2020 (2) TMI 205 - AT - Income Tax

Revision u/s 263 - nature and character of the lease premium receipt and its taxability - HELD THAT - In the course of hearing before us, AR has referred to the order dated 15th march 2019, passed by te NCLT, Mumbai Bench, to advance the proposition that the amount received is in the nature of advance, hence, cannot be treated as income of the assessee in the impugned assessment year. However, it is evident, the aforesaid order of the NCLT was neither available before the Assessing Officer nor before learned PCIT before completion of proceedings under section 263 of the Act. It is clear, while exercising power u/s 263 of the Act, the revisional authority may call for and examine the record of any proceedings under the Act. The word record has been defined under the Explanation 1(b) to mean all records relating to any proceedings under the Act available at the time of examination by the revisional authority. Admittedly, at the time of examination of record by learned PCIT or even while passing the order under section 263 of the Act, the order passed by the NCLT was not available. Therefore, there is no question of taking cognizance of such order while exercising the power under section 263 of the Act. Be that as it may, since, we have directed the Assessing Officer to examine the nature and character of the lease premium receipt and its taxability, the assessee is at liberty to furnish all the material/evidence including the order passed by the NCLT, Mumbai Bench, as referred to above, to advance its case. With the aforesaid observations, grounds raised are partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the exercise of power under section 263 of the Income Tax Act, 1961.
2. Nature and taxability of the lease premium received by the assessee.
3. Whether the assessment order was erroneous and prejudicial to the interests of Revenue.

Detailed Analysis:

1. Validity of the exercise of power under section 263 of the Income Tax Act, 1961:
The Principal Commissioner of Income Tax (PCIT) invoked section 263 of the Act, asserting that the assessment order dated 20th March 2016 was erroneous and prejudicial to the interests of Revenue. The PCIT argued that the Assessing Officer (AO) did not examine or verify the taxability of the lease premium amounting to ?93.02 crore received by the assessee, which was directly credited to the capital reserve in the Balance Sheet without being routed through the Profit & Loss Account. The lack of enquiry by the AO led the PCIT to initiate proceedings under section 263, directing the AO to add the amount to the income of the assessee.

2. Nature and taxability of the lease premium received by the assessee:
The assessee contended that the lease premium received from IMICL was a capital receipt and not taxable. The assessee argued that the AO had specifically enquired into the nature of the lease premium and accepted it as a capital receipt after due enquiry. The assessee also referred to an order dated 15th March 2019 by the National Company Law Tribunal (NCLT), Mumbai Bench, to support the claim that the amount received was in the nature of advance and not income. However, the PCIT held that the lease premium was a revenue receipt and taxable as business profit. The Tribunal observed that the AO failed to conduct a proper enquiry into the nature and character of the lease premium, thus making the assessment order erroneous and prejudicial to the interests of Revenue.

3. Whether the assessment order was erroneous and prejudicial to the interests of Revenue:
The Tribunal noted that the assessment order was passed in a routine manner with general observations and lacked any discussion on the nature and taxability of the lease premium. The Tribunal found that the AO did not conduct any enquiry or examine relevant documents such as the concession agreement and sub-concession agreement. The Tribunal held that the AO's failure to examine the issue rendered the assessment order erroneous and prejudicial to the interests of Revenue, justifying the PCIT's invocation of section 263. However, the Tribunal also noted that the PCIT should not have determined the nature and character of the lease premium himself but should have directed the AO to examine the issue afresh.

Conclusion:
The Tribunal partly allowed the appeal, directing the AO to examine the nature and character of the lease premium received by the assessee and its taxability afresh. The AO was instructed to allow the assessee to furnish all relevant evidence and submissions and to decide the issue in accordance with law without being influenced by the PCIT's observations on the merits of the issue. The Tribunal emphasized that the order passed by the NCLT was not available during the proceedings under section 263 and could not be considered by the PCIT. The AO was directed to consider all materials, including the NCLT order, while re-examining the issue.