9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (6) TMI 1373 - AT - Income TaxValidity of reopening u/s 147 - initiation of reassessment proceedings has been proceeded after internal audit report of the department - whether reopening of assessment and reopening of assessment proceedings beyond four years was validly initiated in the present case ? - assessee did not classify the golf course as per provisions of the Act as to whether it is part of building or plant and machinery - HELD THAT - The income of the assessee escaped assessment due to the reason of failure on the part of the assessee in disclosing fully and truly all material facts pertaining to depreciation on golf course and on the issue of income from sale of Labunum Project. Therefore, on these two counts, action of the AO to initiate reassessment proceedings u/s 147 of the Act and issuing notice u/s 148 of the Act against the assessee for A.Y 2001-02 beyond four years cannot be held as invalid assumption of jurisdiction and finally part conclusion of the ld. CIT(A) on legal contention and objection of the assessee are upheld. Suppressed recognition of revenue from sale value of project - HELD THAT - From the statement submitted by the assessee during the assessment proceedings we observe that the assessee has recorded total sales value of ₹ 174.99 crores whereas sales value has been recognised @ 98% of ₹ 171.10 crores and proportionate project cost of ₹ 156.15 crores has been debited to Profit and loss account and in our humble understanding, this calculation is not in accordance with percentage of completion method. If assessee has incurred some more cost in the subsequent A.Ys, but the total sales value was received during the year under consideration, then the sales value has to be recognise accordingly. The issue requires examination and verification at the end of the AO according to the percentage of completion method consistently and regularly followed by the assessee and accepted by the department. Therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee. Alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after deduction of tax at source and same amount was offered to tax by the recipient Gilt Facilities P. Ltd - HELD THAT - From the copies of the agreement dated 16.8.1995 and correspondence between the assessee and M/s Gilt Facilities P. Ltd, it is clear that the issue of interest was raised and settled during F.Y. 2000-01 and the assessee paid interest to M/s Gilt Facilities P. Ltd as per computation agreed between them. However, from the copy of the chart showing the calculation of total interest amount paid by the assessee to M/s Gilt Facilities P. Ltd reveals that the impugned amount was related to prior period but during the prior period there was no occasion for the assessee to claim the same as expenditure because this liability was accrued and crystallised after long conversation and correspondence with the Gilt Facilities P. Ltd as per agreement dated 16.8.1995 and the assessee paid amount after deduction of tax and the same was offered to tax by the recipient Gilt Facilities P. Ltd during A.Y 2001-01. We are unable to see any apparent mistake or ambiguity in the appellate order on this issue and thus we have no reason to interfere with the same. Depreciation @ 25% on golf course under the category of plant machinery as against 10% as allowable in the case of building which includes golf course - HELD THAT - We observe that the ld. CIT(A) noted that golf course is a specialised superstructure on the land with various level undulation, holes, small points etc. as a specialised profession requirement for playing golf on the piece of land. Therefore cost of creating such technical requirement will certainly make the field of golf course as a plant. It is pertinent to note that for creation of golf course, landscaping is done for in various levels and some holes, ponds and walking path is created but in our humble understanding this kind of piece of land converted into a golf course by creating some specialised facilities for playing golf cannot be put in the category of plant and machinery. No hesitation to hold that the ld. CIT(A) granted relief to the assessee without any basis and without arriving to a conclusion as to whether golf course is a plant and machinery or building. Therefore, conclusion of the ld. CIT(A) is not sustainable as we are unable to see any basis for the factual observations noted by the ld. CIT(A) for putting the golf course in the category of plant. Since the issue has not been adjudicated by the ld. CIT(A) in a proper manner, therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee and without being prejudiced from earlier orders and our observations in this order. Facts regarding this issue have to be dealt in respect to golf course of 300 acres land and how it became plant and machinery attracting 25% depreciation. AO has to examine these detai ls to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order Capital gain u/s 45 - HELD THAT - CIT(A) was right in drawing conclusion that there was neither sale of land nor transfer of possession as per clause (i) to (v) of section 2(47) of the Act pertaining to sale of immovable property and he rightly concluded that these provisions covers a situation where registration of sale deed has been completed. As per clause (v) of section 2(47), any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, but in the present case, the AO could not controvert this fact that the possession of the land in question was not transferred to the assessee and thus applicability of clause (v) of section 2(47) of the Act as part performance of contract cannot be inferred. On the basis of above discussion, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order on this issue and thus we uphold the same. Since facts and circumstances of A.Y 2003- 04 on this issue are similar to A.Y 2001-02, therefore, our conclusion for A.Y 2001-02 would apply mutatis mutandis to A.Y 2003-04 also
Issues Involved:
1. Validity of the reassessment proceedings under section 147 of the Income-tax Act, 1961. 2. Addition on account of difference between budget cost of flats. 3. Treatment of prior period interest expenditure. 4. Depreciation rate applicable on the golf course. 5. Addition on account of long-term capital gain from the agreement to sell land. Issue-wise Detailed Analysis: 1. Validity of the reassessment proceedings under section 147 of the Income-tax Act, 1961: The assessee challenged the reassessment proceedings initiated under section 147, arguing that the proceedings were based on a mere change of opinion, barred by limitation, and initiated without forming a reasonable belief that income had escaped assessment. The CIT(A) upheld the validity of the reassessment, stating that the notice under section 148 was issued after independent application of mind by the AO, not merely based on the audit party's opinion. The Tribunal supported this view, noting that the AO had validly initiated reassessment proceedings beyond four years due to the assessee's failure to disclose fully and truly all material facts, particularly regarding depreciation on the golf course and income from the Laburnum Project. 2. Addition on account of difference between budget cost of flats: The AO added ?3.89 crores to the assessee's income, alleging suppression in recognition of revenue from the Laburnum Project. The CIT(A) deleted this addition, stating that the assessee consistently followed the percentage completion method. The Tribunal, however, found that the issue required further examination and verification by the AO, as the assessee's method of recognizing revenue did not align with the percentage completion method principles. The Tribunal restored the issue to the AO for fresh adjudication. 3. Treatment of prior period interest expenditure: The AO disallowed ?61.11 lakhs as prior period expenditure. The CIT(A) allowed the deduction, noting that the liability to pay interest accrued and crystallized during the year under consideration. The Tribunal upheld the CIT(A)'s decision, agreeing that the interest liability was settled during the relevant period and the amount was paid after deducting TDS, which was also offered to tax by the recipient. 4. Depreciation rate applicable on the golf course: The AO allowed depreciation on the golf course at 10% as a building, while the assessee claimed 25% as plant and machinery. The CIT(A) allowed the higher rate, treating the golf course as plant and machinery. The Tribunal disagreed, stating that the golf course, being a piece of land with landscaping, could not be categorized as plant and machinery. The issue was restored to the AO for fresh adjudication to determine the correct classification and applicable depreciation rate. 5. Addition on account of long-term capital gain from the agreement to sell land: The AO taxed ?41.82 crores as long-term capital gain from an agreement to sell land to ITC Ltd. The CIT(A) deleted the addition, noting that the sale was not completed, and the land remained in the assessee's control. The Tribunal upheld the CIT(A)'s decision, stating that mere receipt of sale consideration did not constitute a transfer under section 2(47) of the Act, as neither the sale deed was executed nor possession handed over to ITC Ltd. Conclusion: The cross objections of the assessee for both years were dismissed. The Revenue's appeals were partly allowed for statistical purposes, with issues regarding the difference in budget cost of flats and depreciation on the golf course being remanded to the AO for fresh adjudication. The additions on account of prior period interest expenditure and long-term capital gain were deleted, upholding the CIT(A)'s decisions.
|
