New Town Kolkata Development Authority, Kolkata V. Pr.CIT-1, Kolkata

ITA 872/KOL/2019

AI Insights

The case revolves around the New Town Kolkata Development Authority (NKDA), which appealed against the order of the Principal Commissioner of Income Tax (PCIT) revising their assessment for the Assessment Year 2015-16 under section 263 of the Income Tax Act. The PCIT had contended that the Assessing Officer failed to investigate the allowability of exempt income under section 10(20) during the original assessment. The Tribunal examined whether the NKDA qualifies as a 'local authority' under section 10(20) and whether the PCIT was justified in revising the assessment based on an audit objection. The Tribunal concluded that the NKDA is indeed a local authority and that the PCIT's revision was not justified as it was based on an unaccepted audit objection.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129166 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2023
• Appeal Filed By: Assessee
• Order Result: AllowedAllowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 16-01-2020
• Other Referred Cases: Thalibai F Jain Vs ITO, Malabar Industrial Co (P) Ltd Vs CIT, Jeevan Lal (1929) Ltd. Vs Additional CIT, CIT Vs Sohana Woollen Mills, CIT Vs Amitabh Bachchan, Paper Mills Ltd. Vs CWT, CIT, Shimla Vs Green World Corporation
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Audit objection; Earning of tax free income; Set aside
• Section: 263; 2; 143(3); 142(1)

Judgement Text

ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member I.T.A. No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority,..Appellant 3, Major Arterial Road, New Town, Kolkata-700156 [PAN: AAANL1239L] -Vs.- Principal Commissioner of Income Tax,....Respondent Central-17, Kolkata, Aayakar Bhawan, Uttarapan Complex, Manicktala Civic Centre, Block-DS-4, 2 nd Floor, Kolkata-700054 Appearances by: Shri Sushil Kumar Pransukhka, FCA, appeared on behalf of the assessee Shri Biswanath Das, CIT (DR), appeared on behalf of the Revenue Date of concluding the hearing : September 15, 2022 Date of pronouncing the order: January 04, 2023 O R D E R Per Rajesh Kumar, Accountant Member:- The assessee is in appeal before the Tribunal against the order of ld. Principal Commissioner of ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 2 Income Tax, Kolkata-17, Kolkata(hereinafter referred to as ‘PCIT’) dated 15.03.2019passed under section 263 of the Income Tax Act for A.Y. 2015-16. 2. The only issue raised by the assessee in the various grounds of appeal is against the invalid exercise of jurisdiction under section 263 of the Income Tax Act by ld. PCIT thereby revising and setting aside the assessment framed under section 143(3) of the Act dated 13.12.2017. 3. The facts in brief are that the assessment was framed under section 143(3) of the Act vide order dated 13.12.2017 determining the total loss at Rs.1,46,18,433/-. The ld. PCIT observed from the assessment order that the ld. Assessing Officer has failed to conduct necessary inquiries/investigation on the issue of allow ability of exempt income of Rs.52,18,99,389/- under section 10(20) of the Act and hence, the assessment order framed was erroneous in so far as prejudicial to the interest of the revenue. Accordingly, a show-cause notice under section 263 of the Act dated 21.01.2019 was issued to the assessee as to why the assessment framed under section 143(3) dated 13.12.2017 should not be revised. The extract of the notice is reproduced as under:- “3. Section 10(20) provides exemption of income of local authorities i.e, Panchayat, Municipality, Municipal ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 3 Committee , District Board or Cantonment Board only. Any authority cannot be a local authority for the purpose of exemption u/s. 10(20) of the Act even if they may be deemed to be local authority under Central or State legislation. This legal position was dearly explained by CBDT Circular No-8 of 2002 dated 27/08/2002 regarding me Explanatory notes to Finance Act,2002 when the amendment was brought in by the Parliament by deleting section 10(20A) of the Act .. 4. Article 243Q of the Constitution of India requires that a transitional area , a smaller urban area or a larger urban area means such area as the Governor may, having regard to the population of the area, the density of the population therein , the revenue generated for local administration, the percentage of employment in non-agricultural activities , the economic importance or such other factors he may deem fit, specify by public notification for the purposes of this part. In this case no such notification by the Governor in terms of Article243Q exists. NKDA Act says New Town Kolkata means the area described in Schedule 1 of NKDA Act The area as mentioned in Schedule 1 does not mention it as municipal area o' a transitional area as mentioned in Article243Q of the Constitution of India. The notification in the assessee's case is not akin to formation of a Municipality or Nagar Panchayat. NKDA Act was passed for a very specific and limited purpose only. Nowhere it is mentioned in NKDA Act that a Municipality is formed in New Town Kolkata as referred to Article 243P(e) of the Constitution of India 5. All the members of the assessee including the Chairman are nominated by the State Govt . After Constitution (74 th Amendment) Act,1992 was introduced and adopted by the West Bengal Municipal Act, a municipality cannot be constituted solely with the nominated members by a State Govt. 6. In view of the above stated facts section 10(20) of the Act. Erroneous & prejudicial to the interest of Revenue:- 7. While making an assessment under section 143(3) of the Act, the Assessing Officer , ACIT,Cir-50(l),Kolkata did not make any enquiry regarding allowability of the provisions of Section 10(20) of the Act in the light of the facts of the case and existing legal provisions. ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 4 8. In view of the above, the order u/s. 143(3) dated 13.12.2017 is considered erroneous in so far as it is prejudicial to the interest of revenue and the said order is required to be revised u/s.263 of the Act. 9. You are hereby offered an opportunity of being heard in accordance with the provisions u/s 263 of the Income Tax Act, 1961 and thereby required to attend the office of the undersigned at Aayakar Bhawan (Uttarapan Complex), Maniktala Civic Centre, Block- DS-4, Second Floor, Kolkata-700054on 07/02/2019 at 12.30pm either in person or by a representative duly authorised in writing in this.-behalf. You or your authorised representative may produce or cause there to be produced at the said time any documents, accounts and any other evidence on which you may rely in support of your reply. You may furnish the information in writing in this office personally or by post or by E- mail kolkata. Pcit17&incometax. gov, in and/or submit orally during the hearing on the said date and time. 10. In case no explanation/reply is received on the appointed date, it shall be presumed that you have nothing to say further in the matter and order u/s 263 of the Income Tax Act, 1961 shall be passed for the A.Y. 2015-16 on the basis of the material and evidence available on record after duly considering .your submissions and no further opportunity will be provided in the matter”. 4. The said notice was replied by the assessee by submitting that the assessee is a local authority as defined by section 10(20) of the Income Tax Act and the said fact was duly examined during the assessment proceeding and was accepted by the ld. Assessing Officer by taking a plausible view. The ld. A.R. submitted that the assessee is a local authority constituted by the Government of West Bengal vide Notification No. 1088-L-27.06.2008 for developing roads, water supply, street lighting, drainage, ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 5 sewerage treatment and disposal of sewerage, public works, tourist spot, open spaces, park, landscaping and play fields and other utilities in its covered area. The ld. PCIT after taking into account the submissions of the assessee, revised the assessment framed under section 143(3) of the Act dated 31.12.2017 with a direction to the ld. Assessing Officer to frame the assessment denovo after allowing reasonable opportunity of hearing as under:- “4. I have examined the facts and circumstances of the case. I have also examined the records of assessment proceedings in case of the assesse for the Assessment Year 2015-16. I have also considered the submissions of the assesse. The case was selected for scrutiny trough CASS with type of scrutiny as ' complete'. One of reasons for selection of the case was " Claim of large exempt income (Schedule El of ITR ) - whether the claim of exempt income is correct".This aspect was not at all enquired/ verified by the A.O.during the assessment proceedings. The A.O failed to discuss this issue inhis order and abruptly concluded the assessment at a loss of Rs. 1,46,18,433/-. In a nutshell, the above circumstances clearly establish the fact that it wasa case where the A.O failed to make necessary enquiries/ verifications for ascertaining the claim of exempt income. 5. Hon'ble Karnataka High Court in the case of Thalibai F JainVs ITO [101 ITR 16 KAR] has held that where no enquiries were made by the assessing Officer on the relevant issue , the assessment must be held to be prejudicial to the interest of the revenue and what is prejudicial to the interest of the't revenue must be held to be erroneous. Hon'ble Supreme court in the case of Malabar Industrial Co (P) Ltd l/s CIT[198 ITR 611] has held that the phrase "prejudicial to the interest of the revenue " is of wide import and is notconfined to the loss of taxes. If the AO has accepted the claim of theassessee without any enquiries then such assessment order passed by theAO was erroneous. ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 6 . 6. In the instant case, the Assessing Officer has failed to make any enquiry on the claim of exempt income of Rs.52,18,99,389/- u/s.10(20) ofthe Income Tax Act, 1961 claimed .in Schedule El of the ITR. Noexplanations thereon were sought by the AO from the assesse. The least the AO was expected to do while completing the assessment proceedings was to raise the issue with the assesse and seek explanation thereon as to the allowability of the claims made in the Schedule-El. The order dated13.12.2017 was passed in utter disregard to the requirements of section 142(1) which clothes the AO with the authority to call for all relevant details for determining the correct income of the assesse. It is evident that the AO did not try to investigate the details of allowability of exempt income. When an assessment is done under section 143(3) of the Act, it is expected that the Assessing Officer will make a detailed enquiry to find out the correct income of the assessee and not take the facts placed by the assessee on their face value. When the very basis of selection of the case for scrutiny was 'whether the claim of exempt income is correct ' , the AO should have made detailed enquiry , which is not apparent from the order passed by him. Clause (a) to Explanation 2 below section 263 of the Act inserted with effect from 01.06.2015 provides that the order is passed without making inquiries or verification which , should have been made, shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. 7. In view of the discussions made above , and after examination of the records of the assessment proceedings , I find that the assessment order under section 143(3) of the Act dated 13.12.2017 for the Assessment Year2015- 16 is erroneous in so far as it was prejudicial to the interest of the revenue. The AO has failed to examine the allowability of exempt income ofRs.52,18,99,389/- claimed in the Schedule El of the ITR. In view of the facts and the legal position stated above and after examination of the records of the assessment proceedings , I am of the considered view that the assessment order under section 143(3) of the Act dated ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 7 13.12.2017 for the Assessment Year 2015-16 is erroneous in so far as it was prejudicial to the interest of the revenue conferring jurisdiction upon the undersigned u/s.263. The correct provisions of law were not examined by the assessing authority. The finding of the A.O was arbitrary and perverse also. The Assessing Officer failed to apply his mind to the case at hand in all its perspectives. To sum up, the concept of an order prejudicial to the interests of the revenue cannot be restricted to cases where there is actual loss of revenue in the matter of quantification of tax liability and that under section 263, the Commissioner can correct both errors of fact and errors of law. 8. In view of above discussions and considering Assessing Officer's failure to enquiry/ verification about the exempt income and allowing the same without application of mind I, in exercise of the jurisdiction conferred by section 263 of the Act, set aside the said order of assessment dated 13/12/2017 for the A.Y. 2015-16 with the direction to the AO to complete the assessment de-novo after allowing a reasonable opportunity of being heard to the assessee”. 5. Ld. Counsel for the assessee submitted that the assessee is constituted for planned development in New Town Rajarhat area which is located on the periphery of Kolkata and for providing civic amenities under the name and style of New Town Kolkata Development Authority (in short ‘NKDA’), which was constituted under New Town Kolkata Development Authority Act, 2007 (NKDA Act 2007). The said Act came into effect from 28.12.2006 and it was notified in the Official Gazette. The ld. Counsel submitted that the said Act was constituted specifically to maintain the civic amenities in the New Town area such as developing roads, water supply, street lighting, drainage, sewerage treatment, solid waste management etc. and was also authorized to collect the property ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 8 tax, trade licence fees etc. The ld. A.R. submitted that the authority used to collect the property tax and fees as entrusted by Government of West Bengal. The ld. A.R. submitted that the said development authority planned by various members and a Member Secretary and is headed by the Chairman, who are all Government Officers either IAS, MLA and MP and are either or nominated by the Government out of elected representatives. The authority also used to sanction the building maps and collect fees from the residents of the area and the said money was duly utilised for carrying out its function/ duties in that area. The ld. A.R. submitted that it is never engaged in the development of any housing colonies or commercial spaces and as such never indulged in the sale and purchase of properties, but it is constituted for a limited purpose of maintaining the functionalities such as drainage, sewerage, water supply, lighting, etc. The ld. Counsel for the assessee submitted that the said issue was raised by the ld. PCIT ignoring the fact that in the original assessment proceeding, the issue has been examined and specific reference has been made in para 3 at page 3 stating that the assessee is a local authority constituted by Government of West Bengal vide Notification No. 1088- L-27.06.2008 and engaged in the developing roads, water supply, street lighting, draining, sewerage treatment and disposal of sewerage, public works, ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 9 tourist spot, open spaces, park, landscaping and play fields and other utilities in its area. The ld. Assessing Officer, by applying his mind, examined all these issues and status of the assessee was accepted as a local authority and accordingly allowed exemption under 10(20) of the Act. The ld. A.R. also referred that for A.Y 14-15, wherein the CBDT allowed the assessee to file the return for the first time and refund was granted by revenue considering status of appellant but the issue of status was not raised by the revenue and thus undisputedly accepted . The ld. A.R. submitted that the assessee is a local authority within the meaning of section 10(20), sub-clause (iii) of the Act. The ld. A.R., while referring to Calcutta Gazette of Government of West Bengal, submitted that the assessee was constituted under West Bengal Act XXX of 2007, The New Town, Kolkata Development Authority Act, 2007 vide Notification No. 1088-L dated 27 th June, 2008. The ld. A.R. referred to part-II, Chaper-II of the said Act and submitted that Section 3, sub-section 2 provides for composition of the Government Authority, which provides that it shall consist of a Chairman, a Member-Secretary and such other members, not exceeding seven, as the State Government may deem fit. Thereafter the ld. Counsel referred to the Notification No. 01(GN)-H2/NT-7/2009 dated 20.01.2011, which is a Notification under sub- section 4 of section 3 of the New Town Kolkata ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 10 Development Authority Act, 2007 (West Bengal Act XXX of 2007), whereby the Governor is pleased to constitute the New Town, Kolkata Development Authority for carrying out aims and objectives of the Committee with effect from 1 st February, 2011 and until further orders nominating Chairman, five Members and a Member-Secretary. Thereafter the ld. Counsel referred to sections 16, 17 and 18 in Chapter IV under the title “powers and functions”, which defines the scope of work of the authority. The ld. Counsel further referred to VIIA which deals interconnection of powers of property tax etc and contended that the authority was entitled to impose and claim property tax from the residents in order to meet its expenses. Thereafter the ld. A.R. referred to the letter of the Assessing Officer to Principal CIT dated 16.11.2018, which is placed at page nos. 247 to 252 of the paper book, wherein para 5 at page 252, the A.O. stated that audit objection was not accepted. Ld. Counsel thereafter submitted that the notice issued by the ld. PCIT under section 263 of the Act is invalid and ab initio. It is issued on the strength of audit objection, which was not accepted by the Assessing Officer, as referred to the above pages. The ld. A.R. referred to the decision of the Hon’ble Jurisdictional High Court in the case of Jeevan Lal (1929) Ltd. –vs.- Additional CIT [108 ITR 407 (Calcutta). The ld. A.R. finally submitted that in view of the above facts, the ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 11 jurisdiction u/s 263 of the Act has been exercised by the ld. PCIT in respect of an issue, on which the ld. AO has conducted detailed enquiry by calling for explanations and details from the assessee and having examined the details accepted the position by taking a possible view. The ld. AR submitted that audit objection cannot be the basis for issue of notice under section 263 of the Act, when the ld. AO has taken a view with which ld. PCIT does not agree or has taken a different view on the issue by relying on the following decision:- (i) CIT –vs.- Sohana Woollen Mills (2007) 296 ITR 238 (P&H) (HC); (ii) CIT –vs.- Amitabh Bachchan (2016) 69 taxmann.com 170 (SC); (iii) Paper Mills Ltd. –vs.- CWT (77 ITR 6) (SC); (iv) CIT, Shimla –vs.- Green World Corporation (2009) 314 ITR 81: 7SCC 69 (SC). 6. The ld. A.R. also submitted that in the present case, on the basis of examination of evidences filed by the assessee, the ld. AO has taken a possible view on this issue and, therefore, the order passed by the A.O. cannot be said to be erroneous in so far as prejudicial to the interest of revenue. The ld. A.R. pointed out that the issue has specifically been discussed in the assessment order and mere fact that elaborate ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 12 discussions were not made cannot be a basis for invoking the provision of section 263 of the Act. 7. On the other hand, the ld. DR relied on the order of ld. PCIT by submitting that the assessee is not covered under section 10(20) of the Act after the amendment of the Act w.e.f. 1.4.2002 by Finance Act, 2002. The ld. DR submitted that the assessee is neither a Committee or Local Body or Municipal Corporation. It is a Body, which is constituted under the Act 2007 to oversee the specified area and also that the management body of the said committee is not directly or indirectly elected by the people but nominated by the Government and, therefore, exemption of section 10(20) of the Act is not available and thus justified the exercise of jurisdiction under section 263 of the Act. 8. We have heard the rival submissions and perused the relevant material available on record. From the records, we find that the assessee is constituted under the West Bengal Act XXX of 2007 under the name and style of New Town Kolkata Development Authority Act, 2007, which was published in the Kolkata Gazette on 30 th June, 2008 and vide Notification No. 1088-L-27 th June, 2008 when it received the assent of the Hon’ble President of India, a copy of which is placed at page no. 47 of the paper book. Under the said Act, detailed ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 13 provisions have been made in Chapter IV and the powers and functions of the said authority, in sections 16, 17 & 18 of the Act, which are reproduced as under for the sake of ready reference:- ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 14 9. We also observe that the said authority is entitled to exercise powers of levy of taxes and collection of taxes under Chapter VIIA, which is reproduced as under:- “Chapter VIIA- Taxation Powers of Taxation and Property Taxes (A) Levy of Taxes (B) 36C. (1) The development authority shall, for the purposes of this Act, have the power to levy property tax on land and building within New Town. ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 15 (2) The levy assessment and collection of taxes mentioned in sub-section (1) shall be in accordance with the provisions of this Act and the rules and regulations made thereunder and such levy, assessment and collection of taxes under this chapter may be made electronically or otherwise in such manner as may be prescribed by the rules, or specified by the regulations. (B)Property tax on land and building 36D. (1) For the purposes of this Act, a property tax on land and buildings within New Town, as determined under this chapter, shall be imposed by the Development Authority. (2) The property tax,- (a) for any building, shall be equal to a percentage of such annual value of covered space of building, as determined under section 36H, subject to the minimum and maximum limit as specified in sub- section (3). Explanation:- The expression covered space in relation to a building, shall mean the total floor area including the thickness of wall, and shall include the spaces of covered courtyard, gangway, garage, open garage, verandah, common service area, balcony and such other spaces as may be determined in the regulations, (b) for any land comprising building or any vacant land in respect of any premises, shall be equal to a percentage of such annual value of land comprising building or any vacant land, as determined under section 36H, subject to the minimum and maximum limit as specified in sub-section (4). 10. We have also examined the statement of objects and reasons in the New Town, Kolkata Development Authority Bill, 2007, which is provided in Part IV of Kolkata Gazette, which is extracted below for the sake of ready reference:- ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 16 The New Town, Kolkata Development Authority Bill, 2007. (Schedule.) STATEMENT OF OBJECTS AND REASONS Social commitment needs to be judged in terms of historical arid local conditions of the society. For long term social gains, it is considered imperative to formulate a balanced planning to address the housing problem of the people, who use to reside in Kolkata and peripheral areas for livelihood due to expansion of technological, industrial and business activities. The development of New Town, Kolkata is for all practical purposes a project which will be developed in phases and may likely take ten to fifteen years to come to a finality in shape with all amenities required for a modern town. This time gap is a transition period for the area to be declared as Municipality. During this period allottees of plots are likely to be engaged in various activities like construction of residential and non- residential purposes, setting up institutions and other commercial activities for which various civic amenities and supportive services are to be provided. A body to act as ‘service provider’ to this growing area/is the crying need of the hour. Moreover, with a view to providing civic amenities and services, which are required for a highly urbanised planned township, recurring/charges like, fees, development charge etc. are to be imposed. 2. In order to ensure the maintenance of civic services and other amenities and to provide for the planned development in the areas in the New Town, Kolkata, an Authority is required to be constituted. 3. As the West Bengal Legislative Assembly was not in session and as it was necessary to take immediate action in the matter, an Ordinance namely, the New Town, Kolkata Development Authority Ordinance, 2006 (West Ben. Ord. V of 2006) was promulgated. 4. The Bill seeks to replace the said Ordinance by an Act of the State Legislature. 5. The Bill has been framed with the above objects in view. 6. KOLKATA, GAUTAM DEB, The 13th March, 2007. Member-in-charge. FINANCIAL MEMORANDUM. The Bill involves expenditure, the provisions for which will be made in the State budget. KOLKATA GAUTAM DEB, The 13th March, 2007. Member-in-charge. \ By order of the Governor, S. K. CHAKRABARTI, Secy, to the Govt, of West Bengal, Law Department. 11. On the basis of above documents, we observe that undisputedly The NKDA was constituted for the purpose of various activities as provided in the Act and nowhere it is engaged in development of any ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 17 residential accommodations or commercial spaces and selling thereof but primarily engaged for developing roads, water supply, street lighting, draining, sewerage treatment and disposal of sewerage, public works, open spaces, park, landscaping and play fields and other utilities in its area. The Ld counsel also referred to page no 147 of paper book to show the approval that NKDA is entrusted with Local funds which is also a condition for a local authority u/s 10(20) explanation (iii). On the basis of these evidences, we are of the view that the assessee is certainly municipal committee entrusted with local funds meeting various parameters as envisaged in the definition of local authority and is entitled for exemption under section 10(20) of the Act. 12. We have also examined the assessment order and find that the ld. Assessing Officer has specifically made observations that the assessee is entitled for exemption under section 10(20) of the Act as a local authority on the basis of evidences filed by the assessee. In our opinion, the ld. Assessing Officer has taken one of the plausible views with which probably the ld. PCIT was not in agreement as he was holding a different view on the issue but the ld. PCIT cannot invoke the jurisdiction under section 263 of the Act. ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 18 13. We have also examined the audit memo issued by the Office of the Director General of Audit (Central), Revenue Audit Direct Taxes (ITRA Wing) to the ACIT, Circle-50(1), Kolkata pointing out that audit is of the view that exemption under section 10(20) of the Income Tax Act is available to those authorities/bodies only, which fulfilled the criteria as contained in explanation to this section inserted by Finance Act, 2002. The said memo is extracted as under:- ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 19 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 20 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 21 Thereafter we have also examined the reply of the ld. Assessing Officer, i.e. ACIT, Circle-50(1), Kolkata addressed to the ld. PCIT dated 16.11.2018, wherein he has stated that the audit objection is not acceptable by giving detailed reasons. The said letter is also produced as under:- ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 22 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 23 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 24 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 25 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 26 ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 27 On the basis of the above documents, we observe that apparently the ld. Assessing Officer is not in agreement as communicated to the ld. PCIT vide letter dated 16.11.2018, which is reproduced above that the audit objection is not acceptable. Thus we find merit in the contention of the ld. Counsel for the assessee that ld. PCIT cannot assume jurisdiction on the basis of audit report, as has been held in the case of Jeevan Lal (1929) Ltd. –vs.- Addl. CIT (supra), wherein the Hon’ble Calcutta High Court has held as under:- “In the case of Jeevan lal (1929) ltd Vs Additional commissioner of income tax 108 ITR 407 Hon’ble jurisdictional Calcutta High court held that suggestion of audit objection cannot be basis of notice u/s 263. 4. The second ground of attack was, as I mentioned before, that this order was passed at the suggestion of the audit department of the revenue and not by the Additional Commissioner in exercise of is quasi-judicial discretion. I have noticed the terms of Section 263 of the ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 28 Act which empowers the Commissioner to call for examination of the record and thereafter to make an order. In this case the Commissioner purported to exercise the power at the suggestion of the audit department. This position would be clear if one refers to the averment made in paragraph 4(d) of the affidavit-in- opposition, by one Madan Mohan Lal, filed on behalf of the respondents. From the facts it is apparent that the Additional Commissioner did not exercise his discretion and judgment. In the aforesaid view of the matter, on the basis of the principles enunciated by the Supreme Court in the case of Sirpur Paper Mills Ltd. v. Commissioner of Wealth-tax, this notice cannot also be sustained. The notice, therefore, issued on the 24th of March, 1972, is hereby quashed and set aside. The respondent-Commissioner is restrained from giving effect to the same. If any order has been passed by the Commissioner, the same is also set aside and quashed. The rule is made absolute to the extent indicated above. There will be no order to cost”. 14. Similar view has been held in the case of CIT –vs.- Sohana Woollen Mills (2007) 296 ITR 238 (P&H High Court). We also note that the main reason for invoking jurisdiction u/s 263 of the Act is that the assessee is not a municipality within the meaning of section 10(20) of the Act but was covered by section 10(20A) of the Act which stands omitted by Finance Act,2002 w.e.f. 01.04.2002. But considering the aims and objects for which this authority was constituted by the Govt of West Bengal under the New Town Kolkata Development Authority Act 2007 and the functions discharged by the said body , we are of the view that the assessee is discharging the functions of municipality and is managed by the nominated members by the State Govt. We further note that the ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 29 assessee is not engaged in the housing development or other commercial property development but purely providing civic amenities and regulating the development in a planned manner meaning thereby it has been discharging the functions of municipality only and is covered u/s 10(20) r.w. Explanation (iii) of the Act. Considering the above facts and in the light of ratio laid down by various Hon’ble High Courts as discussed above, we are of the view that the ld. PCIT has wrongly initiated the revisionary jurisdiction under section 263 of the Act and therefore we quash the same by allowing the appeal of the assessee. 15. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 4 th January, 2023. Sd/- Sd/- Sonjoy Sarma Rajesh Kumar Judicial Member Accountant Member Kolkata, the 4 th day of January, 2023 Copies to : (1) New Town Kolkata Development Authority, 3, Major Arterial Road, New Town,Kolkata-700156 (2) Principal Commissioner of Income Tax, Central-17, Kolkata, Aayakar Bhawan, ITA No. 872/KOL/2019 Assessment Year: 2015-2016 New Town Kolkata Development Authority 30 Uttarapan Complex, Manicktala Civic Centre, Block-DS-4, 2 nd Floor, Kolkata-700054 (3) Commissioner of Income Tax-; (4) The Departmental Representative (5) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.