CAROL INFO SERVICES LTD ( FORMELRY KNWOAN AS WOCHKHARDT LIFE SCIENCE LTD), MUMBAI V. ACIT RG 5(2), MUMBAI

ITA 468/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2390 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-12-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Maximum Marginal Rate; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH C, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI P AWAN SINGH, JUDICIAL MEMBER ITA NO.468/MUM/2011 FOR A Y: 2000-01 ITA NO.470/MUM/2011 FOR A Y: 2001-02 CAROL INFO SERVICES LIMITED. (FORMERLY KNOWN AS WOCKHARDT LIFE SCIENCE LTD) , WOCKHARDT TOWERS, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051. PAN: AAACW1299E VS. ACIT RANGE- 5(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAN VORA / NIKHIL TIWARI (AR) REVENUE BY : SHRI DEEPKANT PRASA D AND SAURABH DESPANDE (DR) D ATE OF HEARING : 22.04.2016 DATE OF PRONOUNCEMENT : 22.07.2016 O R D E R PER PAWAN SINGH, JM: 1. THESE TWO APPEALS FILED BY ASSESSEE AGAINST THE ORD ER DATED 09.11.2010 PASSED BY THE CIT(A)-22, MUMBAI FOR ASSESSMENT YEAR (AY) 2000-01 & 2001-02 RESPECTIVELY WERE HEARD TOGETHER AND ARE DE CIDED BY COMMON ORDER. FIRST WE SHALL DECIDE ITA NO.468/MUM/2011 , WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: INVALIDITY OF REASSESSMENT PROCEEDINGS 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE VALIDI TY OF REASSESSMENT PROCEEDINGS WITHOUT APPRECIATING: A. THAT THERE WAS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT B. THAT THERE WAS NO FAILURE ON THE PART OF THE APP ELLANT IN WHOLLY AND DISCLOSING ALL MATERIAL FACTS TO THE ASSISTANT COMMISSIONER OF INC OME-TAX, CENTRAL CIRCLE - 14, MUMBAI AT THE TIME OF ORIGINAL PROCEEDINGS C. THAT THE REOPENING OF ASSESSMENT WAS BASED ON CH ANGE OF OPINION 2 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. D. THAT THE SANCTION OF CHIEF COMMISSIONER OF INCOM E TAX UNDER SECTION 151(1) FOR ISSUING NOTICE UNDER SECTION 148 WAS NOT VALIDLY OB TAINED. 2. THE LEARNED CIT(A) OUGHT TO HAVE QUASHED THE REO PENING PROCEEDINGS ON THE GROUND THAT SINCE NO ADJUSTMENTS HAVE BEEN MADE ON THE VER Y BASIS OF WHICH REASSESSMENT PROCEEDINGS WERE INITIATED. DISALLOWANCE OF DEPRECIATION ON PORTION OF BUILDING SOLD TO ENRON IN SUBSEQUENT YEAR 3. THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISAL LOWANCE OF PRO RATA DEPRECIATION ON WOCKHARDT TOWERS TO THE EXTENT OF RS. 3.93 CRORES O N PORTION OF BUILDING SOLD IN SUBSEQUENT YEAR TO M/S. ENRON INDIA PVT. LTD. ON TH E GROUND THAT PART OF THE WOCKHARDT TOWER WAS NOT USED BUT WAS INTENDED FOR SALE. LEVY OF INTEREST UNDER SECTION 234B OF THE ACT 4. THE LEARNED CIT(A) ERRED IN CONFIRMING LEVY OF I NTEREST UNDER SECTION 234B, WITHOUT APPRECIATING THAT SINCE THE APPELLANT HAD RETURNED INCOME UNDER SECTION 115JA, PROVISIONS OF ADVANCE TAX CHAPTER COULD NOT HAVE BEEN COMPLIED WITH. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEVY OF INTE REST OUGHT TO HAVE BEEN CONFINED TO INCREMENTAL INCOME ASSESSED IN IMPUGNED REASSESSMEN T PROCEEDINGS AND FOR THE PERIOD FROM DATE OF REGULAR ASSESSMENT TILL DATE OF REASSE SSMENT AS PER SECTION 234B(3) OF THE ACT. LEVY OF INTEREST UNDER SECTION 234D OF THE ACT 6. THE LEARNED CIT(A) ERRED IN CONFIRMING LEVY OF I NTEREST UNDER SECTION 234B, WITHOUT APPRECIATING THAT PROVISIONS OF SECTION 2340 ARE NO T AT ALL ATTRACTED AND LEVY OF INTEREST IS INVALID AND WITHOUT JURISDICTION AND/OR EXCESSIVE S INCE: A. ORDER UNDER WHICH INTEREST IS LEVIED IS NOT AN O RDER OF 'REGULAR ASSESSMENT' WITHIN THE MEANING OF SECTION 234D. B. IN ABSENCE OF SPECIFIC STATUTORY PROVISIONS, INT EREST UNDER SECTION 2340 CANNOT BE LEVIED IN REASSESSMENT AFTER REGULAR ASSESSMENT UND ER SECTION 143(3). C. THE PROVISIONS OF SECTION 2340 WHICH CAME INTO E FFECT FROM 1 JUNE 2003 CANNOT BE APPLIED TO THE YEAR UNDER REFERENCE. D. IN ANY CASE, NO INTEREST CAN BE CHARGED UNDER SE CTION 2340 IN RESPECT OF REFUND WHICH WAS GRANTED PRIOR TO 1 JUNE 2003 AND THAT TOO , FOR PERIOD AFTER DATE OF REGULAR ASSESSMENT. E. WITHOUT PREJUDICE TO THE ABOVE, INTEREST SO LEVI ED IS EXCESSIVE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT AY ON 01.03.2001 DECLARING TOTAL INCOME OF RS. NIL AND BOOK PROFIT AT RS.12,34,72,016/- U/S. 115JA OF THE ACT. THE ASS ESSEE SUBSEQUENTLY FILED REVISED RETURN OF INCOME ON 30.05.2001 DECLARING NI L INCOME AND BOOK PROFIT U/S. 115JA OF RS. 9,38,03,304/-. THE ASSESSMENT WAS COMPLETED ON 03.03.2003 DETERMINING THE TOTAL INCOME AT RS. 4,83 ,04,000/-. THE ASSESSMENT WAS REOPENED U/S.147 OF THE ACT BY ISSUI NG NOTICE U/S. 148 DATED 23.07.2007, AFTER OBTAINING PRIOR SANCTION OF CIT, AND REASONS FOR REOPENING WERE RECORDED AS FOLLOWS:- 'IN THIS CASE, ASSESSMENT WAS COMPLETED U/S. 143(3) ON 3/3/2003 ON A TOTAL INCOME OF RS. 4,83,04,000/- AS SEEN FROM THE ANNEXURE - II (DEPRECIATION CHART) OF THE AUDIT REPORT U/S. 44AB, THE ASSESSEE COMPANY HAS SHOWN ADDITION TO TH E BLOCK OF 'BUILDING' AMOUNTING TO RS.L,54,71,09,098/- UNDER THE COLUMN L ESS THAN 180 DAYS AND CLAIMED DEPRECIATION THEREON AT RS. 38,677,727/-. I T IS SEEN FROM THE DETAILS GIVEN THAT THE ADDITION IS IN RESPECT OF OFFICE BUI LDING AT BKC (BANDRA KURLA 3 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. COMPLEX).THE DATE OF CAPITALIZATION AND THE DATE OF PUT TO USE IS SHOWN AS 31/12/99. THE LAND AT BKC WAS LEASED BY ASSESSEE FROM MMRDA I N 1995 FOR A PERIOD OF 80 YEARS BY AGREEMENT DATED 4/10/1995. THE BUILDING 'NAMED 'WOCKHARDT TOWERS' WAS CONSTRUCTED AND COMPLEX COMPRISED OF BA SEMENTS, GROUND AND 8 UPPER FLOOR, PARKINGS, OPEN SPACE, TERRACE, ETC. TH E CONSTRUCTION IS STATED TO BE COMPLETED IN JULY 1999 THOUGH OCCUPANCY CERTIFIC ATE AND FINAL LEASE DEED WITH MMRDA WAS IN FEBRUARY, 2000. AS SEEN FROM THE CASE RECORDS FOR AY 2000-01 AND 44AB REPORT SPECIALLY ANNEXURE- II WHIC H INDICATED ADDITION TO BUILDING BETWEEN 1/4/99 TO 31/12/99 AT RS.154710909 8/- UNDER 'LESS THAN' 180 DAYS. ALONG WITH THIS, DETAILED STATEMENT ON A DDITION UNDER THE HEADING 'FACTORY BUILDING' WAS ENCLOSED' AND 'CAPITALIZATIO N OF BKC' - 31/12/99 RS. 1531746543.07' WAS INCLUDED BY ASSESSEE IN FACTORY BUILDING. 'WOCKHARDT TOWERS' IS OFFICE COMPLEX AND HAS NO FACTORY THEREI N. STILL, IT WAS INCLUDED IN FACTORY BUILDING' WITH THE OBVIOUS INTENTION OF OBT AINING DEPRECIATION ALLOWANCE. DATE OF STARTING USE OF THIS BUILDING WA S SHOWN AS 15/12/99 THOUGH VERY SAME STATEMENT HAVE DETAILS TO SHOW THAT CIVIL WORK, LANDSCAPING, N 0 C FOR WATER CONNECTION ETC. WERE CONTINUED UPTO FEBRU ARY 2000 WHEN OCCUPANCY CERTIFICATE AND FINAL-AGREEMENT WITH MMRD A WAS ENTERED INTO. THUS, FROM THE ABOVE IT IS CLEAR THAT THERE IS A FA ILURE ON THE PART OF THE ASSESSEE COMPANY TO DISCLOSE FULLY AND TRULY ALL MA TERIAL FACTS, LEADING TO THE EXCESS ALLOWANCE OF DEPRECIATION. HENCE, I HAVE REA SON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THIS A Y 2000-01. HENCE, I PROPOSE TO ISSUE NOTICE U/S. 148 OF THE AC T FOR WHICH APPROVAL OF CIT (C)-I, MUMBAI IS NECESSARY AS PER THE PROVISIONS OF SECTION 151(1) OF THE IT ACT. 3. THE ASSESSEE FILED HIS OBJECTION AGAINST THE RE-OPE NING AND OBJECTED THAT THE REOPENING OF ASSESSMENT IS UNLAWFUL AND WITHOUT JUR ISDICTION AND REQUESTED TO DISPOSE OF THE OBJECTION BY SPEAKING ORDER. THE OBJECTION OF THE ASSESSEE WAS DISPOSED OF ON 08.10.2007. AFTER DISMISSAL OF O BJECTION, THE ASSESSEE REQUESTED THE ASSESSING OFFICER (AO) TO TREAT ITS R EVISED RETURN FILED ON 30.05.2001 AS A RETURN IN RESPONSE TO THE NOTICE U/ S. 148 OF THE ACT. THE AO WHILE RE-ASSESSING THE INCOME OF ASSESSEE DISALLOWE D THE DEPRECIATION IN RESPECT OF WOCKHARDT TOWERS (FLOORS SOLD TO M/S ENR ON AT BKC, MUMBAI) OF RS. 3,93,15,147/- AND SIMULTANEOUSLY PASSED THE ORD ER FOR CHARGING INTEREST U/S. 234B, 234C & 234D IN THE ASSESSMENT ORDER PASS ED U/S. 143(3) R.W.S. 147 OF THE ACT ON 31.12.2007. AGGRIEVED BY THE ORD ER OF AO THE ASSESSEE FILED APPEAL BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CHALLENGED THE VALIDITY OF RE-ASSESSMENT PROCEEDING AND DISALLOWAN CE OF DEPRECIATION AND OTHER CONSEQUENTIAL ADDITIONS OF INTEREST. THE CIT( A) DISMISSED THE APPEAL OF ASSESSEE AFTER HEARING IN THE IMPUGNED ORDER DATED 09.11.2010, AGAINST WHICH THE PRESENT APPEAL IS FILED BEFORE US. 4 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. 4. FIRST GROUND FOR OUR CONSIDERATION IS THE VALIDITY OF RE-ASSESSMENT PROCEEDING. 5. WITH REGARD TO THE CHALLENGE TO THE VALIDITY OF REA SSESSMENT PROCEEDINGS, THE FIRST AND FOREMOST PLEA OF THE ASSESSEE IS THAT THE REASONS RECORDED BY THE ASSESSING OFFICER WERE INCORRECT AND, THEREFORE, TH ERE WAS NO REASON TO ENTERTAIN A BELIEF FOR ESCAPEMENT OF INCOME. IN TH IS CONTEXT, OUR ATTENTION WAS INVITED TO THE REASONS RECORDED, WHICH WE HAVE ALREADY NOTED IN AN EARLIER PART OF THIS ORDER, WHEREBY IT WAS SOUGHT T O BE POINTED OUT THAT REOPENING IS JUSTIFIED ON TWO GROUNDS, VIZ., THAT T HE ADDITION TO THE BLOCK OF ASSETS WAS MADE UNDER THE HEAD FACTORY BUILDING T HOUGH THE BUILDING IN QUESTION, I.E., WOCKHARDT TOWER WAS AN OFFICE BUILD ING; SECONDLY, THE REASONS CONTAIN AN OBSERVATION THAT THE DATE OF PU TTING TO USE OF THE BUILDING IS SHOWN AS 15.12.1999, WHEREAS THE OCCUPANCY CERTI FICATE, WATER CONNECTION, ETC. WAS RECEIVED ONLY ON FEBRUARY, 200 0. IT WAS POINTED OUT THAT BOTH THE REASONS RECORDED BY THE ASSESSING OFFICER WERE TO JUSTIFY HIS INFERENCE THAT IN THE ORIGINAL ASSESSMENT, EXCESSIV E DEPRECIATION HAS BEEN ALLOWED. IN THIS REGARD, REFERENCE WAS ALSO INVITE D TO PAGES 26 TO 29 OF THE PAPER BOOK, WHEREIN ARE PLACED COPIES OF THE REASON S RECORDED AS WELL AS THE APPROVAL/SANCTION GIVEN BY THE COMMISSIONER OF INCO ME-TAX, CENTRAL-1, MUMBAI FOR INITIATING THE PROCEEDINGS U/S 147/148 O F THE ACT. BY REFERRING TO THE SANCTION OF THE COMMISSIONER, IT WAS POINTED OUT THAT THE REASON FOR REOPENING HAS ALSO BEEN SUMMARIZED AS EXCESSIVE DE PRECIATION. ON THIS BASIS IT WAS SOUGHT TO BE POINTED OUT THAT NONE OF THE REASONS WOULD JUSTIFY ANY ESCAPEMENT OF INCOME INASMUCH THE WRONG CLASSIF ICATION OF THE BUILDING DOES NOT CHANGE THE RATE OF DEPRECIATION ALLOWABLE. IN THIS REGARD, IT WAS POINTED OUT THAT THE RATE OF DEPRECIATION ON A FACT ORY BUILDING AS WELL AS AN OFFICE BUILDING IS SAME AND, THEREFORE, EVEN IF THE RE WAS A WRONG CLASSIFICATION, THE DEPRECIATION ALLOWANCE WOULD RE MAIN THE SAME AS THE RATE OF DEPRECIATION IS THE SAME. 6. WITH REGARD TO VARIATION IN THE DATE OF CAPITALIZAT ION OF THE BUILDING, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT WHETHER THE DATE OF CAPITALIZATION IS TAKEN AS 15.12.1999 OR FEBRUARY, 2000, THE BUILDING IS SAID 5 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. TO BE PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS THEREBY RESULTING IN 50% OF THE NORMAL DEPRECIATION ALLOWABLE. THUS, IT WAS PO INTED OUT THAT WHICHEVER DATE OF CAPITALIZATION IS ADOPTED, THE DEPRECIATION CLAIMED REMAINS THE SAME. BY REFERRING TO BOTH THESE ASPECTS, IT WAS SOUGHT T O BE POINTED OUT THAT THERE WAS NO VALID REASON TO JUSTIFY THE INFERENCE THAT A NY EXCESSIVE DEPRECIATION HAS BEEN ALLOWED IN THE ORIGINAL ASSESSMENT. IT WA S, THEREFORE, CONTENDED THAT THE INITIATION OF PROCEEDINGS U/S 147/148 OF THE AC T, BE QUASHED AS IT WAS NOT FOUNDED ON VALID REASONS. 7. ON THE OTHER HAND, THE LD. DR APPEARING FOR THE REV ENUE HAS REFERRED TO THE DISCUSSION MADE BY THE LD. CIT(A) IN PARA 5.3 OF TH E ORDER TO JUSTIFY INITIATION OF PROCEEDINGS. IT WAS POINTED OUT THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY THE FACTS REGARDING THE DE PRECIATION CLAIMED AND, THEREFORE, INITIATION OF PROCEEDINGS WAS VALID. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SEC. 147 OF THE ACT EMPOWERS THE ASSESSING OFFICER TO ASSESS OR REASSES S THE INCOME ONLY IN SITUATIONS WHERE ANY INCOME CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT IN ANY ASSESSMENT YEAR. IT IS ALSO QUITE CLEAR THAT THE I NITIATION OF PROCEEDINGS U/S 147/148 OF THE ACT HAS TO BE FOUNDED ON FORMATION O F A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. I N THE PRESENT CASE, THE CASE OF THE ASSESSEE IS THAT THE REASONS RECORDED B Y THE ASSESSING OFFICER DO NOT SHOW ANY ESCAPEMENT OF INCOME INASMUCH AS EVEN IF THE POINTS MADE OUT BY THE ASSESSING OFFICER ARE TAKEN INTO CONSIDERATI ON, YET, THE DEPRECIATION ALLOWABLE TO THE ASSESSEE WOULD REMAIN THE SAME MEA NING THEREBY THAT THERE WAS NO EXCESSIVE DEPRECIATION ALLOWED IN THE ORIGIN AL ASSESSMENT FINALIZED U/S 143(3) OF THE ACT ON 3.3.2003. ON FACTS, THERE IS NO CONTROVERSION TO THE SAID ASSERTION OF THE ASSESSEE, WHICH IS ALSO BORNE OUT OF RECORD. THUS, ON THE PRELIMINARY POINT ITSELF, WE FIND THAT THE PROCEEDI NGS INITIATED VIDE ISSUANCE OF NOTICE U/S 148 OF THE ACT DT.23.07.2007 ARE INVA LID BECAUSE THE SAME ARE BASED ON REASONS WHICH DO NOT PROVE ANY ESCAPEMENT OF INCOME FROM TAX FOR THE INSTANT ASSESSMENT YEAR. THEREFORE, THE GROUND OF APPEAL NO. 1 RAISED BY 6 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. THE ASSESSEE WITH REGARD TO THE VALIDITY OF REASSE SSMENT PROCEEDINGS IS UPHELD ON THE AFORESAID GROUND ITSELF. BEFORE PARTING, WE MAY ALSO PUT ON RECORD THAT OTHE R PLEAS HAVE ALSO BEEN RAISED BEFORE US TO CHALLENGE THE VALIDITY OF REASS ESSMENT PROCEEDINGS, VIZ., THAT THE REASSESSMENT IS BASED ON CHANGE OF OPINION , AND THAT THE SANCTION OF THE COMMISSIONER OBTAINED U/S 151 OF THE ACT IS NOT VALID, ETC. SINCE THE ASSESSEE HAS SUCCEEDED ON THE AFORESAID GROUND, THE AFORESAID PLEA OTHER PLEAS RAISED WITH REGARD TO THE VALIDITY OF REASSES SMENT PROCEEDINGS ARE NOT BEING ADJUDICATED. AS A CONSEQUENCE OF OUR AFORESAID DISCUSSION, THE R EASSESSMENT PROCEEDINGS ARE HEREBY SET-ASIDE AS BEING LACKING J URISDICTION. SINCE THE REASSESSMENT PROCEEDINGS ITSELF HAS BEEN SET-ASIDE, THE OTHER GROUNDS RAISED WITH REGARD TO THE MERITS OF THE VAR IOUS ISSUES ARE RENDERED ACADEMIC AND IS NOT REQUIRED TO BE ADJUDICATED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 46 8/M/2011 FOR ASSESSMENT YEAR 2000-01 IS HEREBY ALLOWED, AS ABOVE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 11. IN ITA NO. 470/M/2011 , THE ASSESSEE HAS CHALLENGED THE ORDER OF COMMISSIONER OF INCOME TAX APPEALS DATED 29 TH JAN 2007 FOR AY 2001-02, RAISING THE FOLLOWING GROUNDS: TREATMENT OF SALE PROCEEDS OF PART OF BUILDING TO M /S. ENRON 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING ASSESSMENT OF SOME OF RS. 9 7.15 CRORE (BEING PROCE ED FROM SALE OF PROPERTY 2 MASSES. ENRON INDIA PRIVATE LIMITED) AS SHORT TERM CAPITAL GAIN OF NON-DEPRECIABLE ASSETS UNDER SECTION 48 AS AGAINST RETURN CLAIM OF APPELLANT THAT THE CONSIDERATION PERTAINED TO DE PRECIABLE ASSET COVERED BY SECTION 50 OF THE ACT AND WHICH WAS REQU IRED TO BE REDUCED FROM THE BLOCK OF ASSETS OF BUILDING. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N NOT FOLLOWING THE ORDER OF INCOME TAX APPELLATE TRIBUNAL FOR IMPUGNED ASSESSMENT YEAR AGAINST THE ORDER UNDER SECTION 263 OF THE ACT WHER E THE INCOME TAX APPELLATE TRIBUNAL HAS SPECIFICALLY DIRECTED TO RED UCE THE SALE PROCEEDS FROM THE BLOCK OF ASSETS. 7 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. 12. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 31 ST OF OCTOBER 2011, DECLARING TOTAL LOSS OF RS.23,13,16,950/-. THE ASSESSMENT WAS COMPLETED UND ER SECTION 143 (3) ON 25 MARCH 2004.THE ASSESSMENT WAS REVISED BY COMMISS IONER OF INCOME TAX BY EXERCISING POWER UNDER SECTION 263 OF THE ACT. W HILE REVISING THE RETURN OF INCOME. THE LD COMMISSIONER OF INCOME TAX, WIDE ORD ER DATED 28 TH MARCH 2006 PASSED THE FOLLOWING ORDER: CONSIDERING THE FACTS OF THE CASE, IN MY VIEW, THE ASSESSMENT ORDER PASSED BY AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN RESPECT OF SALE OF PART OF PROPERTY TO ENRON. I THEREFORE, WITH THE POWERS VESTED UNDER SECTION 263, DIRECT THE AO AS UNDER:- A. ASSESSEE HAS ASSIGNED 54% OF HIS INTEREST IN PLOT A ND BUILDING TO ENRON AND NOT 58.70% AO TO RE-COMPUTE CAPITAL GAIN. ACCOR DINGLY. B. THE PART OF BUILDING SOLD TO ENRON WAS NOT PUT TO B USINESS USE AND WAS NOT DEPRECIABLE ASSET. THEREFORE, THE SALE PROCEED OF T HE BUILDING SOLD TO ENRON CANNOT BE REDUCED FROM BLOCK OF ASSETS. AO TO MODIFY HIS ORDER AND COMPUTE THE SHORT TERM CAPITAL GAIN ON SALE OF BUIL DING AND TAX AS PER LAW. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TA X, U/S. 263 DATED 28 TH MARCH 2006, THE ASSESSEE FILED APPEAL BEFORE THE TR IBUNAL. THE TRIBUNAL VIDE ITA NO.3265/M/06 DATED 09/09/2009 PARTLY ALLOWED TH E APPEAL OF ASSESSEE AND MADE THE FOLLOWING ORDER: IT IS NOT DISPUTED THAT THE BUILDING, WHICH WAS CONSTRUCTED WAS CAPITALIZED BY IT IN THE PROCEEDING ASSESSMENT YEAR AND DEPRECIATION ALS O GRANTED. ONCE THE DEPRECIATION IS GRANTED AFTER CONSIDERING THE ASSET AS A PART OF THE BLOCK, IT LOSES ITS DISTINCTIVE IDENTITY AND MERGES WITH THE BLOCK. IT IS ALSO NOT DISPUTED THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2000-01 WAS COMP LETED UNDER SECTION 143(3), AND THE ASSESSING OFFICER CONSIDERED ANY PART OF TH E BUILDING AS NOT USED BY THE ASSESSEE FOR THE PURPOSE OF ITS PURPOSE, HE WOULD N OT HAVE DEFINITELY ALLOWED THE DEPRECIATION CLAIMED. ONCE IT IS CONSIDERED AS A PA RT OF BLOCK OF ASSETS, THE PRESUMPTION IS THAT IT WAS USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSE. FURTHER CIT HIMSELF HAD ADMITTED IN AT PARA-5 OF ITS ORDER THAT THE LAND WAS RELEASED BY THE MMRDA TO THE ASSESSEE BY AN AGREEMENT DATED 4 O CTOBER 1995 AND, THEREFORE, THIS CONCLUSION THAT ASSESSEE HAD ASSIGNED THE BUIL DING AND THE LENT TO M/S ENRON WITHIN TWO MONTHS DOES NOT STAND TO REASON. ALL THE MORE SO, BECAUSE ASSESSEE HAD CAPITALIZED THE COST OF BUILDING, IN JULY 1999 AND CLAIMED DEPRECIATION IN ITS RETURN FOR THE ASSESSMENT YEAR 2000-01. THEREFORE, SO FAR AS THE DECISION OF AO TO CONSIDER THE ASSIGNED PART OF THE BUILDING AS A BUS INESS ASSET OF THE ASSESSEE AND REDUCING THE SALE CONSIDERATION FROM THE ELECTED BO OK OF ASSET, WE DO NOT FIND ANY ERROR AT ALL. AS FOR THE VARIOUS DECISIONS CITED BY THE LD CIT, THESE WERE ALL RELATED TO DISPUTE REGARDING WHETHER AND ASSETS ON WITCH DE PRECIATION WAS CLAIMED WAS USED OR NOT. THESE DECISIONS HAVE NO RELEVANCE, SIN CE IN THE PROCEEDING ASSESSMENT YEAR. ASSESSEE HAS ALREADY BEEN GIVEN DE PRECIATION THEREON. ASSESSEES 8 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. CONTENTION THAT THE WHOLE OF THE BUILDING GIVEN COU LD ONLY BE CONSIDERED AS ONE UNIT AND WAS BEING USED BY IT FOR THE PURPOSE OF IT S BUSINESS, PRIOR TO THE ASSIGNMENT OF THE PART THERETO M/S ENRON ALSO STAND UNREBUTTED . THEREFORE, WE ARE OF THE OPINION THAT THE CIT WAS RIGHT IN COMING TO THE CONCLUSION THAT THE PERCENTAGE OF THE INTEREST ASSIGNED TO M/S ENRON CO NSIDERED BY AO AT 58.7% WAS ERRONEOUS IN FACE OF THE ASSIGNMENT DEED. AND THE A REA SHOWED THEREIN, AS REGARD THE PART OF BUILDING ASSIGNED TO M/S ENRON NOT BEIN G CONSIDERED AS DEPRECIABLE ASSET THE HEAD COME TO AN INCORRECT CONCLUSION, WIT HOUT THERE BEING AN ERROR IN THE ORDER OF ASSESSING OFFICER. THE ORDER OF CIT UNDER SECTION 263 OF THE ACT IS THEREFORE UPHELD TO THE EXTENT OF POINT NO. 1IE ASS ESSING OFFICER CONSIDERING 54% OF INTEREST IN THE PLOT OF BUILDING ASSIGNED TO M/S EN RON AGAINST 58.7%. VIZ-A-VIZ THE 2 ND PART REGARDING PART OF THE BUILDING BEING UN-DEPRE CIABLE ASSET, THE ORDER OF CIT UNDER SECTION 263 IS ANNULLED. IN THE MEAN TIME, THE AO FINALIZED THE ASSESSMENT I N LINE WITH ORDER THE ORDER OF CIT-CENTRAL (I), MUMBAI U/S.263 DATED 28.0 3.2006. AND IN ACCORDANCE WITH THE DIRECTION OF CIT-CENTRAL CIRCLE (I) HE MODIFIED THE ASSESSMENT ORDER AND RECOMPUTED THE CAPITAL GAIN AN D THE DEPRECIATION WAS WORKED OUT WITHOUT REDUCING THE SALE PROCEEDS OF TH E BUILDING SOLD TO ENRON FROM BLOCK OF ASSETS VIDE ORDER DATED 29.01.2007 PA SSED U/S 143(3) R.W.S. 263 OF I.T. ACT. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE ALSO FILED APPEAL BEFORE COMMISSIONER OF INCOME TAX APPEALS AGAINST T HE ORDER OF AO UNDER SECTION 143(3) R.W.S. 263 OF THE ACT DATED 30 TH NOV 2006. THE APPEAL OF ASSESSEE WAS DISMISSED VIDE ORDER DATED 29 JANUARY 2007, IMPUGNED THE PRESENT APPEAL. 13. WE HAVE HEARD LD. AR OF ASSESSEE AND DR FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD AR OF THE ASSESSEE ARGUED THAT IN THE APPEAL FILED BEFORE THE TRIBUNAL CHALLENGING THE ORDER OF COMMISSIONER OF INCOME TAX, PASSED UNDER SECTION 263 OF THE ACT. THE TRI BUNAL VIDE ORDER DATED 9/07/2009 UPHELD THAT ASSESSEE HAS ASSIGNED 54% OF INTEREST IN PLOT AND BUILDING TO ENRONS AND THE SECOND PART THAT ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE WAS ANNULLED. AR FOR ASSESSEE FURTHER AR GUED THAT COMPLETION CERTIFICATE WAS OBTAINED IN JULY 1999. THE BUILDING WAS CAPITALIZED IN THE BOOKS OF ASSESSEE IN DECEMBER 1999. IN SEPTEMBER 20 00 THAT IS IN AYS 2001 02, THE ASSESSEE ASSIGNED 5 FLOORS IN THE BUILDIN G TO ENRON INDIA PRIVATE LIMITED WIDE ASSIGNMENT DEED EXECUTED ON 19 SEPTEMB ER 2000, FOR RS.97.5 9 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. CRORE AND REDUCE THE SALE CONSIDERATION FROM BLOCK OF ASSETS BEING BUILDING AND CLAIMED DEPRECIATION ON THE BALANCE VALUE OF BL OCK OF ASSETS. THIS TREATMENT WAS ACCEPTED BY THE AO IN AY 2001-02 DURI NG THE ORIGINAL ASSESSMENT PROCEEDING I.E. IN ASSESSMENT ORDER PASS ED UNDER SECTION 143(3). THE LD. CIT(A) IN ITS ORDER DATED 9 TH NOV 2010 FOR THE PRECEDING YEAR WHICH IS AY 2000-01, DENIED CLAIM OF DEPRECIATION ON 5 FL OORS WHICH WERE ASSIGNED TO ENRON ON THE GROUND THAT SAME WAS NOT USED FOR B USINESS PURPOSE. LD AR FURTHER ARGUED THAT THAT CIT (A) PASSED IMPUGNED OR DER AFTER PASSING THE ORDER OF TRIBUNAL (WHICH IS DT. 09.09.2009). THE TR IBUNAL IN ITS ORDER CLEARLY HELD THAT AO TO CONSIDER THE ASSIGNED PART OF THE B UILDING AS A BUSINESS ASSET OF THE ASSESSEE AND BY REDUCING THE SALE CONSIDERAT ION FROM THE RELATED BOOK OF ASSETS AS THERE IS NO ERROR AT ALL. AND ARGUED T HAT REVENUE HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF TRIBUNAL AND THE SAME H AS BECOME FINAL. LD AR OF ASSESSEE FURTHER ARGUED THAT ACTION OF CIT(A) I S AMOUNTED TO CONTEMPT OF TRIBUNALS ORDER. LD DR FOR REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. WE HAVE NOTICED THAT WHILE HEARING OF THE APPEAL OF THE ASSESSEE AGAINST THE ORDER OF CIT, PASSED U/S. 263 OF THE ACT, THIS TRIBUNAL IN ITS ORDER DAT ED 9 TH JULY 2009, CATEGORICALLY SET-ASIDE THE ORDER OF CIT DATED 28 TH MARCH 2006. WHEN APPEAL WAS HEARD BY LD. CIT(A) AGAINST THE ORDER DATED 30. 11.2006 ( U/S 143(3) R.W.S. 263), THE ORDER OF TRIBUNAL WAS IN THE KNOWL EDGE OF CIT(A). DESPITE THE KNOWLEDGE OF ORDER OF THIS TRIBUNAL, THE LD. CI T(A) SUSTAINED THE ORDER FOR COMPUTING SHORT TERM CAPITAL GAIN. IN ITS ORDER DATED 9 TH NOV 2010. THE LD. CIT(A) PASSED THE IMPUGNED ORDER IN CONTRADICTI ON OF TRIBUNALS ORDER DATED 9 TH JULY 2009, WHEREIN IT WAS HELD THAT THE ASSIGNED P ART OF THE BUILDING WAS A BUSINESS ASSET, AND THAT THE BUILDING WAS A D EPRECIABLE ASSET AND HENCE THE SALE CONSIDERATION THEREOF BE REDUCED FROM THE BLOCK OF ASSET. IN VIEW OF THE ORDER OF THE TRIBUNAL DATED 9 TH JULY 2006,CIT(A) SHOULD HAVE SET ASIDE 10 ITA NO. 468 & 470/M/2011 CAROL INFO SERVICES LTD. THE ACTION OF ASSESSING OFFICER. THUS, THE ORDER PA SSED BY LD. CIT (A) DATED 09.11.2010 IS SET-ASIDE AND THE APPEAL OF THE ASSES SEE IS ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS FOR AYS 2000-01 & 2 001-02 FILED BY ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JULY, 2016. SD- SD- (G.S.PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22 /07/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/