SHIMNIT KIWALITE INDUSTRIES P. LTD, MUMBAI V. CIT 3, MUMBAI

ITA 3010/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87948 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 30-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Business income; Earning of tax free income; Deemed to accrue or arise in india; Valuation report; Prejudicial to interest
• Section: 143(3); 142(1); 115JB; 263

Judgement Text

, , , , , ,, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.3010/MUM/2014 ASSESSMENT YEAR: 2009-10 M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD., 8 TH FLOOR, REGENT CHAMBERS, NARIMAN POINT, MUMBAI - 400021 ! ! ! ! / VS. THE COMMISSIONER OF INCOME TAX-3, AAYAKAR BHAVAN, MUMBAI-400020 ( ! $% /ASSESSEE) ( & / REVENUE) P.A. NO.AAECS8610B ! $% ' ( ' ( ' ( ' ( / // / ASSESSEE BY SHRI VIJAY MEHTA & ' ( ' ( ' ( ' ( / REVENUE BY : SHRI MANJUNATHA SWAMY CIT-DR ! ' %) / // / DATE OF HEARING : 07/01/2015 *+, ' %) / DATE OF PRONOUNCEMENT : 16 /01/2015 - - - - / / / / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : AGGRIEVED BY THE IMPUGNED ORDER DATED 10/03/2014 OF THE LD. COMMISSIONER OF INCOME TAX, MUMBAI, INVOKING RE VISIONAL JURISDICTION U/S 263 OF THE INCOME TAX ACT, 1961, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL, CHALLENGING SUCH INVOCATION ON THE GROUND THAT THE LD. COMMISSIONER ERRED IN HOLDI NG THAT THE AMOUNT SO RECEIVED IS NOTHING BUT A CONSIDERATION F OR M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 2 RELINQUISHMENT OF DEVELOPMENT RIGHT OF THE LAND AND THE REASON ASSIGNED BY HIM, FOR DOING SO, ARE CONTRARY TO THE FACTS. 2. DURING HEARING OF THIS APPEAL, SHRI VIJAY MEHTA, LD. COUNSEL FOR THE ASSESSEE ADVANCED HIS ARGUMENTS WHICH ARE B ROADLY IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTIN G THAT NEITHER THE ASSESSMENT ORDER IS ERRONEOUS NOR PREJUDICIAL T O THE INTEREST OF REVENUE, BY FURTHER SUBMITTING THAT REVISIONAL J URISDICTION WAS INVOKED WITHOUT APPRECIATING THE FACTS SPECIALLY WH EN THE ASSESSMENT ORDER WAS FRAMED AFTER MAKING DUE/DETAIL ED ENQUIRIES, EXAMINATION OF FACTS, APPLYING PROVISION OF THE LAW AND THEN COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT . SETTING ASIDE OF ASSESSMENT AND DIRECTING TO MAKE FRESH ASS ESSMENT WITH REGARD TO THE ISSUE OF SUM OF RS.50 CRORES TO BE IN CLUDED ON ACCOUNT OF ADVANCES RECEIVED FROM THREE PARTIES FOR JOINT DEVELOPMENT OF LAND, THUS, REASON ASSIGNED BY THE L D. CIT ARE CONTRARY TO FACTS AND RULES. IT WAS ALSO PLEADED T HAT THE LD. COMMISSIONER FAILED TO APPRECIATE THAT THE LD. ASSE SSING OFFICER RIGHTLY CONSIDERED THE ADVANCES RECEIVED AS CONTRIB UTION FOR JOINT DEVELOPMENT OF THE LAND, AS PER THE AGREED TERMS OF MOU, RECEIVED FOR RELINQUISHMENT OF DEVELOPMENT OF RIGHT S WHICH IS IN ACCORDANCE WITH LAW. IT WAS EXPLAINED THAT THE AGR EED TERMS AND CONDITIONS, DUE TO CERTAIN UNAVOIDABLE CIRCUMSTANCE S, COULD NOT MATERLISE AND THE AMOUNT WAS SHOWN AS ADVANCES. IT WAS ALSO CONTENDED THAT THE PARTIES FILED SUIT AGAINST THE A SSESSEE FOR RECOVERY OF ADVANCE MONEY GIVEN TO THE ASSESSEE IN THE COURT AND ALL THESE FACTS WERE DULY FILED BEFORE THE ASSE SSING OFFICER. THE CRUX OF ARGUMENT IS THAT AFTER SCRUTINIZING/ EX AMINING THE DETAILS, AFTER MAKING FULL ENQUIRIES AND ON DETAILE D EXAMINATION OF FACTS, THE ASSESSMENT ORDER WAS PASSED BY THE AS SESSING M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 3 OFFICER. OUR ATTENTION WAS INVITED TO PAGES 10 OF THE PAPER BOOK (MOU), PAGE 11(ADVANCE FOR EXCLUSIVE RIGHTS), PAGE 12 (CONFIDENTIAL CLAUSE) AND OTHER PAGES LIKE 16, 19,2 1, 28, NOTE 11 AT PAGE 29, DETAILED NOTICES ISSUED TO THE ASSESSEE BY THE ASSESSING OFFICER (PAGE 34), REPLY OF THE ASSESSEE TO THE ASSESSING OFFICER (PAGE 35), PAGE 37, 38,39,(NOTICE BY THE AS SESSING OFFICER) OF THE PAPER BOOK. IT WAS EXPLAINED THAT EVEN THE CONCERNED PARTIES TREATED THE AMOUNTS AS BUSINESS ADVANCES. OUR ATTENTION WAS FURTHER INVITED TO PAGES 40 TO 45 OF THE PAPER BOOK. MR. MEHTA ALSO INVITED OUR ATTENTION TOWARDS LEGAL NOTICE SENT TO THE ASSESSEE BY THE PARTIES AND FILED SUIT FOR RECO VERY OF THE AMOUNT/BUSINESS ADVANCES. THE LD. COUNSEL INVITED OUR ATTENTION THAT THE ASSESSEE DULY RESPONDED TO THE N OTICES OF THE CONCERNED PARTIES BY ASSERTING THAT MATTER WILL BE SETTLED BY COURT AND THE ASSESSEE IS NOT DENYING REGARDING PAY MENTS MADE AS BUSINESS ADVANCES. STRONG PLEA WAS RAISED THAT BOTH THE PARTIES ARE TREATING THE AMOUNTS AS BUSINESS ADVANC ES. FROM THE MOU, IT WAS EXPLAINED THAT THE MONEY WAS SUBJEC T TO FINAL AGREEMENT AND THE OBSERVATION OF THE LD. CIT THAT M IND WAS NOT APPLIED BY THE ASSESSING OFFICER IS FACTUALLY INCOR RECT AS THE TRANSACTION WAS RIGHTLY LOOKED INTO BY THE ASSESSIN G OFFICER. PLEA WAS ALSO RAISED THAT NO INCOME AROSE OUT OF THE TRA NSACTION AND THE LD. CIT TREATING IT DIFFERENTLY BY TAKING A DIF FERENT VIEW. OUR ATTENTION WAS ALSO INVITED TO PARA 5 RAISING THE CO NTROVERSY IN THE IMPUGNED ORDER. IT WAS EXPLAINED THAT THE AMOUNT O F RS.50 CRORES WAS NOT PUT TO USE, AS PER MOU, AND IF THE M ONEY IS NOT RETURNED, IT WILL BE DEALT WITH AS PER SECTION 51 O F THE ACT AND SECTION 5 HAS NO APPLICATION AT ALL. OUR ATTENTION WAS INVITED TO THE SHOW CAUSE NOTICE WHERE EVEN THERE IS NO WHISPE R OF SECTION 51, THEREFORE, THE JURISDICTION OF THE LD. COMMISSI ONER IS CONFINED M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 4 TO ISSUE RAISED IN SHOW CAUSE NOTICE. RELIANCE WAS PLACED UPON THE DECISION IN CIT VS MAX INDIA LTD. (295 ITR 282) BY CONTENDING THAT VIEW OF THE LD. COMMISSIONER IS NOT SUSTAINABLE. BROADLY, IT WAS CONTENDED THAT THE VIEW TAKEN BY TH E LD. COMMISSIONER IS CONTRARY TO SECTION 5 AND 2(24) OF THE ACT AND UNLESS THE LD. COMMISSIONER COMES TO A DEFINITE CON CLUSION THE ORDER CANNOT BE TERMED AS ERRONEOUS/PREJUDICIAL. 2.1. ON THE OTHER HAND, SHRI MANJUNATHA SWAMY, LD. CIT-DR, DEFENDED THE INVOCATION OF REVISIONAL JURISDICTION BY THE LD. COMMISSIONER BY CONTENDING THAT EVEN TILL TODAY THE MONEY HAS NOT BEEN RETURNED TO THE PARTIES, THE ASSESSING OFF ICER DID NOT APPLY HIS MIND WHILE FRAMING ASSESSMENT U/S 143(3) OF THE ACT, THEREFORE, IT IS AN ERRONEOUS ORDER. IT WAS ALSO C ONTENDED THAT EVEN THE MOU IS SILENT REGARDING RETURN OF MONEY. IT WAS PLEADED THAT NECESSARY ENQUIRIES WERE NOT MADE BY T HE ASSESSING OFFICER, THEREFORE, THE ASSESSMENT SO FRAMED IS ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN K IWALITE REFLECTIVE SHEETS, FILED ITS RETURN BY WAY OF E-FIL ING, DECLARING NIL INCOME, AFTER SETTING OFF OF BROUGHT FORWARD LOSS O F RS.27,56,495/- ON 29/09/2009, WHICH WAS PROCESSED U /S 143(1) OF THE INCOME TAX ACT, 1961( HEREINAFTER THE ACT). THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, CONSEQUENTL Y, NOTICE U/S 142(1) OF THE ACT ALONG WITH DETAILED QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. AFTER THE CHANGE OF INCUMBENT, FRESH STATUTORY NOTICE WAS AGAIN ISSUED ON 06/06/2011 AND SERVED UP ON THE ASSESSEE. THE ASSESSEE ATTENDED THE PROCEEDINGS FR OM TIME TO M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 5 TIME AND FILED THE DETAILS CALLED FOR BY THE ASSESS ING OFFICER. FROM THE ACCOUNTS OF THE ASSESSEE IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE SHOWED SHORT TE RM CAPITAL LOSS OF RS.17,88,101/- AND WHILE COMPUTING THE BUSI NESS INCOME, THE ASSESSEE DID NOT ADD BACK THE SHORT TER M CAPITAL LOSS, THEREFORE, VIDE QUESTIONNAIRE DATED 08/11/201 1, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE CLAIMED SHORT TERM CAPITAL LOSS MAY NOT BE ADDED TO THE BUSINESS INCOM E OF THE ASSESSEE. THE RELEVANT PORTION OF THE NOTICE ISSUED U/S 142(1) OF THE ACT (PAGE-34 OF THE PAPER BOOK) IS REPRODUCED H EREUNDER FOR READY REFERENCE:- NOTICE UNDER SECTION 142(1) OF THE INCOME-TAX ACT, 1961 TO THE PRINCIPAL OFFICER M/S SHIMNIT KIWALITE IND. PVT. LTD. 8TH FLOOR, REGENT CHAMBERS NARIMNA POINT MUMBAI - 400 021 SIR, IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS FOR T HE ASSESSMENT YEAR 2009-10 YOU ARE REQUIRED TO FURNISH IN WRITING AND VERIFIED IN THE PRESCRIBED MANNER INFORMATION B EFORE ME AT THE ABOVE ADDRESS ON 17TH NOVEMBER, 2011 AT 10.30 A.M. ON THE POINTS OR MATTERS SPECIFIED HEREUNDER.- . 2. IF YOU WISH TO BE REPRESENTED BY AN AUTHORISED R EPRESENTATIVE FURNISH A LETTER OF AUTHORITY IN THE PRESCRIBED FOR M. 3. PLEASE FILE TAX AUDIT REPORT IN FORM NO.3GA AND 3CB PREPARED UJ S.44AE OF THE INCOME- TAX ACT, 1961 FOR THE YEAR EN DING 31-03- 2009. ALSO FILE A DETAILED NOTE IN RESPECT OF NATUR E OF BUSINESS CARRIED OUT BY YOU . 4. PLEASE FURNISH THE YEAR-WISE DECLARED AND ASSESS ED LOSSES SHOWN IN THE COMPUTATION OF INCOME WITH NECESSARY S UPPORTING EVIDENCES, NAMELY COPIES OF ASSESSMENT ORDERS OF AL L THE RESPECTIVE YEARS, IF ANY. 5. IN THE ACCOUNTS YOU HAVE SHOWN SHORT TERM CAPITA L LOSS OF RS.17,88,LOLJ -, HOWEVER, WHILE COMPUTING THE BUSIN ESS INCOME THE M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 6 SAID LOSSES HAVE NOT BEEN ADDED BACK. IN THIS REGAR D YOU ARE ASKED TO EXPLAIN AS TO WHY THE SHORT TERM CAPITA LO SS SHOULD NOT BE ADDED BACK TO THE BUSINESS INCOME. ALSO FILE THE DIVIDEND STRIPING AS PER PROVISIONS OF SECTION 94(7) OF THE ACT. 6. HORN THE ACCOUNTS IT IS SEEN THAT SHARE CAPITAL ISSUED ALONG WITH PREMIUM. IN THIS REGARD PLEASE FILE FORM NO.2 FOR A LLOTMENT OF SHARES ALONG WITH BOARD RESOLUTION. ALSO FILE FORM FCGRB FILED WITH RBI ALONGWITH ALL ANNEXURES REQUIRED THEREIN. PLEASE ALSO FILE THE APPROVAL RECEIVED FROM RBI IN THIS REGARD. ALSO STATE THE BASIS FOR WORKING OF PREMIUM. 7. YOU HAVE SHOWN RECEIPT OF LOANS FROM THE FOLLOW ING PARTIES: I. AMAZON ENTERPRISES PVT. LTD. RS.25,OO,OO,OOO/- II. HIMANDARI ENTERPISES PVT. LTD. RS. 10,OO,OO,O OO/- LLL. PUSTI ENTERPRISES PVT. LTD. RS.15,OO,OO,OOO /- IN THIS REGARD PLEASE FILE COPY OF RETURN ALONG WIT H AUDITED ACCOUNTS SPECIFYING THE SHARE HOLDING PATTERN OF TH E SAID ENTITIES, LOAN CONFIRMATION WITH COPY OF BANK STATEMENT HIGHL IGHTING THE SAID LOAN TRANSACTIONS. 8. PLEASE FILE QUANTITY-WISE, ITEM J VALUE-WISE INV ENTORIES OF OPENING AND CLOSING STOCK. 9. PLEASE FILE THE DETAILS OF ADVANCES RECEIVABLE I N CASH OR IN KIND, SPECIFYING THE NAME OF THE PARTY, PURPOSE, CONTRACT AGREEMENT IF ANY OF RS.2,46,72,586/ -. ALSO FILE DETAILS OF OTHE R DEPOSITS OF RS.1,17,30,LOO/-. 10. PLEASE FILE PARTY-WISE DETAILS OF ADVANCES FROM CUSTOMERS MENTIONING THE COMPLETE POST ADDRESS. 11. PLEASE FILE THE PARTY-WISE PURCHASES AND SALES WHOSE VALUE EXCEEDING RS.10 LACS. 12. COMPLETE DETAILS OF ADMINISTRATIVE EXPENSES WIT H NECESSARY SUPPORTING, SPECIFYING THE AMOUNT OF TDS MADE WHERE VER APPLICABLE. PLEASE ALSO FILE THE DETAILS OF FRESH E XPENSES CLAIMED FOR THE YEAR UNDER CONSIDERATION WITH PROPER JUSTIFICAT ION. 13 PLEASE FILE THE COPY OF TDS RETURN ALONG WITH AL L ANNEXURES. 14. PLEASE FILE THE WORKING OF ATTRIBUTABLE EXPENSE S FOR EXEMPT INCOME AS PER RULE 8D OF THE INCOME-TAX RULES 1962. 15. KINDLY NOTE THAT NON-COMPLIANCE LA THE NOTICE M AY ATTRACT PENALTY UJS.271(1)(B) OF THE IT. ACT, 1961 OF RS.10 ,OOO/ - FOR EACH SUCH FAILURE. M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 7 2.3. IN RESPONSE TO THE ABOVE, THE ASSESSEE, VIDE R EPLY DATED 17/11/2011, ADDRESSED TO THE ASSESSING OFFICER, FIL ED THE NECESSARY DETAILS. THE RELEVANT PORTION OF THE REP LY (PAGES 35-38 OF THE PAPER BOOK IS REPRODUCED HEREUNDER:- DATE: 17/11/2011 ASSTT. COMM. OF INCOME TAX CIRCLE3 (L) R.NO. 609, 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI- 400020 REF: NOTICE U/S 142(1) OF THE INCOME TAX ACT, 1961 SUB: SUBMISSION OF DETAILS PAN:AAECS8610B PLEASE FIND ENCLOSED HEREWITH THE FOLLOWING DETAILS AS DESIRED BY YOUR HONOUR. 1) LETTER OF AUTHORITY 2) STATEMENT OF YEAR WISE DECLARED LOSSES AND ASSESSED LOSSES ALONG WITH ASSESSMENT ORDERS FOR THE A.Y 2006-07, 2 007-08 MARKED AS ANNEXURE- 1 3) THE SHORT TERM CAPITAL LOSS OF RS. 17,88,101/- WAS WRONGLY NOT ADDED BACK TO BUSINESS INCOME AND NOT SHOWN SEPARATELY AS SHORT TERM CAPITAL LOSS AND TO BE CAR RIED FORWARD TO BE SET- OFF IN SUBSEQUENT YEARS AGAINST THE CAPITAL GAIN INCOME AND MISTAKE HAS BEEN NOW RECTIFIED AND PLEASES FIND ATTACHED HEREWITH THE REVISED COMPUTATION OF T OTAL INCOME MARKED AS ANNEXURE-2 4) COPY OF FORM 2 FILED WITH THE ROC FOR ALLOTMENT OF 3,50,000 EQUITY SHARES DURING THE YEAR AND COPY OF FC-GPR AL ONG WITH VALUATION REPORT FILED WITH RBI MARKED AS ANNEXURE- 3 5) COPY OF MOU ENTERED WITH M/S AMAZON ENTERPRISES PVT . LTD, M/S HIMANDARI ENTERPRISES PVT. LTD. AND M/S PUSTI ENTERPRISES PVT. LTD. AND COPY OF CHEQUE RECEIVED F ORM THEM AND BANK STATEMENT INDICATING THE SAID TRANSACTION MARKED AS ANNEXURE-4 6) STATEMENT OF ITEM WISE, QUANTITY WISE AND VALUE WISE INVENTORY OF OPENING AND CLOSING STOCK MARKED AS AN NEXURE-5 M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 8 7) STATEMENT OF ADVANCE RECOVERABLE IN CASH OR KIND , DETAILS OF OTHER ADVANCE AND DETAILS OF ADVANCE RECEIVED FROM CUSTOMERS MARKED AS ANNEXURE-6 8) STATEMENT OF SALES AN PURCHASE EXCEEDING RS. 10 LAKHS MARKED AS ANNEXURE-7 9) COPY OF ACKNOWLEDGEMENT OF TDS RETURNS MARKED AS ANNEXURE-8 10) WORKING OF ATTRIBUTABLE EXPENSES FOR EXEMPT INC OME AS PER RULE 80 OF THE INCOME TAX RULES 1962 MARKED AS ANNE XURE-9 PLEASE FIND ABOVE IN ORDER AND AS PER YOUR REQUIREM ENT AND LET US KNOW ANY FURTHER INFORMATION REQUIRED. 2.4. IT IS PERTINENT TO MENTION HERE THAT THE ASSES SEE ANNEXED COPIES OF THE CHEQUES ALSO ANNEXED WITH THE AFORESA ID REPLY ALONGWITH SUMMERY OF ACCOUNTS AS ON 30/04/2008 (PAG ES 37-38 OF THE PAPER BOOK WHICH ARE NOT REPRODUCED ABOVE). WE FIND THAT IN THE AFOREMENTIONED REPLY AS MENTIONED IN PARA -5 , THE COPY OF MOU ENTERED WITH M/S AMAZON ENTERPRISES PVT. LTD., M/S HIDMANDARI ENTERPRISES PVT. LTD. AND M/S PUSTI ENTE RPRISES PVT. LTD. AND COPY OF CHEQUES RECEIVED FROM THEM ALONG W ITH BANK STATEMENT INDICATING THE SAID TRANSACTIONS (MARKED AS ANNEXURE- 4), STATEMENT OF ITEMWISE, QUANTITY WISE, AND VALUE WISE INVENTORY AND CLOSING STOCK (MARKED AS ANNEXURE-5) WERE FILED BEFORE THE ASSESSING OFFICER ALONGWITH STATEMENT OF ADVANCES RECOVERABLE IN CASH OR KIND, DETAILS OF OTHER ADVAN CE AND DETAILS OF ADVANCE RECEIVED FROM CUSTOMERS (MARKED AS ANNEX URE-6), STATEMENT OF SALE AND PURCHASES EXCEEDING RS.10 LAK H (ANNEXURE-7), COPY OF ACKNOWLEDGMENT OF TDS RETURNS (ANNEXURE-7) AND WORKING OF ATTRIBUTABLE EXPENSES F OR EXEMPT INCOME AS PER RULE 8D OF THE RULES (ANNEXURE-9) (TH ESE ANNEXURE MEANS WHICH WERE ANNEXED WITH THE LETTER A DDRESSED TO THE ASSESSING OFFICER) WERE FURNISHED. AGAIN VID E LETTER DATED M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 9 05/12/2011 ADDRESSED TO THE ASSESSING OFFICER, OTHE R DETAILS WERE ALSO FURNISHED. THE RELEVANT PORTION OF THIS LETTER (PAGE -39 OF THE PAPER BOOK) IS REPRODUCED HEREUNDER FOR READ Y REFERENCE:- DATE: 05/12/2011 ASSTT. COMM. OF INCOME TAX CIRCLES (3), R.NO. 609, S' FLOOR, AAYAKAR BHAVAN, , MUMBAI- 400020 REF: NOTICE U/S 142(1) OF THE INCOME TAX ACT, 1961 SUB: SUBMISSION OF DETAILS PAN: AAECS8610B PLEASE FIND ENCLOSED HEREWITH THE FOLLOWING DETAILS AS DESIRED BY YOUR HONOUR. 1)COPY OF BILLS FOR LEGAL & PROFESSIONAL FEES PAID. 2) STATEMENT OF TRAVELLING EXPENSES 3) COPY OF BALANCE SHEET, ANNUAL RETURN FOR THE YEA R ENDED SI' MARCH 2009 AND CERTIFICATE OF CHANGE IN NAME ISSUED BY ROC OF M/S PUSTI ENTERPRISES PVT. LTD, M/S HI MAORI ENTERPRISES PVT. LTD AND M/S AMAZON ENTERPRISES PVT . LTD. 4) COPY OF LEGAL NOTICE DT. 28/11/2011 RECEIVED FRO M M/S AMAZON ENTERPRISES PVT. LTD. AND M/S PUSTI ENTERPRISES PVT. LTD FOR THE RECOVERY OF BUSINESS A DVANCE . PLEASE FIND ABOVE IN ORDER AND AS PER YOUR REQUIREM ENT AND LET US KNOW ANY FURTHER INFORMATION REQUIRED. THANKING YOU YOURS FAITHFULLY FOR SHIMNIT KIWALITE IND. PVT. LTD 2.5. WE FIND THAT ALONG WITH THE AFORESAID REPLY, T HE ASSESSEE ALSO FURNISHED THE FOLLOWING DETAILS:- A. DETAILS OF SHAREHOLDERS B. CERTIFICATE ISSUED BY ROC FOR CHANGE OF NAME OF M/S HIMADRI ENTERPRISES PVT. LTD. (NOW, RELIANCE PROLOFI C TRADERS PVT. LTD.) M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 10 C. CERTIFICATE ISSUED BY ROC FOR CHANGE OF NAME OF M/ S PUSHTI ENTERPRISES PVT. LTD. (NOW RELIANCE PROGRESS IVE TRADERS PVT. LTD.) D. CERTIFICATE ISSUED BY ROC FOR CHANGE OF NAME OF M/S AMAZON ENTERPRISES PVT. LTD. (NOW RELIANCE EMINENT TRADING & COMMERCIAL PVT. LTD.) 2.6. WE ARE ALSO REPRODUCING HEREUNDER SUCH AS MEMO RANDUM OF UNDERSTANDING DATED 28/04/2008 (PAGE-10 TO 14 OF THE PAPER BOOK), WHEREAS COMPUTATION OF TOTAL INCOME AND COPY OF THE ACKNOWLEDGMENT OF THE INCOME TAX RETURN FILED BY TH E ASSESSEE, COPY OF THE BALANCE SHEET, PROFIT & LOSS ACCOUNT AN D NOTES TO ACCOUNTS (NOTE NO. 11), WHICH WERE FILED BEFORE THE ASSESSING OFFICER ARE AVAILABLE FROM PAGES 16 TO 26 OF THE PA PER BOOK AND ARE NOT BEING REPRODUCED. THIS MEMORANDUM OF UNDERSTANDING (MOU) MADE ON THI S 28TH DAY OF APRIL, 2008 AT MUMBAI AMONG SHIMDIT KIWALITE INDUSTRIES PRIVATE LTD (FORMERLY K NOWN AS SHIMROT KIWALITE INDUSTRIES, LIMITED) HAVING ITS RE GISTERED OFFICE AT 8TH FLOOR. REGENT CHAMBERS, NARIMAN POINT, MUMBA I -400 021 (HEREINAFTER CALLED AS SKIL. WHICH EXPRESSION SHALL INCLUDE ANY SUCCESSOR AND PERMITTED ASSIGNEE); PUSTI ENTERPRISES PRIVATE LIMITED HAVING ITS REGIST ERED OFFICE AT MANGLA VIHAR, 7/1, PATE! COLONY. JAMNAGAR, GUJARAT- 361001 (HEREINAFTER CALLED AS 'PUSTI', WHICH EXPRESSION SH ALL UNLESS THE CONTEXT DOES NOT SO ADMIT SHALL INCLUDE ITS SUCCESS OR AND ASSIGNS) ; HIMADRI ENTERPRISES PVT. LTD HAVING ITS REGISTERED OFFICE AT MANGLA VJHAR, 7/1, PATEL COLONY, JAMNAGAR, GUJARAT- 361 00 1 (HEREINAFTER CALLED AS 'HIMADRI', WHICH EXPRESSION SHALL UNLESS TILE CONTEXT DOCS NOT SO ADMIT SHALL INCLUDE ITS SU CCESSOR AND ASSIGNS); AND AMAZON ENTERPRISES PVT. LTD HAVING IT S REGISTERED OFFICE AT MANGLA VIHAR, 7/1, PATEL COLONY, JAMNAGAR , GUJARAT- 361001(HEREINAFTER CALLED AS 'AMAZON', WHICH EXPRES SION SHALL UNLESS THE CONTEXT DOES NOT SO ADMIT SHALL INCLUDE ITS SUCCESSOR AND ASSIGNS) EACH PARTY SHALL BE REFERRED TO AS PARTY AND COLLEC TIVELY SHALL BE REFERRED TO AS 'PARTIES'. M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 11 WHEREAS: A. SKIL, HAS TAKEN ON LEASE FROM MAHARASHTRA INDUST RIAL DEVELOPMENT CORPORATION (MIDC) A PLOT OF LAND ADMEA SURING 20.728' SQUARE METERS KNOWN AS PLOT NO L/44 IN THE TALOJA INDUSTRIAL AREA WITHIN THE VILLAGE LIMITS' OF TONDR E AND OUTSIDE THE LIMITS OF MUNICIPAL COUNCIL, IN RURAL AREA, TAL UKA AND REGISTRATION SUB-DIVISION PANVEL DISTRICT AND REGIS TRATION DISTRICT RAIGAD ('THE PLOT'). THE DESCRIPTION OF THE PLOT IS GIVEN IN 'ANNEXURE 1' UNDER A LEASE AGREEMENT DATED LS1H DECEMBER 2004 ' ('LEASE AGREEMENT') . ' B. SKIL HAS APPROACHED PUSTI, HIMADRI AND-AMAZON TO PARTNER IN DEVELOPMENT OF THE PLOT FOR BUILDING OF FACTORY AND OTHER, BUILDINGS AS PERMITTED UNDER THE LEASE AGREEMENT (' JOINT DEVELOPMENT'). C. PUSTI, HIMADRI AND AMAZON INTEND TO BE JOINT DEV ELOPERS ALONG WITH SKIL FOR THE SAME . D. THIS MOU SETS FORTH THE GENERAL TERMS AND CONDIT IONS FOR THE JOINT DEVELOPMENT. 1) THE TERM OF THIS MOU SHALL BE FOR A PERIOD OF 18 0 DAYS COMMENCING FROM THE DATE OF EXECUTION OF THIS MOU E XTENDABLE BY MUTUAL CONSENT. ('TERM') 2) SKIL REPRESENTS AND WARRANTS (A) THAT IT IS A COMPANY DULY FORMED AND REGISTERED UNDER THE COMPANIES ACT,1956 (B) THAT THEY ARE THE RIGHTFUL LEASEHOLD OWNERS OF THE PLOT AND ARE ENTITLED TO DEVELOP THE SAME BY BUILDING FACTOR Y AND OTHER BUILDINGS. (C) THAT THEY SHALL OBTAIN THE APPROVAL OF MIDC FOR THIS PURPOSE, IF REQUIRED .: (D) THAT THEY ARE ENTITLED TO ENTER INTO MOU'S AGR EEMENTS FOR THIS PURPOSE. 3) PUSTI, HIMADRI AND AMAZON REPRESENTS AND WARRANT S (A) THAT THEY ARE COMPANIES DULY FORMED AND REGISTE RED UNDER THE COMPANIES ACT, 1956 ' (B) THAT-THEY CAN ARRANGE TO PROCURE NECESSARY SKIL L SETS 'FOR THE- CONSTRUCTION AND DEVELOPMENT 4) PUSTI, HIMADRI AND AMAZON HEREBY PAY AN ADVICE T O SKIL AN AGGREGATE AMOUNT OF RS, 50 CRORES (RUPEES FIFTY CRO RES) TOWARDS' ADVANCE FOR EXCLUSIVE RIGHTS FOR DEVELOPMENT AS UND ER: . (A) PUSTI - RS, 15 CRORES (B) AMAZON - RS. 25 CRORES (C) HIMADRI - RS. 10 ERORES SKIL HEREBY ACKNOWLEDGES THE RECEIPT OFTHE ADVANCE. , M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 12 5) THE TERMS, AND CONDITIONS OF THIS MOU FOR JOINT DEVELOPMENT SHALL TAKE EFFECT ON EXECUTION OF FINAL DEFINITIVE AGREEMENTS FOR JOINT DEVELOPMENT. 6) SKIL SHALL MAKE AVAILABLE THE PLOT FOR JOINT DEV ELOPMENT. 7) PUSTI, HIMADRI AND AMAZON WILL BE RESPONSIBLE FO R THE DEVELOPMENT OF THE PLOT AND SHALL BEAR THE CONSTRUC TION COST UPTO RS 50 CRORES, ALL EXPENSES BEYOND THE SAID AMOUNT OF R S. 50 CRORES SHALL BE CONTRIBUTED 50% BY SKIL AND 50% BY PUSTI, HIMADRI AND AMAZON. 8) ONCE PUSTI, HIMADRI AND AMAZON AGREE FOR THE JOI NT DEVELOPMENT, THIS AMOUNT SHOULD BE TREATED AS THEIR CONTRIBUTION FOR THE JOINT DEVELOPMENT. 9) THE PROFITS AND LOSSES OF THE JOINT DEVELOPMENT SHALL BE SHARED IN THE FOLLOWING RATIO: (A) SKLL - 50% (B) PUSTI -15% (C) AMAZON-25%' (D) HIMADRI - 10% 10) SKIL SHALL MAKE ALL ARRANGEMENTS FOR ALLOWING T HE REPRESENTATIVES OF PUSTI, HIMADRI AND AMAZON TO ENT ER THE PLOT AND CARRY OUT ALL THE ACTIVITIES TO DISCHARGE THEIR OBLIGATIONS . 11) THE PARTIES SHALL ENTER INTO A DETAILED DEFINIT IVE AGREEMENTS FOR THIS JOINT DEVELOPMENT BEFORE THE END OF THE TE RM. THE PARTIES AGREE THAT THE OBLIGATIONS OF THE PARTIES FOR JOINT DEVELOPMENT S1WL COMMENCE ON CONCLUSION OF THE DEFINITIVE AGREE MENTS. 12) PARTIES SHALL TREAT THE EXISTENCE OF THIS MOU, THE CONTENTS HEREOF AND ANY DOCUMENT OR INFORMATION EXCHANGED BE TWEEN THE PARTIES IN CONNECTION WITH OR PURSUANT TO THE MOU A S CONFIDENTIAL. NO PARTY WILL, WITHOUT THE PRIOR CONS ENT OF THE OTHER PARTY, MAKE, DIRECTLY OR INDIRECTLY ANY PUBLIC COMM ENT, STATEMENT, OR COMMUNICATION WITH RESPECT TO, OR OTH ERWISE DISCLOSE OR PERMIT THE DISCLOSURE OF THE EXISTENCE .OF DISCUSSIONS REGARDING, A TRANSACTION BETWEEN THE PARTIES OR ANY OF THE TERMS, CONDITIONS. OR OTHER ASPECTS OF THE TRANSACTION DES CRIBED IN THIS MOU EXCEPT AS REQUIRED BY LAW AND AFTER-CONSULTATIO N WITH THE OTHER PARTY PROVIDED HOWEVER, THAT EITHER PARTY SHA LL HAVE THE RIGHT TO DISCLOSE THIS MOU AND THE TERMS AND CONDIT IONS OF THE TRANSACTIONS CONTEMPLATED HEREBY TO ITS SHAREHOLDER S, AFFILIATES, EMPLOYEES WHO ARE INVOLVED IN THE WORK CONTEMPLATED IN THIS MOU. 13) NOTICES . ALL NOTICES TO BE PROVIDED PURSUANT TO THIS MOU SHA LL BE IN WRITING AND DELIVERED BY HAND, OR SENT BY FAX, COUR IER OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, TO THE P ARTIES AT THE M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 13 FOLLOWING ADDRESSES, OR SUCH OTHER ADDRESS AS A PAR TY MAY ADVISE THE OTHER PARTY FROM TIME TO TIME: IF TO PUSTI, HIMADRI AND AMAZON: ATTN: MR K R RAJA TEL: [phone] IF TO SKIL: ATTN: MR. NAVIN SHAH TEL: [phone] FAX: [phone]) THIS MOU MAY BE EXECUTED IN ONE OR MORE COUNTER PARTS, EACH OF WHICH WILL BE DEEMED TO BE AN ORIGINAL AND ALL OF WHICH, WHEN TAKEN TOGETHER, WILL BE DEEMED TO CONSTITUTE ONE AN D THE SAME MOU. 15) NO AMENDMENTS, CHANGES OR MODIFICATIONS TO THIS MOU SHALL BE VALID EXCEPT IF THE SAME ARE IN WRITING AND SIGN ED BY A DULY AUTHORIZED REPRESENTATIVE OF EACH PARTY. 16) THIS MOU WILL BE GOVERNED BY THE LAWS OF INDIA, AND THE PARTIES AGREE THAT THE COURTS IN AHMEDABAD SHALL HA VE EXCLUSIVE JURISDICTION IN MATTERS ARISING UNDER THIS MOU. IN WITNESS WHEREOF, PARTIES HERETO HAVE EXECUTED TH IS MOU THROUGH THEIR DULY AUTHORIZED. REPRESENTATIVES AS O F THE DAY AND YEAR FIRST WRITTEN ABOVE. SIGNED FOR AND 'ON BEHALF OF . SHIMNIT KIWALITE INDUSTRIES PRIVATE LTD. BY NAME. TITLE SIGNED FOR AND ON BEHALF OF PUSTI ENTERPRISES PRIVATE LIMITED BY NAME. TITLE IN THE AFORESAID MOU DATED 28 TH APRIL, 2008, ENTERED INTO/AGREED BY THE PARTIES (AS PER CLAUSE 4) PUSTI( RS. 15 CROR E), HIMADARI (RS.10 CRORE) AND AMAZON(RS.25 CRORE) PAID ADVANCES TO THE ASSESSEE TOWARDS ADVANCE FOR EXCLUSIVE RIGHTS FOR DEVELOPMENT . IT IS FURTHER NOTED THAT TERMS AND CONDITIONS OF THIS MOU FOR JOINT DEVELOPMENT SHALL TAKE EFFECT ON EXECUTION OF FINAL DEFINITIVE AGREEMENT. AS PER CLAUSE-11 THE PARTY SHALL M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 14 ENTERED INTO A DETAILED DEFINITIVE AGREEMENT FOR TH IS JOINT DEVELOPMENT BEFORE THE END OF THE TERM AND FURTHER THE PARTIES AGREED THAT THE OBLIGATION OF THE PARTIES FOR JOINT DEVELOPMENT SHALL COMMENCE ON CONCLUSION OF THE DEFINITIVE AGRE EMENT. IT IS NOTEWORTHY THAT ALL THESE DOCUMENTS WERE MADE AVAIL ABLE BEFORE THE ASSESSING OFFICER, PRIOR TO FINALIZATION OF ASS ESSMENT. THE ASSESSING OFFICER ONLY AFTER EXAMINING THE NECESSAR Y DETAILS FRAMED ASSESSMENT U/S 143(3) THAT TOO AFTER DETAILE D ENQUIRIES, EXAMINATION AND AFTER DUE APPLICATION OF MIND. 2.7. THE LD. CIT ISSUED NOTICE U/S 263 OF THE ACT WHICH IS ALSO REPRODUCED HEREUNDER:- THE REGULAR ASSESSMENT FOR ASSTT.YEAR 2009-10 WAS COMPLETED ON 28.12.2011, ACCEPTING THE TOTAL INCOME AT RS. NIL UNDER NORMAL PROVISIONS OF THE ACT AND DETERMINING BOOK PROFIT OF RS. 57,88,591/- AS AGAINST DECLARED INCOME OF RS. 3 2,79,786/- U/S 115JB OF THE ACT. 2. ON VERIFICATION OF THE RECORDS, CERTAIN DISCREPA NCIES WERE FOUND IN THE ASSESSMENT ORDER DT. 28.12.2011 IE.:-T HE ASSESSEE COMPANY HAD A LAND ON LEASE ADMEASURING 20728 SQ. M T. KNOWN AS PLOT NO.L/44 I THE TALOJA TAKEN FROM MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION(MIDC) UNDER A LEASE AGREEME NT DATED 15/12/2004. DURING THE YEAR THE ASSESSEE HAD SIGNED A MEMORANDUM OF UNDERSTANDING (MOU) WITH THREE PARTIE S NAMELY 'RELIANCE EMINENT TRADING AND COMMERCIAL PVT. LTD. (FORMALLY KNOWN AS AMAZON ENTERPRISES PVT. LTD.), HIMADRI ENT ERPRISES PVT. LTD. AND PUSTI ENTERPRISES PVT. LTD. FOR JOINT DEVELOPMENT OF THE SAID LAND. IN TERMS OF THE MEMORANDUM OF UNDERS TANDING (MOU) DT. 28/04/2008 THESE PARTIES AGREED TO DEVELO P THE PLOT AND BEAR THE CONSTRUCTION COST UP TO RS.50 CRORE AN D ALL EXPENSES BEYOND THE SAID AMOUNT OF RS.50 CRORE WAS TO BE CON TRIBUTED 50% BY ASSESSEE COMPANY AND 50% BY PUSTI, HIMADRI, AND AMAZON ADDITION, THE SAID PARTIES PAID AN AMOUNT OF RS.50 CRORE TO ASSESSEE FOR GETTING EXCLUSIVE RIGHTS FOR DEVELO PMENT AT AGREED PROPORTION. ON VERIFICATION, 1 OBSERVED THAT THE AM OUNT OF RS.50 CRORES RECEIVED BY THE ASSESSEE WAS NOTHING BUT CON SIDERATION RECEIVED FOR RELINQUISHMENT OF DEVELOPMENT RIGHTS O F LAND, THEREFORE THIS AMOUNT WAS REQUIRED TO BE BROUGHT TO TAX. HOWEVER, THIS AMOUNT REMAINED TO BE BROUGHT TO TAX. AS PER SECTION-5 OF THE IT ACT, THE TOTAL INCOME OF ANY PR EVIOUS YEAR OF A PERSON WHO IS RESIDENT INCLUDES ALL INCOME WHICH IS RECEIVED OR DEEMED TO BE RECEIVED, OR ACCRUES OR ARISES, OR DEE MED TO ACCRUE OR ARISE IN INDIA DURING SUCH YEAR FROM WHATEVER SO URCE. M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 15 3. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER PASSE D BY THE DCIT 3(3), MUMBAI DATED 28.12.2011 APPEARS TO BE ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IT I S EVIDENT THAT THE ASSESSING OFFICER HAS COMMITTED THE LAPSE OF NO T APPLYING HIS MIND TO THE ISSUES DISCUSSED ABOVE. I, THEREFORE, P ROPOSE TO PASS SUCH ORDER THEREON AS THE CIRCUMSTANCE OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT UNDER THE PROVISIONS OF SECTION 263 OF THE I.T ACT. 4. YOU ARE HEREBY GIVEN AN OPPORTUNITY TO APPEAR BE FORE THE UNDERSIGNED PERSONALLY OR THROUGH AN AUTHORIZED REP RESENTATIVE AT THE ABOVE MENTIONED ADDRESS ON 25.2.2014 AT 3.30 P.M OR FILE YOUR WRITTEN SUBMISSION BY SAME DATE, FAILING WHICH IT WILL BE PRESUMED THAT YOU HAVE NOTHING TO SAY IN THE MATTER AND THE DECISION WILL BE TAKEN EX-PARTE ON MERITS. 2.8. IN RESPONSE TO THE ABOVE NOTICE, THE ASSESSEE VIDE REPLY DATED 03 RD MARCH, 2014, ADDRESSED TO THE LD. COMMISSIONER REPLIED AS UNDER:- WE REFER TO YOUR CAPTIONED SHOW CAUSE NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 17-02-2 014, RECEIVED BY US ON 22-02-2014 PROPOSING TO PASS AN ORDER, ENH ANCING OR MODIFYING THE ASSESSMENT ORDER, ULS 143(3) OF THE A CT DATED 28.12.201L. YOUR GOODS ELF HAS MENTIONED THEREIN TH AT THE AMOUNT OF RS. 50 CRORES BEING THE AMOUNT RECEIVED F ROM THREE PARTIES IN TERMS OF MEMORANDUM OF UNDERSTANDING (MO U) FOR JOINT DEVELOPMENT OF LAND IS NOTHING BUT CONSIDERATION RE CEIVED FOR RELINQUISHMENT OF DEVELOPMENT RIGHTS OF THE LAND AN D REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN TH IS REGARD, WE HAVE TO SUBMIT AS UNDER:- 1.1 ASSESSEE COMPANY HAS FILED THE RETURN OF INCOME FOR THE CAPTIONED ASSESSMENT YEAR ON 29.09.2009 DECLARING TOTAL INCOM E OF RS.NIL I-.THE REGULAR ASSESSMENT U/S.143(3) OF THE I.T. ACT, 1961 WAS COMPLETED VIDE ORDER DATED 28.L2.2011, AFTER ADDING BACK THE SHORT TERM CAPITAL LOSS OF RS.17,88,101/- AND ASSESSING THE TOTAL INCO ME AT RS.NIL/-AFTER SET OFF OF BROUGHT FORWARD LOSSES UNDER THE NORMAL PROVISIONS OF THE ACT AND DETERMINING THE BOOK PROFIT OF RS. 57,88,591/- U/S 115.18 OF THE ACT. NOW, YOUR GOODS ELF HAS ISSUED NOTICE UNDER SE CTION 263 OF THE ACT ON THE FOLLOWING OBSERVATION:- 1.2 ' ... THE ASSESSEE COMPANY HADA LAND ON LEASE ADMEA SURING 20728 SQ. MT. KNOWN AS PLOT NO.L144 I THE TALOJATAKEN FROM MA HARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) UNDER A L EASE AGREEMENT DATED 15.12.2004. DURING THE YEAR THE ASSESSEE HAD SIGNED A MEMORANDUM OF UNDERSTANDING(MOU) WITH THREE PARTIES NAMELY 'RELIANCE EMINENT TRADING & COMMERCIAL PVT. LTD. (F ORMERLY KNOWN AS AMAZON ENTERPRISES PVT. LTD.), HIMADRI ENTERPRISES PVT. LTD. AND PUSTI ENTERPRISES PVT. LTD. FOR JOINT DEVELOPMENT OF THE SAID LAND. IN TERMS OF M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 16 THE MOU DT. 28.04.2008 THESE PARTIES AGREED TO DEVE LOP THE PLOT& BEAR CONSTRUCTION COSTUPTORS. 50 CRORE AND ALL EXPENSES BEYOND THE SAID AMOUNT OF RS. 50 CRORE WAS TO BE CONTRIBUTED 50% BY THE ASSESSEE COMPANY AND 50% BY PUSTI, HIMADRI AND AMAZON. IN AD DITION, THE SAID PARTIES PAID AN AMOUNT OF RS. 50 CRORE FOR GETTING EXCLUSIVE RIGHTS FOR DEVELOPMENT AT AGREED PROPORTION. ON VERIFICATION, IT WAS OBSERVED THAT THE AMOUNT OF RS. 50 CRORES RECEIVED BY THE ASSESSE E WAS NOTHING BUT CONSIDERATION RECEIVED FOR RELINQUISHMENT OF DEVELO PMENT RIGHTS OF THE LAND, THEREFORE THIS AMOUNT WAS REQUIRED TO BE BROU GHT TO TAX. HOWEVER, THIS AMOUNT REMAINED TO BE BROUGHT TO TAX. AS PER SECTION 5 OF THE ACT, THE TOTAL INCOME IN ANY PREVIOUS YEAR O F A PERSON WHO IS A RESIDENT INCLUDES ALL INCOME RECEIVED OR DEEMED TO BE RECEIVED, ARISES OR ACCRUES TO ARISE OR DEEMED TO ACCRUE OR ARISE IN INDIA FROM WHATEVER 1.2. ACCORDING TO YOUR GOODSELF, THE ASSESSMENT ORD ER PASSED BY THE DCIT.3(3), MUMBAI DATED 28.12.2011 IS CONSIDERE D TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND THAT THE ASSESSING OFFICER HAS COMMITTED THE LAPSE OF NOT AP PLYING HIS MIND TO THE ISSUE DISCUSSED ABOVE. THEREFORE, YOUR GOODSELF PROPOSES TO PASS SUCH ORDER THEREON AS THE CIRCUMST ANCE OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIF YING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECT ING A FRESH ASSESSMENT UNDER THE PROVISIONS OF SECTION 263.' 1.3 IN THIS REGARD, WE HAVE TO SUBMIT THAT THE ASSE SSEE COMPANY HAD ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU ) (COPY ATTACHED) WITH THREE PARTIES NAMELY 'RELIANCE EMINE NT TRADING & COMMERCIAL PVT. LTD. (FORMERLY KNOWN AS AMAZON ENTE RPRISES PVT. LTD.), HIMADRI ENTERPRISES PVT. LTD. AND PUSTI ENTERPRISES PVT. LTD. FOR THEIR INTENTION TO BE JOINT DEVELOPER S FOR THE DEVELOPMENT OF THE PLOT OF LAND. THE TERMS AND COND ITION OF THE SAID MOU WERE EFFECTIVE FOR A PERIOD OF 180 DAYS AN D SHALL TAKE EFFECT ON EXECUTION OF FINAL DEFINITIVE AGREEMENTS FOR JOINT DEVELOPMENT. AS PER CLAUSE 7 OF THE MOU, PUSTI, HIM ADRI AND AMAZON WILL BE RESPONSIBLE FOR THE DEVELOPMENT OF T HE PLOT AND SHALL BEAR THE CONSTRUCTION COST UPTORS. 50 CRORES. ALL EXPENSES BEYOND THE SAID AMOUNT OF RS. 50 CRORES SHALL BE CO NTRIBUTED 50% BY SKIL AND 50% BY PUSTI, HIMADRI AND AMAZON. I N TERMS OF THE MOU, PUSTI, HIMADRI AND AMAZON PAID ADVANCE TO THE COMPANY AN AGGREGATE AMOUNT OF RS. 50 CRORCS AS THE IR CONTRIBUTION FOR THEIR JOINT DEVELOPMENT AS UNDER: (A) PUST I RS. 1 5 CRORCS (B) AMAZON - RS. 25 CRORES (C.) HIMADRI - RS. 10 CRORES THE PROFITS AND LOSSES OF THE JOINT DEVELOPMENT WAS AGREED TO BE SHARED AMONGST THE 4 PARTIES AS PER THE RATIO MENTI ONED IN CLAUSE 9 OF THE MOU. AS PER CLAUSE 8 OF THE MOU DT. 28.04.2008 IT IS VERY CLEARLY MENTIONED THAT ONCE THE PUSTI, H IMADRI AND AMAZON AGREE FOR JOINT DEVELOPMENT, THIS AMOUNT SHO ULD BE TREATED AS THEIR CONTRIBUTION FOR THE JOINT DEVELOP MENT. THUS, THE M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 17 AMOUNT PAID IS AN ADVANCE FOR JOINT DEVELOPMENT OF PROPERTY AND TO BE TREATED AS THEIR CONTRIBUTION FOR THE JOINT D EVELOPMENT. 1.3 FROM THE ABOVE FACTS IT IS EVIDENT THAT THE AMOUNT ASSESSEE HAS RECEIVED 'IS JUST AN INITIAL ADVANCE AS A CONTRIBUT ION FOR THE JOINT DEVELOPMENT OF THE ASSESSEE COMPANY'S PROPERTY AS P ER THE TERMS OF THE MOU AND THE SAID ADVANCE IS NOT THE CONSIDERATI ON FOR RELINQUISHMENT OF DEVELOPMENT OF LAND AS MENTIONED BY YOUR GOODSELF. THESE AMOUNTS OF RS. 50 CRORES RECEIVED F ROM THE SAID THREE PARTIES, THOUGH ADVANCE CONTRIBUTION TOWARDS JOINT DEVELOPMENT, WASREFLECTED UNDER THE HEAD 'UNSECURED LOANS (INTER CORPORATE DEPOSITS)' IN THE BALANCE SHEET AS ON 31 ST MARCH 2009. 1.5 IN THE FOLLOWING PARAGRAPH WE WOULD LIKE TO SUB MIT THAT THIS IS A CASE NOT FIT FOR REVISION PROCEEDINGS UNDER SE CTION 263 OF THE ACT AS THE AMOUNT RECEIVED AS CONTRIBUTION TOWARDS JOINT DEVELOPMENT OF LAND CANNOT BE CONSIDERED AS INCOME AND THE LEARNED ASSESSING OFFICER AFTER DUE APPLICATION OF MIND TO THE FACTS OF THE CASE AND AFTER DULY CONSIDERING THE PR OVISIONS OF LAW. 1.6 IT IS SUBMITTED THAT DURING THE ASSESSMENT PROC EEDINGS U/S. 143(3) THE LD. ASSESSING OFFICER HAD VIDE NOTICE U/ S. 142(1) DATED 08.11.2011 CALLED FOR VARIOUS DETAILS WHICH INCLUDE D THE DETAILS FOR AMOUNT RECEIVED FROM THE ABOVE THREE PARTIES AG GREGATING TO RS. 50 CRORE ALONG WITH CONFIRMATIONS AND COPY OF T HE BANK STATEMENT REFLECTING THE RECEIPT OF THE SAID AMOUNT S. THE ASSESSEE VIDE LETTER DATED 17.11.2011 HAD SUBMITTED THE COPY OF MOU ENTERED WITH M/S AMAZON ENTERPRISES PVT. LTD., M/S HIMANDRI ENTERPRISES PVT. LTD. AND M/S. PUSTI ENTER PRISES PVT. LTD. ALONG WITH COPY OF CHEQUE RECEIVED FROM THE AB OVE PARTIES AND COPY OF THE BANK STATEMENT REFLECTING THE SAID RECEIPT. FURTHER, VIDE LETTER DATED 05.12.2011 THE ASSESSEE HAD ALSO SUBMITTED THE DETAILS OF THE SHAREHOLDING OF THE SA ID THREE COMPANIES AS WELL AS THE COPIES OF THE CERTIFICATED ISSUED BY ASST. REGISTRAR OF COMPANIES FOR CHANGE OF THE NAME S OF THESE COMPANIES. FURTHER, THE POINT NO. 11 OF THE NOTES T O ACCOUNTS STATE THAT THE ASSESSEE COMPANY HAS RECEIVED RS. 50 CRORES FROM THE ABOVE MENTIONED PARTIES FOR THE JOINT DEVELOPME NT OF THE LAND AS PER THE MOU ENTERED BETWEEN THEM ON 28.04.2008. DUE TO SOME UNFORESEEN CIRCUMSTANCES, THE FINAL AGREEMENT BETWEEN THE ASSESSEE COMPANY AND THE PARTIES COULD NOT MATERIAL IZE. AS A RESULT, THE AFORESAID THREE PARTIES DEMANDED THE SA ID AMOUNT AND ALSO FILED SUMMARY SUIT IN THE HON'BLE CITY CIV IL COURT OR AHMEDABAD ON 30TH JUNE, 2012. THE SAME WAS OBJECTED BY THE ASSESSEE OIL THE BASIS OR JURISDICTION. THE PLAINT WAS RETURNED BY THE SAID COURT VIDE ORDER DATED 3RD MAY, 2013. SUBS EQUENTLY, THESES PARTIES HAVE FILED FRESH SUMMARY SUITS IN TH E HIGH COURT OF JUDICATURE AT BOMBAY ON 31 ST MAY. 2013. THE SAM E ARE PENDING BEFORE THE HON'BLE HIGH COURT. AFTER EXAMINING THE FACTS, APPLICABILITY OF PROVISI ONS OF THE LAW AND PROPER APPLICATION OF MIND, THE LD. ASSESSING O FFICER HAS M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 18 RIGHTLY CONSIDERED THE SAID AMOUNTS AS BEING ADVANC E CONTRIBUTION RECEIVED TOWARDS JOINT DEVELOPMENT, AN D NOT AS A CONSIDERATION RECEIVED FOR RELINQUISHMENT OF DEVELO PMENT RIGHTS OF LAND, AS MENTIONED BY YOUR GOODSELF IN THE CAPTI ONED NOTICE. SECTION 5 OF THE ACT EXPLAINS THE SCOPE OF TOTAL IN COME. THE SAID CONTRIBUTION RECEIVED TOWARDS PROPOSED DEVELOPMENT UNDER NO STRETCH OF IMAGINATION BE CALLED OR TREATED AS 'INC OME'. UNDER SECTION 2(24) OF THE ACT, 'INCOME' IS DEFINED WHICH POSTULATES THAT THE WORD 'INCOME' HAS TO BE GIVEN A WIDE MEANING, B UT CERTAINLY IT DOES NOT MEAN TO COVER CAPITAL OR THE STOCK OR CORP US OR PRINCIPAL. IT IS AN INCREASE IN WEALTH OR FRUIT BORNE OF CAPIT AL. THE AMOUNT RECEIVED IN THE INSTANT CASE IS CONTRIBUTION CORPUS FOR THE PROPOSED PROJECT OF DEVELOPMENT. THERE IS NO TRANSF ER OF THE LAND OR ANY ASSET WHICH IS EVIDENT FROM THE MOU AND ITS TERMS. THE LEASEHOLD LAND CONTINUE TO BE ASSET OF THE ASSESSEE COMPANY IN ITS OWN POSSESSION AND NO RIGHT IS TRANSFERRED OR P ARTED WITH. THUS, THE SAID AMOUNT RECEIVED CANNOT BE TREATED AS INCOME AND ACCORDINGLY SECTION 5 OF THE ACT ALSO IS NOT APPLIC ABLE TO THIS AMOUNT. THUS, THE ASSESSING OFFICER HAD ACCEPTED THE CONTEN TION OF THE ASSESSEE AFTER EXAMINING THE SUBMISSIONS. THEREFORE , IT CANNOT BE SAID THAT THE LD. A.O. HAS SUMMARILY ACCEPTED TH E CLAIM OF THE ASSESSEE, WITHOUT APPLICATION OF MIND AND WITHOUT A NY INQUIRY. THEREFORE THERE IS NO ERROR IN THE ASSESSMENT ORDER AND NO PREJUDICE IS CAUSED TO REVENUE AND' HENCE PROVISION S OF SECTION 263 ARE NOT APPLICABLE IN THE INSTANT CASE. THUS, T HE OBSERVATION IN THE ABOVE NOTICE ULS.263 OF THE INCOME TAX ACT, 1961 THAT THE LD. AO HAS COMMITTED LAPSE OF NOT APPLYING HIS MIND TO THE ISSUES IS NOT CORRECT. IT IS THEREFORE SUBMITTED TH AT ONCE THE ASSESSING OFFICER HAS EXAMINED THE FACTS OF THE CAS E WHICH WERE ON THE RECORDS AT THE TIME OF THE ASSESSMENT AND TA KEN A VIEW AS PER THE JUDICIAL POSITION, IT DOES NOT GIVE JURISDI CTION FOR REVISION U/S.263 OF THE ACT. 1.7 YOUR HONOUR WILL AGREE THAT TWO CONDITIONS ARE REQUIRED TO BE FULFILLED FOR THE PURPOSE OF INVOKING JURISDICTION UNDER SECTION 263. THIS ISSUE HAS BEEN CONSIDERED BY VARIOUS COUR TS INCLUDING THE HON'BLE SUPREME COURT AND THE JUDICIAL CONCLUSI ON IS THAT THESE TWO CONDITIONS ARE (1) THAT THE ASSESSING OFFICER WAS 'ERRONEOUS' IN PASSI NG THE ASSESSMENT ORDER, AND (2) THAT THE DECISION OR THE ASSESSING OFFICER WAS 'PREJUDICIAL TO THE INTEREST OF THE REVENUE'. LAW IS WELL SETTLED THAT AN ORDER CAN BE TERMED AS 'ERRONEOUS' ONLY IF IT IS RENDERED CONTRARY TO LAW OR UPON A MI STAKEN VIEW OF THE LAW OR ON ERRONEOUS APPLICATION OF LEGAL PRINCI PALS. AN ORDER CANNOT BE TERMED 'ERRONEOUS' UNLESS IT IS NOT IN AC CORDANCE WITH LAW. IF ASSESSING OFFICER ACTING IN ACCORDANCE WITH LAW, MAKES M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 19 CERTAIN ORDER THE SAME CANNOT BE BRANDED AS ERRONEO US BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, IT W AS NOT WRITTEN ELABORATELY. SECTION 263 DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR TH AT OF ASSESSING OFFICER, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. (SEE CIT V. GABRIEL INDIA LTD . (1993) 203 ITR 108 BOM.). APPARENTLY THE REASON, WHICH IS THE FOUNDATION OF T HE NOTICE, WE HUMBLY SUBMIT, ITSELF IS PATENTLY CONTRARY TO THE F ACTS ON RECORDS, JUDICIAL DECISIONS AND PROVISIONS OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER MADE THE ENQUIRIES ABOUT RECE IPT OF AMOUNT OF RS. 50 CRORES AS CONTRIBUTION FOR JOINT D EVELOPMENT OF THE SAID LAND AS PER THE AGREED TERMS OF MOU AND HA S NOT CONSIDERED IT AS A CONSIDERATION RECEIVED FOR RELIN QUISHMENT OF DEVELOPMENT RIGHTS OF LAND. THIS ACTION OF THE ASSE SSING OFFICER IS STRICTLY IN ACCORDANCE WITH LAW AND ON THE FACE OF THE UNCONTROVERTED FACTUAL POSITION ON RECORD BY NO STR ETCH OF IMAGINATION THE ASSESSING OFFICER'S ORDER CAN BE TE RMED AS ERRONEOUS. IT COULD NOT ALSO BE SAID THAT THE LD. A SSESSING OFFICER INCORRECTLY APPLIED THE LAW IN NOT MAKING ANY ADDIT ION TO THE RETURNED INCOME OF THE ASSESSEE AS WHAT COULD BE LA WFULLY ASSESSED WAS THE INCOME EARNED BY THE ASSESSEE. IN THAT VIEW OF THE MATTER, IT IS SUBMITTED THAT THE NOTICE UNDE R SECTION 263 OF THE ACT ISSUED BY YOUR GOODSELF IS WITHOUT JURISDIC TION AND NOT TENABLE IN LAW, AND WE REQUEST YOUR GOODSELF TO DRO P THE SAID PROCEEDINGS INITIATED BY YOU. 1.8 WE WOULD ALSO LIKE TO CITE IN THIS CONNECTION A FEW JUDICIAL PRONOUNCEMENTS: 1) MALABAR INDUSTRIAL CO. LTD. V. CIT, 243 ITR 83 (S.C .) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDIT IONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCO ME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-RECOURS E CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CAN NOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERR ONEOUS. 2) CIT V. GABRICLLNDIA LTD., 203 ITR 109 (BORN.) THE POWER OR SUOMOTU REVISION UNDER SUB-SECTION (1) OF SECTION 263 OF THE INCOME-TAX ACT, 1961 IS IN THE NATURE OF SUPERVISORY JURISDICTION AND CAN BE EXERCISED ONLY IF THE CIRCU MSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXI ST TO ENABLE M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 20 THE COMMISSIONER TO EXERCISE THE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER SHOULD BE ERRONEOU S; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER CA NNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. 3) ASHOK MANILALTHAKKAR V. ACIT, 279 ITR (AT) 143 ( AHD.). IN THIS CASE DURING THE SURVEY PROCEEDINGS U/S.133A THE ASSESSEE DISCLOSED ADDITIONAL INCOME FOR TWO ASSESS MENT YEARS. HOWEVER, IN THE RETURN OF INCOME THE DISCLOSED INCO ME WAS NOT INCLUDED. THE ASSESSEE FILED A DETAILED REPLY EXPLA INING THEREIN IN WHAT CIRCUMSTANCES THE DISCLOSED AMOUNT WAS NOT SHOWN. THE ASSESSING OFFICER RAISED VARIOUS QUERIES DURING ASS ESSMENT PROCEEDINGS WHICH WERE COMPLIED BY THE ASSESSEE. TH EREAFTER THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ACCE PTING THE RETURNED INCOME. AFTER COMPLETION OF THE ASSESSMENT , PROCEEDINGS U/S.263 WERE INITIATED BY CIT ON THE GROUND THAT TH E ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICE TO THE INTEREST O F REVENUE. IN THE APPEAL, THE ITA T HELD THAT IN THE ABSENCE OF A NY MATERIAL TO SHOW THAT THE ASSESSEE HAD ANY BUSINESS ACTIVITY WH ICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, IT COULD NOT BE I NFERRED THAT THE ASSESSING OFFICER WHILE ASSESSING THE INCOME AT THE RETURNED FIGURE HAD DRAWN ANY INCORRECT ASSUMPTION OF FACTS. IT COULD NOT ALSO BE SAID THAT THE ASSESSING OFFICER INCORRECTLY APPLIED THE LAW IN NOT MAKING ANY ADDITION TO THE RETURNED INCO ME OF THE ASSESSEE AS WHAT COULD BE LAWFULLY ASSESSED WAS THE INCOME EARNED BY THE ASSESSEE. THUS, THE ORDER PASSED BY T HE ASSESSING OFFICER COULD NOT BE SAID TO BE ERRONEOUS WITHIN THE MEANING OF SECTION 263 AS THERE WAS NO INCORRECT AS SUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW. 4) DY. COMMISSIONER OF AGRICULTURAL INCOME TAX AND SALES TAX, QUILON & ANOTHER V. DHANALAXMYVILAS CASHEW CO. - ST ATE OF KERALA V. VIJAYA PRODUCE AGENCY, 24 STC 491 SC, 495 (S.C.) WHILE EXERCISING REVISIONARY JURISDICTION THE COMMI SSIONER WOULD BE RESTRICTED TO THE EXAMINATION OF RECORDS FOR DET ERMINING WHETHER ORDER OF ASSESSMENT WAS ACCORDING TO LAW. 5) C1T V. HONDA SIEL POWER PRODUCTS LTD. 194 TAXMAN 175 (DELHI) WHEREIN THE COURT HELD THAT THE EXPRESSION PREJUDICIAL TO THE INTEREST OF REVENUE APPEARING IN SECTION 263 HA S TO BE READ IN CONJUNCTION WITH THE EXPRESSION 'ERRONEOUS' AND THA T EVERY LOSS OF REVENUE AS A CONSEQUENCE OR AN ORDER OR THE ASSE SSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO INTEREST OF REV ENUE. IN CASES WHERE ASSESSING OFFICER ADOPTS ONE OF THE COURSES P ERMISSIBLE IN LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW, THE COMMISSIONER OF INCOME TAX CANNOT M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 21 EXERCISE HIS POWERS U/S. 263 TO DIFFER WITH THE VIE W OF THE ASSESSING OFFICER EVEN IF THERE HAS BEEN A LOSS OF REVENUE. 6) CIT V. INTERNATIONAL TRAVEL HOUSE LTD. 194 TAXMA N 324 (DELHI) [2010] WHEREIN IT WAS HELD THAT BEFORE INVOKING POW ERS U/S 263 THE CIT MUST HAVE POSITIVE MATERIALS IN HIS POSSESS ION, AND MERELY FORMING A DIFFERENT OPINION IS NOT SUFFICIEN T TO REVISE AN ORDER PASSED U/S 143(3). 7) CIT VS. HINDUSTAN COCA COLA BEVERAGES PVT. LTD. ITA NOS.1391 1 2010, 1394/2010 & 1396 1 2010 WHEREIN THE DELHI H IGH COURT HELD AS UNDER: (I) S. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO IF IT IS NOT ' PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. EVERY LOSS OF REV ENUE AS A CONSEQUENCE OF THE AO'S ORDER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. E.G. W HEN THE AO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AN D IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE AD HAS TAKEN ONE VIEW WITH WHICH T HE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRO NEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW (MALAB AR INDUSTRIAL CO 243 ITR 83 (SC) FOLLOWED); (II) ON FACTS, AS THE ASSESSEE HAD MADE FULL DISCLOSURE OF THE FACTS OF THE CLAIM AND THE AO HAD EXAMINED THE CLAI M AND TAKEN A VIEW, THE ASSESSMENT ORDER CANNOT BE TERMED 'ERRONEOUS & PREJUDICIAL TO THE INTERESTS OF THE RE VENUE'. 2.0 IN VIEW OF THE ABOVE FACTUAL POSITION ON RECORD , THE A.O.'S ORDER BY NO STRETCH OF IMAGINATION CAN BE TERMED AS ERRONEOUS AND/OR PREJUDICIAL TO THE INTEREST OF REVENUE. WE, THEREFORE REQUEST YOUR GOODSELF TO KINDLY DROP THE PROCEEDING S U/S.263 OF THE INCOME TAX ACT. WE EARNESTLY HOPE THAT IN VIEW OF THE ABOVE SUBMISS IONS, YOU WILL BE KIND ENOUGH NOT TO TAKE THE PROPOSED ACTION U/S.263 OF THE INCOME TAX ACT, 1961. WE SHALL BE GLAD TO FURNISH ANY OTHER PARTICULARS R EQUIRED BY YOUR GOODSELF. 2.9. IF THE NOTICE ISSUED BY THE LD. COMMISSIONER U /S 263 OF THE ACT IS ANALYZED, IN PARA-2, IT ALSO SAYS THAT THE P ARTIES PAID RS.50 LAKH TO THE ASSESSEE FOR GETTING EXCLUSIVE RIGHTS F OR DEVELOPMENT M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 22 AT AGREED PROPORTION FOR RELINQUISHMENT OF DEVELOPM ENT RIGHTS OF LAND. THIS FACT HAS ALREADY BEEN CONSIDERED BY THE ASSESSING OFFICER BY ISSUING A NOTICE TO THE ASSESSEE AND AFT ER EXAMINING THE REPLY OF THE ASSESSEE FRAMED THE ASSESSMENT. I T IS NOT THE CASE THAT NO NOTICE OF THIS FACT WAS EVER TAKEN BY THE ASSESSING OFFICER. IN PARA -3 OF THE NOTICE, THE LD. CIT HAS ALLEGED THAT THE ASSESSING OFFICER HAS COMMITTED A LAPSE BY NOT APPL YING HIS MIND ON THIS ISSUE. AS DISCUSSED EARLIER, THE ASSE SSING OFFICER HAS DULY EXAMINED THIS ISSUE, THUS, THE OBSERVATION MADE IN THE NOTICE BY THE LD. COMMISSIONER IS NOT SUBSTANTIATED . THE TERMS AND CONDITIONS OF THE MOU WERE TO BE FULFILLED BY T HE PARTIES ON EXECUTION OF FINAL DEFINITIVE AGREEMENTS FOR JOINT DEVELOPMENT, ALL EXPENSES BEYOND THE AMOUNT OF RS.50 CRORES WERE TO BE CONTRIBUTED 50% BY THE ASSESSEE AND 50% BY PARTIES I.E. PUSTI, HIAMADARI AND AMAZON. IT IS ALSO SEEN THAT IN TERM S OF THE MOU, THESE THREE PARTIES PAID ADVANCE TO THE ASSESSEE AS THEIR CONTRIBUTION FOR THE JOINT DEVELOPMENT AND THE PROF IT AND LOSSES WERE TO BE SHARED AMONGST THE FOUR PARTIES IN THE R ATIO MENTION IN CLAUSE -9 OF THE MOU. AS PER CLAUSE-8, IT IS CL EARLY MENTIONED THAT ONCE THE AFOREMENTIONED THREE PARTIES AGREE FO R JOINT DEVELOPMENT, THE IMPUGNED AMOUNT HAS TO BE TREATED AS THEIR CONTRIBUTION, MEANING THEREBY, THE AMOUNT PAID WAS AN ADVANCE FOR THE JOINT DEVELOPMENT PROPERTY, THUS, IT WAS TH EIR CONTRIBUTION. THE TOTALITY OF FACTS INDICATES THAT THE IMPUGNED AMOUNT WAS AN INITIAL ADVANCE AS A CONTRIBUTION FOR THE JOINT DEVELOPMENT, AS PER TERMS OF THE MOU. IT IS ALSO NOTED THAT VIDE LETTER DATED 05/12/2011, THE ASSESSEE ALSO SUBMITTE D THE DETAILS OF SHARE HOLDING OF THESE PARTIES AS WELL AS CERTIF ICATE ISSUED BY ASSISTANT REGISTRAR OF COMPANIES. FURTHER, THROUG H POINT NO.11 TO NOTES ON ACCOUNT, ASSESSEE HAS RECEIVED THE IMPU GNED AMOUNT M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 23 FOR THE AFOREMENTIONED PARTIES AS PER MOU ON 28/04/ 2008. DUE TO CERTAIN UNFORESEEN CIRCUMSTANCES, THE SAME COULD NOT MATERALIZE AND THESE PARTIES FILED A SUMMARY SUIT I N THE CIVIL COURT ON 30 TH JUNE, 2012, WHICH WAS REJECTED ON THE ISSUE OF JURISDICTION VIDE ORDER DATED 3 RD MAY, 2013, SUBSEQUENTLY, FRESH SUIT WAS FILED BEFORE THE HONBLE HIGH COURT OF BO MBAY ON 31 ST MAY, 2013, AND THE SAME IS PENDING. THEREFORE, WE ARE NOT DECIDING WHETHER THE AMOUNT IS RETURNABLE OR NOT, I TS NATURE BECAUSE THE ISSUE IS PENDING BEFORE THE HONBLE HIG H COURT AND AT THE SAME TIME EVEN THE CONCERNED PARTIES IN THEI R SUIT HAS CLAIMED THE SAME AS ADVANCE PAID TO THE ASSESSEE A S CONTRIBUTION FOR RELINQUISHMENT OF DEVELOPMENT RIGH TS OF THE LAND. SO FAR AS, MENTION OF SECTION 5 OF THE ACT BY THE LD. COMMISSIONER IN THE NOTICE TO TREATING THE SAME AS INCOME, WE NOTE THAT SECTION 5 OF THE ACT EXPLAINS THE SCOPE O F TOTAL INCOME. UNDER THE FACTS AVAILABLE ON RECORD, IT CANNOT BE T REATED AS INCOME AS SUCH. THOUGH, UNDER SECTION 2(24) OF THE ACT, INCOME IS DEFINED BY GIVING A WIDE MEANING BUT IT DOES NOT MEAN TO COVER CAPITAL OR THE STOCK OR CORPUS OR PRINCIPLE OR ANY SUM REFERRED TO IN SECTION 28. SECTION 51 OF THE ACT DEALS WITH ADV ANCE MONEY RECEIVED BY THE ASSESSEE. THE AMOUNT RECEIVED IN T HE INSTANT CASE IS A CONTRIBUTION OR CORPUS FOR THE DEVELOPMEN T OF THE PROPOSED PROJECT, THUS, THE REVISIONARY JURISDICTIO N INVOKED BY THE LD. COMMISSIONER IS WITHOUT ANY MERIT, BECAUSE THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS I.E. (1) THE ASSESSMENT ORDER, SOUGHT TO BE REVISED, IS ERRONEOU S AND (2) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THEME IS ABSENT, MEANING THEREBY, IF THE ASSESSMENT ORDER IS ERRONEOUS BUT NOT PREJUDICE TO THE REVENUE OR IF IT IS NOT ER RONEOUS BUT PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD T O SECTION M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 24 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER. IT IS ONLY WHEN THE ORDER IS ERRONEOUS AN D PREJUDICIAL TO THE REVENUE, THE REVISIONAL JURISDICTION IS ATTRACT ED. OUR VIEW FIND SUPPORTS FROM THE LANDMARK DECISION FROM THE H ONBLE APEX COURT IN MALABAR INDUSTRIAL COMPANY LTD. VS CIT 243 ITR 83 (SC), CIT VS GABRIEL INDIA LTD. (203 ITR 109)(BOM), RATIO LAID DOWN IN ASHOK MANILAL THAKKAR VS ACIT 279 ITR (AT)1 43(AHD.), CIT VS HONDA SIEL POWER PRODUCTS LTD. 194 TAXMAN 17 5 (DEL.), CIT VS INTERNAL TRAVEL HOUSE LTD. 194 TAXMAN 324 (D EL.) AND CIT VS HINDUSTAN COCA COLA BEVERAGES PVT. LTD. (ITA NOS .1391/2010, 1394/2010 & 1396/2010) WHEREIN, THE HONBLE DELHI H IGH COURT HELD THAT SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE COMMITTED BY THE ASSESSING OF FICER, IF IT IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE AN D EVERY LOSS OF REVENUE AS A CONSEQUENCE OF ASSESSMENT ORDER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SO FAR AS, NON- APPLICATION OF MIND BY THE ASSESSING OFFICER IS CON CERNED UNDER THE FACTS NARRATED IN THIS ORDER, RELIANCE CAN BE P LACED UPON THE RATIO LAID DOWN IN FOLLOWING CASES:- I. CIT VS GABRIEL INDIA LTD. 203 ITR 108 (BOM.) II. CIT VS. ASHISH RAJPAL (320 ITR 674)(DEL.) III. CIT VS. EICHER LTD. (294 ITR 310) (DEL.) IV. HARI IRON TRADING CO. VS. CIT (263 ITR 437) (P&H) V. CIT VS. DEVELOPMENT CREDIT BANK LTD. (323 ITR 206) (BOM.) VI. RCI LTD. VS. CIT (2010) 40 DTR MUM (TRB.) 186 VII. RELIANCE GAS TRANSPORTATION INFRASTRUCTURE LTD. VS. CIT(2014) (100 DTR 1)(MUM.)(TRB.) AND VIII. CIT VS. ANIL KUMAR SHARMA 335 ITR 83(DEL.) M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 25 IX. CIT VS ARVIND JEWELLERS 259 ITR 502 (GUJ.) X. CIT VS SUNBEAM AUTO 189 TAXMAN 436 (DEL.) THE HONBLE DELHI HIGH COURT IN INTERNATIONAL TRAVE L HOUSE LTD. (344 ITR 554) HELD THAT THE LD. COMMISSIONER H AS NO UNFETTERED POWER TO INITIATE PROCEEDINGS BY REVISIO N FOR REEXAMINING AND DIRECTING FRESH ENQUIRY ON HIS OWN WHIM FOR CHANGE OR HAVING A DIFFERENT VIEW. 2.10. IF THE OBSERVATION MADE IN THE ASSESSMENT OR DER, NOTICES ISSUED TO THE ASSESSEE ALONG WITH QUESTIONNAIRE, RE PLY FILED BY THE ASSESSEE ALONG WITH DOCUMENTS/DETAILS, OBJECTIONS/O BSERVATIONS MADE IN THE NOTICE ISSUED U/S 263 BY THE LD. COMMIS SIONER AND REPLY FILED BY THE ASSESSEE, IF KEPT IN JUXTAPOSITI ON AND ANALYZED UNDISPUTED FACT OOZES OUT IS THAT THE ASSESSMENT U/ S 143(3) OF THE ACT WAS FRAMED AFTER EXAMINATION OF NECESSARY D ETAILS FILED BY THE ASSESSEE. IT IS NOT THE CASE THAT ASSESSMENT W AS FRAMED WITHOUT APPLICATION OF MIND AND IN A SLIP SHOT MANN ER. NOW QUESTION ARISES WHETHER THE ASSESSMENT ORDER IS ERR ONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ARE OF THE VIEW, THAT THERE IS A DISTINCTION BETWEEN LACK OF ENQUIRY AN D INADEQUATE ENQUIRY. IN THE PRESENT CASE THE ASSESSING OFFICER COLLECTED NECESSARY DETAILS, EXAMINED THE SAME AND THEN FRAME D THE ASSESSMENT U/S. 143(3) OF THE ACT. THEREFORE, IN SU CH A SITUATION THE DECISION FROM HON'BLE HIGH COURT OF DELHI IN CIT VS. ANIL KUMAR SHARMA (2011) 335 ITR 83 (DEL.)(SUPRA), CLEARLY COMES TO THE RESCUE OF THE ASSESSEE . THE HON'BLE HIGH COURT HELD AS UNDER :- HELD, DISMISSING THE APPEAL, THAT THE PRESENT CAS E WOULD NOT BE ONE OF LACK OF ENQUIRY EVEN IF THE ENQUIRY WAS TERMED INADEQUATE. THE TRIBUNAL FOUND M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 26 THAT COMPLETE DETAILS WERE FILED BEFORE THE ASSESSI NG OFFICER AND THAT HE APPLIED HIS MIND TO THE RELEVAN T MATERIAL AND FACT, ALTHOUGH SUCH APPLICATION OF MIND WAS NOT DISCERNABLE FROM THE ASSESSMENT ORDER . THE TRIBUNAL HELD THAT THE COMMISSIONER IN PROCEEDINGS U/S. 263 ALSO HAD ALL THESE DETAILS AND MATERIALS AVAILABLE BEFORE HIM BUT HAD NOT BEEN ABL E TO POINT OUT DEFECTS CONCLUSIVELY IN THE MATERIAL, FOR ARRIVING AT A CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSESSMENT ON ACCOUNT OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER . THE TRIBUNAL WAS RIGHT AND THE ORDER OF REVISION WAS NOT VALID. 2.11. THE AFORESAID ORDER CLEARLY FITS INTO THE FA CTS BEFORE US. WHILE COMING TO THE AFORESAID CONCLUSION THE HON'BL E HIGH COURT DULY CONSIDERED THE DECISION IN CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL.) (PARA-6 & 7). WE ARE EXPECTED TO ASCERTAIN WHETHER THE ASSESSING OFFICER HAD INVESTIGATED/EXAM INED THE ISSUE AND APPLIED HIS MIND TOWARDS THE WHOLE RECORD MADE AVAILABLE BY THE ASSESSEE DURING ASSESSMENT PROCEED INGS. UNCONTROVERTEDLY, NECESSARY DETAILS WERE PRODUCED A ND EXAMINED BY THE ASSESSING OFFICER, THEREFORE, IT IS NOT A CASE OF LACK OF ENQUIRY BY THE ASSESSING OFFICER. IDENTICAL RATIO WAS LAID DOWN BY THE TRIBUNAL IN THE CASE OF RELIANCE GAS TRANSPORTATION INFRASTRUCTURE LTD. VS. CIT (2014) 100 DTR (MUM.) (T RB.) 1 , ORDER DATED 10/1/2014. IN ANOTHER CASE FROM HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. DEVELOPMENT CREDIT BANK LIMIT ED (2010) 323 ITR 206 , ON IDENTICAL FACT WHEREIN ASSESSMENT ORDER WAS PA SSED AFTER CONSIDERING ALL DETAILS CALLED FOR AND FURNIS HED BY THE ASSESSEE. THE LD. COMMISSIONER INVOKED REVISIONAL J URISDICTION ON THE GROUND THAT ENQUIRY WAS NOT CONDUCTED, THE H ON'BLE HIGH COURT HELD THAT THE LD. COMMISSIONER WAS NOT JUSTIF IED. IDENTICAL IS THE SITUATION FROM HON'BLE HIGH COURT PUNJAB & HARYANA IN HARI IRON TRADING COMPANY VS. CIT (263 ITR 437) ORDE R DATED 23/5/2003 . THE HON'BLE HIGH COURT OF DELHI IN CIT VS. EICHER (294 M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 27 ITR 310) (DEL.) WHEREIN THE ENTIRE MATERIAL WAS PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME O F ORIGINAL ASSESSMENT, THE ASSESSING OFFICER APPLIED HIS MIND TO THE MATERIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASS ESSEE AND MERE FACT THAT HE DID NOT EXPRESS THIS IN THE A SSESSMENT ORDER, CANNOT BE A GROUND TO CONCLUDE THAT INCOME H AS ESCAPED ASSESSMENT , FURTHER SUPPORTS THE CASE OF THE ASSESSEE . IDENTICALLY, THE HON'BLE HIGH COURT OF DELHI IN CIT VS. ASHISH RAJPAL (320 ITR 674) VIDE ORDER DT.14/5/2009, DECIDED IN FAVOUR OF THE ASSESSEE . THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (203 ITR 108) HELD THAT THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO SATISFY HIMSELF THAT TWO REQUISITE PROVIDED U/S. 263 ARE PRESENT, OTHERWISE POWER CANN OT BE EXERCISED AT THE WHIMS AND CAPRICE OF THE COMMISSIO NER. WE HAVE ALSO SEEN THE PAPER BOOK FILED BY THE ASSESSEE AND THE DOCUMENTS/PAPERS CONTAINED/MENTIONED THEREIN WERE D ULY MADE AVAILABLE BEFORE THE ASSESSING OFFICER, BEFORE FRAM ING THE ASSESSMENT U/S. 143(3) OF THE ACT AND ARE SATISFIED THAT HE ASKED THE ASSESSEE TO FURNISH THE NECESSARY DETAILS, THER EFORE, THE OBSERVATION MADE BY THE LD. COMMISSIONER IS NOT SUB STANTIATED AS HAS BEEN ALLEGED IN THE REVISIONAL ORDER. 2.12. ADMITTEDLY, AN INCORRECT ASSUMPTION OF FACT O R AN INCORRECT APPLICATION OF LAW WOULD SATISFY THE REQUIREMENT OF ORDER BEING ERRONEOUS U/S. 263 OF THE ACT. THE PHRASE PREJUDIC IAL TO THE INTEREST OF THE REVENUE U/S. 263 OF THE ACT, HAS T O BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER B Y THE ASSESSING OFFICER . EVERY LOSS OF REVENUE AS A CONS EQUENCE OF ASSESSMENT ORDER CANNOT BE TERMED AS PREJUDICIAL T O THE INTEREST OF REVENUE. MEANING THEREBY PREJUDICE MUST BE PR EJUDICE TO M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 28 THE REVENUE ADMINISTRATION. AT THE SAME TIME, IF AN OTHER VIEW IS POSSIBLE REVISION IS NOT PERMISSIBLE. OUR VIEW IS F ORTIFIED BY THE DECISION FROM HIMACHAL PRADESH FINANCIAL CORPN. (186 TAXMANN 105)(HP), BISMILLAH TRADING CO. (248 ITR 292)(KER.) AND CIT VS. GREEN WORLD CORPN. (314 ITR 81)(SC) . FOR INVOKING REVISIONAL JURISDICTION U/S. 263 THE ASSESSMENT ORDER MUST CON TAIN GRIEVOUS ERROR WHICH IS SUBVERSIVE OF THE ADMINIS TRATION OF REVENUE. FURTHER, EXACT ERROR MUST BE DISCLOSED B Y THE COMMISSIONER AS WAS HELD IN CIT VS. G.K. KABRA (211 ITR 336)(AP) . TOTALITY OF FACTS, CLEARLY INDICATES THAT ASSESSM ENT U/S. 143(3) OF THE ACT WAS FRAMED BY THE ASSESSING OFFIC ER AFTER OBTAINING NECESSARY DETAILS FROM THE ASSESSEE AND F URTHER THE SAME WERE EXAMINED BY HIM. THEREFORE, EVEN IF, THE SAME HAS NOT BEEN SPELT ELABORATELY IN THE ASSESSMENT ORDER IT C ANNOT BE SAID THAT THERE IS A LACK OF ENQUIRY OR PREJUDICE HA S BEEN CAUSED TO THE REVENUE, AS WE HAVE DISCUSSED VARIOUS CASE LAWS IN EARLIER PART OF THIS ORDER WHICH ARE IDENTICAL TO THE FACTS BEFORE US. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF MUMBA I BENCH OF THE TRIBUNAL (WHEREIN ONE OF US I.E. JM IS SIGNATORY TO THE ORDER ) IN THE CASE OF MEHTA TRADING COMPANY (ITA NO.2838/MUM/ 2013), ORDER DATED 31/10/2014, WHICH IS ALSO ON IDENTICAL FACTS/ISSUE. IN VIEW OF THESE FACTS AND THE JUDICIAL PRONOUNCEME NT FROM HON'BLE APEX COURT AND VARIOUS HON'BLE HIGH COURTS WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER AND DECIDE THE APPEAL IN FAVOUR OF THE ASSESSEE, BECAUSE, BY NO STRETCH OF I MAGINATION, THE ASSESSMENT ORDER CAN BE TERMED AS ERRONEOUS AND/OR PREJUDICIAL TO THE INTEREST OF THE REVENUE, THUS, INVOKING REVI SIONAL JURISDICTION BY THE LD. COMMISSIONER CANNOT BE UPHE LD. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED . M/S SHIMNIT KIWALITE INDUSTRIES PVT. LTD 29 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/01/2015. - ' *+, .!/ 07/01/2015 + ' 5 SD/- SD/- (SANJAY ARORA) (JOGINDER SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; .! DATED : 16/01/2015 F{X~{T? P.S/. !.. - ' 7%8 98,% - ' 7%8 98,% - ' 7%8 98,% - ' 7%8 98,%/ COPY OF THE ORDER FORWARDED TO : 1. :; / THE APPELLANT 2. 7<:; / THE RESPONDENT. 3. = ( ) / THE CIT, MUMBAI. 4. = / CIT(A)- , MUMBAI 5. 8?5 7%! , , / DR, ITAT, MUMBAI 6. 5@ A / GUARD FILE. -! -! -! -! / BY ORDER, <8% 7% //TRUE COPY// B BB B/ // /C & C & C & C & (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI