KANPUR DEVELOPMENT AUTHORITY,KANPUR V. DCIT, EXEMPTION CIRCLE, GHAZIABAD

ITA 921/DEL/2024

AI Insights

The case involves the Kanpur Development Authority (KDA) appealing against the reassessment order passed by the AO under sections 147 and 144B of the Income Tax Act, 1961, for the assessment year 2015-16. The AO had added an amount of Rs. 57,80,03,316 to the income of KDA, which was unclaimed expenditure on infrastructure, asserting it should have been explained to the income of the assessee. The CIT(A) upheld this addition, leading KDA to appeal to the Tribunal. The Tribunal, referencing previous decisions and the specific government orders guiding the use of the infrastructure funds, ruled in favor of KDA, stating the funds were not taxable income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31591 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Other Referred Cases: CIT vs. Lucknow Development Authority, ITO vs. Saharanpur Development Authority, ACIT vs. M/s Firozabad Shkohabad Development Authority, PCIT vs. Tupperware India (P) Ltd., CIT vs. Kelvinator of India Ltd., UOI vs. Rajeev Bansal, Haryana Acrylic Manufacturing Co. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: RAKESH GUPTA; SOMIL
• Keywords: Set aside; Difference of opinion; Change of opinion; Opportunity of being heard; Principle of natural justice; Benefit of exemption
• Section: 147; 148; 143(3); 11; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA NO. 921/Del/2024 A.YR. : 2015-16 KANPUR DEVELOPMENT AUTHORITY, 1ST FLOOR, KDA BUILDING, BENAJHABAR ROAD MOTI JHEEL, KANPUR, UP-208002 (PAN: AAALK0324M) VS. DCIT, EXEMPTION CIRCLE, GHAZIABAD (APPELLANT) (RESPONDENT) Assessee by : Dr. Rakesh Gupta, Adv. & Sh. Somil Agarwal, Adv. & Ms. Shilpa Gupta, CA Department by : Shri Dayainder Singh Sidhu, CIT(DR) Date of hearing : 20.03.2025 Date of pronouncement : 26.03.2025 ORDER PER SHAMIM YAHYA, AM : Assessee has filed the Appeal against the order dated 28.12.2023 passed by the Ld. NFAC, Delhi relating to assessment year 2015-16 on the following grounds:- 1. That having regard to the facts and circumstances of the case, assumption of jurisdiction in initiating the proceedings u/s 147 and passing the impugned reassessment order us 147/144B and that too without complying with mandatory conditions u/s 147 to 151A as envisaged under the Income Tax Act, 1961, is bad in law and against the facts and circumstances of the case. 2. That in any case and in any view of the matter, assumption of jurisdiction u/s 147 and passing the impugned order u/s 147/144B, is illegal, bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.57,80,03,316/- on account of infrastructure funds and that too by recording incorrect facts and findings and in violation of principles of natural justice. 2 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.57,80,03,316/-on account of infrastructure funds, is illegal, bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in passing the impugned order without providing the adequate opportunity of being heard and in violation of principles of natural justice. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have quashed the impugned reassessment order passed by Ld. AO u/s 147/144B as the same is barred by limitation also. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B and 234C of Income Tax Act, 1961. 8. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 2. Brief facts of the case are that assessment in this case was completed at Rs. 1,39,80,32,716/- u/s. 147/143(3) r.w.s. 144B of the Act. AO held unclaimed expenditure of infrastructure amounting to Rs. 57,80,03,316/- should have been explained to the income of the assessee. But the assessee failed to furnish / explain with documentary /corroborative evidence in this regard. Hence, unclaimed expenditure on infrastructure amounting to Rs. 57,80,03,316/- was added to the income of the assessee. Aggrieved with the aforesaid, assessee preferred the appeal before the Ld. CIT(A), who vide his impugned order has confirmed the additions. 3. Against the above order, assessee is in appeal before us. 4. We have heard both the parties and perused the records. At the time of hearing, ith regard to ground no. 3 & 4 against the action of the Ld. CIT(A) in confirming the actin of AO in treating the amount earmarked as Infrastructure Fund and FAR fund as taxable in the hands of the assessee and disallowing the expenditure incurred form infrastructure fund is concerned, it was submitted by the Ld. AR that it has been held in the following decisions that Infrastructure Funds are received by the assessee under the order of Government of Uttar Pradesh and appellant was required to use such funds as per the directions of the high powered committee having constituted by State Government and the appellant has not control 3 over the said funds and therefore said funds cannot be treated as taxable in the hands of the appellant. * CIT vs. Lucknow Development Authority (2014) 265 CTR 433 (All.) (CLC 137-144). * ITO vs. Saharanpur Development Authority, ITA No. 4113/2017, dated 24.3.2021 (CLC 151-154). * ACIT vs. M/s Firozabad Shkohabad Development Authority, ITA no. 270/2016, dated 25.01.2018 (Agra) (CLC 171-178). Ld. Ld. Counsel for the assessee further submitted that identical issue has been decided in favour of the assessee in assessee’s own case for AY 2013-14 in ITA No. 920/2024 vide order dated 12.3.2025 and AY 2014-15 in ITA No. 1655/2018 vide order dated 12.3.2025 and therefore, the disallowance made is without any basis, material or evidence and may be deleted and ground no. 3 and 4 may be allowed. Further, he submitted that on jurisdictional issues, assessee will definitely succeed and in support thereof, he filed the following written submissions: “Ground Nos. 1, 2 and 6: These grounds are against the assumption of jurisdiction u/s 147 and that too without complying with the mandatory conditions u/s 147 to 151A of the Act and the impugned reopening of AY 2015- 16 is bad in law for the following reasons: (1) Original assessment was framed u/s 143(3) vide order dated 11.12.2017, wherein, inter alia addition was made on account of infrastructure fund which was subject matter of appeal filed by the assessee and therefore in terms of third proviso to section 147, the assessing officer could not have assumed jurisdiction in respect of an issue which is subject matter of appeal and therefore impugned reopening deserves to be quashed on this ground itself. (2) PB 78-83 are detailed objections filed during the assessment proceedings vide letter dated 05.01.2022 and the said letter has been noted by Ld. AO at page 3 of the assessment order, however, the objections to the reopening have not been disposed by way of a speaking order and therefore the assessment order so framed u/s 147 r.w.s. 144B deserves to be quashed as held in the case of PCIT vs. Tupperware India (P) Ltd.. (2016) 127 DTR 161 (Del) (CLC 186- 196). (3) That impugned reopening is nothing but change of opinion on same sets of facts which is evident from reasons recorded enclosed at PB 70-71 which would show that there is no fresh material and reopening is only on the basis 4 of change of opinion which is bad in law in view of the decision in the case of CIT vs. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC) (CLC 211-213). (4) PB 67 is the notice u/s 148 dated 31.03.2021 for AY 2015-16 which would show that the satisfaction u/s 151 has been obtained from CIT(Exemptions) which is bad in law in as much as the same should have been taken from Joint CIT as per section 151(2) and reliance is placed on the judgement in the case of UOI vs. Rajeev Bansal, (2024) 469 ITR 46 (SC), wherein, their Lordships have held that for cases reopened within four years between 20.03.2020 to 31.03.2021, approval would be taken from authorities specified u/s 151(2). (5) Without prejudice to above, original assessment in this case was framed u/s 143(3) vide order dated 11.12.2017 and the impugned reopening is after four years as approval has been taken from CIT(Exemptions), however. plain reading of reasons at PB 70-71 would show that there is no allegation in reasons recorded as to any failure on the part of the assessee to disclose truly and fully all material facts and therefore in absence of such allegation the impugned reopening of AY 2015-16 vide notice dated 31.03.2021 i.e. beyond four years is barred by limitation in terms of first proviso to section 147 and reliance is placed on Haryana Acrylic Manufacturing Co. vs. CIT. (2009) 308 ITR 38 (Del). Thus viewed from any angle. impugned reopening for AY 2015-16 and the impugned reassessment order so passed is bad in law and deserves to be quashed and may please be so held.” 5. Per contra, Ld. DR could not controvert the submissions of the assessee, but he relied upon the orders of the authorities below. 6. Upon careful consideration, we find that that identical issue has been decided in favour of the assessee in assessee’s own case for AY 2013-14 in ITA No. 920/2024 vide order dated 12.3.2025 and for AY 2014-15 in ITA No. 1655/2018 vide order dated 12.3.2025. We find in assessment year 2014-15, the Tribunal has observed as under:- “…..Ground No. 5 & 6 relates to making addition of Rs. 74,65,69,311/- by holding that the amount earmarked for Infrastructure Fund is taxable income. In the assessment order, the AO has stated as under: 5 \"4. Infrastructure Development fund: it was found that an amount of Rs.74,65,69,311/- was directly credited to infrastructure development fund without being credited to Income and expenditure account hence the amount is added back. (Additions of Rs. 74,65,69,311/-) During the appellate proceedings the AR has filed written submission as under:-The premises on which addition has been made, has been laid down by the Assessing Officer on page 5 of the assessment order and reads as hereunder: \"On the Perusal of Income & Expenditure Account read with annexure B out of the total receipts only a fixed portion is credited to Income & Expenditure account the details being as under :- Head of Receipt Credited to Income and Exp. Account Total receipts Short credited in Income Expenditure (directly credited to infrastructure development fund) Conversion of land use 1,17,44,258.00 1,05,69,832.20 11,74,425.80 Betterment & Registration 1,63,06,390.00 1,46,75,751.00 16,30,639.00 Compounding 5,25,66,441.00 2,62,83,220.50 2,62,83,220.50 Income from Stamp Duty 21,59,42,368.00 19,43,49,131.20 2,15,94,236.80 Freehold 2,16,87,260.00 1,95,18,533.94 21,68,726.06 Charges Development Fee 49,24,40,032.00 44,31,96,028.075 4,92,44,003.25 Total 10,63,15,008.51 85,28,84,320.00 74,65,69,311.49 6 On the basis of the aforesaid chart the assessing officer proceeds to arrive at the assessed income by adding the amount shown in column 4 of the above chart against the item of addition. Before going into the reasons for this erroneous addition, without prejudice to whatever is being submitted, it is most humbly pointed out that even the very chart prepared included in the assessment order has been wrongly drafted without application of mind. The correct position behind the logic taken by the assessing officer should have been as follows as is demonstrated in the redrafted chart: Head of Receipts Gross amoun t under each head or total receipts Credited directly to Balance sheet as infrastructure fund in accordance with GO Credited to income and expenditure account in accordance with GO Conversion 1,17,44,258.00 1,05,69,832.20 11,74,425.80 of land use Betterment and Registration 1,63,06,390.00 1,46,75,751.00 16,30,639.00 Compounding Fee 5,25,66,441.00 2,62,83,220.50 2,62,83,220.50 Income from Stamp Duty 21,59,42,368.00 19,43,48,131.20 2,15,94,236.80 Developed Fee 49,24,40,032.00 44,31,96,028.75 4,92,44.003.025 Total 81,06,86,749.00 70,85,91,497.59.00 10,20,95,251.49 7 On comparison of both the charts it will be noted that besides the components of Infrastructure fund having been wrongly identified in the assessment order even the TOTALS of the columns were wrong. Only on this basis of this patent mistake the impugned assessment order needs to be set aside and the addition deleted. Regarding this addition on account of Infrastructure Fund, the appellant begs to draw your honours attention to the G.O.152/E-0-1-1998 dt. 15.01.1998 on the basis of which the transfers have been made to the infrastructure fund. A copy of the GO been submitted during the course of assessment proceedings. From the said G.O. and the documents attached thereto, it would be seen that the receipts represent collection made on behalf of the government, for being utilised for the specified purposes. The appellant itself did not have any right, title or interest to such receipts nor it has even the discretion to apply such receipts for attainment of the objects for which ADA had been notified. During the year under consideration, there were credits for sums aggregating Rs. 70,85,91,497.59/- under the head \"Infrastructure fund\" which the \"appellant authority\" had taken directly to the Balance Sheet, after transferring from various accounts. The said fund is in the process of being created as per the Government order and the same was liable to be utilized in the manner laid down in the related Government order itself. In other words, it was to be utilized only for the purposes as spelt out and specified by the State Government and the \"appellant authority\" has merely acted as \"nodal agency\", having no right, title or interest of its own in the said 'Fund'. It is also relevant to mention here that 'infrastructure fund is being utilised as per instructions of the State Government 8 and it is for this reason that balance in the said account as on 31.3.2014 got increased to Rs. 1,76,86,50,200.17/- and it kept on fluctuating as per the instructions of the State Government. In fact, in relation to infrastructure fund the status of KDA is that of a mere nodal agency. Looking to the nature of receipts, it is stated that the appellant had never acquired any right, title or interest therein of its own, therein. The receipts stood diverted from source.However, the ground on which the disallowance has been made by the Assessing Officer, is that these receipts cannot be allowed exemption under section 11(1)(d) as benefit of exemption under section 11 itself was being denied to the appellant. In this background the appellant's submissions are twofold” vs. a) Firstly, denial of exemption under section 11, is based on misconception and the same deserves to be allowed keeping in view the submissions made in paras herein fore; and irrespective of firstly, the receipts in question never belonged to the appellant as the same stood diverted at source thereof, therefore decision of Delhi Bench of Hon'ble ITAT in case of Saharanpur Development as has been discussed in para herein forth is squarely applicable. Decision: I have perused the facts of the case, contention of AO and submissions made by the appellant. AO has made the addition by a very cryptic and non-speaking order without mentioning anything about the issue involved, facts of the matter or any legal and accounting provision under which the same has been added. Appellant has tried to bring to my knowledge the inference drawn from the assessment order, pointing the para that might be relevant for the basis of this addition. A perusal of the para shows that AO has in fact calculated sum in every column, incorrectly. In fact if it is presumed that the table made by AO is correct then appellant has in fact credited 9 more in P&L Account and not less. Secondly even if it is to be held that the accretion to his fund namely Infrastructure fund received can be added to the income of the assessee then also the same shall be free of taxation because of the fact that appellant enjoys the exemption u/s 11 of the IT Act. Without getting into the merits of the case and submissions of the appellant, this addition is deleted for the reason that it is made without any basis, by passing a non-speaking order. This ground is allowed.”….. …..9. We have heard the parties and gone through the material available on record. 10. The ld. CIT(A) has examined the issues in the correct prospective and rightly deleted the additions made by the AO. The reasoning and findings of the ld. CIT(A) granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reasons to interfere with the findings of the Ld. CIT(A). the appeal of the revenue is liable to be dismissed. 11. In the result, the appeal of the revenue is dismissed.” 7. In view of the aforesaid discussions and respectfully following the aforesaid precedent in assessee’s own case for assessment year 2014-15, we allow the ground 3 & 4 in favour of the assessee. 8. Since we have decided the aforesaid appeal on the merits of the case, the legal grounds have become academic and do not require any adjudication. 9. In the result, the appeal of the assessee is allowed. Order pronounced on 26/03/2025. Sd/- Sd/- (SUDHIR PAREEK) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBhatnagar Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "