Infinity Infotech Parks Ltd., Kolkata V. DCIT, CIR-2(1), KOLKATA, Kolkata

ITA 413/KOL/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0499 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Capital asset; Business income; Revision of order; Depreciation; Opportunity of being heard; Principle of natural justice; Period of limitation; Fair market value; Assessment record; Reason to believe; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 44AD; 143(3); 142(1); 115JB; 32; 147; 148; 263; 63

Judgement Text

I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 1 OF 45 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER I.T.A. NO S . 413 & 414 /KOL/ 2015 ASSESSMENT YEAR S : 2007 - 2008 & 2010 - 2011 INFINITY INFOTECH PARKS LIMITE D,......................... . APPELLANT PLOT A - 3, BLOCK GP, SALT LAKE, SECTOR - V, KOLKATA - 700 091 [PAN : AABCI 0692 J] - VS. - DEPUTY COMMISSIONER OF INCOME TAX,................. . RESPONDENT CIRCLE - 2(1), KOLKATA, AAYAKAR BHAWAN, P - 7, CHOWRINGHEE SQU ARE, KOLKATA - 700 069 APPEARANCES BY: SHRI D.S. DAMLE, FCA, FOR THE ASSESSEE SMT. SUCHISMITA PALAI, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MAY 21, 2015 DATE OF PRONOUNCING THE ORDER : JUNE 09 , 2015 O R D E R PER P.K. BANSAL: BOTH T H E S E APPEAL S HA VE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX - I, KOLKATA PASSED UNDER SECTION 263 OF THE INCOME TAX ACT DATED 26.03.2015 AND 20.03.2015 FOR THE ASSESSMENT YEAR S 2007 - 08 AND 2010 - 11 RES PECTIVELY . THE ISSUES IN BOTH THE APPEALS ARE COMMON THEREFORE WE HAVE DECIDED TO DISPOSE OF THESE APPEALS BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ITA NO. 413/KOL/2015 (ASSESSMENT YEAR : 2007 - 2008) THE ASSESSEE IN THIS CASE HAS TAKEN AS MAN Y AS 12 GROUNDS OF APPEAL CHALLENGING THE ORDER PASSED UNDER SECTION 263 BOTH ON LEGALITY AS WELL AS ON MERIT. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 2 OF 45 3 . BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 WAS COMPLETED ON 31.12.2000 WHICH W AS SUBSEQUENTLY RE - OPENED BY RECORDING THE FOLLOWING REASONS TO BELIEVE: - IT WAS SEEN THAT AS PER NOTE B - 8 OF SCHEDULE P OF THE ACCOUNTS CONTAINED IN THE ANNUAL REPORT FOR THE YEAR ENDING 31.03.2007, THE ASSESSEE COMPANY ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES P. LTD. DURING THE YEAR ENDING 31.3.2007 FOR DEVELOPMENT OF ITS LAND AND THE DEVELOPER HAD TO BEAR ALL THE COSTS AND THE ASSESSEE WILL GET 39% OF THE TOTAL BUILT UP AREA AS WELL AS PARKING AREA. THE NOTE B - 8 IS REPRODUCED BELOW - THE COMPANY HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES P. LT D . FOR THE 5.5978 ACRES OF LEASE HOLD LAND AT SALT LAKE, SECTOR - V, KOLKATA, WHEREBY THE DEVELOPER WILL INCUR ALL THE DEVELOPMENTAL COSTS AS ENVISAGED IN THE SA ID AGREEMENT AND UPON COMPLETION OF CONSTRUCTION THE COMPANY SHALL BE ENTITLED TO THE 39% OF THE TOTAL BUILT UP AREA AS WELL AS PARKING AREA . SCHEDULE F IN RESPECT OF FIXED ASSETS SHOWS LEASEHOLD LAND AT RS.1,89,74,418/ - . SCHEDULE E IN RESPECT OF LIABILI TIES REFLECTS JOINT DEVELOPMENT DEPOSIT AT RS. 5 CRORE. IT IS THUS APPARENT THAT THERE WAS TRANSFER OF THE LAND, BEING CAPITAL ASSET DURING THE YEAR ENDING 31.3.2007 RELEVANT TO AY 2007 - 08 AND THE RESULTANT CAPITAL GAIN IS ASSESSABLE IN AY 2007 - 08 AS PER DECISION OF VARIOUS COURTS IN RESPECT OF DEVELOPMENT AGREEMENTS. AS PER INFORMATION AVAILABLE FROM NEWS LETTER OF THE ASSESSEE COMPANY DATED 4.4.2011, THE TOTAL AREA OF SPACE IN TOWER 1 IS 6,15,557 SFT. AND THAT IN THE TOWER 2 IS 12,40,180 SFT. THE GRAND TOTAL BEING 18,55,847 S.FT. ASSESSEE S SHARE RECEIVABLE OF 39% = 7,23,781 SFT. IN THE CASE OF THE ASSESSEE COMPANY WHICH DEVELOPED AND SUB - LEASED SIMILAR IT BUILDING IN SALT LAKE, SECTOR - V, THE ADMITTED RATE OF COST OF CONSTRUCTION OF AREA SOLD IN FY 2007 - 08 IS RS.3,390/ - PER SQ.FT. VIDE ASSESSMENT RECORDS OF THE ASSESSEE COMPANY FOR THE AY 2007 - 08. ON THE SAME BASIS, THE SA L E CONSIDERATION FOR 61% OF THE LAND OF ASSESSEE (39% OF PROPORTIONATE LAND IN RETAINED BY ASSESSEE ALONG WITH CONSTRUCTED AREA) IS 7, 23,781 SFT. X RS.3,390/ - /SFT. = RS.245,36,17,590/ - . THE PROPORTIONATE COST OF LAND TO THE ASSESSEE IS RS.1,89,74,418/ - X 61% = RS.1,15,74,390/ - . THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 3 OF 45 ASSESSEE IS ENTITLED TO BENEFIT OF INDEXATION. EVEN THEN THE LONG TERM CAPITAL GAIN ASSESSABLE WOULD NOT BE LESS THAN RS.225 CRORE, ON WHICH TAX PAYABLE IS AT THE RATE OF 20% PLUS SURCHARGE / EC ETC. BUT THE ASSESSEE COMPANY HAS NOT DISCLOSED ANY CAPITAL GAIN IN THE RETURN. NO CAPITAL GAIN WAS ASSESSED EITHER. IN VIEW OF THE ABOVE, THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR THE AY 2007 - 08 HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 . ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 WAS COMPLETED VIDE ORDER DATED 30.03.2013 DETERMINING THE BOOK PROFIT AT RS.1,99,42,048/ - UN DER SECTION 115JB OF THE INCOME TAX ACT. IN THE SAID ASSESSMENT, THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON ACCOUNT OF THE CAPITAL GAIN BUT TOOK THE VIEW THAT NO INCOME HAS ACCRUED OR ARISEN TO THE ASSESSEE IN THE ASSESSMENT YEAR 2007 - 08 BY OBSERVI NG AS UNDER: - CONSIDERING AND VERIFYING ALL THE SUBMISSION FILED BY THE ASSESSEE AND INFORMATION COLLECTED FROM GODREJ PROPERTIES LIMITED AND NABADIGANTA INDUSTRIAL TOWNSHIPS AUTHORITY, NO CAPITAL GAIN ACCRUES OR ARISES TO THE ASSESSEE IN THE AY 2007 - 08 . THE BOOK PROFIT WAS DETERMINED AT RS.1,99,42,048/ - AS HAS ORIGINALLY BEEN DETERMINED. SUBSEQUENTLY CIT INVOKED THE JURISDICTION UNDER SECTION 263 BY ISSUING THE SHOW - CAUSE NOTICE DATED 19.02.2015 TO THE ASSESSEE. THE SAID SHOW - CAUSE NOTICE READS AS UNDER : - DURING THE F.Y. 2006 - 07 RELEVANT TO A.Y. 2007 - 08 THE ASSESSEE COMPANY HAD AN AGREEMENT WITH M/S. GODREJ WATER SIDE PROPERTIES PVT. LTD. ON 07.02.2007 FOR ALLOWING THE PERMISSION TO M/S .GODREJ WATERSIDE PROPERTIES PVT. LTD. FOR THE PURPOSE OF CARRYING OUT OF THE CONSTRUCTION OF THE I.T .PROJECT. IT WAS AGREED THAT FOR CONSIDERATION FOR PROVIDING LAND BY THE ASSESSEE COMPANY TOWARDS THE DEVELOPMENT OF I.T. PROJECT BY THE GODREJ WATERSIDE PROPERTIES PVT. LTD. AND AFTER COMPLETION OF I.T PROJECT, 39% OUT O F TOTAL CONSTRUCTED AREA OF I.T. PROJECT TOGETHER WITH AMENITIES AND THEREIN SHALL BELONG TO ASSESSEE COMPANY AND BALANCE 61% CONSTRUCTED AREA WITH FACILITIES SHALL BELONG TO THE GODREJ WATERSIDE PROPERTIES L TD. SIMILARLY, THE ENTIRE COMMON AREA, OPEN AREA WHATSOEVER NATURE SHALL BE APPORTIO NED ON THE SIMILAR PROPORTION I.E. 39% AND 61%. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 4 OF 45 DUR ING THE COURSE OF ASSESSMENT, IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE CAPITAL GAIN TAX IS PAYABLE IN THE F.Y. 2010 - 11 & 2011 - 12 WHEN THE CONSIDERATION PROVIDED IN THE AGREEMENT WAS ACTUALLY PAYABLE ON 39% OF TOTAL CONSTRUCTED AREA TRANSFERRED AND THE ASS ESSING OFFICER HAD ACCEPTED THE ASSESSEE'S SUBMISSION . HOWEVER, AS PER THE PROVISIONS OF SECTION 2(47)(V) OF THE I.T. ACT ANY, TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART - PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECTION 2(47)(V). IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING CONDITIONS N EED TO BE FULFILLED. THERE SHOULD BE A CONTRACT FOR CONSIDERATION, IT SHOULD BE IN WRITING; IT SHOULD BE SIGNED BY THE TRANSFEROR; IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY; LASTLY THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF THE CONTRACT. EVEN ARRANGEMENTS CONFIRMING PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE CAN FALL UNDER SECTION 2(47)(V). THE LEGISLATURE HAS INTRODUCED SECTION 2(47)(V) READ WITH SECTION 45 WHICH INDICATES THAT CAPITAL GAINS IS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. THE YEAR OF CHARGEABILITY IS THE YEAR IN WHICH THE CONTR ACT IS EXECUTED. SECTION 2(47(V) HAD BEEN ENACTED AND IN SUCH CASES, EVEN ENTERING INTO SUCH A CONTRACT COULD AMOUNT TO TRANSFER FROM THE DATE OF THE AGREEMENT ITSELF. THEREFORE, IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY, AN ASSESSING OFFICER CO MES TO THE CONCLUSION THAT IN THE GUISE OF AGREEMENT FOR SALE, A DEVELOPMENT AGREEMENT IS CONTEMPLATED, UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSIONS FROM VARIOUS AUTHORITIES, EITHER UNDER POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF THE ASSESSEE, THEN THE ASSESSING OFFICER IS ENTITLED TO TAKE THE DATE OF CONTRACT AS THE DATE OF TRANSFER IN VIEW OF SECTION 2(47)(V). THEREFORE, THE DECISION TAKEN BY THE ASSESSING OFFICER ON THIS ISSUE IS NOT AS PER THE PROVISIONS OF LAW. THE AS SESSING OFFICER HAS WRONGLY ALLOWED EXCESS DEPRECIATION OF RS.3,03,21,882/- CONSIDERING T HE CURRENT ASSETS AS FIXED ASSETS. IN V IEW OF THE ABOVE FACTS, THE ORDER PASSED U/S 147/143(3) ON 30.03.2013 FOR A.Y. 2007 - 08 APPEARS TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO T HE INTERESTS OF REVENUE. THEREFORE, IT IS PROPOSED TO TAKE UP ABOVE ASSESSMENT ORDER U/S 147/143(3) DATED 30.03.2013 FOR REVISION U/S 263 OF THE I.T. ACT, 1,961. YOUR CASE IS FIXED FOR HEARING U/S 263 OF THE I.T. ACT, 1961 ON 27.02.2015 AT 12.00 NOON FOR T HIS PURPOSE. IN CASE OF FAILURE TO RESPOND TO THIS NOTICE, DECISION MAY BE TAKEN ON MERITS OF THE CASE . I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 5 OF 45 4 . FROM THE SAID SHOW - CAUSE NOTICE IT IS APPARENT THAT THE CIT HAS INVOKED THE JURISDICTION UNDER SECTION 263 ONLY ON TWO ISSUES, THE FIRST ISSUE WAS IN RESPECT OF THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH GODREJ WATERSIDE PROPERTIES PVT. LTD., THE CAPITAL GAIN HAS ARISEN TO THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR IN THE OPINION OF THE CIT, ASSESSING OFFICER ERRONEOUSLY NOT AS SESSED THE CAPITAL GAIN DURING THE IMPUGNED ASSESSMENT YEAR IN RESPECT OF TRANSACTION UNDER THE SAID DEVELOPMENT AGREEMENT WHICH ASSESSEE ENTERED INTO WITH GODREJ WATERSIDE PROPERTIES P LTD., AND ALSO THAT THE ASSESSING OFFICER HAS WRONGLY ALLOWED EXCESS DEPRECIATION OF RS.3,03,21,882/ - CONSIDERING THE CURRENT ASSETS AS FIXED ASSETS. THE ASSESSEE VIDE ITS LETTER DATED 04.03.2015 OBJECTED TO THE PROCEEDING BEING INITIATED UNDER SECTION 263 BOTH ON LEGAL GROUNDS AS WELL AS ON MERITS STATING THAT THE ORDER PA SSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: - (I) MALABAR INDUSTRIAL CO. VS. - CIT [243 ITR 83 (SC); (II) CIT VS. - ALOKANDRAN FINANCE L IMITED [293 ITR 1 (SC); (III) RADHASWAMI SATSANG VS. - CIT (SC); (IV) CIT VS. - HINDUSTHAN MOTORS LIMITED [92 ITR 619 (CALCUTTA); (V) RUSSEL PROPERTIES PVT. LTD. VS. - CIT [109 ITR 229 (CAL.); (VI) CIT VS. - GOPAL PUROHIT [228 CTR 582 (MUMBAI); CIT ULTIMATELY VIDE HIS ORDER PASSED UNDER SECTION 263 SET ASIDE THE ASSESSMENT ON BOTH THESE ISSUES RELATING TO THE CHARGEABILITY OF THE CAPITAL GAINS DURING THE IMPUGNED ASSESSMENT YEAR AS WELL AS ALLOWANCE OF THE DEPRECIATION TO THE ASSESSEE AND DIRECTED TH E ASSESSING OFFICER TO COMPLETE THE ASSESSMENT DE NOVO. 5 . LD. A.R. BEFORE US SUBMITTED THAT THE PROCEEDING UNDER SECTION 263 HAS BEEN INITIATED BY THE CIT. THE MAIN REASONS FOR WHICH THE ASSESSMENT ORDER WAS HELD TO BE ERRONEOUS I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 6 OF 45 (1) THAT THE COMPANY DU RING THE FINANCIAL YEAR 2006 - 07 ENTERED INTO AN AGREEMENT WITH M/S. GODREJ WATERSIDE PROPERTIES PVT. LTD. FOR DEVELOPMENT OF COMPANY S LEASEHOLD PROPERTY IN TERMS OF WHICH SAID COMPANY WAS TO PROVIDE 39% OF THE CONSTRUCTED AREA FREE OF COST AND THE CAPITAL GAINS IN RESPECT OF THE SAID TRANSACTION WAS DECLARED BY THE COMPANY IN THE ASSESSMENT YEARS 2011 - 12 AND 2012 - 13. IN VIEW OF THE PROVISIONS OF SECTION 2, SUB - SECTION 47(V) READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT, THE TRANSFER OF THE CAPIT AL ASSET TOOK PLACE IN ASSESSMENT YEAR 2007 - 08 AND, THEREFORE, THE CAPITAL GAIN ON GRANT OF DEVELOPMENT RIGHT WAS CHARGEABLE IN ASSESSMENT YEAR 2007 - 08 WHEREAS THE ASSESSING OFFICER ACCEPTED THE COMPANY S CONTENTION THAT IT WAS CHARGEABLE IN FINANCIAL YEA RS 2010 - 11 AND 2011 - 12. AND; (2) THE ASSESSING O FFICER WRONGLY ALLOWED EXCESS DEPRECIATION OF RS.3,03,21,882/ - CONSIDERING THE CURRENT ASSETS AS FIXED ASSETS. 6 . IT WAS SUBMITTED THAT THE ORDER PASSED UNDER SECTION 147 READ WITH SECTION 143(3) DATED 30.0 3.2013 IS NOT ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE JURISDICTION UNDER SECTION 263 IS IN EXCESS OF THE POWERS CONFERRED BY THE ACT AND THE POWERS ARE BEING EXERCISED IN ORDER TO SUBSTITUTE THE SUBJECTIVE OPINION OF THE SUPERV ISORY AUTHORITY IN PLACE OF THE OPINION OF THE ASSESSING AUTHORITY WHO AFTER DUE CONSIDERATION OF THE FACTS AND APPLICABLE LEGAL PROVISIONS HAD FOLLOWED ONE OF THE LEGAL COURSE PERMISSIBLE IN FORMING THE ORDER DATED 30.03.2013. THE COMPANY IS ENGAGED IN TH E BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING INFORMATION TECHNOLOGY PARKS. THE COMPANY SET UP ITS FIRST IT PARK KNOWN AND TITLED AS INFINITY THINK TANK AT PLOT A/3, BLOCK GP, SALT LAKE ELECTRONIC COMPLEX, SECTOR - V, KOLKATA - 700 091. THE SAID PARK C ONSISTED OF TWO TOWERS. THE DEVELOPMENT OF THE SAID IT PARK COMMENCED IN AND AROUND 1996 - 97 AND PROCEEDED IN PHASES OVER THE YEARS. THE FIRST TOWER WAS DEVELOPED AND CONSTRUCTION WAS COMPLETED IN FINANCIAL YEAR 2000 - 01. CONSTRUCTION AND DEVELOPMENT OF THE SECOND I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 7 OF 45 TOWER WHICH PROGRESSED IN PHASES WAS COMPLETED IN ASSESSMENT YEAR 2006 - 07. THE COMPANY OWNS OPERATES AND MAINTAIN THE SAID IT PARK, PART OF WHICH IS OWNED BY THE COMPANY AND PART OF WHICH IS LEASED ON LONG - TERM BASIS TO SEVERAL TRANSFEREES. HOWEVER, FOR OPERATING AND MAINTAINING THE IT PARK, THE COMPANY HAD MADE SUBSTANTIAL INVESTMENT IN ATTENDANT FACILITIES AND AMENITIES WHICH ARE NEEDED TO OPERATE THE I.T. PARK. SUBSTANTIAL COST WAS INCURRED IN INSTALLING PLANT AND MACHINERIES FOR OPERATION OF IT P ARK. THE PLANT & MACHINERIES INSTALLED INTER ALIA INCLUDED CENTRAL AIR CONDITIONING PLANT, ELEVATORS, FIRE FIGHTING EQUIPMENTS, BUILDING AUTOMATION SYSTEM, SECURITY SYSTEMS, ELECTRICAL AND CABLING HIGH SPEED DATA CABLES, ELECTRICAL SUB - STATIONS, DG BACKUPS , ETC. THE ASSESSEE REGULARLY DERIVED INCOME FROM THE OCCUPANTS FOR USE OF THE SERVICES AND SERVICE CHARGES RECEIVED HAVE ALWAYS BEEN ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. SINCE THE ASSESSEE CONTINUED TO OWN THESE PLANTS AND EQUIPMENTS AND THE COMP ANY DID NOT RECEIVE CONSIDERATION FOR TRANSFER OF THESE EQUIPMENTS AND PLANT TO THE LESSEES THE COMPANY WAS ELIGIBLE TO CLAIM DEPRECIATION ON THESE ASSETS. THE IT PARK SO DEVELOPED IS RECORDED IN COMPANY S BOOKS AS FIXED/DEPRECIABLE ASSETS. IT WAS NEVER SH OWN OR DECLARED IN THE IT RECORDS TO BE CURRENT ASSETS, BUT WAS ALWAYS DECLARED TO BE PART OF THE DEPRECIABLE ASSET AND DEPRECIATION ON THE BUILDING AS WELL AS PLANT AND MACHINERIES INSTALLED WITH THE IT PARK WAS ALWAYS ALLOWED UNDER SECTION 32 OF THE ACT. IN THE INCOME TAX ASSESSMENT UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2004 - 05 AND ONWARDS THE DEPRECIATION CLAIMED WAS ALLOWED BY THE ASSESSING OFFICER AFTER MAKING THOROUGH DISCUSSION WITH REGARD TO THE NATURE OF THE BUSINESS CONDUCTED BY THE COMPANY. 7 . IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD OBTAINED LAND PARCELS ON LEASE FROM WEST BENGAL ELECTRONIC INDUSTRIAL DEVELOPMENT CORPORATION. IT INCLUDES A PLOT OF LAND ADMEASURING 5.5978 ACRES SITUATED AT BLOCK DP/5, SECTOR - 5, SALT LAKE, KOLKATA. THE A SSESSEE DECIDED TO DEVELOP THE SAID LEASEHOLD LAND THROUGH A JOINT VENTURE WITH GODREJ GROUP WHO HAD EXPERTISE IN DEVELOPMENT OF IT PARK AND ACCORDINGLY, THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 8 OF 45 COMPANY ENTERED INTO A DEVELOPMENT AGREEMENT WITH GODREJ PROPERTIES LIMITED GRANTING THE SAID COMP ANY DEVELOPMENT RIGHTS IN RESPECT OF THE SAID LAND. FOR THIS OUR ATTENTION WAS DRAWN TO PAGE 92 TO 119 OF THE PAPER BOOK. IN PURSUANCE WITH THE SAID DEVELOPMENT AGREEMENT, THE ASSESSEE HAD RECEIVED SECURITY DEPOSIT OF RS.500 LACS. THE RECEIPT HAD DULY BEEN ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE AND SHOWN IN THE AUDITED BALANCE - SHEET FOR THE YEAR AS ON 31.03.2006 AS WELL AS 31.03.2007. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED FOR THE IMPUGNED ASSESSMENT YEAR ON 31.12.2009. IN THIS ASSESSMENT, TH E ASSESSING OFFICER TOOK INTO ACCOUNT ALL THE RELEVANT FACTS CONCERNING THE COST OF CONSTRUCTION WHICH THE ASSESSEE HAD INCURRED ON CONSTRUCTION OF THE IT PARK AND THE DEPRECIATION CLAIMED THEREON FROM TIME TO TIME TILL 31.03.,2006. THE ASSESSING OFFICER N OTED THAT DURING THE FINANCIAL YEAR 2006 - 07, THE ASSESSEE TRANSFERRED ON LONG - TERM LEASE BASIS CERTAIN OFFICE SPACES AND RECEIVED LUMP SUM FROM THE TRANSFEREE. ACCORDING TO THE ASSESSING OFFICER, THE COMPANY WAS LIABLE TO DISCLOSE SHORT TERM CAPITAL GAINS ON TRANSFER OF OFFICE SPACE WHEREAS IN ITS COMPUTATION OF INCOME THE COMPANY HAD REDUCED THE SALE PROCEEDS RECEIVED FROM THE TRANSFEREE FROM THE OPENING OF THE WRITTEN DOWN VALUE OF THE BUILDING BLOCK IN CONFORMITY WITH SECTION 50 OF THE ACT AND ON THE RES ULTANT REDUCED WRITTEN DOWN VALUE THE DEPRECIATION WAS CLAIMED. THE ASSESSING OFFICER HELD THAT THE PROPORTIONATE WRITTEN DOWN VALUE OF THE OFFICE BLOCK WAS REQUIRED TO BE REDUCED FROM THE GROSS SALE CONSIDERATION TO ARRIVE AT SHORT - TERM CAPITAL GAINS WHI CH IN HIS OPINION WAS LIABLE TO BE ASSESSED. THE ASSESSING OFFICER ACCORDINGLY ASSESSED RS.1,50,26,623/ - UNDER THE HEAD SHORT - TERM CAPITAL GAINS ON SALE OF DEPRECIABLE ASSETS. THE ASSESSING OFFICER DID NOT CONSIDER THE IT PARK BUILDING TO BE PART OF COMP ANY S CURRENT ASSETS. TO THE EXTENT, PART OF THE OFFICE BUILDING WAS SOLD, THE ASSESSING OFFICER ASSESSED SHORT - TERM CAPITAL GAINS AS ON SALE OF DEPRECIABLE ASSETS AND ON THE REMAINING WRITTEN DOWN VALUE OF OFFICE BUILDING BLOCK AND THE WRITTEN DOWN VALUE OF THE PLANT AND MACHINERY BLOCK WHICH WAS INSTALLED IN THE IT PARK; DEPRECIATION UNDER SECTION 32 WAS ALLOWED BY HIM. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 9 OF 45 8 . THE APPEAL AGAINST THE SAID ASSESSMENT ORDER WAS DECIDED BY THE CIT(APPEALS) - I, KOLKATA ON 20.08.2010. WHILE DELETING THE ADDITION O N ACCOUNT OF SHORT - TERM CAPITAL GAIN ON SALE OF DEPRECIABLE ASSETS, THE CIT(APPEALS) BESIDES THE SAID RELIEF, VIDE HIS ORDER ALSO ALLOWED RELIEF ON OTHER ISSUES. AGAINST THE RELIEF ALLOWED ON OTHER ISSUES, SECOND APPEAL WAS PREFERRED BUT NO SECOND APPEAL W AS FILED BY THE CIT ON THE RELIEF ALLOWED BY THE CIT(APPEALS) HOLDING NO ADDITION ON ACCOUNT OF SALE OF DEPRECIABLE ASSET WAS WARRANTED. OUR CONTENTION WAS DRAWN TOWARDS THE ORDER OF CIT(APPEALS), COPY OF WHICH IS AVAILABLE AT PAGES 79 TO 85 OF THE PAPER B OOK. OUR ATTENTION WAS DRAWN TOWARDS THE ORDER OF ITAT DATED 08.09.2011 IN ITA NO. 2221/KOL/2010 COPY OF WHICH IS AVAILABLE AT PAGE 86 TO 90 OF THE PAPER BOOK. SUBSEQUENTLY THE ASSESSING OFFICER INITIATED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 BY I SSUING NOTICE UNDER SECTION 148 OF THE ACT FOR THE REASONS RECORDED. OUR ATTENTION WAS DRAWN TOWARDS PAGE 91 OF THE PAPER BOOK, IT WAS CONTENDED THAT FROM THE REASONS RECORDED, IT IS APPARENT THAT THE ASSESSING OFFICER INITIATED RE - ASSESSMENT PROCEEDINGS F OR THE SAME REASON FOR WHICH THE ORDER UNDER SECTION 147/ 143(3) IS CONSIDERED TO BE ERRONEOUS BY THE CIT. 9 . THE ASSESSING OFFICER IN THE RECORDED REASONS REFERRED TO THE DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES PVT. LTD. IN TERMS OF WHICH THE DEVELOPER WAS TO PROVIDE 39% OF THE TOTAL SALEABLE AREA TO THE ASSESSEE AS A CONSIDERATION. THE ASSESSING OFFICER IN SUPPORT OF THE REASONS RELIED ON THE NOTE NO. B/8 OF SCHEDULE P OF THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31.03.2007 FOR WHICH OUR ATT ENTION IS DRAWN TO PAGE 59, NOTE NO. 5. THIS NOTE PROVIDED THE DETAILS OF ASSESSEE S AGREEMENT WITH GODREJ WATERSIDE PROPERTIES PVT. LTD./ GODREJ PROPERTIES LIMITED. THE ASSESSING OFFICER REFERRED TO SCHEDULE E OF THE AUDITED ACCOUNTS WHICH REFLECTED JOINT DEVELOPMENT DEPOSIT OF RS.5 CRORES. THE ASSESSING OFFICER ON THE BASIS OF THE NOTE APPEARING IN THE BALANCE - SHEET CONCLUDED THAT THE ASSESSEE WAS LIABLE TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS IN RESPECT OF THE SAID DEVELOPMENT AGREEMENT AND SINCE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 10 OF 45 T HE CAPITAL GAINS WAS NOT SO ASSESSED IN THE ORDER UNDER SECTION 143(3), HE FORMED HIS REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 2007 - 08 HAD ESCAPED ASSESSMENT. THE ASSESSEE OBJECTED TO THE REOPENING VIDE ITS LETTER DATED 17.0 2.2012. THE ASSESSING OFFICER VIDE ORDER DATED 21.02.2012 DISPOSED OF THE OBJECTION RAISED BY THE ASSESSEE AND BY REFERRING TO THE DECISION OF THE COURTS WHICH INTER ALIA, INCLUDED THE DECISIONS IN THE CASE OF CHATURBHUJ D. KAPADIA VS. - CIT REPORTED IN 26 0 ITR 491 (BOMBAY) AND J.S. SARKARIA REPORTED IN 294 ITR 196 (AAR) OBSERVED THAT CAPITAL GAIN WAS CHARGEABLE IN ASSESSMENT YEAR 2007 - 08. 10 . THE ASSESSING OFFICER AFTER DISPOSING THE ASSESSEE S PRELIMINARY OBJECTIONS, CONDUCTED THE HEARINGS FROM TIME TO TIME AND ULTIMATELY AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE COPY OF WHICH IS AVAILABLE AT PAGES 188 TO 208 OF THE PAPER BOOK, PASSED THE ASSESSMENT ORDER ON 30.03.2013 IN WHICH HE DID NOT ASSESS THE CAPITAL GAINS SINCE HE WAS FULLY SATISFIE D THAT TRANSFER OF CAPITAL ASSET DID NOT TAKE PLACE IN THE RELEVANT YEAR AND HENCE NO CAPITAL GAIN WAS LEGALLY CHARGEABLE TO TAX IN ASSESSMENT YEAR 2007 - 08. OUR ATTENTION WAS DRAWN TO THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE DURING THE COURSE OF HEARIN G. THE ASSESSEE BROUGHT TO THE ATTENTION OF THE ASSESSING OFFICER THAT THE DEVELOPMENT AGREEMENT EXECUTED BY THE COMPANY WITH GODREJ PROPERTY LIMITED WAS PRIOR TO 01.04.2006. SECURITY DEPOSIT WAS ALSO RECEIVED PRIOR TO 01.04.2006. THE DEVELOPMENT ACTIVITIE S HAD COMMENCED PRIOR TO 01.04.2006. DURING THE FINANCIAL YEAR2006 - 07 GODREJ PROPERTIES LTD. HAD MERELY NOMINATED GODREJ WATERSIDE PROPERTIES PVT. LIMITED IN ITS PLACE AND STEAD ON THE SAME TERMS AND SUCH NOMINATION WAS ACCEPTED BY THE ASSESSEE. BY ISSUING NOTICES UNDER SECTION 133(6), THE ASSESSING OFFICER HAD OBTAINED CONFIRMATION OF THESE FACTS FROM GODREJ PROPERTIES LTD. AND GODREJ WATERSIDE PROPERTIES PVT. LIMITED. 1 1 . THE ASSESSEE HAS ALSO SUBMITTED VARIOUS DECISIONS BEFORE THE ASSESSING OFFICER THA T NO CAPITAL GAIN WAS CHARGEABLE TO TAX UNTIL THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 11 OF 45 AGREEMENT WAS PERFORMED AND CONSIDERATION WAS DELIVERED. IT WAS CONTENDED THAT IT IS A FACT THAT BEFORE PASSING THE IMPUGNED ORDER DATED 30.03.2013, THE ASSESSING OFFICER HAD THOROUGHLY EXAMINED THE ISSUE O F THE TAXABILITY OF THE GAINS ARISING FROM THE DEVELOPMENT OF LAND IN ALL ITS PERSPECTIVES. THE ASSESSING OFFICER HAS DULY CONSIDERED ALL THE LEGAL PROVISIONS AS WELL AS THE RELEVANT DOCUMENTARY EVIDENCES WHICH WERE GATHERED BY HIM DURING THE COURSE OF THE RE - ASSESSMENT PROCEEDINGS AND THEN HE TOOK A CONSCIOUS DECISION THAT NO CAPITAL GAIN LEGALLY CHARGEABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, IT WAS CONTENDED THAT ONCE THE ASSESSING OFFICER HAD CONDUCTED ENQUIRIES AS THE CIRCUMSTANCES DEMAND ED, HAD APPLIED HIS MIND AND THEN CAME TO A CONSCIOUS DECISION BY FOLLOWING ONE OF THE COURSES LEGALLY PERMISSIBLE THEN IN PROCEEDINGS UNDER SECTION 263 THE CIT CANNOT HOLD THE ASSESSMENT ORDER TO BE ERRONEOUS ON THE SAME ISSUE BY INVOKING THE JURISDICTION UNDER SECTION 263. OUR ATTENTION TOWARDS THE SHOW - CAUSE NOTICE IT WAS POINTED OUT THAT THE FIRST INSTANCE CONSIDERS THE ASSESSMENT ORDER AS ERRONEOUS FOR THE REASON THAT NO CAPITAL GAIN WAS ASSESSED THOUGH IN TERMS OF SECTION 2(47) OF THE ACT, THE CAPITAL GAIN WAS CHARGEABLE IN THAT YEAR BECAUSE DEVELOPMENT AGREEMENT WAS EXECUTED DURING THE RELEVANT YEAR. THE FACTS ON RECORD ESTABLISH THAT THE REASSESSMENT PROCEEDING UNDER SECTION 147 WAS ALSO INITIATED FOR THE SAME REASON. THEREFORE, IT CANNOT BE SAID TH AT THE ASSESSING OFFICER WAS NOT AWARE TO THE FACTS AS STATED IN THE SHOW - CAUSE NOTICE BY THE CIT. ON DETAILED EXAMINATION OF THE FACTS, DOCUMENTS AND EVIDENCES ON RECORD AND AFTER CONSIDERING THE APPLICABLE LEGAL PROVISION, THE ASSESSING OFFICER WAS SATIS FIED THAT NO CAPITAL GAIN WAS LEGALLY CHARGEABLE TO TAX IN THE ASSESSMENT YEAR 2007 - 08. THE ASSESSING OFFICER HAD ALSO PERUSED THE FACT THAT THE DEVELOPMENT AGREEMENT WAS EXECUTED BY THE ASSESSEE IN JULY, 2005 AND THE DEVELOPMENT WORK HAD ALSO COMMENCED TH EREAFTER. THE ASSESSING OFFICER WAS SATISFIED THAT THE CAPITAL GAIN ULTIMATELY OFFERED IN THE LATER YEARS WAS MUCH HIGHER THAN THE CAPITAL GAINS THAT WOULD HAVE BEEN LEGALLY CHARGEABLE IF ASSESSED IN ASSESSMENT YEAR 2007 - 08. IT WAS ALSO SUBMITTED THAT SUBJ ECT TO PASSING OF THE ORDER UNDER SECTION 147/143(3), THE ASSESSING OFFICER COMPLETED THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 12 OF 45 ASSESSMENT FOR THE ASSESSMENT YEARS 2011 - 12 AND 2012 - 13 WHEREIN THE CAPITAL GAINS ON TRANSFER OF ASSESSEE S RIGHTS IN THE LEASEHOLD LAND AT SALT LAKE WAS ASSESSED ON SUBSTANTIVE BASIS. OUR ATTENTION WAS DRAWN TOWARDS THE ASSESSMENT ORDER OF THIS ASSESSMENT YEARS, WHICH IS AVAILABLE IN THE PAPER BOOK AT PAGES 234 TO 244. THUS IT WAS CONTENDED THAT ONCE THE REVENUE AUTHORITIES HAVE ALREADY ASSESSED THE INCOME FROM TRANSF ER OF THE LEASEHOLD LAND IN ASSESSMENT YEARS 2011 - 012 AND 2012 - 13, AND FINALITY OF THESE ORDER IS NOT DISTURBED THEN IT WOULD BE ENTIRELY ERRONEOUS FOR THE SUPERVISORY TAX AUTHORITY TO HOLD THAT THE SAME INCOME WAS CHARGEABLE TO TAX IN ASSESSMENT YEAR 2007 - 08 AS WELL. MOREOVER, ONCE THE ASSESSING AUTHORITIES ASSESSED THE CAPITAL GAINS ON TRANSFER OF THE SAME CAPITAL ASSET IN ASSESSMENT YEAR 2011 - 12 AND 2012 - 13 THEN IT LEADS TO ONLY ONE CONCLUSION THAT ON THE ISSUE OF TAXABILITY AND THE YEAR OF TAXABILITY O F THAT INCOME UNDER THE HEAD CAPITAL GAINS CONCEIVABLY MORE THAN TWO LEGAL VIEWS WERE PERMISSIBLE AND ONCE MORE THAN TWO VIEWS ARE PREVAILING WITH REGARD TO THE YEAR OF TAXABILITY OF CAPITAL GAINS, THE ORDER PASSED BY THE ASSESSING OFFICER AFTER DUE DELIBE RATION OF ALL MATERIAL FACTS AND APPLICABLE LEGAL PROVISIONS, CANNOT BE TERMED TO BE ERRONEOUS MERELY BECAUSE THE ASSESSING OFFICER HAS NOT FOLLOWED THE VIEW TAKEN BY THE CIT. OUR ATTENTION WAS DRAWN IN THE DECISION OF THE HON BLE SUPREME COURT IN THE CAS E OF MALABAR INDUSTRIAL COMPANY VS. - CIT REPORTED IN 243 ITR 83). RELIANCE WAS ALSO PLACED IN THIS REGARD ON THE FOLLOWING DECISIONS: - (I) CIT VS. - MAX INDIA LIMITED [295 ITR 282](SC); (II) CIT VS. - GRASIM INDUSTRIES LIMITED (226 TAXMAN 165 (BOM. HC); (III) CIT VS. - SUNBEAM AUTO LTD. (332 ITR 167) (DEL. HC); (IV) CIT VS. - J.L. MORRISION (I) LTD. (366 ITR 593 (CAL. HC). 1 2 . OUR ATTENTION WAS ALSO DRAWN TOWARDS THE FOLLOWING DECISIONS IN SUPPORT OF THE PROPOSITION OF LAW THAT WHERE THE ASSESSING O FFICER HAS EXAMINED THE RELEVANT ISSUE IN THE ASSESSMENT PROCEEDINGS BY GATHERING RELEVANT MATERIAL, BY MAKING NECESSARY INQUIRIES AND AFTER APPLYING HIS I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 13 OF 45 MIND THEN THE CIT CANNOT EXERCISE REVISIONARY POWERS UNDER SECTION 263 MERELY BECAUSE IN CIT S OPINION ANOTHER VIEW IS PERMISSIBLE: - ( I ) CIT VS. - GABRIEL INDIA LIMITED [332 ITR 167 (BOM. HC)]; ( II ) CIT VS. - J.L. MORRISION (I) LTD. (359 ITR 573 (CAL. HC); ( III ) CIT VS. - SUNBEAM AUTO LTD. (332 ITR 167)(DEL. HC); ( IV ) HARI CORPORATION TRADING CO. VS. - CIT(263 ITR 437) (P&H HC) ; ( V ) SIDDH INTERNATIONAL VS. - CIT (32 SOT 14) (AHD. ITAT); ( VI ) GITA CHOWDHURY VS. - CIT (ITA NO. 704/KOL/2014)(KOL. ITAT); ( VII ) SARITA KANODIA VS. - CIT (ITA NO. 705/KOL/2014)(KOL. ITAT). 1 3 . IN RESPECT OF THE DECISION REFERRED TO BY THE CIT IT WAS POINTED OUT THAT T HE CIT S RELIANCE ON THE JUDICIAL DECISIONS CITED IN THE ORDER IS ALSO INAPPROPRIATE BECAUSE MOST OF THE DECISIONS WERE RENDERED PRIOR TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. - MAX INDIA LIMITED (292 ITR 282) AND THE DECISION OF CIT VS. - GREENWORLD CORPORATION (314 ITR 81). IN THESE DECISIONS, THE HON BLE SUPREME COURT HAS HELD THAT IN RESPECT OF ANY DEBATABLE ISSUE THE CIT CANNOT EXERCISE REVISIONARY POWERS IF THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEW. 1 4 . IN RE SPECT OF THE SECOND ISSUE RELATING TO THE DEPRECIATION IT IS SUBMITTED THAT THE CIT DID NOT DEAL WITH THE SUBMISSIONS OF THE ASSESSEE CHALLENGING HIS JURISDICTION. IN THIS CASE, THE ISSUE CONCERNING ALLOWANCE OF DEPRECIATION WAS THE SUBJECT MATTER OF REGUL AR ASSESSMENT. THE ASSESSING OFFICER HAD ALLOWED THE DEPRECIATION IN THE ORIGINAL ASSESSMENT, WHICH WAS COMPLETED IN 2009. IN THIS ASSESSMENT, THE ASSESSING OFFICER HAD ALLOWED THE DEPRECIATION AFTER CARRYING OUT ADJUSTMENT IN THE WRITTEN DOWN VALUE OF THE BUILDING BLOCK. IN THE CIRCUMSTANCES EVEN IF THERE WAS ALLEGED ERROR OF ALLOWING DEPRECIATION, IT WAS COMMITTED IN THE ORIGINAL ORDER AND, THEREFORE, PERIOD OF LIMITATION WAS REQUIRED TO BE COMPUTED WITH REFERENCE TO THE ORDER DATED 31.12.2009 WHICH EXPIR ED ON 31.03.2012. RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE SUPREME I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 14 OF 45 COURT IN THE CASE OF CIT VS. - ALAGENDRAN FINANCE LIMITED REPORTED IN 293 ITR 1. 1 5 . IT WAS FURTHER SUBMITTED THAT THE NATURE OF IT PARK BUILDING WAS CURRENT OR FIXED ASSET WAS E XAMINED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT(APPEALS) WHEN THEY DEALT WITH THE ISSUE OF COMPUTATION OF CAPITAL GAINS. THE CIT AFTER EXAMINATION OF ASSESSEE S CONTENTION HAD CATEGORICALLY HELD THAT THE CONSTRUCTED AREA WHICH THE ASSESSEE SOLD DURI NG THE RELEVANT YEAR TO SHRI MAMTA AGARWAL WAS FORMING PART OF THE BLOCK OF DEPRECIABLE ASSET AND, THEREFORE, CAPITAL GAIN COULD NOT BE ASSESSED UNDER SECTION 50 BECAUSE THERE WAS A POSITIVE WRITTEN DOWN VALUE OF THE BUILDING BLOCK. THE TRIBUNAL HAS DULY TAKEN NOTE OF THIS FINDING AND THEREAFTER UPHOLD THE ORDER OF CIT(APPEALS). THE TRIBUNAL ALSO NOTED THAT THE CIT(APPEALS) S FINDING THAT THE SPACE SOLD WAS PART OF DEPRECIABLE ASSET WAS NOT CONTESTED IN APPEAL BY THE REVENUE. THUS IT IS QUITE EVIDENT THAT THE NATURE OF THE BUILDING BLOCK AS FIXED AND DEPRECIABLE ASSET WAS CONSIDERED AND DECIDED BY THE APPELLATE AUTHORITIES AND THUS THERE BEING MERGER OF THE ASSESSMENT ORDER WITH THE ORDER OF THE CIT(APPEALS) AS WELL AS THAT OF THE ITAT AND, THEREFORE, IN TE RMS OF CLAUSE (C) OF PROVISO TO SECTION 263, THE CIT DID NOT HAVE JURISDICTION TO REVISE THE ASSESSMENT ON THAT ISSUE. 1 6 . IT WAS FURTHER SUBMITTED THAT THE SAME BUILDING HAS BEEN USED BY THE ASSESSEE FOR THE PURPOSES OF EARNING BUSINESS INCOME IN THE EAR LIER YEARS. EVEN DURING THE YEAR UNDER CONSIDERATION THE INCOME DERIVED FROM THE USE OF THE BUILDING AS ALSO FROM OPERATION AND MAINTENANCE OF IT PARK HAS BEEN ASSESSED AS BUSINESS INCOME. BUT FOR THE USE OF IT PARK BUILDING THE ASSESSEE COULD NOT HAVE EAR NED THE BUSINESS INCOME. THE ASSESSEE WAS THE OWNER OF THE BUILDING. AS SUCH ALL CONDITIONS SPECIFIED IN SECTION 32 WERE FULFILLED. IN VIEW OF THE FIFTH PROVISO TO SECTION 32, DEPRECIATION IS A MANDATORY ALLOWANCE. IN THE ACCOUNTS OF THE ASSESSEE FOR ALL T HE PAST AND SUBSEQUENT YEARS, THE BUILDING HAS ALWAYS BEEN SHOWN AS AND BY WAY OF FIXED ASSETS AND AT NO STAGE THE IT PARK BUILDING WAS SHOWN AS CURRENT I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 15 OF 45 ASSETS AS ALLEGED. THE CIT THEREFORE, COULD NOT TAKE ANY CONTRARY VIEW AND HOLD THAT THE BUILDING WAS A CURRENT ASSET. 1 7 . OUR ATTENTION WAS DRAWN TO PAGE 20 OF THE IMPUGNED ORDER AND ON THAT BASIS IT WAS CONTENDED THAT THE CIT HAS INCORRECTLY ALLEGED THAT THE DEPRECIATION HAS BEEN CLAIMED IN RESPECT OF THE BUILDING WHICH WAS RECEIVED UNDER THE JOINT DEVEL OPMENT AGREEMENT WITH GODREJ PROPERTIES LIMITED AND, THEREFORE, IT HAS TO BE TREATED AS CURRENT ASSETS. THIS FINDING CLEARLY SHOWS THAT THE CIT HAS NOT EVEN APPLIED HIS MIND TO THE JURISDICTIONAL FACTS. AS IS EVIDENT FROM RECORDS, THE BUILDING UNDER THE DE VELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES LIMITED WAS NOT CONSTRUCTED AND DELIVERED TO THE ASSESSEE TILL ASSESSMENT YEAR 2011 - 12. THEREFORE, THERE WAS NO QUESTION OF ITS ACCOUNTING IN THE ASSESSEE S BOOKS NOR HAD THE ASSESSEE CLAIMED DEPRECIATIO N ON THE SAID ASSETS. THE ASSESSEE HAS BEEN CLAIMING IN RESPECT OF IT PARK BUILDING KNOWN AS INFINITY THINKTANK WHICH THE ASSESSEE ITSELF HAD CONSTRUCTED IN TWO PHASES AND WHOSE CONSTRUCTION WAS COMPLETED IN FINANCIAL YEAR 2005 - 06. ALL THE RELEVANT FACTS PERTAINING TO COST OF CONSTRUCTION INCURRED BY THE ASSESSEE IN RESPECT OF THIS BUILDING WERE DISCUSSED IN THE ORDER UNDER SECTION 143(3) AND, THEREFORE, THE CIT COULD NOT CONFUSE THE CLAIM OF DEPRECIATION ON THE EXISTING BUILDING WITH THE BUILDING WHICH W AS YET TO BE CONSTRUCTED BY THE GODREJ WATERSIDE PROPERTIES LIMITED. THUS IT WAS CONTENDED THAT SINCE THE CIT S ORDER WAS ENTIRELY BASED ON WRONG APPRECIATION OF FACTS, THE ORDER PASSED BY THE LD. CIT BE SET ASIDE. 1 8 . LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF CIT AND CONTENDED THAT SINCE THE ASSESS E E HAS EXECUTED THE AGREEMENT DURING THE IMPUGNED ASSESSMENT YEAR, THEREFORE, THE CAPITAL GAIN WAS RIGHTLY CHARGEABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER HAS OVERLOOKED THE RE LEVANT AGREEMENT AND THE CONDITIONS MENTIONED THEREIN. SIMILARLY IN RESPECT OF THE DEPRECIATION, RELIANCE WAS PLACED ON THE ORDER OF CIT, DEPRECIATION HAS NOT BEEN RIGHTLY ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 16 OF 45 1 9 . WE HAVE HEARD THE RIVAL SUBMI SSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASES CITED BEFORE US. IN THIS CASE, WE NOTED THAT THE CIT PASSED THE ORDER UNDER SECTION 263 DATED 26.03.2015. BY PASSING THE SAID ORDER THE CIT SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 30.03.2013 UNDER SECTION 143(3) READ WITH SECTION 147 AS JURISDICTION UNDER SECTION 263 HAS BEEN INVOKED BY THE CIT IN RESPECT OF THE SAID ORDER. THE CIT VIDE HIS ORDER UNDER SECTION 263 DATED 26.03.2015 SET ASIDE THE ASSESSMENT ON LIMITED ISSUES FOR WHICH THE SO CAUSE NOTICE WAS GIVEN TO THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO PASS THE ORDER WITH REGARD TO THESE TWO ISSUES NAMELY; - (1) ASSESSMENT OF THE CAPITAL GAIN IN R ELATION TO THE ASSESSEE S DEVELOPMENT RIGHTS IN RESPECT OF ITS LEASEHOLD PROPERTY BEING PLOT NO. 5, BLOCK DP, SECTOR - V, SALT LAKE CITY, KOLKATA - 700 091; AND (2) DEPRECIATION CLAIMED IN RESPECT OF THE INFORMATION TECHNOLOGY PARK KNOWN AS INFINITY THINK TA NK SITUATED AT PLOT A/3, BLOCK GP, SALT LAKE ELECTRONIC COMPLEX, SECTOR - V, SALT LAKE CITY, KOLKATA - 700 091 THE UNDISPUTED FACTS PLACED BEFORE US ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING CIVIL INFR ASTRUCTURES TO USE INFORMATION TECHNOLOGY AND INFORMATION TECHNOLOGY CABLE SERVICES. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING IT PARKS AND OTHER CIVIL INFRASTRUCTURES SINCE LATE 1990 S. IN CONNECTION WITH THE BUSIN ESS OF DEVELOPMENT OF IT PARK, THE ASSESSEE HAD OBTAINED LAND PARCELS ON LEASE FROM WEST BENGAL ELECTRONIC INDUSTRIAL DEVELOPMENT CORPORATION (WEBEL), WHICH IS A GOVERNMENT OF WEST BENGAL UNDERTAKING ENTRUSTED WITH DEVELOPMENT OF THE ELECTRONIC INDUSTRY IN THE STATE OF WEST BENGAL. 2 0 . SUBSEQUENTLY WE NOTED THAT THE ASSESSING O FFICER INITIATED THE PROCEEDINGS UNDER SECTION 147 ON 30.09.2011 BY ISSUING A NOTICE UNDER SECTION 148. THE REASONS RECORDED READ AS UNDER: - I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 17 OF 45 IT WAS SEEN THAT AS PER NOTE B - 8 OF SCH EDULE P OF THE ACCOUNTS CONTAINED IN THE ANNUAL REPORT FOR THE YEAR ENDING 31.03.2007, THE ASSESSEE COMPANY ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES P. LTD. DURING THE YEAR ENDING 31.3.2007 FOR DEVELOPMENT OF ITS LAND AND THE DEV ELOPER HAD TO BEAR ALL THE COSTS AND THE ASSESSEE WILL GET 39% OF THE TOTAL BUILT UP AREA AS WELL AS PARKING AREA. THE NOTE B - 8 IS REPRODUCED BELOW - THE COMPANY HAS ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES P. LTD. FOR THE 5.5978 ACRES OF LEASE HOLD LAND AT SALT LAKE, SECTOR - V, KOLKATA, WHEREBY THE DEVELOPER WILL INCUR ALL THE DEVELOPMENTAL COSTS AS ENVISAGED IN THE SAID AGREEMENT AND UPON COMPLETION OF CONSTRUCTION THE COMPANY SHALL BE ENTITLED TO THE 39% OF THE TOTAL BUILT UP AR EA AS WELL AS PARKING AREA . SCHEDULE F IN RESPECT OF FIXED ASSETS SHOWS LEASEHOLD LAND AT RS.1,89,74,418/ - . SCHEDULE E IN RESPECT OF LIABILITIES REFLECTS JOINT DEVELOPMENT DEPOSIT AT RS. 5 CRORE. IT IS THUS APPARENT THAT THERE WAS TRANSFER OF THE LAND, BEING CAPITAL ASSET DURING THE YEAR ENDING 31.3.2007 RELEVANT TO AY 2007 - 08 AND THE RESULTANT CAPITAL GAIN IS ASSESSABLE IN AY 2007 - 08 AS PER DECISION OF VARIOUS COURTS IN RESPECT OF DEVELOPMENT AGREEMENTS. AS PER INFORMATION AVAILABLE FROM NEWS LETTER OF THE ASSESSEE COMPANY DATED 4.4.2011, THE TOTAL AREA OF SPACE IN TOWER 1 IS 6,15,557 SFT. AND THAT IN THE TOWER 2 IS 12,40,180 SFT. THE GRAND TOTAL BEING 18,55,847 S.FT. ASSESSEE S SHARE RECEIVABLE OF 39% = 7,23,781 SFT. IN THE CASE OF THE ASSESSEE COMPAN Y WHICH DEVELOPED AND SUB - LEASED SIMILAR IT BUILDING IN SALT LAKE, SECTOR - V, THE ADMITTED RATE OF COST OF CONSTRUCTION OF AREA SOLD IN FY 2007 - 08 IS RS.3,390/ - PER SQ.FT. VIDE ASSESSMENT RECORDS OF THE ASSESSEE COMPANY FOR THE AY 2007 - 08. ON THE SAME BASIS , THE SALE CONSIDERATION FOR 61% OF THE LAND OF ASSESSEE (39% OF PROPORTIONATE LAND IN RETAINED BY ASSESSEE ALONG WITH CONSTRUCTED AREA) IS 7,23,781 SFT. X RS.3,390/ - /SFT. = RS.245,36,17,590/ - . THE PROPORTIONATE COST OF LAND TO THE ASSESSEE IS RS.1,89,74,4 18/ - X 61% = RS.1,15,74,390/ - . THE ASSESSEE IS ENTITLED TO BENEFIT OF INDEXATION. EVEN THEN THE LONG TERM CAPITAL GAIN ASSESSABLE WOULD NOT BE LESS THAN RS.225 CRORE, ON WHICH TAX PAYABLE IS AT THE RATE OF 20% PLUS SURCHARGE / EC ETC. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 18 OF 45 BUT THE ASSESSEE COM PANY HAS NOT DISCLOSED ANY CAPITAL GAIN IN THE RETURN. NO CAPITAL GAIN WAS ASSESSED EITHER. IN VIEW OF THE ABOVE, THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR THE AY 2007 - 08 HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 . THE REASONS RECORDED WERE BASED ON THE INFORMATION DISCLOSED IN NOTE B/8 OF SCHEDULE P OF THE ANNUAL ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH, 2007, WHICH IS AVAILABLE AT PAGE 59 OF THE PAPER BOOK. THIS NOTE, IN OUR OPINION, INFORMED THAT THE ASSESSEE HAD ENTERE D INTO DEVELOPMENT AGREEMENT IN RESPECT OF ITS LEASEHOLD LAND AT SALT LAKE, SECTOR - V, KOLKATA UNDER WHICH DEVELOPER WAS TO INCUR ALL DEVELOPMENTAL COSTS ENVISAGED IN THE AGREEMENT AND UPON COMPLETION OF CONSTRUCTION, THE ASSESSEE WOULD BE ENTITLED TO 39% O F THE TOTAL BUILT - UP AREA AS WELL AS PARKING AREA. THE ASSESSING OFFICER, IN THE RECORDED REASONS, FURTHER STATED THAT SCHEDULE E OF THE FINANCIAL STATEMENTS WAS IN RESPECT OF LIABILITIES REFLECTED JOINT DEVELOPMENT DEPOSIT AT RS.5 CRORES. REFERRING TO THESE INFORMATION AVAILABLE IN THE AUDITED ACCOUNTS FOR THE YEAR ENDED 31.03.2007, THE ASSESSING OFFICER OBSERVED THAT THERE WAS A TRANSFER OF THE LAND BEING THE CAPITAL ASSET DURING THE YEAR ENDING 31.03.2007 RELEVANT TO ASSESSMENT YEAR 2007 - 08 AND THE RE SULTANT CAPITAL GAIN WAS ASSESSABLE IN ASSESSMENT YEAR 2007 - 08 AS PER DECISIONS OF VARIOUS COURTS IN RESPECT OF DEVELOPMENT AGREEMENTS BUT SINCE THE ASSESSEE DID NOT DISCLOSE ANY CAPITAL GAIN IN THE RETURN AND NO CAPITAL GAIN WAS ASSESSED TO TAX FOR THE AS SESSMENT YEAR 2007 - 08. THUS THERE WAS AN ESCAPEMENT OF INCOME IN ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. 2 1 . THE RE - ASSESSMENT PROCEEDINGS WERE ALSO INITIATED ON APPRAISAL OF FACTS, WHICH WERE AVAILABLE ON THE ASSESSMENT RECORD DURING TH E IMPUGNED ASSESSMENT YEAR. WE NOTED THAT THE ASSESSEE WHEN FILED A WRIT PETITION BEFORE THE HON BLE CALCUTTA HIGH COURT, THE HON BLE HIGH COURT DISMISSED THE WRIT PETITION AS NONE APPEARED ON BEHALF OF THE PETITIONER AND ALSO ON BEHALF OF THE RESPONDENT. THE ASSESSING OFFICER WAS SATISFIED IF THE CONTENTION OF THE ASSESSEE THAT NO CAPITAL GAIN WAS ASSESSABLE IN I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 19 OF 45 ASSESSMENT YEAR 2007 - 08, AND, THEREFORE, THE ASSESSING OFFICER WHILE MAKING THE DECISION HAD PROPOSED NOT TO ASSESS THE CAPITAL GAINS IN ASSESSMENT YEAR 2007 - 08 AND ALSO PLACED A DETAILED NOTE SETTING OUT HIS REASONS AS TO WHY CAPITAL GAIN WAS NOT ASSESSED, COPY OF WHICH WAS PLACED BEFORE US BY THE LD. A.R. AT PAGE 220 TO 226 OF THE PAPER BOOK, WHICH WE PERUSED. WE NOTED THAT THE CIT EXERCISED HIS JU RISDICTION UNDER SECTION 263 OF THE ACT BY ISSUING THE SHOW - CAUSE NOTICE DATED 19.02.2015 ON THE TWO ISSUES AS MENTIONED HEREINABOVE AND ULTIMATELY PASSED THE ORDER UNDER SECTION 263 VIDE ORDER DATED 26.03.2015. NOW THE QUESTION BEFORE US IS WHETHER THE OR DER PASSED BY THE CIT UNDER SECTION 263 IS WITHIN THE FOUR CORNERS OF POWE R AS IS ENVISAGED ON HIM UNDER THE INCOME TAX ACT, 1961. BEFORE DECIDING THE ISSUE WHETHER THE ORDER PASSED BY THE CIT LAYS DOWN UNDER SECTION 263, IT IS NECESSARY TO DISCUSS THE PRO VISION OF SECTION 263 WHICH EMPOWERS THE CIT TO REVISE THE ASSESSMENT ORDER UNDER SECTION 263, WHICH READS AS UNDER: - 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER P ASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PAS S SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB - SECTION, - (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE - (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY DIRECTOR OR THE INCOME - TAX OFFICER O N THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCISE OF THE POWER OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 20 OF 45 (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELA TING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER TH E 1ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE O F AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION. - IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF S UB - SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 2 2 . F ROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT THERE ARE FOUR MAIN FEATURES OF THE POWER OF REVISION TO BE EXERCISED U/S 263 BY THE COMMISSIONER OF INCOME - TAX. FIRSTLY, THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND FOR THIS PURPOSE HE NEED NOT TO SHOW ANY REASON OR RECORD ANY REASON TO BELIEVE. IT IS A PART OF HIS ADMINISTRATIVE POWER TO CALL FOR THE RECORD AND EXAMINE THEM RELATING TO ANY ASSESSEE. SECONDLY HE MAY CONSIDER ANY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS CONSIDERATION HAVING REGARD TO THE LANGUAGE OF SECTION 263 APPARENTLY IS A CONSIDERATION WHICH HE EXERCISES BY CALLING FOR AND EXAMINING THE RECORD AVAILABLE AT THI S STAGE. THERE IS NO QUESTION OF THE ASSESSEE TO APPEAR AND MAKE SUBMISSION. THIRDLY, IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE COMMISSIONER CONSIDERS THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE MAY JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCE L LING ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THIS EMPOWERS THE C.I.T. TO CAUSE OR MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY. FOURTHLY THE C.I.T. U/S 263 CAN ENHANCE OR MODIFY THE ASSESSMENT. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 21 OF 45 2 3 . IT IS A SETTLED LAW TH AT FOR INVOKING THE PROVISIONS OF SECTION 263 THE CIT MUST SATISFY BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND ALSO THAT IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THE CONDITIONS IS ABSENT, THE ORDER PASSED BY THE CIT BY INVOKING THE PROVISIONS OF SECTION 263 WILL NOT BE LEGAL. THE TERM ERRONEOUS HAS NOT BEEN DEFINED UNDER THE INCOME - TAX ACT BUT IT IS WELL SETTLED THAT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER CANNO T BE SAID TO BE AN ERROR. AN ORDER CAN BE SAID TO BE ERRONEOUS IF THERE IS AN INCORRECT ASSUMPTION OF FACT OR INCORRECT APPLICATION OF LAW IN THE ORDER PASSED BY THE ASSESSING OFFICER. IF THE ASSESSING OFFICER AFTER MAKING THE ENQUIRIES AND EXAMINING THE R ECORDS, TAKEN ONE OF THE POSSIBLE VIEWS, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS. 2 4 . IT IS ALSO APPARENTLY CLEAR THAT THE POWER S OF THE CIT ARE THREE FOLD S . ONE IS PRIOR TO THE INITIATION OF THE PROCEEDINGS U/S 263. SECOND IS AT THE TIME OF INITIATION OF THE PROCEEDINGS. THIRD, IS THE FINAL OUTCOME AFTER THE INITIATION OF THE PROCEEDING. POWER OF THE CIT PRIOR TO THE INITIATION INCLUDES CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT. THE WORD R ECORD IS VERY IMPORTANT, BECAUSE ON THE BASIS OF THE RECORD OF THE PROCEEDINGS THE CIT WILL FORM AN OPINION THAT THE ORDER PASSED IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ONCE HE FORMS AN OPINION, HE HAS TO GIVE AN OPPORTUNIT Y TO THE ASSESSEE OF BEING HEARD AND AFTER MAKING OR CAUSING THE ENQUIRY HE CAN PASS AN ORDER. MOREOVER THE INQUIRY IS CONDUCTED ONCE THE CIT FORMS AN OPINION ON THE BASIS OF RECORD THAT THE ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE. THE WORD RECORD HAS BEEN DEFINED UNDER EXPLANATION (B) OF SECTION 263 TO MEAN THAT THE RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THE EXAMINATION OF THE RECORD IS TO BE CARRIED BY THE COMMISSIONER PRIOR TO THE FORMING AN OPINION THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ONCE THE RECORD IS EXAMINED AND THE CIT ON THE BASIS OF EXAMINA TION OF THE RECORD FORMS AN OPINION THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS EMPOWERED AFTER GIVING THE OPPORTUNITY TO THE ASSESSEE, TO MAKE SUCH ENQUIRY AS HE MAY DEEM NECESSARY. THEREFORE, THE ENQUIRY TO BE CONDUC TED BY THE CIT IS AN ACT ONCE THE CIT ARRIVES AT A CONCLUSION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 22 OF 45 PREJUDICIAL TO THE INTEREST OF THE REVENUE AFTER EXAMINING THE RECORD. THUS ENQUIRY PRECEDES THE RECORD AND THE MATERIAL COLLECTED DURING THE COURSE OF THE ENQUIRY CANNOT BE THE PART OF THE RECORD OF THE PROCEEDINGS WHEN THE CIT FORMS AN OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 5 . FROM THE SHOW - CAUSE NOTICE AS POINTED OUT BY US EARLIER, IT IS APPARENT THAT THE CIT HAS INVOKED HIS JURISDICTION UNDER SECTION 263 WITH REGARD TO THE FOLLOWING TWO ISSUES - (I) ASSESSMENT OF CAPITAL GAINS IN RELATION TO ASSESSEE S DEVELOPMENT RIGHTS IN RESPECT OF ITS LEASEHOLD PROPE RTY BEING PLOT NO. 5, BLOCK DP, SECTOR - V, SALT LAKE CITY, KOLKATA; AND (2) DEPRECIATION CLAIMED IN RESPECT OF INFORMATION TECHNOLOGY PARK BUILDING KNOWN AS INFINITY THINKTANK SITUATED AT PLOT A - 3, BLOCK GP, SECTOR - V, SALT LAKE CITY, KOLKATA. 2 6 . FROM T HE FACTS AS NARRATED BY US IN THE PRECEDING PARAGRAPH AS REGARD TO THE FIRST ISSUE, WE NOTED THAT THE ASSESSING OFFICER HAS DULY CONSIDERED THIS ISSUE WHILE FRAMING THE ASSESSMENT UNDER SECTION 147 READ WITH SECTION 143(3) IN RESPECT OF WHICH THE CIT HAS I NVOKED JURISDICTION UNDER SECTION 263. FROM THE SAID ASSESSMENT ORDER, IT IS APPARENT THAT THE ASSESSING OFFICER HAS DULY NOTICED THAT THE ASSESSEE - COMPANY HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S/ GODREJ WATERSIDE PROPERTIES PVT. LTD. FOR DEVELOP MENT OF ITS LAND AND IN WHICH IT HAS TO GET 39% OF THE TOTAL SANCTIONED CONSTRUCTED AREA AND THE PROPORTIONATE CAR PARKING SPACES. EVEN THE NOTICE UNDER SECTION 148 WAS ISSUED ONLY ON THE SAME REASON AS ESCAPEMENT OF CAPITAL GAIN IN RELATION TO THE ASSESSE E S DEVELOPMENT RIGHTS IN THE SAID LEASEHOLD PROPERTY BEING PLOT NO. 5, BLOCK DP, SECTOR - V, SALT LAKE CITY, KOLKATA. THE ASSESSING OFFICER TOOK THE VIEW THAT NO CAPITAL GAIN ACCRUES OR ARISE S TO THE ASSESSEE IN ASSESSMENT YEAR 2007 - 08 BY EXAMINING THE FOLL OWING SUBMISSIONS OF THE ASSESSEE AS APPEARING AT PAGE 2 - 3 OF THE ASSESSMENT ORDER: - THE ASSESSEE COMPANY HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ PROPERTIES LIMITED IN JULY 2005. THEREAFTER, IN FEBRUARY 2007 THE SAID GODREJ PROPERTIES I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 23 OF 45 LIMITED N OMINATED M/S GODREJ WATERSIDE PROPERTIES PVT LTD IN ITS PLACE TO CARRY OUT THE OBLIGATIONS UNDER THE DEVELOPMENT AGREEMENT BETWEEN THE ASSESSEE AND GODREJ PROPERTIES LIMITED. UNDER THE DEVELOPMENT AGREEMENT, GODREJ WAS TO DEVELOP IT PARK AT PLOT - S, BLOCK - D P, SECTOR V, SALTLAKE, KOLKATA AND WILL RETAIN 61% OF THE BUILT UP AREA INCLUDING CAR PARKING AREA AND ASSESSEE'S ALLOCATION WILL BE 39% OF THE BUILT UP AREA INCLUDING CAR PARKING AREA. THE LAND ON WHICH THE IT PARK WAS REQUIRED TO DEVELOP BY GODREJ WAS A LEASEHOLD LAND AND THE ASSESSEE WAS ONLY HOLDING THE LEASEHOLD INTEREST IN THE LAND. ACCORDING TO THE SUBMISSION BY THE A/R, LEASEHOLD INTEREST IN THE LAND WAS NEVER TRANSFERRED WHEN THE DEVELOPMENT AGREEMENTS WERE ENTERED INTO. THE DEVELOPER WAS ONLY GRAN TED A LICENSE TO CARRY OUT ITS OBLIGATIONS UNDER THE DEVELOPMENT AGREEMENT AND THAT THE ASSESSEE NEVER PARTED WITH THE POSSESSION OF THE LAND TILL THE PHYSICAL DELIVERY OF THE BUILT UP SPACE TO THE ASSESSEE BY THE DEVELOPER AND HAD FULL CONTROL OVER THE LA ND. IN FACT, THE TRANSFER OF LEASEHOLD TITLE WILL BE TRANSFERRED IN THE YEAR IN WHICH POSSESSION IS DELIVERED AND RECEIVED BY THE ASSESSEE FROM THE DEVELOPER. THE A/R HAD ALSO MENTIONED THAT TRANSFER OF ITS RIGHTS WAS COMPLETE ONLY WHEN THE PHYSICAL POSSES SION OF THE ASSESSEE'S ALLOCATION IN THE BUILT UP AREA IN TOWER - I AND TOWER - II OF THE PROJECT WAS DELIVERED BY THE DEVELOPER IN A.YS. 2011 - 12 & 2012 - 13 RESPECTIVELY. THE ASSESSEE FURTHER SUBMITTED THAT THE INCOME BY WAY OF CAPITAL GAINS ACCRUED FROM THE SA ID DEVELOPMENT AGREEMENTS WERE OFFERED TO TAX IN THE ASSESSMENT YEARS 2011 - 12 AND AY 2012 - 13 TAKING FULL VALUE OF CONSIDERATION AT RS.34.96 CRORE AND RS.63.60 CRORE RESPECTIVELY. THE ASSESSEE ALTERNATIVELY CLAIMED THAT IN CASE THE ASSESSMENT IS DONE IN AY 2007 - 08, IT SHOULD HAVE BEEN DONE ON THE BASIS OF FAIR MARKET VALUE OF THE LEASEHOLD RIGHT IN THE LEASEHOLD LAND. IF THE SAID FAIR MARKET VALUE, AS PER G AZETTE N OTIFICATION OF GOVT. O F WEST BENGAL FOR LEASEHOLD TRANSFER OF RIGHT IN LEASEHOLD LAND, IS CONSI DERED THEN CONSIDERATION OF 61% TRANSFER OF LEASEHOLD RIGHT WILL COME TO RS.6.15 CRORE ONLY. CONSIDERING AND VERIFYING ALL THE SUBMISSION FILED BY THE ASSESSEE AND INFORMATION COLLECTED FROM GODREJ PROPERTIES LIMITED AND NABADIGANTA INDUSTRIAL TOWNSHIPS A UTHORITY, NO CAPITAL GAIN ACCRUES OR ARISES TO THE ASSESSEE IN THE AY 2007 - 08 . 2 7 . EVEN WE NOTED IN THIS REGARD THAT THE ASSESSING O FFICER MADE A DETAILED NOTE WHY THE CAPITAL GAINS IN RELATION TO THE ASSESSEE S DEVELOPMENT RIGHTS ARE NOT CHARGEABLE TO T AX IN THE IMPUGNED ASSESSMENT YEAR, THE COPY OF THE SAID NOTE IS AVAILABLE AT PAGES 22 0 TO 226 OF THE PAPER BOOK, WHICH WERE OBTAINED BY THE ASSESSEE BY TAKING THE INSPECTION ON 12.05.2015, THE RELEVANT NOTE IS REPRODUCED AS UNDER: - I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 24 OF 45 I. IN THIS CASE, MY PRE DECESSOR HAD INITIATED REASSESSMENT PROCEEDING U/S 147 FOR THE AY 2007 - 08 FOR BRINGING TO TAX CAPITAL GAINS ACCRUING OR ARISING TO THE ASSESSEE IN RESPECT OF ITS DEVELOPMENT AGREEMENT WITH GOCLREJ WATERSIDE PROPERTIES PVT. LTD. THE 'REASON TO BELIEVE' I.E. , INCOME CHARGEABLE TO TAX FOR THE AY 200708 HAD ESCAPED ASSESSMENT, WAS BASED ON NOTE 88 OF THE SCHEDULE P TO THE ANNUAL REPORT OF THE ASSESSEE FOR THE YEAR ENDED 31.03.2007. ACCORDING TO THE INFORMATION CONTAINED IN THAT NOTE DURING THE FY 2006 - 07, THE A SSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES PVT. LTD IN RESPECT OR ASSESSEE'S LEASEHOLD LAND AT SALT LAKE, SECTOR V, KOLKATA. IN TERMS OF THE SAID DEVELOPMENT AGREEMENT, THE DEVELOPER WAS TO INCUR ALL DEVELOPMENTAL COS TS UP TO COMPLETION OF THE CONSTRUCTION. IN CONSIDERATION OF ASSESSEE GRANTING DEVELOPMENT RIGHTS IN THE LAND: THE ASSESSEE WAS ENTITLED TO 39% OF THE TOTAL BUILT U P A R E A AND PARKING SPACES. FROM THE INFORMATION AVAILABLE FROM THE ASSESSEE'S N E WSLE TTER DAT ED 04.04.2011, M Y PREDECESSOR OBSERVED THAT THE TOTAL SPACE AVAILABLE IN THE NEWLY CONSTRUCTED BUILDIN GS AMOUNTED TO 18,55,847 SQ.FT. IN WHICH ASSESSES SHARE AT 39 % WAS 7,23,781 SQ.FT.. MY PREDECESSOR TH E R EAFTER ESTIMATED THE COST OF CONSTRUCTION IN FY 200 7 - 08 AT RS.3,390/ - PER SQ.FT. AND BASED ON THE SAME , ESTIMATED THE CON SIDERATION FOR TRANSFER OF ASSESSEE S 61% INTEREST IN LAND AT RS.245.36 CRORE. SINCE INCOME BY WAY OF CAPITAL GAIN WAS NOT DISCLOSED , THE REASSESSMENT PROCEEDING WAS INITIATED B Y MY PR ED ECESSOR BY ISSUING NOTICE U/S. 148 DATED 30.09.2011. 2. THE ASSESSEE FILED OBJECTIONS TO THE REA SONS R ECORDED BUT THESE OBJECTIONS WERE REJ ECTED BY MY PREDECESSOR FOR THE REASONS DISCUSSED IN HIS ORDER DATED 21.02.2012. THE ASSESSEE THEREAFTER FILED A WR IT PETITION BEFORE THE KOLKATA HIGH COURT CHALLENGING THE REOPENING OF ASSESSMENT FOR AY 2007 - 08. THE HON BLE CALCUTTA HIGH COURT ADMITTED ASSESSEE S WRIT PETITION AND HAS DIRECTED THE INCOME TAX DEPARTMENT TO FILE AFFIDAVIT IN REPLY. HOWEVER, NO STAY OF A SSESSMENT PROCEEDING WAS GRANTED BY THE HIGH COURT. IN TITS ORDER DATED 01.10.2012 IN WP NO. 537 OF 2012, THE H ON BLE HIGH COURT PERMITTED THE AO TO PROCEED WITH THE REASSESSMENT U/S 147 ON THE CONDITION THAT FINAL ORDER SHOULD NOT BE PASSED WITHOUT THE LE AVE OF THE COURT. BY ANOTHER ORDER DATED 03.01.2013, THE INTERIM ORDER EARLIER PASSED ON 01.10.2012 WAS ORDERED TO REMAIN IN FORCE TILL 01.04.2013. 3. IN TERMS OF THE LEAVE GRANTED BY THE HIGH COURT, REASSESSMENT PROCEEDINGS WERE CONTINUED AND THE ASSESSE E WAS ASKED TO FURNISH ITS EXPLANATION AND DOCUMENTS IN SUPPORT OF ITS PLEA THAT CAPITAL GAINS CHARGEABLE TO TAX DID NOT ACCRUE OR ARISE IN AY 2007 - 08. THE CASE WAS LISTED FOR HEARING FROM TIME TO TIME AND THE SAME WAS DISCUSSED WITH THE REPRESENTATIVES OF THE ASSESSEE ON VARIOUS DATES. IN ORDER TO VER IFY THE BASIC JURISDICTIONAL BETS, LETTERS WERE SENT LA GODREJ PROPERTIES LTD AND GODREJ WATERSIDE PROPERTIES PVT. LTD WITH WHOM THE ASSESSEE ENTERED INTO AGREEMENTS ON 21,07,2005 AND I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 25 OF 45 07,02,2007 RESPECTIVELY, THE SAID TWO COMPANIES FURNISHED THEIR DETAILED REPLIES AND ALSO FURNISHED THE INFORMATION AS WAS REQUISITIONED BY MY PREDECESSOR. SIMILAR LETTERS WERE ALSO ADDRESSED TO NAVADIGANTA INDUSTRIAL TOWNSHIP AUTHORITY ENQUIRING AS TO WHEN THE BUILDING PLANS WERE SANCTIONED, WHEN THE COMPLETION CERTIFICATES WERE GRANTED AND HOW MUCH OF THE AREA WAS CONSTRUCTED AS PER THE SANCTIONED PLANS, THE SAID AUTHORITY FURNISHED THE INFORMATION AS REQUISITIONED, THE ASSESSEE WAS ASKED TO FURNISH ITS EXPLANATIONS AS TO WHETHER AT ANY TIME IT HAD OFFERED THE INCOME BY WAY OF CAPITAL GAINS IN RESPECT OF ITS DEVELOPMENT AGREEMENT WITH GODREJ WATERSIDE PROPERTIES PVT. LTD. THE ASSESSEE EXPLAINED THAT IN TERMS OF THE DEVELOPMENT AGREEMENT, IT HAD GRANTED ONLY A LICENCE TO GODREJ WAT ERSIDE PROPERTIES PVT. LTD AND GODREJ PROPERTIES I.TD PERMITTING THEM TO ENTER UPON THE LEASEHOLD PREMISES TO UNDERTAKE DEVELOPMENT OR IT PARK IN CONFORMITY WITH THE SANCTIONED BUILDING PLANS. AT ALL MATERIAL TIME THE LEGAL AND BENEFICIAL OWNERSHIP RIGHTS IN THE LAND VESTED IN THE ASSESSEE AND THE DEVELOPER NEVER RECEIVED LEGAL POSSESSION OF THE LAND, THE CONSIDERATION PROVIDED IN THE AGREEMENT WAS PAYABLE IN KIND AND THE SAME WAS DELIVERED TO THE ASSESSEE PARTLY IN FY 20 I 0 - 11 AND PARTLY IN FY 2011 - 12, WH EN THE CONSTRUCTION OF TOWER I & TOWER 11 OF THE IT PARK WAS COMPLETED, IT IS ONLY UPON COMPLETION OF' IT PARKS, THE CONSIDERATIONS IN KIND WAS DELIVERED AND AT THAT STAGE ONLY THE TRANSFER OF THE CAPITAL ASSET WAS COMPLETED. THE CAPITAL GAINS THEREFORE CR YSTALIZED AT THAT TIME BECAUSE THE CONSIDERATION FOR TRANSFER CAME INTO EXISTENCE AND THE SAME WAS PAID TO THE ASSESSEE IN THESE TWO YEARS. THE ASSESSEE CLARIFIED THAT ONLY RECEIPT OF THE CONSIDERATION, IT WAS ABLE TO COMPUTE ITS TAX LIABILITY AND PAY THE TAX ON THE RESULTANT CAPITAL GAINS IN THE AYS 2011 - 12 & 2012 - 13 RESPECTIVELY. COPIES OF THE TAX RETURNS FOR THESE TWO YEARS WERE FILED TO SUBSTANTIATE THE FACT THAT THE ASSESSEE HAS DISCLOSED THE CAPITAL GAINS IN THE YEARS IN WHICH THE TRANSFER OF THE CAPI TAL ASSET WAS AFFECTED AND THE CONSIDERATION WAS ACTUALLY RECEIVED. 4. DRAWING ATTENTION TO CLAUSE 5 OF THE AGREEMENT IT WAS POINTED OUT THAT IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO ENSURE THROUGHOUT THE CONSTRUCTION PERIOD THAT THE PROPERTY REMAINED FREE FR OM ALL ENCUMBRANCES AND IN VACANT CONDITION SO THAT THE DEVELOPMENT OR THE IT PROJ ECT COULD BE UNDERTAKEN. CLAUSE 7 FURTHER PROVIDED THAT THE ASSESSEE WOULD ENSURE THE SANCTION OF THE BUILDING PLAN AND IT WAS ALSO LIABLE TO BAR AND PAY ALL COSTS AN D EXPENSES TILL THE ORIGINAL SANCTION OF THE BUILDING PLAN FOR THE IT P ROJECT. CLAUSE 8 OF THE AGREEMENT REQUIRED THE ASSESSEE TO SING AND EXECUTE THROUGHOUT NTHE COURSE OF DEVELOPMENT ALL PAPERS AND DOCUMENTS NECESSARY FOR OBTAINING APPROVAL AND PERMISSIO N FOR UNDERTAKING DEVELOPMENT OF IT PROJECT. THE ASSESSEE THEREFORE CLAIMED THAT IT WAS NOT A CASE THAT THE PROPERTY BELONGING TO THE ASSESSEE WAS UNDER COMPLETE AND FULL CONTROL AND MANAGEMENT OF THE DEVELOPER AND THE ASSESSEE CEASED TO HAVE ANY CONTROL O VER ITS I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 26 OF 45 LEASEUHOLD LAND AT SALT LAKE. THE ASSESSEE CONTINUED TO BE INVOLVED IN THE MANAGEMENT AND CONTROL OF THE IT PROJECT JOINTLY WITH THE DEVELOPER. IT WAS THE ASSESSEE S CASE THAT FOR DETERMINATION OF INCOME BY WAY OF CAPITAL GAINS, EXISTENCE OF CONSID ERATION AND ITS QUANTIFICATION IN MONETARY TERMS WAS AN ESSENTIAL PREREQUISITE. IN THIS CASE THE CONSIDERATION FOR TRANSFER OF 61% OF ASSESSEE'S INTEREST IN LEASEHOLD AND WAS COST OF 39% OF THE CONSTRUCTED SPACE. THE FACTS ON RECORD HOWEVER SHOWED THAT IN 2005 OR 2007 WHEN THE AGREEMENTS WERE ENTERED INTO BY THE ASSESSEE, THE CONSIDERATION IN KIND DID NOT EVEN EXIST, THE DEVELOPER HAD NOT EVEN INCURRED ANY SIGNIFICANT COST FOR DEVELOPMENT OF THE IT PARK. BASED ON MERE PROMISE TO PERFORM AN AGREEMENT IT COUL D NOT BE HELD THAT INCOME ON ACCOUNT OF CAPITAL GAINS ACCRUED. FROM THE INFORMATION OBTAINED FROM GODREJ PROPERTIES LTD. IT WAS FOUND THAT TILL 31.03.2007 IT HAD INCURRED CONSTRUCTION COST OF AROUND RS.30 CRORE ON THE SAID PROJECT WHICH IN OVERALL SCHEME W AS QUITE INSIGNIFICANT. IN THIS CIRCUMSTANCE, IT IS DIFFICULT TO HOLD THAT TRANSFER OF A CAPITAL ASSET TOOK PLACE MERELY WHEN AN AGREEMENT WAS ENTERED INTO BY THE ASSESSEE BUT THE CORRESPONDING CONSIDERATION DID NOT EXIST. 5. IT ALSO APPEARED FROM THE DO CUMENTS ON RECORD THAT WHEN THE AGREEMENTS WERE ENTERED BY THE ASSESSEE, THERE WAS NO DEFINITIVE QUANTIFICATION OF THE AREA THAT COULD BE DEVELOPED OR CONSTRUCTED ON THE LEASEHOLD LAND. THE AGREEMENTS BETWEEN THE ASSESSEE AND GODREJ NOWHERE SPELT OUT THE E XACT AREA THAT WAS CONSTRUCTIBLE IN TERMS OF THE DEVELOPMENT AGREEMENT. IN ABSENCE OF THE FINAL QUANTIFICATION OF THE AREA CONSTRUCTIBLE; IT WAS NOT POSSIBLE TO ASCERTAIN IN MONETARY TERMS THE CONSIDERATION FOR TRANSFER AND CONSEQUENTLY IT WAS ALSO NOT POS SIBLE TO ASSESS THE CAPITAL GAINS. FROM THE INFORMATION PLACED ON RECORD, IT IS APPARENT THAT THE CONSTRUCTION OF THE IT PROJECT WAS COMPLETED ONLY IN FY 2011 - 12, IT IS ONLY UPON COMPLETION OF THE CONSTRUCTION OF TOWERS I & II, IT WAS FINALLY ASCERTAINED A S TO HOW MUCH TOTAL AREA WAS FINALLY CONSTRUCTED BY THE DEVELOPER WHICH TOGETHER AMOUNTING TO 18,55,847 SQ.FT. AND THE ASSESSEE S 39% SHARE THEREIN WAS QUANTIFIED AT 7,23,781 SQ.FT. IN FACT MY PREDECESSOR RELIED ON THE ASSESSEE S NEWSLETTER DATED 04.04.201 1 IN WHICH THIS INFORMATION WAS DISCLOSED. THE FACTS ON RECORD THEREFORE, SUGGEST THT TILL 2011, EVEN THE AREA COMING TO ASSESSEE S ALLOCATION WAS NOT FULLY QUANTIFIABLE. IT THEREFORE, APPEARED EVEN FROM THE REASONS RECORDED THAT TILL APRIL 2011, THERE WAS NO CERTAINTY ABOUT THE AREA THAT WAS TO BE DELIVERED TO THE ASSESSEE IN TERMS OF THE DEVELOPMENT AGREEMENT. IT WAS ONLY AFTER COMPLETION OF IT PROJECT AND DELIVERY OF ASSESSEE S SHARE THEREIN THE COMPUTATIONAL PROVISIONS OF IT ACT BECAME APPLICABLE. IN AB SENCE OF THE FINAL QUANTIFICATION OF THE AREA TO BE CONSTRUCTED WHICH WAS NOT EVEN ASCERTAINED IN AY 2007 - 08, IT WAS NOT POSSIBLE TO DETERMINE AND ASSESSEE S INCOME BY WAY OF CAPITAL GAINS. MY PREDECESSOR RECORDED HIS REASONS TO BELIEVE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 27 OF 45 AND QUANTIFIED THE AMOUNT OF INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT ON THE BASIS OF INFORMATION WHICH BECAME AVAILABLE IN APRIL 2011, I.E. MORE THAN 4 YEARS FROM THE END OF THE RELEVANT PREVIOUS YEAR. AS SUCH BASED ON THE EVENTS WHICH OCCURRED MUCH AFTER THE CLOSE OF THE PREVIOUS YEAR, IT WAS NOT CORRECT TO HOLD THAT INCOME HAD ESCAPED ASSESSMENT IN THE EARLIER YEAR. 6. AS REGARDS DELIVERY OF POSSESSION OF LAND TO THE DEVELOPER THE ASSESSEE CONTENDED THAT IT HAD ONLY GIVEN LICENSE TO ENTER UPON THE LEASEHOLD LAND TO CARRY OUT THE DEVELOPMENT OBLIGATIONS UNDER AGREEMENT. IN THE LETTERS ADDRESSED TO GODREJ WATERSIDE PROPERTIES PVT. LTD, THE DEVELOPER WAS SPECIFICALLY ASKED TO FURNISH THE DATE/S ON WHICH THE POSSESSION OFHE LAND WAS DELIVERED, IN RESPONSE, THE ASSESSEE FILED REPLY. 7. FROM THIS REPLY, IT APPEARED THAT EVEN THE DEVELOPER IN ITS REPLY ADMITTED THAT LEGAL POSSESSION OF THE PROPERTY WAS NEVER RECEIVED BY GODREJ WATERSIDE PROPERTIES PVT. LID BUT IT WAS ONLY ALLOWED TO CARRY ON CONSTRUCTION IN TERMS OF THE DEVELOP MENT AGREEMENT. THE CATEGORICAL CONFIRMATION IN THIS REGARD BY THE DEVELOPER THEREFORE SHOWED THAT THE ASSESSEE NEVER PARTED WITH LEGAL POSSESSION OF ITS LAND, TILL 39% OF THE CONSTRUCTED SPACE IN THE COMPLETED BUILDING WAS NOT DELIVERED. 8. FROM THE DIS CUSSION IN THE FOREGOING PARAS THEREFORE IT APPEARED THAT THE ASSESSEE THOUGH ENTERED INTO DEVELOPMENT AGREEMENT WITH GODREJ PROPERTIES LTD INITIALLY AND THEREAFTER WITH GODREJ WATERSIDE PROPERTIES PVT, LTD IT NEVER CEASED TO BE IN CONTROL OR ITS LAND, THE ASSESSEE ALONG WITH THE DEVELOPER JOINTLY REMAINED IN CONTROL AND MANAGEMENT OF THE LAND AND THE PROJECT. AT THE TIME WHEN THE AGREEMENT WAS ENTERED THERE WAS NO FINALITY WITH REGARD TO TOTAL CONSTRUCTIBLE AREA WHICH WAS TO ACCRUE TO BOTH THE PARTIES. IN ABSENCE OR THE FINAL CRYSTALLIZATION OF TOTAL CONSTRUCTIBLE AREA THERE COULD NOT HAVE BEEN DETERMINATION OF THE CONSIDERATION WHICH WAS THE ESSENTIAL INGREDIENT FOR ASSESSMENT OF CAPITAL GAINS. WHEN THE ASSESSEE ENTERED INTO AGREEMENT WITH GODREJ PROPERTIE S LTD., THE CONSIDERATION IN KIND DID NOT EVEN EXIST AND THEREFORE, QUANTIFICATION OF THE CONSIDERATION AND CONSEQUENTLY CAPITAL GAIN ACCRUING THERE FROM WAS IMPOSSIBLE. FURTHER THE CONSIDERATION WHICH WAS ACTUALLY RECEIVED CAME ONLY IN FYS 2010 - 11 & 2011 - 12. IT WAS ONLY AT THAT POINT OF TIME WAS POSSIBLE TO DETERMINE WITH CERTAINTY THE COSTS INCURRED BY THE DEVELOPER, BASED ON WHICH THE INCOME BY WAY OF CAPITAL GAIN COULD BE ASSESSED. IN THE BACKGROUND OF THE FACT THAT IN FY 2006 - 07 THE COST OF CONSTRUCTIO N WAS NOT EVEN INCURRED AND THE CONSTRUCTED SPACE DID NOT EXIST, THE DETERMINATION OR QUANTIFICATION OF CONSIDERATION WOULD BE AN ACT OF ABSTRACT ESTIMATION WHICH IS NEITHER PRACTICAL NOR PERMITTED BY THE ACT. 9. IN FACT TILL SECTION 50D WAS ENACTED BY TH E PARLIAMENT THERE WAS NO STATUTORY GUIDELINE FOR DETERMINATION OF THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 28 OF 45 CONSIDERATION IN CASE OF TRANSACTION SUCH AS DEVELOPMENT AGREEMENT. IT IS ONLY WITH THE ENACTMENT OF SECTION 50D BY THE FINANCE ACT, 2012 EFFECTIVE FROM AY 2013 - 14, IT IS NOW POSSIBLE T O ESTIMATE THE CONSIDERATION WITH REFERENCE TO FAIR MARKET VALUE OF THE CAPITAL ASSET TRANSFERRED. HOWEVER EVEN U/S 50D OF THE IT ACT, THE CONSIDERATION COULD ONLY BE VALUED BY TAKING INTO CONSIDERATION THE FAIR MARKET VALUE OF 61% OF THE ASSESSEE S LEASEH OLD RIGHTS IN LAND AND BUT NOT TAKING INTO CONSIDERATION COST OF CONSTRUCTION OF THE AREA COMING TO ASSESSEE S SHARE. SINCE THE LAND IN QUESTION WAS LEASEHOLD LAND AND IS NOT FREELY TRANSFERABLE IN VIEW OF RESTRICTIONS PLACED BY THE GOVT. O F WEST BENGAL, F AIR MARKET VALUE OF THE LEASEHOLD INTEREST WOULD BE ALSO HIGHLY DEPRESSED AND BASED ON SUCH VALUE THE CAPITAL GAINS CANNOT BE ASSESSED. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINION THAT ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT WOULD B E MOST APPROPRIATE THAT THE CAPITAL GAINS BE ASSESSED IN YEARS IN WHICH THE CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS WAS ACTUALLY DELIVERED BY THE DEVELOPER. IF THE CAPITAL GAIN IS ASSESSED IN THE YEARS OR RECEIPT OF THE CONSIDERATION THEN THE QUAN TIFICATION OF CAPITAL GAIN CAN BE DONE WITH MOST CERTAINTY BECAUSE TILL THEN IT WILL BE POSSIBLE TO ASSESS THE CORRECT AMOUNT OF CAPITAL GAINS WITH REFERENCE TO COST OF CONSTRUCTION ACTUALLY INCURRED BY THE DEVELOPER. THE FACTS ON RECORD SHOWS THAT THE COS T OR CONSTRUCTION WAS INCURRED BY THE DEVELOPER MUCH LATER THAN FY 2006 - 07 AND MAJOR PORTION OR THE CONSTRUCTION COST WAS INCURRED DURING FYS 2009 - 10 & 2010 - 11. IN THE CIRCUMSTANCES IF ONE HAS TO RESORT TO ESTIMATION OF THE CONSIDERATION THEN I WILL HAVE T O ALLOW DISCOUNTING OR THE CONSTRUCTION COST TO ARRIVE AT THE PRESENT VALUE OF THE CONSIDERATION. THIS WILL RESULT IN SUBSTANTIAL REDUCTION IN THE CAPITAL GAIN TAX AND THIS WILL BE TO THE PREJUDICE TO THE REVENUE. ON THE CONTRARY IF THE CAPITAL GAIN IS ASS ESSED IN AY 2011 - 12 & 2012 - 13, THEN THE CAPITAL GAIN CAN BE ASSESSED IN THE YEARS WHEN THE ASSESSEE HAS RECEIVED THE CONSIDERATION AND BASED ON ACTUAL COST INCURRED BY THE DEVELOPER THE CAPITAL GAIN CAN BE ASSESSED WITH MUCH CERTAINTY AND WITHOUT GIVING BE NEFIT OF DISCOUNTED PRESENT VALUE OF THE CONSIDERATION. SUCH COURSE IN MY OPINION WILL BE FOR MORE BENEFICIAL FOR THE REVENUE. 10. IN SUPPORT OR THE CONTENTION THAT CAPITAL GAIN IS ASSESSABLE IN THE YEAR IN WHICH CONSIDERATION IS ACTUALLY RECEIVED. DECIS ION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. K. JEELANI BASHA 256 ITR 282 (MADRAS) IS RELEVANT IN THIS CASE THE ASSESSEE HAD AGREED TO SELL ITS LAND FOR A CONSIDERATION OF RS.57 CRORES WHICH WAS TO BE PAID WITHIN THE TIME PRESCRIBED IN THE AGREEMENT . THE TRANSFEREE WAS ABLE TO PAY ONLY RS.22 LACS AND IN CONSIDERATION TH E REOF THE ASSESSEE PARTED WITH OHNLY ONE THIRD OF THE POSSESSION. THE AO ASSESSED FULL CAPITAL GAIN IN THE YEAR IN WHICH THE AGREEMENT WAS EXECUTED ON THE GROUND THAT THE ASSESSEE HAD DELIVERED PART POSSESSION IN PERFORMANCE OF AGREEMENT FOR SALE. ON APPEAL THE TRIBUNAL AND THEREAFTER THE HIGH COURT HELD THAT SINCE THE ASSESSEE RECEIVED CONSIDERATION I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 29 OF 45 OF ONLY RS.22 LACS DURING THE RELEVANT YEAR THE CAPITAL GAIN WAS ASSESSABLE ONLY WITH REFERENCE TO THE CONSIDERATION WHICH WAS ACTUALLY RECEIVED BY THE ASSESSEE IN THAT YEAR. IN OTHER WORDS, THE HIGH COURT HELD THAT CAPITAL GAIN CAN ONLY BE ASSESSED IN THE YEAR IN WHICH THE CONSIDERATION IS ACTUALLY RECEIVED. IN THE ASSESSEE S CASE, THE CON SIDERATION IN THE FORM OF 39% OF THE CONSTRUCTED AREA WAS DELIVERED TO THE ASSESSEE IN AY 2011 - 12 & 2012 - 13 AND IN THE SAME YEAR THE ASSESSEE DELIVERED POSSESSION OF THE DEVELOPER S ALLOCATION TO THE DEVELOPER. ACCORDINGLY APPLYING THE RATIO LAID DOWN IN T HE DECISION OF THE MADRAS HIGH COURT, I AM OF THE OPINION THAT THE ASSESSMENT OF CAPITAL GAIN CAN BE MADE ON MORE SCIENTIFIC BASIS IF THE CAPITAL GAINS ARE ASSESSED IN AYS 2011 - 12 & 2012 - 13 RESPECTIVELY. IT MAY ALSO BE RELEVANT TO REFER TO THE DECISION OF THE ITAT, KOLKATA IN THE CASE OF ITO VS. - VIKAS BEHEL (132 TTJ 229) IN THIS CASE, THE ASSESSEE WAS ONE OF THE OWNERS OF LAND WHICH WAS ACQUIRED IN 1990. ON 31.10.2000 THE CO - OWNERS ENTERED INTO A DEVELOPMENT AGREEMNE, IN TERMS OF WHICH THE OWNERS WERE TO RECEIVE 32.5% OF THE CONSTRUCTED SPACE. THE CONSTRUCTION STARTED ON 07.11.2000 AND COMPLETED ON 02.06.2004. ASSESSEE S SHARE IN THE CONSTRUCTED SPACE WAS DELIVERED ON COMPLETED IN 2004. IN THE SAME YEAR THE ASSESSEE SOLD PART OF THE CONSTRUCTED SPACE OUT O F THE OWNER S ALLOCATION SHARE AND THE CAPITAL GAINS WAS RETURNED IN AY 2005 - 06. THE AO ASSESSED THE CAPITAL GAIN AS SHORT TERM WHEREAS THE ASSESESE CLAIMED THE SAME TO BE LONG TERM IN NATURE. THE TRIBUNAL HELD THE GAIN TO BE LONG TERM IN NATURE. HOWEVER, WHAT IS MATERIAL TO NOTE FROM THE FACTS DISCUSSED IN THIS DECISION IS THAT IT WAS NEVER THE CASE OF THE DEPARTMENT NOR THE TRIBUNAL HELD THAT CAPITAL GAINS SHOULD WAS ASSESSABLE IN AY 2001 - 02 ALTHOUGH THE DEVELOPMENT AGREEMENT WAS EXECUTED ON 31.10.2000 AN D THE CONSTRUCTION BEGAN ON 07.11.2000. THE FACT DISCUSSED IN THE DECISION OF THE TRIBUNAL, THEREFORE, SHOWS THE CAPITAL GAIN WAS HELD ASSESSABLE ONLY IN THE YEAR IN WHICH THE CONSIDERATION WAS ACTUALLY RECEIVED BY THE ASSESSEE. IN THE ASSESSEE S CASE ALSO IT DISCLOSED CAPITAL GAIN IN AYS 2011 - 12 & 2012 - 13 BEING YEARS IN WHICH THE CONSIDERATION WAS ACTUALLY RECEIVED. FOR THESE REASONS, TOTAL INCOME AS SHOWN BY THE ASSESSEE IN ITS RETURN FOR AY 2007 - 08 IS ACCEPTED. HOWEVER, AYS 2011 - 12 & 2012 - 13 MAY BE SCRUT INIZED SO THAT LONG TERM CAPITAL GAIN INCOME CAN BE ASSESSED ON MORE SCIENTIFIC BASIS AFTER OBTAINING ALL RELEVANT EVIDENCE, FACTS AND MATERIALS FROM THE ASSESSEE S POSSESSION AS ALSO FROM THE DEVELOPER. 11. MOREOVER, IT IS ALSO SUBMITTED BY THE ASSESSEE VIDE ITS LETTER DATED 21.903.2013 THAT IF IT IS PRESUMED THAT THE TRANSFER OF THE CAPITAL ASSET TOOK EFFECT WHEN THE DEVELOPMENT AGREEMENT WSA ENTERED THEN IT WILL MEAN THAT 61% OF THE LEASE HOLDS INTEREST IN LAND WAS TRANSFERRED IN FAVOUR OF THE DEVELOPER . ON THAT DATE, THE CONSIDERATION IN KIND WAS NOT IN EXISTENCE AND THEREFORE, A NON - EXISTENT CONSIDERATION COULD NOT BE EVALUATED FOR ASSESSING CAPITAL GAINS. IN THE CIRCUMSTANCES WHAT COULD BE ADOPTED FOR THE PURPOSE OF ASSESSING THE INCOME I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 30 OF 45 BY WAY OF CAPI TAL GAINS, WAS THE MARKET VALUE OF THE LEASEHOLD INTEREST IN LAND AS EXISTING ON THE DATE OF THE AGREEMENT. THE FAIR MARKET VALUE OF THE LEASEHOLD INTEREST IN LAND COULD BE ASSESSED AND DETERMINED ONLY WITH REFERENCE TO THE GAZETTE NOTIFICATION OF WEST BEN GAL GOVT. ACCORDING TO WHICH THE FAIR MARKET VALUE OF 61% OF OUR LEASEHOLD INTEREST WAS ONLY RS.6.15 CRORES. IN FACT , THE SAID METHOD OF DETERMINATION OF THE CONSIDERATION IS NOW STATUTORILY INCORPORATION IN PROVISIONS OF SECTION 50D OF THE IT ACT WHICH WE RE ENACTED THROUGH THE FINANCE ACT, 2012. IN THE CIRCUMSTANCES IF ONE ASSUMES THAT THE CAPITAL GAIN ON TRANSFER OF COMPANY S 61% INTEREST IN LEASEHOLD LAND ACCRUED ON EXECUTION OF THE DEVELOPMENT AGREEMENT THEN THE CAPITAL GAIN CAN ONLY BE ASSESSED WITH RE FERENCE TO SUCH FAIR MARKET VALUE I.E. RS.6.15 CRORES WHICH IS FAR BELOW THE INCOME WHICH THE ASSEESSEE HAVE VOLUNTARILY OFFERED TO TAX IN AYS 2011 - 12 & 2012 - 13 RESPECTIVELY. THE DETAILS OF CAPITAL GAIN ARE GIVEN AS UNDER: - TOTAL CONSTRUCTION AREA 18,55,84 3 SQ.FT. ALLOTTED PORTION TO THE ASSESSEE (39%) 7,21,640 SQ.FT. ALLOTTED PORTION W.R.T. TOWER - 1 2,57,786 SQ.FT. ALLOTTED PORTION W.R.T. TOWER - II 4,63,854 SQ.FT. NO. OF ALLOTTED CAR PARKING W.R.T. TOWER - I 183 NO. OF ALLOTTED CAR PARKING W.R.T. TOWER - I I 375 DETAILS OF CAPITAL GAIN COST OF CONSTRUCTED AREA COST OF CAR PARKING AREA TOTAL COST CAPITAL GAIN SHOWN TOWER - I 32,22,32,500 2,74,50,000 34,96,82,500 33,21,91,886 TOWER - II 57,98,17,500 5,62,50,000 63,60,67,500 60,04,98,920 AS SUCH ANY AS SESSMENT WITH REFERENCE TO FMV OF RS.6.15 CRORES WILL ONLY REDUCE THE COMPANY S OVERALL TAX LIABILITY. 12. CONSIDERING DISCUSSION AS IN FOREGOING PARA 1 TO 11, CAPITAL GAIN AS SHOWN BY THE ASSESSEE IN AYS 2011 - 12 & 2012 - 13 IN RESPECT OF ALLEGED TRANSFER O F DEVELOPMENT RIGHTS ON LEASEHOLD LAND IS ACCEPTED. ORDER FOR THE AY 2007 - 08 IS COMPLETED ON INCOME AS ASSESSED EARLIER. 13. SINCE W.P. IS DISMISSED BY THE HON BLE KOLKATA HIGH COURT AND NO FURTHER STAY HAD BEEN GRANTED (REF. LETTER OF A.P. GOMES ADV. DAT ED 02.04.2013), ASSESSMENT ORDER HAS BEEN ISSUED TO THE ASSESSEE AND SERVED UPON IT ON 03.04.2013. I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 31 OF 45 14. WHILE PASSING THE ORDER FOR THE AY 2007 - 08, DISCUSSION WITH LD. JCIT, RANGE - 2, KOLKATA HAD BEEN MADE TIME TO TIME . 28 . FROM THIS WE NOTED THAT SO FAR AS THE ISSUE NO.1 IS CONCERNED, THE ASSESSING OFFICER HAS AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS MAKING THE ENQUIRY ON THIS ISSUE TAKEN A CONSCIOUS DECISION. FROM THE FINDING OF THE ASSESSMENT ORDER IT IS APPARENTLY CLEAR THAT THE ASSE SSING OFFICER HAD DULY EXAMINED THE ISSUE RELATING TO ASSESSMENT OF CAPITAL GAINS IN RELATION TO ASSESSEE S DEVELOPMENT RIGHTS IN RESPECT OF ITS LEASEHOLD PROPERTY BEING PLOT NO. 5, BLOCK DP, SECTOR - V, SALT LAKE CITY, KOLKATA AND TOOK THE VIEW THAT NO CAPI TAL GAIN IS CHARGEABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THUS IT IS A CASE WHERE THE ASSESSING OFFICER HAS EXAMINED THE ISSUE BY MAKING ENQUIRY ON THE BASIS OF WHICH THE CIT INVOKED JURISDICTION UNDER SECTION 263. IT IS NOT A CASE OF LACK OF ENQUIRY ON THE PART OF ASSESSING OFFICER THE ASSESSING OFFICER AFTER MAKING ENQUIRIES ALLOWED THE CLAIM OF THE ASSESSEE ON THAT ISSUE. IT IS NOT NECESSARY THAT THE ASSESSING OFFICER SHOULD DISCUSS IN DETAIL THE FINDING IN HIS ORDER, ALTHOUGH THE ASSESSING OFFICER HAS GIVEN CLEAR - CUT FINDING IN THIS REGARD. 29 . IF THE ASSESSING OFFICER HAS NOT DISCUSSED THE INQUIRY MADE BY HIM IN THE CASE OF ASSESSEE IN RESPECT OF WHICH, HE ISSUED SHOW - CAUSE TO ASSESSEE, WE CANNOT SAY THAT ORDER IS ERRONEOUS AS THE ASSESSING OFFI CER HAS NOT MADE ANY INQUIRY INTO THE MATTER. THE ASSESSEE CANNOT DICTATE THE ASSESSING OFFICER WHAT SHOULD HE INCORPORATE IN THE ASSESSMENT ORDER AND HOW HE SHOULD DRAFT THE ASSESSMENT ORDER. WE FIND THAT THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. - GABRIEL INDIA LIMITED REPORTED IN 203 ITR 108 HAS HELD IN THIS REGARD AS UNDER: - HELD, THAT THE INCOME TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN A DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE INCOME TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE INCOME TAX OFFICER CO ULD NOT BE HELD TO BE ERRONEOUS SIMPLY I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 32 OF 45 BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NO T SAY THAT THE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME TAX OFFICER TO RE - EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 . 3 0 . SIMILAR VIEW HAS BEEN TAKEN BY THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. - MAHENDER KUMAR BANSAL, 297 ITR 099 IN WHICH RESPEC TFULLY FOLLOWING THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. - GOYAL PRIVATE FAMILY SPECIFIC TRUST, 171 ITR 698 (ALLD.) HAS HELD UNDER PARA NO. 12 AS UNDER: - AS HELD BY THIS COURT IN THE CASE OF GOYAL PRIVATE FAMILY SPECIFIC TRUST (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT MERELY BECAUSE THE ITO HAD NOT WRITTEN LENGTHY ORDER, IT WOULD NOT ESTABLISH THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3)/148 OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHOUT BRI NGING ON RECORD SPECIFIC INSTANCES, WHICH IN THE PRESENT CASE, THE CIT HAS FAILED TO DO . NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE BY EITHER OF THE SIDES. 3 1 . WE NOTED THAT HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. - LEISURE WEAR EXPORTS L TD., 341 ITR 166 (DEL.) HAS CLEARLY HELD AS UNDER: - THE POWER OF REVISION IS NOT MEANT TO BE EXERCISED FOR THE PURPOSE OF DIRECTION THE AO TO HOLD ANOTHER INVESTIGATION WITHOUT DESCRIBING AS TO HOW THE ORDER OF THE AO IS ERRONEOUS. FROM THIS IT ALSO FOLLO WS THAT WHERE THE ASSESSMENT ORDER HAS BEEN PASSED BY THE AO AFTER TAKING INTO ACCOUNT THE ASSESSEE S SUBMISSIONS AND DOCUMENTS FURNISHED BY HIM AND NO MATERIAL WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE CIT WHICH SHOWED THAT THERE WAS ANY DISCREPANCY O R FALSITY IN EVIDENCES FURNISHED BY THE ASSESSEE, THE ORDER OF THE AO CANNOT BE SET ASIDE FOR MAKING DEEP INQUIRY ONLY ON THE PRESUMPTION AND ASSUMPTION THAT SOMETHING NEW MAY COME OUT. FOR MAKING A VALID ORDER UNDER SECTION 263 IT IS ESSENTIAL THAT THE CI T I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 33 OF 45 HAS TO RECORD AN EXPRESS FINDING TO THE EFFECT THAT ORDER PASSED BY THE AO IS ERRONEOUS WHICH HAS CAUSE LOSS TO THE REVENUE. FURTHERMORE, WHERE ACTING IN ACCORDANCE WITH LAW THE AO FRAMES CERTAIN ASSESSMENT ORDER, SAME CANNOT BE BRANDED AS ERRONEOUS SIMP LY BECAUSE ACCORDING TO THE CIT, THE ORDER SHOULD BE WRITTEN MORE ELABORATELY . 3 2 . IN THE CASE OF DIT VS. - JYOTI FOUNDATION, 357 ITR 388 (DEL.), THE HON BLE DELHI HIGH COURT HAS HELD AS UNDER: - REVISIONARY POWER UNDER SECTION 263 IS CONFERRED BY THE A CT ON THE COMMISSIONER/DIRECTOR OF INCOME TAX WHEN AN ORDER PASSED BY THE LOWER AUTHORITY IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, BUT ORDERS WHICH ARE PASSED AFTER INQUIRY/INVESTIGATION ON THE QUESTION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FU RTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN . 3 3 . THUS IN VIEW OF SETTLED LAW AS DISCUSSED ABOVE, WE ARE OF THE FIRM VIEW THAT IT IS A CASE WHERE DUE INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER AS IS APPA RENT FROM ASSESSMENT ORDER ON THIS ISSUE ON WHICH CIT INVOKED JURISDICTION UNDER SECTION 263. IT IS NOT THE CASE OF LD. D.R. THAT THE VIEWS TAKEN BY ASSESSING OFFICER ARE UNSUSTAINABLE IN LAW. 3 4 . IT IS A SETTLED LAW THAT IF THE AO HAS TAKEN ONE OF THE PO SSIBLE VIEWS, IT CANNOT BE SAID THAT THERE IS AN ERROR IN THE ORDER PASSED UNLESS AND UNTIL THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. THE SAID VIEW HAS BEEN TAKEN BY THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC) WHEREIN THEIR LORDSHIPS HAS HELD AS UNDER : - 'THE PRE - REQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 IS THAT THE ORDER OF THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. TH E COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE ASSESSING OFFICE IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHE N AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 34 OF 45 ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPL ES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSE SSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. WHERE A SUM NOT EAR NED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME WITHOUT APPLICATION OF MIND AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE CASE OF CIT VS. R.K . CONSTRUCTION CO., HON BLE GUJARAT HIGH COURT 313 ITR 65 (GUJ.) AS CONFIRMED BY SUPREME COURT HAS HELD AS UNDER: - THE DETAILS OF SUB - CONTRACTORS EXAMINED BY THE AO AS PER THE DIRECTIONS OF CIT IN REVISION PROCEEDINGS, INTER ALIA, INCLUDE THE NAMES OF TH ESE SUB - CONTRACTORS, THEIR PERMANENT ACCOUNT NUMBERS, THEIR PERMANENT ADDRESSES, AMOUNT GIVEN TO THEM, NAME OF WORK ENTRUSTED TO THEM, NATURE OF SUCH WORK AND STATEMENTS RECORDED BY THE AO, ETC. THESE DETAILS REVEAL THAT DURING THE COURSE OF EXAMINATION U NDER S. 131, NO QUESTION WAS PUT TO MANY OF THESE SUB - CONTRACTORS AS TO THE VARIATION IN THEIR SIGNATURES. SIMILARLY, NO QUESTION WAS PUT TO THEM FOR THE REASONS OF DISCOUNTING WITH THE SHROFF. IT IS THE STAND OF THE ASSESSEE RIGHT FROM THE BEGINNING THA T ALL THESE SUB - CONTRACTORS WERE MAINLY WORKING FOR THE ASSESSEE AND THEY DID NOT HAVE ANY OFFICE SET UP AND SINCE THEY WERE WORKING FOR THE ASSESSEE, THEY HAVE USED ASSESSEE S ADDRESS FOR CORRESPONDENCE, ESPECIALLY WITH THE GOVERNMENT FOR TIMELY COMMUNICA TION. THESE PERSONS ARE ELIGIBLE UNDER S. 44AD TO FILE THEIR RETURNS UNDER PRESUMPTIVE SCHEME OF TAXATION. ALL THESE PERSONS WERE PRODUCED BEFORE THE AO IN REVISION PROCEEDINGS AND NO QUESTION WAS PUT TO THEM THOUGH THEIR STATEMENTS ON OATH WERE RECORDED . ALL THESE PERSONS HAVE CONFIRMED IN REVISION PROCEEDINGS THAT THE MONEY WAS NOT RETURNED BY THEM TO ANY PERSON AND WAS USED FOR THEIR PERSONAL BENEFIT. THE PAYMENTS WERE MADE TO THESE PERSONS BY BANKING CHANNELS AND TAX WAS DEDUCTED AT SOURCE IN ACCORD ANCE WITH LAW. THE ASSESSEE HAS ALSO GIVEN COMPLETE DETAILS WITH RESPECT TO LABOUR EXPENSES CALLED FOR IN ASSESSMENT PROCEEDINGS. THESE DETAILS WERE DULY VERIFIED BY THE AO WITH THE BOOKS AND RECORDS. NO ADVERSE OBSERVATION WAS MADE BY THE AO AND HENCE, NO ADDITION WAS MADE IN THE REGULAR ASSESSMENT. THE AO HAS ALSO RANDOMLY SELECTED TWO LABOURERS AND EXAMINED THEM AND THEIR STATEMENTS WERE RECORDED UNDER S. 131. SINCE ALL NECESSARY DETAILS WERE FURNISHED BY THE ASSESSEE, THERE WAS NO REASON FOR THE CI T TO INVOKE THE REVISIONAL JURISDICTION UNDER S. 263. THE CIT HAS NOT STOPPED I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 35 OF 45 MERELY BY ISSUANCE OF NOTICE UNDER S. 263. ONCE COMPLIANCE IS MADE, HE WENT ON ISSUING NOTICE AFTER NOTICE AND CERTAIN ADVERSE INFERENCE WERE DRAWN BY HIM FROM THE DETAILS COLL ECTED BY HIM DURING THE REVISIONAL PROCEEDINGS. THOSE DETAILS WERE THOROUGHLY CHECKED AND EXAMINED BY THE TRIBUNAL AND IT ARRIVED AT A FACTUAL FINDING THAT THERE WAS NO ILLEGALITY COMMITTED BY THE ASSESSEE IN ENTRUSTING THE WORK TO SUB - CONTRACTORS NOR THE RE WAS ANY ILLEGALITY IN MAKING ALL DUE PAYMENTS TO THEM. THE TRIBUNAL HAS ALSO GIVEN SPECIFIC FINDING TO THE EFFECT THAT THERE WAS NO EVIDENCE ON RECORD THAT THESE CONTRACTORS WERE RELATED TO THE ASSESSEE OR WERE ASSOCIATES OR SISTER CONCERNS OF THE ASSE SSEE. THE TRIBUNAL HAS ALSO GIVEN FINDING THAT THE REVENUE HAS NOT DISCHARGED THE ONUS THAT THE PAYMENTS TO SUB - CONTRACTORS WERE NOT GENUINE. THUS THE TRIBUNAL HAS COME TO THE CONCLUSION THAT NO DISALLOWANCES CAN BE MADE MERELY ON THE BASIS OF SUSPICION, HOWSOEVER STRONG MAY IT BE, AND THE SUSPICION CANNOT TAKE THE PLACE OF ACTUALITY. AO HAS TAKEN A PARTICULAR VIEW ON THE BASIS OF EVIDENCE PRODUCED BEFORE HIM. ON THE BASIS OF THE SAID MATERIAL AND MATERIALS WHICH WERE COLLECTED BY THE CIT IN REVISIONAL PROCEEDINGS, THE CIT HAS TAKEN A DIFFERENT VIEW. HOWEVER, IN THE REVISIONAL PROCEEDINGS UNDER S. 263, IT IS NOT OPEN FOR THE CIT TO TAKE SUCH A DIFFERENT VIEW. NO SUBSTANTIAL QUESTIONS OF LAW ARISE OUT OF THE ORDER OF THE TRIBUNAL AND HENCE, THE APPEAL F ILED BY THE REVENUE DESERVES TO BE DISMISSED. CIT VS. ARVIND JEWELLERS (2002) 177 CTR (GUJ) 546 : (2003) 259 ITR 502 (GUJ) AND MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) RELIED ON). 3 5 . HON BLE SUPREME COURT IN T HE CASE OF CIT VS. MAX INDIA LIMITED, 295 ITR 282 (SC) HAS HELD AS UNDER: - THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SECTION 263 OF THE INCOME - TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY T HE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 3 6 . IN CIT VS. RATLAM COAL ASH CO., 171 ITR 141 (MP), MADHYA PRADESH HIGH COURT HAS HELD AS UNDER: - I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 36 OF 45 IT IS WELL SETTLED THAT WHERE THE ITO MADE THE ASSESSMENT IN UNDUE HURRY, ACCEPTING WHAT THE ASSESSEE STATES I N THE RETURN WITHOUT MAKING ANY ENQUIRIES IN THE CIRCUMSTANCES OF THE CASE, THE CIT WOULD BE JUSTIFIED IN HOLDING THE ORDER OF THE ITO TO BE ERRONEOUS. IN THE INSTANT CASE, HOWEVER, THE TRIBUNAL HAS FOUND THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE INFORMATION AND THAT THE ITO, CONSIDERING ALL THE FACTS, HAD COMPLETED THE ASSESSMENT. THE TRIBUNAL FURTHER HELD THAT IN THE CIRCUMSTANCES OF THE CASE, IT COULD NOT BE HELD THAT THE ITO HAD MADE ASSESSMENT WITHOUT MAKING PROPER ENQUIRIES. IN VIEW OF THES E FINDINGS, THE TRIBUNAL WAS JUSTIFIED IN LAW IN REVERSING THE ORDER PASSED BY THE CIT. 3 7 . IN CIT VS. ARVIND JEWELLERS, 259 ITR 502 (GUJ), HON BLE GUJRAT HIGH COURT HAS HELD AS UNDER: - IT IS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSESSEE HA S PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF THE NOTICES ISSUED UNDER S. 142(1) AS WELL AS S. 143(2) AND AFTER CONSIDERING THOSE MATERIALS AND EXPLANATION, THE ITO HAS COME TO A DEFINITE CONCLUSION. THE CIT DID NOT AGREE WITH THE C ONCLUSION REACHED BY THE ITO. SEC. 263 DOES NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED BY THE ITO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE ITO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW CAN BE TAKEN, SHOULD NOT BE THE BASIS FOR AN ACTION UNDER S.263 AND IT CANNOT BE HELD TO BE JUSTIFIED. HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE CIT UNDER S. 263. MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) FOLLOWED. 38 . IN THE CASE OF INCOME - TAX OFFICER V. DG HOUSING PROJEC TS LTD. 343 ITR 329 ( D EL), DELHI HIGH COURT HAS HELD AS UNDER: - A FINDING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MUST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961. THE MATTER CANNOT BE RE MITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. IN SUCH MATTERS, TO REMAND THE MATTER TO THE ASSESSING OFFICER WOULD IMPLY THE COMMISSIONER HAS NOT EXAMINED AND DECIDED WHETHE R OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE QUESTION. THE ORDER OF THE ASSESSING OFFICER MAY OR MAY NOT BE WRONG. THE COMMISSIONER CANNOT DIRECT RECONSIDERATION ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CA NNOT BE PASSED BY THE COMMISSIONER TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. THE COMMISSIONER MUST AFTER RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. A DISTINCTION MUST BE DRAWN IN THE CASES WH ERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY ; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS AN ENQUIRY BUT THE FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 37 OF 45 PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE LATTER CASES, THE COMMISSIONER HAS TO EXAMINE THE ORDER OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON THE MERITS AND THEN FORM AN OPINION ON THE MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSIONER CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. 39 . IN THE CASE OF COMMISSIONER OF INCOME - TAX V. SUNBEAM AUTO LTD. 332 ITR 167(DEL ) , HON BLE DELHI HIGH COURT HAS TAKEN FOLLOWING VIEW: - THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE A DETAILED REASON IN RESPECT OF EACH AND EV ERY ITEM OF DEDUCTION, ETC. WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. AN ORDER CANNOT BE TERMED ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME - TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, IT CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. SECTION 263 DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME - TAX OFFICER WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. WHERE THE INCOME - TAX OFFICER HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH L AW AND ARRIVED AT A CONCLUSION SUCH A CONCLUSION CANNOT BE FOUND TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THE ASSESSEE WAS A MANUFACTURER OF CAR PARTS. ITS RETURN FOR THE ASSESSMENT YEAR 2001 - 02 W AS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED. IN REVISIONAL PROCEEDINGS, THE SOLITARY OBJECTION OF THE COMMISSIONER WAS THAT THE EXPENDITURE ON TOOLS AND DIES AGGREGATING TO RS. 10,56,69,367 WAS ALLOWED AS REVENUE EXPENDITURE WITHOUT A DETAILED IN VESTIGATION. AFTER CONSIDERING ALL THE MATERIALS FURNISHED BY THE ASSESSEE THE COMMISSIONER TOOK THE VIEW THAT THE ACCOUNTING PRACTICE FOLLOWED BY THE ASSESSEE TO DEBIT THE ENTIRE COST OF TOOLS AND DIES IN THE YEAR OF INSTALLATION WAS NOT CORRECT AND HE RE MITTED THE CASE TO THE ASSESSING OFFICER FOR RE - EXAMINATION. THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL : _ HELD, _ DISMISSING THE APPEAL, (I) THAT THE ASSESSING OFFICER ALLOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESS EE. SUCH DECISION OF THE ASSESSING OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. THE ASSESSING OFFICER HAD CALLED FOR EXPLANATION ON THE VERY ITEM FROM THE ASSESSEE AND THE ASS ESSEE HAD FURNISHED ITS EXPLANATION. THIS FACT WAS CONCEDED BY THE COMMISSIONER HIMSELF IN HIS ORDER. THIS SHOWED THAT THE ASSESSING OFFICER HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DIES AND I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 38 OF 45 TOOLS WAS TO BE TREATED AS REVENUE EXPENDITURE OR NOT. THEREFORE, IT COULD NOT BE SAID THAT IT WAS A CASE OF LACK OF INQUIRY. THE ACCOUNTING PRACTICE FOLLOWED FOR A NUMBER OF YEARS HAD THE APPROVAL OF THE INCOME - TAX AUTHORITIES. EVEN FOR FUTURE ASSESSMENT YEARS, THE VERY SAME ACCOUNTING PRACTICE WAS ACCEPTED. (II) THAT THE DIES WERE COMPONENTS OF THE MACHINES. THEY NEEDED CONSTANT REPLACEMENT, AS THEIR LIFE WAS NOT MORE THAN A YEAR. THE ASSESSEE ALSO EXPLAINED THAT SINCE THE PARTS WERE MANUFAC TURED FOR THE AUTOMOBILE INDUSTRY, WHICH HAD TO WORK ON COMPLETE ACCURACY AT HIGH SPEED FOR A LONGER PERIOD, REPLACEMENT OF THE PARTS AT SHORT INTERVALS BECOMES IMPERATIVE TO RETAIN THE ACCURACY. WITH THE REPLACEMENT OF TOOLS AND DIES NO NEW ASSET COMES IN TO EXISTENCE NOR WAS THEIR BENEFIT OF ENDURING NATURE. THEY DID NOT EVEN ENHANCE THE LIFE OF THE EXISTING MACHINE OF WHICH THE TOOLS AND DIES WERE ONLY PARTS. THEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER WAS ONE OF THE POSSIBLE VIEWS AND THE ASSESSME NT ORDER PASSED BY HIM COULD NOT BE HELD TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE OPINION OF THE ASSESSING OFFICER IN TREATING THE EXPENDITURE AS REVENUE EXPENDITURE WAS PLAUSIBLE AND THUS THERE WAS NO MATERIAL BEFORE THE COMMISSIONER TO VARY THAT OPINION AND ASK FOR FRESH INQUIRY . 4 0 . NOW COMING TO THE SECOND ISSUE, WHICH RELATES TO DEPRECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF INFORMATION TECHNOLOGY PARK BUILDING KNOWN AS INFINITY THINKTANK SITUATED AT PLOT NO. A - 3, BLOCK GP, SECTOR - V, SALT LAKE CITY, KOLKATA, ON WHICH JURISDICTION UNDER SECTION 263 HAS BEEN INVOKED. THE ASSESSEE S FIRST VENTURE IN THE FIELD OF DEVELOPMENT OF IT PARK WAS CONSTRUCTION OF INFORMATION TECHNOLOGY PARK BUILDING NOW KNOWN AS INFINITY THINKTANK SITUATED A T PLOT A/3, BLOCK GP, SECTOR - V, SALT LAKE CITY, KOLKATA. THE ASSESSEE S REGISTERED AND ADMINISTRATIVE OFFICE IS ALSO SITUATED IN THE SAID BUILDING. THE DEVELOPMENT AND CONSTRUCTION OF THE SAID IT PARK BUILDING WAS COMPLETED IN TWO PHASES AND THE CONSTRUCTI ON WORK WAS COMPLETED IN FINANCIAL YEAR 2005 - 06 RELEVANT TO ASSESSMENT YEAR 2006 - 07. THE SAID IT PARK BUILDING IS OPERATED AND MAINTAINED BY THE ASSESSEE AS AND BY WAY OF INFORMATION TECHNOLOGY PARK. THE SAID IT PARK HAS BEEN APPROVED AS AN INDUSTRIAL PARK BY THE CBDT UNDER SECTION 80IA(4) AND THE RELEVANT NOTIFICATION GIVEN IN THE PAPER BOOK AT PAGE 273. PART OF THE IT PARK HAS BEEN LEASED OUT ON LONG TERM BASIS BY COLLECTING LUMP SUM LEASE PREMIUM. HOWEVER, MAJORITY OF THE AREA IN THE IT PARK HAS BEEN LEA SED OUT ON SHORT TERM BASIS AND THE LESSEES PAY MONTHLY LEASE RENT AND ALSO OPERATING AND I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 39 OF 45 MAINTENANCE EXPENSES. THE RENT AND THE MAINTENANCE CHARGES RECOVERED FROM THE SHORT TERM LESSEES IS ALSO ASSESSED AS BUSINESS INCOME OF THE ASSESSEE. THE INCOME EARN ED BY THE ASSESSEE IS REGULARLY ASSESSED UNDER THE HEAD BUSINESS. THE DEPRECIATION ON THE ACTUAL COST/ WRITTEN DOWN VALUE OF THE FIXED ASSETS OF THE IT PARK UNDERTAKING HAD BEEN CLAIMED AND ALLOWED IN THE INCOME TAX ASSESSMENTS OF THE ASSESSEE IN ASSESSME NT YEAR 2002 - 03 AND ONWARDS. 4 0 .1. THE ASSESSMENTS FOR THE ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 WERE COMPLETED UNDER SECTION 143(3) OF THE ACT, WHEREIN THE DEPRECIATION ON THE FIXED ASSETS OF THE IT PARK UNDERTAKING INCLUDING IT PARK BUILDING WAS ALLOWED BY THE AO AFTER DISCUSSION. THERE WERE DISPUTES WITH REGARD TO CALCULATION OF DEPRECIATION AND THE ASSESSEE S CLAIM FOR DEPRECIATION ON FIXED ASSETS OF THE IT PARK UNDERTAKING INCLUDING THE IT PARK BUILDING, WHICH WAS SUBSEQUENTLY ALLOWED BY THE CIT(APPEA LS) AND BY THE TRIBUNAL FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06.IN THE IMPUGNED ASSESSMENT YEAR, THE RETURN OF INCOME WAS DECLARED BY THE ASSESSEE AT RS.89,03,382/ - . THE ASSESSEE ALSO CLAIMED DEPRECIATION WHILE COMPUTING THE TOTAL INCOME AT RS.4,17,62,205 / - . BOOK PROFIT WAS DECLARED AT RS.1,99,42,050/ - . ALONG WITH THE RETURN, THE ASSESSEE FILED THE AUDITED ACCOUNTS FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED VIDE ORDER DATED 31.12.2009 AT A TOTAL INCOME OF RS.1,50,26 ,623/ - . DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD GRANTED 6972 SQ.FT. OF THE DEVELOPED SPACE ON LONG TERM LEASE AND RECEIVED LUMP SUM PREMIUM OF RS.2,40,95,000/ - . BESIDES THE ASSESSEE ALSO RECEIVED REFUNDABLE DEPOSITS OF RS.86,74,200/ - . THE ASS ESSING OFFICER HAD TAKEN BOTH THE SUMS TOGETHER AS THE SALE PRICE OF THE OFFICE SPACE. THE ASSESSING OFFICER NOTED THAT IN ARRIVING AT THE WDV OF THE BUILDING BLOCK FOR CLAIMING DEPRECIATION, THE LUMPSUM PREMIUM OF RS.2,40,95,000/ - WAS REDUCED FROM THE OPE NING WDV AND ON THE RESULTANT REDUCED WDV DEPRECIATION UNDER SECTION 32 WAS COMPUTED AND CLAIMED. THE ASSESSING OFFICER, HOWEVER, HELD THAT THE ASSESSEE SHOULD HAVE OFFERED THE GAIN REALIZED ON GRANTING LONG TERM LEASE OF OFFICE SPACE AFTER DEDUCTING PROP ORTIONATE WDV INCLUDED IN THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 40 OF 45 OPENING WDV RELATABLE TO TRANSFER AREA. THE ASSESSING OFFICER, THEREFORE, CONSIDERED RS.3,27,69,200/ - [RS.2,40,95,000/ - PLUS RS.86,74,200/ - ] AS SALE PROCEEDS RECEIVED ON TRANSFER OF 6972 SQ. FT. AREA AND ACCORDINGLY DETERMINED THE WDV OF THE BUILDING BLOCK ATTRIBUTABLE TO SUCH AREA AT RS.1,77,42,577/ - . THE ASSESSING OFFICER THUS ASSESSED RS.1,50,26,623/ - AS SHORT - TERM CAPITAL GAIN. 4 1 . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WHO DELETED THE ADDITION MADE BY THE A SSESSING OFFICER. CIT(APPEALS) HELD THAT REFUNDABLE DEPOSIT OF RS.86,74,200/ - WAS ASSESSEE S LIABILITY AND COULD NOT BE TAKEN INTO ACCOUNT IN DETERMINING INCOME. AS REGARDS ASSESSMENT OF CAPITAL GAINS INSTEAD OF DEDUCTING THE GROSS LUMP SUM PREMIUM FOR GRA NTING LONG TERM LEASE FROM THE WDV BLOCK, THE CIT(APPEALS) ACCEPTED THE ASSESSEE S PLEA THAT PROVISIONS OF SECTION 50 ARE APPLICABLE SINCE THE CAPITAL ASSETS TRANSFERRED WAS INTEGRAL PART OF THE DEPRECIABLE ASSET. THE RELEVANT FINDINGS OF THE CIT(APPEALS) ARE REPRODUCED AS UNDER: - PROVISIONS OF SECTION 50 OF THE INCOME TAX ACT, 1961 ARE SPECIFIC AND UNDISPUTEDLY APPLICABLE IN THIS CASE. THE ASSESSING OFFICER HAS HIMSELF STATED IN THE ORDER THAT THE CAPITAL ASSET IN QUESTION IS A DEPRECIABLE ASSET. I, THERE FORE, AGREE WITH THE A/R THAT IF PROVISION OF SECTION 50 OF THE INCOME TAX ACT, 1961 ARE APPLIED (WHICH IN THIS CASE IS APPLICABLE) THERE WILL BE NO AMOUNT OF CAPITAL GAIN CHARGEABLE TO TAX AS COMPUTED BY THE ASSESSING OFFICER . THUS CIT(APPEALS) IN HIS O RDER HAD SPECIFICALLY DEALT WITH THE NATURE OF THE IT PARK BUILDING AND HAVING FOUND THAT THE SAID IT PARK BUILDING WAS A DEPRECIABLE ASSET HELD THAT CAPITAL GAIN COULD NOT BE COMPUTED WHEN ONLY PART OF THE BUILDING WAS TRANSFERRED AND THE WDV OF THE BLOCK HAD NOT TURNED NEGATIVE. 4 2 . WE NOTED THAT THE REVENUE CHALLENGED THE ORDER OF THE CIT(APPEALS) WITH REGARD TO THE DELETION OF RS.86,74,200/ - BEING REFUNDABLE DEPOSITS WHICH WAS CONSIDERED AS PART OF SALE CONSIDERATION, BUT DID NOT CHALLENGE THE FINDING OF THE CIT(APPEALS) AS REGARD TO THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 41 OF 45 LUMP SUM PREMIUM OF RS.2,40,95,000/ - . THE TRIBUNAL NOTED THAT THE OPENING WRITTEN DOWN VALUE OF THE BUILDING AS ON 1.4.2006 WAS RS.32,60,17,820/ - AND IF THE SAME WAS CONSIDERED IN THE LIGHT OF SECTION 43(6)/50, NO CAPIT AL GAIN AROSE TO THE ASSESSEE. THE RELEVANT FINDING HAS BEEN GIVEN BY THE TRIBUNAL IN PARA 10, WHICH READS AS UNDER: - WE AGREE WITH THE LD. A/R THAT IF THE D/R S CONTENTION IS ACCEPTED IN THAT CASE THE WDV ATTRIBUTABLE TO THE PORTIONS SUB - LEASED BY THE AS SESSEE WILL BE AFFECTED BUT CIT(A) HAS DIRECTED THE AO TO REDUCE THE SALE PROCEEDS OF RS.2,49,95,000/ - OUT OF OPENING WDV OF RS.32,60,17,820/ - WHICH WAS BROUGHT FORWARD FROM EARLIER YEARS. IT IS A FACT THAT THE DEPARTMENT HAS NOT DISPUTED THE SAID PART OF ORDER OF CIT(A). IT IS NOT IN DISPUTE THAT SPACE CONSTRUCTED BY THE ASSESSEE IN THE SAID TOWERS HAS BEEN CONSIDERED AS BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED TO ASSESSEE IN THE PAST ASSESSMENT YEARS . 4 3 . THUS THE ITAT DISMISSED THE DEPARTMENTAL APPEAL. WE NOTED FROM THE FINDING OF THE CIT(APPALS) AND THE ITAT THAT BOTH THE APPELLATE AUTHORITIES HAD CONSIDERED THE NATURE OF IT PARK BUILDING AND TOOK THE VIEW THAT THE IT PARK BUILDING HAD CONSISTENTLY BEEN CONSIDERED BY THE DEPART MENT TO BE PART OF THE BUILDING BLOCK ON WHICH DEPRECIATION WAS ALLOWED AND IN THAT VIEW OF THE MATTER DECIDED THE QUESTION OF DETERMINATION OF INCOME ASSESSED IN THE AO S ORDER UNDER THE HEAD SHORT - TERM CAPITAL GAINS . THE ITAT S ORDER WAS PASSED ON 08.0 9.2011, WHILE THE CIT(APPEALS) PASSED HIS ORDER ON 20.08.2010. SHOW CAUSE NOTICE HAS BEEN ISSUED VIDE LETTER DATED 19.02.2015 I.E. MUCH AFTER THE ORDER PASSED BY THE CIT(APPEALS) AS WELL AS ITAT. WE NOTED THAT THIS ISSUE WAS DULY CONSIDERED BY THE CIT AS W ELL AS ITAT. CLAUSE (C) OF PROVISO 2 TO SECTION 263 MANDATES THAT CIT DOES NOT HAVE JURISDICTION TO REVISE THE ASSESSMENT ON THE ISSUE WHICH HAS BEEN CONSIDERED AND DECIDED BY THE CIT(APPEALS). THE CIT BY EXERCISE HIS JURISDICTION UNDER SECTION 263 IN RESP ECT OF THE ISSUE OF DEPRECIATION, IN OUR OPINION, EXCEEDED HIS JURISDICTION WHICH HAS NO LEG TO STAND. EVEN OTHERWISE ALSO, THE ISSUE RELATING TO DEPRECIATION CLAIMED IN RESPECT OF THE INFORMATION TECHNOLOGY PARK BUILDING KNOWN AS INFINITY THINKTANK SITU ATED AT PLOT I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 42 OF 45 A/3, BLOCK GP, SECTOR - 5, SALT LAKE CITY, KOLKATA WAS DULY DISCUSSED IN THE ORDER PASSED UNDER SECTION 143(3). THE SAID ORDER GOT MERGED WITH THE ORDER OF THE CIT(A) , C IT DOES NOT HAVE ANY JURISDICTION TO INITIATE THE PROCEEDING U/S 263. WE TH EREFORE QUASH THE ORDER PASSED U/S 263 ON THIS ISSUE. 4 4 . WE HAVE ALREADY QUASHED THE ORDER PASSED U/S 263 ON THE SECOND ISSUED AS ON THIS ISSUE ORDER PASSED BY THE ASSESSING OFFICER HAS ALREADY GOT MERGED WITH THE ORDER OF THE APPELLATE AUTHORITY BEFORE THE ISSUE OF THE SO CAUSE NOTICE BY THE CIT. EVEN THIS ISSUE DOES NOT ARISE OUT OF THE ORDER PASSED UNDER SECTION 147 READ WITH SECTION 143(3) AS IN THAT ORDER NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE REASONS RECORDED. IT I S THE SETTLED LAWS IN VIEW OF THE DECISIONS OF MUMBAI HIGH COURT IN THE CASE OF CIT VS. - JETAIRWAYS 331 ITR 236( BOM), RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. DEVENDRA GUPTA 336 ITR 59 (RAJ.) AND THAT OF DELHI HIGH COURT IN THE CASE OF RANBAXY LABORAT ORIES LTD VS. CIT 336 ITR 136 (DELHI) THAT NO ADDITION CAN BE MADE IN THE ORDER PASSED U/S 147 R.W. S. 143(3) UNLESS THE ADDITION HAS BEEN MADE IN RESPECT OF THE ESCAPED ASSESSMENT FOR WHICH THE REASONS WERE RECORDED FOR THE REOPENING OF THE ASSESSMENT. 4 5 . A PERUSAL OF THE ORDER OF THE CIT INDICATES THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 147 READ WITH SECTION 143(3) WAS SET ASIDE ON THESE TWO ISSUES. AS HAS BEEN DISCUSSED BY US IN THE PRECEDING PARAGRAPHS, THESE ISSUES HAVE DULY BEEN EXAMINED AND CONSIDERED BY THE ASSESSING OFFICER IN FRAMING THE ASSESSMENT. THUS, IN OUR CONSIDERED OPINION, THESE ISSUES CANNOT BE SUFFICIENT GROUND FOR SETTING ASIDE ASSESSMENT. WHILE MAKING ASSESSMENT ORDER, IT IS THE SATISFACTION OF THE ASSE SSING OFFICER WHO MADE THE ENQUIRY AND IT SHOULD BE A TOUCHSTONE OF THE ASSESSMENT ORDER PASSED BY HIM, THE CIT CANNOT SUBSTITUTE HIS VIEW IN PLACE OF FINDING OF THE ASSESSING OFFICER UNTIL AND UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. D.R., I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 43 OF 45 WHICH MAY PROVE THAT THE DECISION TAKEN BY THE ASSESSING OFFICER IS NOT SUSTAINABLE IN LAW. THE ORDER PASSED BY PRINCIPAL CIT IS ILLEGAL WITHOUT JURISDICTION ON THESE IS SUES. SO FAR AS THESE ISSUES ARE CONCERNED, THE ORDER PASSED BY THE PRINCIPAL CIT CANNOT BE SUSTAINED IF SUCH TYPE OF ORDER IS SUSTAINED THEN THIS WILL PERMIT THE ILLEGALITY TO CONTINUE AND THE SUBSEQUENT ACTIONS CARRIED OUT ON THE ILLEGAL ORDER ARE ALSO I LLEGAL. WE, THEREFORE, QUASH THE ORDER PASSED BY THE PRINCIPAL CIT UNDER SECTION 263 OF THE ACT. 46. ITA NO. 414/KOL/2015 (ASSESSMENT YEAR : 2010 - 2011) IN THIS CASE ALSO, THE ASSESSEE HAS TAKEN AS MANY AS EIGHT GROUNDS OF APPEAL CHALLENGING THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX - I, KOLKATA PASSED UNDER SECTION 263 OF THE INCOME TAX ACT DATED 20.03.2015 BOTH ON LEGAL AS WELL AS MERIT. 47. IN THIS CASE, WE NOTED THAT THE PRINCIPAL CIT HAS ISSUED SHOW - CAUSE NOTICE TO THE ASSESSEE UNDER SECTION 2 63 IN RESPECT OF THE TWO ISSUES, ONE ISSUE RELATES TO THE ALLOWING OF DONATION AMOUNTING TO RS.97,57,650/ - UNDER THE HEAD GENERAL EXPENSES AMOUNTING TO RS.16,49,04,595/ - , WHILE IN THE OPINION OF THE PRINCIPAL CIT ONLY A SUM OF RS.5,00,000/ - WAS ADMISSIBL E UNDER SECTION 35AC. THE SECOND ISSUE IN RESPECT OF WHICH THE RE - OPENING WAS PROPOSED RELATES TO THE SAME ISSUE RELATING TO THE CLAIM OF DEPRECIATION ALLOWING THE EXCESS DEPRECIATION CONSIDERING THE CURRENT ASSET S AS FIXED ASSET S . 48. AFTER HEARING BOTH THE PARTIES AND GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, WE NOTED THAT ULTIMATELY THE PRINCIPAL CIT SET ASIDE THE ASSESSMENT ORDER ON BOTH THESE ISSUES AND DIRECTED THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT DE NOVO. SO FAR AS THE ISSUE RELATI NG TO THE ALLOWING EXCESS DEPRECIATION CONSIDERING THE CURRENT ASSET S AS FIXED ASSET S, BOTH THE PARTIES AGREED THAT TH E ISSUE IS SAME AS HAS BEEN TAKEN WHILE REVISING THE ISSUE FOR THE ASSESSMENT YEAR 2007 - 08. WE HAVE ALREADY QUASHED THE ORDER OF PRINCIPAL CIT ON THIS ISSUE FOR THE I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 44 OF 45 ASSESSMENT YEAR 2007 - 08 IN THE PRECEDING PARAGRAPH 43. RESPECTFULLY FOLLOWING OUR AFORESAID ORDER, WE QUASH THE ORDER OF PRINCIPAL CIT PASSED UNDER SECTION 263 ON THIS ISSUE. 49. SO FAR AS THE OTHER ISSUE RELATING TO THE ALL OWING WRONG DEDUCTION BY THE ASSESSING OFFICER IN PASSING THE ORDER UNDER SECTION 143(3) IN RESPECT OF THE DONATION, THE ONLY SUBMISSION MADE BY THE LD. A .R. IS THAT ALLOWING THE DONATION TO THE EXTENT OF RS. 9 2,5 7 ,650/ - WHILE COMPUTING THE BUSINESS INCOME MERELY A MISTAKE APPARENT FROM RECORD AND THIS MISTAKE COULD HAVE BEEN RECTIFIED BY THE ASSESSING OFFICER UNDER SECTION 154. THEREFORE, THE INVOCATION OF THE JURISDICTION UNDER SECTION 263 IS NOT FOR CARRYING OUT THE RECTIFICATION OF THE MISTAKE. 50. LD. D.R., BEFORE US ON THE OTHER HAND, RELIED ON THE ORDER OF PRINCIPAL CIT ON THIS ISSUE. 51. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERING THE SAME, WE NOTED THAT THERE IS NO BAR UNDER THE INCOME TAX ACT ON THE POWER OF CIT UNDER SECTION 26 3 THAT IF THE ORDER COULD HAVE BEEN RECTIFIED UNDER SECTION 154, CIT COULD HAVE NOT EXERCISED THE JURISDICTION UNDER SECTION 263 . THIS IS A FACT THAT THE ORDER PASSED BY THE ASSESSING OFFICER ON THIS ISSUE WAS ERRONEOUS AS THE ASSESSING OFFICER HAS INCORRE CTLY ALLOWED THE DEDUCTION IN RESPECT OF THE DONATION AMOUNTING TO RS .9 2 ,57,650/ - . THIS IS NOT A CASE WHERE THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS TAKEN A PARTICULAR VIEW WHICH IS SUSTAINABLE IN LAW OR THERE CAN BE TWO V IEWS ABOUT THE ALLOWANCE OF DEDUCTION IN RESPECT OF THE DONATION. THIS SUBMISSION OF THE LD. A.R. THAT IT WAS A PURE MISTAKE APPARENT FROM RECORD ITSELF PROVES THAT THE ORDER PASSED ON THIS ISSUE BY THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIA L TO THE INTEREST OF THE REVENUE. EVEN THE LD. A.R. HAS NOT RAISED ANY PLEA THAT THIS ISSUE HAS BEEN EXAMINED BY THE ASSESSING OFFICER. ON THAT COUNT ALSO, WE FIND THAT THERE WAS TOTALLY LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER. WE, THEREFORE, CONFIRM THE ORDER OF I.T.A. NO S . 413 & 414 / KOL ./20 1 5 ASSESSMENT YEAR: 200 7 - 20 0 8 & 2010 - 2011 PAGE 45 OF 45 PRINCIPAL CIT PASSED UNDER SECTION 263 ON THIS ISSUE AND ACCORDINGLY MODIFY THE ORDER OF CIT BY HOLDING THAT THE ASSESSMENT IS SET ASIDE ON THE ISSUE OF ALLOWING DONATION TO THE ASSESSEE AND ACCORDINGLY DIRECT THE ASSESSING OF FICER TO EXAMINE THE ISSUE RELATING TO THE DEDUCTION OF DONATION CLAIMED BY THE ASSESSEE DO NOVO IN ACCORDANCE WITH LAW. 52 . IN THE RESULT, THE APPEAL BEING ITA NO. 413/KOL/2015 F ILED BY THE ASSESSEE IS ALLOWED, WHILE THE APPEAL BEING ITA NO. 414/KOL/2015 FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 09 , 2015. SD/ - SD/ - MAHAVIR SINGH P.K. BANSAL (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, THE 9 TH DAY OF JUNE, 201 5 COPIES TO : (1) INFINITY INFOTECH PARKS LIMITED, PLOT A - 3, BLOCK GP, SALT LAKE, SECTOR - V, KOLKATA - 700 091 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), KOLKATA, AAYAKAR BHAWAN, P - 7, CHOWRINGHEE SQUARE, KOLKATA - 700 069 (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIB UNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.