M/s Punjab State Container & Warehousing Corporation Ltd., Chandigarh V. ACIT, Chandigarh

CO 29/CHANDI/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1135 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Capital asset; Business income; Opportunity of being heard; Assessment record
• Section: 40A(3); 143(3); 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 474/CHD/2012 ASSESSMENT YEAR: 2007-08 M/S PUNJAB STATE CONTAINERS & VS THE CIT-1, WAREHOUSING CORPORATION LTD., CHANDIGARH. SCO 119-120, SECTOR 17-B, CHANDIGARH. PAN: AAECP0606J & ITA NO. 828/CHD/2013 ASSESSMENT YEAR: 2007-08 THE ACIT, VS M/S PUNJAB ST ATE CONTAINERS & CIRCLE 2(1), WAREHOUSING CORPORATION LTD., ROOM NO. 414, SCO 119-120, 4 TH FLOOR, SECTOR 17-B, AAYAKAR BHAWAN, CHANDIGARH. SECTOR 17-E, CHANDIGARH. PAN: AAECP0606 J & C.O. 29/CHD/2013 IN ITA NO. 828/CHD/2013 ASSESSMENT YEAR: 2007-08 M/S PUNJAB STATE CONTAINERS & VS THE ACIT- 1, WAREHOUSING CORPORATION LTD., CIRCLE 2(1), SCO 119-120, CHANDIGARH. SECTOR 17-B, CHANDIGARH. PAN: AAECP0606J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.N. SINGLA DEPARTMENT BY : DR. AMAR VEER SINGH DATE OF HEARING : 28.07.2015 DATE OF PRONOUNCEMENT : 04.08.2015 2 O R D E R PER BHAVNESH SAINI,JM THIS ORDER SHALL DISPOSE OF ALL THE ABOVE MATTERS I N APPEALS RELATING TO THE SAME ASSESSEE. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE APPEALS ARE DECIDED AS UNDER. ITA 474/CHD/2012 3. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX-I CHANDIGAR H DATED 29.03.2012 FOR ASSESSMENT YEAR 2007-08 UNDER SECTION 263 OF THE INCOME TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF LEARNED C.I.T-I, IS BAD AND AGA INST THE FACTS & LAW. 2. THAT THE LEARNED C.I.T.-I HAS WRONGLY SET ASIDE THE A SSESSMENT ORDER OF THE LEARNED ASSESSING OFFICER UNDER SECTION 263 OF THE ACT. 3. THAT THE LEARNED C.I.T.-I HAS WRONGLY TREATED THE UPFR ONT FEE OF RS.35 CRORE FOR THE ENTIRE PERIOD OF 'OPERATIONS AN D MANAGEMENT AGREEMENT' AS REVENUE RECEIPT IN THE YEA R OF RECEIPT. 4. THAT THE LEARNED C.I.T.-I, HAS WRONGLY TREATED THE TYPOGRAPHICAL MISTAKE IN THE FIGURES GIVEN IN ONE OF THE REPLIES DURING THE PROCEEDINGS UNDER SECTION 263 AS BASE FOR TREATING THE ORDER OF LEARNED ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3 5. THAT THE MISTAKES APPARENT FROM RECORD WHICH COULD B E RECTIFIED UNDER SECTION 154 HAS ALSO BEEN TAKEN AS BASE FOR T REATING THE ORDER OF THE LEARNED ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE CORPORATION FILED ITS RETURN OF INCOME FOR ASSESSME NT YEAR UNDER APPEAL ON 25.10.2007 DECLARING TOTAL INCOME O F RS. 6.77 CRORE. ORDER OF ASSESSMENT WAS FRAMED UNDER SE CTION 143(3) OF THE INCOME TAX ACT ON 08.12.2009 ON AN IN COME OF RS. 9,63,06,306/-. 5. THE LD. COMMISSIONER OF INCOME TAX ON EXAMINATIO N OF ASSESSMENT RECORD FOUND THAT ASSESSMENT SO MADE UNDER SECTION 143(3) WAS ERRONEOUS ON THE FOLLOWING COUNTS : (A) THE CORPORATION RECEIVED A ONE TIME SUM OF RS.35 CRORES AS NON REFUNDABLE UPFRONT FEE FOR GRANT OF R IGHTS TO OPERATE & MAINTAIN THE C.F.S. (CONTAINER FREIGHT ST ATION) NAVI MUMBAI, SET UP ON LAND LEASED FROM CIDCO, TO A COMPA NY NAMELY M/S GATEWAY DISTRIPARKS LTD. FOR A PERIOD OF 15 YEARS W.E.F.01.02.2007 UNDER AN AGREEMENT DATED 19 TH JANUARY 2007. THE RELEVANT CLAUSE 3 OF THE SAID AGREEMENT IS REPRO DUCED HEREWITH :- 'SUBJECT TO AND IN ACCORDANCE WITH THE TERMS AND CO NDITIONS SET FORTH IN THIS AGREEMENT, CONWARE HEREBY AGREES /GRANTS UNTO THE OPERATOR, FROM THE EFFECTIVE DATE, THE RIG HT TO OPERATE AND MANAGE THE CFS FACILITY FOR A PERIOD OF [15] YEA RS ('THE GRANT'); AND THE OPERATOR HEREBY ACCEPTS THE SAID GR ANT THE ACTIVITIES THAT ARE AND MAY BE CARRIED ON IN THE CFS FACILITY INCLUDE THE FOLLOWING (PERMITTED ACTIVITI ES') I) HANDLING THE IMPORT AND EXPORT OF CARGO INCLUDING D ELIVERY OF CONTAINERS; II) OPERATION AND MAINTENANCE OF A BUFFER YARD; III) OPERATE AND MAINTAIN A CONTAINER YARD FOR HANDLING O F EMPTY CONTAINERS AND CARRYING OUT REPAIR FACILITIES INCLU DING REFURBISHING CONTAINERS, IV) CARRY OUT PRE-TRIP CONSTRUCTIONS OF REEFER CONTAINER S AND STORAGE OF REEFER CONTAINERS; . V) PROVIDE WAREHOUSING FACILITIES; 4 VI) PROVIDE THIRD PARTY LOGISTICS; VII) PROVIDE BONDED WAREHOUSING FACILITIES; VIII) SURVEY AND INSPECTION OF CONTAINERS; IX) REPAIR YARD FOR EQUIPMENTS AND OTHER RELATED EQUIPME NT; X) ANY OTHER CONTAINER HANDLING AND TRANSPORTATIONS SERV ICES. IT IS EVIDENT THAT THE SAID AGREEMENT TRANSFERS THE MANAGEMENT AND OPERATION OF THE CFS. THE CFS BECAME OPERATIONA L IN 1999 AND TILL JANUARY, 2007 WAS BEING OPERATED & MAINTAINED BY PU NJAB STATE CONTAINER & WAREHOUSING CORPORATION LIMITED. TH E UPFRONT FEE OF RS. 35 CRORES RECEIVED BY PUNJAB STATE CONTAINER & WAREHOUSING CORPORATION LIMITED FOR TRANSFER OF BUSINESS OPERAT IONS (SOURCE OF INCOME), IS THE INCOME OF THE CORPORATION AND WAS RE QUIRED TO BE TAXED IN THE YEAR OF RECEIPT OF THE AMOUNT. THIS AMO UNT CAN NOT BE SPLIT OVER A PERIOD OF 10 YEARS FOR ITS TAXABILITY. THE NON-REFUNDABLE UPFRONT FEE RECEIVED IS TO BE TREA TED AS REVENUE RECEIPT AS IT AROSE OUT OF TRANSFER OF BUSINESS/SOUR CE OF INCOME AND NOT THE CAPITAL ASSETS. THE OVERALL CONTROL IN TERMS OF FIXATION OF TARIFF RATES, DISPOSAL OF UNCLAIMED CARGO ETC., STILL R EMAINS WITH THE CORPORATION. THE ASSESSMENT FRAMED BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR NOT HAVING EXPLORED THE TRUE NATURE OF THIS RECEIPT. B) AS PER PARA 17(H)(B) AND 17(I) OF THE AUDIT REPO RT SUBMITTED BY PUNJAB STATE CONTAINER & WAREHOUSING CORPORATION LI MITED IN FORM 3CD, IT WAS STATED THAT SOME TRANSACTIONS ARE INADMI SSIBLE U/S 40A(3) AND 40A(7). THE DETAILS OF THESE TRANSACTIONS ARE AS UNDER:- 1. RS. 72 7 405/- AS TRAVELLING EXPENSES. 2. RS. 1,00,578/- AS ENTERTAINMENT EXPENSE 3. RS. 2,28,978/- ON ACCOUNT OF GRATUITY. THE ASSESSMENT WAS FRAMED BY THE AO WITHOUT DISALLO WING THE AFOREMENTIONED EXPENSES. THE AUDITORS IN THE AUDIT REPORT HAVE MENTIONED THAT THE EXPENSES ON ACCOUNT OF TRAVELING EXPENSES AND ENTERTAINMENT EXPENSES WERE NOT ALLOWABLE IN VIEW O F PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD . THE AUDITORS HAVE FURTHER POINTED OUT THAT THE PROVISION FOR GRATUITY WAS NOT ALLOWABLE. THESE EXPENSES WERE TO BE ADDED BACK AT THE TIME OF ASSESSME NT. (C) THE BALANCE SHEET ALSO SHOWED THAT INTEREST PA YABLE AS ON 31/03/2006 BEING 'INTEREST ACCRUED AND DUE' WAS RS. 29,20,99,102/- AND INTEREST PAYABLE AS ON 31/03/2007 BEING INTERES T ACCRUED AND DUE APPEARED AT RS.22,02,63,492/-. A PERUSAL OF THE B ALANCE SHEET AND PROFIT & LOSS ACCOUNT OF EARLIER YEARS REVEALED THE F OLLOWING:- 5 FINANCIAL YEAR INTEREST ACCRUED & DUE AS SHOWN IN THE BALANCE SHEET (RS.) INTEREST PAID ON PSWC LOAN (RS.) DEBITED UNDER FINANCIAL CHARGES IN P&L A/CS. 2002-03 21,82,08,909/- 2,37,12,780/- 2003-04 24,25,17,365/- 2,43,08,456/- 2004-05 26,61,89,721/- 2,36,72,356/- 2005-06 29,20,99,102/- 2,59,09,381/- 2006-07 22,05,63,492/- 2,84,64,390/- IT IS NOT EXPLAINED HOW THIS LIABILITY INCREASED OVER THE PAST YEARS. IF INTEREST PAYABLE HAD BEEN ACCRUING THEN IT SHOULD H AVE BEEN DEBITED TO THE P&L ACCOUNTS FOR THOSE YEARS. THE STATED RE-PAY MENT DURING F.Y. 2006-07 SEEMS TO BE A AFTERTHOUGHT. IF THE ITEM OF LIABILITY IS COMPOSED OF INTEREST OUTSTANDING, THE SERVICING OF T HE CORRESPONDING LOAN SHOULD BE REFLECTED IN THE P&L A/C OF THE RELEVANT YEAR S. THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT DOES NOT SPEAK ABOUT THE VERIFICATION/INVESTIGATION ON THESE AFOREMENTIONED ISSUES. BY NOT APPLYING THE PROVISIONS OF LAW IN THE RIGHT PERSPECTIVE AND NOT EXAMINING THE FACTS OF THE CA SE, IT IS APPARENT THAT THE AO FAILED TO DETECT THE EVASION OF LAWFUL TAX OBLIGATION BY THE ASSESSEE. RESULTANTLY, I AM OF THE O PINION THAT THE SAID ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY, A SHOW CAUSE NOTICE U/S 263(1 ) OF THE I. T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 06.03.2012 WH EREBY THE ASSESSEE WAS AFFORDED AN OPPORTUNITY OF BEING HEARD ON THE ISSUES. IN RESPONSE TO THIS, SH. TEJ IQBAL SINGH, SR. ASSTT (ACC OUNTS) ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND ALSO FILED WR ITTEN SUBMISSIONS. THE OBSERVATIONS, AFTER GOING THROUGH THE ASSESSMEN T RECORDS VISA-VIS THE ASSESSEE'S WRITTEN SUBMISSIONS, ARE DISCUSSED IN THE SUCCEEDING PARAGRAPHS. 6. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE UPFRONT FEE WAS RECEIVED AS ADVA NCE FEE FOR THE PERIOD OF TEN YEARS BY THE CORPORATION BUT AT THE SAME TIME, THIS IS REFUNDABLE UPON TERMINATION OF AGREEMENT AS PER CLAUSES OF AGREEMENT IN MERCANTILE SYSTEM OF ACCOUNTING ADVANCES RECEIVED BEFORE THE COMPLETION OF SERVICES ARE TREATED AS ADVANCES NOT AS INCOME TILL SERVICES ARE PROVIDED. FOR EXAMPLE IN C ASE OF RENT INCOME, ANY ADVANCE FROM TENANT WILL NOT BE T REATED 6 AS RENT BEFORE THE PERIOD OF USE OF PREMISES. REL IANCE WAS PLACED BY THE ASSESSEE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS; 1. CIT VS. ASHOKBHAI CHIMANBHAI ,SUPREME COUR T OF INDIA (1965) 56 ITR 42 (SC) 2. CIT VS. PUNJAB TRACTORS CO-OPERATIVE MULTIPURPOSE S OCIETY LTD, HIGH COURT OF PUNJAB & HARYANA (1997) 142 CTR (P&H) 20 3. CIT VS. PUNJAB BONE MILLS HIGH COURT OF PUNJAB & HARYANA (1998) 146 CTR (P&H) 63 4. SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. VS. CI T & ORS. SUPREME COURT OF INDIA (2004) 191 CTR (SC) 66 5. COMMISSIONER OF INCOME TAX VS. SANT RAM MANGAT RAM HIGH COURT OF PUNJAB & HARYANA (2005) 195 CTR (P&H) 345 6. COMMISSIONER OF INCOME TAX VS DEMPO & CO. PVT. LTD. HIGH .COURT OF BOMBAY (1996) 131 CTR (BOM) 203 7. ASSISTANT COMMISSIONER OF INCOME TAX VS. MAGNUM I NTERNATIONAL TRADING CO. LTD. ITAT, DELHI 'D'THIRD MEMBER BENCH (2003) 79 TTJ (DEL) (TM) 552 7. THE LD. COMMISSIONER OF INCOME TAX CONSIDERING T HE MATERIAL ON RECORD, SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO PASS FRESH ASSESS MENT ORDER AND RECOMPUTED THE INCOME OF THE ASSESSEE AFT ER MAKING ENQUIRIES ON THE SAME. THE FINDINGS OF LD. COMMISSIONER OF INCOME TAX IN THE IMPUGNED ORDER AR E 7 REPRODUCED AS UNDER : I HAVE GONE THROUGH THE SUBMISSIONS OF THE AUTHORI ZED REPRESENTATIVE ON THIS ISSUE AND FOUND THAT THE FACTS AND CIRCUMSTANC ES OF THE CASE AS BROUGHT OUT IN THE DOCUMENTS AVAILABLE ON RECORD DIFFER FRO M THE SUBMISSIONS OF AUTHORIZED REPRESENTATIVE. IN THE SAID AGREEMENT IT IS NO WHERE STATED THAT THE AMOUNT OF RS. 35 CRORE IS BEING GIVEN TO THE CO RPORATION AS AN ADVANCE. THE UPFRONT FEE HAS BEEN RECEIVED BY THE C ORPORATION FOR GRANT OF OPERATION AND MANAGEMENT OF C.F.S. THUS ANY SUCH RE CEIPT IS TO BE TREATED AS BUSINESS INCOME. AS REGARDS THE JUSTIFICATION GI VEN WITH REGARD TO REFUND OF THIS FEE UNDER CERTAIN CIRCUMSTANCES AS MENTIONE D IN CLAUSE 11 OF THE AGREEMENT, INCLUDING THE FORCE MAJEURE CLAUSE, IT N EEDS TO BE APPRECIATED THAT SUCH CONDITIONS ARE INTEGRAL TO ANY CONTRACTUA L ARRANGEMENT. IF SUCH CONDITIONS ARE TAKEN TO MEAN THAT CONTRACTUAL PAYME NTS ARE REFUNDABLE THEN NO SUCH RECEIPT CAN EVER BE TAXED. THEREFORE, THE JUSTIFICATION OFFERED IS NOT ACCEPTABLE AND THE ENTIRE SUM RECEIV ED UPFRONT IS LIABLE TO BE TAXED IN THE YEAR OF RECEIPT THE JUDICIAL PRO NOUNCEMENTS ON WHICH THE AUTHORIZED REPRESENTATIVE HAS RELIED UPON ARE N OT RELEVANT TO THIS CASE BECAUSE ALL THESE JUDGMENTS ARE RELATED TO AN 'ADVANCE' FOR PROVISION OF SERVICES. ACCORDINGLY THESE ARE DISTINGUISHABLE ON FACTS. ON THE ISSUE AS DISCUSSED IN PARA (B) ABOVE, THE AU THORIZED REPRESENTATIVE HAS GIVEN ITS NO OBJECTION ON THE ISSUE OF DISALLOW ANCES U/S 40A (3) & 40A (7) OF THE ACT FOR THE PASSING AN ORDER U/S 154. HO WEVER, IT WILL NOT AFFECT THE TAX LIABILITY OF THE CORPORATION IF THE DISALLOWANC E IS MADE EITHER U/S 154 OR U/S 263 OF THE INCOME TAX ACT, 1961. ON THE ISSUE OF INTEREST/FINANCIAL CHARGES REFLECTE D IN THE BALANCE SHEET WHICH HAS BEEN DECREASED TO RS.22.05 CRORES FROM RS . 29.20 CRORES SHOWN IN THE LAST YEAR, THE AUTHORIZED REPRESENTATIVE HAS SU BMITTED THAT THE REPAYMENT OF ANY LIABILITY AFFECT THE LIABILITY SID E OF THE BALANCE SHEET WITHOUT EFFECTING PROFIT & LOSS ACCOUNT AS PER THE DOUBLE ENTRY METHOD OF ACCOUNTING ADOPTED BY THE COMPANIES. IT IS NOT EXPL AINED HOW THIS LIABILITY INCREASED OVER THE PAST YEARS. IF INTEREST PAYABLE HAD BEEN ACCRUING THEN IT SHOULD HAVE BEEN DEBITED TO THE P&L ACCOUNTS FOR TH OSE YEARS. THE STATED RE-PAYMENT DURING F.Y. 2006-07 SEEMS TO BE A AFTERT HOUGHT. IF THE ITEM OF 8 LIABILITY IS COMPOSED OF INTEREST OUTSTANDING, THE SERVICING OF THE CORRESPONDING LOAN SHOULD BE REFLECTED IN THE P&L A /C OF THE RELEVANT YEARS. MOREOVER, THE CALCULATION GIVEN IN THE REPLY IS NOT CORRECT WHICH IS REPRODUCED AS UNDER: ADD: INTEREST DURING F. Y. 2006-07 RS.29,20,99,102/- RS. 2,84,64,390/- RS.32,05,63,492/- LESS: REPAYMENT DURING THE YEAR ON 29.01.2007 RS. 1 ,00,00,000/- BALANCE AS ON 31.03.2007 RS.22,05,63,492/- (BY ABOVE CALCULATION THIS FIGURES COMES TO RS.31,05,63,492/- OR HE MAY MODIFY THE ASSESSMENT, CANCEL THE ASSESSM ENT AND DIRECT A FRESH ASSESSMENT. IN THIS WAY, THE COMMISS IONER'S ORDER CANNOT BE FAULTED BECAUSE HE CANCELLED THE ASSESSME NT AND DIRECTED A FRESH ASSESSMENT' THE NECESSARY TWO INGREDIENTS I.E ' THE ORDER SHOU LD BE ERRONEOUS ' AND 'IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF R EVENUE' ARE VERY MUCH AVAILABLE IN THIS CASE. THE CASE LAWS QUOTED BY THE ASSESSES IN THE SUPPORT OF HIS CLAIM ARE DISTINGUISHABLE ON FACTS AND CIRCUMST ANCES AS THE FACTS NARRATED IN THESE CASES ARE NOT IDENTICAL TO THE CASE OF THE ASSESSEE. IN VIEW OF THE FACTS AND THE LEGAL POSITION .STATED ABOVE, IT IS APPARENT THAT THE SUBJECT ORDER OF ASSESSMENT DATED 08.12.2009 IS NOT ONLY ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE INTERESTS OF REVENUE. CONSE QUENTLY, IN EXERCISE OF THE JURISDICTION CONFERRED BY SECTION 263 OF THE AC T, THE SAID ORDER OF ASSESSMENT DATED 30.09.2008 IS SET ASIDE FOR MAKING FRESH ORDER BY THE AO. THE ASSESSING OFFICER IS DIRECTED TO PASS A FRESH A SSESSMENT ORDER AND RE- COMPUTE THE ASSESSEE'S INCOME AFTER MAKING, FURTHER ENQUIRIES AS DIRECTED IN THE FOREGOING PARAGRAPHS AFTER AFFORDING DUE OPPORT UNITY TO THE ASSESSEE TO PRESENT HIS CASE. 8. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THE ASSESSEE IN THE PRESENT APPEAL H AS CHALLENGED THE ORDER OF LD. COMMISSIONER OF INCOME TAX WITH REGARD TO TREATMENT GIVEN TO UPFRONT FEES OF R S. 35 9 CRORES ONLY. HE HAS REITERATED THE SUBMISSIONS MAD E BEFORE LD. COMMISSIONER OF INCOME TAX AND REFERRED TO PB-50 WHICH IS ORDER-SHEET OF THE ASSESSING OFFICER AT THE ASSESSMENT STAGE ASKING FOR THE COPY OF AGREEMENT I N QUESTION WITH M/S GATEWAY DISTRIPARKS LTD. AND DETA ILS OF ACCOUNTING TREATMENT GIVEN TO THE UPFRONT FEES AMOU NTING TO RS. 35 CRORES. THE ASSESSEE FILED REPLY PB-51 D ATED 07.10.2009 FILING THE COPY OF THE AGREEMENT IN QUES TION AND EXPLAINING THE ACCOUNTING TREATMENT OF RS. 35 C RORES RECEIVED IN ADVANCE AS UPFRONT FEES AND NOTE ON ACC OUNTS. PB-42 IS THE NOTES ON ACCOUNT OF GIVING TREATMENT T O RS. 35 CRORES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE AGREE MENT IN QUESTION, COPY OF WHICH IS FILED AT PAGE 1 ONWARD I N THE PAPER BOOK BETWEEN THE ASSESSEE AND M/S GATEWAY DISTRIPARKS LTD. AND REFERRED TO PAGE 5 TO SHOW AGR EEMENT WAS FOR 15 YEARS, PB-7 IS WITH REGARD TO CONSIDERAT ION OF THE SAID AGREEMENT IN FAVOUR OF THE OPERATOR. PB-1 9 IS THE CLAUSE FOR TERMINATING OF AGREEMENT BETWEEN THE PAR TIES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN CASE THE AGREEMENT WOULD BE CANCELLED BETWEEN THE PARTIE S, ASSESSEE IS LIABLE TO REFUND THE AMOUNT IN QUESTION TO THE OTHER PARTY. HE HAS REFERRED TO VARIOUS CLAUSES TO SHOW THAT IN CASE OF CANCELLATION OF THE AGREEMENT, THE REFUND HAS TO BE GIVEN BACK OF RS. 35 CRORE. THEREFORE, R S. 35 CRORE WAS SPREAD OVER IN 10 YEARS AND HAS BEEN SHOW N AS INCOME IN TEN YEARS. HE HAS, THEREFORE, SUBMITTED THAT ASSESSING OFFICER HAS EXAMINED THIS ISSUE IN DETAIL AND 10 ADOPTED ONE OF THE POSSIBLE VIEW IN THE MATTER, THE REFORE, LD. COMMISSIONER OF INCOME TAX SHOULD NOT SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WI TH REGARD TO RECEIPT OF UPFRONT FEES BY THE ASSESSEE T HROUGH THE AGAREEMENT. 9. ON THE OTHER HAND, LD. DR RELIED UPON IMPUGNED ORDER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED COPY OF THE ORDER-SHEET PREPARED BY THE AT THE ASSESSMENT STAGE (PB-50) IN WHICH ASSESSING OFFICER HAS RAISED THE QUERY IN WRITING ASKING THE ASSESSEE TO FILE COPY OF THE AGREEMENT WITH M/S GATEWAY DISTRIPARKS LTD. AND DETAILS OF ACCOUNTING TREATMEN T GIVEN TO UPFRONT FEES AMOUNTING TO RS. 35 CRORES THE ASS ESSEE FILED COPY OF THE REPLY FILED BEFORE ASSESSING OFFI CER (PB- 51) DATED 07.10.2009 IN WHICH THE ASSESSEE FILED CO PY OF THE AGREEMENT IN QUESTION BEFORE ASSESSING OFFICER AND ALSO EXPLAINED THE TREATMENT OF RS. 35 CRORES RECEI VED IN ADVANCE AS UPFRONT FEES AND ALSO FILED NOTE ON THE SAME AS PER THE ACCOUNTS. COPY OF THE NOTE ON ACCOUNT IS A LSO FILED AT PAGE 42 OF THE PAPER BOOK EXPLAINING AS TO HOW THE AMOUNT OF RS. 35 CRORES WAS RECEIVED BY ASSESSE E AND AS PER AGREEMENT, SAID UPFRONT FEE HAS BEEN EQUALLY SPLITTED IN 10 YEARS. IT WAS EXPLAINED THAT UPFRONT FEES HAS BEEN EQUALLY SPLITTED IN TEN YEARS AS PER CLAUS ES OF AGREEMENT AND HAS BEEN SHOWN IN THE BOOKS OF ACCOUN T. 11 THE ASSESSING OFFICER EXAMINING BOOKS OF ACCOUNT, V ARIOUS DETAILS FILED AT ASSESSMENT STAGE AND CONSIDERING T HE AGREEMENT IN QUESTION, REPLY OF THE ASSESSEE AND NO TES TO ACCOUNTS ACCEPTED THE EXPLANATION OF THE ASSESSEE T HAT RS. 35 CRORE WAS PROPERLY SPREAD IN TEN YEARS. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PB-19 WHICH CONTAINED THE TERMINATION CLAUSE IN THE AGREEMENT W HICH PROVIDES THAT IF TERMINATION IS ON ACCOUNT OF NON-P OLITICAL OR INDIRECT POLITICAL FORCE, OR DIRECT POLITICAL FO RCE, ASSESSEE SHALL HAVE TO MAKE A TERMINATION PAYMENT T O THE OPERATOR I.E. OTHER SIDE IN AMOUNT AS SPECIFIED IN THE CLAUSE IN RESPECT OF UPFRONT FEES. IT IS, THEREFOR E, CLEAR THAT UPFRONT FEES WAS RECEIVED AS ADVANCE BY THE AS SESSEE AND A PORTION OF IT IS REFUNDABLE TO THE OPERATOR O N TERMINATION OF THE AGREEMENT, IF SUCH TERMINATION T AKES PLACE WITHIN TEN YEARS OF COMMENCEMENT OF THE ALLIA NCE. THE AGREEMENT IN QUESTION CONTAINED THE PROCEDURE F OR TERMINATION OF THE AGREEMENT AND FOR REFUND OF PART OF UPFRONT FEES IN CASE OF TERMINATION OF THE AGREEMEN T. THUS, IT IS TO BE SEEN WHETHER ASSESSEE RECEIVED TH E AMOUNT IN QUESTION AS ADVANCE OR THE SAME PARTAKES THE CHARACTER OF INCOME WHEN IT ACCRUES. THEREFORE, TH E TOTAL PERIOD OF AGREEMENT AND POSSIBILITY OF TERMINATION OF THE AGREEMENT IN FUTURE SHOULD HAVE BEEN CONSIDERED WHI LE DECIDING THE MATTER IN ISSUE. AS THE UPFRONT FEES IS A ONE TIME RECEIPT AND IS PART CONSIDERATION OF THE AGREE MENT WHICH HAS TO RUN FOR 15 YEARS, IT SHOULD BE TREATED FOR ENTIRE PERIOD OF THE AGREEMENT. THE AGREEMENT ALSO 12 PROVIDES THAT RS. 35 CRORES WAS PAID TO THE ASSESSE E AS ONE TIME WHICH SHALL NOT BE REFUNDABLE EXCEPT AS PR OVIDED IN THIS AGREEMENT. THEREFORE, THE PAYMENT OF RS. 3 5 CRORES TO THE ASSESSEE WAS NOT ABSOLUTE IN TERM AND IT WAS SUBJECT TO OTHER CLAUSES OF TERMINATION OF THE AGRE EMENT. THEREFORE, CONTENTION OF ASSESSEE WAS CORRECT THAT THERE WAS A POSSIBILITY OF REFUND OF THE AMOUNT IN QUESTI ON IN CASE OF TERMINATION OF THE AGREEMENT. THE ASSESSEE HAS, THEREFORE, RIGHTLY SPREAD OVER THE AMOUNT OF RS. 35 CRORES IN TEN YEARS IN ORDER TO MEET OUT ANY EVENTUALITY I N FUTURE. THE ASSESSING OFFICER, THUS, HAS EXAMINED THIS ISSUE AT THE ASSESSMENT STAGE BY ISSUING A QUERY AN D CALLING FOR THE DETAILS FROM THE ASSESSEE AND WAS S ATISFIED WITH CONTENTIONS OF ASSESSEE. 11. THE HON'BLE GUJRAT HIGH COURT IN THE CASE OF CI T VS AMIT CORPORATION 21 TAXMAN.COM 64 HELD THAT, WHERE ASSESSING OFFICER AFTER DETAILED VERIFICATION OF RE CORD AND MAKING ENQUIRY HAD FRAMED ASSESSMENT, THE LD. COMMISSIONER OF INCOME TAX COULD NOT REVISE THE SAM E UNDER SECTION 263 OF THE ACT. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KRISHNA CAPBOX PVT. LTD. 372 I TR 310 HELD THAT WHEN ASSESSING OFFICER CALLED FOR DETAILS AND ASSESSEE RESPONDED, ASSESSING OFFICER HOWEVER, DID NOT DISCUSS OR MENTIONED THE SAME IN THE ASSESSMENT ORD ER, LD. COMMISSIONER OF INCOME TAX COULD NOT REVISE THE ORDER UNDER SECTION 263 OF THE ACT. 13 12. THE HON'BLE SUPREME COURT IN THE CASE OF MALABA R INDUSTRIAL CO. LTD. VS CIT 243 ITR 83 HELD AS UNDER : EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 13. THE HON'BLE SUPREME COURT ALSO TOOK THE SAME V IEW IN THE LATER DECISION IN THE CASE OF CIT VS MAX IND IA LTD. 295 ITR 282. SINCE THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEW ON THE BASIS OF EXAMINATION OF TH E MATERIAL BEFORE HIM AT ASSESSMENT STAGE I.E. AGREEM ENT IN QUESTION, REPLY OF ASSESSEE AND NOTES ON ACCOUNTS G IVING THE TREATMENT TO RS.35 CRORES IN THE BOOKS OF ACCOU NT WITH WHICH THE LD. COMMISSIONER DID NOT AGREE, ASSESSMEN T ORDER COULD NOT BE TREATED AS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF REVENUE. THE LD. COMMISSIONER OF I NCOME TAX HAS NOT GIVEN ANY FINDING THAT THE VIEW TAKEN B Y THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW. 14. SINCE THE ASSESSING OFFICER HAS EXAMINED THE IS SUE WITH REGARD TO RECEIPT OF RS. 35 CRORES ON ACCOUNT OF NON REFUNDABLE UPFRONT FEES AT THE ASSESSMENT STAGE AND WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE REFORE, LD. COMMISSIONER OF INCOME TAX SHOULD NOT SUBSTITUT E THE VIEW OF THE ASSESSING OFFICER IN THE PROCEEDING UND ER 14 SECTION 263 OF THE ACT. THE ORDER PASSED BY THE AS SESSING OFFICER COULD NOT BE TREATED AS ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE. WE THEREFORE, DO NOT SU BSCRIBE TO THE VIEW TAKEN BY THE LD. COMMISSIONER OF INCOME TAX FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICE R WITH REGARD TO RECEIPT OF RS. 35 CRORES AND TREATMENT GI VEN IN THE BOOKS OF ACCOUNT BY ASSESSEE. WE, THEREFORE, S ET ASIDE AND QUASH THE ORDER UNDER SECTION 263 OF THE ACT DA TED 29.03.2012 QUA RECEIPT OF RS. 35 CRORES ON ACCOUNT OF UPFRONT FEE AND RESTORE THE ASSESSMENT ORDER OF THE ASSESSING OFFICER DATED 08.12.2009. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA 828/CHD/2013 & C.O. 29/2013 16. THE DEPARTMENTAL APPEAL IS FILED AGAINST THE OR DER OF LD. CIT(APPEALS) CHANDIGARH DATED 26.06.2013 FOR ASSESSMENT YEAR 2007-08, CHALLENGING THE DELETION O F ADDITION OF RS. 34,41,66,667/- ON ACCOUNT OF AMOUNT RECEIVED AS UPFRONT FEES. THE ASSESSING OFFICER, O N ACCOUNT OF ORDER PASSED UNDER SECTION 263 OF THE AC T TOOK UP THE MATTER IN ISSUE AGAIN IN PROCEEDINGS UNDER S ECTION 143(3) READ WITH SECTION 263 OF THE ACT AND PASSED THE FRESH ASSESSMENT ORDER ON 07.12.2013. THE ASSESSIN G OFFICER CONSIDERING THE CLAUSE OF THE AGREEMENT AND AS PER DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX UND ER SECTION 263 CONSIDERED RS. 35 CRORES AS INCOME OF ASSESSEE DURING ASSESSMENT YEAR UNDER APPEAL. HOWE VER, WHEN INCOME OF RS. 58,33,333/- WAS ALREADY OFFERED FOR 15 TAX BY SPLITTING THE SAME OVER TEN YEARS, MADE THE ADDITION OF THE BALANCE AMOUNT OF RS. 34,41,66,667/ -. THE LD. COMMISSIONER OF INCOME TAX (A), HOWEVER, DE LETED THE ADDITION. 17. SINCE WE HAVE ALLOWED THE APPEAL OF ASSESSEE QUASHING THE ORDER UNDER SECTION 263 OF THE ACT IN ITA 474/CHD/2012, THEREFORE, THE PRESENT ADDITION BEING CONSEQUENTIAL IN NATURE MADE BY THE AUTHORITIES BEL OW ON ACCOUNT OF ORDER PASSED UNDER SECTION 143(3)/263 OF THE ACT WOULD NOT SURVIVE BECAUSE THE EARLIER ORDER PAS SED BY THE ASSESSING OFFICER HAVE BEEN RESTORED. THE DEPARTMENTAL APPEAL THUS, HAS NO MERIT AND IS ACCOR DINGLY DISMISSED. 18. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS CROSS OBJECTION FILED BY THE ASSESSEE. THE SAME IS THERE FORE, DISMISSED AS WITHDRAWN. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. THE DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTIO N OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH AUGUST,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4 TH AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH