M/s. Landbase India Ltd., New Delhi V. DCIT, New Delhi

CO 111/DEL/2010

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4113 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 1 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 07-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Opportunity of being heard; Audit objection; Question of law; Tangible material; Difference of opinion; Validity of assessment; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 143(2); 192; 32; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D : NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AN D SHRI L.P. SAHU, ACCOUNTANT MEMBER , ITA NOS. 3549/DEL /2009 & 4847/DEL/2009 ASSESSMENT YEARS: 2001-02 & 2003-04 THE D.C.I.T. VS. M/S LANDBASE INDIA LTD CIRCLE 4(1) 25, BASANT LOK NEW DELHI COMMUNITY CENTRE, NEW DELHI PAN : AAACL 0053F CO NO. 328/DEL/2009 & 111/DEL/2010 [A/O ITA NO. 3549/DEL /2009 & 4847/DEL/2009] ASSESSMENT YEARS: 2001-02 & 2003-04 M/S LANDBASE INDIA LTD VS. THE D.C.I.T. 25, BASANT LOK CIRCLE 4(1) COMMUNITY CENTRE NEW DELHI NEW DELHI PAN : AAACL 0053 F [APPELLANT] [RESPONDENT] DATE OF FINAL HEARING : 17.03.2016 DATE OF PRONOUNCEMENT : 15.06.2016 REVENUE BY : SMT. SULEKHA VERM A, CIT-DR ASSESSEE BY : SHRI ROHIT JAIN, ADV. SHRI SAMBHAV JAIN, CA ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THESE APPEALS BY THE REVENUE AND CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A, DATED 22/05/2009 FOR A.YS 2001-02 AND 2003-04. 2 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 2 2. FIRST WE SHALL TAKE UP THE CROSS OBJECTIONS RAIS ED BY THE ASSESSEE. THE ASSESSEE HAS RAISED SIMILARLY WORDED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN UPHOLDING THE VALIDITY OF THE ORDER OF ASSESSING OFFICER PASSED UNDER SECTION 143(3) READ WITH SECTI ON 147 OF THE INCOME-TAX ACT, 1961 (THE ACT), WITHOUT APPRECIAT ING THAT THE ORDER OF ASSESSING OFFICER WAS BEYOND JURISDICTION, BAD IN LAW AND VOID-AB-INITIO. 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT (A) HAS ERRED IN HOLDING THAT THE ISSUE REGARDING L EGALITY OF PROCEEDINGS UNDER SECTION 147 OF THE ACT COULD NOT BE RAISED SINCE THE VALIDITY THEREOF WAS NOT CHALLENGED BEFOR E THE ASSESSING OFFICER. 1.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT (A) FAILED TO APPRECIATE THAT INITIATION OF PROCEE DINGS WAS BARRED BY LIMITATION PRESCRIBED IN THE PROVISO TO S ECTION 147 OF THE ACT AND CONSEQUENTLY THE ASSESSMENT ORDER WAS I LLEGAL AND BAD IN LAW 1.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE REASS ESSMENT PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER ON A MERE CHANGE OF OPINION AND THERE WAS NO FAILURE ON THE P ART OF APPELLANT TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND CONSEQUENTLY, THE ASSESSMENT ORD ER WAS ILLEGAL AND BAD IN LAW. 1.4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN HOLDING THAT THE ORDER PASSED BY ASSES SING OFFICER WAS AFTER INDEPENDENT APPLICATION OF MIND, WITHOUT APPRECIATING THAT THE RE-ASSESSMENT PROCEEDINGS WER E INITIATED ON THE OPINION OF AUDIT PARTY, WHICH IS NOT PERMISS IBLE UNDER LAW. 3 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 3 1.5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT REASSESSMENT PRO CEEDINGS WERE INITIATED BY THE ASSESSING OFFICER UNDER SECTI ON 147 OF THE ACT WITHOUT FORMING A REASONABLE BELIEF THAT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT, WHICH A PRE-REQUI SITE CONDITION FOR VALIDLY INITIATING PROCEEDINGS UNDER THAT SECTION. 3. BRIEFLY STATED, THE FACTS RELATING TO THESE GROU NDS ARE THAT THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ASSESSM ENT ORDER DATED 24 TH DECEMBER, 2007 ON VARIOUS GROUNDS. THE ASSESSEE ORI GINALLY FILED RETURN OF INCOME ON 30 TH OCTOBER, 2001, DECLARING LOSS OF RS. 20,72,84,983. ASSESSMENT WAS ORIGINALLY COMPLETED U /S 143(3) OF THE INCOME TAX ACT, 1961 [FOR SHORT, 'THE ACT'] VIDE OR DER DATED 29 TH MARCH, 2004 ASSESSING THE LOSS OF THE ASSESSEE AT RS.20,71 ,55,977 AFTER MAKING CERTAIN DISALLOWANCES. THEREAFTER, REASSESSMENT PRO CEEDINGS WERE INITIATED U/S 147 OF THE ACT VIDE NOTICE DATED 30 TH OCTOBER, 2006 ISSUED U/S 148 OF THE ACT, ON THE BASIS OF CERTAIN AUDIT OBJECTIONS AFTER OBTAINING APPROVAL OF THE APPROPRIATE AUTHORI TIES. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED RETURN VIDE LET TER DATED 27 TH NOVEMBER 2006, REQUESTING THE ASSESSING OFFICER TO TREAT THE RETURN ORIGINALLY FILED AS RETURN FILED IN RESPONSE TO NOT ICE UNDER SECTION 148 OF THE I.T. ACT. IN THE AFORESAID BACKGROUND FA CTS, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE REASSESSMENT ORDER O N THE FOLLOWING FOUR GROUNDS: 4 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 4 (A) THE REASSESSMENT PROCEEDINGS WERE INITIATED O N A MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW; (B) IN TERMS OF PROVISO TO SECTION 147 OF THE ACT , PROCEEDINGS UNDER THAT SECTION COULD BE VALIDLY INITIATED BEYON D THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT YEAR ONLY IF THE RE WAS ANY FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THAT BEING NOT SO I N THE PRESENT CASE, THE PREREQUISITE CONDITION FOR INITIATING REASSESSM ENT PROCEEDINGS, IN TERMS OF PROVISO TO SECTION 147 OF THE ACT, WERE NO T FULFILLED/SATISFIED; (C) THE IMPUGNED REASSESSMENT PROCEEDINGS WERE INIT IATED U/S 147 OF THE ACT WITHOUT FORMING A REASONABLE BEL IEF THAT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT WHIC H IS A PRE REQUISITE CONDITION FOR VALIDLY INITIATING PROC EEDINGS UNDER THAT SECTION. (D) THE IMPUGNED REASSESSMENT PROCEEDINGS WERE INI TIATED ON THE OPINION OF THE AUDIT PARTY WHICH IS NOT PERM ISSIBLE IN LAW. 4. THE LD. AR SUBMITTED THAT IN THE CASE OF THE ASS ESSEE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT 5 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 5 AFTER DUE APPLICATION OF MIND ON THE CLAIMS MADE BY THE ASSESSEE IN THE RETURN AND/OR DURING THE ASSESSMENT PROCEEDINGS. IT WAS FURTHER CONTENDED THAT THE ASS ESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF MERE CHA NGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW. 5. RELYING UPON THE FOLLOWING DECISIONS, THE LD. CO UNSEL FOR THE APPELLANT SUBMITTED THAT THE ASSESSMENT ORDER IS IL LEGAL AND BAD IN LAW: * INDIAN AND EASTERN NEWSPAPER SOCIETY V. CIT: 119 ITR 997 (SC) CIT V. LUCAS T.V.S. LTD. 249 ITR 306 (SC) ADANI EXPORTS V. DCIT: 240 ITR 224 (GUJ.) CIT V. METTUR CHEMICAL & INDS. CORPN: 242 ITR 119 ( MAD.) WALDIES LIMITED V. ITO: 246 ITR 29 (CAL.) ITO V. JIYAJEERAO COTTON MILLS LTD: 247 ITR 122 (CA L.) CIT V. SAMBHAR SALT LIMITED: 262 ITR 675 (RAJ.) THE SUBMISSIONS FILED BY THE APPELLANT WERE FORWARD ED TO THE ASSESSING OFFICER FOR COMMENTS' WHO SUBMITTED HIS R EMAND REPORT VIDE LETTER NO. ACIT/CIRCLE(4)/2009-10/279 DATED 15 TH OCTOBER, 2008. IN THE REMAND REPORT, THE ASSESSING OFFICER H AS NOT COMMENTED ON THE SUBMISSIONS FILED BY THE APPELLANT ON THE AFORESAID ISSUE FOR THE ASSESSMENT YEAR BEING ILLEG AL AND BAD IN LAW. HOWEVER, DURING THE COURSE OF PERSONAL HEARING, THE ASSESSING 6 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 6 OFFICER SUPPORTED THE ASSESSMENT ORDER AND SUBMITTE D THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED BY INDEPEND ENT APPLICATION OF MIND AND AFTER OBTAINING APPROVAL FR OM THE LD. ADDL. CIT AND CIT ON 5 OCTOBER, 2006 AND 27 TH OCTOBER, 2006, RESPECTIVELY. THE AO ACCORDINGLY SUBMITTED THAT THE OBJECTION OF THE APPELLANT IS WITHOUT MERIT AND SHOULD BE DISMIS SED. 6. IN ITS REPLY TO THE REMAND REPORT FURNISHED BY T HE APPELLANT VIDE LETTER DATED 17 TH NOVEMBER, 2008, THE APPELLANT, APART FROM THE SUBMISSIONS MADE EARLIER ALSO REFERRED TO THE D ECISION OF THE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MAN UFACTURING CO. VS. CIT IN SUPPORT OF ITS CONTENTION THAT THE REASS ESSMENT PROCEEDINGS ARE ILLEGAL AND BAD IN LAW. 7. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSION S, THE LD. CIT(A) HAS HELD AS UNDER: THE SUBMISSIONS OF THE A.R. OF THE APPELLANT AND T HE ARGUMENTS MADE BY THE ASSESSING OFFICER IN THE COUR SE OF APPELLATE PROCEEDINGS HAVE CAREFULLY BEEN CONSIDERE D. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, I A GREE WITH THE ARGUMENTS OF THE ASSESSING OFFICER THAT THE VAL IDITY OF THE NOTICE UNDER SECTIONT48 CANNOT BE CHALLENGED AT THI S STAGE. THE CONDUCT OF THE APPELLANT IN SUBMITTING ALL THE RELEVANT INFORMATION AND COMPLYING WITH ALL THE REQUIREMENTS , THE 7 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 7 NOTICES ISSUED UNDER SECTION 148 / 143(2) AND 142(1 ) HAVE MADE IT CLEAR THAT HE DID NOT HAVE ANY OBJECTION FO R RE- OPENING THE ASSESSMENT PROCEEDINGS AT THE INITIAL S TAGE. SUBSEQUENTLY ALSO, NO OBJECTION WAS TAKEN IN THE CO URSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE APPELLANT HAD CHALLENGED THE VALIDITY OF THE RE-OPENING OF THE AS SESSMENT PROCEEDINGS ONLY AT THE TIME OF THE FILING OF THE A PPEAL WHICH IS NOT ONLY AFTER THOUGHT AND APPEARED TO HAVE BEEN RAISED ONLY FOR THE SAKE OF RAISING A GROUND OF APPEAL. EV EN ON THE MERIT OF THE FACTS, I AM OF THE VIEW THAT AO HAS BE EN JUSTIFIED IN ISSUING THE NOTICE UNDER SECTION 148 OF THE INCO ME TAX ACT, 1961. ALTHOUGH THE INITIAL SOURCE OF INFORMATI ON WAS THE AUDIT OBJECTION BUT SAME HAS NOT BEEN MADE THE BASIS FOR RE-OPENING THE ASSESSMENT PROCEEDINGS. IT WAS INDEPENDENT APPLICATION OF MIND ON THE VARIOUS FACT S AS POINTED OUT BY THE AUDIT AUTHORITY WARRANTING THE ISSUANCE OF NOTICE UNDER SECTION 148 AS SOME OF THE ISSUES INVOLVED IN THE APPEAL WERE ALTOGETHER OMITTED IN T HE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS OF ON SOME OF TH E ISSUES THERE WAS NOT FULL AND TRUE DISCLOSURE OF THE INFOR MATION. IN TOTALITY OF ALL THESE FACTS AND CIRCUMSTANCES, I DI SMISS APPELLANT'S APPEAL ON GROUND NOS. 1 AND 2. 8. FURTHER, THE LD. CIT(A) GRANTED RELIEF TO THE AS SESSEE ON MERITS IN BOTH THE YEARS. THUS THE REVENUE FILED APPEALS CHA LLENGING THE CONCLUSION OF THE LD. CIT(A) ON MERITS WHEREIN THE FIRST APPELLATE AUTHORITY DIRECTED THE AO TO DELETE THE ADDITION MA DE ON ACCOUNT OF 8 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 8 DIFFERENCE BETWEEN BUDGET COST OF FLATS, PRIOR PERI OD INTEREST EXPENDITURE, EXCESS DEPRECIATION ON LAND AND CAPITA L GAIN ON AGREEMENT TO SALE DATED 17.3.2003 IN A.Y 2001-02. THE REVENUE HAS ALSO FILED APPEAL FOR A.Y 2003-04 WHEREIN THE LD. C IT(A) GRANTED RELIEF TO THE ASSESSEE ON MERITS DIRECTING THE AO TO DELET E ADDITION MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN MADE BY THE AO U/S 32 OF THE ACT, ADDITION ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE ON GOLF COURSE. THE ASSESSEE HAS ALSO FILE D CROSS APPEALS CHALLENGING THE VALIDITY OF REOPENING U/S 147 OF TH E ACT AND NOTICE U/S 148 OF THE ACT FOR BOTH THE YEARS. 9. ON THE CROSS OBJECTIONS OF THE ASSESSEE FOR BOTH THE YEARS, THE ALLEGATIONS OF THE ASSESSEE TO THE REOPENING OF ASS ESSMENT ARE SIMILARLY WORDED, WHICH HAS BEEN REPRODUCED HEREINABOVE. FOR THE SAKE OF CLARITY IN OUR FINDINGS, WE ARE CONSIDERING THE RIV AL ARGUMENTS OF BOTH THE SIDES IN VIEW OF THE FACTS AND CIRCUMSTANCES OF A.Y 2001-02. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. AR REITERATING SUBMISSIONS OF THE ASSESSEE PLACED BEFORE THE LD. CIT(A), CONTENDED TH AT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE VALIDITY OF ASSESSMENT O RDER WITHOUT 9 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 9 APPRECIATING THAT THE ORDER OF REASSESSMENT WAS BEY OND JURISDICTION, BAD IN LAW AND VOID AB INITIO. THE LD. AR VEHEMENT LY POINTED OUT THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ISSUE REGARDING LEGALITY OF PROCEEDINGS U/S 147 OF THE ACT COULD NOT BE RAISED SINCE THE VALIDITY THEREOF WAS NOT CHALLENGED BEFORE THE AO. THE LD. AR ALSO POINTED OUT THAT IN THE PRESENT CASES, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE INITIATION OF PROCEEDINGS WAS BARRED BY LIMITATION PRESCRIBED IN PROVISO TO SECTION 147 OF THE ACT AND CONSEQUENTLY THE ASSE SSMENT ORDER WAS ILLEGAL AND BAD IN LAW. THE LD. AR REITERATING HIS WRITTEN SUBMISSIONS DATED 28.10.2015 ALSO CONTENDED THAT THE REASSESSME NT PROCEEDINGS WERE INITIATED BY THE AO ON A MERE CHANGE OF OPINIO N AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND THUS TH E ASSESSMENT ORDER WAS ILLEGAL AND BAD IN LAW. THE LD. AR ALSO POINTE D OUT THAT THE FIRST APPELLATE AUTHORITY WAS NOT CORRECT IN HOLDING THAT THE ORDER PASSED BY THE AO WAS AFTER INDEPENDENT APPLICATION OF MIND WI THOUT APPRECIATING THAT REASSESSMENT PROCEEDINGS WERE INITIATED ON THE OPINION OF AUDIT PARTY WHICH IS NOT PERMISSIBLE UNDER LAW. THE LD. AR READ OUT ALL THREE POINTS MENTIONED IN THE REASONS RECORDED BY THE AO. THE LD. AR LASTLY POINTED OUT THAT REASSESSMENT PROCEEDINGS WERE INIT IATED BY THE AO WITHOUT FORMING A REASONABLE BELIEF THAT INCOME OF THE ASSESSEE HAS 10 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 10 ESCAPED ASSESSMENT WHICH IS A PRE REQUISITE CONDITI ON FOR INITIATING PROCEEDINGS VALIDLY. 11. REPLYING TO THE ABOVE, THE LD. CIT-DR DREW OUR ATTENTION TOWARDS RELEVANT OPERATIVE PART OF THE IMPUGNED FIRST APPEL LATE ORDER AND CONTENDED THAT FROM THE REASONS RECORDED IT IS AMPL Y CLEAR THAT THE AO WAS NOT GUIDED BY THE OBSERVATIONS OF THE AUDIT PAR TY AND HE APPLIED HIS MIND INDEPENDENTLY WHILE RECORDING SATISFACTION FOR INITIATION OF PROCEEDINGS. THE LD. DR ALSO POINTED OUT THAT THE ASSESSEE DID NOT RAISE ANY OBJECTION DURING THE ASSESSMENT PROCEEDIN GS CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS AND ISSUANCE O F NOTICE U/S 147/148 OF THE ACT. THEREFORE, THIS LEGAL CONTENTIO N WAS NOT MAINTAINABLE BEFORE THE LD. CIT(A) AT FIRST APPELLA TE STAGE. THE LD. DR ALSO POINTED OUT THAT THE AO MADE INDEPENDENT APPLI CATION OF MIND ON VARIOUS FACTS AS POINTED OUT BY THE AUDIT AUTHORITY WHILE ISSUING NOTICE U/S 147 OF THE ACT BECAUSE SOME OF THE IMPORTANT IS SUES INVOLVED IN THE APPEAL WERE ALTOGETHER OMITTED DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND THERE WAS NOT A FULL AND TRUE DISCL OSURE OF INFORMATION REGARDING DEPRECIATION CLAIMED BY THE ASSESSEE, THE ASSESSEE UNDERSTATED THE SALE PROCEEDS RESULTING INTO ESCAPE MENT OF PROCEEDINGS AND THE ASSESSEE ALSO CLAIMED PRIOR PER IOD EXPENDITURE WHICH ALSO SHOWS THAT THE ASSESSEE DID NOT DISCLOSE FULL AND TRUE 11 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 11 PARTICULARS OF ITS INCOME FOR THE RELEVANT PERIOD. THEREFORE, REOPENING OF ASSESSMENT AND ISSUANCE OF NOTICE WAS VALID AND THE FIRST APPELLATE AUTHORITY RIGHTLY REJECTED THE LEGAL OBJECTION OF T HE ASSESSEE IN THIS REGARD. 12. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, WE ARE OF THE VIEW THAT THE AO INITIATED REASSESSMENT PROCEED INGS BY RECORDING FOLLOWING REASONS: DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WA S SEEN THAT THE ASSESSEE CLAIMED DEPRECIATION ON GOLF COU RSE AT THE RATE OF 25% UNDER CAT EGORY OF PLANT AND MACHINERY. THE GOLF COURSE IS A STRUCTURE OF BUILDING IN WHICH VARIOUS SPORTS FACIL ITIES HAVE BEEN PROVIDED TO THE MEMBERS OF THE ASSESSEE COMPANY. THE DEPRECIATION IS ADMISSIBLE ON THE GOLF COURSE AT THE RATE OF 10% AS IN THE CASE OF BUILDING, IT IS SEEN FROM DEPRECIAT ION SCHEDULE THAT THE DEPRECIATION WAS CLAIMED ON GOLF COURSE AT R S .2,42, , 64,813/- AS AGAINST THE ADMISSIBLE DEPRECIATION AT RS 1,04,93,770/- IT HAS BEEN HELD BY SUPREME COURT IN THE CASE OF CIT VS ANAND THEATRE (244 I TR 192) THAT BUILDING IS NOT A PLANT AND EVEN IF IT IS TO BE CONSTRUED AS PLANT ONLY THAT PART OF THE BUILDING HOUSING THE AUDITORIUM AND FURNITURE AND FITTINGS FOUND THEREIN SHOULD BE CONSTRUED AS PLANT AND NOT THE EN TIRE B U I LDING. IN THIS PARTICULAR CASE, ONLY SPORTS FACILITIES HAV E BEEN PROVIDED : HE MEMBERS. AT MOST THE EQUIPMENT OF SPORTS MAY BE CONSIDERED FOR ALLOWING DEPRECIATION AS PLANT AND MACHINERY UN LESS THE ASSESSEE HAS SE PARATELY CLAIMED THE DEPRECIATION ON THESE 12 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 12 EQUIPMENTS. THUS EXCESS DEPRECIATION HAS BEEN ALLOW ED AT RS 1,37,71,043/-. THUS THE INCOME TO THE EXTENT OF RS 1,37,71,043/- HAS ESCAPED ASSESSMENT. 3. IT IS FURTHER SEEN FROM DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE SOLD APART MENTS DURING THE YEAR. THE TOTAL SALE CONSIDERATION HAS BEEN SHO WN AT RS 174,99,49,491/-, HOWEVER IN THE COMPUTATION OF INCO ME AND PROFIT AND LOSS ACCOUNT THE ASSESSEE COMPANY HAS CO NSIDERED SALE PROCEEDS ONLY AT RS 171,10,16,224/-. 3.1 THE DETAILS IN THIS REGARD FILED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS WERE EXAMINED. THE ASSESSEE WORKED OUT THE SALE CONSIDERATION ON THE BASIS OF PROPORTI ON OF BUDGETED EXPENDITURE TO THE ACTUAL EXPENDITURE AND APPLIED THE PROPORTION TO ACTUAL SALES. HOWEVER IN THIS WOR KING THE ASSESSEE REDUCED ACTUAL EXPENDITURE FROM PROPORTION ED SALES PROCEEDS WHICH IS NOT ONLY INCORRECT BUT IT IS NOT BASED ON ANY ACCOUNTING OR LEGAL PRINCIPLES. IT IS ALSO NOT SANC TIONED BY THE ACCOUNTING STANDARDS PRESCRIBED BY ICAI. THERE IS N O BASIS FOR THIS COMPUTATION. THIS WORKING IS NEITHER BASED ON MERCANTILE BASIS OF ACCOUNTING NOR ON ANY OTHER PROVISIONS OF LAW OR ACCOUNTANCY. THUS THE ASSESSEE COMPANY HAS UNDER ST ATED THE SALES PROCEEDS BY 3,89,33,267/- WHICH HAS ESCAPED A SSESSMENT. 3.2 THE ASSESSEE COMPANY HAS CLAIMED INTEREST AT RS 61 , 11 , 162 /- IN RESPECT OF LOAN ADVANCED BY M/S GILT FACILITI ES PRIVATE LIMITED. THERE WAS A OVER DELAYED COMPLETIO N OF PROJECTS AND RETENTION OF MONEY COLLECTED BY THE AS SESSEE 13 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 13 COMPANION ON BEHALF OF M/S GILT FACILITIES PRIVATE LTD. AFTER SETTLEMENT THE INTEREST OF 61.11,162/- WAS CONSIDER ED PAYABLE TO THE CREDITORS. IT WAS CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THIS COMPONENT OF INTEREST RELATED TO ONLY ASSESSMENT 2004-05 AND NOT TO ANY EARLIER ASSESSMEN T YEAR. HOWEVER THE DETAILS DURING THE ASSESSMENT PROCEEDIN GS CLEARLY SHOWED THAT THERE IS METICULOUS WORKING OF YEAR WISE INTEREST ON THE AMOUNT OF LOAN NEED TO THE ASSESSEE COMPANY. THE INTEREST OF RS 61,11,162/- IS NOT ADMISSIBLE A N THE ASSESSMENT YEAR AS IT IS PRIOR PERIOD EXPENDITU RE WHICH IS NOT ADMISSIBLE. THUS THE INCOME OF RS 61,11,162/- H AS ESCAPED THE ASSESSMENT. 13. IN VIEW OF ABOVE, IN THE PRESENT CASE, ADMITTED LY AND UNDISPUTEDLY, REOPENING OF ASSESSMENT AND ISSUANCE OF NOTICE HAS BEEN INITIATED BEYOND FOUR YEARS OF PRESCRIBED PERIOD AN D HENCE, AS PER FIRST PROVISO TO SECTION 147 OF THE ACT, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT A.Y UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A.Y BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO MA KE A RETURN U/S 139 OR IN RESPONSE TO NOTICE ISSUED U/SS (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT FOR THE A.Y UNDER CONSIDERATION. IN VIE W OF SAID PROVISION, FOR INITIATION OF REASSESSMENT PROCEEDINGS IT WAS T HE DUTY OF THE AO TO RECORD A SATISFACTION THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED 14 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 14 ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IN THE REASONS RECORDED IT WAS ALLEGED THAT THE ASSESSEE HAD WRONGLY CLAIMED DEPRECATION O N GOLF COURSE. IN THIS REGARD THE LD. AR POINTED OUT THAT THE ASSESSE E HAS SHOWN GOLF COURSE UNDER THE HEAD ASSETS IN THE AUDITED FINAN CIAL STATEMENTS AND NOT AS A PART OF BUILDING AND AS PER TAX AUDIT R EPORT, DEPRECIATION ON GOLF COURSE WAS SHOWN AT SL. NO. 3 AND RATE OF DEPR ECIATION WAS 25%. THE LD. AR ALSO POINTED OUT THAT THE ASSESSEE FURNI SHED DETAILED BREAK UP OF ADDITION TO GOLF COURSE AND VIDE LETTER FILED ON15.3.2004, THE ASSESSEE CERTIFIED THAT NO DEPRECIATION HAS BEEN CL AIMED ON THE VALUE OF LAND ON WHICH GOLF COURSE HAS BEEN CONSTRUCTED. 14. ON ISSUE OF UNDERSTATEMENT OF SALE CONSIDERATIO N, THE LD. AR POINTED OUT THAT ON ACCOUNT OF SALE OF APARTMENTS, THE AO IS REFERRING TO THE INCOME FROM LABURNUM PROJECT UNDERTAKEN BY T HE ASSESSEE AND PROFIT FROM THE SAID PROJECT WAS CONSISTENTLY BEEN ACCOUNTED AS PER PERCENTAGE COMPLETION METHOD. THE LD. AR POINTED O UT THAT VIDE NOTE NO. 7, REVENUE RECOGNITION SCHEDULE XXI SIGNIFICANT ACCOUNTING POLICIES OF THE AUDITED ACCOUNTS FOR THE YEAR ENDED ON 31.3. 200, THE ASSESSEE CLEARLY MENTIONED THAT REVENUE ON ACCOUNT OF SALE O F LAND AND CONSTRUCTED APARTMENTS IS ACCOUNTED FOR ON THE BASI S OF PERCENTAGE COMPLETION METHOD AND REGARDING LABUNUM PROJECT, TH E ASSESSEE FILED 15 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 15 DETAILED NOTE IN FEBRUARY 2004 WITH THE DETAILS OF PROFIT ON THE PROJECT BOOKED DURING THE YEAR UNDER CONSIDERATION. THE LD . AR ALSO POINTED OUT THAT VIDE LETTER DATED 15.3.2004 AVAILABLE AT P AGE 20 OF THE ASSESSEES PAPER BOOK, THE ASSESSEE ALSO FURNISHED DETAILED WORKING OF THE APARTMENT AMOUNTING TO RS. 11.09 CRORES WHICH W AS DECLARED IN THE RELEVANT PROFIT AND LOSS ACCOUNT. THEREFORE, O N THIS COUNT ALSO, THERE WAS FULLY AND TRULY ALL DISCLOSURE BY THE ASS ESSEE. THEREFORE, REASSESSMENT BEYOND FOUR YEARS IS NOT PERMISSIBLE. 15. REGARDING THIRD ISSUE, THE LD. AR POINTED OUT T HAT VIDE LETTER FEBRUARY 2004, THE ASSESSEE FURNISHED A DETAILED NO TE ON ACCRUAL ON INTEREST AND JUSTIFIED ITS ALLOWABILITY AFTER EXPLA INING THE ENTIRE BACKGROUND OF THE SALE ALONGWITH DETAILED JUSTIFICA TION. THE LD. AR ALSO POINTED OUT THAT THE ASSESSEE ALSO FILED COPY OF THE AGREEMENT DATED 16.8.1995 ENTERED INTO WITH GILT FACILITIES P . LTD. WHICH IS AVAILABLE AT PAGES23 TO 26 OF ASSESSEES PAPER BOOK AND AGAIN FURNISHED DETAILED JUSTIFICATION OF INTEREST AND ITS ALLOWABI LITY DURING A.Y 2001- 02. VIDE LETTER DATED 15.3.2004 WHICH IS ALSO AVAI LABLE AT PAGES 17 AND 18 OF THE ASSESSEES PAPER BOOK. THE LD. AR ALSO P OINTED OUT THAT VIDE LETTER MARCH 2004, AVAILABLE AT PAGES 21, 22 AND 27 -45 OF THE ASSESSEES PAPER BOOK, THE ASSESSEE FURNISHED DETAI LED BACKGROUND OF 16 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 16 INTEREST PAID TO M/S GILT FACILITIES P. LTD AND LEG AL JUSTIFICATION FOR ALLOWABILITY OF ENTIRE INTEREST PAID DURING A.Y 200 1-02. THEREFORE, IT CANNOT BE ALLEGED THAT THE INCOME OF THE ASSESSEE H AD ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSEE. 16. THE LD. AR ALSO POINTED OUT THAT IT WAS A MERE CHANGE OF OPINION ON THE SIMILAR MATERIAL AND REOPENING OF ASSESSMENT CANNOT BE HELD AS VALID WHEN WITHOUT ANY TANGIBLE MATERIAL, AND WITHO UT APPLICATION OF MIND, THE AO HELD THAT THERE IS ESCAPEMENT OF INCO ME. FOR THIS PROPOSITION, THE LD. AR PLACED RELIANCE ON THE RATI O OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR OF INDIA LTD 320 ITR 561 [SC]. THE LD. AR REITERATING ITS SUBMI SSION AGAIN POINTED OUT THAT AS PER FIRST PROVISO TO SECTION 147 OF THE ACT, REOPENING OF ASSESSMENT IS NOT PERMISSIBLE AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT A.Y UNLESS ANY INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT BY THE REASON OF FAILURE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE LD. A R LASTLY ALLEGED THAT THE AO INITIATED REASSESSMENT PROCEEDINGS ONLY ON T HE REPORT OF AUDIT PARTY OF THE DEPARTMENT AND WITHOUT APPLYING HIS MI ND HE PROCEEDED TO INITIATE REASSESSMENT PROCEEDINGS WHICH IS NOT A LEGAL AND FAIR APPROACH. 17 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 17 17. REPLYING TO THE ABOVE, THE LD. DR FAIRLY ACCEPT ED THAT ORIGINAL ORDER OF ASSESSMENT WAS PASSED U/S 143(3) OF THE AC T AND NOTICE U/S 148 OF THE ACT WAS ISSUED BEYOND THE PERIOD OF FOUR YEARS. HE ALSO VEHEMENTLY POINTED OUT THAT THE AO CAN TAKE PERMISS IBLE VIEW WHEN TWO TREATMENTS ARE PERMISSIBLE AND ONE VIEW HAS BEE N TAKEN BY THE ASSESSEE BUT WHEN THE CLAIM IS NOT SYSTEMATIC, THEN TWO-VIEWS THEORY WILL NOT APPLY AND ALLEGATION OF CHANGE OF OPINION CANNOT BE MADE AGAINST THE AO. THE LD. DR POINTED OUT THAT AS PER AUDITED FINANCIAL RESULTS OF THE ASSESSEE, IN THE SCHEDULE FORMING PA RT OF THE BALANCE SHEET [APB PAGE 297] GOLF COURSE HAS BEEN SHOWN SEP ARATELY WHICH IS NOT AS PER PROVISIONS OF THE ACT. THE ASSESSEE SHO ULD HAVE SPECIFICALLY MENTIONED THAT THE GOLF COURSE FALLS EITHER IN BUIL DING OR PLANT AND MACHINERY AND THIS CONDUCT OF THE ASSESSEE SHOWS TH AT THE ASSESSEE DID NOT FILE TRULY AND FULLY ALL MATERIAL FACTS FOR CLA IMING DEPRECIATION ON GOLF COURSE AND HENCE, THE AO HAS VALIDLY REOPENED THE ASSESSMENT AND ISSUED NOTICE U/S 147/148 OF THE ACT. 18. THE LD. DR FURTHER TOOK US THROUGH ASSESSMENT O RDER FOR A.Y 2003-04 AND SUBMITTED THAT ASSESSEE HAS NOT CHALLEN GED THIS ORDER DATED 28.2.2006 AND SUBSEQUENT TO THAT THE AO ISSUE D NOTICE U/S 148 OF THE ACT ON 30.10.2006 WHICH CLEARLY SHOWS THAT R EOPENING OF 18 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 18 ASSESSMENT FOR EARLIER YEAR WAS CONSEQUENT TO THE S UBSEQUENT ASSESSMENT ORDER OF A.Y 2003-04. THE LD. DR POINTE D OUT THAT ORIGINAL ASSESSMENT ORDER FOR A.Y 2001-02 AVAILABLE AT PAGES 49 AND 50 OF THE PAPER BOOK DATED 29.3.2004 WAS 19. THE LD. DR FURTHER TOOK US THROUGH AUDIT OBJECT ION AND SUBMITTED THAT AS PER ORDER FOR A.Y 2003-04, THE ASSESSEE ACC EPTED THAT THE GOLF COURSE IS A BUILDING AND DEPRECIATION WAS ALLOWED T HEREON @ 10% WHEREAS THE ASSESSEE CLAIMED DEPRECIATION @ OF 25% WHICH IS NOT SUSTAINABLE. THE LD. CIT-DR ALSO DREW OUR ATTENTIO N TOWARDS REVENUE PB PAGES 29 AND 30 AND READ OUT AUDIT OBJECTIONS RA ISED IN THE CASE OF ASSESSEE FOR A.Y 2001-02. THE LD. DR ON THE SECOND ISSUE RECORDED IN THE REASONS POINTED OUT THAT AS PER PAGES 4 TO 12 O F APB, THE PROFIT POSITION FOR THE F.Y. COMMENCING FROM 1989-99 TO 20 03-04 IT IS AMPLY CLEAR THAT ENTIRE SALE WAS COMPLETED IN F.Y. 2000-0 1. THEREFORE, CALCULATION PLACED AT PAGE NO. 6 IS INCORRECT AND W RONG AND NOTE ON LABUNUM PROPERTY PLACED AT APB PAGE 9, THE PROFIT F OR THE F.Y. 2000- 01 HAS ARRIVED ON THE BASIS OF THE MATCHING OF THE REVENUE FOR THE NUMBER OF APARTMENTS SOLD IN THE F.Y. 200-01 WITH T HE CORRESPONDING COST OF THE APARTMENTS. BUT THIS CALCULATION WAS F ACTUALLY INCORRECT AS THE ASSESSEE ONLY ACCOUNTED 90% OF THE SALE PRICE A ND 98% OF THE COST 19 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 19 FOR CALCULATION OF PROFITABILITY FROM LABUNUM PROJE CT FOR THE YEAR WHICH IS NOT A CORRECT APPROACH AND THUS THE ASSESS EE SHOULD BE HELD LIABLE FOR NOT DISCLOSING TRULY AND FULLY ALL PARTI CULARS OF ITS INCOME DURING THE ASSESSMENT PROCEEDINGS AND FOR THIS REAS ON, REASSESSMENT BEYOND FIVE YEARS IS PERMISSIBLE. 20. THE LD. DR VEHEMENTLY POINTED OUT THAT ON THE L AST ISSUE RECORDED IN THE REASONS, THE ASSESSEE HAS TO MAKE C LAIM AS PRIOR PERIOD INTEREST EXPENDITURE AND TAX AUDITOR SHOULD MENTION THIS GLARING FACT IN THE REPORT AND ON THIS COUNT ALSO, THE INCOME OF TH E ASSESSEE ESCAPED ASSESSMENT FOR THE RELEVANT A.Y BY THE REASON OF FA ILURE OF THE ASSESSEE FOR NOT DISCLOSING TRULY AND FULLY ALL RELEVANT MAT ERIAL FACTS FOR ITS ASSESSMENT. THE LD. DR POINTED OUT THAT THE REASSE SSMENT PROCEEDINGS WERE NOT INITIATED ONLY ON THE BASIS OF AUDIT REPOR T OF THE REVENUE, BUT IT WAS CONSEQUENT TO THE ASSESSMENT ORDER FOR A.Y 2 003-04 DATED 28.2.2006 AND DUE APPLICATION OF MIND, THE AO HELD THAT REASSESSMENT PROCEEDINGS HAS TO BE INITIATED. 21. THE LD. AR ALSO PLACED REJOINDER TO THE ABOVE S UBMISSIONS OF THE REVENUE AND CONTENDED THAT REASONS RECORDED BY THE AO FOR REOPENING OF ASSESSMENT HAS TO BE READ WITHOUT ANY SUPPORT AN D NO 20 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 20 SUPPLEMENTATION OR SUBSTITUTION OR DELETION THEREIN OR THEREFROM IS PERMISSIBLE. HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD VS. A CIT 268 ITR 332 [BOM] TO SUPPORT THIS CONTENTION. THE LD. AR ALSO POINTED OUT THAT THERE IS NO REFERENCE OF SUBSEQUENT ASSESSMENT ORDE R FOR 2003-04 IN THE REASONS RECORDED AND THE ISSUE OF DEPRECIATION ON GOLF COURSE AS DECIDED BY THE AO HAS NOT BEEN ACCEPTED BY THE ASSE SSEE BECAUSE THE ASSESSEE IS AGITATING THIS ISSUE CONTINUOUSLY AND R EGULARLY. THE LD. AR PLACING RELIANCE ON THE DECISION OF HONBLE HIGH CO URT OF DELHI IN THE CASE OF CIT VS. USHA INTERNATIONAL, 348 ITR 485 [DE L] CONTENDED THAT WHERE AN AO INCORRECTLY OR ERRONEOUSLY APPLIES LAW OR COMES TO A WRONG CONCLUSION, THEN INITIATION OF REASSESSMENT P ROCEEDINGS WILL BE INVALID ON THE GROUND OF CHANGE OF OPINION. THE LD . AR FURTHER PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF D ELHI IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO.[SUPRA] SUBMITTED THAT NOTICE AFTER FOUR YEARS U/S 148 OF THE ACT AND THERE IS NO INDIC ATION IN THE REASONS RECORDED ABOUT FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ITS ASSESSMENT, THEN N OTICE IN SUCH A SITUATION IS NOT A VALID NOTICE. THE LD. AR OF THE ASSESSEE AGAIN TOOK US THROUGH PARA 28 OF THE SAID DECISION OF THE HONBLE HIGH COURT AND CONTENDED THAT SINCE THERE WAS NO FAILURE TO MAKE T HE RETURN, THE 21 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 21 ESCAPEMENT OF INCOME CANNOT BE ATTRIBUTED TO SUCH F AILURE AND WHEN THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR ASSESSMENT THEN NO ACTION U/S 148 OF THE ACT CO ULD HAVE BEEN TAKEN AFTER FOUR YEARS PERIOD AS PER PROVISIONS OF THE ACT. 22. THE LD. AR FURTHER DREW OUR ATTENTION TOWARDS T HE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT VS. PUROLATOR INDIA LTD 343 ITR 155 PARA 10 TO SUPPORT THIS CONTENTION THAT THERE I S NO INDICATION THAT THE ASSESSEE HAS FAILED OR OMITTED TO DISCLOSE THE MATERIAL AND PRIMARY FACTS, THEN REASSESSMENT PROCEEDINGS BEYOND FOUR YE ARS ARE NOT PERMISSIBLE. THE LD. COUNSEL PLACING RELIANCE ON T HE PLETHORA OF DECISION INCLUDING DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT 119 IT R 996 [SC] SUBMITTED THAT THE OPINION OF INTERNAL AUDIT PARTY OF THE DEPARTMENT ON A POINT OF LAW CANNOT BE REGARDED AS AN INFORMAT ION WITHIN THE MEANING OF SECTION 147(B) OF THE ACT. 23. REPLYING TO THE ABOVE, THE LD. DR ALSO PLACED R ELIANCE ON PLETHORA OF DECISIONS INCLUDING DECISION OF HON'BLE SUPREME COURT IN THE CASE OF P.V.S. BEEDIES PVT. LTD 237 ITR 13 [SC] & DECISION IN THE CASE OF ESS KAY ENGG. COM. (P) LTD 247 ITR818 [SC] AND HON'BLE HIGH COURT OF MADRAS IN THE CASE OF FIRST LEASING CO. OF INDIA LTD 241 ITR 248 22 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 22 [MADRAS] AND VEHEMENTLY CONTENDED THAT AFTER CONSID ERING THE RATIO OF ITS OWN DECISION IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY [SUPRA], IT WAS HELD THAT THE AUDIT REPORT HAS TO B E CONSTRUED AS IF RELEVANT PROVISION OF LAW HAD BEEN BROUGHT TO ITOS NOTICE, THEN THE SAID REPORT CONSTITUTED INFORMATION WITHIN THE MEAN ING OF SECTION 147(B) OF THE ACT. SHE ALSO CONTENDED THAT WHEN AUD IT PARTY HAD MERELY POINTED OUT A FACT WHICH HAD BEEN OVERLOOKED BY THE AO, AND THIS WAS NOT A CASE OF INFORMATION ON A QUESTION OF LAW, THEN REOPENING OF CASE U/S 147(B) OF THE ACT ON THE BASIS OF FACTU AL INFORMATION GIVEN BY THE INTERNAL AUDIT PARTY WAS VALID IN LAW. 24. THE LD. CIT-DR PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MAHARAJ KUMAR KAMAL SI NGH VS. CIT 35 ITR 1 [SC] CONTENDED THAT THE ASSESSEE HAS ACCEPTED ASSESSMENT ORDER FOR A.Y 2003-04 DATED 28.2.2006 AND CONTENDED THAT SUBSEQUENT ORDERS OF HON'BLE SUPREME COURT, HON'BLE HIGH COURT, TRIBU NAL AND REVENUE AUTHORITIES IN ASSESSEES OWN CASE WAS INFORMATION WITHIN THE MEANING OF SECTION 34(1)(B) OF THE I.T. ACT, 1922 WHICH IS A CORRESPONDING SECTION OF SECTION 147 OF THE ACT AND IN THE PRESEN T CASE NOTICE U/S 148 OF THE ACT DATED 30.10.2006 WAS ISSUED AFTER SAID A SSESSMENT ORDER PASSED IN ASSESSEES OWN CASE FOR AY 2003-04 WHICH VALIDLY EMPOWER THE AO FOR REOPENING OF ASSESSMENT BEYOND FOUR YEAR S. 23 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 23 25. ON A CAREFUL CONSIDERATION OF THE ABOVE CONTENT IONS, FIRST OF ALL, WE MAY POINT OUT THAT ALL THE DECISIO NS RELIED UPON BY BOTH THE PARTIES ARE PERTAINING TO OLD PROV ISION OF SECTION 147 OF THE ACT WHICH HAS BEEN AMENDED BY TH E FINANCE ACT, 1987 W.E.F 1.4.1989. IN THE PRESENT C ASE, UNDISPUTEDLY AND ADMITTEDLY, THE REOPENING AND INIT IATION OF REASSESSMENT PROCEEDINGS HAS BEEN PROCEEDED AFTER I NTERNAL AUDIT REPORT OF THE DEPARTMENT AND AFTER ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT FOR AY 2003-04. BUT, FROM THE REASONS RECORDED BY THE AO AS REPRODUCED HEREINABOV E, THERE IS NO MENTION OF AUDIT REPORT AND SUBSEQUENT ASSESS MENT ORDER AND THE AO HAS APPLIED HIS OWN MIND FOR STATI NG REASONS FOR REOPENING OF ASSESSMENT AND INITIATION OF PROCEEDINGS U/S 147 OF THE ACT AND CONSEQUENT TO TH AT NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED TO THE ASSESSEE. 26. THE IMPORTANT NEXT QUESTION POSED TO US FOR ADJUDICATION TO US IS AS TO WHETHER REOPENING OF AS SESSMENT AND REOPENING OF ASSESSMENT PROCEEDINGS BEYOND FOUR YEARS WAS VALIDLY INITIATED IN THE PRESENT CASE. THE CRU X OF THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS T HAT THE ASSESSEE DISCLOSED ALL MATERIAL FACTS TRULY AND FUL LY DURING 24 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 24 THE ASSESSMENT PROCEEDINGS BY WAY OF SUBMITTING AUD ITED FINANCIAL STATEMENT, TAX AUDIT REPORT VIDE LETTER D ATED FEBRUARY 2004, VIDE LETTER 15.3.2004 AND COPY OF TH E OPINION DATED 22.4.2002 ON THE ISSUE OF DEPRECATION CLAIMED ON GOLF COURSE @ 25%. HE FURTHER CONTENDED THAT ON THE ISS UE OF INCOME FROM LABUNUM PROJECT, THE ASSESSEE BESIDES A BOVE DOCUMENTS FILED VIDE NOTE NO. VII IN SCHEDULE 21 OF SIGNIFICANT ACCOUNTING POLICY AND ON THIRD ISSUE OF INTEREST EXPENDITURE, THE ASSESSEE BESIDES ABOVE DOCUMENTS, ALSO FILED ANOTHER LETTER IN MARCH 2004 FURNISHING DETAI LED BACKGROUND OF INTEREST PAID AND LEGAL JUSTIFICATION FOR ALLOWABILITY OF ENTIRE INTEREST PAID DURING A.Y. 20 01-02. AFTER SUBMITTING ABOVE, THE LD. AR VEHEMENTLY POINTED OUT THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. THEREFORE, REOPENING OF ASSESSMENT AND INITIATION O F RE ASSESSMENT PROCEEDINGS AND ISSUANCE OF NOTICE U/S 1 47/148 OF THE ACT WAS NOT VALID. THUS, THE SAME SHOULD BE QU ASHED. 27. ON THE OTHER HAND, THE LD. DR REITERATED HER CO NTENTIONS AS NOTED ABOVE AND VEHEMENTLY SUBMITTED THAT WHILE THE ASSESSEE IS NOT DISCLOSING BASIS OF DEPRECIATION CH ARGED AND 25 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 25 CLAIMED ON GOLF COURSE, NOT SHOWING ACTUAL INCOME F ROM LABUNUM PROJECT AND NOT PLACING PROPER AND TRUE DET AILS ABOUT THE INTEREST CHARGED, THEN IT HAS TO BE HELD THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT BY TH E REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 28. ON CAREFUL CONSIDERATION OF ABOVE, FIRST OF ALL WE MAY POINT OUT THAT IN THE CASE OF SOM DUTT BUILDERS PVT . LTD VS. DCIT, 98 ITD 78 [KOL] ITAT KOLKATA BENCH C HELD T HAT REOPENING OF A CASE BY THE AO ON THE BASIS OF SUBST ANTIAL POINTED OUT BY THE REVENUE AUDIT IS PERMISSIBLE UND ER LAW AND CHANGE OF OPINION COMES TO RESCUE OF ASSESSEE O NLY WHERE THE AO HAS TAKEN ONE OF THE PERMISSIBLE VIEW AT THE TIME OF ORIGINAL PROCEEDINGS AND A WRONG APPRECIATI ON OF FACTS AND LAW CANNOT BE HELD AS PERMISSIBLE VIEW AN D THAT CAN ALWAYS BE CHANGED FOR PROPER APPRECIATION OF LA W AND IN THIS SITUATION, INITIATION OF REASSESSMENT PROCEEDI NGS WAS WITHIN THE MANDATE OF LAW. 26 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 26 29. IN THE PRESENT CASE, THE AO CONSIDERED MATERIAL PLACED ON RECORD BY THE ASSESSEE DURING ORIGINAL ASSESSMEN T PROCEEDINGS AND ACCEPTED THE CLAIM OF THE ASSESSEE REGARDING DEPRECIATION, INTEREST PAID DURING THE RELEVANT PER IOD AND ACCEPTED THE INCOME SHOWN BY THE ASSESSEE FROM LABU NUM PROJECT RELYING ON THE DETAILS FILED BY THE ASSESSE E. 30. ON A VIGILANT PERUSAL OF DOCUMENTS AND DETAILS REFERRED BY THE COUNSELS AND REASONS FOR REOPENING OF ASSESS MENT, IT IS AMPLY CLEAR THAT THE ASSESSEE DID NOT CLASSIFY THE GOLF COURSE AS PER PROVISIONS OF THE ACT AS TO WHETHER IT IS PA RT OF BUILDING OR PLANT AND MACHINERY AND CLAIMED DEP RECIATION @ 25% WHICH WAS ALLOWED @ 10% ONLY IN A.Y. 2003-04 AND THUS, IN OUR CONSIDERED OPINION IT CAN SAFELY BE PR ESUMED THAT THE ASSESSEE DID NOT DISCLOSE ALL MATERIAL FAC TS FULLY AND TRULY FOR THE CLAIM OF DEPRECATION ON GOLF COURSE. 31. FURTHER, WE ARE ALSO IN AGREEMENT WITH THE CONT ENTION OF THE LD. CIT-DR THAT THE ASSESSEE DID NOT PROPERL Y DISCLOSE INCOME FROM LABUNUM PROJECT AS PER PERCENTAGE COMPL ETION METHOD BECAUSE PAGE NO. 4 OF THE ASSESSEES PAPER B OOK REVEALS THAT ENTIRE SALES WAS COMPLETED UPTO A.Y. 2 001-02 27 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 27 AND ONLY THERE WAS A SALE OF RS. 3,10,99,749/- IN F .Y. 2001- 02 WHICH IS LESS THAN 2% OF THE TOTAL SALES WHICH R ESULTED INTO UNDER STATEMENT OF INCOME FROM SALE OF APARTMENTS O F RS. 3.89 CRORES. FROM THE ASSESSEES PAPER BOOK PAGE 8 9, NOTE ON LABUNUM PROFITABILITY IT HAS BEEN MENTIONED THAT PROFIT FOR THE F.Y. 2000-01 HAS BEEN ARRIVED ON THE BASIS OF MATCHING THE REVENUE FOR THE NUMBER OF APARTMENTS S OLD IN THE F.Y. WITH THE CORRESPONDING COST OF THE APARTME NT AND TO SUPPORT THIS FACTUAL CONTENTION, THE ASSESSEE ALSO ENCLOSED A STATEMENT ON PROFITABILITY FROM LABUNUM PROJECT WHI CH REVEALS THAT TOTAL SALE VALUE WAS OF RS. 174.99 CRO RES WHEREAS THE REVENUE RECOGNISED FROM SALES WAS 171.10 CRORES RESULTING INTO UNDERSTATEMENT OF SALE RECEIPTS BY R S. 3.89 CRORES AND THIS TREAT6METN GIVEN BY THE ASSESSEE WA S NOT IN ACCORDANCE WITH THE WELL ACCEPTED PRINCIPLES OF PER CENTAGE OF COMPLETION ACCOUNTING METHOD. THUS, THESE FACTS CLEARLY ESTABLISH THE MISTAKE APPARENTLY SHOWING THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL RELEVANT FACTS NECESSARY FOR ASSESSMENT TRULY AND FULLY FOR THE PERIOD UNDER ASSESSMENT. HENCE, THE AO WAS WELL WITHIN HI S VALID JURISDICTION WHILE ISSUING NOTICE U/S 148 OF THE AC T BEYOND 28 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 28 FOUR YEARS FOR INITIATION OF PROCEEDINGS OF REASSES SMENT U/S 147 OF THE ACT. 32. ON THE THIRD ISSUE, THE LD. AR FAIRLY SUBMITTED THAT AFTER SETTLEMENT OF INTEREST IN RESPECT OF LOAN ADVANCED BY M/S GILT FACILITIES P. LTD, THE AMOUNT OF INTEREST INCL UDING RS. 61,11,162/- WAS RELATED TO PRIOR PERIOD AND NOT FOR A.Y 2001- 02. AS PER THE DETAILS FILED DURING THE ASSESSMENT PROCEEDINGS AVAILABLE AT PAGES 31 TO 45 OF ASSESSEE S PAPER BOOK, IT IS AMPLY CLEAR THAT ON 16.4.2001, GILT FAC ILITIES CONFIRMED THE CALCULATION FORWARDED BY THE ASSESSEE THAT AN AMOUNT OF RS. 1,28,74,844/- WAS ACCEPTED AS DUE FRO M THE ASSESSEE TO M/S GILT FACILITIES P. LTD AS INTEREST ON SURPLUS MONEY LYING WITH THE ASSESSEE. THIS CALCULATION UN DISPUTEDLY INCLUDES IMPUGNED AMOUNT WHICH CLEARLY SHOWS THAT T HE INTEREST AMOUNT OF RS. 61.11 LAKHS WAS NOT RELATED TO A.Y 2001-02. IN OUR CONSIDERED OPINION, FROM THE CORRE SPONDENCE COPY OF THE AGREEMENT DATED 16.8.1995 BETWEEN THE A SSESSEE AND M/S GILT FACILITIES P. LTD IT IS CLEAR THAT AN AGREEMENT WAS ENTERED WITH THE SAID COMPANY AND BECAUSE THERE WAS A DELAY ON THE PART OF THE ASSESSEE COMPANY, THEREFOR E, AS PER AGREEMENT, M/S GILT FACILITIES P. LTD VIDE LETTER D ATED 29 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 29 16.2.2001 DEMANDED INTEREST ON UNUTILISED AMOUNT @ 25% PER ANNUM AND THE ASSESSEE VIDE REPLY DATED 20.3.2001 I NFORMED M/S GILT FACILITIES P. LTD THAT INTEREST @ 16% PER ANNUM IS ACCEPTABLE AND FINALLY VIDE LETTER DATE 31.3.2001, M/S GILT FACILITIES P. LTD ACCEPTED THE PROPOSAL OF THE ASS ESSEE AND THIS LIABILITY STOOD CRYSTALLISED DURING THE PERIOD UNDER CONSIDERATION. IN VIEW OF ABOVE FACTS, IT CANNOT B E SAID THAT THE ASSESSEE DID NOT DISCLOSE TRULY AND FULLY ALL M ATERIAL FACTS ON THE ISSUE OF INTEREST CLAIM. THEREFORE, ON THE THIRD COUNT, ACTION OF THE AO CANNOT BE HELD AS VALID FOR ASSUMI NG JURISDICTION TO REOPEN THE ASSESSMENT AND TO ISSUE THE NOTICE U/S 147/148 OF THE ACT. TO SUM UP, AS WE HAVE OBSE RVED EARLIER THAT THE INCOME OF THE ASSESSEE ESCAPED ASS ESSMENT DUE TO THE REASON OF FAILURE ON THE PART OF THE ASS ESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS PERTA INING TO DEPRECIATION ON GOLF COURSE AND ON THE ISSUE OF INC OME FROM SALE OF LABUNUM PROJECT. THEREFORE, ON THESE TWO C OUNTS, ACTION OF THE AO TO INITIATE REASSESSMENT PROCEEDIN GS U/S 147 OF THE ACT AND ISSUING NOTICE U/S 148 OF THE ACT AG AINST THE ASSESSEE FOR A.Y 2001-02 BEYOND FOUR YEARS CANNOT B E HELD AS INVALID ASSUMPTION OF JURISDICTION AND FINALLY PART CONCLUSION 30 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 30 OF THE LD. CIT(A) ON LEGAL CONTENTION AND OBJECTION OF THE ASSESSEE ARE UPHELD. SINCE FACTS AND CIRCUMSTANCES OF THE A.Y 2003-04 ON THE ISSUE OF CLAIM OF DEPRECIATION O N GOLF COURSE ARE SIMILAR TO THE A.Y 2001-02 AND THIS FACT WAS FAIRLY ACCEPTED BY THE LD. AR AND THUS OUR CONCLUSION FOR A.Y 2001- 02 AS NOTED ABOVE, WOULD APPLY MUTATIS MUTANDIS FOR A.Y 2003-04 ALSO. CONSEQUENTLY, CROSS OBJECTION OF THE ASSESSEE FOR BOTH THE YEARS ARE JETTISONED. REVENUE APPEAL ITA NO. 3549/DEL/2009 FOR A.Y 2001-0 2 AND 4847/DEL/2009 FOR A.Y 2003-04 33. GROUNDS NOS. 1 AND 6 RAISED BY THE REVENUE ARE OF GENERAL IN NATURE. REMAINING GROUNDS FOR A.Y 2001- 02 READ AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 3,89 CRORES MADE BY THE AO ON ACCOU NT OF RS. 3,89,33,267/- BEING THE DIFFERENCE BETWEEN T HE BUDGET COST OF THE FLATS. 2.1 THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THA T THE ASSESSEE HAS DEBITED 98% OF THE BUDGET COST AND ONLY 90% SALES HAVE BEEN CHARGED IN P & L ACCOUNT. 31 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 31 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING PR IOR PERIOD INTEREST AS EXPENDITURE OF THE YEAR UNDER CONSIDERATION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION @ 25% ON GOLF COURSE UNDER THE CATEGOR Y OF PLANT AND MACHINERY AS AGAINST ADMISSIBLE @ 10% IN CASE OF BUILDING . THUS DELETING THE EXCESS DEPREC IATION OF RS. 1,37,71,043/-. 4.1 THE LD. CIT(A) HAS ERRED IN TREATING GOLF COURS E AS PLANT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 41.82 CRORES BEING THE CAPITAL GAIN ON AGREEMENT TO SALE DATED 17.3.2003. 5.1 THE CIT(A) ERRED IN HOLDING THAT NEITHER SALE N OR TRANSFER OF POSSESSION WAS COMPLETE WHEN THE AGREEMENT TO SALE WAS EXECUTED ON 17.3.2003. 32 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 32 34. GROUNDS NOS. 1 AND 4 OF THE REVENUE ARE OF GENE RAL IN NATURE WHICH REQUIRE NO ADJUDICATION. REMAINING EF FECTIVE GROUNDS READ AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 8,12,14,136/- MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2.1 THE CIT(A) ERRED IN IGNORING THE FACT THAT THE AO HAS MADE THE ADDITION IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 32 OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF HT CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS. 60.54.840/- MADE BY THE AO ON ACCOU NT OF EXCESS DEPRECATION CLAIMED BY THE ASSESSEE ON GO LF COURSE. 3.1 THE CIT(A) IGNORED THE FACT THAT DEPRECIATION O N GOLF COURSE IS TO BE ALLOWED @ 10% AS APPLICABLE FO R BUILDINGS UNDER THE PROVISIONS OF INCOME TAX ACT, 1 961. GROUND NOS. 2 AND 2.1 FOR A.Y 2001-02 35. APROPOS THESE GROUNDS, WE HAVE HEARD THE ARGUME NTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT M ATERIAL ON RECORD. THE LD. CIT-DR CONTENDED THAT THE AO RIGHT LY MADE 33 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 33 ADDITION OF RS. 3.89 CRORES BY HOLDING THAT THE ACT UAL COST INCURRED BY THE ASSESSEE WAS REFLECTED AT RS. 156.1 5 CRORES WHICH WAS STATED TO BE INCURRED TO THE EXTENT OF 98 % OF THE BUDGETED TOTAL COST OF THE PROJECT AND IT WAS NOT K NOWN AS TO HOW AND IN WHAT MANNER THE ASSESSEE CONSIDERED 98% OF THE TOTAL REVENUE AT RS. 171.10 CRORES AS CHARGEABLE TO THE PROFIT AND LOSS ACCOUNT AGAINST THE PROFIT ACTUALLY INCURR ED TILL 31.3.2001. THE LD. DR VEHEMENTLY CONTENDED THAT NE ITHER ANY PROVISION OF BALANCE AMOUNT OF COST TO BE INCUR RED NOR ANY JUSTIFICATION OF RECOGNITION FROM SALE EXISTED. THEREFORE, THE ASSESSEE SUPPRESSED IN RECOGNITION OF REVENUE F ROM SALE VALUE OF PROJECT TO THE EXTENT OF 3.89 CRORES WHICH WAS RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE WHEREAS THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY J USTIFIED BASIS OR REASONS. THEREFORE, IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 36. REPLYING TO THE ABOVE, THE LD. AR STRONGLY SUPP ORTED THE CONCLUSION OF THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE HAD RECOGNISED TOTAL REVENUE OF RS 174.16 CRORES FR OM FINANCIAL YEAR 1998-99 TO 2002-03 BY FOLLOWING PERC ENTAGE COMPLETION METHOD AND ASSESSEES ACCOUNTING METHOD IS 34 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 34 CONSISTENT AND REGULAR. THEREFORE, FIRST APPELLATE AUTHORITY RIGHTLY HELD THAT THERE WAS NO SUPPRESSION IN RECOG NITION OF REVENUE FROM LABUNUM PROJECT WHICH HAS ALREADY BEEN OFFERED FOR TAXATION IN THE SUCCEEDING YEAR. 37. THE LD. CIT-DR CONTENDED THAT REVENUES AND GROS S PROFIT ARE RECOGNISED EACH PERIOD BASED ON THE CONSTRUCTIO N PROGRESS. SHE FURTHER ELABORATED THAT IN THIS SITU ATION CONSTRUCTION COST AND GROSS PROFIT EARNED TO DATE A RE ACCUMULATED IN THE ASSET ACCOUNT AND PROGRESS BILLI NG ARE ACCUMULATED IN A LIABILITY ACCOUNT. THEREFORE, THE ASSESSEE DID NOT PROPERLY FOLLOW THE PERCENTAGE COMPLETION M ETHOD IN LETTER AND SPIRIT. THEREFORE, THERE WAS SUPPRESSIO N IN RECOGNITION OF REVENUE FROM SALE IN THE LABUNUM PRO JECT. THE LD. CIT-DR VEHEMENTLY POINTED OUT THAT THE INCO ME OFFERED TO TAX IN SUBSEQUENT YEAR CANNOT DEMOLISH T HE ALLEGATION OF SUPPRESSION IN RECOGNITION OF REVENUE IN THE EARLIER YEAR UNDER CONSIDERATION. 38. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE VIEW THAT THE LD. CIT-DR GRANTED RELIEF TO THE ASSESSEE ONLY ON THIS BASIS THAT THE ASSESSEE IS REGULARLY F OLLOWING 35 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 35 PERCENTAGE COMPLETION METHOD CONSISTENTLY FROM F.Y 1998-99 TO 2002-03 REGULARLY BUT HE HAS NOT DELIBERATED OR ADJUDICATED CONTENTION OF THE AO THAT IN WHAT MANNE R THE ASSESSEE CONSIDERED 98% OF THE TOTAL REVENUE AS CHA RGEABLE TO PROFIT AND LOSS ACCOUNT AGAINST THE COST ACTUALL Y INCURRED TILL 31.3.2001. IT IS ALSO PERTINENT TO NOTE THAT THE AO HAS CLEARLY MENTIONED THAT NO EVIDENCE OF ANY FURTHER C OST TO BE INCURRED IN THE SAID PROJECT WAS FILED AND HOW THE VESTED COST WAS TAKEN AS BENCH MARK FOR ASCERTAINED COST W HEREAS THE ENTIRE PROJECT WAS ADMITTED TO HAVE BEEN SOLD A ND CONSIDERATION IS TO BE RECEIVED TILL 31.3.2001. FRO M THE STATEMENT SUBMITTED BY THE ASSESSEE DURING THE ASSE SSMENT PROCEEDINGS, AVAILABLE AT PAGE 5 AND 6 WE OBSERVE T HAT THE ASSESSEE HAS RECORDED TOTAL SALES VALUE OF RS. 174. 99 CRORES WHEREAS SALES VALUE HAS BEEN RECOGNISED @ 98% OF RS . 171.10 CRORES AND PROPORTIONATE PROJECT COST OF RS. 156.15 CRORES HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT AND IN OUR HUMBLE UNDERSTANDING, THIS CALCULATION IS NOT IN AC CORDANCE WITH PERCENTAGE OF COMPLETION METHOD. IF ASSESSEE H AS INCURRED SOME MORE COST IN THE SUBSEQUENT A.YS, BUT THE TOTAL SALES VALUE WAS RECEIVED DURING THE YEAR UNDE R 36 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 36 CONSIDERATION, THEN THE SALES VALUE HAS TO BE RECOG NISE ACCORDINGLY. IN VIEW OF THE ABOVE, WE ARE OF THE CO NSIDERED OPINION THAT THE ISSUE REQUIRES EXAMINATION AND VER IFICATION AT THE END OF THE AO ACCORDING TO THE PERCENTAGE OF COMPLETION METHOD CONSISTENTLY AND REGULARLY FOLLOW ED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT. THEREFORE , THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR A FRESH ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. GROUND NO. 3 OF THE REVENUE FOR A.Y 2001-02. 39. THE LD. CIT-DR SUPPORTING THE ACTION OF THE AO CONTENDED THAT THE DETAILS FILED BY THE ASSESSEE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS CLEARLY SHOWED THA T THERE WAS METICULOUS WORKING OF YEAR-WISE INTEREST AND TH E INTEREST OF RS. 61.11 CRORES WAS NOT ADMISSIBLE IN THE CURRE NT YEAR AS IT WAS PRIOR PERIOD EXPENDITURE. THEREFORE, THE AO RIGHTLY ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LD. CIT- DR POINTED OUT THAT THE FIRST APPELLATE AUTHORITY G AVE RELIEF TO THE ASSESSEE WITHOUT ANY BASIS. THEREFORE, THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. THE LD. AR STRONGLY SUPPORTED THE IMPUGNED ORDER AND SUBMIT TED THAT 37 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 37 THE LD. CIT(A) AFTER CONSIDERING ALL RELEVANT FACTS AND REMAND REPORT OF THE AO RIGHTLY HELD THAT THE LIABILITY TO PAY THE SAID INTEREST ACCRUED AND CRYSTALLISED DURING THE YEAR O NLY THEREFORE, THE SAME WAS ALLOWABLE IN THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL POINTED OUT THAT TH E LD. CIT(A) WAS RIGHT IN GRANTING RELIEF TO THE ASSESSEE BY PLACING ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF SHRI RAM PISTONS LTD REPORTED AT 220 CTR 404 [DE L]. THE LD. AR ALSO POINTED OUT THAT THE LD. CIT(A) RIGHTLY CONSIDERED THIS FACT THAT THE ENTIRE AMOUNT OF 1.28 CRORE WAS PAID TO GILT FACILITIES P. LTD FACILITIES AFTER DEDUCTING T DS WHICH WAS ALSO DEPOSITED ON 17.5.2001 AND THE RECIPIENT GILT FACILITIES P. LTD OFFERED THIS AMOUNT TO IN ITS RETURN OF INCO ME IN A.Y 2001-02 ONLY. 40. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS ELABORATELY DISCUS SED FACTS AND CIRCUMSTANCES OF THE CASE AT PAGE 16 LAST OPERA TIVE PARA WHEREIN IT WAS NOTED THAT THE ALLEGED INTEREST AMOU NT RELATES TO PRIOR PERIOD HOWEVER, IT WAS ACCRUED AND CRYSTAL LISED DURING THE FINANCIAL PERIOD UNDER CONSIDERATION AND ENTIRE 38 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 38 AMOUNT WAS PAID TO GILT WAS PARTED AFTER DEDUCTION OF TAX AT SOURCE AND SAME AMOUNT WAS OFFERED TO TAX BY THE RE CIPIENT GILT FACILITIES P. LTD. FROM THE COPIES OF THE AGRE EMENT DATED 16.8.1995 AND CORRESPONDENCE BETWEEN THE ASSE SSEE AND M/S GILT FACILITIES P. LTD, IT IS CLEAR THAT TH E ISSUE OF INTEREST WAS RAISED AND SETTLED DURING F.Y. 2000-01 AND THE ASSESSEE PAID INTEREST TO M/S GILT FACILITIES P. LT D AS PER COMPUTATION AGREED BETWEEN THEM. HOWEVER, FROM THE COPY OF THE CHART SHOWING THE CALCULATION OF TOTAL INTER EST AMOUNT PAID BY THE ASSESSEE TO M/S GILT FACILITIES P. LTD REVEALS THAT THE IMPUGNED AMOUNT WAS RELATED TO PRIOR PERIOD BUT DURING THE PRIOR PERIOD THERE WAS NO OCCASION FOR THE ASSE SSEE TO CLAIM THE SAME AS EXPENDITURE BECAUSE THIS LIABILIT Y WAS ACCRUED AND CRYSTALLISED AFTER LONG CONVERSATION AN D CORRESPONDENCE WITH THE GILT FACILITIES P. LTD AS P ER AGREEMENT DATED 16.8.1995 AND THE ASSESSEE PAID AMO UNT AFTER DEDUCTION OF TAX AND THE SAME WAS OFFERED TO TAX BY THE RECIPIENT GILT FACILITIES P. LTD DURING A.Y 200 1-01. WE ARE UNABLE TO SEE ANY APPARENT MISTAKE OR AMBIGUITY IN THE APPELLATE ORDER ON THIS ISSUE AND THUS WE HAVE NO R EASON TO 39 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 39 INTERFERE WITH THE SAME. CONSEQUENTLY, GROUND NO. 3 OF THE REVENUE BEING DEVOID OF MERITS STANDS DISMISSED. GROUND NO 4 AND 4.1 FOR A.Y 2001-02 AND GROUND NO. 3 & 3.1 FOR A.Y 2003-04 OF THE REVENUE. 41. APROPOS THESE GROUNDS, THE LD. CIT-DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION @ 25% ON GOLF COURSE UNDER THE CATEGORY OF PLANT MACHINERY A S AGAINST 10% AS ALLOWABLE IN THE CASE OF BUILDING WHICH INCL UDES GOLF COURSE. THE LD. CIT-DR POINTED OUT THAT THE LD. CI T(A) HAS ERRED IN TREATING THE GOLF COURSE AS PLANT AND MACH INERY WHEREAS THE SAME IS INCLUDIBLE AS BUILDING FOR THE PURPOSE OF DEPRECATION. AS PER PROVISIONS OF THE ACT, THE LD. CIT-DR POINTED OUT THAT AS PER DECISION OF THE OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ANAND THEATRE 2424 ITR 192 [SC] BUILDING IN NOT A PLANT AND MACHINERY. EVEN IF IT I S TO BE CONSTRUED AS PLANT ONLY THAT PART OF THE BUILDING C AN BE PUT IN THE CATEGORY OF PLANT AND MACHINERY NOT THE ENTI RE BUILDING. THE LD. CIT-DR POINTED OUT THAT GOLF COU RSE IS A STRUCTURE OF BUILDING IN WHICH VARIOUS SPORTS FACIL ITIES HAVE BEEN PROVIDED TO THE MEMBERS OF THE ASSESSEE COMPAN Y AND THE ASSESSEE WRONGLY CLAIMED DEPRECIATION ON GOLF C OURSE AS 40 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 40 PLANT AND MACHINERY @ 25%. THE LD. CIT-DR POINTED OUT THAT THE LD. CIT(A) MISUNDERSTOOD THE RATIO OF DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANAND THEATRE [SUPRA] AS IN THAT CASE, IT WAS HELD THAT ALL THE BUILDINGS CANNOT BE CONSIDERED AS PLANT AND MACHINERY. HOWEVER, SOME BU ILDING USING THE AUDITORIUM AND FURNITURE AND FITTING FOUN D THEREIN SHOULD BE CONSTRUED AS A PLANT. THE LD. DR VEHEMEN TLY POINTED OUT THAT THERE WAS NO BASIS FOR THE LD. CIT (A) TO TREAT THE GOLF COURSE AS PLANT AND MACHINERY. THEREFORE, HE WAS NOT JUSTIFIED IN DELETING THE ADDITION. 42. REPLYING TO THE ABOVE, THE LD. AR POINTED OUT T HAT THE LD. CIT(A) RIGHTLY HELD THAT BENEFIT OF RATIO OF DE CISION OF ANAND THEATRE [SUPRA] RENDERED BY HON'BLE SUPREME C OURT IS NOT AVAILABLE FOR THE REVENUE AS PRESENT CASE IS PE RTAINING TO GOLF COURSE AND NOT A THEATRE. THE LD. AR SUPPORTE D THE ACTION OF THE LD. CIT(A). 43. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUB MISSIONS WE NOTE THAT THE LD. CIT(A) GRANTED RELIEF WITH FOL LOWING OBSERVATIONS AND CONCLUSION: 41 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 41 RIVAL CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED AFTER CONSIDERING THE RIVAL SUBMISSIONS I FIND A SUBSTANT IAL SUPPORT IN THE CONTENTION OF THE ID. A.R. OF THE APPELLANT. IT IS A FACT THAT THE ASSESSING OFFICER HAS MISCONCEIVED THE FACTS OF THE CASE TO SOME EXTENT. IN FACT, THE APPELLANT HAS NOT CLAIMED DEPRECIATION (A). 25% ON THE CONCRETE PATH, DRIVEWAYS, INTERCONNECTI NG ROADS CONSTRUCTING AROUND PLAY GROUNDS IN THE GOLF COURT AS RECORDED BY THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER. THE GOLF COURSE CONSIST OF THE OPEN LAND WITH SO MANY L EVELS WHICH HAS BEEN PREPARED AS PER TECHNICAL REQUIREMEN T AS REQUIRED TO PLAY THE GAME GOLF. IT INCLUDES EXPENS ES TOWARDS CREATING WATER TANK, BUNKERS, FAIR WAYS, TURF, RUBS , GROUNDS, INSTALLING PROPER ERECTION SYSTEM. LANDSCAPING ETC. . GOLF COURSE IS A SPECIALIZED SUPERSTRUCTURE ON THE LAND WITH VA RIOUS LEVELS OF UNDULATION, HOLES, SMALL PONDS ETC. AS A SPECIALIZE D PROFESSIONAL REQUIREMENT FOR PLAYING THE GOLF ON THE PIECE OF LA ND THEREFORE, COST OF CREATING SUCH TECHNICAL REQUIREM ENT WILL CERTAINLY MAKE THE FIELD OF GOLF COURSE AS A PLANT ONLY. ALTHOUGH THE VARIOUS COURTS CITATIONS RELIED UPON B Y THE ID. A.R. OF THE APPELLANT ARE NOT DIRECTLY APPLICABLE T O THE FACTS OF THE CASE BUT THERE IS AN OBLIQUE REFERENCE FOR CONS IDERING THE GOLF COURSE AS A PLANT ONLY. AS FAR AS THE RELIAN CE PLACED BY THE ASSESSING OFFICER IN THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. ANAND THEATER IS CONCERNED. I FIND THAT SAME IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE AT ALL. IN THAT CASE IT WAS CLARIFIED BY THE HONBLE SUPREME C OURT THAT ALL THE BUILDINGS CAN NOT BE CONSIDERED AS A PLANT. H OWEVER, SOME BUILDINGS USING THE AUDITORIUM AND FURNITURE & FITT INGS FOUND 42 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 42 THEREIN SHOULD BE CONSTRUED IN A PLANT. IN THE CASE OF THE APPELLANT, NONE OF THE BUILDING OR ANY ASSET IN THE NATURE OF BUILDING HAS BEEN CONSIDERED AS PLANT. IT IS ONLY A PIECE OF LAND WHICH HAS BEEN PREPARED BY PUTTING SEVERAL EXPENDIT URES ON VARIOUS ACCOUNTS TO PREPARE IT AS PER THE TECHNICAL REQUIREMENTS TO PLAY THE GAME OF GOLF. IN THAT CONT EXT, IT HAS ALSO BEEN NOTICED THAT THE BUSINESS OF THE APPELLAN T IS TO INVITE THE PLAYERS FOR PLAYING THE GOLF AND CHARGING THE F EES FOR THAT. THEREFORE, THE FIELD SO PREPARED WAS A BUSINESS OPE RATED USED BY THE APPELLANT FOR CARRYING ON ITS BUSINESS OF PL AYING THE GOLF. IN VIEW OF THESE FACTS AND CIRCUMSTANCES. I ALLOW A PPELLANTS CLAIM OF DEPRECIATION (A), 25% AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE BY HIM ON ANT OF DISALL OWANCE OF THE DEPRECIATION ON THE GOLF COURSE. 44. IN VIEW OF ABOVE, WE OBSERVE THAT THE LD. CIT(A ) IN THE FIRST PART OF THE THIS PARA NOTED THAT GOLF COURSE IS A SPECIALISED SUPERSTRUCTURE ON THE LAND WITH VARIOUS LEVEL UNDULATION, HOLES, SMALL POINTS ETC. AS A SPECIALIS ED PROFESSION REQUIREMENT FOR PLAYING GOLF ON THE PIEC E OF LAND. THEREFORE COST OF CREATING SUCH TECHNICAL REQUIREME NT WILL CERTAINLY MAKE THE FIELD OF GOLF COURSE AS A PLANT. 43 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 43 45. IN THE SECOND PART OF ABOVE OPERATIVE PARA, THE LD. CIT(A) HELD THAT THE RATIO OF THE DECISION OF HON'B LE SUPREME COURT IN THE CASE OF CIT VS. ANAND THEATRE IS NOT A PPLICABLE AND THEN JUMP TO A CONCLUSION THAT THE BUSINESS OF THE ASSESSEE IS TO INVITE PLAYERS FOR PLAYING THE GOLF AND CHARGING THE FEE FOR THAT AND THUS THE FIELD SO PREPARED WAS A BUSINESS OPERATED USED BY THE ASSESSEE FOR CARRYING ON ITS B USINESS OF PLAYING GOLF. IN THE LAST LINES, WITHOUT SPECIFICA LLY POINTING OUT AS TO WHETHER THE GOLF COURSE THAT IS A PIECE O F LAND WITH MANY LEVELS OF UNDULATION, HOLES, SMALL PONDS ETC C AN BE CATEGORISED AS A PLANT AND MACHINERY AND NOT AS A B UILDING. THE LD. CIT(A) JUMPED TO A CONCLUSION THAT THE ASSE SSEES CLAIM OF DEPRECIATION @ 25% IS ALLOWED WHICH IS NOT A PROPER AND JUSTIFIED APPROACH FOR A QUASI-JUDICIAL AUTHORI TY. WE MAY POINT OUT THAT GOLF COURSE HAS NOT BEEN CATEGOR ISED IN THE SCHEDULE OF DEPRECIATION AND THE MAIN DISPUTE B ETWEEN THE ASSESSEE AND THE REVENUE IS THAT THE ASSESSEE I S SEEKING TO PLACE THE GOLF COURSE IN THE CATEGORY OF PLANT A ND MACHINERY WHEREAS THE REVENUE WANTS TO TREAT THE SA ME AS BUILDING. 44 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 44 46. AT THIS JUNCTURE, WE MAY POINT OUT THAT WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT( A) THAT A PIECE OF LAND HAVING SOME LANDSCAPING FOR PLAYING G OLF SUCH AS VARIOUS LEVEL UNDULATION, HOLES, SMALL PONDS ETC CONSTRUED A SUPER STRUCTURE WHICH CAN BE CATEGORISED AS A PLA NT AND MACHINERY. IF THIS VIEW IS ACCEPTED THEN EVERY LAN DSCAPING HAVING SOME SPECIAL FEATURES FOR THE PURPOSE OF ITS INTENDED USE WOULD BECOME PLANT AND MACHINERY AND EVERY CONSTRUCTION OF BUILDING FOR THE PURPOSE OF SPORTS WOULD BE CONVERTED INTO PLANT AND MACHINERY. IT IS PERTINEN T TO NOTE THAT FOR CREATION OF GOLF COURSE, LANDSCAPING IS DO NE FOR IN VARIOUS LEVELS AND SOME HOLES, PONDS AND WALKING PA TH IS CREATED BUT IN OUR HUMBLE UNDERSTANDING THIS KIND O F PIECE OF LAND CONVERTED INTO A GOLF COURSE BY CREATING SOME SPECIALISED FACILITIES FOR PLAYING GOLF CANNOT BE P UT IN THE CATEGORY OF PLANT AND MACHINERY. 47. IN VIEW OF ABOVE, WE HAVE NO HESITATION TO HOLD THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT A NY BASIS AND WITHOUT ARRIVING TO A CONCLUSION AS TO WHETHER GOLF COURSE IS A PLANT AND MACHINERY OR BUILDING. THERE FORE, CONCLUSION OF THE LD. CIT(A) IS NOT SUSTAINABLE AS WE ARE 45 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 45 UNABLE TO SEE ANY BASIS FOR THE FACTUAL OBSERVATION S NOTED BY THE LD. CIT(A) FOR PUTTING THE GOLF COURSE IN THE C ATEGORY OF PLANT. SINCE THE ISSUE HAS NOT BEEN ADJUDICATED BY THE LD. CIT(A) IN A PROPER MANNER, THEREFORE, THIS ISSUE I S RESTORED TO THE FILE OF THE AO FOR A FRESH ADJUDICATION AFTE R AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND WITHOUT BEING PREJUDICED FROM EARLIER ORDERS AND OUR OBSERV ATIONS IN THIS ORDER. 48. WE MAY ALSO POINT OUT THAT TO SUPPORT THE CASE OF THE AO, THE LD. CIT-DR HAS PLACED RELIANCE ON PLETHORA OF DECISIONS INCLUDING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ANAND THEATRE [SUPRA], CIT VS. GWALIOR RAYON SILK MFG. MILLS 196 ITR 149 [SC] AND DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF MORADABAD TOLL R OAD CO. VS. ACIT [2014] 52 TAXMANN.COM 21 [DELHI] TO ESTABL ISH THAT GOLF COURSE IS NOT A PLANT AND MACHINERY AND IT IS TO BE CATEGORISED AS A BUILDING AND ON THE OTHER HAND, T HE LD. AR HAS PLACED RELIANCE ON THE CASE OF DECISION OF HON' BLE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA POW ER CORPN. 247 ITR 268 [SC], SCIENTIFIC ENGINEERING HOU SE P. LTD VS. CIT 157 ITR 86 [SC] AND DECISION IN THE CASE OF VICTORY 46 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 46 AQUA FARM LTD 61 TAXMANN.COM 166 [SC] AND PLETHORA OF DECISION TO SUPPORT THE CASE OF THE ASSESSEE THAT G OLF COURSE IS A PLANT AND MACHINERY AND IT IS NOT A BUILDING. INTERESTINGLY, NO CITED DECISION RELIED BY BOTH THE PARTIES ARE RELATED TO GOLF COURSE. THEREFORE, FACTS REGARDING THIS ISSUE HAVE TO BE DEALT IN RESPECT TO GOLF COURSE OF 300 A CRES LAND AND HOW IT BECAME PLANT AND MACHINERY ATTRACTING 25 % DEPRECIATION. THE AO HAS TO EXAMINE THESE DETAILS TO ASCERTAIN THE ISSUE BETWEEN THE PARTIES AS STATED A BOVE. WE ALSO NOTE THAT THE ASSESSEE IN ITS WRITTEN SUBMISSI ONS BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE THE TRIBUNA L HAS SUBMITTED THE DETAILS OF CONSTRUCTION ON THE 300 AC RES OF LAND CONVERTING IT INTO A GOLF COURSE, BUT THESE DE TAILS HAVE NOT BEEN SUBMITTED BEFORE THE AO AND THE AO COULD N OT GET AN OPPORTUNITY TO VERIFY AND EXAMINE THE SAME. THE REFORE, IN OUR CONSIDERED OPINION, THIS ISSUE REQUIRES DETA ILED VERIFICATION AND EXAMINATION AT THE END OF THE AO A FTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E AND WITHOUT BEING PREJUDICED FROM THE EARLIER ASSESSMEN T AND FIRST APPELLATE ORDER. NEEDLESS TO SAY THAT THE AO WOULD EXAMINE ALL MATERIAL FACTS ON THIS ISSUE AND 47 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 47 AFTER CONSIDERING THE MANDATE OF THE RELEVANT PROVI SIONS O OF THE ACT AS WELL AS THE RATIO OF DECISIONS RELIED UP ON BY BOTH THE PARTIES SHALL DECIDE THE ISSUE AFRESH IN ACCORD ANCE WITH LAW. CONSEQUENTLY, GROUND NO 4 AND 4.1 FOR A.Y 2001 -02 AND GROUND NO. 3 & 3.1 FOR A.Y 2003-04 OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES BY RESTORING THE S AME TO THE FILE OF THE AO. GROUND NO 5 AND 5.1 FOR A.Y 2001-02 AND GROUND NO. 2 & 2.1 FOR A.Y 2003-04 OF THE REVENUE. 49. APROPOS THESE GROUNDS, THE LD. CIT-DR STRONGLY SUPPORTED THE ACTION OF THE AO AND SUBMITTED THAT A S PER THE AGREEMENT TO SALE EXECUTED BETWEEN THE COMPANY AND ITC LTD. IN F.Y. 2000-01, 22.69 ACRES OF LAND WAS SOLD TO ITC LTD. FOR A CONSIDERATION OF RS. 45 CRORES AND ASSESSEE C OMPANY RECEIVED ENTIRE CONSIDERATION UNDER THIS AGREEMENT DURING A.Y 2001-02. THE LD. DR FURTHER CONTENDED THAT THE ASSESSEE COMPANY HAD UNCONDITIONALLY AND IRREVOCABLY TRANSFE RRED ALL ITS RIGHTS AND INTEREST OF OWNERSHIP IN THE SUBJECT PROPERTY IN FAVOUR OF ITC LTD. TO THE EXCLUSION OF OTHERS IN TH E YEAR OF AGREEMENT TO SALE ONLY. THEREFORE, THE TRANSACTION WAS COMPLETED WITHIN A.Y 2001-02 AND MERELY BECAUSE FOR WANT 48 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 48 OF SOME GOVERNMENT APPROVAL IF SALE DEED COULD NOT BE EXECUTED IN FAVOUR OF ITC LTD, THEN ALSO INCOME ACC RUED THEREFROM WAS TO BE TAXED AS LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. THE LD. CIT-DR ALSO POINTED OUT THAT THE ITC LTD USED THE LAND AS A POSSESSION AND TITLE HOLDER AND ALSO OBTAINED LOAN BY MORTGAGING THE LAND. THEREFO RE, THE AO WAS QUITE CORRECT AND JUSTIFIED IN CALCULATING L ONG TERM CAPITAL GAIN AND TAXING THE SAME IN THE HANDS OF TH E ASSESSEE. THE LD. DR VEHEMENTLY CONTENDED THAT THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY B ASIS. THEREFORE, IMPUGNED ORDER MAY BE SET ASIDE BY RESTO RING THAT OF THE AO. 50. PER CONTRA, THE LD. AR OF THE ASSESSEE STRONGLY SUPPORTED THE FIRST APPELLATE ORDER AND ALSO TOOK US THROUGH THE RELEVANT OPERATIVE PART OF THE LD. CIT(A) FROM PAGE S 25 TO 51. THE LD. AR POINTED OUT THAT NOTIONAL INCOME CANNOT BE CHARGED TO TAX ESPECIALLY WHEN THE TRANSACTION OF S ALE OF LAND WAS NOT COMPLETED DURING THE PERIOD UNDER CONSIDERA TION AND THE SAME WAS CANCELLED IN SUBSEQUENT F.Y 2009-10. SINCE THE AGREEMENT STANDS CANCELLED AND ENTIRE AMOUNT STOOD REFUNDED TO THE ASSESSEE IN F.Y. 2009-10. THE LD. AR ALSO 49 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 49 CONTENDED THAT THE AO MISUNDERSTOOD THE FACTS AND H ELD THAT ITC LTD OBTAINED LOAN BY MORTGAGING THE LAND TO VAR IOUS BANKS AND THIS MISTAKE WAS CORRECTED BY THE AO BY F ILING REMAND REPORT TO LD. CIT(A) WHEREIN HE FAIRLY ACCEP TED THAT THE DOCUMENTARY EVIDENCE IN SUPPORT OF AVERMENT OF THE ASSESSEE THAT THE ASSESSEE AND THE ITC LTD, HAD ACT UALLY MORTGAGED THE LAND TO VARIOUS BANKS AND FINANCIAL I NSTITUTIONS HAS BEEN FOUND TO BE CORRECT. ON THIS ISSUE NO OTH ER ARGUMENT WAS PLACED BY THE PARTIES. 51. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS AND PERUSAL OF THE ASSESSMENT ORDER, FIRST APPELLATE OR DER AND ALL RELEVANT MATERIAL PLACED ON RECORD, WE ARE OF THE C ONSIDERED VIEW THAT IN ORDER TO TAX CAPITAL GAIN U/S 45 OF TH E ACT, THERE MUST BE TRANSFER OF LAND OR ANY OTHER MOVABLE OR IM MOVABLE PROPERTY AS DEFINED IN SECTION 2(47) OF THE ACT. I N THE PRESENT CASE, THE LD. CIT-DR COULD NOT CONTROVERT T HIS FACT THAT NEITHER THE SALE DEED WAS EXECUTED NOR POSSESS ION OF THE LAND WAS HANDED OVER TO ITC LTD AND THE LAND IN QUESTION CONTINUES TO BE IN COMPLETE CONTROL OF THE ASSESSEE . WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE LD. CIT(A) THAT MERE 50 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 50 RECEIPT OF ENTIRE SALE CONSIDERATION AS AN ADVANCE DOES NOT MAKE THE AGREEMENT AS EFFECTIVE TRANSFER AS DEFINED IN SECTION 2(47) OF THE ACT. THE LD. CIT-DR COULD NOT CONTROVERT THIS FACT THAT THE ASSESSEE IS REGULARLY SHOWING AD VANCE AMOUNT AS ADVANCE IN ITS FINANCIAL STATEMENTS AS TH E REQUIRED PERMISSION FROM DTCP COULD NOT BE OBTAINED TO EXECU TE SALE DEED IN FAVOUR OF THE ASSESSEE TO COMPLETE AFORESAI D TRANSACTION. SO FAR AS THE ALLEGATION OF THE AO REG ARDING MORTGAGE BY ITC LTD IS CONCERNED, THIS FACT WAS DEM OLISHED BY THE AO HIMSELF IN THE REMAND REPORT FILED TO THE LD. CIT(A) DURING FIRST APPELLATE PROCEEDINGS WHEREIN IT WAS S TATED THAT THE FUNDS, IN FACT, WERE RAISED BY THE ASSESSEE AND NOT BY ITC BY MORTGAGING THE LAND. FROM THE RECORD, IT IS APP ARENT THAT THE ASSESSEE CONTINUOUS TO POSSESS THE LAND PHYSICA LLY AND IT COULD NOT BE TRANSFERRED TO ITC LTD TILL A VALID PE RMISSION IS RECEIVED FROM DTCP. FROM THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW IT IS CLEAR THAT THE LAND IN QUESTION OWNED BY THE ASSESSEE IS SITUA TED WITHIN CONTROLLED AREA AND SAME IS GOVERNED BY THE PROVISI ONS OF PUNJAB SCHEDULED ROAD AND CONTROLLED AREAS RESTRICT IONS OF UNREGULATED DEVELOPMENT ACT, 1963 AND RULES MADE 51 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 51 THEREUNDER. IN THIS SITUATION, THE ASSESSEE WAS PR OHIBITED FROM DOING ANY COMMERCIAL ACTIVITY ON THE LAND WITH OUT APPROVAL OF DTCP AND THE ASSESSEE WAS LEGALLY PROHI BITED FROM PARTING WITH THE POSSESSION AND TITLE OF THE L AND TO ITC OR ANY OTHER ENTITY. IN VIEW OF ABOVE NOTED FACTS, THE LD. CIT(A) WAS RIGHT IN DRAWING CONCLUSION THAT THERE W AS NEITHER SALE OF LAND NOR TRANSFER OF POSSESSION AS PER CLAU SE (I) TO (V) OF SECTION 2(47) OF THE ACT PERTAINING TO SALE OF I MMOVABLE PROPERTY AND HE RIGHTLY CONCLUDED THAT THESE PROVIS IONS COVERS A SITUATION WHERE REGISTRATION OF SALE DEED HAS BEEN COMPLETED. AS PER CLAUSE (V) OF SECTION 2(47), ANY TRANSACTION INVOLVING THE ALLOWING OF POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882, BUT IN THE PRESENT CASE, THE AO COULD NOT CONTROVERT THIS FACT THAT THE POSSESSION OF THE LAND IN QUESTION WAS NOT TRANSFER RED TO THE ASSESSEE AND THUS APPLICABILITY OF CLAUSE (V) OF SE CTION 2(47) OF THE ACT AS PART PERFORMANCE OF CONTRACT CANNOT B E INFERRED. ON THE BASIS OF ABOVE DISCUSSION, WE ARE UNABLE TO SEE ANY PERVERSITY, AMBIGUITY OR ANY OTHER VALID RE ASON TO 52 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 52 INTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE AND THUS WE UPHOLD THE SAME. SINCE FACTS AND CIRCUMSTANCES OF A.Y 2003- 04 ON THIS ISSUE ARE SIMILAR TO A.Y 2001-02, THEREF ORE, OUR CONCLUSION FOR A.Y 2001-02 WOULD APPLY MUTATIS MUTA NDIS TO A.Y 2003-04 ALSO. CONSEQUENTLY GROUND NOS 5 AND 5.1 FOR A.Y 2001-02 AND GROUND NOS. 2 & 2.1 FOR A.Y 2003-04 OF THE REVENUE ARE DISMISSED. 52. TO SUM UP, IN THE RESULT, CROSS OBJECTIONS OF T HE ASSESSEE FOR BOTH THE YEARS ARE DISMISSED AND APPEA L OF THE REVENUE ON TWO ISSUES ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSES, FOR BOTH THE YEARS, IN THE MANNER AS INDI CATED ABOVE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15.06. 2016. SD/- SD/- (L.P. SAHU) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH JUNE, 2016 VL/ 53 ITA NO. 3549 & 4847/DEL/200 9 CO NO. 328/DEL/2009 & 111/2010 53 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI