M/s Berhampur Development Authority, V. ITO, Berhampur

ITA 128/CTK/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3779 (ITAT-CUTTACK)
• Duration Of Justice: 5 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D K SHETH
• Keywords: Capital asset; Depreciation; Rule of consistency; Tangible material; Difference of opinion; Assessment record; Capital receipt; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 201; 143(2); 147; 148; 12

Judgement Text

P A G E 1 | 17 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO S . 12 8 & 366 /CTK/201 4 ASSESSMENT YEAR S : 20 05 - 06 & 2008 - 09 BERHAMPUR DEVELOPMENT AUTHORITY , OPP. M.K C.G. MEDICAL COLLEGE, BERHAMPUR VS. ITO, WARD - 1, BERHAMPUR CIRCLE, BERHAMPUR PAN/GIR NO. AAALB 0112 C (APPELLANT ) .. ( RESPONDENT ) ITA NO.351/CTK/2014 ASSESSMENT YEAR: 2008 - 09 ITO, WARD - 1, BERHAMPUR CIRCLE, BERHAMPUR VS. BERHAMPUR DEVELOPMENT AUTHORITY, OPP. M.K C.G. MEDICAL COLLEGE, BERHAMPUR PAN/GIR NO.AAALB 0112 C (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH , AR REVENUE BY : SHRI SUBHENDU DUTTA , DR DATE OF HEARING : 26 / 11 / 201 9 DATE OF PRONOUNCEMENT : 29 / 1 1 / 201 9 O R D E R PER C.M.GARG,JM TH E ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF THE CIT(A) , BERHAMPUR DATED 20.1.2012 FOR THE ASSESSMENT YEAR 2005 - 06 AND CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE FOR THE ASSESSMENT YEAR 2008 - 09 AGAINST THE ORDER DATED 10.6.2014 OF THE CIT(A), BERHAMPUR . BERHAMPUR DEVELOPMENT AUTHORITY P A G E 2 | 17 ITA NO.128/CTK/2014: A.Y: 2005 - 06 2. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER: FOR THAT THE ASSESSMENT AS MADE U/S.143(3) IS BAD IN LAW IN VIEW OF THE FACT THAT THE RETURN OF INCOME WAS FILED ON 31.10.2005 AND NOTICE U/S.143(2) WAS ISSUED AND SER VED ON THE APPELLANT ON 26.5.2009. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AFORE - EXTRACTED ADDITIONAL GROUND WAS INADVERTENTLY OMITTED TO BE TAKEN IN THE MEMORANDUM OF APPEAL BUT ARE SIGNIFICANT FOR THE DISPOSAL OF THE APPEAL BY THE TRIBUNAL. IT WAS, THEREFORE, PRAYED THAT THE SAME BE ADMITTED, WHICH WAS OPPOSED BY THE LD. DR. 4. HAVING GONE THROUGH THE SUBJECT MATTER OF THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE, IT IS DISCERNIBLE THAT THE SAME IS A LEGAL GROUND INVOLVING ADJUDIC ATION ON QUESTIONS OF LAW AND, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC) , WE ADMIT THE SAME AND PROCEED TO DECIDE THE SAME AS PER LAW. 5 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEVELOPMENT AUTHORITY CONSTITUTED UNDER THE ODISHA DEVELOPMENT AUTHORITIES ACT, 1982. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 06 ON BERHAMPUR DEVELOPMENT AUTHORITY P A G E 3 | 17 31.10.2005 DECLARING LOSS OF RS.29,02,540/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 26.11.2009 U/S.144/147 OF THE ACT, INTER ALIA, ADDING RS.83,90,492/ - TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS SHOWN BY THE ASSESSEE AS EXCESS OF CAPITAL EXPENDITURE OVER CAPITAL RECEIPT AND RS.31,18, 535/ - WHICH WAS THE RECEIPT OF THE ASSESSEE FROM SALE OF SHOP ROOMS. THE ASSESSEE CARRIED THE MATTER IN APPEAL UPTO ITAT AND THE MATTER WAS RESTORED TO THE FILE OF THE AO BY THE TRIBUNAL DATED 12.9.2011 IN ITA NO.299/CTK/2011 IN THE LIGHT OF THE FACT THA T THE CIT(A) RIGHTLY NOTED THAT THE APPLICATION OF FUNDS WERE ON ACCOUNT OF REVENUE FOR CLAIMING APPLICATION OF FUNDS OF INCOME EXEMPT UNDER THE PROVISIONS OF SECTION 11 OF THE AC T. THE TRIBUNAL ALSO OBSERVED THAT IT IS IMPERATIVE WHETHER THE ASSESSEE HAS PREFERRED TO APPLY FOR SEEKING REGISTRATION U/S.12A OR NOT . IN PURSUANCE TO THE TRIBUNAL ORDER (SUPRA), T HE ASSESSING OFFICER PASSED HIS ORDER U/S.143(3)/254 OF THE ACT ON 6.12.2012 AND DETERMINED THE TOTAL INCOME OF RS.55,50,620/ - CONSISTING OF EXCESS OF REVENUE RECEIPT OVER REVENUE EXPENSES AT RS.54,88,250/ - AND PROFIT ON SALE OF COMMERCIAL COMPLEX AMOUNTING TO RS.62,370/ - AND THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE CIT(A). 6 . BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US RAISING THE ADDITIONAL GROUND THAT THE ASSESSMENT U/S.143(3) /254 OF THE ACT IS BAD IN LAW IN VIEW OF THE FACT THAT THE RETURN OF INCOME WAS FILED ON BERHAMPUR DEVELOPMENT AUTHORITY P A G E 4 | 17 31.10.2005 AND NOTICE U/S.143(2) WAS ISSUED AND SERVED ON THE ASSESSEE ON 26.5.2009. 7 . AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2005 - 06 ON 31.10.2005. THE CONTENTION OF THE ASSESEE E IS THAT NOTICE U/S.143(2) OF THE ACT COULD HAVE BEEN SERVED ON THE ASSESSEE WITHIN SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED BY THE ASSESSEE. HE SUBMITTED THAT NOTICE U/S.143(2) OF THE ACT WAS SERVED ON THE ASSESSEE ON 26.5.2009, WHICH WAS NOT WITHIN THE STIPULATED PERIOD. THE ASSESSEE ALSO REFERRED TO THE CBDT CIRCULAR NO. 549 DATED 31ST OCTOBER, 1989, WHICH CLARIFIED THE LEGAL POSITION THAT WHEN THERE WAS A FAILURE TO ISSUE A NOTICE TO AN ASSESSEE UNDER SECTION 143(2) OF THE ACT WITHIN SIX MONTHS FRO M THE END OF THE MONTH IN WHICH THE RETURN IS FURNISHED OR DURING THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED, WHICHEVER IS LATER, THEN THE ASSESSEE CAN TAKE IT THAT THE RETURN FILED BY HIM HAS BECOME FINAL AND NO SCRUTINY PROCEEDINGS ARE TO BE STA RTED IN RESPECT OF THAT RETURN. 7. REPLYING TO ABOVE, LD DR DREW OUR ATTENTION TOWARDS PARAS 1 & 2 OF THE REASSESSMENT ORDER DATED 26.11.2009 U/S 144/147 OF THE ACT AND SUBMITTED THAT ORIGINALLY THE RETURN FOR ASSESSMENT YEAR 2005 - 06 WAS FILED BY THE ASSESSEE SHOWING A LOSS OF RS.29,02,540/ - ON 30.10.2005 AND THE SAME WAS PROCESSED U/S.143(1) OF THE ACT ON 24.2.2006. LD D.R. FURTHER SUBMITTED THAT FROM PARA 2 OF THE SAID REASSESSMENT ORDER, IT IS CLEAR THAT BERHAMPUR DEVELOPMENT AUTHORITY P A G E 5 | 17 SUBSEQUENTLY THE CASE WAS REOPENED U/S.147 OF THE ACT AND NOTICE U/S.148 OF THE ACT WAS ISSUED ON 31.7.2 008, WHICH WAS SERVED ON THE ASSESSEE ON 4.8.2008 AND DESPITE PROPER SERVICE OF NOTICE, NO RETURN OF INCOME WAS FILED BY THE ASSESSEE IN RESPONSE TO SAID NOTICE ISSUED TO THE ASSESSEE U/S 148 OF THE ACT. LD DR FURTHER SUBMITTED THAT WHEN THE ASSESSEE IS N OT FILING ANY RETURN OF INCOME IN RESPONSE TO NOTICE U/S.148 OF THE ACT NOR SUBMITTING ANY REQUEST TO THE AO THAT HIS EARLIER RETURN FILED U/S.139 OF THE ACT MAY BE TREATED AS RETURNED FILED IN RESPONSE TO NOTICE U/S.148 OF THE ACT, THEN THE ASSESSEE CANN OT RAISE ANY OBJECTION TOWARDS SERVICE OF NOTICE U/S.143(2) OF THE ACT ALLEGING THE REASSESSMENT ORDER AS BAD IN LAW. 8. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSION, WE ARE OF THE CONSIDERED OPINION THAT ON BEING ASKED BY THE BENCH, LD COUNSEL FOR THE ASSESSEE, AT BAR, IN ALL FAIRNESS, ACCEPTED THAT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S.148 OF THE ACT. HOWEVER, IN PARA 3 OF THE REASSESSMENT ORDER DATED 26.11.2009, THE ASSESSING OFFICER HAS MENTIONED THAT NOTI CE U/S 143(2) OF THE ACT AND NOTICE U/S.142(1) OF THE ACT WAS SERVED ON THE ASSESSEE ON 26.5.2009. IN ABSENCE OF ANY RETURN OR RESPONSE TO THE NOTICE U/S.148 OF THE ACT, THE ASSESSEE CANNOT RAISE ANY OBJECTION OR GROUND REGARDING SERVICE OF NOTICE. THERE FORE, THE ADDITIONAL GROUND OF THE ASSESSEE BEING DEVOID OF MERITS IS DISMISSED. 9. ON MERITS, THE ASSESSEE HAS RAISED THE SOLE GROUND, WHICH READS AS FOLLOWS: BERHAMPUR DEVELOPMENT AUTHORITY P A G E 6 | 17 THE LD AO HAS NOT CONSIDERED THE OBJECTS OF THE ASSESSEE AND ERRED IN DETERMINING CAPITAL & REV ENUE EXPENDITURE & RECEIPTS AND COMPUTED THE INCOME AS RS.55,50,620/ - WHICH SHOULD BE DELETED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WAS NOT RIGHT AND JUSTIFIED IN R EPEATING THE ADDITION MADE BY HIM IN EARLIER REASSESSMENT ORDER DATED 26.11.2009 KEEPING ASIDE THE RULE OF CONSISTENCY. LD COUNSEL VEHEMENTLY POINTED OUT THAT THE ASSESSEE IS A NON - PROFIT MAKING LOCAL DEVELOPMENT AUTHORITY CREATED UNDER THE SPECIAL ACT AN D MAINTAINING ITS BOOKS OF ACCOUNT ON THE SAME PRINCIPLE AS IS FOLLOWED BY THE NON - PROFITING MAKING ORGANISATION/AUTHORITY. LD COUNSEL SUBMITTED THAT THE TOTAL RECEIPTS OF THE ASSESSEE WERE USED FOR THE PURPOSE OF OBJECT OF THE AUTHORITY AND IF THE EXPEND ITURE INCURRED BY THE ASSESSEE IN CAPITAL AND REVENUE ACCOUNT IS CONSIDERED TOGETHER, THEN THERE WAS NET DEFICIT OF RS.29,02,540/ - . LD COUNSEL SUBMITTED THAT THE ASSESSEE IS REGULARLY SHOWING REVENUE AND CAPITAL TRANSACTION IN THE INCOME AND EXPENDITURE A CCOUNT AND THERE WAS NO REQUIREMENT OF SEGREGATING THE SAME. LD COUNSEL SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN DENYING THE FACT IN MAKING ADDITION OF RS.54,88,250/ - BEING EXCESS ON REVENUE RECEIPTS OVER THE REVENUE EXPENDITURE AS PER REVISED INCOME AN D EXPENDITURE STATEMENT FILED BY THE ASSESSEE BEFORE THE CIT(A). LD COUNSEL SUBMITTED THAT THE ACTION OF THE AO IN REJECTING THE INCOME AND EXPENDITURE ACCOUNT FILED BY THE ASSESSEE SHOWING NET LOSS OF RS.29,02,540/ - IS NOT JUSTIFIED AND SUSTAINABLE AND T HE AUTHORITIES BELOW BERHAMPUR DEVELOPMENT AUTHORITY P A G E 7 | 17 COMPELLED THE ASSESSEE TO FILE ANOTHER INCOME AND EXPENDITURE ACCOUNT SHOWING SEPARATE REVENUE AND CAPITAL ACCOUNT, WHEREIN SURPLUS OF RS.54,88,250 ON THE REVENUE RECEIPT WAS PICKED UP IN MAKING ADDITION KEEPING ASIDE THE FACT THAT THE RE WAS ALSO DEFICIT OF RS.83,90,792/ - IN THE CAPITAL ACCOUNT, WHICH CLEARLY REVEALS THAT IN THE CAPITAL ACCOUNT, THE ASSESSEE HAS INCURRED EXPENDITURE MORE THAN THE RECEIPTS SHOWING DEFICIT OF RS.83,90,792/ - IN THE CAPITAL ACCOUNT. LD COUNSEL SUBMITTED TH AT THE DEPARTMENT WAS REGULARLY ACCEPTING THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE, WHEREIN, CAPITAL AND REVENUE RECEIPTS AND EXPENDITURE WAS CLUBBED TOGETHER AND SURPLUS OR DEFICIT THEREON WAS TO BE CONSIDERED FOR THE PURPOSE OF TAXATION. LD C OUNSEL LASTLY SUBMITTED THAT IF THE RULE OF CONSISTENCY IS APPLIED, IT IS CLEARLY DISCERNIBLE FROM THE INCOME AND EXPENDITURE ACCOUNT THAT THERE WAS DEFICIT/LOSS OF RS.29,02,540/ - AND, THEREFORE, NO ADDITION IS CALLED FOR IN THIS REGARD. 11. REPLYING TO ABOVE, LD DR STRONGLY SUPPORTED THE ORDER OF THE AO AS WELL AS THE CIT(A) AND SUBMITTED THAT SINCE THE ASSESSEE IS NOT REGISTERED U/S.12A OF THE ACT AND NOT CLAIMING ANY EXEMPTION U/S.11 OF THE ACT, THEREFORE, THE GENERAL PRINCIPLE OF ACCOUNTAN CY HAS TO BE APPLIED TO THE CASE OF THE ASSESSEE. LD D.R. SUBMITTED THAT THE REVENUE AND CAPITAL ACCOUNT CANNOT BE MIXED AND THE AMOUNT OF SURPLUS ON REVENUE RECEIPTS OVER THE REVENUE EXPENDITURE HAS TO BE TAXED IN THE HANDS OF THE ASSESSEE IN THE CAPACIT Y OF ORDINARY ASSESSEE OR AN AOP. BERHAMPUR DEVELOPMENT AUTHORITY P A G E 8 | 17 12. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT UNDISPUTEDLY, THE ASSESSEE IS NOT REGISTERED U/S.12A OF THE ACT AND HENCE, IT IS NOT CLAIMING ANY EXEMPTION U/S.11 OF THE ACT. F URTHER, IN THIS SITUATION, THE ASSESSEE HAS TO BE ASSESSED AS AN ORDINARY ASSESSEE OR IN THE STATUS OF AN AOP. HENCE, CLEARLY THE PRINCIPLE OF ACCOUNTANCY HAS TO BE APPLIED WHILE DECIDING AND ADJUDICATING THE TAX LIABILITY OF THE ASSESSEE. THE ASSESSEE W ANTS THAT HIS CAPITAL AND REVENUE RECEIPTS SHOULD BE MIXED TOGETHER AND CAPITAL AND REVENUE EXPENDITURE SHOULD ALSO BE MISSED TOGETHER AND, THEREAFTER, SURPLUS OR DEFICIT WHICHEVER IS FOUND SHOULD BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF CALCULATING THE TAX LIABILITY OF THE ASSESSEE. WE ARE NOT IN AGREEMENT WITH SUCH PROPOSITION AS THE CAPITAL RECEIPTS HAS TO BE USED FOR THE PURPOSE OF CAPITAL ASSETS AND IF ANY SURPLUS OR DEFICIT IS THERE, THEN SAME HAS NO RELEVANCE FOR THE PURPOSE OF CALCULATING TAX LIABILITY OF THE ASSESSEE. THE ASSESSEE MAY CLAIM DEPRECIATION OR OTHER INCIDENTAL EXPENDITURE TO MAINTAIN CAPITAL ASSETS BUT THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE OVER AND ABOVE THE CAPITAL RECEIPTS CANNOT BE TAKEN INTO CONSIDERATION WHILE DEC IDING THE NET AMOUNT OF SURPLUS OR DEFICIT ON THE REVENUE ACCOUNT. WE ALSO FIND IT APPROPRIATE TO REPRODUCE PARA 4.3 OF THE CIT(A), WHEREIN, THE ADDITION MADE BY THE AO HAS BEEN UPHELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE MATTER AND GONE THROUGH T HE ASSESSMENT RECORDS. I HAVE ALSO GONE THROUGH THE ASSESSMENT RECORDS OF BHUBANESWAR DEVELOPMENT AUTHORITY ASSESSED AT ACIT, CIRCLE - L(L), BHUBANESWAR AND LOOKED AT THE PUBLISHED ACCOUNTS OF CUTTACK BERHAMPUR DEVELOPMENT AUTHORITY P A G E 9 | 17 DEVELOPMENT AUTHORITY. WHILE SETTING ASIDE THE MATTER WITH THE FILE OF THE AO, THE HON'BLE ITA T WANTED THE AO TO VERIFY AS TO WHETHER THE APPELL ANT HAS PREFERRE D TO SEE K REGISTRATION U/S.12AA OR N OT. AS HAS BEEN MENTIONED BY THE AO AND ALSO BY THE APPELLANT DURING THE COURSE OF THE APPEAL HEARINGS ADMITTEDLY THE APPELLANT DOES NOT ENJOY ANY REGISTRATION U/S.12AA. IN OTHER WORDS, THE APPELLANT'S ACCOUNTS ARE NOT TO BE CONSIDERED IN LINE WITH THE PROVISIONS OF SEC. 11 TO 13 WHICH APPLIES TO TRUSTS. THE APPELLANT STRICTLY SPEAKING IS ENGA GED IN SOME REVENUE YIELDING ACTIVITIES WHICH IS REFLECTED IN ITS REVENUE ACCOUNT. IN SUCH A SITUATION, I AM UNABLE TO APPRECIATE THE GRIEVANCE OF THE APPELLANT IN RESPECT OF THE ACTION OF THE AO IN DENYING T HE SET OFF OF THE DEFICIT IN THE CAPITAL ACCOU NT. ADMITTEDLY THE CAPITAL RECEIPTS IN THE CURRENT YEAR IS LESS THAN THE CAPITAL EXPENDITURE AND THAT IS WHY THE APPELLANT HAS A LOSS AND WANTS TO BE SET OFF AGAINST ITS SURPLUS IN THE REVENUE ACCOUNT. HOWEVER, CLEARLY THIS CAPITAL EXPENDITURE ARE EITHE R STRAIGHT AWAY CAPITAL EXPENDITURE ON ACCOUNT OF THE APPELLANT(AS IN THE CASE OF CONSTRUCTION OF SHOPS) OR ARE IN THE NATURE OF EXPENDITURE IN RESPECT OF ASSETS NOT OWNED BY THE APPELLANT. IN THE LATTER CASE, THE APPELLANT GETS SUITABLE GRANTS/MONEY TO INCUR THE EXPENDITURE. IN EITHER CASE, SUCH EXPENSES ARE NEITHER ALLOWABLE EXPENDITURE RELATING TO THE REVENUE ACCOUNT OF THE APPELLANT NOR SUCH CREDITS IN THE CAPITAL ACCOUNT WHICH CAN AS IS CLEAR FROM THE GROUNDS OF APPEAL BE LOANS BE TAKEN AS REVENUE RECEIPT. THEREFORE, IN A YEAR, IF THE APPELLANT RECEIVES A LOAN OR AN ADVANCE FROM ANY AUTHORITY SAY THE GOVERNMENT OR BERHAMPUR MUNICIPALITY TO UNDERTAKE A PROJECT AND ITS RELATABLE EXPENDITURE IS EITHER NEGLIGIBLE OR VERY LESS DURING A PARTICULAR YEAR THEN IT WILL BE EQUALLY UNFAIR TO TAX THE SURPLUS IN THE CAPITAL ACCOUNT IN THE HANDS OF THE APPELLANT. APPLYING THIS LOGIC ANY DEFICIT IN THE CAPITAL ACCOUNT ALSO CANNOT BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE TOTAL INCOME OF THE APPELLANT. IN THIS REGARD I MAY MENTION HERE THAT THE BHUBANESWAR DEVELOPMENT AUTHORITY, WHICH IS ALSO GOVERNED BY THE SAME RULES AND THE ACT DOES NOT CLAIM IN ITS RETURN ANY SUCH SET OFF. THE SAME IS THE CASE WITH THE CUTTACK DEVELOPMENT AUTHORITY. IN FACT, THE BHU BANESWAR DEVELOPMENT AUTHORITY, ON THE ADVICE OF THE C & AG, CONSIDERS 15% OF SUCH CAPITAL RECEIPTS WHICH IT GETS FROM ENTITIES LIKE GOVERNMENT, IDCO OR BHUBANESWAR MUNICIPAL CORPORATION FOR DEVELOPMENTAL WORK AS INCOME IN THE REVENUE ACCOUNT (IN THE INSTA NT CASE, HOWEVER, GIVEN THE FACT THAT THE IMPUGNED ASSESSMENT IS RESULT OF A REMAND BY HON'BLE ITAT, THERE IS NO SCO PE TO EXAMINE THIS ANGLE IN THE CAS E OF THE APPELLANT). IN VIEW OF THE ABOVE DISCUSSION, I AM NOT INCLINED TO INTERFERE WITH THE ACTION OF T HE AO. THE AO IS JUSTIFIED IN NOT ALLOWING THE SET OFF THE DEFICIT IN THE CAPITAL ACCOUNT AGAINST THE SURPLUS IN THE REVENUE ACCOUNT. FURTHER, IN RESPECT OF INCOME FROM SALE OF SHOPS, I SEE NO REASON TO DIFFER FROM THE DECISION OF MY PREDECESSOR IN OFFICE WHO ESTIMATED THE SAID INCOME AT 2% OF THE SALES PRICE. THE CASE LAWS CITED BY THE APPELLANT ARE BASICALLY ABOUT WHAT CONSTITUTES CAPITAL OR REVENUE EXPENDITURE. I DO NOT SEE THE RELEVANCE OF THESE CASE LAWS TO THE FACTS OF THE CASE. IN THE CAPITAL ACCOUNT , THE APPELLANT HAS EITHER EXPENDITURE IN RESPECT OF AN ASSET WHICH IT OWNS OR INCURS EXPENDITURE IN RESPECT OF AN ASSET NOT OWNED BY IT OUT OF BERHAMPUR DEVELOPMENT AUTHORITY P A G E 10 | 17 PAYMENTS/REIMBURSEMENTS RECEIVED FROM THE OWNER OF SUCH ASSETS. IN THE SECOND TYPE OF CASES, THE APPELLANT IS AN AGENT WHO GIVES ITS EXPERTISE AND INFRASTRUCTURE. IN VIEW OF THESE FACTS, THE CASE LAWS CITED BY THE APPELLANT ARE OF NO HELP TO IT. ACCORDINGLY, THE INCOME OF RS.55,50,620/ - ASSESSED BY THE AO IS CONFIRMED AND THE GROUNDS ARE DISMISSED. 13. IN THE PRE SENT CASE, UNDISPUTEDLY, THE ASSESSEE HAS INCURRED CAPITAL EXPENDITURE OVER AND ABOVE ITS CAPITAL RECEIPTS AND SAME CANNOT BE ALLOWED TO BE SET OFF FROM THE REVENUE SURPLUS FOR THE PURPOSE OF CALCULATION OF TAX LIABILITY OF THE ASSESSEE. 14. ADMITTEDLY, TH E CAPITAL RECEIPTS IN THE CURRENT YEAR ARE LESS THAN THE CAPITAL EXPENDITURE AND THAT IS WHY THE ASSESSEE WANTS TO SET OFF AGAINST SURPLUS IN THE REVENUE ACCOUNT. 15. IN VIEW OF ABOVE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN CONFIRMIN G THE ADDITION OF RS.55,50,620/ - MADE BY THE AO. ACCORDINGLY, THE SOLE GROUND ON MERITS OF THE ADDITION IS DISMISSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.366/CTK/2014: A.Y. 2008 - 09 17. THE ASSESSEE HAS RAISED ADDITIONAL GROUND S. GROUND NO.1 OF ASSESSEE IS AS UNDER: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE ASSESSMENT AS INITIATED U/S.147 AND AS COMPLETED U/S.144/147 IS ARBITRARY AND UNJUSTIFIED INSOFAR AS NO NEW MATERIALS WERE AVAILABLE FOR INIT IATION OR COMPLETION OF PROCEEDINGS U/S.147. BERHAMPUR DEVELOPMENT AUTHORITY P A G E 11 | 17 18. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THIS SPECIFIC GROUND WAS OMITTED TO BE TAKEN THROUGH OVERSIGHT AND THAT IT WAS TAKEN ON 16.3.2018 . IT WAS PLEADED THAT ASSESSEE MAY BE PERMITTED TO RAISE THE ADDITIONAL GROUND WHICH GOES TO THE ROOT OF THE MATTER AND CLEARLY TRANSPIRES FROM THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES WITH COMPLETE FACTS ON RECORD . 19. REPLYING TO ABOVE, T HE LEARNED DEPARTMENTAL REPRESENTA TIVE OPPOSED TO THE ADMISSION OF THE ABOVE GROUND. 20 . AFTER CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE, IT WILL BE NECESSARY TO ADMIT THE ADDITIONAL GROUND IN VIEW OF THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED VS. CIT , 229 ITR 383 (SC), WE ADMIT THE ADDITIONAL GROUND AND PROCEED TO ADJUDICATE THE SAME. 21 . AT THE OUTSET, LD A.R. OF THE ASSESSEE SUBMITTED THAT NOTICE U/S.148(2) OF THE ACT WAS ISSUED TO THE A SSESSEE ON 23.3.2012 AND SERVED ON THE ASSESSEE ON 10.4.2012 FOR REOPENING THE ASSESSMENT ON THE FOLLOWING REASONS ( AS NOTED BY THE AO IN PARA 1 OF ASSESSMENT ORDER) : (I ) IT WAS SEEN FROM THE INCOME AND EXPENDITURE ACCOUNT OF REVENUE ACCOUNT AND THE CAPITAL ACCOUNT THAT RS.3,72,23,360/ - AND RS.1,36,45,546/ - WERE CLAIMED AS REVENUE EXPENSES AND CAPITAL EXPENSES RESPECTIVELY. IN THE REVENUE RECEIPT AND PAYMENT ACCOUNT THER E WAS NO RECEIPT OF GRANT IN AID WHERE AS IN THE CAPITAL RECEIPT BERHAMPUR DEVELOPMENT AUTHORITY P A G E 12 | 17 AND PAYMENT ACCOUNT RS.2,47,41,000/ - WAS RECEIVED TOWARDS GRANT IN AID. (II) IT WAS ALSO SEEN FROM THE INCOME AND EXPENDITURE ACCOUNT OF REVENUE ACCOUNT, THE ASSESSEE HAD CLAIMED THE FOLLOWIN G EXPENSES, WHICH ARE CAPITAL IN NATURE, AS REVENUE EXPENDITURE. COST OF BATTERY : RS.5,400/ - COST OF LAWN MOVER : RS.3,315/ - COST OF MIKE : RS.8,652/ - COST OF SPARE PARTS : RS.31,930/ - DIGITAL CAMERA : RS.8,700/ - PUMP : RS.6,874/ - TELEPHONE : RS.2,180/ - WATER SUPPLY CONNECTION: RS.15,800 / - TOTAL: RS.82,671/ - THE ALLOWABLE DEPRECIATION RATE FOR ALL THESE ITEMS ARE 15%. THEREFORE, AFTER ALLOWING DEPRECIATION OF RS.12,401/ - , THE BALANCE AMOUNT OF RS.70,270/ - SHOULD HAVE BEEN DISALLOWED. III) THE ASSESSEE HAD CLAIMED FBT OF RS.18,823/ - IN THE INCOME AND EXPENDITURE ACCOUNT OF REVENUE ACCOUNT, WHICH IS NOT AN ALLOWABLE EXPENSE UNDER THE I.T.ACT. THUS, AN AMOUNT OF RS.5,09,58,000/ - (RS.5,08,68,906/ - PLUS RS.70,270/ - PLUS RS.18,823/ - ) IN THE A BOVE MANNER CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T.ACT, 1961. 22 . LD COUNSEL SUBMITTED THAT SINCE NO RETURN OF INCOME WAS FILED IN RESPONSE TO SAID NOTICE, AGAIN ANOTHER NOTICE ON 11.7.2013 WAS ISSUED AS CAL LED FOR U/S.148 OF THE ACT ON OR BEFORE 23.7.2013 FAILING WHICH THE ASSESSMENT WOULD BE COMPLETED EXPARTE TO THE BEST OF JUDGMENT. LD COUNSEL SUBMITTED THAT THERE WAS NO NEW TANGIBLE MATERIAL AVAILABLE WITH BERHAMPUR DEVELOPMENT AUTHORITY P A G E 13 | 17 THE ASSESSING OFFICER WHILE RESORTING TO SECTI ON 147/148 OF THE ACT, MORE SPECIFICALLY, WHILE FRAMING ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT, THERE WAS FULL DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEE AND ON THE BASIS OF THOSE FACTS, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. FOR THIS PROP OSITION, HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. (2010) 310 ITR 561 (SC) AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS USHA INTERNATIONAL LTD. (2012) 348 ITR 485 (DELHI) 23 . REPLYING TO ABOVE, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 24 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE AC T ON 16.12.2010 ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED RS.3,72,23,360/ - AND RS.1,36,45,546/ - IN THE REVENUE AND THE CAPITAL RESPECTIVELY AS UNUTILISED GRANTS IN AID. THEREFORE, THE AO ISSU ED NOTICE U/S.148 OF THE ACT FOR REOPENING THE ASSESSMENT AND COMPLETED THE REASSESSMENT U/S.144/147 OF THE ACT ON 29.1.2014 DETERMINING THE TOTAL INCOME AT RS.5,09,58,000/ - , INTER ALIA, DISALLOWING RS.3,72,23,360/ - AS SURPLUS IN THE REVENUE ACCOUNT AND R S.1,36,45,546/ - AS CAPITAL ACCOUNT. WE PERUSE THE ASSESSMENT ORDER U/S.143(3) DATED 16.12.2010 AND FIND THAT THE ASSESSEE HAD FILED BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT ON BERHAMPUR DEVELOPMENT AUTHORITY P A G E 14 | 17 20.7.2010 AND FURNISHED VARIOUS DETAILS AS REQUIRED BY THE ASSESSING OF FICER AND AFTER VERIFYING THE SAME, THE ASSESSING OFFICER ACCEPTED THE RETURNED INCOME OF THE ASSESSEE AND FRAMED THE ASSESSMENT. THE REASSESSMENT PROCEEDINGS U/S.144/147 OF THE ACT WAS MADE BY THE ASSESSING OFFICER ON THE SAME INCOME AND EXPENDITURE ACC OUNT. HENCE, IT CANNOT BE SAID THAT ANY NEW MATERIAL HAS COME TO THE NOTICE OF THE ASSESSING OFFICER. 25 . WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. (2010) 310 ITR 561 (SC), WHEREIN NEWLY SUBSTITUTED PROVISION OF SECTION 147 OF THE ACT WITH EFFECT FROM 01.04.1989 IS INTERPRETED BY OBSERVING, THAT SECTION 147 OF THE ACT, AS SUBSTITUTED W.E.F. 01.04.1989 DOES NOT POSTULATES CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPINION. FURTHER, IF 'REASON TO BELIEVE' OF THE ASSESSING OFFICER IS FOUNDED ON AN INFORMATION WHICH MIGHT HAVE BEEN RECEIVED BY THE ASSESSING OFFICER AFTER THE COMPLETION OF ASSESSMENT, IT MAY BE A SOUND FOUNDATION FOR EXERCISING THE POWER UNDER SEC TION 147 R.W.S. 148 OF THE ACT. IT CANNOT BE ACCEPTED THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RECORDED, AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY BE JUSTIFYING THE ASSESSING OFFICER TO INITIATE A PROCEEDING U/S. 147 OF THE ACT. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED U/S 143(3) OF THE ACT, THE BERHAMPUR DEVELOPMENT AUTHORITY P A G E 15 | 17 PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. 26. WE FIND THAT IN THE CASE OF USHA INTERNATIONAL LTD (SUPRA), IT HAS BEE N HELD AS UNDER: IN VIEW OF THE ABOVE OBSERVATIONS WE MUST ADD ONE CAVEAT. THERE MAY BE CASES WHERE THE ASSESSING OFFICER DOES NOT AND MAY NOT RAISE ANY WRITTEN QUERY BUT STILL THE ASSESSING OFFICER IN THE FIRST ROUND/ ORIGINAL PROCEEDINGS MAY HAVE EXAMINED THE SUBJECT MATTER, CLAIM ETC, BECAUSE THE ASPECT OR QUESTION MAY BE TOO APPARENT AND OBVIOUS. TO HOLD THAT THE ASSESSING OFFICER IN THE FIRST ROUND DID NOT EXAMINE THE QUESTION OR SUBJECT MATTER AND FORM AN OPINION, WOULD BE CONTRARY AND OPPOSED TO NORMAL HUMAN CONDUCT. SUCH CASES HAVE TO BE EXAMINED INDIVIDUALLY. SOME MATTERS MAY REQUIRE EXAMINATION OF THE ASSESSMENT ORDER OR QUERIES RAISED BY THE ASSESSING OFFICER AND ANSWERS GIVEN BY THE ASSESSEE BUT IN OTHERS CASES, A DEEPER SCRUTINY OR EXAMINATION MAY BE NECESSARY. THE STAND OF THE REVENUE AND THE ASSESSEE WOULD BE RELEVAN T. SEVERAL ASPECTS INCLUDING PAPERS FILED AND SUBMITTED WITH THE RETURN AND DURING THE ORIGINAL PROCEEDINGS ARE RELEVANT AND MATERIAL. SOMETIMES APPLICATION OF MIND AND FORMATION OF OPINION CAN BE ASCERTAINED AND GATHERED EVEN WHEN NO SPECIFIC QUESTION OR QUERY IN WRITING HAD BEEN RAISED BY THE ASSESSING OFFICER. THE ASPECTS AND QUESTIONS EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF MAY INDICATE THAT THE ASSESSING OFFICER MUST HAVE APPLIED HIS MIND ON THE ENTRY, CLAIM OR DEDUCTION ETC. IT MAY BE APPARENT AND OBVIOUS TO HOLD THAT THE ASSESSING OFFICER WOULD NOT HAVE GONE INTO THE SAID QUESTION OR APPLIED HIS MIND. HOWEVER, THIS WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. 27 . THEREFORE, IN THE ABSENCE OF ANY FRESH MATERIAL, THE REAPPRAISAL OF SAME MATERIAL TO INITIATE REASSESSMENT PROCEEDINGS TANTAMOUNTS TO CHANGE OF OPINION AND HENCE BAD IN LAW. WE ALSO FIND THAT IN THE PRESENT CASE, THERE WAS ADMITTEDLY NO FAILURE ON THE PART OF THE ASSESSEE TO MAKE A BERHAMPUR DEVELOPMENT AUTHORITY P A G E 16 | 17 RETURN OR TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. FROM THE ABOVE FACTS OF THE CASE AND FOLLOWING THE DECISION S QUOTED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE REASSESSMENT ORDER U/S. 147 R.W.S. 144 DATED 29.1.2014 OF THE ACT IS BAD IN LAW A HENCE, SAME IS QUASHED AND ALLOW THE ADDITIONAL GROUND OF APPEAL. 28 . SINCE WE HAVE QUASHED THE REASSESSMENT ORDER U/S. 147/144 OF THE ACT DATED 29,.1.2014 WHILE ADJUDICATING ADDITIONAL GROUND OF APPEAL, OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS OF THE ADDITIONS HAVE BECOME INFRUCTUOUS AND HENCE, NOT ADJUDICATED. 29. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. I TA NO.351/CTK/2014: A.Y 2008 - 09 - REVENUES APPEAL 30 . AS WE HAVE QUASHED THE REASSESSMENT ORDER U/S.147/144 OF THE ACT WHILE DECIDING THE ADDITIONAL GROUND IN THE ASSESSEES APPEAL IN ITA NO.366/CTK/2014 , THE APPEAL FILED BY THE REVENUE IS ALSO DISMISSED . 3 1 . EVEN OTHERWISE, WE MADE IT CLEAR THAT THE TAX EF FECT IN THE APPEAL IS BELOW THE LIMIT OF RS.50 LAKHS FIXED BY THE CBDT IN CIRCULAR NO. 17/2019 DATED 8 TH AUGUST, 2019. THEREFORE, ON THIS COUNT ALSO, THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE. 3 2 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. BERHAMPUR DEVELOPMENT AUTHORITY P A G E 17 | 17 ORDER PRONOUNCED ON 29 / 1 1 /201 9 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 29 / 1 1 /20 1 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT : /ASSESSEE: BERHAMPUR DEVELOPMENT AUTHORITY, OPP. M.K C.G. MEDICAL COLLEGE, BERHAMPUR 2. THE RESPONDEN T/REVENUE : ITO,BERHAMPUR CIRCLE, BERHAMPUR 3. THE CIT(A) - , BERHAMPUR 4. PR.CIT - , B ERHAMPUR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//