2017 (10) TMI 1096 - AT - Income Tax

Revision u/s 263 - assessing officer has not made any reference with regard to the verification of TDS certificates and the claim of depreciation of asset, claimed by assessee with respect to superstructure of multiplex cinema - Held that - The perusal of the assessment order reveals that the assessing officer has not raised any query with regard to the nature of asset, lease hold period of building of Multiplex Theater. Further, the assessee claimed credit of TDS of ₹ 2,54,69,821/-, the assessing officer has not made any inquiry nor verified the TDS certificates and the books of account. The assessee has not offered the advertisement income to tax. The assessee claimed deduction of portion on ticket amount as entertainment tax without offering it to income by treating it as capital receipt. The assessing officer allowed the payment as revenue expenditure without examining the scheme of subsidy of Maharashtra Government for entertainment tax vis a vis its taxablity. The assessing officer impliedly allowed the relief to the assessee without making any discussion on the issues. In the present case the assessing officer mechanically accepted the claim with regards to the depreciation on fixed asset/ Multiplex Building and on the issue of TDS certificate, if the corresponding income was offered to tax as no reconciliation was made. Further the assessing officer without calling and examining the scheme of Government of Maharashtra on entertainment tax treated the entertainment tax same as revenue receipt. In the present case the order sought to be revived reflects that it was passed in mechanical way and without application of mind by assessing officer. Thus, in view of the forgoing reasons the assessment order was passed without making requisite inquiries will satisfy the condition of the order being erroneous and prejudicial to the interest of revenue - Decided against assessee.

Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax under Section 263.
2. Credit for TDS claimed by the assessee.
3. Depreciation claimed on Cinema Building.
4. Treatment of Entertainment Tax as a capital receipt.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax under Section 263:
The assessee challenged the jurisdiction of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, arguing that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The Tribunal observed that the CIT is empowered to revise an assessment order if it is found to be erroneous and prejudicial to the interest of revenue. The CIT had concluded that the Assessing Officer (AO) failed to make requisite inquiries and passed the order in a mechanical way without proper verification. Therefore, the Tribunal upheld the CIT's jurisdiction under Section 263.

2. Credit for TDS claimed by the assessee:
The CIT raised an issue regarding the credit for TDS of ?2,54,69,821 claimed by the assessee, noting discrepancies between the income reported in Form 26AS and the books of account. The Tribunal found that the AO had not made any inquiry or verification regarding the TDS certificates and the corresponding income offered for tax. The AO's failure to reconcile the income as per Form 26AS with the books of account was deemed erroneous and prejudicial to the interest of revenue. Thus, the Tribunal upheld the CIT's direction to re-examine this issue.

3. Depreciation claimed on Cinema Building:
The assessee claimed depreciation of ?6,03,92,623 on a Cinema Building, which included a premium for obtaining a 900-year lease. The CIT contended that the premium paid was for acquiring possession of land, not for the superstructure, and thus depreciation on this amount was not permissible. The Tribunal noted that the AO had not examined the nature of the asset or the leasehold period of the building. The AO's failure to carry out a relevant and meaningful inquiry into the depreciation claim rendered the assessment order erroneous and prejudicial to the interest of revenue. The Tribunal upheld the CIT's direction to re-examine this issue.

4. Treatment of Entertainment Tax as a capital receipt:
The assessee claimed a deduction for a portion of the ticket amount as entertainment tax, treating it as a capital receipt under the Capital Subsidy Scheme of the Government of Maharashtra. The CIT argued that the AO failed to examine the scheme and the nature of the subsidy, and incorrectly treated the entertainment tax as a revenue receipt. The Tribunal found that the AO had not made any inquiry into the scheme or the taxability of the entertainment tax. The AO's failure to examine this issue rendered the assessment order erroneous and prejudicial to the interest of revenue. The Tribunal upheld the CIT's direction to re-examine this issue.

Conclusion:
The Tribunal concluded that the AO had passed the assessment order without making requisite inquiries and in a mechanical way, which satisfied the conditions of the order being erroneous and prejudicial to the interest of revenue. The Tribunal dismissed the appeal filed by the assessee and upheld the CIT's order under Section 263, directing the AO to re-frame the assessment order after examining all three issues.

Final Order:
The appeal filed by the assessee was dismissed, and the order was pronounced in the open court on 25th October 2017.

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