2015 (6) TMI 607 - AT - Income Tax

Revision u/s 263 - Doctrine of merger - development agreement entered into by the assessee with Godrej Waterside Properties Pvt. Ltd., the capital gain has arisen to the assessee during the impugned assessment year in the opinion of the CIT, assessing officer erroneously not assessed the capital gain during the impugned assessment year in respect of transaction under the said development agreement - Held that - It so far as the issue no.1 is concerned, the Assessing officer has after examining the submissions of the assessee as well as making the enquiry on this issue taken a conscious decision. From the finding of the assessment order it is apparently clear that the Assessing Officer had duly examined the issue relating to assessment of capital gains in relation to assessee s development rights in respect of its leasehold property being Plot No. 5, Block DP, Sector-V, Salt Lake City, Kolkata and took the view that no capital gain is chargeable to tax in the impugned assessment year. Thus it is a case where the Assessing Officer has examined the issue by making enquiry on the basis of which the CIT invoked jurisdiction under section 263. It is not a case of lack of enquiry on the part of Assessing Officer the Assessing Officer after making enquiries allowed the claim of the assessee on that issue. It is not necessary that the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding in this regard.If the Assessing Officer has not discussed the inquiry made by him in the case of assessee in respect of which, he issued show-cause to assessee, we cannot say that order is erroneous as the Assessing Officer has not made any inquiry into the matter. The assessee cannot dictate the Assessing Officer what should he incorporate in the assessment order and how he should draft the assessment order. - Decided in favour of assessee. Assessing Officer has wrongly allowed excess depreciation of ₹ 3,03,21,882/- considering the current assets as fixed assets - Held that - The rent and the maintenance charges recovered from the short term lessees is also assessed as business income of the assessee. The income earned by the assessee is regularly assessed under the head business. The depreciation on the actual cost/ written down value of the fixed assets of the IT Park Undertaking had been claimed and allowed in the income tax assessments of the assessee in assessment year 2002-03 and onwards. The assessee went in appeal before the CIT(Appeals), who deleted the addition made by the Assessing Officer. CIT(Appeals) held that refundable deposit of ₹ 86,74,200/- was assessee s liability and could not be taken into account in determining income. As regards assessment of capital gains instead of deducting the gross lump sum premium for granting long term lease from the WDV block, the CIT(Appeals) accepted the assessee s plea that provisions of section 50 are applicable since the capital assets transferred was integral part of the depreciable asset.The CIT by exercise his jurisdiction under sect ion 263 in respect of the issue of depreciation, in our opinion, exceeded his jurisdiction which has no leg to stand. Even otherwise also, the issue relating to depreciation claimed in respect of the Information Technology Park Building known as Infinity Thinktank situated at Plot A/3, Block GP, Sector-5, Salt Lake City, Kolkata was duly discussed in the order passed under section 143(3). The said order got merged with the order of the CIT(A), CIT does not have any jurisdiction to initiate the proceeding u/s 263. We therefore quash the order passed u/s 263 on this issue. - Decided in favour of assessee. Allowing wrong deduction by the Assessing Officer in passing the order under section 143(3) in respect of the donation as per CIT(A) - Held that - There is no bar under the Income Tax Act on the power of CIT under section 263 that if the order could have been rectified under section 154, CIT could have not exercised the jurisdiction under sect ion 263. This is a fact that the order passed by the Assessing Officer on this issue was erroneous as the Assessing Officer has incorrectly allowed the deduction in respect of the donation amounting to ₹ 92,57,650/-. This is not a case where the Assessing Officer after considering the submission of the assessee has taken a particular view which is sustainable in law or there can be two views about the allowance of deduction in respect of the donation. This submission of the ld. A.R. that it was a pure mistake apparent from record itself proves that the order passed on this issue by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue. Thus therefore, confirm the order of Principal CIT passed under section 263 on this issue and accordingly modify the order of CIT by holding that the assessment is set aside on the issue of allowing donation to the assessee and accordingly direct the Assessing Officer to examine the issue do novo. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Assessment of capital gains related to development rights in leasehold property.
2. Depreciation claimed on Information Technology Park Building.
3. Allowing of donation under general expenses.

Issue-wise Detailed Analysis:

1. Assessment of Capital Gains:
The assessee entered into a development agreement with Godrej Waterside Properties Pvt. Ltd. for the development of its land, receiving 39% of the total built-up area in return. The original assessment for the year 2007-08 did not include capital gains from this transaction. The CIT invoked Section 263, arguing that capital gains should have been assessed in the year the agreement was made, citing Section 2(47)(v) of the IT Act and Section 53A of the Transfer of Property Act. The CIT's position was that the transfer occurred in the year the agreement was executed, making capital gains taxable in that year. However, the Tribunal found that the Assessing Officer (AO) had conducted a thorough examination and concluded that no capital gain accrued in the assessment year 2007-08. The Tribunal held that since the AO had taken a plausible view after due inquiry, the CIT could not invoke Section 263 merely because he had a different opinion.

2. Depreciation on Information Technology Park Building:
The AO allowed depreciation on the IT Park Building known as "Infinity Thinktank," treating it as a fixed asset. The CIT argued that the AO had wrongly allowed excess depreciation by considering current assets as fixed assets. The Tribunal noted that the issue of depreciation had been previously examined and decided by the CIT(A) and the ITAT, which considered the IT Park Building as a depreciable asset. The Tribunal held that the CIT could not invoke Section 263 on this issue as it had already been adjudicated upon by appellate authorities, and the assessment order had merged with the CIT(A)'s order.

3. Allowing of Donation under General Expenses:
For the assessment year 2010-11, the CIT issued a show-cause notice under Section 263, questioning the allowance of a donation amounting to Rs. 97,57,650 under general expenses, while only Rs. 5,00,000 was admissible under Section 35AC. The Tribunal found that the AO had incorrectly allowed the deduction, making the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal confirmed the CIT's order on this issue, directing the AO to re-examine the deduction of the donation de novo.

Conclusion:
The Tribunal quashed the CIT's order under Section 263 for the assessment year 2007-08, holding that the AO had conducted due inquiries and taken a plausible view. For the assessment year 2010-11, the Tribunal upheld the CIT's order regarding the incorrect allowance of the donation but quashed the order concerning excess depreciation, as it had already been adjudicated by appellate authorities.