Infinity Infotech Parks Ltd., Kolkata vs Assessee on 9 June, 2015

[Cites 33, Cited by 0]

Income Tax Appellate Tribunal - Kolkata

Infinity Infotech Parks Ltd., Kolkata vs Assessee on 9 June, 2015

                                                                  I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5
                                                      A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1
                                                                                                Page 1 of 45

                  IN THE INCOME TAX APPELLATE TRIBUNAL,
                        KOLKATA 'B' BENCH, KOLKATA

                 Before Shri P.K. Bansal, Accounta nt M em be r
                  and Shri Maha vir Singh, Judicial Member

                        I.T .A. No s. 41 3 & 4 14 /KOL/ 20 15
                    Assess ment years : 20 0 7- 200 8 & 2 010 -20 11

Infinity Infotec h Pa rks Limite d ,...... ........ ...........................App ella nt
Plot A -3, Block GP, Sa lt la ke, Sec tor-V,
Kol ka ta -700 091
[PA N : AA BC I 0692 J]

       -Vs.-

Dep u ty Com mis si one r of Income Ta x,... ..............................Resp ond ent
Circle-2(1), Kolka ta,
A a ya ka r Bha wa n,
P-7, C howring hee Squa re,
Kol ka ta -700 069

Appeara nces by :
Shri D. S. Daml e, FCA, f or the ass es s ee
Smt. Su chismita Palai, JCIT, Sr. D.R., fo r t he Departm en t

Dat e of concluding t he hearin g : M ay 21, 2 015
Dat e of pr onouncing th e order : Jun e 09 , 201 5

                                       O R D E R

Per P.K. Bansal:

Both these ap peals have been filed by the asses see again st the order of Prin cipal Co mmis sione r of In c ome Tax-I, Kolkata pas sed und er sect ion 263 of the Income Tax A ct dat ed 26.0 3.2015 and 20.03.2015 fo r the ass essme nt yea rs 2007-08 and 2010-11 resp ectively. The issues in both the appeals are com mon th erefo re we have d ecided to dispose of thes e app eal s by this commo n o rde r fo r the s ake o f conveni ence.

2. ITA No. 413/Kol/2015 (Asse ssment Year : 2007-2008) The assessee in this case ha s taken as many as 12 grou nds of app eal ch allenging th e ord er passed und er section 2 63 both on legality as well as on merit.

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 2 of 45

3. Brief f act s of the case are tha t the o ri ginal a ss ess men t unde r sect ion 143(3) of the In come Tax Act, 19 61 was compl eted on 31. 12.2000 which wa s su bsequ ently re-op en ed by recordin g the fo llo wing reason s to believe:-

"It was seen tha t as per No te B-8 of Sch edule P o f the accou nts contained in th e a nnual report for th e y ear ending 31.03.2007 , the assessee compan y en tered into develop ment agreemen t with Go drej W atersid e Properti es P. Ltd. during the year ending 31.3.2 007 for develop ment o f its land and the develop er had to bear all the co sts and the assess ee will get 39% of the total built up area as well as parking area. The Note B-8 is repro duced below-

"The company has ent er ed into development agreemen t with Godrej Water sid e Pro perti es P. Ltd. For the 5 .5978 acres of lease ho ld la nd at Salt lake, Sector -V, Kolkata, whereby th e develop er will incur a ll the dev elopmental costs as envisaged in the said agreemen t and upon completion of construction the compan y sh all be entitl ed to the 39% of the total built up area as well as parking area".

Sch ed ule F in r esp ect of fixed ass et s sho ws l easeho ld land at Rs.1,89,74,418/-.

Sch ed ule E in respect of liabilities reflects Joint Dev elopment deposit at Rs. 5 cro re.

It is thus apparent tha t ther e was transfer of th e land, being capital asset during th e yea r endin g 31.3.20 07 relevan t to AY 2007-08 and th e r esulta nt capital gain is assessabl e in AY 2007-0 8 as per decision of va riou s cou rts in r esp ect of develop men t a greement s.

As per information available from n ews lett er of the assess ee compan y dated 4 .4.2011 , the tota l area of space in Tower 1 is 6 ,15,557 sft. And that in the To wer 2 is 12,40 ,180 sft. The gran d total being 18,55,847 s.ft. ass essee's share r eceivable of 39% = 7,23,781 sft.

In the case of th e assess ee company which developed and sub-leas ed similar IT building in Salt lake, Sector-V, th e admitted rat e of cost of const ruction o f area sold in FY 2007-08 is Rs.3,390/- per sq.ft. vid e assessmen t r eco rds of the ass ess ee compan y for the AY 2007-08. On the sa me basis, th e sale consid eratio n for 61% of the land of a ssessee (39 % of proportio nate land in retained by a ssessee along with constru ct ed area ) is 7,23,7 81 sft. X Rs.3,390 /-/sft. = Rs.245,3 6,17,590/-. The proportionate co st of lan d to the assess ee is Rs.1,89,7 4,418/- x 61% = Rs.1,15,74,390/-. The I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 3 of 45 assess ee is entitl ed to ben efit of indexati on. Even then th e long term capital gain assessabl e would not be less tha n Rs.225 cror e, on whi ch tax payable is a t t he ra te o f 20% plu s surcharge / EC etc. But the ass essee company has not disclo sed an y capital gain in th e r eturn . No cap ital gain was ass essed either.

In view of th e above, ther e wa s reaso n to beli ev e tha t income chargea bl e to tax for the AY 2007-08 has esca ped assess ment within the mean ing of sectio n 147".

Assessment unde r sect io n 143(3) read with section 1 47 was co mpl eted vide order dat ed 3 0.03.2013 determinin g th e book profit at Rs. 1,99,42,04 8/- un der s ection 115JB of the Inco me Tax Act. I n th e said as se ssm ent, the As ses sin g Of fice r did n ot make any additio n on account of the capit al gain b ut took the view that n o income h as accru ed or arisen to the a sse ss ee in the ass es sme nt year 200 7-08 by observing as under:-

"Considering and verifying all the subm ission filed by the ass essee and information collected fro m Godrej Properti es L imited and Nabadiganta Industrial Townships Authority, no capital gain accru es o r aris es to the a ss essee in th e AY 2007 -08 ".

The book profit was d ete rmin ed at R s.1,99,42,0 48/- as has ori gin ally been dete rmi ned. Subsequently CIT invoked the jurisd iction unde r sect ion 2 63 by issuing the sho w-cau se notice dat ed 19.02.2015 to the as se sse e. The said show-c aus e notice re ads a s un der:-

"Dur ing t he F. Y . 2006-07 r el evant to A. Y. 2007-08 the as s es s ee com pany had an agr eeme nt with M/s . Godr ej Water Sid e Pr oper ties Pvt. L td. on 07. 02. 2007 f or al lowing t he per m iss ion to M/s . God rej Waters ide Pr operties P vt. Ltd. for the purpos e of car rying out of the c onstr uction of the I. T . Pr oj ect. It was agr eed that f or co ns ider ation for pr oviding l and b y the as s es s ee com pany towar ds the d evel opme nt of I. T. Pr oj ect by the God rej W ater sid e Pr oper ties Pvt. Ltd . and af ter compl etion o f I. T Proj ect, 39% out of total cons truct ed area of I. T. Pr oj ect together with am enities and therein s hal l b el ong to as s es s ee comp any a nd b al ance 6 1% cons tructe d ar ea with f acil ities shall b el ong to t he G odr ej W ater sid e Pr oper ties L td. Simil arl y, the entir e com mon ar ea, open area whats oe ver nature s hal l b e appor tioned on the s im il ar pr opor tion i. e. 39% and 61%.

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 4 of 45 Dur ing the co urs e of ass ess ment, it has been cl aimed by the as s es s ee that the Capital gain tax is payabl e in the F. Y . 2010-11 & 2011-12 w hen the co ns ideration pro vided in the agr eem ent was actual l y payabl e on 39% of total cons tr uct ed ar ea tr ans f er r ed and the As sessing Off icer had accepted the ass ess ee's s ubm ission .

However, as per the pr ovisions of s ectio n 2(47)( v) of the I. T. Act any, trans actio n invol ving al l owing of pos s es s ion to be taken over or r etained in part-perf orm ance of a contract of the n atur e r ef err ed to in section 53A of the Trans f er of Pr oper ty A ct woul d com e within the ambit of section 2(47)(v). In or der to attr act s ection 53A, the f ol l owing cond itions need to b e ful f ill ed . Ther e s houl d be a contr act f or consid er ation, it s houl d be in writing ; it s houl d be sig ned b y t he tr ansf eror; it s houl d per tain to tr ans f er of im movab l e pr oper ty; the transf er ee shoul d have taken pos ses sion of the proper ty; l as tl y the tr ans f er ee s houl d be ready and wil l ing to perf orm his par t of the contract. E ven ar r ang em ents confir m ing pr ivil eges of owner ship without tr ansf er of titl e can f al l under s ection 2(47)(v).

The L eg is l ature has i ntrod uced s ection 2( 47)(v) r ead with s ection 45 which in dicates that capital gains is taxabl e in the year in which s uch tr ansactions ar e e nter ed int o even if the tr ans f er of im movab l e pr oper ty is not ef f ective or com pl ete under the gener al l aw. The year of charg eabil ity is the ye ar in w hich t he contr act is executed.

Section 2(4 7(v) had bee n enacted and in s uch c as es , even enter ing i nto such a contr act co ul d am ount to tr ans f er f rom the date of the agr eem ent itsel f . T her efore, if on a bar e r ead ing of a contr act i n its entir ety, an A ss es s ing O ff icer com es to the co ncl us ion that in the g uis e of agr eement f or s al e, a Devel opm ent Ag reem ent is contempl ated, und er w hich the devel oper appl ies f or per m iss ions f r om various author ities , either under power of attor ney or other wis e and in t he name of the as s es see, then the A ss es s ing Of ficer is entitl ed to take the date of contr act as the date of tr ansf er in view of s ection 2(47) (v). Theref or e, the decis ion take n by the As s es sing off icer on this is sue is not as per the pr ovis ions of l aw.

The As s ess ing of ficer has wr ongl y al l owed exces s depreciation of R s. 3, 03, 21, 882/- cons idering the curr ent as sets as f ixed as s ets.

In view of the ab ove f acts , the order passed u/s 147/143(3 ) on 30. 03. 2013 for A . Y . 2007-08 appears to be er roneous in s o f ar as it is pr ej ud icial to the i nter es ts of r evenue. Ther ef ore, it is pr oposed to take u p ab ove as s es s ment or der u /s 147/143( 3) dated 30. 03. 20 13 f or r evision u/s 263 of the I. T. Act, 1, 961. Y our case is f ixed f or hear ing u/s 263 of the I. T . Act, 1961 on 2 7. 02. 2015 at 12. 00 no on f or this purpos e. In cas e of f ail ure to r es pond to this notice, d ecision m ay b e taken on merits of the cas e".

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 5 of 45

4. From th e said sho w-cau se notice it i s apparen t that th e CIT ha s invok ed the jurisdictio n und er section 263 only on two issues, the first issu e wa s in respect of the developme nt agreement en tered into by the as se sse e with Godrej Waterside Prop erties Pvt. Ltd ., the capital ga in ha s ari sen to the ass ess ee durin g the i mp ugn ed a ssess men t year in th e opinion of the CIT, assessin g offic er e rroneously not assessed the capit al ga in during the impu gn ed asses smen t y ear in re spect of trans action under the said develop ment agreem ent which ass ess ee entered into with Godrej Wat ersid e p ro perti es P Ltd., and also th at the A sse ssin g Office r has wron gly allowed exces s d ep reci atio n of Rs.3,03,21,882/- co nsiderin g the current as se ts as fixed a ss et s. Th e as se sse e vide its letter dat ed 04.03.2015 objected to the p roce eding being initiat ed und er s ection 263 both on legal g rou nds as well as o n m erit s st atin g th at the o rder passed by the Asse ssin g Offi cer is n either erroneo us nor p rejudicial to the interest of the revenue. In this regard, relian ce wa s plac ed on th e following d eci sions:-

(i) Mal abar Indus tri al Co. - vs.- CIT [243 ITR 83 ( SC) ;

(ii) CIT -v s.- Alokand ran Fin ance Li mited [293 ITR 1 ( SC);

(iii) R adha swami Sats an g -vs.- CIT (SC);

(iv) CIT - vs.- Hindusthan Motors L imite d [92 ITR 619 (Calcutta);

(v) Ru ssel Pro perti es Pvt. Ltd. -vs.- CIT [109 ITR 229 (Cal.);

(vi) CIT - vs.- Gopal Puro hit [228 CTR 58 2 (Mu mbai) ;

CIT ultimately vide his o rder p as sed under s ection 263 s et asid e the as se ssm ent on both these is sues relating to the ch arg eability of the capital g ains du rin g the i mpu gned ass essment year as well as allowan ce of the dep reci ation to the asses see and directed the Assessin g Officer to co mplet e the ass ess ment de novo.

5. Ld. A.R. befo re us submitt ed th at th e p roceedin g und er section 263 has been initi ated by the CIT. The main re ason s fo r which the assessmen t order was h eld to b e erroneous -

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 6 of 45 (1) That the Comp any d urin g th e fin an cial year 200 6-07 ent ered into an agreemen t with M/s. God rej Waterside Prope rti es Pvt. Ltd. for develo pment of co mpany's l easeho ld p rope rty in terms of which said co mpany was to provide 39% of the co nst ru cted are a free of co st a nd the cap it al gain s in respect of the said t ran sactio n wa s declared by the company in the assessment years 2 011-12 and 2012-13. In view of th e p rov isions of sect ion 2, sub-section 47(v ) read with section 5 3A o f the Tran sf er of Prope rty Act, the 'tran sfe r' of the "capital as set" to ok place in ass es sment year 2007-08 and, therefo re, th e cap it al gai n on grant o f development ri ght was ch arg eable in as se ss ment year 2007-08 whereas the A ssessi ng Officer accept ed the comp any's cont enti on that it was cha rge able in financi al yea rs 2010-11 an d 2011-12. And;

(2) The A sse ssin g o ffic er wron gly allowed exce ss dep reciation of Rs.3,03,21,882/- con siderin g the curren t as sets as fixed assets.

6. It was submitt ed that the o rd er passed under section 147 read with sect ion 143(3) dated 30. 03.2013 is not erron eous as well as prejudicial to the interest of the revenue. The juri sdiction under s ection 263 is in exces s of th e powers conferred by the Act and th e powers are bein g exerc ised in o rde r to substitute the subjectiv e opinion of the superviso ry authority in place of th e opinion of the as se ssin g authority who aft er due co nsideration of the f act s and applic able legal provision s h ad followed one of the legal course permi ssible in formin g the ord er dat ed 30.03.2013. The compan y is eng aged in the busines s of developing, operatin g and maintain in g in formation Technology Parks. The Company set up its fi rst IT Park known and titled as "Inf inity Think Tank" at Plot A/3, Block GP, Salt Lake Elect ronic Co mplex, Secto r-V, Kolkata-700 091. The said p ark consisted o f two Towers . Th e develo pment of the said IT Park comm enced in and around 1996-97 and proc eeded in ph as es over the years. The first Tower was d eveloped and con st ructio n was co mpleted in fin ancial yea r 2000-01. Const ructio n and develo pment of the second I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 7 of 45 Tower which pro gre ssed in phas es was co mpl eted in asses smen t year 2006-07. The company owns o p erates and maintain the s aid IT Park , part of which is o wn ed by the co mpany and part of which is leased on long- term basis to several transferees. Howe ver, for operatin g and m aint ainin g the IT Pa rk, the comp any had made su bstanti al in vestment in attendan t faciliti es and amenitie s which are n eed ed to ope rate the I.T. Park. Sub st antial co st wa s incu rred in in st alling plant and ma chineries fo r operation o f IT Pa rk. The plant & machi neries in st alled int er ali a in cluded cent ral ai r conditionin g plant, elevators, fi re fi gh ting equipm ent s, building auto mation sy stem, s ecu rity systems, electri cal and cabling hi gh speed data cables, el ectrical sub-st ation s, DG back ups, etc. The a sse ss ee regularly derived income fro m the o ccup ants for us e of the service s and serv ice charges received h ave al ways been a ssessed as business inco me of the assess ee. Sinc e the asse ssee con tin ued to own the se plants and equ ip ment s and th e comp any did not re ceive consid eration fo r t ran sfer of thes e equipments and pla nt to th e les sees th e comp any was eligible to claim dep reci ation o n these a ssets. The IT Park so developed is record ed in comp any's boo ks as fixed /dep reciab le ass ets. It was n eve r sho wn or declared in th e IT record s to be curren t ass ets, but was always de clared to b e p art of the depreciable as set an d depreciation on the building as well as plan t an d machineries in st alled with th e IT Park was always allowed unde r section 32 of th e A ct. In the income t ax assess ment und er sect ion 143(3) for as sessment year 2004-05 and on wards the dep reci ation clai med was allowed by the A ss essin g Officer after m aking thorough discu ssion with regard to the n ature o f th e busines s con ducted by the company.

7. It was further submitt ed that the a ss ess ee had o btain ed l and parcel s on leas e f ro m W es t Ben gal E lectro nic Industri al Development Corporation. It includes a plot of land adme asu rin g 5.59 78 acres si tuat ed at Block DP/5, Se ctor-5, Salt L ake, Kolkata. The as se sse e d ecided to dev elop the said leasehold land through a joint venture with Godrej Gro up who had e xperti se in d ev elopme nt of IT P ark and acco rdin gly, the I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 8 of 45 Company ent ered into a developm ent agreemen t wi th Godrej Properti es Limited grant ing the said co mpan y d evelopment ri ghts in re spect o f the said land. F or this our attention was d ra wn to pa ge 92 to 1 19 of the pap e r book . In pursuance with the said dev elopment ag ree men t, the assessee had received security deposit of Rs.500 lacs. The receipt h ad duly b een accoun ted for in th e b ooks of the ass essee and shown in th e audited balance-sheet fo r the year as on 31.03.2006 as well as 31.0 3.2007. The as se ssm ent un der section 143(3) was comp leted for the i mpu gned as se ssm ent year on 31.12. 2009. In this asses sment, the Asse ssin g Of fice r took into account all the relev ant fact s concernin g the cost of co nst ru ction which th e asses see had i ncurred on con st ructio n of the IT Park and th e d ep re ciation cl ai med thereon f rom ti m e to ti me till 31.03.,2006. The Assessin g office r not ed that durin g th e fin anci al yea r 2006-07, the assessee t ran sf erred on lo ng-term le ase basi s certain of fice space s and re ceived lump sum f ro m the trans feree. Acco rdin g to the Assessing offi cer, th e company was lia ble to disclose short term capital ga ins on t ran sf e r of office space whereas in its co mputation of inco me the co mpany had reduc ed the sale p rocee ds rec eived from the t ransferee fro m the o pening of th e written down value of the building block in co nformity wi th section 50 of the A ct and on the resultant reduced writte n down value the depreciation was clai med. The Assessin g Office r held that the proportion ate writt en down valu e o f the offic e block was requi red to b e reduced f rom the gross sal e con sideration to arriv e at short-term c apit al gain s which in hi s o pinion was liable to be assessed. The Assessin g Officer acco rdin gly asses sed R s.1, 50,26,623/- under the head "sho rt-term capi tal gain s" on sal e of dep reciable asset s. The Assessing Office r d id not co nsider th e IT Park building to be part of co mpany 's current as sets. To the exten t, part o f the office building was sold, th e A ss essin g Officer asses sed sho rt-term capital gai ns a s on s ale of dep reci able ass et s and o n th e remai n ing writt en down v alue o f of fice building block an d the writt en down value o f the plant and machinery block which was installed in the IT Pa rk; dep reci ation under s ection 32 was allo wed by him.

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 9 of 45

8. The appeal agains t the said as se ssmen t o rder was d ecid ed by the CIT(App eals)-I, Kolkata on 20.08.2010. While deleting the addition on accoun t of short-t erm capital gain o n sale of dep reci able assets, the CIT(App eals) besid es th e said relief, vide his order also allo wed relief on other is sue s. Ag ainst th e reli ef allowed on other issues, second appeal was p referred but no second app eal was filed b y the CIT on th e reli ef allowed by the CIT(Appeals) holding no ad dition on account of sale of dep reci able as set was warrant ed . Our conten tion was d rawn to ward s the order of CIT(App eals), copy of which is available at page s 79 to 85 of the pap er book. Our att ention was d rawn towa rd s the o rder of ITAT dat ed 08.09.2011 in ITA No. 2221/Kol/2010 cop y of which is available at p a ge 86 to 90 o f the pap er boo k. Subsequently the Ass essin g Offic er initi ated the reassessme nt proc eedin gs under sectio n 1 47 by issuing notice unde r sect ion 148 of the Act for th e re aso n s record ed. Our attention was d ra wn towa rd s page 91 of the pap er book, it was con tend ed that f rom th e reasons reco rded, it i s app arent that t he as sessing Officer i nitiat ed re- as se ssm ent p roc eedin g s fo r the same reason fo r which the ord er unde r sect ion 147/ 143(3) is co nsidered to be erron eous b y the CIT.

9. The As ses sin g Of fice r in the reco rded reasons ref erred to th e dev elopment agreement with God rej Waterside Properti es Pvt. Ltd. in terms of which the d eveloper was to provide 39% of the total sale able area to the assessee as a con side ration. The Assessin g offic er in suppo rt of the reason s relied on the Note No. B/8 of Schedule P of the Annual Accounts fo r th e yea r ended 31.03.200 7 fo r wh ich our attentio n is d rawn to pag e 59, Note No. 5. This note p rovided the d etail s of ass es see's ag ree ment with Godrej W at ersid e Prop ert ies Pvt. Ltd./ Go drej P roperties Limited. The A ss essin g Office r referred to Schedule E o f the audited accoun ts which re flect ed joint dev elopment dep o sit of Rs.5 crores. The Assessing Offi cer on the basi s of th e No te appea rin g in the balance-sh eet co ncluded that the assessee wa s liabl e to be ass essed under the h ead "capital gains" in respect of th e s aid develop ment agreement and sin ce I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 10 of 45 the cap ital g ains was not so assessed i n the o rde r und er section 143(3 ), he formed hi s re ason s to believe tha t inco me charge able to tax for th e as se ssm ent yea r 2007-08 had e scap ed assessment. The a ss ess ee objected to the reop enin g vide it s letter dat ed 17.02. 2012. The Assessi ng Offi cer vide orde r d ated 21.02. 2012 dispose d of the objection raised by the as se sse e and by referrin g to th e d ecisio n o f the Cou rts which inter alia, includ ed the decision s in th e cas e of Chaturb huj D. Kapadia - vs.- CIT repo rted in 260 ITR 491 (Bo mbay) and J.S. Sa rkaria repo rt ed in 294 ITR 196 (AAR) observed that capital gain wa s ch arg eable in a ssess ment yea r 2007-08.

10. The Assessin g Offic er aft er di sposin g the ass ess ee's prelimi nary objections, conducted the hea rin gs f rom ti me to ti me and ultimately afte r co nsiderin g the submi ssio n s of the assessee, the cop y o f which i s av ailable at pages 188 to 20 8 of the pape r book, passed th e assessmen t order on 30.03.2013 in which he did not assess the c apital gain s sin ce he was fully sati sfi ed that t ransfe r of cap ital a sset did no t t ake p lace in th e rel evant ye ar and h ence no c apital gai n was legally chargeable to t ax in as se ssm ent year 2007-08. Our atten tio n was drawn to the various submission s made by the assess ee durin g the co urs e of hearin g. The as se sse e brou ght to the att ention of the A ss essin g Offic er that the dev elopment agreement exe cuted by the Comp an y with Godrej Prop erty Limited was prio r to 01.04.2006. Secu ri ty deposit wa s also rece iv ed prior to 01.04.2006. The d evelop ment acti vities had co mmen ced p rio r to 01.04.2006. During the fin an ci al yea r2 006 -07 Godrej propertie s Ltd. had me rely nominated Godrej Wate rsid e p roperti es Pvt. Limited in its place and stead on the s ame t erms and such nomination was ac cept ed by the as se sse e. By issu in g notic es unde r sect ion 133(6), the Assessin g Office r had o btained con firmation of thes e fact s fro m Godrej Properties Ltd. and Godrej Wat ersid e Prop ert ies Pvt. Limited.

11. The as sessee has also su b mitted v ariou s d ecis ions befo re the Assessing Offi ce r th at no capit al gai n wa s chargeable to tax until th e I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 11 of 45 ag ree ment was p erfo rmed and consi deration wa s delivered. It was co ntended that it i s a fact th at before passin g the impugn ed o rd er dated 30.03.2013, the ass essin g offic er had thoroughly examin ed the is sue of the taxability of the gain s ari sin g f ro m the development of land in all its persp ectives. The A ssessin g of ficer h as duly con sidered all the le gal provision s a s well a s the rel evan t document ary ev id ence s which were ga the red by him durin g th e course o f t he re-assessment p roceeding s and then he took a conscious deci sio n that no capital gain leg ally charge able to tax in the i mp u gned a sse ss ment year. Therefo re, it was cont ended th at once the A ssessin g officer had con duct ed enqu iri es a s the ci rcum st ances dem anded , had applied his mi nd and then came to a consc ious deci sion by following on e o f the course s l eg ally permi ssible then in proc eedin gs under section 263 the CIT cannot hold the asses sment ord e r to be erro n eous on the sa me issue by inv oking the jurisdiction under s ection

263. Our atten tion to wards the show-c ause notice it wa s point ed o ut that the first in st anc e consid ers the assessment o rder as erroneous fo r the reason that no capital gain was assessed though in terms of section 2(47) of the Act, the cap ital gain wa s chargeable in that year becau se dev elopment a gre ement was executed d urin g the relevant yea r. The fact s on reco rd establish that the reassessm ent proc eedin g u nd er s ection 147 was also initiated fo r th e sa me reason. Therefo re, it cannot be said that the asses sing Officer was not awa re to the f acts as stat ed in the sho w- cause n otic e by the CIT. On detail ed ex amin ation of the f acts, docum ents and evidenc es on reco rd and after considerin g the applicable le gal provision , the Asse ssin g Of ficer was satis fied that n o capital gai n was leg ally charge able to ta x in the asse ss ment year 2007-08. The Ass es sin g Officer had also pe rus ed the f act that the developmen t agreem ent was executed by th e assessee in July, 2005 and the development wo rk had also co mm enced the reaf te r. The A ss ess ing Officer was satisfi ed that the capital gain u ltimately o ff e red in th e l ate r years was much high er than the cap ital gains that would have b een legally chargeable if asses sed in as se ssm ent yea r 2007 -08. It was al so submitted that subject to p assin g of the order u nder sec tion 147 /143(3), the As ses sin g Offi ce r co mpl eted th e I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 12 of 45 as se ssm ent for th e a ssessment years 2 011-12 and 2012-13 wherein the capital gain s on trans fer of as se ssee's rights in th e le asehold land at Salt lake was as ses sed on sub st antive basi s. Ou r att ention was d rawn to ward s the asses smen t o rd er of this assessment years, which i s avail able in the pap er book at pages 234 to 244. Thus it was contend ed that once th e reven u e auth oriti es hav e al ready assess ed th e income fro m tran sfer of the leaseho ld land in ass es sment ye ars 2011-012 an d 2012-13, and finality of thes e ord er is not di stu rbed then it wou ld be enti rely erro n eous fo r the superviso ry tax autho rity to hold that the same income was chargeab le to tax in a ss ess men t year 2007-08 as well. Mo reove r, on ce the assessing autho rities assess ed the capital gai ns on tran sf er of the same c apital as set in as ses sment year 2 011-12 and 201 2-13 then it leads to on ly one co nclusio n that on the is sue of t ax ability and the year of taxability of that income und er the head capit al gain s conceivably more than two legal views were permissible and o nce more than two views are prevailin g with reg ard to the y ear of ta xability of capital gain s, the orde r pas sed by th e As ses sin g offi cer aft er due delibe ration of all ma te ri al facts and applicable legal provision s, cannot be t ermed to be erron eous me rely because the Asses sin g Of ficer has no t followed the view taken by the CIT. Our attention wa s d rawn in th e deci sion of the Hon'ble Sup re me Court in th e case o f M alaba r Indus tri al Company - vs.- CIT report ed in 243 ITR 83 ). Reliance wa s also p laced i n this regard on the fo llowing decision s:-

(i) CIT -v s.- Ma x Indi a L imited [295 ITR 282](SC);

(ii) Cit -vs.- Grasi m Indus tri es Limited (226 Taxman 165 (Bom. HC);

(iii) CIT -vs.- Sunbeam Auto Ltd. (332 ITR 167) (Del. HC);

(iv) CIT - vs.- J.L. Morri sio n (I ) Ltd. (366 ITR 593 (Cal. HC).

12. Our attention was also drawn toward s the following deci sions in support of the pro position of law that where the A sse ssin g Offi cer ha s examin ed the relevant i s sue in the as ses sment p roceedin gs by gath erin g rel evant ma te ri al, by mak ing n ecessary inquiries and aft er applying hi s I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 13 of 45 mind then th e CIT cannot exerci s e revisiona ry po wers unde r sect ion 263 me rely because in CIT's opinio n another view i s p ermis sible:-

(i) CIT-vs.- Gabriel India Li mit ed [332 ITR 167 (Bom. HC)];

(ii) CIT -vs.- J.L. Morri sion (I ) Ltd. (359 IT R 573 (Cal. HC);

(iii) CIT -vs.- Sunbeam Auto Ltd. (332 ITR 1 67)(Del. HC);

(iv) Hari Co rpo ratio n T radin g Co.-v s.-CIT(26 3 ITR 43 7) (P&H HC);

(v) Siddh Int ernation al -vs. - CIT (32 SOT 1 4) (Ahd. ITAT);

(vi) Gita Chowdhu ry-vs.-CIT (ITA No. 704/Kol/2014)(Kol.

ITAT);

(vii) Sari ta K anodia - vs.- CIT (ITA No. 705/Kol/2014)(Kol.

ITAT).

13. In re sp ect o f the deci sio n referred to by the CIT it was pointed out that the CIT's reliance on th e judicial d ecisions cit ed in th e ord er i s al so inapp rop ri ate because mo st of the deci sions were rendered prio r to the decision of the Hon'ble Su preme Court in the ca se of CIT -vs.- M ax India Limited (292 ITR 2 82) and the d ecision of CIT -v s.- GreenWo rld Corporation (314 ITR 81). In thes e deci sions, the Hon'ble Sup reme Cou rt has h eld that in respect of any debatab le issu e th e CIT can not exe rcise revisio nary p owers if the Ass essin g Officer has taken on e of the pos sible view.

14. In resp ect of th e second issu e rel atin g to the dep reciatio n it is submitted th at the CIT did not deal with the submi ssion s o f the assessee ch allenging h is jurisdi ction. In this case, the issu e concernin g allowan ce of depreciation was the sub ject mat ter of re gular a ssess ment. The Assessing o ffic er h ad allowed the dep reciation in the o ri ginal a ssessment, which was completed in 2009. In this as se ssment, th e A ssessin g officer had allowed the dep reciation afte r carrying o ut adjustment in the written down value o f the building block. In the ci rcu mst ance s even if th ere wa s alleged error o f allowing d epreci ation, it was committ ed in the ori ginal order and, therefo re, period o f limitati on was requi red to be co mputed with ref erenc e to the orde r dated 31.12. 2009 which expired on 31.03.2012. Reliance wa s placed on th e deci sion of th e Hon'ble Supre me I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 14 of 45 Court in th e case of CIT -v s.- Alagend ra n Financ e Li mit ed repo rted in 293 ITR 1.

15. It wa s fu rther submitted th at the n at ure of IT Park building was cu rrent or f ixed asset was examined by the As sessin g officer as well as by the CIT( Appeals) wh en they dealt wi th the is sue of comp utation of capit al ga ins. The CIT after exami nation of assess ee's contention had catego rically h eld that th e con structed area which the ass es see sold durin g the relevant yea r to Sh ri Mamt a Agarwal was fo rmin g part o f the block of depreciable as set and, therefore, capital gain could not be as se ssed unde r sectio n 50 because th ere was a po sitive wri tten down valu e of th e building block. The Tribunal has duly taken note of thi s finding and the reafter u phold the order of CIT(Ap p eal s). The Tribunal also noted that the CIT(App eal s)'s findi ng that the sp ac e so ld was part of dep reci able as set was not co nte st ed in appe al by the R even ue. Thus it i s quite eviden t that the nature of the bu ilding block as fixed and dep reci able as set was consid ered and decided by the appellate authorities and thu s there bein g merger of the ass essment o rd er with the order of the CIT(Appeals) as well as that of the ITAT and, therefore, in terms o f clau se (c) of p ro viso to section 263, the CIT did not have jurisdiction to revis e th e a ssess ment on that issu e.

16. It was furth er submitted that the same building ha s been u sed by the as ses se e for the pu rpo ses of earni ng busin ess inco me in the earlie r years. Even durin g th e year und er con si deration the inco me derived fro m the us e of the building as also f ro m ope ration and maint enan ce o f IT P ark has been ass es sed a s busin ess inco m e. But for the use of IT P ark building the ass es see could not have earned th e b usiness incom e. The a ssess ee was th e o wner of the b uild in g. A s such all conditio ns specified in sect ion 32 we re fulfilled. In view of the fi fth p roviso to sectio n 3 2, d epreci ation is a mandato ry allowanc e. In th e accou nts of the a sse ss ee for all the p ast and subs equent years, the building has always been sho wn as and by way of fixed ass ets and at no stage the IT Park building was shown as curren t I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 15 of 45 as se ts as alleged. The CIT therefo re, co uld not take any con trary view and hold that the building wa s a current ass et.

17. Our atten tion was d rawn to page 20 of the impugn ed o rder and on that basis it was co ntend ed that the CIT has incorrectly alleged that the dep reci ation has been cl ai med in respect of the building which was received under the Jo in t dev elopment Agreement with Go drej properties Limited and, therefo re, it h as to be treated a s current asset s. This finding clearly shows that the CIT has not even app lied h is mind to the jurisdictional f acts. As i s evident f ro m reco rd s, the building under the dev elopment agreement with Godrej Waterside prop erties Li mited wa s not con st ructed and d elivered to th e as se ss ee till a ssessment yea r 2011-

12. Therefo re, there was no question o f its accou ntin g in th e assessee's book s nor h ad th e ass essee clai med de pre ciation on the said a sset s. The as se sse e has been claimin g in respect of IT Park building known as "In finity Think tank" which the assess ee it self h ad construct ed in t wo phases and who se con st ruction was co mplet ed in financial year 2005-06. All the rel evant f act s p ertainin g to co st o f const ruction incu rred by the as se sse e in respect of this b uild in g were di scus sed in th e ord er unde r sect ion 1 43(3) and, therefo re, the CI T could not co nfuse th e clai m of dep reci ation on the exi stin g building with the bu ilding which was yet to be construct ed by the Godrej Wate rsid e prope rti es Limited. Thu s it was co ntended that sinc e the CIT's o rde r wa s enti rely based on wron g app reci ation of f acts, the o rder p as sed b y the ld. CIT be set a side.

18. Ld. D.R., on the other hand, relied o n the order of CIT and co ntended that sinc e the asse ss ee has execut ed the a gre ement during th e impugn ed asses sment year, therefore, the cap it al gain wa s ri ghtly ch arg eable to tax in th e i mpugned as ses sm ent year. The A ssessin g Off ice r has ove rlook ed the relevan t ag ree ment and th e condition s mention ed therein. Si milarly in resp ect of the d ep re ciation, reliance was placed on the order of CIT, depreciation has n ot been ri ghtly allowed by the Assessing Officer to the a ss ess ee.

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 16 of 45

19. We hav e heard the rival submission s and ca refully conside red th e same along with the orde r of tax autho rities belo w. We have also gone thro ugh th e cases cited be fo re u s. In this case, we noted that th e CIT pas sed th e o rder under sectio n 263 dat ed 2 6.03.2015. By passin g th e said order the CIT set asid e the ass essme nt ord er passed by the Asses sin g Officer on 30. 03.2013 u nder section 143(3) read with section 147 as jurisdiction und er sect ion 263 has been invo ked by the CIT in respect of the said o rder. The CIT vide hi s order unde r sectio n 263 d ated 26.03.2015 set aside the as se ssm ent o n limit ed i ssu es fo r which the so cause notice was given to the ass essee and di rect ed th e A ssessin g Office r to pass th e order with regard to thes e two issues nam ely; - (1) as se ssm ent of the capit al gai n in relati on to th e assessee's developmen t rights in re spect of its l eas ehold prop erty bein g Plot no. 5, Block DP, Sector-V, Salt L ake City, Ko lkata-700 091; and (2 ) d epreci ation clai med in resp ect of the Info rmation Technology Park kn own as ' In finity Think Tank ' situat ed at Plot A/3, Block GP, Salt Lake Electronic Co mplex, Sector-V, Salt L ake City, Kolkata-700 091 The undisp uted facts plac ed before us a re th at th e asses see is a Company en ga ged in th e busin e ss of dev eloping, operatin g and maintaini ng civil inf ra st ructu res to u se Inform ation Technology and Info rmati on Technology Cable serv ices. The as se sse e is en gag ed in the bu sines s of developing, ope ratin g and main tainin g IT Pa rks and other civil infrast ructu res si nce late 1990's. In co nnection with the busine ss o f d evelop ment of IT Park , the as sessee h ad obtained land p arcel s on leas e f ro m West Ben gal Elect ro nic I ndust rial Developmen t Corpo ratio n (WEBEL), which is a Govern ment of West Beng al Und ert aking ent rusted with d evelop ment of the Elect ronic Industry in the State of West Ben gal.

20. Subsequently we noted that the Asses sin g Officer initiat ed the proce edin gs und er se ction 147 on 30.09.2011 by issuing a notice unde r sect ion 148. The reasons record ed re ad as und er:-

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 17 of 45 "It was seen tha t as per No te B-8 of Sch edule P o f the accou nts contained in th e a nnual report for th e y ear ending 31.03.2007 , the assessee compan y en tered into develop ment agreemen t with Go drej Watersid e Properti es P. Ltd. during the year ending 31.3.2 007 for develop ment o f its land and the develop er had to bear all the costs and the assess ee will get 39% of the total built up area as well as parking area. The Note B-8 is repro duced below-

"The company has ent er ed into development agreemen t with Godrej Water sid e Pro perti es P. Ltd. For the 5 .5978 acres of lease ho ld la nd at Salt lake, Sector -V, Kolkata, whereby th e develop er will incur a ll the dev elopmental costs as envisaged in the said agreemen t and upon completion of construction the compan y sh all be entitl ed to the 39% of the total built up area as well as parking area".

Sch ed ule F in r esp ect of fixed ass et s sho ws l easeho ld land at Rs.1,89,74,418/-.

Sch ed ule E in respect of liabilities reflects Joint Dev elopment deposit at Rs. 5 cro re.

In the case of th e assess ee company which dev eloped and sub-leas ed similar IT building in Salt lake, Sector-V, th e admitted rat e of cost of const ruction o f area sold in FY 2007-08 is Rs.3,390/- per sq.ft. vid e assessmen t r eco rds of the ass ess ee compan y for the AY 2007-08. On the sa me basis, th e sale consid eratio n for 61% of the land of a ssessee (39 % of proportio nate land in retained by a ssessee along with constru ct ed area ) is 7,23,7 81 sft. X Rs.3,390 /-/sft. = Rs.245,3 6,17,590/-. The proportionate co st of lan d to the assess ee is Rs.1,89,7 4,418/- x 61% = Rs.1,15,74,390/-. The assess ee is entitl ed to ben efit of indexati on. Even then th e long term capital gain assessabl e would not be less tha n Rs.225 cror e, on whi ch tax payable is a t t he ra te o f 20% plu s surcharge / EC etc. I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 18 of 45 But the ass essee company has not disclo sed an y capital gain in th e r eturn . No cap ital gain was ass essed either.

In view of th e above, ther e wa s reaso n to beli ev e tha t income chargea bl e to tax for the AY 2007-08 has esca ped assess ment within the mean ing of sectio n 147".

The reasons reco rded were based on t he inform ation d is closed in Note B/8 of Schedule P of the An nual Ac counts fo r th e year ended 31 s t M arch, 2007, which is av ailable at p age 59 o f the pap er book . This note, in o ur opinion, informed that the as ses see h ad entered into development ag ree ment in respect of its leas ehold land at Salt lake, sector-V, Kolkata under wh ich dev eloper was to incur all develo pment al cost s envisa ged in the agree men t and upon compl etion of construction, the as ses se e would be entitl ed to 39% of the tot al built-up area as well as pa rkin g are a. The Assessing Of ficer, in the reco rded reasons, further stat ed that Schedule E of the finan cial state ment s wa s in respect of liabilitie s refl ect ed 'Jo in t Developmen t Depo sit' a t Rs.5 cro res. Ref errin g to the se in formation av ailable in the audited account s for the y ear end ed 31.03.20 07, the Assessing office r observed th at there was a t ransfe r of the l and bein g the capital a sset du rin g the y ear endin g 3 1.03.2007 relevant to a ss ess ment year 20 07-0 8 and th e resultan t c apit al gain was assessable in ass ess men t year 2 007-08 as per d ecision s of v ario us Cou rt s in respect of dev elopment agreement s but since th e ass ess ee did not di sclose any capital gain in th e retu rn and no capit al gain was as se ss ed to ta x fo r the as se ssm ent y ear 2007-08. Thus there was an esc ap ement of in com e in as se ssm ent within the meanin g of sectio n 147 of the Act.

21. The re- asses sment p roce edin gs were al so initiat ed on appraisal of facts, which were avail able on the assess ment reco rd durin g the impugn ed as ses sm ent year. We not ed t hat the as sessee wh en filed a writ petition before the Hon'ble Calcutta Hi gh Court, the Hon'ble High Court dismi ssed th e writ p etition as no n e ap pea red on beh alf of the p etitione r and also on behalf of the respondent. The As se ssin g Offi cer was s atisfied if the contention of the ass es see that no capital gain was assessable in I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 19 of 45 as se ssm ent yea r 200 7-08 , and, theref ore, the As se ssin g Offic er while makin g the d eci sion had p ropos ed n ot to ass es s th e c apital gains in as se ssm ent year 2007-08 and also placed a d et ailed note settin g out his reasons as to why capital gain was not asses sed , copy of which wa s placed before us by th e ld. A.R. at p age 220 to 226 of the pape r boo k, which we peru sed. We noted that the CIT exerci sed h is jurisdi ction u nder s ection 263 of the Act by issuin g th e sho w-cau se n otic e d ated 19. 02.2015 on the two issues as men tion ed herein above and u ltimately pass ed the orde r under sect ion 263 vide o rder dat ed 26.0 3.2015. Now the question before us i s wh eth er the ord e r p assed by the CIT unde r section 263 is within the four co rners of p ower as i s envisaged on him unde r the Inco me T ax A ct, 1961. Before d ecidin g the issue wheth e r the order passed by the CIT lay s down under section 263, it is nece ssary to discu ss the p rov ision of sect ion 263 which empo wers the CIT to rev ise the assessment ord e r under s ection 26 3, which re ads as u nder:-

"263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed 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, pass 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 on 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 . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 20 of 45

(b) "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;

(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 the 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 of 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 sub-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."

22. From 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 this 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 cancelling 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 . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 21 of 45

23. It is a settled law that 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 cannot 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 records, taken one of the possible views, it cannot be said that the order passed by the Assessing Officer is erroneous.

24. It is also apparently clear that the powers of the CIT are three folds. 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 'record' 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 opportunity 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 Revenue. 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 examination 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 conducted 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 . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 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.

25. From the show-c aus e notice as pointed out by u s earlier, it is app are nt that the CIT ha s invoked his jurisd ic tio n under section 263 with regard to th e followin g t wo issu es- (i ) assessment of capital gain s in rel ation to as ses se e's d evelopm ent ri ghts in re sp ect of its leas ehold property being Plot No. 5, Block DP, Sector-V, Salt L ake City, Kolkata; and (2) dep reci ation claim ed in respect of Inform ation Tech nology Park Building known as "In finity Thinktank" situated at Plot A-3 , Block GP, Sector-V, S alt Lake City , Kolkata.

26. From the fact s as n arrated by us in the p recedin g paragraph as regard to the fi rst is sue, we noted th at the A ssessi ng Of ficer h as duly co nsidered th is i ssu e while f ramin g the assessmen t unde r sectio n 147 read with section 143(3) in respect of which the CIT has inv oked jurisdiction under section 263. From the s aid asse ss ment ord er, it i s app are nt that the Ass es sin g Offic er has du ly noticed that the ass ess ee- co mpany had entered into a d evelo pment agreeme nt with M/s/ God rej Waterside P rope rties Pvt. Ltd. for development of its land and in whi ch it has to ge t 39% of the total san cti on ed construct ed area and the proportion ate car parking sp aces. Even the notic e und e r sect ion 148 was issu ed only o n the same rea son as escapement of capital gain in rel ation to the as ses se e's d evelop ment ri ghts in th e said leasehold p roperty bein g Plot No. 5, Block DP, Sector- V, Salt L ak e City, Kolk ata. The Ass es sin g Officer to ok the view that no c apital gai n accru es o r ari se s to the a ssess ee in ass es smen t yea r 2007-08 by exami ning th e followin g submi ssion s of the a sse ss ee a s ap peari ng at p a ge 2-3 of the assessment o rder:-

"The as s es see company had enter ed into devel opment ag reem ent with Go dr ej P roper ties Limited in Jul y 2005. Ther eaf ter, in Febr uar y 2007 the said Godr ej Pr oper ties I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 23 of 45 Lim ited nom inated M/s G odr ej W ater sid e Pr oper ties Pvt Ltd in its pl ace to car ry out the obl igations u nd er the devel opme nt ag reem ent b etween the as ses see and G odr ej P roper ties Lim ited. Und er t he d evel opment agr eement, G odr ej was to devel op IT park at Pl ot-S, Bl ock-DP, Sector V, Sal tl ake, K ol kata and wil l r etain 61% of the buil t up ar ea incl ud i ng c ar par king ar ea and as s es s ee's all ocation wil l be 39% of the buil t up ar ea incl uding car par ki ng area. The l and on which the IT Par k was requir ed to d evel op by Godr ej was a l easehol d l and and the ass ess ee was onl y hol ding t he l easehol d inter est in the l and. Accor ding to the s ubm is sion by the A /R , l eas ehol d inter es t in the l and was never trans f er red when the d evel opme nt agr ee ments wer e ent er ed into. The d evel oper was onl y gr anted a l icens e to c ar r y out its ob l igations und er the Devel opme nt Ag reem ent and that the as s es s ee never par ted with t he pos s es s ion of the l an d til l the phys ical d el iver y of t he b uil t up s pace to the ass ess ee by the devel oper and had f ul l contr ol over the l and . In f act, the trans f er of l easehol d titl e will b e tr ansf err ed in the year in which poss ess ion is d eliver ed and received by the as ses see f r om the dev el oper. The A/R had al s o me ntioned that tr ans f er of its r ights was compl ete onl y when t he physical poss ess ion of the as s es s ee's al l ocation in the buil t up ar ea in Tower -I and T ower - II of the pr oj ect was d el iver ed by the d evel oper in A. Y s . 2011-12 & 2012-13 r es pectivel y. The as sess ee f urther s ub mitted that the incom e by way of capital gains accr ued f r om the s aid devel opment agr eements were of f ered to tax in t he As s es s ment year s 2011-12 and AY 201 2-13 taking f ul l val ue of cons ideration at R s. 34. 96 crore and R s . 63. 60 crore r es pectivel y. The as s es see al ternativel y cl aim ed that in cas e the as s es s ment is done in AY 2007-08, it sh oul d hav e been done o n t he b as is of f air m arket val ue of the l eas ehol d right in the l eas ehol d l and . If the said f air mar ket val ue, as per Gazette Notif ication of Govt. of west Bengal f or l easehol d tra ns f er of r ig ht in l eas ehol d l and , is consid er ed then co ns ideration of 61% tr ans f er of l easehol d r ight will com e to Rs. 6. 15 cr or e onl y.

Co ns ider ing and verif ying al l the subm ission f il ed b y the as s es s ee and inform ation col l ected f r om Godr ej Pr oper ties Lim ited and Nabadig anta Ind ustr ial Towns hips Authority, no capital gain accr ues or ar ises to t he as ses see in the AY 2007- 08".

27. Even we noted in thi s rega rd th at the A ssessin g Offic er mad e a detailed not e why the capit al gain s in relation to the ass essee 's dev elopment ri ghts a re not chargeable to tax in the impugned assess men t year, th e copy of th e said note is avai lable at pages 220 to 226 of the pap er bo ok, which were obtain ed b y th e as ses se e by tak in g the inspection on 12 .05.2015, the relevant note is rep ro duced as under:-

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 24 of 45 I. In this cas e, m y predecess or had init iated reas s es s ment pr oceeding u/s 147 f or the AY 2007- 08 f or b ring ing to ta x capital gains accr uing or ar is ing t o the as s es s ee in respect of its Devel opm ent Ag reem ent with Gocl rej W ater s ide Pr oper ties Pvt. Ltd. The "reas on t o b el ieve" i. e. , income charg eab l e to ta x f or the A Y 200708 had escaped ass es s ment, was b as ed on N ote 88 of the Sc hed ul e P to the Annu al R epor t of the ass ess ee f or the year en ded 31. 03. 2007. Accord ing t o the i nform ation contai ned in t hat Note d ur ing the FY 2006- 07, the ass es s ee had enter ed into a Devel opme nt Agr eement with Godr ej Waters ide Pr oper ties Pvt. L td in r espect or as sess ee's l eas ehol d l and at Sal t L ake, Sector V, Kol kata. In ter ms of the s aid Devel opment Agr eem ent, the Devel oper was to inc ur al l devel opm ental costs up to com pl etion of the co ns tr uction. In consid er ation of as s es s ee g ranting d evel opme nt rig hts in th e l and: the ass es s ee was e ntitl ed to 3 9% of the total b uil t up ar ea a nd par king s paces . From the inf orm ation avail abl e fr om the ass ess ee's News l etter dated 0 4. 04. 2011, m y predecess or ob ser ved t hat the total s pace avail ab l e in the newl y cons tr ucted b uil dings am ou nted to 18, 55, 847 sq . f t. in which as s es ses s har e at 39% was 7, 23, 781 sq . f t.. My pr ed eces s or thereaf ter estim ated the cos t of constr uction i n FY 2007-08 at R s . 3,390/- per s q. f t. and based on the s am e, estim ated the cons ideration f or transf er of as s es s ee's 61% inter es t in l and at R s. 245. 36 cr or e. Since income by way of capital gain was not dis cl os ed , the reas s es s ment pr oceeding w as initiated b y my predeces sor by is s uing notice u/s . 148 dated 30. 09. 2011.

2. The as s es s ee f il ed obj ections to the r easo ns record ed b ut these obj ections were rej ected b y m y pr ed eces sor f or the r eas ons d iscus sed in his or der dated 21. 02. 2012. The ass es s ee thereaf ter f iled a writ petition before the Kol kata hig h C our t chal l enging the re opening of ass ess m ent f or AY 2007-0 8. The Hon'bl e Cal cutta Hig h Cour t Adm itted as ses see's wr it petition and has d irected the Income Tax Depar tm en t to f il e affid avit in r epl y. However, no stay of as s es s ment proceed ing was gr anted by the High Cour t. In tits or der dated 01. 10. 2012 in WP No. 537 of 2012, the H on'bl e Hig h Court perm itted the AO t o pr oceed with the reas ses sm ent u/s 147 on t he c on dition t hat f inal ord er s houl d not be pas sed without the l eave of the cour t. By another or der date d 03. 01. 2013, the i nterim or de r earl ier pass ed on

01. 10. 201 2 was or dered to r emain in f orce till 01. 04. 2013.

3. In ter ms of the l eave g ranted b y the High Cour t, r eas s es s ment pr oceeding s were co ntinued and the ass ess ee was as ked to f ur nis h its expl anation and d ocum ents in s uppor t of its pl ea that capital gains char g eabl e to ta x did not accr ue or ar is e in AY 2007-08. T he cas e was lis ted f or hear ing f r om time to tim e and the same was d iscus s ed with the repr es entatives of the as s es see on var ious dates. In order to ver ify the basic j ur is dictional bets, l etters were sent la G odr ej Pr oper ties L td and G od rej Water s ide P roper ties Pvt. Ltd with w hom t he as s es s ee enter ed int o Ag reem ents o n 21, 07, 2005 and I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 25 of 45 07, 02, 200 7 res pectivel y, The s aid two c om panies f ur nis hed their d etail ed r eplies and al s o f urnished the inform ation as was r equisitioned by m y predecess or . Simil ar l etters wer e al so ad dr es sed to Nav adig ant a In dus trial Tow ns hip A uthority enq uir ing as to when the b uil ding pl ans wer e sanctioned , when the com pl etion cer tif icates wer e g ranted a nd how m uch of the ar ea w as cons tr ucted as per th e sanctioned pl ans , The s aid auth or ity f ur nis hed the inf or mation as r eq uis itioned, The as s es s ee was asked to f ur nis h its expl anatio ns as to whether at any time it ha d of f er ed the i ncom e by way of capital gains in r es pect of its Devel opm ent Ag reem ent with Godr ej Waters ide Pr oper ties Pvt. L td . The as s essee expl ained that in ter ms of the Devel opm ent A gr eement, it had gr anted onl y a l icence to God rej Water sid e Properties Pvt. L td and God rej Pr oper ties I. td perm itting them to e nter upon the l eas ehol d pr em is es to un der take devel opment or IT Par k in conf or mity with the s anctione d b uil d ing pl ans. At al l mater ial tim e the l egal and benef icial owner ship rig hts in the l and ve s ted in the ass es s ee and t he d evel oper never receive d l eg al pos s es s ion of the l and , The consid er ation provided i n the A gr eement w as payabl e in kind and t he same was deliver ed to t he as s es see par tl y in FY 20 I 0-11 a nd par tl y in FY 2011-12, when the constr uction of Tower I & Tower 11 of the IT P ar k was c om pl eted, it is onl y upon compl etion of " IT Par ks , the c ons ide rations in ki nd was del ivered and at th at Stag e onl y the tr ansf er of the capital as s et was compl eted . The capital gains ther ef ore cr ys tal ized at that tim e b ecause the cons ider ation f or tr ans f er cam e into exis tence an d the s am e was p aid to the as s es s ee in thes e t wo year s . The as s es see cl arified that onl y r eceipt of the cons ideration, it was abl e to com pute its tax l iabil ity and pay the tax o n the resul ta nt capital gains in the AY s 2011-12 & 2012-13 r es pectivel y. Copies of the tax re turns f or thes e t wo year s were f il ed to s ubs tantiate the f act that the as s es s ee has dis cl os ed the capital g ains in the year s in w hich the tr ansf er of the capital as set was aff ected and the cons ideration was actual l y r eceived.

4. Dr awing att entio n t o cl ause 5 of th e Agr eement it was pointed out that it was the r es pons ibil ity of the ass ess ee to ens ure t hroughout the constr uctio n per iod that the pr oper ty r em ained f ree f r om al l encum br ances and in vacant co ndition s o that the devel opm ent or the IT pr oj ect c oul d be undertaken.

Cl aus e 7 f ur ther provid ed that the as s es s ee woul d ens ur e the s anction of the buil ding pl an and it was al so l iabl e to bar and pay al l cos ts and expenses til l the or iginal s anction of the buil ding pl an f or the IT Pr oj ect. Cl ause 8 of the Agr eement r equired the as s es s ee to s ing and execut e thr ou gho ut nthe cour s e of devel opme nt al l paper s and d ocu ments neces s ary f or ob taining appr oval and per mis s ion f or und er taki ng devel opment of IT Pr oj ect. The as ses see ther ef or e cl aim ed that it was not a cas e that the proper ty bel ong ing to the as s es s ee was u nder compl ete and ful l contr ol and m anageme nt of the devel oper and the as ses see ceased t o have any contr ol over its I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 26 of 45 l eas euhol d l and at Sal t Lake. The as s es see conti nued to b e invol ved in the ma nagem ent and contr ol of the IT Proj ect j ointl y with the devel oper. It was the as s es s ee's cas e that f or deter mination of inc om e by way of ca pital gains, exis tence of cons ideration an d its quantif ication in m on etar y term s was an ess ential prerequisite. In this cas e the cons ider ation f or trans f er of 61% of as sess ee's interest in l eas ehol d and was cos t of 39 % of t he constr ucte d s pace. The f acts on r ecord however s howed that in 2005 or 2007 whe n the Agr eements were enter ed into by the as s es see, the cons ideration in kind did not even exis t, The devel oper ha d not even incur r ed any sig nif icant cos t f or d evel opment of the IT P ar k. Based on mere pr om is e to perf orm an ag reem ent it coul d not be hel d that income on account of capital gains accrued. Fr om the inform ation ob tained f r om God rej Pr oper ties Ltd. it was f ou nd th at til l

31. 03. 200 7 it had i ncurr ed c ons tr uction c os t of around R s . 30 crore on the said proj ect w hich in overal l s chem e was quite ins ignif icant. In this cir cums tance, it is dif f icul t to hol d that trans f er of a capital as set took pl ace merel y when an ag reem ent was e nter ed into by the ass es s ee but the cor respond i ng consid er ation did not exis t.

5. It al so appeared f r om the d ocum ents on recor d that whe n the ag reem ents wer e entered by the as s es see, ther e was no def initive quantif ication of the ar ea t hat coul d be devel o ped or cons tructe d on the l eas ehol d l and. T he agr eements betwee n the as s es s ee and G odr ej now her e spel t out the exact area t hat w as cons tructibl e in term s of the Devel opment Agr eement. In ab sence of the f inal q uantif ication of the a rea cons tructibl e; it was not pos sib l e to as certain in m onetary ter ms the cons ideration for transf er and cons eq uentl y it was al s o not poss ibl e to ass es s the capital gains. Fr om the inform ation pl aced on record , it is appar e nt that the c onstr uctio n of the IT Pr oj ect was com pl eted onl y in FY 2011-12, it is onl y upon com pl etion of the cons truction of Tower s I & II, it was f inal l y as cer tained as to how m uch tot al ar ea was f inall y cons tructed by the devel op er which t og ether amou nting to 18, 55, 847 sq . f t. and the as ses see's 39% s hare t her ein was q uantif ied at 7, 23, 781 s q. f t. In f act my pr edeces sor r el ied on the ass ess ee's newsl etter dated 04. 04. 2011 in w hich this inform ation was dis cl os ed. T he f acts on record ther ef ore, suggest tht til l 2011, even the ar ea com ing to as s es s ee's all ocation was n ot f ul l y quantif iab l e. It theref or e, appear ed eve n f r om the r easo ns r ecor ded that til l Apr il 2011, there was n o cer tainty about the ar ea that was to be d el ivered to the as s es s ee in term s of the devel opment ag reem ent. It was onl y af ter com pl etion of IT Pr oj ect and d el iver y of as sess ee's shar e ther ein t he com putational pr ovisions of IT Act b ecam e appl icabl e. In ab sence of the f inal qua ntif ication of the area to be cons tructe d which was not even ascertained in AY 2007-08, it was not poss ibl e to deter mine and as ses see's incom e b y way of capital gains . My pr ed eces s or r ecor ded his reas ons to b el ieve I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 27 of 45 and q ua ntif ied the am ount of incom e al l eged to have es caped as s es s ment on the basis of inf or mation which becam e avail abl e in Apr il 2011, i. e. m or e than 4 year s f rom the e nd of the r el evant pr evious year . A s s uch bas ed on the eve nts w hich occurr ed much after the cl os e of the pr evious year , it was not cor rect to hol d that income had escap ed as sess m ent in the earl ier year .

6. As r egard s d eliver y of poss ess ion of l and to the devel oper the ass ess ee contended that it had onl y g iven l icens e to enter upon the l eas ehol d l and to car r y out the devel opment ob l igations under agr eement. In the l etters addr es s ed to God rej Water sid e Properties Pvt. Ltd, the devel oper was s pecif ical l y as ked t o f ur nis h the d ate/s on which t he pos s es sion of he l and was del ivered, In res ponse, the ass es see fil ed r epl y.

7. From this r epl y, it appear ed that eve n the devel oper in its r epl y ad mitted that l egal pos s es sion of the pr oper ty was never r eceived by G odr ej Waters ide Pr oper ties Pvt. L id b ut it was onl y al l owed to carr y o n co ns tr uction in ter ms of the d evel opment ag reem ent. T he categ or ical confir m ation in this r egard b y the devel oper ther ef ore s howed t hat t he as s es see nev er parted with l egal pos sess ion of its l and, till 39% of the c ons tr ucte d s pace in the compl eted buil d ing was not delivered.

8. Fr om the d iscus s ion in t he foregoi ng par as ther ef ore it appeared that the ass ess ee thoug h e nter ed into devel opme nt ag reem ent with G odr ej Pr oper ties Ltd initial l y and ther eaf ter with God rej Waters ide Pr oper ties Pvt, L td it never ceas ed to be in contr ol or its l and, The ass ess ee al ong with t he d evel oper j ointl y remained in c ontr ol and m anagem ent of t he l and and the pr oj ect. At the tim e whe n t he agr eeme nt was entered t here was n o f inal ity with regard to total cons tructibl e area which was to accr ue to both the par ties . In abs ence or the f inal crystall ization of total cons tr uctib l e ar ea ther e coul d not have been deter mination of the consid er ation which was the ess ential ingr ed ient f or as ses sm ent of capital g ains . When t he as s es s ee enter ed into ag reem ent with God r ej Pr operties Ltd. , the co ns ideration i n kind did not even exist and ther ef or e, quantif ication of the consid er ation and c ons eq uentl y capital gain accr uing there f rom was im pos s ibl e. Fur ther t he cons ideration which w as actual l y r eceived came onl y in FY s 2010-11 & 2011-1 2. It was o nl y at t hat point of time was poss ibl e to determ ine with cer tai nty the costs incurr ed by t he devel oper , b as ed o n which the income b y way of capital gain coul d be ass es s ed . In the backgr ound of the f act that in FY 2006-07 the c os t of cons tr uctio n was not even inc ur red and t he cons tructe d s pace d id not e xis t, the d eterm ination or quantif ication of cons ider ation wo ul d be an act of abs tr act estim ation which is neither practical nor per mitted by the Act.

9. In f act til l s ection 5 0D w as en acted by t he Parl iament there was no s tat utor y g uidel ine f or determ ination of the I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 28 of 45 cons ideration in c as e of trans action su ch as devel opment ag reem ent. It is onl y with the enactment of section 50D b y the Finance Act, 2012 ef f ective f r om AY 2013-14, it is now poss ibl e to es timate the cons ideration with ref er ence to f air mar ket val ue of the capital as s et trans f er red. Howe ver even u /s 50D of the IT Act, the cons ideration coul d onl y b e val ued b y taking into cons ideration the f air mar ket v al ue of 61% of t he as s es s ee's l eas ehol d r ights in l and and b ut not taking into cons ideration cos t of constr uctio n of the area coming to as s es s ee's s hare. Since the l and in q ues tion was l easehol d l and and is not f reel y tr ansf erabl e in view of r es trictions pl aced by the Go vt. of Wes t Be ng al , fair market val ue of the l easehol d interest wo ul d b e al s o hig hl y depr es sed and b as ed on s uch val ue the capital gai ns can not be as s es s ed. In view of the abo ve dis cus sion, I am of the opinion that on t he f acts and circum stances of the pr es ent case, it woul d be most appr opriate that the capital gains b e as s es s ed in year s in which the cons ideration f or tr ans f er of devel opm ent r ights was actual l y del ivered b y the devel oper. If the capital gain is ass es s ed in the year s or receipt of the co ns ider ation then the q uantif ication of capital gain can be d on e with most cer tainty becaus e til l then it wil l be pos s ibl e to as sess the corr ect am ount of capital g ai ns with ref er ence to cost of cons tr uctio n actu al l y incurr ed by the devel oper . The f acts o n record s hows that the cos t or cons truction was incurr ed by the devel oper much l ater than FY 2006-07 and m aj or por tion or the c on str uction cost was incur red d ur ing FY s 2009-10 & 2010-1 1. In the circum s tances if one has t o resort to estim ation of the c onsi der ation t he n I wil l have to al l ow dis counti ng or the c ons tr uction cost to arr ive at the pr es ent v al ue of the c ons ideration. T his will r esul t in s ubs tantial reduction in the capital gain ta x and t his wil l be to the pr ej udice to the R evenue. On the con tr ar y if the capital gain is as s es sed in AY 2011-12 & 2012-13, t hen the capital gain can b e as s es s ed in the years w hen t he as ses see has received the cons ideration and b as ed on actual cos t incur red b y the devel oper the capital gain can be ass ess ed with mu ch c er tainty and witho ut giving benef it of dis counte d pres ent val ue of the cons ideration. Suc h cour s e in my opinion wil l be for more benef icial for the R evenue.

10. In s uppor t or t he co ntention t hat capital g ain is as s es s abl e in the y ear in which consid er ation is actual ly r eceived . decis ion of the Madr as High Court in t he c as e of CIT Vs. K. Jeel ani Bas ha 256 ITR 282 (Mad ras) is rel evant In this case the ass ess ee had ag reed to s el l its l and f or a cons ider ation o f R s. 57 cr or es which was to be paid within th e time pr escrib ed in the agr eement. The tr ansf eree was abl e t o pay onl y R s. 22 l acs and in cons ideration there of the ass ess ee parted with o hnl y one t hird of the pos s es s ion. T he AO ass ess ed f ul l capital g ain in the year in which the agr eem ent was e xecuted on t he gro und that the as s es s ee had del ivered part pos s es s ion in per f or mance of ag reem ent f or s al e. On appeal the Trib unal and ther eaf ter the High Cour t hel d that since the as s es see r eceived co ns ider ation I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 29 of 45 of onl y R s. 22 l acs during the r el evant year the capital gain was as s es s abl e onl y with r ef erence to the consi d er ation w hich was actual l y received by the as s es see in that year. In other wor ds , the Hig h Court hel d that c apital g ain c an onl y be ass ess ed in the year in which the cons ideration is actual l y r eceived. In the as s es s ee's case, the cons ideration i n t he f or m of 39 % of the cons tructe d ar ea was d el iver ed to the as sessee in AY 2011-12 & 2012-13 and i n the same year the ass es s ee del ivered poss ess ion of the devel oper 's al l ocation to the d ev el oper . Accord ingl y appl ying t he ratio l aid dow n in the decis ion of the Mad r as High Co ur t, I am of the opinion that the as s es sment of capital gain can b e m ad e on m or e scientif ic bas is if the capital gains are as s es s ed in AY s 2011-12 & 2012-13 r es pecti vel y. It m ay al so be r el evant to ref er to the d ecision of the ITA T, Kol kata i n t he cas e of IT O - vs .- Vikas Behel (132 TTJ 229) In t his cas e, the as s es s ee was one of the owner s of l and which was acquir ed in 1990. On 31. 10. 2000 th e co-owners enter ed into a d evel opment ag reem ne, in ter ms of which the ow ners wer e to r eceive 32. 5% of the c ons tr ucted s pace. T he constr uction s tar ted on

07. 11. 200 0 and compl eted on 02. 06. 2004. As sess ee's s hare in the constr ucted s pace was del iver ed o n co mpl eted in 2004. In the s am e year the ass es s ee s ol d par t of the cons tructed s pace out of the ow ner's al l ocation s hare and the capital gains was r etur ned in A Y 2005-06. The A O ass es s ed the capital g ain as s hor t term wher eas the ass es ese cl aim ed the same to b e l ong ter m in natur e. The Tr ibunal hel d the gain to be l ong term in nature. However, w hat is m ater ial to n ote f r om the facts dis cus sed in this d ecision is that it was never the cas e of the depar tment nor the Tr ibu nal hel d that capit al gains s houl d was as s es s abl e in AY 2001-02 al though the deve l opm ent agr eeme nt was executed o n 31. 10. 200 0 and the cons tr uction bega n on

07. 11. 200 0. The fact dis cus sed in the d ecision of the Trib unal , theref or e, s hows the capital gain was hel d ass es s able onl y in the year in which t he consid er ation was actual l y received by the as ses see. In the as sessee's cas e al so it dis cl osed capital gain in A Y s 2011-12 & 2012-13 b eing ye ar s in which the cons ideration was act ual l y r eceived . For t hese r easons , total incom e as s hown by the ass es s ee in its retur n f or AY 2007-0 8 is accepted. However , AY s 2011-12 & 2012-13 m ay b e s cr utini zed s o that l o ng t er m capital gain income ca n be as ses sed on more s cientif ic b as is af ter obtaining al l r el evant evid ence, f acts and m ater ial s f rom the as sessee's poss ess ion as al so f rom the devel oper .

11. Mor eover , it is also s ubm itted by the ass ess ee vide its l etter d ated 21. 903. 201 3 that if it is pr es umed that the trans f er of the capital as s et took ef f ect whe n the devel opme nt ag reem ent ws a e nter ed then it wil l m ean that 61% of the l ease hol ds inter es t in l and was trans f er red in f avour of the devel oper . O n that d ate, the consid er ation in kind was n ot in exis tence a nd ther ef or e, a non-existent co ns ider ation coul d n ot be eval uated f or as sess ing capital g ains . In the circum s tances what coul d be adopted f or the pur pos e of as ses sing the income I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 30 of 45 by way of capital gains, was t he mar ket val ue of the l easehol d interest in l and as existing on the d ate of the agr eeme nt. The f air m ar ket val ue of the l easehold intere s t in l and coul d be as s es s ed and deter mined onl y with r efer ence to the Ga zette Notif ication of Wes t Bengal G ovt. Accord ing to w hich the f air m ar ket val ue of 61% of our l eas ehol d inter es t was onl y R s. 6. 15 crores. In f act, the s aid m ethod of de ter mination of t he cons ideration is now s tatut or il y incor por at ion in pr ovisions of s ection 50D of the IT Act which wer e enacted t hr oug h the Finance Act, 2012. In the cir cum s tances if one as s um es that the capital g ain o n tr ans f er of com pan y's 61 % i nteres t in l easehol d l and accr ued on e xecutio n of the d evel opm ent agr eem ent t hen the capital gain can onl y be ass es s ed with ref er ence to s uch f air m ar ket val ue i. e. R s. 6. 15 cr or es which is f ar bel ow the incom e which the as s eess ee have vol untari l y of f er ed to tax in AY s 2011-12 & 2012-13 respectivel y. The d etail s of capital gain ar e given as under: -

            Total cons tr uction ar ea                 18, 55, 843 s q. f t.
            Al l otted portion to the                  7, 21, 640 s q. f t.
            as s es s ee (39%)
            Al l otted      portion      w. r . t.     2, 57, 786 s q. f t.
            Tower-1
            Al l otted        por tion w. r . t.       4, 63, 854 s q. f t.
            Tower-II
            No. of all otted car par king              183
            w. r . t. Tower-I
            No. of all otted car par king              375
            w. r . t. Tower-II

                   Details of cap ital gain

                Cost           of   Cost o f car Total Cost                        Capital        gain
                co nstru ct ed      parking area                                   sho wn
                area
Tower -I        32,22,32,50 0       2,74,50,000          34,96,82,500              33,21,91,886
Tower -II       57,98,17,50 0       5,62,50,000          63,60,67,500              60,04,98,920

As such a ny assessmen t with r eferen ce t o FMV of Rs.6.15 cro res will only reduce the comp any's overall ta x liability.

12. Con sidering discussion as in fo regoing para 1 to 11, capital gain as shown by the assess ee in AYs 2 011-12 & 2012-1 3 in resp ect of alleged t ransfer of develo pment rights o n leas ehold land is accept ed. Order for th e AY 2007 -0 8 is comp leted o n inco me as a ss essed ea rli er.

13. Since W.P. is dismiss ed by th e Ho n'ble K olkata High Co urt and no further stay h ad been g ranted (ref. Lett er of A.P. Gomes Ad v. Dated 02 .04.201 3), a ssessm en t order h as been issu ed to the ass es see and serv ed up on it on 03 .04.2013.

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 31 of 45

14. While p assing the o rder for th e AY 2007-0 8, discussio n with ld. JCIT, Rang e-2, Kolkata had been made time to time".

28. From this we noted that so far a s the i ssu e no.1 is co ncern ed, the Assessing office r h as a fte r exa minin g t he su bmissions of th e ass es see a s well as m aking the enquiry on this i s sue taken a conscious decision. Fro m the finding of the assessm ent orde r it is apparently clear that the Assessing Of ficer had duly examined th e issu e relatin g to asses smen t of capital gains in relatio n to ass essee' s d ev elopment ri ghts in resp ect of it s lea seho ld property being Plot No. 5, Block DP, Sector-V, Salt Lake City, Kolkata and took the view th at n o capit al gain is cha rge able to t ax in the impugn ed as ses sm ent year. Thus it is a case where th e As sessin g Office r has exa min ed the issue by makin g enq uiry on the basis of which the CIT invok ed jurisdiction unde r section 263. It i s not a case o f lack of enqu iry on the p art of Assessin g Office r th e Ass es sin g O fficer aft er makin g enq uiries allowed the cl aim of the asses see on that i ssue. It i s no t neces sary that the Asses sin g Officer should discuss in detail the findin g in his o rd er, although the As sessin g Off icer ha s given clear-cu t findin g in this regard.

29. If the As sessin g Office r has not discus sed the inqu iry made by him in the cas e of assessee in re spe ct of which, h e issued show-caus e to as se sse e, we canno t say th at o rder is erroneous as th e As se ssin g Office r has not mad e any inq uiry into the m atte r. The as sessee can not dictat e the Assessing Of ficer what should h e incorporat e in the a ss ess ment ord er and how he should draft the a ss ess ment order. We find that the Hon'ble Bombay High Cou rt in th e ca se of CIT -vs.- Gabriel I ndia Li mit ed rep o rted in 203 ITR 108 has h eld in this rega rd a s und er:-

"Held, tha t th e In come Tax Officer in t his ca se had mad e en quiries in r ega rd to th e natu re o f the exp enditur e incurr ed by th e ass es see. Th e ass essee had given a deta iled explanation in that rega rd by a lett er in writing. All th ese w er e part o f the record of the cas e. Evidently, th e claim was allowed by th e Inco me Tax Officer o n being satisfied wi th the explanation o f the a ssessee. This decision of the In come Tax Officer could not be h eld to be 'erron eous' simply I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 32 of 45 becaus e in his order he did not ma ke an elaborate discussion in th at reg ard. Mor eov er , in the instant case, th e Commission er himself, even a fter initia ting p roceedings for r evision and h earing the assess ee, could not say tha t th e disallowance of the claim of the assessee was erron eous a nd that the expenditur e was no t reven ue expenditure bu t an expen ditu re of cap ital nature. He simp ly asked the In com e Tax Officer to r e- examine th e matt er. That was not permissibl e. Th e T ribunal was justified in setting asid e th e order passed by th e Commissioner o f Income Tax under section 263".

30. Si mila r vie w has been taken by the Hon'ble Allahabad Hi gh Court in the c as e of CIT - vs.- Mahen d er Kumar B ans al, 297 ITR 099 in which resp ectfully following the decision of A llahabad Hi gh Court in the ca se of CIT -vs.- Goyal Private F amily Specific Trust, 1 71 ITR 6 98 (Alld.) has held under p a ra n o. 12 as unde r:-

"As held by th is Court in the case of Go yal Private Family Specific Trust (supra ), we ar e of th e considered opinion that merely becaus e th e ITO had not written l engthy order, it would not establish that the assess ment ord er passed under s ectio n 143(3)/148 o f the Act is erroneo us an d prejudicial to the inter es t of the Revenu e with out bringing on record specific ins tances, whi ch in th e pr es ent cas e, th e CIT has failed to do".

No co ntrary decision was bro ught to ou r knowled ge by either of the sid es.

31. We noted that Ho n'ble Delh i High Co urt in the case of CIT - vs.- Leisu re we ar Exports Ltd., 341 ITR 166 (Del.) has cle arly held as und er:-

"The po wer of revision is not mea nt to be ex ercised for the purpose of direction the AO to hold an other investig atio n witho ut describing as to how th e or der of th e AO is erroneo us. From this it also follows that wh er e th e assess ment o rder has been passed by t he AO after ta kin g into accoun t the a ss essee's su bmissio n s and d ocuments furnished by him and no material whatso ever has been brought on record by the CIT which sho wed tha t there was any discrepan cy or falsity in eviden ces furnished by th e assess ee, th e ord er of th e AO ca nnot be s et aside for ma king deep inquiry o nly on the presumption an d assu mption that so mething new may come out. For makin g a valid order un der section 263 it is essential that th e CIT I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 33 of 45 has to reco rd an exp ress finding to the effect th at order passed by th e AO is erron eous which h as cause loss to th e Rev enu e. Furth ermor e, wh ere acting in accordance with law the AO fra mes certain ass essmen t order , sam e ca nnot be branded as erron eo us simply becaus e a ccording to the CIT, th e ord er sho uld be writt en mor e elaborately".

32. In the case of DIT -vs.- Jyoti Foundation, 357 ITR 388 (Del.), the Hon'ble Delhi High Court h as h eld as un der:-

"Revisionary power und er section 263 is conferr ed by th e Act on the Commissioner /Director of Inco me Tax wh en an order passed by th e lo wer authority is er roneous a nd prejudicial to the interest of the R ev enu e. O rders wh ich are passed withou t inquiry or in ves tigation are t r eat ed as erroneo us an d prejudicial to the interest of the rev enu e, but orders which ar e passed after inquiry/in ves tigation on th e question/issu e are not per se or n ormally treat ed as erroneo us a nd prejudicial to the in terest of the reven u e becaus e th e r evision ary a uthority feels a nd opines that further inq uiry/investigation was req uired or deep er or further scrutiny shou ld be u nder taken ".

33. Thus in view of settled law a s discussed abov e, we a re of the firm view th at it i s a c ase where due inquiry was cond uct ed by the Ass es sin g Officer a s i s ap parent f ro m as ses sment order on th is issue on which CIT invok ed jurisdiction under sec tio n 2 63. It i s not the case of ld. D. R. that the views taken by Assessin g Officer are unsust ainable i n law.

34. It is a settled law that if the AO has taken one of the possible 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. The 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 when an order is erroneous that the section will be I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 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 principles 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 assessing 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 earned 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 these 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 under 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 that 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 communication. 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 accordance 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 CIT to invoke the revisional jurisdiction under s. 263. The CIT has not stopped I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 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 collected 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 there 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 assessee. 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 filed 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)."

35. Hon'ble Supreme Court in the 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 the 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 it 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."

36. In CIT vs. Ratlam Coal Ash Co., 171 ITR 141 (MP), Madhya Pradesh High Court has held as under:-

I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 36 of 45 "It is well settled that where the ITO made the assessment in undue hurry, accepting what the assessee states in 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 these findings, the Tribunal was justified in law in reversing the order passed by the CIT."

37. 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 has 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 conclusion 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 circumstances 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 Projects Ltd. 343 ITR 329 (Del), 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 remitted 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 whether 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 cannot 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 where 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 . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 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 every 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 law 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 was 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 investigation. 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 remitted 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 assessee. 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 assessee 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 . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 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 manufactured 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 into 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 assessment 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".

40. Now comin g to the second is sue, which rel ates to d ep reci ation claimed by the asse ss ee in resp ect of Info rmation T ech nology pa rk Building kno wn as "In finity Thinktank " situated at Plot No . A-3, Block GP, Sector-V, Salt l ak e City , Ko lkata, on which jurisdiction unde r sect ion 263 has been invoked. The as se ssee's fi rst venture in th e field of developmen t of IT Park wa s co nst ruction of Info rmation Techno lo gy Park building now known as "In finity Thinktank" situated at Plot A /3 , Block GP, Secto r-V, Salt Lake City, Kolkata. The asse ss ee's regi st ered an d admin istrative Office i s also situ ated in the s aid building. The developmen t and co nst ru ction o f the said IT Park building was compl eted in two phases and the construction wo rk was co mpleted in finan cial year 2005-06 rel evant to assessm ent y ear 2006-07. The said IT Park building is operated and maintain ed by the a ssess ee as and by way of In formation Technology Park. The said IT Park has been app roved a s an Indu st rial Park b y the CBDT under Section 8 0IA (4) and the relev ant notifi cation given in the p aper book at pag e 273. Part of the IT Park has been leas ed out on long term basis by collecting lu mp su m lea se p remiu m. However, majority of th e area in the IT Park h as been leased out on short te rm basis and the less ees pay monthly lease rent and also op eratin g and I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 39 of 45 main ten ance exp en ses. The rent and th e mainten ance charges recovered fro m the short te rm l es see s is al so as sessed as busines s inco me of the as se sse e. The in come ea rn ed by th e ass es see is regularly ass es sed unde r the head busin ess. The depreciatio n on the actual cost / written do wn valu e of the fi xed a ss et s of the IT Park Undert aking h ad been clai med and allowed in the income t ax assessme nts of the assess ee in assess men t year 2002-03 and onward s.

40.1. The assessm ents fo r the assessment year 200 4-05 and 2005-06 were co mpleted under s ection 14 3(3) of the Act, wherein the dep reci ation on the fixed asset s of the IT Park Undertaking including IT Park Building wa s allowed by the AO after discu ssion. There were dispute s with re gard to calculation of depreci ation and the ass es see's claim fo r d epreci ation on fixed assets of th e IT Pa rk Undert aking includ in g the IT Park Building, which was subsequently allowed by the CIT(App eals ) an d by the Tribunal for asses sment years 2004-05 and 2005-06.In the impugn ed as ses sment year, the retu rn of income was declared by the a ss ess ee at R s. 89,03,382/-. The ass essee also clai med dep reci ation while co mputin g the total income at Rs.4,17,62, 205/-. Book profit was d eclared at Rs.1,99,42,050/-. Along with th e retu rn, the as se sse e filed th e audit ed accounts fo r the i mpu gned ass es sment yea r. The as ses sment und er s ection 143(3) was co mplet ed vide order d ated 31.12.2009 at a total inco me of R s.1,50,26, 623/-. During th e i mpu gn ed as se ssm ent y ear, the as sess ee had granted 6972 sq.ft. o f the developed space on lon g term lease and received lump sum pre mium of Rs. 2,40,95,00 0/-. Besides the ass essee also rece iv ed re fu ndable dep osit s of Rs.86,74,200/-. The As sessin g Office r had taken b oth the su m s to geth er as the sal e p rice of the of fic e sp ace. The As ses sin g Of ficer noted th at in arriv in g at the WDV o f the building block for claimin g dep reci ation, the lumpsum p remiu m of Rs. 2,40,95,000/- wa s reduced f rom the o penin g WDV and on the resultant reduced WDV dep reciation under section 32 was co mputed an d clai med. The A ss es si ng Offi cer, however, held that the as se sse e should have offe red th e gain reali zed on g ran tin g long term lea se of office sp ace afte r ded uctin g p ropo rtion ate W DV included in the I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 40 of 45 opening WD V relat ab le to tran sf er area. The Asse ssin g Offi cer, therefo re, co nsidered Rs.3,27,69, 200/- [Rs.2,40,9 5,000/- plus Rs.86,74,200/-] a s sal e proceeds received on tran sfer of 6972 sq. ft. Area and ac cordin gly determined th e WDV of the building b lock attribu table to such area at Rs. 1,77,42,57 7/-. The Assessin g offi ce r thus a ssess ed Rs.1 ,50,26,623/- as short-term capit al g ain.

41. The assess ee went in app eal before th e CIT (Appeals ), who del eted the addition made by the Ass essin g Officer. CIT(App eal s) held that refundable dep osit of Rs.86,7 4,200/- was as se ss ee's liability and could not be taken into accoun t in d etermini ng inco me. A s rega rd s assessmen t of capit al gain s in st ead of deductin g t he gro ss lump sum pre mium fo r granti ng long term leas e fro m the WDV block, th e CIT(Appeals) acc epted the as ses se e's ple a th at p rovisions of s ection 50 are applic able since the capital ass et s t ransferred was in te gral part of th e dep reci able asset. The rel evant findin g s of th e CIT (Appeals) are rep rodu ced as und er:-

"Pro visio ns of section 50 of the In co me Tax Act, 19 61 are specific and undisputedly a pplicable in this case. Th e Assessing Officer ha s hims elf stated in the ord er that th e capita l asset in question is a dep reciable asset. I, ther efore, agree with th e A/R that if provision of sectio n 50 of the Income Tax A ct, 1961 are applied (which in this case is applicable) th er e will b e no amount of cap ital ga in charg eable to ta x as co mputed by the Ass es sin g Officer".

Thus CIT(Appeals) in his o rder had sp ecific ally dealt with th e natu re of the IT Park building and having found that the said IT Park building was a dep reci able a sset h eld that cap it al g ain could n ot be computed wh en only part of the building was t ran sfe rred a nd the WDV of the block had not turned n egative.

42. We noted that the R even ue chall enged the ord er of the CIT(App eals) with regard to the deletion of Rs.86 ,74,200/- being refundable d eposit s which wa s con sidered as p art of sal e con sideration, but did not challenge th e findin g of the CIT(App eal s) as rega rd to the I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 41 of 45 lump sum p remiu m of Rs.2,40 ,95,000/-. Th e Tribun al noted that the opening writt en do wn v alue of the b uild in g as o n 1.4.200 6 was Rs. 32,60,17,8 20/- and if the same was considered in the light o f s ection 43(6)/50, no capital gain arose to the as se sse e. The relevant findin g ha s been given by the Tribunal in P ara 10, which reads as under:-

"We agr ee with th e ld. A/R tha t if the D/R's co ntention is accepted in that case th e WDV attr ibutable to the portions sub-leased by the assess ee will be affected but CIT(A) ha s dir ect ed th e AO to r ed uce th e sale pro ceeds o f Rs.2,49,95,000/- out of open ing WDV of Rs.3 2,60,17 ,820/- which was bro ught forward fro m ea rlier years . I t is a fact that the department has not disputed the said part o f order of CIT (A). It is not in dispute that s pace co nst ruct ed by the ass ess ee in the said towers has been co nsidered as block of assets in respect of which depreciation has been allowed to asses s ee in th e past ass essmen t y ears" .

43. Thus the ITAT dismi ss ed the depart mental appe al. We n oted fro m the findin g of the CIT(App als) and t he ITAT that both the app ellate authorities had considered th e n atu re of IT Park bu ilding and took the view tha t the IT Park building had co nsist ently been conside red by the Depart ment to be pa rt o f the building block on which depreci ation was allowed and in that vie w of the mat ter decid ed the question of determination o f income assessed in the AO's ord er und er the head "short-term capital gain s". The ITAT's order was passed on 08.0 9.2011, while th e CIT(Appe als) p as sed h is o rder o n 20.08.2010. Show cause notice ha s been issued vide l etter d at ed 19.02.2015 i.e. much after the order p as sed by the CIT(App eals ) as well as ITAT. W e not ed that this issu e was duly conside red by the CIT as well as ITAT. Clau se (c) of proviso 2 to s ection 263 mandat es that CIT does not have juri sdiction to revise the ass es sment on th e i ssu e which ha s been consid ered and decided by the CIT(App eal s). Th e CIT by exercise hi s juri sdiction unde r sect ion 263 in respect of the i ssu e of depreci ation, in our opinion, exceed ed his jurisdictio n which ha s no leg to stand. Even o therwise also, the issue rela ting to dep reciatio n clai med in resp ect of th e Info rmation Technology Park Building kno wn as "In finity Thinktank" situated at Plot I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 42 of 45 A/3, Block GP, Sector-5, S alt L ake City, Kolkata was duly discussed in the order p assed und er s ection 143(3). The s aid o rder go t merged wi th the order of th e CIT(A), C IT does not hav e any juri sdiction to ini tiate the proce edin g u /s 263. We therefore quas h the o rder p as sed u /s 26 3 on this issu e.

44. We hav e al re ady quashed the order passed u/s 263 on the second issu ed as on th is issue o rd er p assed by th e ass es sin g office r has al re ady got merged with the ord er of the app ellate authority b efore the is sue of the so cau se notice by the CIT. Even this issu e does n ot ari se out of th e order p ass ed unde r s ection 147 read wi th section 143(3) as in th at o rde r no addition has been m ade by the ass essin g officer on the basi s of the reasons reco rded. It is the settled l aws in view of the de cisio n s of Mumb ai Hi gh co urt in the case of CIT - vs. - Jetairways 3 31 ITR 23 6( Bom ), Rajas than Hi gh court in th e c as e of CI T Vs. D even dra Gupta 336 ITR 59 (Raj.) an d th at of Delhi High court i n the case of R anba xy Laboratories Ltd Vs. CIT 3 36 ITR 1 36 (D elhi) that no add ition can be mad e in th e ord e r pas sed u /s 147 r. w.s. 143(3) unless the addition has been m ade in respect of the esc aped assessm ent for which the re asons we re record ed for the reop enin g of the asse ss ment.

45. A peru sal of the order of the CIT ind icates that the assess men t order p as sed b y the A ssessi ng Officer u nder s ection 14 7 read with s ection 143(3) was set aside on these two issu es. A s h as been discu s sed by us in the p rec edin g p ara graph s, these i ssues have duly been ex amined and co nsidered by the Ass essin g Offic er in fram in g the a ssess ment. Thus, in our con sid ered op in io n, these i ssu es canno t be suffi cient grou nd fo r settin g a side as sess ment. While making assess ment o rder, it i s the satisf action of the Ass essin g Offic er wh o made th e enqui ry and it should be a touchstone of the ass ess ment ord er p as sed by him, the CIT cannot substitute h is view in plac e of f inding of the A ss essin g Officer until and unless the view t ak en by the As sessin g Officer is unsu stain able in law. No co gent mate ri al or ev id ence was brou ght to our knowledge b y the ld. D.R., I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 43 of 45 which may p rove that the d eci sion taken by the A ssessi ng Offic er i s no t sust ainab le in law. The ord er p ass ed by Principal CIT i s illegal withou t jurisdiction on th es e issu es. So fa r as these i ssu es are concerned, the order passed by th e Principal CIT can not be sustain ed if such typ e of order is su stain ed then this will pe rmit the illegality to co ntinu e and the subsequent actions c arried out on the illegal order a re al so illegal. We, therefo re, quash the o rder p assed by the Princip al CIT unde r se ction 263 of the Act.

46. ITA No. 414/Kol/2015 (Assessment Year : 2010-2011) In this case al so , th e assesse e has t aken as m any as ei ght g rou nds of app eal challen gin g th e ord er o f P rincip al Com mi ssion er o f In come Tax-I, Kolkata pass ed und er s ection 2 63 of the Income T ax Act d ated 20. 03.2015 both on legal a s well as merit.

47. In this ca se, we not ed that the P rincip al CIT has issu ed show-caus e notice to the ass es see under sectio n 263 in resp ect of th e two issues, one issu e rel ate s to the allowin g o f don at ion amountin g to R s.97, 57,650/- under the h ead " general exp ens es" amo untin g to Rs.16,4 9,04,595/-, while in the o pinion of the P rincip al CIT o nly a sum of Rs.5,00, 000/- was admi ssib le under section 35A C. The s eco nd is sue in resp ect of which t he re-openin g was p ropos ed rel ates to the s ame i s sue relatin g to t he claim of dep recia tio n allo wi ng the exce ss dep reciation consid erin g th e current ass et s a s fixed asset s.

48. After he arin g both the part ies and goin g throu gh the sub missions of the assessee, we noted th at ulti mat el y the Princip al CIT set asid e th e as se ssm ent o rd er on bo th these i s sues and direct ed the A s sessi ng Officer to complete the as sessment d e n ovo. So far as the is sue relatin g to th e allowin g excess dep reciat ion considering the current ass et s as fixed as se ts, both the pa rti es a greed th at th e i ssu e i s s ame as has be en taken while rev isin g the is sue fo r the as ses sment year 2007-08. We have already quashed the ord er of Princ ip al CIT on this issue fo r the I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 44 of 45 as se ssm ent year 2007-08 in the preceding paragraph 4 3. Respect fully following our afo re said o rder, we quash the order of Princip al CIT passed under s ection 26 3 on this i s sue.

49. So f ar as the other is sue relatin g to the allowing wrong d eduction by th e As sessi ng Offic er in pa ssing th e ord e r under section 14 3(3) i n resp ect of the do nat ion, th e only submission mad e by the ld. A.R. is that allowin g the donatio n to the extent of Rs.92,57,650 /- while computing the b usines s in co me merely a mi stak e app arent f rom reco rd a nd this mis take co uld h ave been recti fied by the Assessin g Officer un der s ection

154. Th ere fore, the invocation of the jurisdiction und er s ection 263 is not for carry in g out the rectifi cation of the mis take.

50. Ld. D.R., before u s on th e other h and, relied on th e o rd er of Principal CIT on this issue.

51. After h earin g th e rival submissio n s an d carefully consid erin g the same, we noted that there is no bar un der the Income Tax A ct o n the power of CIT under section 263 that if the order could have been rectifi ed under section 154 , CIT could have not exe rcised the ju risdic tio n unde r sect ion 263. This i s a fact that the ord er pas sed b y the As se ssin g Offi ce r on this issue wa s e rroneous as the Assessing Of ficer has inco rrectly allowed th e deduction in respect of the donation a mounting to Rs. 92,57,650/-. Th is is no t a case wh ere the Assessin g Offic er after co nsiderin g the submi s sion of the as sessee has t aken a particular v iew which is su stain able in law or there can be two v iews about the allowance of deduction in respect of th e d onatio n. This submis sion of th e ld . A.R. that it was a pure mi stake ap parent f ro m record itself p roves that the order pass ed on this issue by the Asses sin g Officer was e rron eous as well as prejudicial to the int erest of the revenue. Even the ld. A.R. has not rai sed any plea that this issue ha s been exa mined b y the Assessi ng Officer. On th at count also, we find that the re was tot ally lack of enq uiry on the part of the Assessin g Offic er. We, therefore, confirm the o rder of I .T.A . N os . 41 3 & 4 14/ KOL ./2 01 5 A sse ssm e nt y e ar : 20 07 - 20 0 8 & 2 01 0- 2 01 1 Page 45 of 45 Principal CIT pass ed under se ction 263 on this issue and acco rdin gly mod ify the ord e r of CIT by holding that the as se ss ment i s set aside on the issu e of allowin g dona tion to the a ss essee and acco rdin gly direct the Assessing Offi cer to examine th e i ss ue relat in g to the d eduction of donation clai med by the assessee do novo in accord ance wi th law.

52. In the result, the appeal being ITA No. 413/ Kol/2015 file d by the assessee is allowe d, while the appeal being ITA No. 414/Kol/2015 file d by the assessee is partly a llowed.

Orde r p ronounced in th e open Co urt on June 09, 2015.

            Sd/-                                        Sd/-
      Mahav ir Singh                                 P.K. Bansa l
    (Judi cial Member)                           (A ccounta nt M ember)
Kolkata, th e 9 t h day of June, 2015

Co pies to :    (1)   Infinity Infotec h Pa rks Limite d ,
                      Plot A -3, Block GP, Sa lt la ke, Sec tor-V,
                      Kol ka ta -700 091

                (2)   Dep u ty Com mis si one r of Income Ta x,
                      Circle-2(1), Kolka ta,
                      A a ya ka r Bha wa n,
                      P-7, C howring hee Squa re,
                      Kol ka ta -700 069


                (3)   Comm iss ioner of Income-tax (Appeal s)
                (4)   Com mis sioner of Incom e Tax
                (5)   The Depar tmental R epr es entative
                (6)   Guard Fil e

                                                                              B y order


                                                                 Assistant Registrar
                                                      Income Tax App ellate Tribunal
                                                           Kolkata Ben ch es, Kolkata
Laha/Sr. P.S.

Legal Document View

Unlock Advanced Research with PRISMAI

Income Tax Appellate Tribunal - Kolkata

Infinity Infotech Parks Ltd., Kolkata vs Assessee on 9 June, 2015