Cuttack Development Authority, Cuttack V. CIT, Cuttack, Cuttack

ITA 361/CTK/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4343 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-02-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 22-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Capital receipt; Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 CUTTACK DEVELOPMENT AUTHORITY, ARUNODAYA MARKET, CUTTACK VS. CIT, CUTTACK PAN/GIR NO. AACHC 0247 F (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K.MOHAPATRA AR REVENUE BY : SHRI PIYUSH KOLHE, CIT DR DATE OF HEARING : 28 /02/ 2018 DATE OF PRONOUNCEMENT : 5 /03/ 2018 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT, CUTTACK U/S.263 OF THE INCOME TAX ACT DATED 11.3.2014 FO R THE ASSESSMENT YEAR 2009 - 2010. 2. ALTHOUGH VARIOUS GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL, BUT THE ONLY ISSUE REQUIRED TO BE ADJUDICATED BEFORE US IS AS TO WHETHER THE CIT IS JUSTIFIED IN ASSUMING JURISDICTION U/S.263 OF THE ACT SETTING ASIDE THE ORDER OF THE ASSESSMENT UNDER SECTION 143(3) AND DIRECTING THE ASSESSING OFFICER TO REDO THE ASSESSMENT. 2 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A LOCAL BODY AUTHORITY ASSESSED IN THE STATUS OF ARTIFICIAL JURIDICAL PERSON. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE RETURN OF INCOME WAS FILED ON 30.9.2009 DISCLOSING TOTAL INCOME OF RS. NIL AFTER SETTING OFF OF THE BROUGHT FORWARD LOSSES OF EARLIER YEARS. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 30. 1.2011 DETERMINING THE TOTAL INCOME AT RS. NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES, INTER ALIA, DISALLOWING RS.40,482/ - TOWARDS DEDUCTION OF FBT. 4. THE COMMI SSIONER OF INCOME TA X, ON VERIFICATION OF RECORDS OF THE ASSESSEE , FOUND THAT THE ASSESSEE HAD DEBITED RS.3,50,00,000/ - IN THE PROFIT AND LOSS ACCOUNT TOWARDS LAND PREMIUM. HOWEVER, IN THE PROFIT AND LOSS ACCOUNT, NEITHER ANY SALE PROCEED OF LAND WAS CREDITED NOR THE PREMIUM VALUE OF THE LAND WAS DISCLOSED AS THE CLOSIN G STOCK. THE CIT WAS OF THE OPINION THAT THE LAND PREMIUM PAID AND DEBITED TO PROFIT AND LOSS ACCOUNT IS NOT A REVENUE EXPENDITURE BUT A CAPITAL EXPENDITURE AND HENCE THE SAME IS NOT ADMISSIBLE FOR DEDUCTION U/S.37(1) OF THE ACT. HE, THEREFORE, OPINED TH AT THE ASSESSING OFFICER HAS NOT EXAMINED THE ABOVE ASPECTS WHILE COMPLETING THE ASSESSMENT. HENCE, HE CONSIDERED THE ASSESSMENT ORDER U/S.143(3) IS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, A SHOW CAUSE NOTICE U/S.26 3 OF THE ACT WAS ISSUED TO THE ASSESSEE DIRECTING TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER DATED 30.11.2011 SHOULD NOT BE CANCELLED. 3 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 5. THE ASSESSEE SUBMITTED THAT THE LAND PREMIUM OF RS.3,50,00,000/ - WAS PAID TO THE GOVERNMENT OF ODISHA TOWARDS ENHANCED COST OF LAND FOR THE LANDS ALREADY ACQUIRED IN EARLIER YEARS AND THE LANDS WERE ALREADY SOLD TO DIFFERENT PERSONS. THEREFORE, NO LANDS WERE LEFT TO BE SHOWN AS CLOSING STOCK. 6. THE CIT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND NOTED THAT IT HAS BEE N JUDICIALLY SETTLED THAT PREMIUM PAID FOR LAND IS CAPITAL EXPENDITURE AND PERIODICAL RENTALS PAID IS REVENUE EXPENDITURE AND REFERRED TO THE JUDICIAL DECISIONS IN THE IMPUGNED ORDER. HE OBSERVED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THIS ASPECT WHILE FRAMING THE ASSESSMENT ORDER U/S.143(3) OF THE ACT . THER EFORE, IN THE OPINION OF THE CIT, THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HENCE, HE IN EXERCISE OF HIS POWER CONFERRED U/S.263 OF THE ACT , SET ASIDE THE ASSESSMENT ORDER AND RESTORED THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDO THE ASSESSMENT AFTER AFFORDING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE AFT ER EXAMINING THE FOLLOWING ISSUES: 1. WHEN AND WHAT IS THE EXTENT OF LAND ACQUIRED BY THE ASSESSEE FROM GOVERNMENT OF ODISHA WITH REFERENCE TO WHICH LAND PREMIUM OF RS.3,50,00,000/ - HAS BEEN DEMANDED AND THE RATE AT WHICH SAID LAND WAS ACQUIRED. 2 . WHEN A ND TO WHOM SUCH LANDS WERE SOLD/DISTRIBUTED. 3 . WHEN THE DEMAND NOTICE FOR PAYMENT OF LAND PREMIUM WAS RECEIVED FROM THE GOVERNMENT OF ODISHA. 4 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 4. IF LAND PREMIUM PAYMENTS ARE CONSIDERED CAPITAL EXPENDITURE WHETHER THE RECEIPTS ON ACCOUNT OF TRANSFER FEES A ND STAMP DUTY WOULD CONSTITUTE CAPITAL RECEIPT. 7 . AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 8 . BEFORE US, LD A.R. SUBMITTED THAT THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT AND THE ASSESSING OFFICER CALLED FOR TH E BOOKS OF ACCOUNT AND BEEN VERIFIED AND EXAMINED. THE LD A.R. FILED THE ASSESSMENT ORDER U/S.143(3) OF THE ACT AND SUBMITTED THAT THE ASSESSING OFFICER MADE DISA LLOWANCE AND, THEREFORE, THE CIT HAS ERRED IN REVISING T HE ORDER THOUGH IT IS NOT PREJUDICIAL AND ERRONEOUS TO THE INTERESTS OF THE REVENUE. LD A.R. EXPLAINED THAT RS.3,50,00,000/ - WAS PAID TO GOVERNMENT OF ODISHA TOWARDS LAND S PREMIUM WHICH WERE SOLD IN EARLIER YEARS, WHICH IS FULLY ALLOWABLE EXPENDITURE U/S. 37 OF THE ACT AS THE LAND IS NOT A FIXED ASSET. 9 . CONTRA, LD D.R . RELIED ON THE ORDER OF THE CIT AND EXPLAINED THAT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOT DISCUSSED REGARDING LAND PREMIUM PAID TO ODISHA GOVERNMENT AND, THEREFORE, THE CIT IS JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER BY INVOKING HIS POWER CONFERRED U/S.263 OF THE ACT. 10 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE SOLE DISPUTED ISSUE IS 5 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 WITH RESPECT TO SETTING ASIDE THE ASSESSMENT ORDER BY THE CIT IN RESPECT OF LAND PREMIUM OF RS.3.,50,00,000/ - . ON PERUSAL OF ASSESSMENT ORDER U/S.143(3) OF THE ACT DATED 30.11.2011, WE FIND THAT NO DISCUSSION WAS MADE BY THE ASSESSING OFFICER REGARDING L AND PREMIUM PAID OF RS.3,50,00,000/ - TO GOVERNMENT OF ODISHA. NO ENQUIRIES WERE ALSO MADE BY THE ASSESSING OFFICER. PRIM A FACIE, IT APPEARS THAT THE CIT FOUND THAT THE ORDER PASSED U/S.143(3) OF THE ACT IS WITHOUT MAKING ENQUIRIES ON THIS PARTICULAR DISP UTED ISSUE, WHICH IS RAISED IN THE REVISION PROCEEDINGS. LD A.R. SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND ONLY DEMONSTRATED BEFORE US THAT RS.3,50,00,000/ - WAS PAID TO GOVERNMENT OF ODISHA TOWARDS LAND PREMIUM WHICH WERE SOLD IN EARLIER YEARS, WHICH IS FULLY ALLOWABLE EXPENDITURE U/S.37 OF THE ACT AS THE LAND IS NOT A FIXED ASSET BUT STO C K IN TRADE . WE ARE OF THE CONSIDERED OPINION THAT THE EXPLANATION S SUBMITTED BEFORE US ARE TO BE VERIFIED BY T HE ASSESSING OFFICER AND THE CIT HAVING DEALT ON THIS ISSUE AND HAS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AS THE FACTS ARE NOT EMANATING OUT OF ASSESSMENT ORDER. WE RELY ON VARIOUS JUDICIAL PRONOUNCEMENTS, WHEREIN, IT WAS HELD THAT THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME - TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE S TATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. IT WAS ALSO HELD THAT THE INCOME - TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN O F 6 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 I N C O M E . WHEN THE CIRCUMSTANCES OF THE CASE AR E SUCH SO AS TO PROVOKE AN ENQUIRY, IT IS HIS DUTY TO MAKE PROPER ENQUIRY. FAILURE TO MAKE ENQUIRY IN SUCH CIRCUMSTANCES WOULD MAKE THE ASSESSMENT ORDER ERRONEOUS. THE HONBLE APEX COURT IN THE CASE OF SMT. TARA DEVI AGGARWAL VS. CIT, 88 ITR 323 (SC), HAS HELD THAT THE CIT MAY CONSIDER AN ORDER OF THE AO TO BE ERRONEOUS NOT ONLY IT CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO BECAUSE IT IS A STEREO TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATE D IN HIS RETURN AND FAILS TO MAKE ENQUIRIES WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. RECENTLY, THE HONBLE APEX COURT IN THE CASE OF DENIAL MERCHANTS PVT LTD. VS ITO IN SPECIAL LEAVE (C) NO.(S) 23976 /2017 AND OTHERS ORDER DATED 29.11.2017 HA S UPHELD THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT PASSED ON 10.4.2017 IN G.A. NO.599/2016, DISMISSING THE SPECIAL LEAVE PETITION OBSERVING THAT THE CIT AFTER SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER, SIMPLY DIRECTED THE ASSESSING OFFICER TO CAR RY THOROUGH AND DETAILED ENQUIRY. 11 . IN THE PRESENT CASE , THE CIT HAS DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY EXAMINATION REGARDING THE EXTENT OF LAND ACQUIRED BY THE ASSESSEE WITH REFERENCE TO WHICH LAND PREMIUM OF RS.3,50,00,000/ - WAS DEMANDED AND RATE AT WHICH SAID LAND WAS ACQUIRED AND TO WHOM THE LANDS WERE SOLD AND LAND PREMIUM WAS RECEIVED AND SUCH RECEIPTS ON ACCOUNT OF TRANSFER FEES AND STAMP DUTY WOULD CONSTITUTE CAPITAL RECEIPTS. WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WILL MAKE ENQUIRIES AS 7 ITA NO. 361/CTK/2014 ASSESSMENT YEAR : 2009 - 2010 DIRECTED BY THE CIT AND MAKE FRESH ASSESSMENT. ACCORDINGLY , WE UPHOLD THE ORDER OF THE CIT AND DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 5 /03/2018. S D / - S D / - ( N.S SAINI) ( PAVAN KUMAR GADALE) A CCOUNTANT MEMBER JUDICIALMEMBER CUTTACK; DATED 5 /03/2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : CDA, CUTTACK 2. THE RESPONDENT. CIT , CUTT A CK 3. THE CIT(A) - 4. PR.CIT - 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//