Ambience Hotel & Resort Pvt. Ltd., New Delhi V. CIT, New Delhi

ITA 2500/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91161 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A MISRA
• Assessee Lawyers: SAMIT GOEL
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR ITA NO. 2500/DEL/2012 ASSESSMENT YEAR: 2008-09 AMBIENCE HOTEL & RESORT PVT. LTD., VS. COMMISSIONER OF INCOME-TAX, C/O RAJ KUMAR & ASSCIATES, CA CENTRAL-II, 4435/7, ANSARI ROAD, DARYAGANJ, NEW DELHI. NEW DELHI. (PAN: AADCA7906K) (APPELLANT) (RESPONDENT) ITA NO. 2501/DEL/2012 ASSESSMENT YEAR: 2008-09 AMBIENCE DEVELOPERS & INFRASTRUCTURE PVT. LTD., VS. C.I.T._II, C/O RAJ KUMAR & ASSCIATES, CA CENTRAL-II, 4435/7, ANSARI ROAD, DARYAGANJ, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) (PAN: AAECA6894P) APPELLANT BY: S/SHRI RK GUP TA & SAMIT GOEL, CA RESPONDENT BY: MS. A. MISRA, C IT(DR) DATE OF HEARING : 09.04.2015 DATE OF PRONOUNCEMENT: 16:06.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER ITA NO.2500/DEL/2012: (AMBIENCE HOTEL & RESORT PVT. LTD.) : ASSESSEE HAS QUESTIONED VALIDITY OF REVISIONAL ORDE R PASSED UNDER 263 OF THE INCOME-TAX ACT, THE 1961 ON THE FOLLOWING GR OUNDS: 2 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, LEARNED CIT(APPEALS) EXCEEDED HIS JURISDICTION IN INVOKING PROVISIONS OF SEC. 263 OF THE INCOME-TAX ACT, 1961 AS THE ORDER OF THE LEARNED AS SESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE APART FROM THAT NO SUCH CIRCUMSTANCE EXIST WHICH MAY JUSTIFY I NVOKING OF SEC. 263 OF THE I.T. ACT. 2. THAT WITHOUT PREJUDICE, LEARNED A.O. DULY APPLIE D HIS MIND LAWFULLY AND LEGALLY ON THE ISSUE OF ASSESSABIITY O F THAT INCOME IN THE HANDS OF THE ASSESSEE ON WHICH TDS OF RS.1,09,32,21 2 HAS BEEN MADE, THEREFORE, IT IS OUTSIDE THE SCOPE OF SEC. 26 3. 3. THAT WITHOUT PREJUDICE, THE DIRECTIONS AND FINDI NGS OF THE LEARNED CIT ARE UNSUSTAINABLE AND CONTRADICTORY SO MUCH SO THAT ON ONE HAND HE HAS DIRECTED THE A.O. TO DECIDE THE ISS UE OF ASSESSABIITY OF INCOME IN THE HANDS OF THE ASSESSEE RELATING TO TDS OF RS.1,09,32,212, AFRESH WHILE ON OTHER HAND HE HAS H ELD THAT THE SAID INCOME IS TAXABLE IN THE HANDS OF ANOTHER ASSESSEE NAMELY M/S. AMBIENCE DEVELOPERS & INFRASTRUCTURE (P) LTD. ITA NO.2501/DEL/2012: (AMBIENCE DEVELOPERS & INFRAS TRUCRURE PVT. LTD. : 2. ASSESSEE HAS QUESTIONED VALIDITY OF REVISIONAL O RDER PASSED UNDER 263 OF THE INCOME-TAX ACT, THE 1961 ON THE FOLLOWING GR OUNDS: 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, LD CIT EXCEEDED HIS JURISDICTION IN INVOKING PROVISIONS OF SEC. 263 OF THE I.T. ACT AS THE ORDER OF THE A.O. IS NEITHER ERRONEOUS NOR PREJUDIC IAL TO THE INTEREST OF 3 REVENUE APART FROM THAT NO SUCH CIRCUMSTANCE EXIST WHICH MAY JUSTIFY INVOKING OF SEC.263 OF THE I.T. ACT. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, LD. A.O. AFTER PROPER APPLICATION OF MIND HAS ACCEPTED THE CLAIM OF THE A SSESSEE THAT INCOME OF LEASE RENTAL FROM LEASING OF RETAIL SPACE IN AMB IENCE MALL, GURGAON IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PRO PERTY, THUS, TOOK ONE OF THE POSSIBLE VIEWS, THEREFORE, THE IMPUGNED ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. HENCE, SETTING ASIDE THIS ISSUE TO THE A.O. FOR EXAMINING THE HEAD OF INCOME UNDER WHICH THIS LEASE RENTAL INCOME COULD BE ASSESSED IS UNSUSTAINABLE. 3.1 THAT UNDER THE FACTS AND CIRCUMSTANCES, THE LD. CIT ERRED IN INVOKING SEC. 263 BY DIRECTING THE A.O. TO EXAMINE THE ISSUE THAT THE LEASE RENTAL INCOMES FROM SHOPS/RETAIL SPACE OWNED BY AMBIENCE HOTELS & RESORTS LTD. SHOULD NOT BE ASSESSED IN THE ASSESSEES HANDS BUT IN THE HANDS OF AMBIENCE HOTELS & RESORTS LTD. AND THEREAFTER IN FURTHER DIRECTING THE A.O., THAT IF IT IS ASSESSABL E IN ASSESSEE HANDS, THEN IT SHOULD BE ASSESSED AS INCOME FROM SUB-LETTI NG AND SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ORDER OF THE LD. A.O. ON THIS ISSUE IS NEITHER ERRONEOUS NOR PRE JUDICIAL TO THE INTEREST OF THE REVENUE. 3.2 THAT UNDER THE FACTS AND CIRCUMSTANCES, THE LD. A.O. AFTER PROPER APPLICATION OF MIND HAS TAKEN A CONSCIOUS DE CISION BY ADOPTING ONE OF THE POSSIBLE VIEWS, THEREFORE, INVOKING OF S EC. 263 IS UNSUSTAINABLE. 4 4. THAT UNDER THE FACTS AND CIRCUMSTANCES, LD. CIT ERRED IN LAW AS WELL AS ON MERITS IN HOLDING THAT THE ACCEPTANCE BY A.O. OF SALE CONSIDERATION OF SHARES OF 6 GROUP PRIVATE LIMITED COMPANIES AT FACE VALUE, AT COST AND AT PAR WITHOUT DECLARING ANY CAP ITAL GAIN IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 3. THE LEARNED AR POINTED OUT THAT THERE IS A TYPOG RAPHICAL MISTAKE IN GROUND NO.2 HEREINABOVE AS IN PLACE OF AMBIENCE MA LL, GURGAON, AMBIENCE HOTEL & RESORT PVT. LTD., NEW DELHI SHOU LD HAVE BEEN TYPED. HE REQUESTED THAT GROUND NO.2 SHOULD BE READ AND UN DERSTOOD ACCORDINGLY. 4. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 5. IN BOTH THE APPEALS, THE VALIDITY OF REVISIONAL ORDER PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 HAS BEEN QU ESTIONED ON SEVERAL GROUNDS. IN THE CASE OF AMBIENCE HOTEL & RESORT LTD ., (IN SHORT HOTEL), THE LEARNED CIT HAS HELD THE ASSESSMENT ORDER AS ER RONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUN D THAT THE ASSESSING OFFICER HAS NOT CARRIED OUT INVESTIGATION, INQUIRY, VERIFICATION ON THE CLAIM OF 5 TDS OF RS.1,09,32,212 WITHOUT OFFERING CORRESPONDIN G INCOME FOR TAXATION. THE LEARNED CIT ALSO NOTED THAT THE HOTEL HAD GOT RS.75 CRORES INTEREST FREE DEPOSITS FROM AMBIENCE DEVELOPERS & INFRASTRUCTURE (P) LTD. (IN SHORT DEVELOPER) & AND IN TURN THE HOTEL GAVE TO THE DE VELOPER COMPANY THE RIGHTS IN SOME RETAILS SPACES IN THE HOTEL PREMISES FOR MANAGING LEASING AND TO RECEIVE AN APPROPRIATE REVENUE AND RECEIPTS FROM SAID SPACE. THE REVENUE RECEIPTS FROM THE SAID SPACES DURING THE YEAR WAS RS.6,27,84,240. THE LEARNED CIT HELD THAT THE PROVISIONS OF SEC. 60 OF THE INCOME-TAX ACT, 1961 ARE APPLICABLE IN THE CASE OF THE HOTEL. THE LEARNE D CIT HELD THAT THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND, VERI FICATION AND INVESTIGATION HAS ACCEPTED THE DECLARED INCOME OF RS.6,27,84,240 AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF AMBIENCE DEVELOPERS & INFRASTRUCTURE (P) LTD. THE LEARNED CIT HOLDING THE ASSESSMENT ORDER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE HAS SET ASI DE THE SAME AND RESTORED IT TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO FRAME THE ASSESSMENT AFRESH ON THE ISSUES AS PER THE PROVISIONS OF INCOM E-TAX ACT, 1961 AND ALLOW PERMISSIBLE DEDUCTIONS AS PER LAW AFTER AFFORDING T HE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING PROPER INQUIRIES AN D VERIFICATIONS. THE LEARNED CIT HAS MENTIONED FURTHER THAT AS THE ABOVE LEASE INCOME IS TAXABLE IN THE HANDS OF AMBIENCE HOTELS & RESORT LTD., THE ASSESSING OFFICER IS 6 DIRECTED TO REDUCE THE SAME FROM AMBIENCE DEVELOPER S AND INFRASTRUCTURE P. LTD. WHERE THE ABOVE INCOME HAS BEEN ERRONEOUSLY AS SESSED. THIS REVISIONAL ORDER HAS BEEN QUESTIONED BY THE ABOVE NAMED TWO AS SESSEES BEFORE THE ITAT ON SEVERAL GROUNDS. 6. IN SUPPORT OF THE GROUNDS, THE LEARNED AR SUBMIT TED THAT THE REVISIONAL ORDERS ARE INVALID ON SIX ASPECTS; I) FIRSTLY, BOTH THE ASSESSMENTS HAVE BEEN COMPLETE D AFTER SEARCH ON 10.10.2007 AFTER CONDUCTING INVESTIGATION AND INQUI RIES BY THE ASSESSING OFFICER. BOTH THE ASSESSEES ARE SISTER/RE LATED CONCERNS. THE HOTELS COMPANY WAS RUNNING A FIVE STAR HOTEL BY THE NAME THE LEELA AT GURGAON. THE DEVELOPERS COMPANY WAS HAVING A MAL L ADJACENT TO HOTELS. HOTEL WAS IN NEED OF FUNDS FOR THE HOTEL PR OJECT AND THE DEVELOPERS WAS HAVING SPARE FUNDS. THUS, BOTH COMPA NIES ENTERED INTO AN AGREEMENT WHEREBY DEVELOPERS GAVE INTEREST FREE REFUNDABLE DEPOSITS OF RS.75 CRORES TO HOTELS. IN TURN, HOTELS COMPANY GAVE TO DEVELOPER COMPANY THE RIGHTS IN SOME RETAIL SPACES IN THE HOTEL PREMISES FOR MANAGING LEASING AND TO RECEIVE AN APP ROPRIATE REVENUE AND RECEIPTS FROM SAID SPACES. THE REVENUE RECEIPTS FROM THE SAID RETAIL SPACES OWNED BY HOTELS WAS RS.6,27,84,240 DU RING THE YEAR WHICH WAS DECLARED BY THE DEVELOPERS AS INCOME FROM HOUSE PROPERTY. THE SAME WAS ASSESSED UNDER SEC. 143(3) OF THE ACT. THE LEARNED AR SUBMITTED THAT IT IS THIS AMOUNT WHICH IS THE SUBJE CT MATTER OF THE REVISIONAL ORDER IN QUESTION IN BOTH THE CASES. HE SUBMITTED THAT BOTH THE ASSESSMENT ORDERS PASSED UNDER SEC. 143(3) ON 3 1.12.2009 ARE BY 7 THE SAME ASSESSING OFFICER WHO HAD EXAMINED BOTH TH E CASES TOGETHER. THE LEARNED AR SUBMITTED THAT THE INCOME WAS DULY DECLARED IN THE STATEMENT OF INCOME OF DEVELOPERS B EING PART OF THEIR TOTAL INCOME OF RS.29,18,07,201 WHICH INCLUDED RS.6 ,27,84,240 IN QUESTION. HE SUBMITTED THAT COMPLETE BOOKS OF ACCOU NT AND OTHER RELEVANT RECORDS WERE EXAMINED. THE ISSUE WAS SPECI FICALLY ADDRESSED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF DEVELOPERS. IN THIS REGARD, HE REFERRED PAGE NO.22 AND 23 OF TH E PAPER BOOK FILED IN THE CASE OF DEVELOPERS I.E. COPY OF THE LETTER A DDRESSED TO THE ASSESSING OFFICER BY THE ASSESSEE ON THE SUBJECT OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. AMBIENCE DEVELOPERS AND INFRASTRUCTURE PVT. LTD. (ADIPL), ASSESSMENT YEAR 2 008-09 PAN AAECA6894P EXPLAINING THE RECEIPT OF RS.75 CRORES AND ABOUT THE ARRANGEMENT WITH ITS SISTER CONCERN. THE LEARNED AR SUBMITTED FURTHER THAT BOTH THE ASSESSMENT ORDERS HAVE BEEN P ASSED AFTER TAKING APPROVAL FROM ADDITIONAL CIT, CENTRAL RANGE-5, NEW DELHI WHO HAD ALSO EXAMINED THE COMPLETE FILE ALONG WITH THE ISSU ES AND APPROVED THE SAME. THUS, THERE IS NO ERROR OF LAW AND FACT W HILE PASSING THE IMPUGNED ASSESSMENT ORDER. HE SUBMITTED THAT EVEN I N THE CASE OF TWO POSSIBLE OPINIONS, SECTION 263 CANNOT BE INVOKED. IT IS NOT THE LAW THAT IF THE BODY OF ASSESSMENT ORDERS DOES NOT TOUC H UPON SOME ISSUES SPECIFICALLY, THEN SECTION 263 CAN BE INVOKED. THE LEARNED AR PLACED RELIANCE ON SEVERAL DECISIONS INCLUDING THE DECISIO NS IN THE CASES OF MALABAR INDUSTRIES CO. LTD. 243 ITR 83 (S.C), SUPPE R CASSETTES INDUSTRIES PVT. LTD. 41 ITD 530 (DEL.), SALORA INTE RNATIONAL LTD. 2 SOT 705 (DEL.), GANPAT RAI VISHNOI 152 TAXMAN 242 (RAJ.) ETC.; 8 SECONDLY, IT IS NECESSARY FOR INVOCATION OF SEC. 26 3 THAT THE ORDER SHOULD BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE I NTEREST OF REVENUE. IN THE PRESENT CASE, BOTH THE ORDERS ARE NEITHER ERRON EOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE, CONTENDED THE LEARNED A R. HE SUBMITTED THAT BOTH THE COMPANIES FALL WITHIN THE SAME TAX BR ACKET OF 30%. HE SUBMITTED THAT IT IS AN ADMITTED FACT THAT RS.6,26, 84,240 HAS BEEN DECLARED AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF DEVELOPERS COMPANY. THE LEARNED CIT HAS OPINED THAT RS.6,27,84 ,240 SHOULD HAVE BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY IN THE HANDS OF HOTELS COMPANY. WHEREVER IT STANDS ASSESSED, THE TA X IMPACT SHALL BE THE SAME. THE OBSERVATION OF THE LEARNED CIT THAT I N ONE CASE, THERE IS A LOSS AND IN OTHER CASE, THERE IS PROFIT, THERE FORE, THIS ALLEGED ARRANGEMENT WILL AFFECT THE TAX AMOUNT IS TOTALLY M ISCONCEIVED. IN CASE OF LOSS IN A COMPANY, THE LOSS IS ALLOWED TO B E CARRIED FORWARD, THEREFORE, IT WILL ULTIMATELY NEUTRALIZE THE TAX IM PACT IN SUBSEQUENT YEARS. THE LEARNED AR ACCORDINGLY SUBMITTED THAT IN SUBSTANCE THE IMPUGNED ASSESSMENT ORDERS ARE NOT PREJUDICIAL TO T HE INTEREST OF REVENUE. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, THE LE ARNED AR SUBMITTED THAT THE LEARNED CIT IN THE ORDER OF DEVE LOPERS HAS HIMSELF ADMITTED THAT IT IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE AND REFERRED THE BEGINNING PARAGRAPH AT PAGE NO. 7 OF T HE REVISIONAL ORDER. HE SUBMITTED FURTHER THAT IN THE ORDER OF HOTELS, T HE LEARNED CIT HAS DIRECTED THE ASSESSING OFFICER TO REDUCE THE SAID I NCOME FROM DEVELOPERS. 9 THIRDLY, BOTH THE ASSESSMENT ORDERS HAVE BEEN FRAME D AFTER APPROVAL OF ADDITIONAL CIT UNDER SEC. 153D OF THE ACT, THUS, THE ISSUES STANDS EXAMINED BY THE ASSESSING OFFICER AND THEREAFTER RE EXAMINED BY THE ADDITIONAL CIT, HENCE, SUCH FINDINGS ARE NOT OPEN F OR DISTURBANCE UNDER SEC. 263 OF THE ACT. IN THIS REGARD, THE LEAR NED AR PLACED RELIANCE ON THE DECISIONS IN THE CASES OF BRIJ BHUS HAN AGGARWAL 2 SOT 811 (AGRA) AND CIT VS. SMT. ANNAPOORNA CHANDER SHEKHAR 204 TAXMAN 158 (KARL.) (MAG.). FOURTHLY, THE LEARNED CIT HAS GIVEN SELF-CONTRADICT ORY FINDINGS AT DIFFERENT PLACES. IN THE ORDER OF HOTELS, THE LEARN ED CIT HAS DIRECTED FOR THE SAID INCOME TO FRAME FRESH ASSESSMENTS AS P ER LAW AND IN THE SAME PARAGRAPH, HE HAS MENTIONED THAT SAID INCOME I S TAXABLE IN THE HANDS OF HOTELS AND HAS DIRECTED TO REDUCE THE SAME FROM DEVELOPERS. IN SUPPORT, THE LEARNED AR HAS REFERRED CONCLUDING PARAGRAPH OF SEC. 263 ORDER IN THE CASE OF HOTELS. THE LEARNED AR SUBMITTED FURTHER THAT THE LEARNED C IT IN THE CASE OF DEVELOPERS HAS DIRECTED THAT IF THE SAID IN COME IS ASSESSED IN THE HANDS OF DEVELOPERS, IT WILL BE ASSESSED AS INC OME FROM SUB- LETTING. IN SUPPORT, HE REFERRED BEGINNING PARAGRAP HS OF PAGE 7 OF SECTION 263 ORDER IN THE CASE OF DEVELOPERS. THE LE ARNED AR POINTED OUT THAT LEARNED CIT FURTHER SAID THAT THE ISSUE UN DER CONSIDERATION IS NOT THAT THE INCOME SHOULD BE TAXED UNDER WHICH PAR TICULAR HEAD BUT THE FACT THAT THE ISSUE HAS NOT BEEN EXAMINED BY TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN SUP PORT, HE REFERRED PAGE NOL. 8, PARA 2 OF SEC. 263 ORDER IN THE CASE O F DEVELOPERS. 10 FIFTHLY, THE LEARNED CIT HAS GIVEN FINDING THAT PRO VISIONS OF SEC. 60 OF THE ACT ARE APPLICABLE IN THE PRESENT CASE WHICH IS NOT THE CORRECT POSITION OF LAW, CONTENDED THE LEARNED AR. HE SUBMI TTED THAT SEC. 60 IS APPLICABLE WHERE THE INCOME ARISES FROM AN ASSET WHICH IS NOT TRANSFERRED, SUCH INCOME SHALL BE TAXED IN THE HAND S OF TRANSFEROR. THE LEARNED CIT HAS FAILED TO APPRECIATE THE FACTS OF T HE PRESENT CASE WHICH ARE TOTALLY DIFFERENT. IN THE PRESENT CASE, D EVELOPER HAS GIVEN RS.75 CRORES INTEREST FREE, REFUNDABLE SECURITY TO HOTEL. IN TURN, THE HOTEL HAS COMPENSATED THE DEVELOPER BY GIVING THE R IGHTS TO EXPLOIT AND ENJOY THE RECEIPTS OF CERTAIN RETAIL SPACES OWN ED BY HOTEL WHICH EXISTS IN THE HOTEL PREMISES. IT IS A PROPER BUSINE SS ASSESSMENT WHEREBY, HOTEL IS ENJOYING RS. 75 CRORES INTEREST F REE FUNDS, THEREFORE, IT IS NOT A CASE, WHERE THE INCOME IS TRANSFERRED W ITHOUT ANY CONSIDERATION. HE SUBMITTED THAT THE DECISION IN TH E CASE OF TARA DEVI AGGARWAL VS. CIT 88 ITR 323 (S.C) RELIED UPON BY THE LEARNED CIT IS NOT APPLICABLE. IN THAT CASE, INCOME WAS TRANSFE RRED IN ORDER TO ASSIST SOMEONE ELSE WHO WOULD HAVE BEEN ASSESSED TO A LARGER AMOUNT. SECTION 60 IS APPLICABLE WHEN THE ASSET IS NOT TRAN SFERRED. THIS NO TRANSFER OF ASSETS DOES NOT MEAN THAT TO COME OUT OF SEC. 60, ASSETS SHOULD BE PERMANENTLY TRANSFERRED. HE POINTED OUT T HAT IN THE PRESENT CASE, THERE IS TRANSFER OF ASSETS BY TRANSFERRING T HE RIGHTS OF EXPLOITING THE SPECIFIED SPACE OWNED BY HOTEL TO THE DEVELOPER S AGAINST WHICH RS.75 CRORES WAS GIVEN. TRANSFER OF RIGHTS IN SAID RETAIL SPACES IS A TRANSFER. RIGHT IS ALSO AS ASSET. THUS, IT IS NOT A CASE OF NO TRANSFER OF ASSET. HENCE, SECTION 60 IS NOT APPLICABLE. IN SUP PORT, HE PLACED 11 RELIANCE ON THE DECISION IN THE CASE OF ITO VS. NAL IN BHAI M. SHAH 93 TTJ 107 (AHM.). SIXTHLY, THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED FOR AN OPINION THAT THE AMOUNT SHOULD BE ASSESSED AS INCOME OF HOTELS A ND UNDER THE HEAD HOUSE PROPERTY. THE LEARNED AR SUBMITTED THAT NO INCOME HAS BEEN EARNED, ACCRUED TO HOTEL, THEREFORE, IT CANNOT BE A SSESSED AS INCOME OF HOTEL. HE SUBMITTED THAT INCOME HAS BEEN EARNED/ACC RUED TO THE DEVELOPER, THEREFORE, IT IS THE INCOME OF DEVELOPER ONLY. THE INTEREST FREE ADVANCE OF RS.75 CRORES TANTAMOUNT TO EARNING OF DEEMED INCOME BY HOTEL BY WAY OF SAVING INTEREST OF RS.75 CRORES, IF THE AMOUNT WOULD HAVE BEEN BORROWED FROM BANK/OTHER SOURCES AN D IF CALCULATED @ 1% PER MONTH, IT WILL BE NEARING TO THE AMOUNT OF INCOME EARNED BY DEVELOPERS FROM RETAIL SPACES. THUS, THE LEARNED CIT WAS INCORRECT IN GIVING THE FINDING THE RS. 6,27,84,240 SHOULD BE ASSESSED AS INCOME OF HOTELS. 7. IN SUPPORT OF GROUND NO.4 OF THE APPEAL PREFERRE D BY DEVELOPERS, THE LEARNED AR SUBMITTED THAT SHARES OF SIX COMPANIES W ERE HELD BY THE DEVELOPERS. THE DEVELOPER WAS HAVING SUBSTANTIAL SH ARE HOLDING IN THOSE COMPANIES. ALL THE SHARES WERE TRANSFERRED DURING T HE YEAR AT FACE VALUE/COST, HENCE NO CAPITAL GAIN WAS DECLARED. THE LEARNED CI T HAS HELD THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE SALE VALUE A ND ALSO WITH REFERENCE TO SEC. 40A(2)(B) OF THE ACT. THE LEARNED CIT WAS THUS NOT JUSTIFIED IN GIVING 12 DIRECTION TO THE ASSESSING OFFICER TO EXAMINE THE I SSUE OF CAPITAL GAIN ON TRANSFER OF SHARES OF SIX COMPANIES UNDER SEC. 40A( 2)(B) OF THE ACT. HE SUBMITTED FURTHER THAT IN THE ASSESSMENT FRAMED UND ER SEC. 143(3)/263, NO ADDITION HAS BEEN MADE ON THIS ISSUE. WITHOUT PREJU DICE, HE CONTENDED THAT THIS ASPECT HAS BEEN FULLY EXAMINED BY THE ASSESSIN G OFFICER DURING ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS BY THE LEARNED AD DITIONAL CIT WHILE GIVING APPROVAL. 8. THE LEARNED AR ALSO INFORMED THAT CONSEQUENTIAL ASSESSMENTS HAVE ALREADY BEEN FRAMED VIDE ORDERS DATED 28.3.2013 WHE REIN THE ASSESSING OFFICER HAS ASSESSED RS.627,84,240 ON SUBSTANTIVE B ASIS IN THE HANDS OF HOTEL AS INCOME FROM HOUSE PROPERTY AND ON PROTECTIVE BAS IS IN THE HANDS OF DEVELOPERS. THE LEARNED CIT(APPEALS) HAS CONFIRMED THE SUBSTANTIVE ADDITION IN THE HANDS OF HOTEL AND DELETED THE PROT ECTIVE ADDITION IN THE HANDS OF DEVELOPERS. 9. THE LEARNED CIT(DR) ON THE OTHER HAND TRIED TO J USTIFY THE REVISIONAL ORDERS IMPUGNED WITH THE SUBMISSION THAT THE ASSESS ING OFFICER HAD FAILED TO EXAMINE THE ISSUE INVOLVED REGARDING THE RECEIPT OF RS.6,27,84,240 DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE PASSING THE ORIGINAL ASSESSMENT 13 ORDER, THE LEARNED CIT WAS JUSTIFIED IN INVOKING TH E PROVISIONS LAID DOWN UNDER SEC. 263 OF THE ACT. HE SUBMITTED THAT INCO ME HAS TO BE ASSESSED IN THE CORRECT HANDS. THE PROVISIONS LAID DOWN UNDER S EC. 60 OF THE ACT CANNOT BE COMPARED WITH SEC. 64 OF THE ACT SINCE BOTH ARE HAVING DIFFERENT PROPOSITION. SHE PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF SMT. TARA DEVI AGGARWAL VS. CIT - 8 8 ITR 323 (S.C). 10. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT RECEIPT OF RS.6,27,84,240 IS THE SUBJECT MATTER OF THE ORDERS PASSED UNDER SEC. 263 OF THE ACT IN BOTH THE CASES. THE RELATED FACTS ARE TH AT THE HOTEL WAS IN NEED OF FUNDS FOR ITS HOTEL PROJECT. THE DEVELOPER WAS HAVI NG SPARE FUNDS. THUS, BOTH THE COMPANIES ENTERED INTO AN AGREEMENT WHEREBY THE DEVELOPER GAVE INTEREST FREE REFUNDABLE DEPOSITS OF RS.75 CRORES T O HOTELS. IN TURN, HOTELS GAVE TO THE DEVELOPERS THE RIGHT IN SOME RETAIL SPA CES IN THE HOTEL PREMISES FOR MANAGING LEASING AND TO RECEIVE AN APPROPRIATE REVENUE AND RECEIPTS FROM SAID SPACES. RS.6,27,84,240 WAS DECLARED AS IN COME FROM HOUSE PROPERTY BY THE DEVELOPERS IN THEIR HANDS. THE LEAR NED CIT IS OF THE VIEW THAT THE SAID INCOME FROM HOUSE PROPERTY SHOULD HAV E BEEN ASSESSED IN THE HANDS OF HOTELS. NOW, THE ISSUE BEFORE US UNDER THE BACKGROUND OF THE PROVISIONS LAID DOWN UNDER SEC. 263 OF THE INCOME-T AX ACT, 1961 IS AS TO 14 WHETHER THE ASSESSMENT ORDERS ON THE ISSUE IS ERRON EOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. IF THE ASS ESSING OFFICER HAS FAILED TO VERIFY, EXAMINE AND INQUIRE DURING THE ASSESSMENT P ROCEEDINGS THE VALIDITY OF THE CLAIMED INCOME, THEN CERTAINLY THE ASSESSMEN T ORDER IS ERRONEOUS. THE ASSESSMENT ORDER IS ALSO HELD ERRONEOUS WHEN THE FI NDING OF THE ASSESSING OFFICER IS CONTRARY TO THE LAW. IF AN ASSESSMENT OR DER IS ERRONEOUS THEN THE SECOND STEP WOULD BE TO EXAMINE AS TO WHETHER THE S AID ASSESSMENT ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS NOW A ESTABLISHED PROPOSITION OF LAW THAT FOR INVOCATION OF THE PROVI SIONS LAID DOWN UNDER SEC. 263 OF THE ACT, BOTH THE INGREDIENTS I.E. FIRSTLY T HE ASSESSMENT ORDER MUST BE ERRONEOUS AND SECONDLY IT MUST BE PREJUDICIAL TO TH E INTEREST OF REVENUE ARE TO BE EXAMINED. IT APPEARS FROM THE ASSESSMENT ORDERS THAT TAXABILITY OF RS.6,27,84,240 IN THE PROPER HAND IN VIEW OF THE PR OVISIONS OF SECTION 60 OF THE INCOME-TAX ACT, 1961 AS WELL AS SECTION 53A OF THE TRANSFER OF THE PROPERTY ACT, HAS NOT BEEN EXAMINED BY THE ASSESSIN G OFFICER AS THE ISSUE WAS LINKED TO BOTH THE ASSESSEES AS IT WAS TO BE TA XED IN ONE HAND AND EFFECT THEREOF WAS TO BE GIVEN IN THE OTHER HAND. THUS, IT CAN BE SAID THAT IN ABSENCE OF EXAMINATION/INQUIRY OF THE ABOVE ASPECT THE ASSE SSMENT ORDERS ARE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. TO THIS EXTENT THE REVISIONAL ORDERS IN QUESTION ARE UPHELD. THE GROUN D NOS. 1 AND 2 IN THE CASE 15 OF AMBIENCE HOTEL & RESORTS (P) LTD. AND GROUND NOS . 1, 2, 3.2 ARE THUS REJECTED. WE, HOWEVER, ARE OF THE VIEW THAT WHEN THE LEARNED CIT WAS SETTING ASIDE THE MATTER TO THE FILE OF THE A.O. FOR FRAMIN G THE ASSESSMENT ORDERS AFRESH AS PER THE LAW AFTER EXAMINING/MAKING INQUI RY ON THE ISSUE, HE WAS NOT JUSTIFIED AND A CONTRADICTION IN HIS STAND IN D IRECTING THE ASSESSING OFFICER TO TAX THE LEASE INCOME IN THE HANDS OF THE AMBIENCE HOTEL & RESORTS AND REDUCE THE SAME FROM AMBIENCE DEVELOPER & INFRASTRUCTURE PVT., ESPECIALLY WHEN KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND IN ABSENCE OF EXAMINATION/MAKING IN QUIRY BY THE A.O., IT WAS A DEBATABLE ISSUE AS TO IN WHOSE HAND AND UNDER WHAT HEAD THE LEASE INCOME IS TO BE TAXED. FOR A READY REFERENCE, THE RELEVANT PORTION OF THE REVISIONAL ORDER IN THE CASE OF AMBIENCE HOTEL & RE SORTS LTD. AFFECTING THE TAXABILITY OF AMBIENCE DEVELOPERS & INFRA-STRUCTURE (P) LTD. AS WELL, IS BEING REPRODUCED AS UNDER: I, THUS, HOLD THAT THE ASSESSMENT ORDER PASSED IN T HE CASE OF THE ASSESSEE BY THE ASSESSING OFFICER, CENTRAL CIRCLE-1 6, NEW DELHI ON 31.12.2009 U/S. 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, THE SAID ORDER IS SET ASIDE ON THE ABOVE ISSUE AND THE ASSESSMENT PROCEEDINGS ON THE ISSUE ARE RESTORE D BACK TO THE FILE OF THE ASSESSING OFFICER. THE A.O. IS DIRECTED TO F RAME THE ASSESSMENT AFRESH ON THIS ISSUE AS PER THE PROVISIONS OF THE I NCOME-TAX ACT AND ALLOW PERMISSIBLE DEDUCTIONS AS PER LAW, AFTER AFFO RDING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING PROP ER INQUIRIES AND VERIFICATIONS. FURTHER, AS THE ABOVE LEASE INCOME IS TAXABLE IN TH E 16 HANDS OF THE ASSESSEE I.E. M/S. AMBIENCE HOTEL & RE SORTS LTD., THE A.O. IS DIRECTED TO REDUCE THE SAME FROM M/S. AMBIE NCE DEVELOPERS & INFRASTRUCTURE P. LTD. WHERE THE ABOVE INCOME HAS ERRONEOUSLY ASSESSED . 11. THE ABOVE FINDINGS OF LEARNED CIT TYPED IN BO LD TO TAX THE LEASE INCOME IN THE HANDS OF M/S. AMBIENCE HOTEL & RESORT S LTD., AND DIRECTION TO THE ASSESSING OFFICER TO REDUCE THE SAME INCOME FROM M/S. AMBIENCE DEVELOPERS & INFRA-STRUCTURE (P) LTD. ARE THUS HELD INVALID AND ARE MODIFIED BY DELETING THE SAME. GROUND NOS. 3 IN THE APPEAL OF AMBIENCE HOTEL & RESORTS (P) LTD. AND GROUND NO.3.1 IN THE APPEAL OF AMBIENCE DEVELOPERS & INFRA-STRUCTURES (P) LTD. ARE ALLOWED. 11. IN RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 .06.2015 SD/- SD/- ( T.S. KAPOOR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/06/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 17 DATE DRAFT DICTATED ON COMPUTER 16.06.2015 DRAFT PLACED BEFORE AUTHOR 16.06.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 16.06.2015 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 17.06.2015 KEPT FOR PRONOUNCEMENT ON 16.06.2015 FILE SENT TO THE BENCH CLERK 17.06.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.