HAD BEEN A REASON FOR SELECTION THE CASE UNDER CASS. THUS THE APPROACH OF AO IN NOT CALLING FOR THE DETAILS OF EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME PRIMA FACIE APPEARS TO BE ERRONEOUS SO AS TO CAUSE PREJUDICE TO THE INTEREST OF REVENUE. IT IS SEEN THAT FROM THE RECORDS THAT THE ASSESSEE HAS SOLD ITS UNDERTAKING TO ITS 100% SUBSIDIARY M/S NOIDA TOWERS PRIVATE LIMITED DURING THE RELEVANT PREVIOUS YEAR THUS THE PROVISIONS OF DOMESTIC TRANSFER PRICING WERE APPLICABLE TO SUCH TRANSACTION. THE AO HAS NOT SCRUTINIZED SUCH TRANSACTION FROM DTP STANDPOINT THUS THE APPROACH OF AO IN NOT SCRUTINIZING SUCH HUGE TRANSACTION PRIMA FACIE APPEARS TO BE ERRONEOUS SO AS TO CAUSE PREJUDICE TO THE INTEREST OF REVENUE. 3. THE ASSESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY IN THE LIGHT OF ABOVE FACTS CONTAINED IN THE SHOW-CAUSE NOTICE THE ASSESSMENT ORDER PASSED IN ITS CASE BY THE ASSESSING OFFICER CENTRAL CIRCLE-16 NEW DELHI ON 10.08.2015 MAY NOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS PER THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT 1961. ASSESSEE WAS GIVEN AN OPPORTUNITY TO FILE ITS SUBMISSIONS ON THE ISSUES RAISED IN THE SHOW-CAUSE NOTICE. ON 07.11.2017 CA/AR OF THE ASSESSEE SH. VINOD SAHNI FILED POWER OF ATTORNEY AND REQUESTED FOR ADJOURNMENT FOR I MONTH. THEREFORE THE CASE WAS ADJOURNED TO 29.11.2017 AT 11:00 AM. AGAIN ON 29.11.2017 CA/AR OF THE ASSESSEE SH. VINOD SAHNI FILED LETTER IN WHICH HE REQUESTED FOR ADJOURNMENT THE CASE WAS ADJOURNED TO 11.12.2017. ON 11.12.2017 SH. VINOD SAHNI CA & AR & SH. DINESH KUMAR ON BEHALF OF THE ASSESSEE COMPANY APPEARED AND SUBMITTED THAT ASSESSING OFFICER HAD ASKED THE ASSESSEE COMPANY TO SUBMIT A DETAILED NOTE AND SUPPORTING DOCUMENTS FOR CLAIMING DEDUCTION US/ 801A. IN REPLY TO THAT THE ASSESSEE COMPANY SUBMITTED A LETTER DATED 23.07.2015 PROVIDING DETAILED NOTE ALONGWITH FIVE 46 ANNEXURE WHICH INCLUDE NOTIFICATION BY CBDT NOTIFYING THE ASSESSEE COMPANY AS INDUSTRIAL PARK ELIGIBLE FOR DEDUCTION U/S 801A AND AUDIT REPORT U/S 801A IN FORM NO. 10CCB IN SUPPORT OF CLAIM OF DEDUCTION U/S80IA. A FULL SET OF DOCUMENTS SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS ARE ATTACHED AS ANNEXURE. FURTHER LD. AO ASKED INFORMATION ABOUT THE CLAIM OF DEDUCTION IN EARLIER YEARS ALSO IN SUPPORT OF WHICH THE ASSESSEE COMPANY SUBMITTED ASSESSMENT ORDER OF THOSE YEARS. THESE FACTS ARE ALSO STATED IN THE ASSESSMENT ORDER U/S 143(3) OF THE IT ACT FOR THE AY UNDER REFERENCE AND WHILE PASSING THE ORDER THE LD. ASSESSING OFFICER HAS ALSO DISALLOWED PART OF THE DEDUCTION CLAIMED BY THE ASSESSEE COMPANY WHICH INDICATES THE DEPTH IN WHICH LD. ASSESSING OFFICER WENT INTO THE CLAIM OF DEDUCTION U/S80IA. FROM THE ABOVE FACTS IT IS EVIDENT THAT THE LD. ASSESSING OFFICER WAS FULLY AWARE OF THE CLAIM OF THE ASSESSEE COMPANY AND HAS ENQUIRED FULLY BEFORE PASSING THE ASSESSMENT ORDER. IN THE INSTANT CASE THE ASSESSEE COMPANY AS MENTIONED IN POINT NO.2 ABOVE HAS DEVELOPED AND OPERATED AN INDUSTRIAL PARK AND HAS SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION AND HAS CLAIMED THE DEDUCTION AS ALLOWED IN SUB SECTION 4(III) OF SECTION 801A. THE ABOVE FACTS WERE MADE TO THE KNOWLEDGE OF LD. AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE COMPANY. THEREFORE IT IS EVIDENT THAT THE ASSESSEE COMPANY HAD CLAIMED THE DEDUCTION U/S 80IA 4(III) FOR DEVELOPING AND OPERATING THE INDUSTRIAL PARK AND NOT ONLY FOR OPERATING AND MAINTAINING AS CONTEMPLATED IN THE SCN. HENCE WHILE ALLOWING THE DEDUCTION U/S 80IA 4(III) THE LD. AO HAS APPLIED HIS MIND AND FULLY VERIFIED THE FACTS BEFORE PASSING THE ORDER. THE LD. AO HAS ALLOWED THE DEDUCTION AS PER THE PROVISIONS OF THIS SECTION ONLY AND ORDER U/S 143(3) WAS NOT AN ERRONEOUS ORDER. FOR THE EXEMPT INCOME CLAIMED OF RS. 77 65 278/- ASSESSEE SUBMITTED THAT EXEMPT INCOME EARNED FROM DIVIDEND EARNED FROM INVESTMENT MADE IN MUTUAL FUND AND ISSUE WAS EXAMINED DURING ASSESSMENT PROCEEDING. FURTHER ASSESSEE SUBMITTED THAT ASSESSEE COMPANY HAS SOLD INDUSTRIAL PARK/UNDERTAKING TO ITS 100% SUBSIDIARY M/S NOIDA TOWERS PVT. LTD. THE UNDERTAKING WAS SOLD AT MUCH HIGHER PRICE THAN PREVAILING CIRCLE RATE OF NOIDA AUTHORITY. THE FACTS WERE DISCUSSED AT THE TIME OF ASSESSMENT AND SINCE THERE WAS NO REVENUE EFFECT FURTHER NO DOCUMENTS WERE ASKED BY THE A.O. FURTHER THE CASE WAS FIXED FOR HEARING ON 10.01.2018 ON THE GIVEN DATE NEITHER ANYBODY ATTENDED NOR ANY REPLY SUBMITTED BY THE ASSESSEE. ON 08.02.2018 SH. VINOD SAHNI CA & AR & SH. DINESH KUMAR ON BEHALF OF THE ASSESSEE COMPANY APPEARED AND SUBMITTED SUPPORTING DOCUMENTS IN SUPPORT OF SALE OF INDUSTRIAL PARK AND THEY WERE REQUESTED TO SUBMIT THE FURTHER DETAILS BY 23.02.2018. ON 23.02.2018 SH. VINOD SAHNI CA & AR & SH. DINESH KUMAR ON BEHALF OF THE ASSESSEE COMPANY APPEARED AND 47 SUBMITTED THE REPLY IN SUPPORT OF DEDUCTION U/S 80-IA EXEMPT INCOME EARNED ETC. 4. I HAVE PERUSED THE ASSESSMENT RECORDS AND SUBMISSIONS MADE BY THE ASSESSEE IN THIS CASE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 161 37 41 713/- U/S 80IA FOR WHICH NO SUBSTANTIAL ENQUIRY/INVESTIGATION WAS CONDUCTED BY; THE AO. ASSESSING OFFICER FAILED TO CONDUCT ENQUIRY/INVESTIGATION OF EXACT AMOUNT OF PROFIT EARNED ON SALE OF INDUSTRIAL PARK AND SUBSEQUENTLY ALLOWABILTY OF DEDUCTION U/S 80IA. EVERY ASSESSMENT YEAR IS A SEPARATE ASSESSMENT AND ASSESSING OFFICER EXAMINED THE CONDITION FOR ALLOWABILTY' DEDUCTION U/S 80IA INDEPENDENTLY IRRESPECTIVE OF THE FACT THAT ASSESSEE HAS PREVIOUSLY CLAIMED DEDUCTION U/S 80IA OR NOT. IN THE INSTANT CASE AO HAS NOT AT ALL INITIATED THE REQUISITE ENQUIRY WITH REGARDS TO DEDUCTION CLAIMED U/S 80TA. IT WAS INCUMBENT ON THE AO TO HAVE NOTICED THE DISTINGUISHING FEATURE VIS-A-VIS THE PRECEDING YEAR TO THE EFFECT THAT WHILE DURING PRECEDING YEAR THE ASSESSEE RECEIVED ONLY RENTAL/MAINTENANCE RECEIPTS DURING THE YEAR UNDER REFERENCE THE WHOLE INFRASTRUCTURE FACILITY HAS BEEN SOLD OFF FOR A SUBSTANTIAL CONSIDERATION AND PROFIT IS CLAIMED EXEMPT. IT WAS THE DUTY OF THE AO TO MINUTELY EXAMINE THE ELIGIBILITY OF CLAIM AND TRUE ELIGIBLE QUANTUM OF EXEMPTION TO BE ALLOWED. AO COMPLETELY FAILED IN EXAMINING THIS ASPECT AND IN BRINGING ANY EVIDENCE ON RECORD IN THIS BEHALF. ASSESSEE HAS MADE SPECIFIED DOMESTIC TRANSACTION OF RS.208 47 12 830/- WITH NOIDA TOWERS LTD. AND ASSESSEE HIMSELF ADMITTED THAT TRANSACTIONS WERE MADE MUCH HIGHER PRICE THEN PREVAILING CIRCLE RATE. IN THIS REGARD ASSESSING OFFICER FAILED TO CONDUCT REQUISITE ENQUIRY/INVESTIGATION TO FIND OUT THE .ARM'S LENGTH PRICE OF THE TRANSACTION AND FAILED TO MAKE REFERENCE TO TPO WHICH WAS HE WAS SUPPOSED TO MAKE AS PER THE CBDT GUIDELINES INSTRUCTION NO 3/2003 AND S UBSEQUENT DIRECTIONS OF CBD T. CONDITION F OR REFERENCE TO TPO IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE BUT THE AO HAD PASSED ASSESSMENT ORDER WITHOUT REFERRING THE ISSUE OF SP ECIFIED DOMESTIC TRANSACTION FOR DETERMINING ARM'S LENGTH PRICE. THUS THE ACTION OF THE AO IN COMPLETING THE ASSESSMENT WITHOUT MAKING AN ENQUIRY THROUGH REFERENCE TO TPO AS PER CBDT GUIDELINES AND SUBSEQUENTLY ALLOWING DEDUCTION U/S 80IA MADE THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE AO ALSO FAILED TO EXAMINE APPLICABILITY' OR OTHERWISE OF SEC.801A(8) FURTHER THE AO HAD NOT CONDUCTED REQUISITE ENQUIRY/INVESTIGATION ON EXEMPT INCOME EARNED BY THE ASSESSEE AND APPLICABILITY OF THE PROVISION OF SECTION 14A OF THE IT ACT RWS RULE 8D OF THE IT RULE. 5. ALSO RELIANCE ON THE ISSUES OF LACK OF ENQUIRY MAY BE PLACED ON THE APEX COURT DECISION IN THE CASE OF RAM PYARI DEVI SARAOGI VS CIT (67 1TR 84) AND IN THE CASE OF SMT. TARA DEVI AGARWAL VS CIT (88 ITR 323) THAT LACK OF ENQUIRY WOULD RENDER ORDER OF THE ASSESSMENT AS ERRONEOUS 48 AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE HON'BLE DELHI HIGH HAS ALSO HELD IN THE CASE OF ITO VERSUS DG HOUSING PROJECTS LIMITED (2012) 343 FIR 329 (DELHI) AS UNDER: '10. REVENUE DOES NOT HAVE ANY RIGHT TO APPEAL TO THE FIRST APPELLATE AUTHORITY AGAINST AN ORDER PASSED BY THE ASSESSING OFFICER. SECTION 263 HAS BEEN ENACTED TO EMPOWER THE CJT TO EXERCISE POWER OF REVISION AND REVISE ANY ORDER PASSED BY THE ASSESSING OFFICER IF TWO CUMULATIVE CONDITIONS ARE SATISFIED. FIRSTLY THE ORDER SOUGHT TO BE REVISED SHOULD HE ERRONEOUS AND SECONDLY IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE EXPRESSION 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' IS OF WIDE IMPORT AND IS NOT CONFINED TO MERELY LOSS OF TAX. THE TERM 'ERRONEOUS' MEANS A WRONG/INCORRECT DECISION DEVIATING FROM LAW. THIS EXPRESSION POSTULATES AN ERROR WHICH MAKES AN ORDER UNSUSTAINABLE IN LAW. 11. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. IF THE ASSESSING OFFICER AS AN ADJUDICATOR DECIDES A QUESTION OR ASPECT AND MAKES A WRONG ASSESSMENT WHICH IS UNSUSTAINABLE IN LAW IT CAN BE CORRECTED BY THE COMMISSIONER IN EXERCISE OF REVISIONARY POWER. AS AN INVESTIGATOR IT IS INCUMBENT UPON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS REQUIRED TO BE EXAMINED AND VERIFIED TO COMPUTE THE TAXABLE INCOME. IF THE ASSESSING OFFICER FAILS TO CONDUCT THE SAID INVESTIGATION HE COMMITS AN ERROR AND THE WORD 'ERRONEOUS' INCLUDES FAILURE TO MAKE THE ENQUIRY. IN SUCH CASES THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION HAS NOT BEEN MADE AND NOT BECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. 12. DELHI HIGH COURT IN GEE VEE ENTERPRISES V. ADDITIONAL COMMISSION OF INCOME-TAX DELHI-1 (1975) 99 HR 375 HAS OBSERVED AS UNDER: - (1) 'THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME-TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. 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 HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS SLATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE 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 THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. 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. 49 I THUS HOLD THAT THE ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE BY THE ASSESSING OFFICER CENTRAL CIRCLE-16 NEW DELHI ON 10.08.2015 U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS THE SAID ASSESSMENT IS SET ASIDE AND THE ASSESSMENT PROCEEDINGS ARE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER ON THE ISSUE OF EXAMINATION/VERIFICATION/ALLOWABILTY OF DEDUCTION U/S 801A AND THE QUANTUM OF DEDUCTION U/S 80IA IF AT ALL THE CLAIM ITSELF IS VALID AND APPLICABILITY OF SEC.14A ON EXEMPT INCOME. THE AO IS DIRECTED TO FRAME THE ASSESSMENT AFRESH AS PER THE PROVISIONS OF THE INCOME TAX ACT AFTER DULY EXAMINING THE SPECIFIED DOMESTIC TRANSACTIONS THROUGH REFERENCE TO THE TPO AS PER BOARDS GUIDELINES AND CONSIDERING THE REPORT OF THE TPO ON RECEIPT OF ORDER U/S. 92CA(3) OF THE L.T. ACT 1961 AND AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE. AO SHALL ALSO CONSIDER THE APPLICABILITY C OTHERWISE OF SEC 80IA(8) AS PER LAW. THE A.O. SHALL NOTE THAT NO OTHER ERROR/PREJUDICE TO THE INTEREST C THE REVENUE HAS BEEN NOTED BY THE UNDERSIGNED OR HAS BEEN CONFRONTED TO THE ASSESSEE AND THEREFORE THE A.O. IS DIRECTED TO RESTRICT HIMSELF WHILE FRAMING FRESH ASSESSMENT TO THE ISSUES DISCUSSED ABOVE AND CONSIDER THE SAME AS PER LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. (37.2) THIS APPEAL IS AGAINST THE AFORESAID REVISION ORDER DATED 31.03.2018 UNDER SECTION (U/S FOR SHORT) 263 OF IT ACT PASSED BY THE LD. COMMISSIONER OF INCOME TAX CENTRAL-II NEW DELHI. IN HIS IMPUGNED REVISION ORDER DATED 31.03.2018; LD. CIT HAS HELD THE ASSESSMENT ORDER DATED 10.08.2015 OF THE AO PASSED U/S 143(3) OF IT ACT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON TWO ISSUES. THE FIRST ISSUE PERTAINS TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IA OF IT ACT. THE SECOND ISSUE PERTAINS TO APPLICABILITY OF THE PROVISIONS OF SECTION 14A OF IT ACT READ WITH RULE 8D OF INCOME TAX RULES 1962 (IT RULES FOR SHORT). ON BOTH THE ISSUES THE LD. CIT HAS NOT SPECIFICALLY INDENTIFIED THE EXACT ERROR IN THE ORDER OF THE AO; AND HE HAS ALSO NOT CLEARLY SPECIFIED THE EXACT PREJUDICE CAUSED TO REVENUE- EXCEPT THAT HE OPINED THAT THE AO DID NOT CONDUCT ENQUIRY / INVESTIGATION ADEQUATELY. THE OPINION OF THE LD. CIT THAT THE ORDER OF THE AO WAS ERRONEOUS AND 50 PREJUDICIAL TO THE INTEREST OF REVENUE; IS BASED ON THE FOUNDATION OF THE FOLLOWING CONCLUSIONS OF FACT AS EXPRESSED BY THE LD. CIT IN HIS IMPUGNED REVISION ORDER DATED 31.03.2018: I) IN PARAGRAPH 4 OF THE AFORESAID IMPUGNED ORDER DATED 31.03.2018 THE LD. CIT HAS ALLEGED THAT NO SUBSTANTIAL ENQUIRY/INVESTIGATION WAS CONDUCTED BY THE ASSESSING OFFICER (AO FOR SHORT) FOR ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF IT ACT. A LITTLE LATER IN THE SAME PARAGRAPH THE LD. CIT HAS ESCALATED THE ALLEGATION AGAINST THE AO BY OBSERVING THAT AO HAS NOT AT ALL INITIATED THE REQUISITE ENQUIRY WITH REGARDS TO DEDUCTION CLAIMED U/S 80IA. LATER IN THE SAME PARAGRAPH THE LD. CIT WENT ON TO STATE THAT IT WAS THE DUTY OF THE AO TO MINUTELY EXAMINE THE ELIGIBILITY OF CLAIM AND TRUE ELIGIBLE QUANTUM OF EXEMPTION TO BE ALLOWED (U/S 80IA OF IT ACT) AND ALLEGED THAT THE AO COMPLETELY FAILED IN EXAMINING THIS ASPECT AND IN BRINGING ANY EVIDENCE ON RECORD IN THIS BEHALF. II) THE LD. CIT HAS ALLEGED THAT THE AO FAILED TO CONDUCT REQUISITE ENQUIRY/INVESTIGATION TO FIND OUT THE ARMS LENGTH PRICE OF THE TRANSACTION AND FAILED TO MAKE REFERENCE TO TPO WHICH HE WAS SUPPOSED TO MAKE AS PER THE CBDT GUIDELINES / INSTRUCTION NO 3/2003 AND SUBSEQUENT DIRECTIONS OF CBDT. 51 III) THE LD. CIT HAS ALLEGED THAT THE CONDITION FOR REFERENCE TO TPO IS SQUARELY APPLICABLE TO THE FACTS OF THIS CASE BUT THE AO HAD PASSED ASSESSMENT ORDER WITHOUT REFERRING THE ISSUE OF SPECIFIED DOMESTIC TRANSACTION FOR DETERMINING ARMS LENGTH PRICE. IV) THE LD. CIT HAS ALLEGED THAT THE AO HAD NOT CONDUCTED REQUISITE ENQUIRY/INVESTIGATION ON EXEMPT INCOME EARNED BY THE ASSESSEE AND APPLICABILITY OF THE PROVISION OF SECTION 14A OF THE IT ACT READ WITH RULE 8D OF THE IT RULE. (38) PERUSAL OF ASSESSMENT ORDER DATED 20.03.2013 U/S 143(3) OF IT ACT SHOWS THAT RETURN OF INCOME DECLARING AN INCOME OF RS. 12 18 222/- WAS FILED ON 27.09.2010. THE RETURN WAS PROCESSED U/S 143(1) ON 07.05.2011 AT THE RETURNED INCOME. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. STATUTORY NOTICE U/S 143(2) AND 142(1) WERE ISSUED ALONG WITH A DETAILED QUESTIONNAIRE. IN RESPONSE TO NOTICES AUTHORIZED REPRESENTATIVES OF THE ASSESSEE ATTENDED AND FURNISHED THE DETAILS AS CALLED FOR. BOOKS OF ACCOUNT WERE ALSO PRODUCED BY THE ASSESSEE WHICH WERE TEST CHECKED BY THE AO. DURING THE ASSESSMENT PROCEEDINGS VARIOUS DETAILS FILED BY THE ASSESSEE BEFORE THE AO ARE SUMMARIZED AS UNDER: I) VIDE LETTER DATED 22.09.2014: A) ORIGINAL POWER OF ATTORNEY B) COPY OF ACKNOWLEDGEMENT AND COMPUTATION OF TAXABLE INCOME FOR THE AY 2013-14 52 C) COPY OF AUDITED BALANCE SHEET ALONG WITH ALL SCHEDULES FOR THE YEAR ENDED 31.03.2013. D) COPY OF TAX AUDIT REPORT FOR THE YEAR ENDED 31.03.2013. E) COPY OF FORM-3CB FORM-29B AND 10CCB WITH ACKNOWLEDGES FOR THE YEAR ENDED 31.03.2013. II) VIDE LETTER DATED 23.06.2015: A) COPY OF ITR BALANCE SHEET ETC. B) DETAILS AND HISTORY OF BUSINESS ACTIVITIES. C) COPY OF MEMORANDUM OF ASSOCIATION. D) DETAILS OF SHARE CAPITAL PENDING FOR ALLOTMENT. E) DETAILS OF SECURED AND UNSECURED LOANS. F) DETAIL OF ADDITION TO FIXED ASSETS. III) VIDE LETTER DATED 01.07.2015: A) DETAILS OF SUNDRY CREDITORS ABOVE RS. 1 LAC. B) DETAILS OF SUNDRY DEBTORS ABOVE RS. 1 LAC. C) DETAILS OF STATUTORY LIABILITIES. D) DETAILS OF OTHER LIABILITIES. E) PARTY WISE SALE AND PURCHASE AND MANUFACTURING EXPENSES. IV) VIDE LETTER DATED 20.07.2015: A) DETAILS OF FINANCIAL EXPENSES. B) DETAILS OF FOREIGN TRAVELLING. C) DETAILS OF CAPITAL GAINS/LOSS. 53 D) BANK STATEMENT. E) CREDITORS ACCOUNT WITH NO TRANSACTION. F) ASSESSMENT ORDER FOR 2012-13. G) COPY OF TDS RETURN. V) VIDE LETTER DATED 23.07.2015: A) JUSTIFICATION OF DEDUCTION U/S 80IA. B) DETAILS OF INVESTMENT IN MUTUAL FUNDS . VI) VIDE LETTER DATED 29.07.2015: A) COPY OF AGREEMENT FOR SALE OF BUSINESS UNDERTAKING BETWEEN ETT LIMITED (I.E. THE ASSESSEE) AND NOIDA TOWERS PRIVATE LIMITED. VII) VIDE LETTER DATED 06.08.2015: A) DETAILS OF RELATED PARTY TRANSACTIONS MENTIONED IN FORM 10CCB. B) RECONCILIATION OF INCOME WITH SERVICE TAX RETURN. C) DOMESTIC TRANSACTION WITH ASSOCIATED ENTERPRISES. (38.1) PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 16 09 314/- BY THE AO VIDE AFORESAID ORDER DATED 20.03.2013 KEEPING IN VIEW THE DETAILS FILED BY THE ASSESSEE AND AFTER DISCUSSION WITH ASSESSEES REPRESENTATIVE WHEREIN ADDITIONS WERE MADE ON ACCOUNT OF ADDITION U/S 40A(7) OF IT ACT AND ON ACCOUNT OF PARTIAL DISALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF IT ACT. REVISION PROCEEDINGS U/S 263 OF IT ACT WERE INITIATED BY THE LD. CIT VIDE SHOW CAUSE NOTICE U/S 263 OF IT ACT DATED 11.10.2017. DURING THE REVISION PROCEEDINGS U/S 263 54 OF IT ACT THE ASSESSEE MADE WRITTEN SUBMISSIONS RUNNING INTO A TOTAL OF 198 PAGES VIDE SEPARATE LETTERS DATED 11.12.2017 08.02.2018 AND 23.02.2018. A SHORT GIST OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT IS REPRODUCED AS UNDER: (38.1.1) GIST OF WRITTEN SUBMISSIONS VIDE LETTER DATED 11.12.2017 THE ASSESSEE COMPANY HAS RECEIVED SHOW CAUSE NOTICE U/S 263 (SCN). ASSESSEE COMPANYS POINT-WISE REPLY IS HEREUNDER: 1) REPLY TO POINT NO. 2 (A): WITH REGARD TO DEDUCTION U/S 80 IA WE DRAW YOUR KIND ATTENTION TO THE FACT THAT THE LD. ASSESSING OFFICER HAD ASKED THE ASSESSEE COMPANY TO SUBMIT A DETAILED NOTE AND SUPPORTING DOCUMENTS FOR CLAIMING DEDUCTION U/S 80IA. IN REPLY TO THAT THE ASSESSEE COMPANY SUBMITTED A LETTER DATED 23/07/2015 PROVIDING DETAILED NOTE ALONG WITH FIVE ANNEXURES WHICH INCLUDE NOTIFICATION BY CBDT NOTIFYING THE ASSESSEE COMPANY AS INDUSTRIAL PARK ELIGIBLE FOR DEDUCTION U/S 80 IA AND AUDIT REPORT U/S 80 IA IN FORM NO. 10CCB IN SUPPORT OF CLAIM OF DEDUCTION U/S 80IA. A FULL SET OF DOCUMENTS SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS ARE ATTACHED AS ANNEXURE. THERE WERE DETAILED DISCUSSIONS ON DOCUMENTS SUBMITTED AND CLAIM OF DEDUCTION BETWEEN LD. ASSESSING OFFICER AND THE AR OF THE ASSESSEE COMPANY DURING VARIOUS ASSESSMENT PROCEEDINGS. FURTHER LD. ASSESSING OFFICER ASKED INFORMATION ABOUT THE CLAIM OF DEDUCTION IN EARLIER YEARS ALSO IN SUPPORT OF WHICH THE ASSESSEE COMPANY SUBMITTED ASSESSMENT ORDER OF THOSE YEARS. THESE FACTS ARE ALSO STATED IN THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR UNDER REFERENCE AND WHILE PASSING THE ORDER THE LD. ASSESSING OFFICER HAS ALSO DISALLOWED PART OF THE DEDUCTION CLAIMED BY THE ASSESSEE COMPANY WHICH INDICATES THE DEPTH IN WHICH LD. ASSESSING OFFICER WENT INTO THE CLAIM OF DEDUCTION U/S 80IA. FROM THE ABOVE FACTS IT IS EVIDENT THAT THE LD. ASSESSING OFFICER WAS FULLY AWARE OF THE CLAIM OF THE ASSESSEE COMPANY AND HAS ENQUIRED FULLY BEFORE PASSING THE ASSESSMENT ORDER. THE ASSESSEE COMPANY HAS DEVELOPED THE INDUSTRIAL PARK AT PLOT NO. 15 & 16 SECTOR 16-A NOIDA DISTRICT- NOIDA UTTAR PRADESH-201301 AND HAD APPLIED UNDER INDUSTRIAL PARK SCHEME 2002 TO CLAIM DEDUCTION U/S 80 IA OF THE INCOME TAX ACT. THE CBDT HAS ISSUED THE NOTIFICATION DATED 17 TH NOVEMBER 2006 NOTIFYING THE ASSESSEE COMPANY AS THE UNDERTAKING BEING DEVELOPED AND BEING MAINTAINED AND OPERATED BY THE ASSESSEE COMPANY AS AN INDUSTRIAL PARK FOR THE PURPOSE OF SECTION 80-1A (4) (HI). THE SAID SUB SECTION IS REPRODUCED HERE BELOW: 55 80-IA(4)(III) ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK OR SPECIAL ECONOMIC ZONE NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 1997 AND ENDING ON THE 31ST DAY OF MARCH 2006: PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN INDUSTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL 1999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE AS THE CASE MAY BE TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING) THE DEDUCTION UNDER SUBSECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING: PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF FOR THE FIGURES LETTERS AND WORDS '31ST DAY OF MARCH 2006' THE FIGURES LETTERS AND WORDS '31ST DAY OF MARCH 2011' HAD BEEN SUBSTITUTED; THIS INDICATES THAT THERE ARE THREE DISTINCT CATEGORIES OF PROFITS CONTEMPLATED AS ELIGIBLE FOR THE BENEFIT OF THE DEDUCTION UNDER SECTION 80-IA(4)(III) 1. PROFITS MADE BY AN ASSESSEE WHO BUILDS / CONSTRUCTS / AN INDUSTRIAL PARK AND IMMEDIATELY SELLS IT (DEVELOPS) 2. PROFITS MADE BY AN ASSESSEE WHO BUILDS / CONSTRUCTS AN INDUSTRIAL PARK LEASES IT OUT FOR A PERIOD AND THEN SELLS IT (DEVELOPS AND OPERATES) 3. PROFITS MADE BY AN ASSESSEE WHO WITHOUT HAVINGCONSTRUCTED IT MERELY MAINTAINS AND OPERATES AN INDUSTRIAL PARK (MAINTAIN AND OPERATES) IN THE INSTANT CASE THE ASSESSEE COMPANY AS MENTIONED IN POINT NO. 2 ABOVE HAS DEVELOPED AND OPERATED AN INDUSTRIAL PARK AND HAS SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION AND HAS CLAIMED THE DEDUCTION AS ALLOWED IN SUB -SECTION 4(III) OF SECTION 80IA. THE ABOVE FACTS WERE MADE TO THE KNOWLEDGE OF LD. ASSESSING OFFICER DURING VARIOUS DISCUSSIONS AND THE SAME WAS CROSS VERIFIED BY HIM FROM THE INCOME TAX ACT AND ONLY THEREAFTER THE LD. ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE COMPANY. THEREFORE IT IS EVIDENT THAT THE ASSESSEE COMPANY HAD CLAIMED THE DEDUCTION U/S 80IA 4(III) FOR DEVELOPING AND OPERATING THE INDUSTRIAL PARK AND NOT ONLY FOR OPERATING AND MAINTAINING AS CONTEMPLATED IN THE SCN. 56 HENCE WHILE ALLOWING THE DEDUCTION U/S 80IA4(III) THE LD A.O. HAS APPLIED HIS MIND AND FULLY VERIFIED THE FACTS BEFORE PASSING THE ORDER. THE LD. ASSESSING OFFICER HAS ALLOWED THE DEDUCTION AS PER THE PROVISIONS OF THIS SECTION ONLY AND ORDER U/S 143(3) WAS NOT AN ERRONEOUS ORDER. 2) REPLY TO POINT NO. 2 (B): DURING THE ASSESSMENT YEAR UNDER REFERENCE THE ASSESSEE COMPANY HAS EARNED DIVIDEND INCOME AMOUNTING TO RS. 77 65 278/-. THE DIVIDEND WAS EARNED FROM MUTUAL FUND INVESTMENTS MADE DURING THE YEAR. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSE COMPANY FILED DETAILS OF INVESTMENTS IN MUTUAL FUND ALONG WITH INCOME EARNED THEREOF. THE MONEY WAS INVESTED OUT OF SALES CONSIDERATION RECEIVED FROM SALE OF INDUSTRIAL PARK. THE SAME WAS EVIDENT FROM BANK STATEMENTS FILED DURING THE ASSESSMENT PROCEEDINGS. THE LD. ASSESSING OFFICER DISCUSSED THE MATTER WITH THE AR OF THE ASSESSE COMPANY AND WAS EXPLAINED ABOUT THE RELATION OF EXPENDITURE INCURRED WITH REFERENCE TO INVESTMENT MADE. IT WAS CLARIFIED THAT THE INTEREST ON BANK LOAN AMOUNTING RS.1 79 46 655/ WAS RELATED TO THE PERIOD BEFORE MAKING THE 'INVESTMENT AS THE BANK LOAN WAS FULLY PAID FROM THE SALES CONSIDERATION OF 'INDUSTRIAL PARK AND ONLY THE BALANCE AMOUNT OF CONSIDERATION WAS INVESTED IN MUTUAL FUNDS. IN SUPPORT OF THIS THE AR FILED THE SANCTION LETTER OF THE BANK LOAN ALONG WITH BANK LOAN STATEMENT AND DETAIL OF FINANCIAL EXPENSES. FURTHER IT WAS ALSO EXPLAINED THAT CLOSING BALANCE OF CURRENT INVESTMENT IS NIL AND OF NON-CURRENT INVESTMENT IS RS.83 509/- AS AT THE END OF THE YEAR UNDER REFERENCE. WE ALSO WISH O SUBMIT THAT MUTUAL FUND INVESTMENT WAS MADE THROUGH CONSULTANT BROKER AND NO DIRECT/INDIRECT EXPENDITURE WAS INCURRED/REQUIRED TO BE INCURRED TO EARN DIVIDEND INCOME ON SUCH INVESTMENT AND THE ASSESSING OFFICER WAS MADE WELL AWARE ABOUT THESE FACTS DURING THE ASSESSMENT PROCEEDINGS. SINCE THE LD. ASSESSING OFFICER HAS CROSS CHECKED ALL THE ABOVE FACTS AND AR HAS SUBMITTED HE REQUISITE DETAILS AND DOCUMENTS WITH REFERENCE TO INVESTMENT THE QUESTION OF NO ENQUIRY WAS MADE BY THE LD. ASSESSING OFFICER IS ABSOLUTELY WRONG BASELESS AND NOT TENABLE. IN ADDITION TO ABOVE WE ALSO WISH TO SUBMIT THAT ANY ADDITIONS OF UPTO RS.3 86 28 233/- WAS OF NIL EFFECT TO REVENUE AS THERE WOULD HAVE BEEN BE NO CHANGE TO TAXABLE INCOME OF THE ASSESSE COMPANY FOR THE RELEVANT ASSESSMENT YEAR DUE TO DEDUCTION U/S 80IA AMOUNTING RS.165 14 13 241/- WHICH WAS RESTRICTED TO THE AMOUNT OF GROSS TOTAL INCOME OF RS.161 27 85 008/-. HENCE EVEN IF THERE WAS ANY ADDITION DUE TO EXPENDITURE RELATED TO DIVIDEND INCOME THERE WOULD HAVE NOT BEEN ANY ADDITIONAL TAX REVENUE FOR THE YEAR UNDER REFERENCE. FROM THE ABOVE IT IS EVIDENT THAT THERE WAS NO ERRONEOUS ASSESSMENT BY THE LD. ASSESSING OFFICER WITH REFERENCE TO EXEMPT INCOME OF RS.77 65 278/- AND THERE WAS NO REVENUE LOSS EITHER. 57 3) REPLY TO POINT NO. 2 (C): THE ASSESSING OFFICER HAD GIVEN A QUESTIONNAIRE DATED 16/06/2015 WHICH HAS 23 QUESTIONS/ REQUIREMENTS AGAINST WHICH THE ASSESSE COMPANY HAD SUBMITTED VARIOUS DOCUMENTS AND STATEMENTS DURING THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER REFERENCE. AFTER VERIFYING VARIOUS DOCUMENTS AND EVIDENCES SUBMITTED BY THE ASSESSE COMPANY THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND WAS TEST CHECKED BY HIM. THESE FACTS ARE ALSO MENTIONED IN THE FIRST PARAGRAPH OF THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER. REPRODUCING VERBATIM FOR YOUR REFERENCE - IN RESPONSE TO NOTICES SHRI VINOD SAHNI FCA AND SHRL VAIBHAV GUPTA FCA AUTHORIZED REPRESENTATIVE OF THE ASSESSE COMPANY ATTENDED AND FURNISHED THE DETAILS AS CALLED FOR BOOKS OF ACCOUNT PRODUCED WHICH WERE PUT TO TEST CHECK. HENCE THE QUESTION OF PASSING THE ORDER IN HASTE DOES NOT ARISE AT ALL AND FACT THAT ASSESSMENT ORDER IS ERRONEOUS AND IS PREJUDICE TO THE INTEREST OF REVENUE IS UNFOUND. 4) REPLY TO POINT NO. 2 (D): THE ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND HAS EARNED RENTAL INCOME ON INDUSTRIAL PARK BUILDING DURING THE YEAR UNDER REFERENCE. THERE WAS DIFFERENCE OF RS. 42 13 138/- IN THE AMOUNT OF RENT RECEIVED AS SHOWN IN THE SERVICE TAX RETURN COMPARED TO AS SHOWN IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR. THE AR HAS FILED THE RECONCILIATION STATEMENT DURING THE ASSESSMENT PROCEEDING EXPLAINING THE REASON FOR DIFFERENCE. AS SUBMITTED EARLIER THAT THE ASSESSE COMPANY HAS SOLD THE INDUSTRIAL PARK DURING THE YEAR AND THE RENTAL INCOME WHICH WAS EARNED BY THE ASSESSE COMPANY ON THAT INDUSTRIAL PARK ONLY HAS STOPPED FROM THE DATE OF SALE I.E. 23 RD MAY 2012. THE RENT WAS RECEIVED EVERY MONTH IN ADVANCE AND FULL MONTH RENT OF MAY 2012 HAS BEEN INCLUDED IN THE SERVICE TAX RETURN. HOWEVER AS THE INDUSTRIAL PARK BUILDING WAS SOLD ON 24 RD MAY 2012 THE ASSESSE COMPANY NEEDED TO TRANSFER 8 DAYS RENT TO THE PURCHASER AND THE SAME WAS OF RS.42 13 138/-. THE ASSESSE COMPANY HAS DULY TRANSFERRED THE SAME AND THAT LED TO THE DIFFERENCE BETWEEN RENT AMOUNT SHOWN IN THE PROFIT & LOSS ACCOUNT AND SERVICE TAX RETURN. THE LD. ASSESSING OFFICER ASKED FOR THE RECONCILIATION AND THE SAME ABOVE FACTS WERE EXPLAINED TO HIM WHILE SUBMITTING THE RECONCILIATION STATEMENT VIDE LETTER DATED 06/08/2015. THE FACTS WERE SO EVIDENT FROM THE RECORDS PRODUCED BEFORE THE ASSESSING OFFICER THAT NO FURTHER EXPLANATION WAS NEEDED BY THE LD. ASSESSING OFFICER. HENCE THE QUESTION OF ERRONEOUS ORDER BY THE ASSESSING OFFICER DOES NOT ARISE AT ALL. 5) REPLY TO POINT NO. 2 (E): 58 AS SUBMITTED EARLIER THE ASSESSE COMPANY HAS SOLD INDUSTRIAL PARK / UNDERTAKING DURING THE YEAR UNDER REFERENCE. THE SAME WAS SOLD TO ITS 100% SUBSIDIARY M/S NOIDA TOWERS PVT. LTD. THE ASSESSING OFFICER ASKED THE AR TO PRODUCE DOCUMENTS IN SUPPORT OF DOMESTIC TRANSFER PRIDING GUIDELINE. IN RESPONSE TO THAT THE AR FILED COPY OF 3CEB FORM AND EXPLAINED THE TRANSACTION VERBALLY. THE UNDERTAKING WAS SOLD AT MUCH HIGHER PRICE THAN THE PREVAILING CIRCLE RATE OF THE NOIDA AUTHORITY. A VALUATION REPORT WAS ALSO OBTAINED BY THE ASSESSE COMPANY FROM THE APPROVED INDEPENDENT VALUED WHO VALUED IT AT RS.205 94 90 864/- LOWER THAN THE SALE PRICE WHICH WAS RS.208 47 12 83C/-. THE FACTS WERE DISCUSSED AT THE TIME OF ASSESSMENTS AND SINCE THERE WAS NO REVENUE EFFECT FURTHER DOCUMENTS WERE NOT ASKED BY THE LD. ASSESSING OFFICER. HENCE THERE IS NO LOSS OF REVENUE AND THE BASIC DOCUMENTS WITH REGARD TO DOMESTIC TRANSFER PRICING WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THE QUESTION OF ERRONEOUS ASSESSMENT ORDER DOES NOT ARISE ON THIS GROUND. 6) REPLY TO POINT NO. 2 (F): THE ASSESSE COMPANY HAS SUFFERED LOSSES ON SALE OF CURRENT INVESTMENT OF RS.29 41 25 518/- DURING THE YEAR UNDER REFERENCE. THE AR HAS FILED SCRIPT WISE PROFIT & LOSS DETAILS OF THE ABOVE LOSES DURING THE ASSESSMENT PROCEEDINGS. THE LOSSES WERE ON ACCOUNT OF PURCHASE AND SALE OF EQUITY SHARES THROUGH SEBI REGISTERED BROKER M/S RELIGARE SECURITIES LIMITED AT RECOGNIZED STOCK EXCHANGES. THE ASSESSE COMPANY ALSO PAID SECURITIES TRANSACTION TAX (STT) ON ALL THE SHARE TRANSACTIONS. THESE FACTS WERE EXPLAINED TO THE LD. ASSESSING OFFICER AND ORIGINAL BILLS/CONTRACT NOTES/ LEDGER ACCOUNTS OF BROKER WERE PRODUCED DURING TEST CHECK OF BOOKS OF ACCOUNTS WHICH WERE DULY VERIFIED BY THE LD. ASSESSING OFFICER. HE ACCEPTED THE LOSS CLAIMED BY THE ASSESSEE AFTER BEING SATISFIED FROM THE SUPPORTING PRODUCED BEFORE HIM AND HAD PASSED THE ORDER THEREAFTER ONLY. FROM THE ABOVE FACTS IT IS EVIDENT THAT THE LD. ASSESSING OFFICER HAS DULY VERIFIED THE CLAIM OF LOSS BY THE ASSESSE COMPANY AND QUESTION OF ERRONEOUS ORDER DOES NOT ARISE. 7) REPLY TO POINT NO. 2(G): THE ASSESSE COMPANY TRANSFERRED THE SHARES OF WHOLLY OWNED SUBSIDIARY COMPANY M/S VALLEY COMPUTECH LTD. TO ITS ANOTHER WHOLLY OWNED SUBSIDIARY COMPANY M/S AUXIN ENGINEERING LTD. THE TRANSACTION WAS MADE AT FACE VALUE OF RS. 2 56 71 500/- THE COST OF WHICH WAS RS. 126 21 65 200/- AND THE BOOK LOSS OF RS. 1 23 64 93 700/- ON SALE OF SHARE WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE SALE OF SHARES TO ITS SUBSIDIARY COMPANY IS NOT REGARDED AS TRANSFER U/S 47(IV) OF THE INCOME 59 TAX ACT. ACCORDINGLY THE SALE WAS NOT TREATED AS TRANSFER UNDER THE INCOME TAX ACT AND THE ASSESSE COMPANY HAS ALSO NOT CLAIMED ANY LOSS ON THE SAME IN ITS INCOME TAX RETURN FOR THE YEAR. THE ABOVE FACTS WERE DISCUSSED IN DETAIL WITH THE LD. ASSESSING OFFICER AND HE WAS TOTALLY SATISFIED WITH THE EXPLANATION PROVIDED AND PROVISIONS OF LAW APPLICABLE ON SUCH TRANSFER. FURTHER THERE WAS NO LOSS OF REVENUE IN THIS TRANSACTION. HENCE THE ORDER WAS NOT ERRONEOUS AND ALSO NOT PREJUDICE TO THE INTEREST OF THE REVENUE. FROM THE ABOVE POINT WISE REPLY OF ALL THE ISSUES RAISED IN THE LETTER DATED 11 TH OCTOBER I 2017 WE CAN CONCLUDE THAT: A) THERE WERE NUMBER OF HEARINGS DURING THE ASSESSMENT PROCEEDINGS AND HUNDREDS OF DOCUMENTS WERE SUBMITTED; B) ALL THE DETAILS AND DOCUMENTS WERE VERIFIED BY THE LD. ASSESSING OFFICER AND ALL HIS QUESTIONS WERE ANSWERED; C) BOOKS OF ACCOUNTS WERE PRODUCED AND TEST CHECK WAS DONE BY THE LD. ASSESSING OFFICER; D) THERE WAS NO LOSS OF REVENUE ON ANY ISSUES RAISED IN THE SCN DATED 11 LH OCTOBER 2017; E) THE ASSESSMENT ORDER WAS NOT ERRONEOUS AND ALSO NOT PREJUDICE TO THE INTEREST OF REVENUE ON ANY ACCOUNT. ON THE ABOVE FACTS WE HEREBY PRAY NOT TO INITIATE PROCEEDINGS U/S 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2013-14 AGAINST THE ASSESSEE COMPANY. ETT LIMITED ASSESSMENT YEAR 2013-14 NOTE FOR CLAIMING DEDUCTION U/S 80IA:- ETT LIMITED (FORMERLY KNOWN AS INDIAN EXPRESS MULTIMEDIA LIMITED) WAS INCORPORATED ON NOVEMBER 11 1993 AND THE NAME GOT CHANGED TO ETT LIMITED ON 01/06/2007 A COPY OF THE FRESH CERTIFICATE OF INCORPORATION CONSEQUENT UPON CHANGE OF NAME IS ATTACHED AS ANNEXURE-I. THE COMPANY IS ENGAGED IN DEVELOPING OPERATING AND MAINTAINING THE IT PARK. ETT LIMITED HAD CONSTRUCTED AND DEVELOPED AN IT PARK AT 15-16 SECTOR 16A NOIDA WHICH WAS DECLARED FUNCTIONAL IN MARCH2004 BY THE NOIDA AUTHORITY. THE ASSESSEE COMPANY APPLIED FOR EXEMPTION IN TERMS OF SECTION 80-IA WITH THE MINISTRY OF COMMERCE & INDUSTRY IN SEPTEMBER 2005. AS PER SECTION 80IA(1)- WHERE THE GROSS INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE 60 ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH THE SUBJECT TO THE PROVISIONS OF THIS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEAR.] FURTHER THE SUB SECTION (2) OF SECTION 80-IA STATES THAT ' THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY AT THE OPTION OF THE ASSESSEE BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK . FURTHER 80-IA(4)(III) STATES THAT: ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK [OR SPECIAL ECONOMIC ZONE] NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL 1997 AND ENDING ON THE 31ST DAY OF MARCH [2006]: [PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN INDUSTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL 1999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE AS THE CASE MAY BE TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING) THE DEDUCTION UNDER SUBSECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING. ON THE BASIS OF APPLICATION BY THE ASSESSEE COMPANY AND AFTER DUE DILIGENCE THE MINISTRY OF COMMERCE & INDUSTRY GRANTED APPROVAL TO THE COMPANY VIDE NOTIFICATION DATED 17 TH NOVEMBER 2006 UNDER THE PROVISIONS OF SECTION 80-IA OF THE INCOME TAX ACT 1961 TO DECLARE AREA AS AN INDUSTRIAL PARK FOR 100% INCOME TAX EXEMPTION. A COPY OF THE NOTIFICATION DATED 17/11/2006 IS ATTACHED AS ANNEXURE-LL. THE ASSESSEE COMPANY HAS RECEIVED THE APPROVAL IN TERMS OF THE INDUSTRIAL PARK SCHEME 2002 NOTIFIED BY THE DEPARTMENT IN EXERCISE OF POWERS U/S 80IA SUB SECTION 4(III) OF THE INCOME TAX ACT-1 961.THE INDUSTRIAL PARK AT PLOT NO-15 & 16 SECTOR-1 6A NOIDA IS DULY NOTIFIED INDUSTRIAL PARK VIDE NOTIFICATION NO. 347/2006.F.NO-178/122/2006-ITA-L. THE NOTIFICATION RECEIVED BY THE ASSESSEE COMPANY CLEARLY STATED THAT NOW THEREFORE IN EXERCISE OF THE POWERS CONFERRED BY CLAUSE (III) OF SUB SECTION (4) OF SECTION 80-IA OF THE SAID ACT THE CENTRAL GOVERNMENT HEREBY NOTIFIES THE UNDERTAKING BEING DEVELOPED AND BEING MAINTAINED AND OPERATED BY M/S INDIAN EXPRESS MULTIMEDIA LIMITED NOIDA AS AN INDUSTRIAL PARK FOR THE PURPOSES OF THE SAID CLAUSE (III). THE NOTIFICATION HAS GIVEN CERTAIN TERMS AND CONDITIONS FOR SUCH DEDUCTION UNDER THE INCOME TAX ACT. THE DETAILED CONDITIONS ARE SPECIFIED IN THE ANNEXURE TO THE NOTIFICATION. 61 FEW OF THE MAJOR CONDITIONS IMPOSED BY THE NOTIFICATION WERE AS FOLLOWS: 1. PROPOSED CONDITION : 90% OF THE ALLOCABLE AREA WAS EARMARKED FOR INDUSTRIAL USE. THE PROPOSED INDUSTRIAL ACTIVITIES WERE DEFINED IN THE NOTIFICATION ITSELF ACTUAL : 90.01% OF THE TOTAL AREA WAS FOR ALLOWED INDUSTRIAL USE ONLY IN THE YEAR UNDER CONSIDERATION AS EVIDENT FROM THE HALF YEARLY RETURN FILED. 2. PROPOSED CONDITION : INVESTMENT REQUIRED WAS MINIMUM OF RS.43 CRORES ACTUAL : RS.46.13 CRORES WERE INVESTED BY THE ASSESSEE COMPANY AS EVIDENT FROM THE BALANCE SHEET. 3. PROPOSED CONDITION : COMMENCEMENT OF IT PARK SHALL BE MADE ON OR BEFORE APRIL 2005 ACTUAL : MUCH BEFORE APRIL 2005 4. PROPOSED CONDITION: UNDER TAKING SHALL PROVIDE ALL INFRASTRUCTURE FACILITY FOR COMMON USE SUCH AS ROADS WATER SUPPLY AND SEWERAGE GENERATION AND DISTRIBUTION OF POWER AIR CONDITIONING ETC. ACTUAL : THE COMPANIES IS PROVIDING ALL THESE FACILITIES AT THE IT PARK AND CAN BE CROSS VERIFIED FROM THE BALANCE SHEET & PROFIT & LOSS ACCOUNT OF THE COMPANY. 5. PROPOSED CONDITION : MINIMUM NUMBER OF INDUSTRIAL UNIT SHALL NOT BE LESS THAN FOUR. ACTUAL: TEN THE ASSESSEE COMPANY HAS FULFILLED ALL THOSE TERMS AND CONDITIONS ON WHICH THE APPROVAL OF THE GOVERNMENT OF INDIA HAS ACCORDED FOR SETTING UP OF AN INDUSTRIAL PARK. THE COMPANY HAS LEASED OUT ITS PREMISES FOR APPROVED INDUSTRIAL ACTIVITIES TO SIX TENANTS (OCCUPYING MORE THAN 90% OF INDUSTRIAL ACTIVITY AREA) AND COMPLYING WITH THE TERMS OF ABOVE SAID NOTIFICATION. THE COMPANY IS ALSO FILING RETURN REGULARLY TO MINISTRY OF COMMERCE & INDUSTRY IN TO THE PRESCRIBED FORM-IPS-LL STATING ALL THE COMPLIANCES WHICH HAS BEEN DULY ACCEPTED BY MINISTRY. THE COMPANY HAS ALSO PROVIDED INFRASTRUCTURE DEVELOPMENT INCLUDING WATER SUPPLY 100% POWER BACK UP THROUGH DG SETS CENTRALIZED AIR-CONDITIONING SERVICES THROUGH CHILLERS AND OTHER 62 FACILITIES FOR COMMON USE OF INDUSTRIAL ACTIVITY AS ALSO REFERRED IN CLAUSE 3 OF THE SAID NOTIFICATION AND AMOUNT RECEIVED AGAINST IS CREDITED TO PROFIT AND LOSS ACCOUNT UNDER THE HEAD OF MAINTENANCE CHARGES RECEIVED. A COPY OF THE RETURNS FILED IN FORM IPS-II OF THE RELEVANT PERIOD IS ATTACHED AS ANNEXURE-LLL. AS STATED ABOVE THE IT PARK DEVELOPED BY THE COMPANY GOT FUNCTIONAL IN THE YEAR 2004-05 A COPY OF THE COMPLETION CERTIFICATE DATED 17/06/2004 ISSUED BY NOIDA AUTHORITY IS ATTACHED AS ANNEXURE-IV THE COMPANY HAS GIVEN PART OF THE PREMISES ON RENT IN THE FINANCIAL YEAR 2004-05 WHICH SHOWS THE COMMENCEMENT OF OPERATION AT THE IT PARK. HOWEVER THE APPROVAL FROM THE MINISTRY CAME IN THE MONTH OF NOVEMBER 2006 AND ACCORDINGLY THE COMPANY HAS NOT CLAIMED ANY DEDUCTION U/S 80-IA IN THE ASSESSMENT YEARS 2005-06 2006-07 AND 2007-08. THE COMPANY STARTED CLAIMING THE DEDUCTION IN THE ASSESSMENT YEAR 2008-09 AND CLAIMING THE SAME CONTINUOUSLY THEREAFTER. THE ASSESSMENT U/S 143(3) WAS COMPLETED IN FOUR OF THE LAST SEVEN YEARS (I.E. PERIOD BETWEEN A.Y. 2005-06 TO A.Y. 2012-13). OUT OF THESE SEVEN YEARS THE ASSESSE COMPANY HAS CLAIMED DEDUCTION U/S 80-IA ONLY FOR THE A.Y. 2008-09 2009-10 2010-11 2011-12 2012- 13 & 2013-14. THE ASSESSMENT FOR THE A.Y. 2012-13 WAS COMPLETED IN JULY 2014 BY YOUR OFFICE ONLY AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80-IA HAS BEEN ACCEPTED AFTER DETAILED VERIFICATION BY THE CONCERNED OFFICER. THE ASSESSEE COMPANY HAS ALREADY SUBMITTED A DETAILED COMPUTATION OF DEDUCTION U/S 80-IA ALONG WITH COPY OF THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANTS REQUIRED FOR CLAIMING DEDUCTION. A COPY OF BOTH THE DOCUMENTS IS ATTACHED AGAIN AS ANNEXURE-V IN VIEW OF ABOVE THE ASSESSE COMPANY HAS RIGHTLY CLAIMED THE DEDUCTION U/S 80-IA OF THE INCOME TAX ACT AND SHALL BE ALLOWED THE SAME WHILE MAKING THE ASSESSMENT FOR THE A.Y. 2013-14. (38.1.1.1) GIST OF WRITTEN SUBMISSIONS VIDE LETTER DATED 08.02.2018 FURTHER TO OUR SUBMISSION DATED 11/12/2017 AND AS REQUIRED BY YOUR GOOD SELF WE ARE SUBMITTING FOLLOWING INFORMATION AND DOCUMENTS: 1) RECONCILIATION OF INCOME WITH SERVICE TAX RETURN : - A SHEET SHOWING RECONCILIATION OF INCOME WITH SERVICE TAX RETURN COPY OF SERVICE TAX RETURN AND COPY OF LEDGER ACCOUNT IS ATTACHED HEREWITH AS ANNEXURE I. 2) SALE OF INDUSTRIAL PARK TO ITS SUBSIDIARY AND SUBSEQUENT TO IL.FS:- AS SUBMITTED EARLIER THE ASSESSEE COMPANY HAS SOLD AN INDUSTRIAL PARK 63 LOCATED AT PLOT NO. 15 & 16 AT SECTOR 16A NOIDA TO ITS WHOLLY OWNED SUBSIDIARY M/S NOIDA TOWERS PVT. LTD. AND SUBSEQUENTLY THE OWNERSHIP OF THAT SUBSIDIARY WAS TRANSFERRED TO IL & FS GROUP. ALL THESE TRANSACTIONS ARE SUPPORTED BY VALUATION REPORT OF INDUSTRIAL PARK AND VARIOUS AGREEMENTS BETWEEN THE PARTIES. THE TRANSACTION WAS MADE AT ARMS LENGTH PRICE AS EVIDENT FROM THE VALUATION REPORT AND OTHER SUPPORTING DOCUMENTS WHICH ARE DESCRIBED HEREUNDER AND ATTACHED AS A NNEXURE-II. - IN SUPPORT OF TRANSACTION WAS MADE AT ARMS LENGTH PRICE A COPY OF VALUATION REPORT ALONG WITH TRANSFER PRICING STUDY & REPORT AND AGREEMENT FOR SALE OF BUSINESS UNDERTAKING BETWEEN ETT LIMITED AND NOIDA TOWERS PVT. LTD. - IN SUPPORT OF SUBSEQUENT TRANSFER A) INVESTMENT AGREEMENT BETWEEN IL&FS TRUST COMPANY LTD WITH NOIDA TOWERS PVT. LTD. AND B) ESCROW AGREEMENT BETWEEN ETT LIMITED AND NOIDA TOWERS PVT. LTD. AND C) COPY OF VALUATION REPORT OF SHARES OF M/S NOIDA TOWERS PVT. LTD. 3) CAPITAL GAIN STATEMENT IN SUPPORT OF LOSSES: - A DETAILS SHOWING DATE WISE & SCRIPT WISE PURCHASE AND SALE OF SHARE ARE ATTACHED HEREWITH AS ANNEXURE III. 4) CLARIFICATION LOSS ON SALE OF NON - CURRENT INVESTMENT: - AS SUBMITTED EARLIER THE ASSESSEE HAS TRANSFERRED SHARES OF SUBSIDIARY M/S VALLEY COMPUTECH PVT LTD TO ITS ANOTHER SUBSIDIARY M/S AUXIN ENGINEERING LTD FOR THE PURPOSE OF INTERNAL RESTRUCTURING ONLY. FURTHER CAPITAL LOSS ARISING ON SALE OF NON- CURRENT INVESTMENT WAS NOT CLAIMED IN THE INCOME TAX RETURN. 5) METHODOLOGY FOR COMPUTING PROFIT ON SALES OF INDUSTRIAL PARK: - THE ASSESSEE COMPANY HAS DEVELOPED ONLY ONE INDUSTRIAL PARK TILL ASSESSMENT YEAR UNDER CONSIDERATION AND HAS SOLD THE SAME IN THIS YEAR. TILL THE DATE OF SALE THE INDUSTRIAL PARK WAS RENTED OUT TO VARIOUS PARTIES ALL THE RENTAL INCOMES AND MAINTENANCE CHARGES ARE RECOGNIZED AS BUSINESS INCOME. DEDUCTION U/S 80IA WAS CLAIMED AS PER NOTIFICATION DATED 17 TH NOVEMBER 2006 IN ALL THE YEARS. THE PROFIT ON SALE OF INDUSTRIAL PARK IS SHOWN UNDER THE HEAD BUSINESS INCOME AND DEDUCTION U/S 80IA IS CLAIMED UNDER THE SAME NOTIFICATION. THE ASSESSEE COMPANY HAS GOT THE NOTIFICATION FOR CLAIMING DEDUCTION U/S 80IA FOR THE UNDERTAKING BEING DEVELOPED AND BEING MAINTAINED AND OPERATED BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS DEVELOPED THE INDUSTRIAL PARK AND AFTER MAINTAINING AND OPERATING FOR SOME YEARS SOLD THE SAME AND HAS CLAIMED THE DEDUCTION. COPIES OF ALL PREVIOUS ASSESSMENT YEARS ARE ATTACHED IN SUPPORT OF CLAIM OF THE ASSESSEE COMPANY OF DEDUCTION U/S 80IAARE ATTACHED AS ANNEXURE IV. 64 ON THE ABOVE FACTS WE HEREBY PRAY NOT TO INITIATE PROCEEDINGS U/S 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2013-14 AGAINST THE ASSESSE COMPANY. (38.1.1.2) GIST OF WRITTEN SUBMISSIONS VIDE LETTER DATED 23.02.2018 FURTHER TO OUR SUBMISSION DATED 08/02/2018 AND AS REQUIRED BY YOUR GOOD SELF WE ARE SUBMITTING FOLLOWING INFORMATION AND DOCUMENTS: 1) DEDUCTION U/S 80 IA IN THE EARLIER HEARINGS WE HAVE SUBMITTED THAT THE ASSESSEE COMPANY WAS A DEVELOPER OF AN INDUSTRIAL PARK SITUATED IN NOIDA AND HAS OPERATED AND MAINTAINED THE SAME FOR SOME YEARS AND LATER ON SOLD IT AND HAS EARNED BUSINESS INCOME ON WHICH IT HAS CLAIMED DEDUCTION U/S 80IA UNDER SUB CLAUSE (III) OF CLAUSE 4. YOUR GOOD SELF HAS RAISED CERTAIN POINTS AND ASKED FOR THE CLARIFICATION WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S 80-IA (4) (III) TO THE DEVELOPER OF THE AN INDUSTRIAL PARK. IN SUPPORT OF OUR CLAIM OF DEDUCTION WE ARE PRODUCING HEREWITH FOLLOWING DOCUMENTS AND INFORMATION FOR YOUR REFERENCE : A) AMENDMENT IN FINANCE ACT 1999 AND CIRCULAR NO. 779 DATED 14-09-1999 ISSUED BY CBDT ON FINANCE ACT 1999 : THERE WAS AN AMENDMENT IN FINANCE ACT 1999 IN SECTION 80 IA WHICH HAS RESULTED IN* ENHANCEMENT OF ITS SCOPE FOR THE INFRASTRUCTURE ACTIVITIES ELIGIBLE FOR EXEMPTION. PRIOR TO THIS AMENDMENT SECTION 80-IA (4D) STATES AND WE QUOTE THIS SECTION APPLIES TO ANY UNDERTAKING WHICH BEGINS TO OPERATE AN INDUSTRIAL PARK NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL 1997 AND ENDING ON 31 ST DAY OF MARCH 2002. THE FINANCE ACT 1999 HAS AMENDED THE SECTION AND BROUGHT IN 80- IA(4)(III) IN PLACE OF 80-IA (4D) WHICH STATES AS UNDER. ANY UNDERTAKING WHICH DEVELOPS DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK NOTIFIED * BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED + BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL 1997 AND ENDING ON THE 31 ST DAY OF MARCH 2002 . CBDT FURTHER CLARIFIED THAT WITH THIS AMENDMENT IT IS MADE CLEAR THAT ANY ENTERPRISES ENGAGED IN DEVELOPING MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY OR MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY 65 OR ONLY DEVELOPING THE INFRASTRUCTURE FACILITY WOULD ALSO BE ELIGIBLE FOR EXEMPTION UNDER THIS CLAUSE (A COPY OF CIRCULAR BY CBDT ON FINANCE ACT IS ATTACHED FOR YOUR REFERENCE AS ANNEXURE-1. FURTHER THE MEMORANDUM OF THE FINANCE ACT 1999 STATES AS UNDER AN UNDERTAKING OR A PROJECT FOR (I) DEVELOPING (II) DEVELOPING AND OPERATING OR (HI) MAINTAINING AND OPERATING AN INDUSTRIAL PARK WHICH HAS BEEN NOTIFIED BY THE CENTRAL GOVERNMENT UNDER CLAUSE (III) OF SUB-SECTION (4) OF SECTION 80-IA IS ALSO INCLUDED IN THE DEFINITION OF INFRASTRUCTURE FACILITY AND IS THUS WITHIN THE SCOPE OF EXEMPTION UNDER THIS CLAUSE . COPIES OF THE RELEVANT AMENDMENTS AND PORTION OF MEMORANDUM TO FINANCE ACT 1999 IS ATTACHED HEREWITH AS ANNEXURE-2. FROM ALL THE ABOVE AMENDMENTS AND THE INTENTION OF THE LAW TO BRING THESE AMENDMENTS IT IS QUITE EVIDENT THAT THE DEDUCTION U/S 80-IA (4)(III) IS ALLOWABLE TO THE ASSESSEE COMPANY ON THE DEVELOP AND SALE OF INDUSTRIAL PARK. B) SOME JUDGMENTS IN WHICH COURTS HAVE ALLOWED THE DEDUCTION U/S 80-IA FOR DEVELOPING INFRASTRUCTURE FACILITIES ARE AS FOLLOWS : PLEASE REFER TO OUR DISCUSSION ON THE ALLOWABILITY OF DEDUCTION U/S 80- IA (4)(III) TO A DEVELOPER OF AN INDUSTRIAL PARK AND YOUR QUARRIES ON ANY JUDGMENTS ON THE MATTER WE ARE PRODUCING HEREWITH COPIES OF SOME OF THE JUDGMENTS SIMILAR TO THE MATTER UNDER ASSESSMENT: I) PARNIKA COMMERCIAL & ESTATES (P.) LTD. V. ADDL CIT RANGE NEW DELHI [2016] 72 TAXMANN.COM 177 (DELHI - TRIB.) : IN WHICH IT WAS STATED THAT SECTION 80-IA INTENDS TO COVER THE ENTITIES CARRYING OUT DEVELOPMENT OR OPERATION AND MAINTENANCE OR DEVELOPMENT OPERATION & MAINTENANCE OF INFRASTRUCTURE FACILITY. AS PER CBDT CIRCULAR NOS. 779. DATED 14-9-1999 AND 794 DATED 9-8-2000 THE DEVELOPER IS ALSO ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80-IA IRRESPECTIVE OF FULFILLING THE CONDITION OF OPERATING AND MAINTAINING OR DEVELOPING MAINTAINING AND OPERATING WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA IN FINANCE ACT 2001. TO AVOID MISUSE OF THE AFORESAID AMENDMENT AN EXPLANATION WAS INSERTED IN SECTION 80-IA IN THE FINANCE ACT-2007 AND 2009 TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80-IA(4). BUT CERTAINLY THE EXPLANATION CANNOT BE READ TO DEBAR THE ELIGIBILITY OF THE DEVELOPER. THUS THE AFORESAID EXPLANATION WAS INSERTED CERTAINLY TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ONLY WORKS CONTRACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THE EXPLANATORY MEMORANDUM TO THE FINANCE ACT 2003 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE 66 INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK AS A CONTRACTOR. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTION 80-IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS WHO UNDERTAKES ONLY BUSINESS RISK. AFTER THE AMENDMENT THE SECTION 80-IA(4) READ AS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. PRIOR TO AMENDMENT THE WORD 'OR' BETWEEN THREE ACTIVITIES WAS NOT THERE AND AFTER THE AMENDMENT 'OR' HAS BEEN INSERTED WITH EFFECT FROM 1-4- 2002 BY FINANCE ACT 2001. THEREFORE THE ENTITIES WHO CARRY OUT ANY OF THE ABOVE ACTIVITIES SHALL BE ENTITLED TO CLAIM DEDUCTION UNDER THIS SECTION. II) JAYPEE INFRATECH LTD V. COMMISSIONER OF INCOME-TAX NOIDA [2015] 57 TAXMANN.COM 397 (DELHI - TRIB.): SECTION 80-IA OF THE INCOME-TAX ACT 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS (INFRASTRUCTURE UNDERTAKING) - ASSESSMENT YEAR 2009-10 - ASSESSEE-COMPANY WAS ENGAGED IN BUSINESS OF DEVELOPING OPERATING AND MAINTAINING 'ROAD INCLUDING TOLL ROAD' - IT ENTERED INTO A CONCESSION AGREEMENT WITH TEA FOR DEVELOPMENT OPERATION AND MAINTENANCE OF SIX LANE EXPRESSWAY/TOLL ROAD - IN TERMS OF AGREEMENT ASSESSEE- COMPANY WAS ALSO GRANTED BY TEA RIGHTS FOR LAND DEVELOPMENT OF 25 MILLION SQ. MTS. OF LAND ALONG PROPOSED EXPRESSWAY FOR COMMERCIAL AMUSEMENT INDUSTRIAL INSTITUTIONAL AND RESIDENTIAL DEVELOPMENT - ASSESSEE'S CASE WAS THAT SINCE ONE OF ITS AVOWED OBJECTS WAS RESIDENTIAL AND INSTITUTIONAL DEVELOPMENT CONSISTING OF SALE OF PLOTS AND BUILDINGS THOSE ACTIVITIES OF HOUSING AND SALE OF LAND ETC. WERE AN INTEGRAL PART OF PROPOSED HIGHWAY PROJECT - ASSESSEE FILED ITS RETURN CLAIMING DEDUCTION UNDER SECTION 80-IA(4) IN RESPECT OF INCOME FROM SALE OR SUB-LEASE OF LAND ASSIGNED TO IT UNDER CONCESSION AGREEMENT - ASSESSING OFFICER ALLOWED ASSESSEE'S CLAIM - WHETHER ON FACTS BUSINESS ACTIVITIES OF ASSESSEE-COMPANY FELL WITHIN AMBIT OF CLAUSE(A) OF EXPLANATION TO SECTION 80-IA(4)(I) AND THUS ASSESSING OFFICER WAS JUSTIFIED IN ALLOWING ASSESSEE'S CLAIM - HELD YES [PARA 57] III) ACIT V. BHARAT UDYOG LTD. [2008] 24 SOT 412 (MUMBAI): SECTION 80-IA OF THE INCOME-TAX ACT 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS - ASSESSMENT YEAR 2002-03 - WHETHER ASSESSEE BEING ENGAGED IN 'DEVELOPING' INFRASTRUCTURAL FACILITY I.E. ROAD AND NOT ENGAGED IN 'OPERATING AND MAINTAINING' SAID FACILITY IS ENTITLED TO BENEFITS OF DEDUCTION UNDER SECTION 80- IA(4) - HELD YES 67 THIS INDICATES THAT THERE ARE THREE DISTINCT CATEGORIES OF PROFITS CONTEMPLATED AS ELIGIBLE FOR THE BENEFIT OF THE DEDUCTION UNDER SECTION 80-IA(4)(II.I) 1. PROFITS MADE BY AN ASSESSEE WHO BUILDS / CONSTRUCTS / A INDUSTRIAL PARK AND IMMEDIATELY SELLS IT (DEVELOPS) 2. PROFITS MADE AN ASSESSEE WHO BUILDS / CONSTRUCTS AN (DEVELOPS AND OPERATES) 3. PROFITS MADE BY AN ASSESSEE WHO WITHOUT HAVING CONSTRUCTED IT MERELY MAINTAINS AND OPERATES AN INDUSTRIAL PARK (MAINTAIN AND OPERATES) IN THE INSTANT CASE THE ASSEESEE COMPANY AS MENTIONED IN POINT NO. 2 ABOVE HAS DEVELOPED AND OPERATED AN INDUSTRIAL PARK AND HAS SOLD THE SAME DURING THE YEAR UNDER CONSIDERATION AND HAS CLAIMED THE DEDUCTION AS ALLOWED IN SUB - SECTION 4(III) OF SECTION 80IA. THEREFORE IT IS EVIDENT THAT THE ASSESSEE COMPANY HAD CLAIMED THE DEDUCTION U/S 80IA 4(III) FOR DEVELOPING AND OPERATING THE INDUSTRIAL PARK AND NOT ONLY FOR OPERATING AND MAINTAINING AS MENTIONED IN THE SHOW CAUSE NOTICE. 2) EXPENSES IN RELATION TO EARN EXEMPT INCOME OF RS. 77 65 278/- THE ASSESSEE COMPANY HAS EARNED EXEMPT INCOME BY WAY OF DIVIDEND ON MUTUAL FUNDS WHICH WAS INVESTED FROM THE MONEY RECEIVED ON SALE OF INDUSTRIAL PARK AND ALL THE LOANS WERE REPAID BEFORE THE SALE OF INDUSTRIAL PARK AS IT WAS A CONDITION IN THE BUSINESS TRANSFER AGREEMENT. SINCE INVESTMENT WERE AFTER TRANSFER AND INTEREST COST WAS BEFORE TRANSFER THERE' IS NO CORRELATION BETWEEN THE INTEREST EXPENSE AND EXEMPT INCOME EARNED. A COPY OF LEDGER OF INVESTMENT IN MUTUAL FUND DIVIDEND EARNED LOAN STATEMENT INTEREST EXPENSE ARE ATTACHED HEREWITH AS ANNEXURE-3. 3) DETAIL OF INVESTMENT IN VALLEY COMPUTECH LIMITED PLEASE FIND ATTACHED DETAIL OF INVESTMENT IN M/S VALLEY COMPUTECH LIMITED AS ANNEXURE-4. 4) BOOK LOSS DEBITED TO THE PROFIT & LOSS ACCOUNT ARE ELIGIBLE AS DEDUCTION FOR COMPUTING PROFIT U/S 115JB OF THE INCOME TAX ACT. SECTION 115JB OF THE INCOME TAX ACT SPECIFIES VARIOUS AMOUNT BY WHICH THE BOOK PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IS TO BE INCREASED OR DECREASE TO ARRIVE AT THE 68 PROFIT OR LOSS TO BE CONSIDERED FOR CALCULATING THE MINIMUM ALTERNATE TAX (MAT) LIABILITY. SUCH ADJUSTMENTS HOWEVER DO NOT INCLUDE INCREASING THE BOOK PROFITS BY THE LOSS ARISING ON ACCOUNT OF SALE OF INVESTMENT. THE ACCOUNTING LOSS ON TRANSFER OF SHARES IN VALLEY COMPUTECH IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY BASED ON THE TREATMENT PRESCRIBED AS PER THE ACCOUNTING STANDARDS AND AS DULY CERTIFIED BY THE STATUTORY AUDITORS OF THE COMPANY. AS PER THE PROVISIONS OF INCOME TAX ACT THE NET PROFIT AS DECREASED BY THE LOSS ON SALE OF CAPITAL ASSET AND AS CERTIFIED BY THE STATUTORY AUDITORS OF ETT LTD. CANNOT BE INCREASED BY THE ASSESSING OFFICER AND THUS BE MADE LIABLE TO MAT PLACING RELIANCE OF THE SUPREME COURT DECISION IN THE CASE OF APOLLO TYRES LTD. (2000)255 ITR 273 WHEREIN THE APEX COURT HELD THAT WHERE THE ACCOUNTS OF THE ASSESSEE ARE CERTIFIED BY THE STATUTORY AUDITORS OF THE COMPANY THE ASSESSING OFFICER CAN MAKE ONLY ADJUSTMENTS WHICH ARE SPECIFICALLY PERMITTED U/S 115J OF THE INCOME TAX ACT AND CANNOT RESTATE THE BOOK PROFITS. A COPY OF JUDGMENT IS ATTACHED HEREWITH AS ANNEXURE-5. THE ABOVE FACTS WERE DISCUSSED IN DETAIL WITH THE LEARNED AO AND HE WAS TOTALLY SATISFIED WITH THE EXPLANATION PROVIDED AND PROVISIONS OF LAW APPLICABLE ON SUCH TRANSFER. FURTHER THERE WAS NO LOSS OF REVENUE IN THIS TRANSACTION. HENCE THE ORDER WAS NOT ERRONEOUS AND ALSO NOT PREJUDICE TO THE INTEREST OF THE REVENUE. ON THE ABOVE FACTS WE HEREBY PRAY NOT TO INITIATE PROCEEDINGS U/S 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2013-14 AGAINST THE ASSESSE COMPANY. (39) IT IS NOT CLEAR FROM PERUSAL OF RECORDS AS TO WHAT WAS THE CAUSE OF ACTION FOR INITIATION OF PROCEEDINGS U/S 263 OF IT ACT; SUCH AS WHETHER THERE WAS ANY AUDIT OBJECTION OR WHETHER ANY OTHER NEW INFORMATION FROM OUTSIDE THE ASSESSMENT RECORDS WERE RECEIVED BY THE LD. CIT . BE THAT AS IT MAY NUMEROUS HEARINGS WERE FIXED BY THE LD. CIT INCLUDING ON 07.11.2017 29.11.2017 11.12.2017 10.01.2018 08.02.2018 AND 23.02.2018. EVENTUALLY THE AFORESAID IMPUGNED ORDER DATED 31.03.2018 WAS PASSED BY THE LD. CIT ON 31.03.2018. THUS IT IS SEEN THAT ALTHOUGH THE REVISION PROCEEDINGS U/S 263 69 OF IT ACT PROLONGED FOR A FEW MONTHS THE IMPUGNED ORDER WAS PASSED BY THE LD. CIT ON THE LAST DAY OF LIMITATION PERIOD I.E. ON 31.03.2018. A PERUSAL OF THE AFORESAID IMPUGNED REVISION ORDER DT. 31.03.2018 PASSED U/S 263 OF IT ACT SHOWS THAT ALTHOUGH SUBMISSIONS MADE BY THE ASSESSEE VIDE AFORESAID WRITTEN SUBMISSIONS DATED 08.02.2018 AND 23.02.2018 HAVE BEEN MENTIONED; THE CONTENTS OF THESE SUBMISSIONS HAVE NOT AT ALL BEEN DISCUSSED BY THE LD. CIT. EVEN AS FAR AS AFORESAID WRITTEN SUBMISSIONS DATED 11.12.2017 IS CONCERNED ONLY A SMALL PORTION OF IT HAS FOUND MENTION IN AFORESAID IMPUGNED REVISION ORDER DATED 31.03.2018 PASSED BY LD. CIT U/S 263 OF IT ACT. THUS IT IS OBVIOUS THAT THE MATERIAL BROUGHT BY THE ASSESSEE FOR THE CONSIDERATION OF LD. CIT HAVE NOT BEEN FULLY FACTORED IN BY THE LD. CIT; AND THE LD. CIT HAS NOT FULLY DEALT WITH THE ENTIRE FORCE OF ASSESSEES SUBMISSIONS BEFORE MAKING AN ADVERSE DECISION AGAINST THE ASSESSEE. MOREOVER THE LD. CIT HAS OBSERVED IN A CRYPTIC SUMMARY AND NON- SPEAKING MANNER IN AFORESAID ORDER DATED 31.03.2018 THAT THE AO HAD NOT CONDUCTED REQUISITE ENQUIRY / INVESTIGATION ON EXEMPT INCOME EARNED BY THE ASSESSEE AND APPLICABILITY OF THE PROVISION OF SECTION 14A OF THE IT ACT READ WITH RULE 8D OF I.T. RULES 1962; WITHOUT DEALING WITH SUBMISSIONS MADE AND MATERIALS PLACED BY THE ASSESSEE BEFORE THE LD. CIT VIDE AFORESAID LETTERS DATED 11.12.2017 AND 23.02.2018 AS PER FOREGOING PARAGRAPHS (38.1.1) AND (38.1.1.2) OF THIS ORDER. IT IS ALSO FOUND IN VIEW OF FOREGOING PARAGRAPH (37.2) (I) OF THIS ORDER THAT THE ALLEGATIONS OF THE LD. CIT AGAINST THE AO NARRATED BY HIM IN PARAGRAPH 4 OF THE AFORESAID ORDER DATED 31.03.2018 FLUCTUATE IN SEVERITY AND DESCRIPTION. FROM THESE 70 FEATURES OF THE AFORESAID ORDER DATED 31.03.2015 OF LD. CIT; IT CAN BE CONCLUDED THAT THE ORDER HAS BEEN PASSED BY LD. CIT IN A HASTY MANNER WITHOUT DUE APPLICATIONS OF MIND WITHOUT FULLY TAKING INTO CONSIDERATION THE SUBMISSIONS MADE AND MATERIALS PLACED BY THE ASSESSEE BEFORE LD. CIT AND WITHOUT DEALING WITH THE FULL FORCE OF ASSESSEES SUBMISSIONS AND CONTENTIONS; AND PART OF THE ORDER IS ALSO CRYPTIC SUMMARY AND NON-SPEAKING IN NATURE. AN ORDER SUCH AS THIS IS LIABLE TO BE QUASHED. (40) AS ALREADY MENTIONED IN PARAGRAPHS (37.2)(I) AND (39) OF THIS ORDER THE LD. CIT HAS VARYINGLY ALLEGED THAT NO SUBSTANTIAL ENQUIRY / INVESTIGATION WAS CONDUCTED BY THE AO FOR ASSESSEES CLAIM OF DEDUCTION U/S 80-IA OF IT ACT; THAT THE AO HAS NOT AT ALL INITIATED THE REQUISITE ENQUIRY WITH REGARDS TO DEDUCTION CLAIMED U/S 80-IA OF THE IT ACT; AND THAT THAT IT WAS THE DUTY OF THE AO TO MINUTELY EXAMINE THE ELIGIBILITY OF CLAIM AND TRUE ELIGIBLE QUANTUM OF EXEMPTION TO BE ALLOWED (U/S 80IA OF IT ACT) AND ALLEGED THAT THE AO COMPLETELY FAILED IN EXAMINING THIS ASPECT AND IN BRINGING ANY EVIDENCE ON RECORD IN THIS BEHALF. ALL OF THESE ALLEGATIONS WHILE VARYING IN SEVERITY AND DESCRIPTION ARE HOWEVER CONTRARY TO MATERIALS ON RECORD. IN PARAGRAPH (38) OF THIS ORDER A LIST OF VARIOUS DETAILS FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS HAS BEEN SUMMARIZED. IN PARAGRAPH (38.1) OF THIS ORDER THE PARTIAL DISALLOWANCE MADE BY THE AO OUT OF ASSESSEES CLAIM FOR DEDUCTION U/S 80-IA OF IT ACT HAS BEEN MENTIONED. IN PARAGRAPHS (38.1.1) (38.1.1.1) AND (38.1.1.2) OF THIS ORDER A GIST OF THE SUBMISSIONS MADE BY THE ASSESSEE AND THE MATERIALS BROUGHT BY THE ASSESSEE FOR THE CONSIDERATION OF THE LD. CIT DURING 71 PROCEEDINGS U/S 263 OF IT ACT HAVE BEEN INCLUDED WHEREIN THE ASSESSEE HAS ELABORATELY EXPLAINED THE ENQUIRIES / INVESTIGATIONS CONDUCTED BY THE AO AND HOW THE AO EXAMINED THIS ASPECT AND BROUGHT EVIDENCES ON RECORD IN THIS BEHALF. IN PARAGRAPHS 22 23 AND 24 OF THE ORDER OF ESTEEMED JUDICIAL MEMBER HE HAS ELABORATELY EXPLAINED THE ENQUIRIES / INVESTIGATIONS CONDUCTED BY THE AO AND HOW THE AO EXAMINED THIS ASPECT AND BROUGHT EVIDENCES ON RECORD IN THIS BEHALF. IN VIEW OF THE FOREGOING IT IS READILY INFERRED THAT THE ALLEGATIONS AND CONCLUSIONS OF FACT EXPRESSED BY THE LD. CIT AS PER FOREGOING PARAGRAPH (37.2)(I) ARE SUCH WHICH CANNOT BE DRAWN BY ANY REASONABLE PERSON OR AUTHORITY ON THE DISCLOSED STATE OF FACTS. SUCH BEING THE CASE THE FACTUAL CONCLUSIONS AND THE ALLEGATIONS OF THE LD. CIT AS PER FOREGOING PARAGRAPH (37.2)(I) ARE HELD TO BE PATENTLY PERVERSE. (40.1) COMING TO CONCLUSIONS OF FACT AND ALLEGATIONS AS PER PARAGRAPHS (37.2)(II) AND (37.2)(III) OF THIS ORDER AS EXPRESSED BY THE LD. CIT IN HIS IMPUGNED REVISION ORDER DATED 31.03.2018 PASSED U/S 263 OF IT ACT; USEFUL REFERENCE MAY BE MADE TO PARAGRAPHS 24 25 26 27 AND 28 OF THE ORDER OF THE ESTEEMED JUDICIAL MEMBER WHEREIN HE HAS CLEARLY ESTABLISHED THAT NOT ONLY THE AO CONDUCTED REQUISITE ENQUIRY / INVESTIGATION TO FIND OUT THE ARMS LENGTH PRICE OF THE TRANSACTIONS BUT ALSO THAT MANDATORY REFERENCE TO TPO IN RESPECT OF SPECIFIED DOMESTIC TRANSACTIONS WAS NOT APPLICABLE FOR DETERMINING ARMS LENGTH PRICE. USEFUL REFERENCE MAY ALSO BE MADE TO PARAGRAPH (38) OF THIS ORDER CONTAINING A LIST OF VARIOUS DETAILS FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. FURTHER REFERENCE MAY ALSO BE MADE TO PARAGRAPHS (38.1.1) (38.1.1.1) AND (38.1.1.2) OF THIS ORDER CONTAINING A GIST OF THE 72 SUBMISSIONS MADE BY THE ASSESSEE AND THE MATERIALS BROUGHT BY THE ASSESSEE FOR THE CONSIDERATION OF THE LD. CIT DURING PROCEEDINGS U/S 263 OF IT ACT. IN VIEW OF THE FOREGOING ONCE AGAIN ALLEGATIONS MADE AND CONCLUSIONS OF FACT DRAWN BY THE LD. CIT AS PER FORGOING PARAGRAPHS (37.2)(II) AND (37.2)(III) ARE SUCH WHICH CANNOT BE DRAWN BY ANY REASONABLE PERSON OR AUTHORITY ON THE DISCLOSED STATE OF FACTS. THEREFORE THESE ALLEGATIONS AND CONCLUSIONS OF FACT ARE ALSO HELD TO BE SUFFERING FROM PATENT PERVERSITY. (40.1.1) NOW COMING TO THE ALLEGATION AND CONCLUSION OF FACT EXPRESSED BY THE LD. CIT AS PER PARAGRAPH (37.2)(IV) OF THIS ORDER USEFUL REFERENCE MAY BE MADE TO FOREGOING PARAGRAPHS (38.1.1) AND (38.1.1.2) CONTAINING GIST OF ASSESSEES SUBMISSIONS INCLUDING ON APPLICABILITY OF SECTION 14A OF IT ACT READ WITH RULE 8D OF IT RULES; MADE BEFORE THE LD. CIT DURING PROCEEDINGS U/S 263 OF IT ACT. IN PARAGRAPH 34 OF HIS ORDER LD. JUDICIAL MEMBER HAS HELD: NOW COMING TO THE ISSUE OF APPLICABILITY OF PROVISION OF SECTION 14A THE ASSESSEE BEFORE THE ASSESSING OFFICER HAS FILED ALL THE RELEVANT DETAILS FOR INVESTMENT MADE IN MUTUAL FUNDS ON WHICH ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 77 65 278/-. IT HAS ALSO BEEN BROUGHT ON RECORD BEFORE THE ASSESSING OFFICER THAT ENTIRE MONEY INVESTED IN THE MUTUAL FUNDS WERE OUT OF SALES CONSIDERATION RECEIVED FROM THE SALE OF INDUSTRIAL PARK AND THIS WAS SHOWN FROM THE BANK STATEMENTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BEFORE THE ASSESSING OFFICER THIS ISSUE WAS DISCUSSED THREAD BARE AND IT WAS SPECIFICALLY POINTED OUT THAT INTEREST ON BANK LOAN AMOUNTING TO RS. 1 79 46 655/- RELATED TO THE PERIOD PRIOR TO MAKING OF THE INVESTMENT AND THE BANK 73 LOAN WAS FULLY PAID FROM THE SALE CONSIDERATION OF THE INDUSTRIAL PARK I.E BANK LOAN WAS FULLY PAID BEFORE MAKING THE INVESTMENT IN THE MUTUAL FUNDS. IN SUCH A SITUATION OSTENSIBLY NO INTEREST COULD HAVE BEEN DISALLOWED. THE CLOSING BALANCE OF CURRENT INVESTMENT WAS NIL AND NON-CURRENT INVESTMENT WAS ONLY RS. 83 509/- AT THE END OF YEAR. IT WAS ALSO STATED BEFORE THE ASSESSING OFFICER THAT NO DIRECT OR INDIRECT EXPENDITURE WAS INCURRED TO EARNED THE DIVIDEND INCOME. AFTER VERIFYING THESE FACTS ASSESSING OFFICER ACCEPTED THE ASSESSEES PLEA AND NO DISALLOWANCE WERE MADE. THE ESTEEMED JUDICIAL MEMBER AGAIN IN PARAGRAPH 34 OF HIS ORDER HAS OBSERVED: .THERE IS NO WHISPER BY THE LD. CIT AS TO WHY DISALLOWANCE U/S 14A WAS CALLED FOR ON THE FACTS OF THE CASE. THE DISALLOWANCE UNDER SECTION 14A IS NOT AUTOMATIC WHENEVER THERE IS ANY KIND OF EXEMPT INCOME. IT HAS TO BE SEEN WITH REGARD TO NATURE OF EXPENSES DEBITED AND WHETHER ANY EXPENDITURE CAN BE CALCULATED. IN VIEW OF THE FOREGOING ONCE AGAIN ALLEGATION AND CONCLUSION OF FACT EXPRESSED BY THE LD. CIT AS PER FORGOING PARAGRAPH (37.2)(IV) ARE SUCH WHICH CANNOT BE DRAWN BY ANY REASONABLE PERSON OR AUTHORITY ON THE DISCLOSED STATE OF FACTS. THEREFORE THIS ALLEGATION AND CONCLUSION OF FACT ARE ALSO HELD TO BE SUFFERING FROM PATENT PERVERSITY. (40.2) IN VIEW OF THE FOREGOING PARAGRAPHS (40) (40.1) AND (40.1.1) IT IS HELD THAT ALL THE ALLEGATIONS AND CONCLUSIONS OF FACT AS EXPRESSED BY THE LD. CIT IN HIS IMPUGNED REVISION ORDER DATED 31.03.2018 AS PER PARAGRAPH (37.2) OF THIS ORDER SUFFER FROM PATENT PERVERSITY. THUS THE ALLEGATION AND CONCLUSIONS OF FACT WHICH FORM THE FOUNDATION OF THE AFORESAID IMPUGNED REVISION ORDER DATED 31.03.2018 OF 74 LD. CIT PASSED U/S 263 OF IT ACT; SUFFER FROM PATENT PERVERSITY. ACCORDINGLY THE AFORESAID IMPUGNED REVISION ORDER DATED 31.03.2018 PASSED U/S 263 OF IT ACT IS HELD TO BE A PERVERSE ORDER HAVING NO LEGITIMATE FOUNDATION ON WHICH IT CAN STAND AND IS LIABLE TO BE QUASHED. (41) USEFUL REFERENCE MAY BE MADE TO DECIDED JUDICIAL PRECEDENTS IN SUPPORT OF THE VIEW THAT A PERVERSE ORDER OF AN AUTHORITY IS WRONG AND IS LIABLE TO BE QUASHED. IN THE CASE OF KEJRIWAL ENTERPRISES AND ANOTHER V. CIT 260 ITR 341 (CALCUTTA) THE HONBLE HIGH COURT HELD: W HEN AN AUTHORITY DRAWS A CONCLUSION WHICH CANNOT BE DRAWN BY ANY REASONABLE PERSON OR AUTHORITY ON THE DISCLOSED STATE OF FACTS THEN A PERVERSE DECISION IS ENTERED AND A PERVERSE DECISION IS WRONG. IN THE CASE OF PYARELAL MITTAL VS. ACIT 291 ITR 214 (GAUHATI) THE HONBLE HIGH COURT TOOK THE VIEW THAT THE APPELLATE AUTHORITY IS COMPETENT TO INTERFERE WHEN THE FINDINGS OF FACT BY THE LOWER AUTHORITY ARE PERVERSE AND CONTRARY TO MATERIALS ON RECORD. IN THE CASE OF DCIT V. H.V. SHANTHARAM 261 ITR 434 (KARNATAKA) THE HONBLE HIGH COURT HELD THAT PERVERSE CONCLUSIONS AND FINDINGS COULD NOT BE SUSTAINED. IN THE CASE OF CIT V. B.L. PASSI 254 ITR 225 (DELHI) THE HONBLE HIGH COURT TOOK THE VIEW: . A FINDING ON A QUESTION OF FACT CAN BE CHALLENGED AS ERRONEOUS WHERE .THE FINDING IS SO PER VERSE OR UNREASONABLE THAT NO PERSON ACTING JUDICIALLY AND PROPERTY INSTRUCTED ON LAW COULD HAVE ARRIVED AT IT. IN THE CASE OF CIT V. NOVA PROMOTERS AND FINLEASE (P) LTD. 342 ITR 169 (DELHI) HONBLE HIGH COURT HELD THAT FINDINGS OF FACTS BASED ON IRRELEVANT MATERIAL OR BY IGNORING THE RELEVANT MATERIAL CANNOT BE UPHELD. IT WAS ALSO HELD BY THE 75 HONBLE HIGH COURT RELYING ON DIT V. BHARAT DIAMOND BOURSE 259 ITR 280 (SC) THAT PERVERSE FINDINGS OF FACT OF THE LOWER AUTHORITY OR IF THE FINDINGS ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERTY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE COME TO THE DETERMINATION UNDER APPEAL ARE NOT BINDING ON THE APPELLATE AUTHORITY. IN THE CASE OF SANTOSH HAZRI V. PURUSHOTTAM TIWARI 251 ITR 84 (SC) HONBLE SUPREME COURT HELD: . IF THE APPRAISAL OF THE EVIDENCE BY THE TRIAL COURT SUFFERS FROM A MATERIAL IRREGULARITY OR IS BASED ON INADMISSIBLE EVIDENCE OR ON CONJECTURES AND SURMISES THE APPELLATE COURT IS ENTITLED TO INTERFERE WITH THE FINDING OF FACT. IN THE CASE OF DIT V. BHARAT DIAMOND BOURSE 259 ITR 280 (SC) HONBLE APEX COURT HELD THAT PERVERSE FINDINGS OF FACT CAN BE DISTURBED AND INTERFERED WITH. IN THE CASE OF MEHTA PARIKH AND CO. V. CIT 30 ITR 181 (SC) HONBLE SUPREME COURT HELD: THE COURT WOULD BE ENTITLED TO INTERVENE IF IT APPEARS THAT THE FACT FINDING AUTHORITY HAS ACTED WITHOUT ANY EVIDENCE OR UPON A VIEW OF THE FACTS WHICH COULD NOT REASONABLY BE ENTERTAINED OR THE FACTS FOUND ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERTY INSTRUCTED AS TO THE RELEVANT LAW WOULD HAVE COME TO THE DETERMINATION IN QUESTION. IN THE CASE OF EDWARDS (INSPECTOR OF TAXES) V. BAIRSTOW AND ANOTHER. 28 ITR 579 (HL) CITED WITH APPROVAL IN MEHTA PARIKH AND CO. V. CIT (SUPRA) IT WAS SO HELD: IF THE CASE CONTAINS ANYTHING EX FACIE WHICH IS BAD LAW AND WHICH BEARS UPON THE DETERMINATION IT IS OBVIOUSLY ERRONEOUS IN POINT OF LAW. BUT WITHOUT ANY SUCH MISCONCEPTION APPEARING EX FACIE IT MAY BE THAT THE FACTS FOUND ARE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE 76 COME TO THE DETERMINATION UNDER APPEAL. IN THOSE CIRCUMSTANCES TOO THE COURT MUST INTERVENE. IT WAS FURTHER HELD IN EDWARDS (INSPECTOR OF TAXES) V. BAIRSTOW AND ANOTHER (SUPRA) THAT PURE FINDING OF FACT MAY BE SET ASIDE IF IT APPEARS THAT THE COMMISSIONERS HAVE ACTED WITHOUT EVIDENCE OR UPON A VIEW OF THE FACTS WHICH COULD NOT REASONABLY BE ENTERTAINED. (42) IN VIEW OF THE FOREGOING DISCUSSION AND THE VIEWS EXPRESSED IN PARAGRAPHS (39) (40) (40.1) (40.1.1) (40.2) AND (41) I CONCUR WITH THE ESTEEMED JUDICIAL MEMBER IN QUASHING THE IMPUGNED REVISION ORDER DATED 31.03.2018 OF LD. CIT PASSED U/S 263 OF IT ACT. ACCORDINGLY THE IMPUGNED REVISION ORDER DATED 31.03.2018 OF LD. CIT PASSED U/S 263 OF IT ACT IS QUASHED. FOR STATISTICAL PURPOSES THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH DAY OF MARCH 2019. SD/- 26/03/19 (ANADEE NATH MISSHRA) ACCOUNTANT MEMBER I FULLY CONCUR WITH AFORESAID ORDER OF MY LD. BROTHER. SD/- (AMIT SHUKLA) JUDICIAL MEMBER DATED: 26.03.2019 (BIDHAN) FIT FOR PUBLICATION SD/- SD/ (A.N.M) (A.S.) AM JM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 77 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 28.02.2019 (THURSDAY) DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER (PS ON LEAVE / TOUR) 22.03.2019 (FRIDAY) DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 26.03.2019 (TUESDAY) DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 26.03.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER