IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 237/JU/2012 [A.Y. 2007-08] MARUDHAR HOTELS P. LTD VS. THE C.I.T. UMAID BHAVAN PALACE JODHPUR JODHPUR PAN NO: AABCM 0773 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV PANDEY DEPARTMENT BY : SHRI SUBASH CHANDRA DATE OF HEARING : 20.11.2012 DATE OF PRONOUNCEMENT : 14.12.2012 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL OF THE ASSESSEE-COMPANY FOR THE A.Y 2007-08 IS DIRECTED AGAINST THE ORDER OF THE LD. CI T-I, JODHPUR DATED 30.3.2012, PASSED U/S 263 OF THE INCO ME- TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' , FOR SHORT]. 2 2. FACTS OF THE CASE LEADING TO THIS APPEAL, IN BRI EF, ARE THAT THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOM E [ROI] FOR A.Y. 2007-08 ON 30.10.2007, DECLARING TOTAL IN COME AT RS. NIL, AFTER SETTING OFF OF CURRENT YEARS BUSINESS LO SS OF RS. 2,23,93,753/- AND UNABSORBED DEPRECIATION OF A.Y. 2 001-02 AND 2002-03 AMOUNTING TO RS. 1,91,43,217/-) AGAINST LON G TERM CAPITAL GAIN. THE REGULAR ASSESSMENT U/S 1 43(3) WAS FRAMED ON 29.12.2009 AT NIL INCOME AFTER ADJUSTMENT OF UN ABSORBED BUSINESS LOSS FOR A.Y 2002-03 AND 2003-04 AMOUNTING TO RS. 4,19,25,521/- AND LONG TERM CAPITAL LOSS OF RS. 16, 12,256/-. LATER, ON 28.12.2010, AN ORDER U/S 154 WAS PASSED ON GIVIN G EFFECT TO THE CHANGES IN THE ASSESSMENT ORDER DATED 28.12.2010 FO R THE A.Y. 2006-07, IN WHICH THE ADJUSTMENT OF BUSINESS LOSS A ND DEPRECIATION WAS CARRIED OUT AND ACCORDINGLY BUSINE SS LOSS FOR A.Y. 2002-03 AND 2004-05 AND UNABSORBED DEPRECIATIO N FOR A.Y. 2001-02 AND 2002-03 WAS ADJUSTED AGAINST BUSIN ESS INCOME OF RS. 4,19,25,521/-. THUS BUSINESS INCOME WAS DETE RMINED AT RS. NIL AND LONG TERM CAPITAL LOSS OF RS. 16,12,256 /. 3 3. SUBSEQUENTLY, THE LD. CIT, JODHPUR CALLED FOR TH E RECORDS OF THIS ASSESSMENT ORDER AND NOTICED THAT T HIS ORDER WAS BOTH ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE IN RELATION TO CERTAIN ITEMS OF INCOME, FOR WHICH HE ISSUED A SHOW CAUSE NOTICE U/S 263 DATED 21.2.2011 AND 21.2.2012 IN RESPECT OF THE FOL LOWING ISSUES: (I) WHY TOTAL RECEIPT OF THE ASSESSEE-COMPANY SHOULD NOT BE ASSESSED AS RENT UNDER THE HEAD INCOME FROM HOUSE-PROPERTY AS NO ENQUIRY WAS CONDUCTED BY THE A.O. ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED IN THE SHOW-CAUSE NOTICE DATED 21.02.2011. (II) WHY SALE OF DEVELOPED PROPERTY IN ACCORDANCE TO AGREEMENT BETWEEN THE ASSESSEE AND M/S ESS GEE REAL ESTATE DEVELOPERS PVT. LTD. MADE ON 20.09.2001 SHALL NOT BE CONSIDERED IN NATURE OF ADVENTURE AND TRADE AS AGAINST PARTLY TREATED LONG TERM CAPITAL GAIN BY THE ASSESSING OFFICER AS DISCUSSED IN THE SHOW-CAUSE NOTICE 21.02.2011. (III) WHY COST OF ACQUISITION OF PLOT SOLD IN UMAID HERITAGE SCHEME AS ON 01.04.1981 SHOULD NOT BE TAKEN AT RS. 8 PER SQUARE FT. FOR THE PURPOSE OF 4 COMPUTATION OF LONG TERM CAPITAL GAIN AGAINST RS. 250 PER SQ. FT. CLAIMED IN THE RETURN OF INCOME. THIS ISSUE IS WITHOUT PREJUDICED TO THE DEPARTMENT STAND THAT THE TRANSACTIONS ARE IN NATURE OF ADVENTURE IN TRADE AND INCOME THEREON IS ASSESSABLE UNDER THE HEAD BUSINESS (VIDE SHOW-CAUSE NOTICE DATED 21.02.2012). (IV) WHY INTEREST ON THE FUNDS PROVIDED TO RELATIVES, FRIENDS AND ASSOCIATE ENTITIES SHOULD NOT BE DISALLOWED IN VIEW OF THE FACT THAT INTEREST WAS PAID ON THE DIVERTED FUND/ADVANCED FUND AND IT WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS (VIDE SHOW - CAUSE NOTICE DATED 21.02.2012). (V) WHY CLAIM OF COMMISSION OF RS. 40,34,980/-- SHOULD NOT BE DISALLOWED IN ACCORDANCE TO THE PROVISIONS OF SECTION 40(A)(IA) AS NO DEDUCTION AT SOURCE WAS MADE ON SUCH PAYMENT OF COMMISSION AS REQUIRED U/S 194H (VIDE SHOW-CAUSE NOTICE DATED 2012). 4. THE REPLY OF THE ASSESSEE, FILED IN RESPONSE TO THE ABOVE SHOW-CAUSE NOTICE(S) IS AS UNDER: 04. IN RESPONSE, SH. K.C. PARASAR, CA AND SH. RAJIV PANDEY CA AND SH. DILIP SINGH ATTENDED AND FILED REPLY AND SUBMIT TED AS UNDER:- 5 (I) THE SUBJECT MATTER OF ASSESSMENT ORDER WA S UNDER APPEAL BEFORE THE CIT(APPEAL), JODHPUR WHO PASSED A N ORDER DATED 26.12.2011 AND THE SAME IS CHALLENGED BEFORE HON'BLE IT AT, JODHPUR BENCH, JODHPUR ON 15.02.2012. HENCE, ORDERED PROPOSED TO BE RENEWE D CANNOT BE REVIEWED U/S 263. (II) THE ASSESSEE COMPANY SUBMITTED DETAILS TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS AND HE HAS APPLIED HIS MIND. THE SCOPE OF REVIEW OF INCOME OR EXPENDITURE CANNOT BE BEYOND TH E ISSUE OF PAPERS SUBMITTED. (III) IN RESPECT OF TREATING SALE OF LAND TO BE BUS INESS INCOME AND ADVENTURE IN NATURE IN TRADE, HE SUBMITTED THAT THIS ISSUE WILL BECOME REDUNDANT AFTER ISSUE OF NOTICE U /S 251 BY CIT(APPEAL), BIKANER IN ASSESSMENT YEAR UNDER CONSIDERATION AND HE HAS ALREADY UPHELD THAT SURPLU S OF PLOTS IS TO BE TAXABLE AS BUSINESS INCOME VIDE ORDE R DATED 26.12.2011. (IV) IN RESPECT OF BUSINESS INCOME FROM SALE OF ROOM, FOOD AND BEVERAGES TO BE BELONGING TO IHCL AND THEREAFTE R INCOME RECEIVED BY THE COMPANY WOULD BE IN NATURE O F INCOME FROM HOUSE PROPERTY, HE SUBMITTED THAT: 6 (A) INCOME DECLARED AS PER RETURN OF INCOME AND AUD ITED BALANCE SHEET SHOWS SALE OF ROOMS, FOOD AND BEVERAG E, OTHER SERVICES ARE OUT OF BILLING MADE BY MARUDHAR HOTELS PVT. LTD. AND ARE BUSINESS RECEIPTS WHICH HAVE BEEN VERIFIED BY AUDITORS. THE INCOME HAS ALSO BEEN VERI FIED BY THE AO AND BOOKS OF ACCOUNTS HAVE BEEN PRODUCED. THERE IS NO RECEIPT IN THE NATURE OF LEASE RENT WHI CH IS PROPOSED BY ID. CIT. ( B) SECTION 2 OF ARTICLE V BEING AGREE MENT BETWEEN MARUDHAR HOTELS PVT. LTD. (ASSESSEE) AND INDIAN HOT EL COMPANY PVT. LTD. (IHCL) REPRODUCED AT PAGE 2 OF NO TICE DT. 21.12.2011 HAS BEEN INTERPRETED AS TO GIVE FULL OPERATING CONTROL AND OCCUPATION EXCLUSI VE POSSESSION OF THE PROPERTY TO INDIAN HOTEL COMPANY LTD. CONTIN UES TO BE OWNER AND IN POSSESSION OF M/S. UMAID BHAWAN PALACE AND HAVE SIMPLY ENGAGED INDIAN HOTEL CO. LTD . FOR PURPOSES OF MANAGEMENT AS THE OWNER COMPANY IS NO T HAVING EXPERTISE AND PERSONNEL TO MANAGE HO TEL OPERATIONS. MANAGEMENT INVOLVES OPERATION O F THE HOTEL AND IT WOULD NOT IN ANY WAY BE CONSTRUED AS LEASING OF THE HOTEL. AT PAGES OF NOTI CE DT. 21.02.2011 THE RECORDING THAT IHCL HAS FULL CONTROL OVER THE PALACE AND ITS ACTIVITIES WITHOUT ANY INTERFERE NCE OF THE OWNERS IS A FINDING WHICH HAS BEEN RECORDED WIT HOUT ANY BASIS. THE BOARD OF DIRECTORS OF THE HOTEL COMP ANY (ASSESSEE) ARE OWNER AND HAVE FULL CONTROL OVER TH E PALACE HOTEL AND ITS ACTIVITIES AND LAY OUT POLICY OF ITS HOTEL BUSINESS AND INDIAN HOTEL COMPANY LTD, IS 7 PROVIDING ASSISTANCE IN OPERATIONAL EXPERTI SE AND MANAGING THE HOTEL. (C) COMPLETE INCOME IS IN NAME OF MARUDHAR HOTEL PVT. LTD. AND EXPENSES ARE INCURRED AND APPROVED BY THE OWNER S OF THE ASSESSEE COMPANY. (D) MHPL HAS THE RIGHT TO HIRE AND TERMINATE EMPL OYEES AND FURTHER PF,ESI AND LABOUR AMENITIES ARE IN NAME OF MHPL. (V) IN RESPECT OF NON-DEDUCTION OF IDS ON PAYMENT O F COMMISSION AND APPLICATION OF PROVISION OF SECTION 40(A)(IA) R.W.S. 194H, IT IS SUBMITTED THAT THE EXP ENDITURE IS NOT IN NATURE OF COMMISSION AND IT IS IN NATURE OF INTERESTS CHARGED BY BANK ON ACCOUNT OF EARLY PAYMENT. THEREF ORE, SUCH EXPENDITURE INCURRED IN NOT COMMISSION AND HEN CE DOES NOT ATTRACT PROVISIONS OF SECTION 194H. IT IS FURTHER SUBMITTED THAT ASSESSEE DOES NOT MAKE PAYMENT BUT S UCH INTEREST IS RECOVERED OUT OF THE PAYMENT MADE BY CR EDIT CARD AGENCY. (VI) IN RESPECT OF DISALLOWANCE OF INTEREST ON ADVA NCES TO SISTER CONCERNS AND ITS DIRECTORS AND THEIR RELA TIVES, IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS EXAMINED D ETAILS IN THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED VIDE LETTER DATED 25.12.2009 WHEREIN IT HAS BEEN SUBMITTED THAT INTEREST 8 FREE ADVANCES ARE NOT OUT OF BORROWED FUND AND THE FUND BORROWED WAS UTILIZED FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE ABOVE, HE SUBMITTED THAT THE ABOVE I SSUES DO NOT CAUSE ANY PREJUDICE TO THE REVENUE AND HENCE PROCEEDINGS U/S 263 MAY PLEASE BE DROPPED. 5. AFTER CONSIDERING THE REPLY OF THE ASSESSEE-COMP ANY THE LD. CIT DROPPED THE SHOW-CAUSE NOTICE IN RESPEC T OF ITEM AT SL. NO. (I) RELATING TO ASSESSABILITY OF IN COME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BUT, IN RES PECT OF THE REMAINING ITEMS I.E. II TO IV, AS ABOVE, THE LD . CIT HAS FOUND THE ORDER NOT ONLY ERRONEOUS BUT ALSO PREJUDI CIAL TO THE INTEREST OF THE REVENUE, AND HAS REVISED THE SA ME U/S 263 OF THE ACT BY SETTING ASIDE IT AND DIRECTING TH E A.O. TO EXAMINE/ENQUIRE INTO THE ABOVE THREE ISSUES AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. THE ASSESSEE-COMPANY IS AGGRIEVED FROM THIS ORDE R OF THE LD. CIT PASSED U/S 263 OF THE ACT, AND THEREFOR E, HAS FILED APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOL LOWING GROUNDS: 9 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE ID. COMMISSIONER OF INCOME TAX, JODHPUR ERRED IN - I) INVOKING PROVISIONS OF SECTION 263 OF IT ACT, 1961 AND IN NOT FOLLOWING PROVISIONS OF LAW. II) IN HOLDING THAT THE ASSESSMENT ORDER DT. 29.12.2009 PASSED US/ 143(3) BY ASSESSING OFFICER TO BE ERRONEOUS IN SO FAR AS IS PREJUDICIAL TO INTEREST OF REVENUE ON ISSUES OF A) TREATING THE INCOME FROM SALE OF LAND TO BE BUSINES S INCOME AND FURTHER DETERMINING THE DEDUCTION OF COS T OF ACQUISITION AS ON 1.4.1981 TO BE RS.8/- PER SQ. YAR D AS PER THE ASSESSMENT ORDER RELATING TO A.Y. 2009-10 ( 1 ST PARA PAGE 8 OF ORDER) AND IN DISREGARDING THAT THE MATTER HAS BEEN CONSIDERED BY ID. CIT (A), JODHPUR BY ISSUING SHOW CAUSE NOTICE FOR ENHANCEMENT OF INCOME U/S 251 OF IT ACT, 1961. B) INTEREST NOT DISALLOWED ON LENDING TO SISTER CON CERNS BESIDES - SH.GAJSINGH AND BALSAMAND HORTICUL TURE AND ANIMAL HUSBANDRY C) NON-DEDUCTION OF TAX AT SOURCE ON ALLEGED COMMI SSION PAID TO CREDIT CARD INSTITUTION AND DISALLOWING IT U/S 40A(IA) R.W.S 194H [PARA 4 PAGE 9 AND 10 OF THE ORD ER] 10 AND IN DISREGARDING THE FACT THAT THE EXPENDITURE I S I THE NATURE OF INTEREST ON DISCOUNTING. D) IN HOLDING THAT THE LEARNED ASSESSING OFFICER HA S PASSED THE ASSESSMENT ORDER U/S 143(3) IN HASTE WIT HOUT PROPER VERIFICATION AND EXAMINATION OF THE RECORDS AND THE EVIDENCES PRODUCED BY THE ASSESSEE. 7. WE HAVE HEARD BOTH SIDES IN DETAIL. WE HAVE ALS O PERUSED CAREFULLY THE ENTIRE EVIDENCES AVAILABLE ON RECORD. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDI TIONS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO -EXIST. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEEN VA STLY EXAMINED AND ANALYZED BY VARIOUS COURTS INCLUDING THAT OF HO NBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT V IDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CALL F OR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EMPOWE RS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A P RIMA FACIE 11 OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFI CER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE CIT IS EMPOWER ED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE MAY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MAY MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN S ECTION 263. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DISCRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISIONAL POWER WITHIN THE BOUNDS OF THE LAW AND H AS TO SATISFY THE NEED OF FAIRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPECT TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTION OF INDIA AS WELL AS IN SECTION 263. AN ORDER CAN BE TREATED AS ERRONEOUS IF IT WAS PASSED IN UTTER IG NORANCE OR IN VIOLATION OF ANY LAW; OR PASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAKING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IS CONTEMPLATED UNDER SECTION 263 IS THE 12 PREJUDICE TO THE INCOME TAX ADMINISTRATION AS A WHO LE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE C ONTEXT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 M AY BE SUMMARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOU S ORDER. 13 (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHI CH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HI S POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SU CH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. 14 (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANAT ION BE A LETTER IN WRITING AND THE ASSESSING OFFICER AL LOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION O F THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN T HAT REGARD. 8. REVERTING TO THE FACTS OF THIS CASE, IN RESPECT OF REMAINING ISSUES RAISED IN THE SHOW-CAUSE NOTICE, IT WAS ARGU ED BY THE LD. A.R., VOCIFEROUSLY THAT THE ASSESSMENT ORDER HAD ME RGED WITH THE LD. CIT(A)S ORDER, BY THE TIME CIT PASSED THE ORDE R U/S 263 OF THE ACT. THE LD. CIT(A) HAS PASSED HIS ORDER ON 26.12. 2011 AND THE SAME HAS BEEN CHALLENGED BEFORE THE ITAT, JODHPUR B ENCH. THEREFORE, IT WAS ARGUED THAT AFTER THE ASSESSMENT ORDER HAD MERGED WITH THE LD. CIT(A)S ORDER, THE LD. CIT(A) HAS NO JURISDICTION TO PASS ORDER U/S 263 OF THE ACT. ON THE OTHER HAN D, THE LD. CIT, 15 D.R. HAS SUPPORTED THE ORDER OF THE LD. CIT PASSED U/S 263 OF THE ACT. 9. AFTER COGITATING RIVAL STANDS, WE HAVE FOUND IT FOR A FACT THAT THE ISSUE REGARDING NATURE OF SALE OF LAN D IF BUSINESS OR LONG TERM CAPITAL GAINS; AND DETERMINAT ION OF COST OF LAND AS ON 1.4.1981, HAS BEEN THE ISSUE IN APPEAL BEFORE THE LD. CIT(A). THE ORDER OF THE A.O. HAS, THUS, MERGED WITH THE ORDER OF THE LD. CIT(A) AND, THEREF ORE, THE ASSUMPTION OF JURISDICTION U/S 263 OF THE ACT I S IMPROPER AND ILLEGAL. THERE IS NO DISPUTE REGARDING THE FACTS OF THIS ISSUE. THE A.O. HAS PASSED ORDER ON 29.12.2009 U/S 143(3) AND THE APPEAL FILED BY THE A SSESSEE WAS DISCUSSED AND DECIDED BY THE LD. CIT(A) VIDE OR DER DATED 26.12.2011. THE COPY OF THE LD. CIT(A)S ORD ER IS ENCLOSED AT PAGES 7 TO 23 OF THE APB AND AT PAGE 18 THE DISPUTE REGARDING NATURE OF INCOME FROM THE SALE OF PLOTS AND THE ADOPTION OF COST AS ON 1.4.1981 ARE FOUND T O BE THE SUBJECT MATTER OF THAT FIRST APPEAL. AND THE S AME ISSUE IS FURTHER PENDING BEFORE THE ITAT. WE ARE C ONSCIOUS 16 OF THE LEGAL POSITION REGARDING MERGER OF ASSESSMEN T ORDER WITH LD. CIT(A)S ORDER. THE LD. CIT CANNOT SIT IN JUDGMENT OVER THE ORDER OF THE LD. CIT(A). THE COST OF ACQU ISITION IN CASE OF BUSINESS PROFIT ON SALE OF LAND AND ON THE ISSUE OF TREATING SALE OF LAND AS BUSINESS INCOME INSTEAD OF LTCG, THE LD. CIT(A) HAD ISSUED A NOTICE DATED 28.3.2011 U/S 251 OF THE ACT AND HE HAS GIVEN HIS FINDING BY ENHANCIN G THE INCOME. IT WAS NOTICED THAT AFTER THE ORDER U/S 26 3 WAS PASSED THE A.O. ISSUED A NOTICE U/S 148 DATED 28.3. 2012 ALSO. THE DECISIONS REGARDING MERGER WHICH ARE REL EVANT HERE ARE: 1. CIT VS. ARBUDA MILL LTD. [1998] 231 ITR 50 [SC] 2. KUNHAYMMED & OTEHRES VS. STATE OF KERALA & ANR [2000] 245 ITR 360 [SC] 3. S. SHANMUGAVEL NADAR VS. STATE OF TAMIL NADU [20 03] 263 ITR 658 [SUPREME COURT] 10. THUS, IN VIEW OF THE SETTLED LEGAL POSITION IN THIS REGARD THE REVISION IN RESPECT OF ISSUE NO. (II) IS SET ASIDE AND THE ASSESSMENT ORDER IS RESTORED. THE LD. CIT HAD NO JURISDICTION AFTER THE LD. CIT(A) HAS DISCUSSED AND DECIDED THIS ISSUE. THE ASSUMPTION OF JURISDICTION BY THE CIT ON 17 THIS ISSUE IS HELD ILLEGAL. WE HAVE REFRAINED FROM DECIDING THE MERITS OF THIS ISSUE AS THE MATTER IS ALREADY P ENDING BEFORE THE BENCH. 11. NEXT IS THE ISSUE OF APPLICATION OF THE PROVISI ONS OF SECTION 194H. WE HAVE FOUND THAT CREDIT-CARD- COMMISSION IS NOT IN FACT A COMMISSION, AS IT IS S O UNDERSTOOD IN COMMON PARLANCE. THIS TYPE OF EXPEND ITURE WAS BEING ALLOWED CONSISTENTLY IN THE PAST. IN OUR CONSIDERED OPINION, THE A.O. HAS VERILY EXAMINED TH E ISSUE ALSO AND THERE IS NO LACK OF ENQUIRY. THE A.O. HAS TAKEN ONE POSSIBLE VIEW ON THE ISSUE WHICH CANNOT BE REPL ACED BY THE VIEW OF THE LD. CIT U/S 263 OF THE ACT. THE A.O. HAS EXAMINED ALL THESE ISSUES AND THE ASSESSEE HAS APTLY EXPLAINED THE SAME. THERE IS A DIFFERENCE BETWEEN LACK OF ENQUIRY AND IT IS ONLY WHEN THERE IS NO ENQUIRY THA T JURISDICTION U/S 263 OF THE ACT CAN BE INVOKED. 12. ACCORDINGLY, IN VIEW OF OUR FORGOING DISCUSSION , WE SET ASIDE THE REVISIONAL ORDER IN RESPECT OF THIS I SSUE ALSO 18 PASSED U/S 263 OF THE ACT AND RESTORE THE ASSESSMEN T ORDER. 13. REGARDING OTHER ISSUES, WE HAVE FOUND THAT THE A.O. HAS MADE REQUISITE AND NECESSARY ENQUIRIES. THE A. O. HAS NOT LACKED ENQUIRY. THE ASSESSEE FILED WRITTEN SUB MISSIONS DATED 25.12.2009 REGARDING DISALLOWANCE OF INTEREST AS FUNDS PROVIDED TO RELATIVES/FRIENDS/ASSOCIATES/ENTI TIES AND NOT UTILIZED FOR BUSINESS PURPOSE. THE ASSESSEE HAS DISCUSSED THE ISSUE OF INTEREST CLAIMED BY IT. IT WAS EXPLAINED THAT THE LENDING TO SISTER CONCERN ETC. W AS NOT OUT OF BORROWED FUNDS AND THEREFORE, INTEREST DESER VES TO BE ALLOWED. COPY OF WRITTEN SUBMISSIONS IS ENCLOSE D AT APB PAGES 36 AND 37. THIS ISSUE WAS EXAMINED BY TH E A.O. AND ALSO MERGED WITH THE ORDER OF THE LD. CIT(A) DA TED 26.12.2012, THE ASSESSMENT ORDER CANNOT BE REVISED ON THIS ISSUE. 19 14. REGARDING CLAIM OF COMMISSION ON CREDIT CARD RS . 40,34,980/- WHICH WAS NOT ALLOWED FOR WANT OF DEDUC TION OF TAX AT SOURCE. IT WAS FOUND THAT THIS PAYMENT I S NOT A COMMISSION AND IS ONLY AN INTEREST CHARGED BY BANK/FINANCIAL INSTITUTION ISSUING THE CREDIT-CARD. SUCH AN EXPENDITURE HAS BEEN ALLOWED IN THE PAST CONSISTENT LY. ACCORDINGLY, THERE IS NO ERROR IN THE FINDING OF TH E A.O. IN ALLOWING THIS EXPENDITURE WHICH WAS BEING CHARGED A ND ALLOWED IN EACH YEAR BY THE A.O. FROM INCEPTION OF THE COMPANY. 15. TO SUM UP, THE APPEAL OF THE ASSESSEE IS ALLOW ED. THE ORDER OF THE LD. CIT IS SET-ASIDE AND THAT OF T HE A.O. IS RESTORED. ORDER PRONOUNCED IN THE COURT ON 14 TH DECEMBER, 2012. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : DECEMBER, 2012 VL/- 20 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) BY ORDER 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR