9911796707
TMI Blog2003 (3) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the period of the scheme called lease period. During the period relevant to the assessment year under appeal the assessee had received a total fee, on account of sale of such time sharing periods, of Rs. 1,27,81,072 from 459 members and out of 459 members, only 249 members had paid full amount of the time share, amounting to Rs. 54,68,088. During the course of assessment proceedings the AO, after referring to the assessment of another assessee M/s Sterling Resorts, who was carrying on the same business as was of the appellant, came to the conclusion that 45 per cent of the total receipts were attributable to assessee's liability to provide stay to the members and therefore, was attributable to the fixed assets such as building and other infrastructure which the assessee had permanently acquired and consequently considered that 45 per cent part of the receipts as capital receipts liable to be adjusted against the cost of such permanent assets. The assessee agreed to this conclusion of the AO and consequently, 45 per cent of the receipts were considered as capital receipts and were adjusted against the building cost. The balance 55 per cent was considered as revenue receipt but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice under s. 263 of the Act because an opportunity of being heard can be given just by an intimation or a simple letter asking the assessee to explain the case with respect to the issues which the CIT is making the basis for considering the order to be erroneous and prejudicial to the interest of the Revenue. He, therefore, submitted that the proposition of law that if a notice is found to be bad in law, the subsequent proceedings will be bad in law is not applicable to the communication made by the CIT for giving the assessee an opportunity of being heard, as required under s. 263 of the Act. Relying on the decisions of Hon'ble Supreme Court in Geeta Devi Agarwal vs. CIT (1970) 76 ITR 496, 499 (SC) and CIT vs. Electro House (1971) 82 ITR 824 (SC) the learned Departmental Representative submitted that under s. 263 of the Act, which corresponds to s. 33B of the IT Act, 1922, there is no requirement to issue any notice by the CIT before he assumes jurisdiction to proceed to revise an order passed by any IT authority subordinate to him. He, therefore, reiterated that the CIT is to give an opportunity of being heard to the assessee and that too not before assuming jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 282(2) of the Act. On the other hand, some provisions require simply the giving of an opportunity of being heard and the communication used for that purpose, though, generally is called and is known as notice, but it is not a notice as required under s. 143(2) or under s. 148 of the Act and it is so, because, giving of an opportunity is not relevant for assuming jurisdiction to proceed with the proceedings. In other words, in the case of provisions requiring giving of an opportunity to the assessee before passing the order the authority is already vested with the jurisdiction to proceed with the proceedings but it is in the interest of natural justice that the provisions have provided giving of an opportunity of being heard to the assessee. For example the authorities have jurisdiction to initiate the penalty proceedings under various sections of Chapter XXI of the Act but, the provisions of s. 274(1) specifically require that no order imposing penalty under Chapter XXI shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard which otherwise means that it is only before passing of an order of penalty, and not before initiating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own places, but since a notice giving opportunity of being heard before passing the order under s. 263 of the Act is, in our opinion, covered by the notice of the second category, the decision relied upon by Mr. Gupta is not applicable whereas the decisions relied upon by the learned Departmental Representative supports our view that a notice under s. 263 is not required to be addressed as provided under s. 282(2) of the Act. Mr. Gupta's plea that notice under s. 263 of the Act dt. 28th March, 2002 having been not addressed in accordance with the provisions of s. 282(2) is an invalid notice, therefore, fails. 7. The second plea raised by Mr. Gupta was that the order under s. 263 of the Act having been made after the expiry of limitation available under s. 263(2) of the Act was barred by limitation. According to Mr. Gupta the assessment order under s. 143(3) was passed on 29th Feb., 2000 and therefore, as per the provisions of s. 263 of the Act the CIT could pass or make an order under s. 263 of the Act on or before 31st March, 2002. According to Mr. Gupta though the order under s. 263 is shown to be dt. 28th March, 2002 but having been served upon the assessee on 2nd April, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order cannot be said to have been made before the limitation unless it is served upon by the assessee. According to him service of order before expiry of limitation is never a condition for making an order to be within limitation. Referring to the present case the learned Departmental Representative submitted that the order having been typed on 28th March, 2002 and having been served on the assessee on 2nd April, 2002 it has to be taken that the order was dispatched to the assessee before 31st March, 2002 because postal authorities take at least three or four days for delivery and if that is the case then it has to be taken that it was pronounced before the limitation. He, therefore, submitted that the CIT's order under s. 263 is not barred by time. 8. We have considered the rival submissions and the facts and circumstances of the case as well as decision of Hon'ble Court of Kerala relied upon by Mr. Gupta with out most care. 9. After careful consideration of the law laid down by the Hon'ble Supreme Court in B.J. Shelat, and followed by Kerala High Court in Government Woodwork Shop vs. State of Kerala, specially the observations at p. 69 and the decision in case of Shree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass the order within limitation and not to serve the order within limitation and therefore, in the facts and circumstances of the present case, we have no hesitation to hold that CIT's order under s. 263 which is under appeal before us having been passed before the limitation prescribed under s. 263 of the Act and consequently, Mr. Gupta's plea that order is barred by time fails. 10.1 The next plea advanced by Mr. Gupta was that the CIT had assumed jurisdiction to revise the assessment order dt. 28th March, 2002 wrongly, because the assessment was framed after making detailed enquiries and on relying on assessment on M/s Sterling Resorts which was carrying on same type of business as that of assessee. Not only this, Mr. Gupta further submitted, that the assessment order was passed with the directions of Addl. CIT. According to Mr. Gupta, the CIT can assume jurisdiction to take action under s. 263 of the Act if the order is erroneous as well as prejudicial to the interest of the Revenue and the order can be termed as erroneous only if it is not in accordance with the law, i.e., if the AO acts in accordance with law and makes assessment the same cannot be (termed) as erroneous b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase "prejudicial to the Revenue" must be read in conjunction with an erroneous order and on order of Tribunal, Pune Bench (Third Member) in Jamunadas T. Mehta vs. ITO (2002) 75 TTJ (Pune)(TM) 843 : (2002) 81 ITD 103 (Pune) (TM). 10.4 The learned Departmental Representative on the other hand submitted that as per Explanation to s. 263 the CIT has powers to revise order of any of the subordinate authorities even if such order has been passed with the directions of Addl. CIT and in support of the same relied on decision cited on p. 8198 of volume 5 of Income-tax Law by Chaturvedi and Pitisaria. With regard to the erroneous nature of the assessment order the learned Departmental Representative pointed out that AO has attributed 45 per cent of the receipts towards fixed assets and has considered the same as of capital nature stating and following the assessment order in case of Sterling Resorts, but if one goes through the assessment order in case of Sterling Resorts there is no such finding or observation or attribution. According to the learned Departmental Representative the assessment order of M/s Sterling Resorts does not speak of consideration of 45 per cent of the receipt as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying on assessment order in case of M/s Sterling Resorts was misplaced and had rendered the assessment order to that extent erroneous in nature. Further, this erroneousness having resulted in loss of revenue, the assessment to that extent was erroneous so as to be prejudicial to the interest of the Revenue. We therefore uphold the validity of the order under s. 263 to that extent, though, subject to our further findings on the issue. 12. Another objection raised by Mr. Gupta was that the directions of the CIT are not specific and in consonance with the terms of notice under s. 263 of the Act. Elaborating these points Mr. Gupta, after referring to the copy of notice under s. 263 placed on p. 3 of the paper book, submitted that the proceedings were initiated by the CIT with the intention that the total receipts—including 45 per cent attributed by the AO towards fixed assets; were of revenue nature and related to whole of the period of lease, i.e. 99 years, but in the order under s. 263 he has considered the whole of the receipts as income of current year alone. Mr. Gupta further submitted that observations of the CIT that fees received by the assessee is not refundable is not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from a member is constituted of 2 parts—one is towards the free stay in the hotel and other is for the other facilities agreed to be provided. As regards the stay, the infrastructure is already in existence and on which the assessee is claiming depreciation. The fee towards this, which, of course, is to be estimated and in this case has been estimated at 45 per cent has accrued for good and against which there is no recurring liability. As regards the second part, which again is a revenue receipt but is fastenes with a recurring liability the same can be regarded as belonging to the entire period. 4. The treatment so given by the AO of taking of the fees to be a capital receipt prima facie is erroneous and prejudicial to the interest of Revenue. In view of these facts, I intend to review the assessment order for the asst. yr. 1997-98 under s. 263 of the IT Act for which you are afforded an opportunity of being heard by fixing the case for hearing on 27th March, 2001 at 11.00 a.m. in my office at Dandi Swami Chowk, Civil Lines, Ludhiana". (ii) Extract from order under s. 263: "I have considered the submissions of the assessee. The issue under debate is not related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to his intention with which he had initiated the proceedings under s. 263 of the Act and therefore, the same is bad in law and liable to be struck down. Respectfully following the decision of the Hon'ble High Court of Punjab and Haryana and in the facts and circumstances of the case, we strike down that portion of the order under s. 263 of the Act, i.e.; the findings of the CIT relating to consideration of 55 per cent of the receipts as income for the current year are set aside/deleted. 14. Another plea taken by Mr. Gupta was that the assessment order for the asst. yr. 1996-97 has been completed under s. 143(3) of the Act where the whole of the receipts have been considered for 99 years. In view of this fact, Mr. Gupta submitted that since the facts and circumstances for both the assessment years were same, the doctrine of res judicata came in to play and therefore, the CIT was not justified in revising the assessment order for asst. yr. 1996-97 for the purpose of consideration of the total receipts (including the 45 per cent portion) as income for the current year alone and in support of the same relied on the decision of Haryana High Court in case of CIT vs. Dalmia Dadri Ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement applicable to whole of the period of lease and the assessee's liability being to fulfil the terms and conditions of the agreement throughout the period of lease, such an opinion of the CIT, which is otherwise also not supported by facts or in law, can't be sustained. 17. In view of above discussion, we are unable to uphold the view expressed by the CIT on this point and therefore, we modify his directions to the effect that the 45 per cent of the receipts are relatable to the whole of the period of lease which may be 33 years or 49 years or 99 years, as the case may be and therefore, the 45 per cent part of the whole receipts may also be dealt with in the same manner (taxed) by the AO as the balance 55 per cent of the receipts have been dealt with (taxed). 18. Before ending with the matter, we would like to submit that Mr. Gupta had objected to the admission of the documents placed at page Nos. 7 and 8 and 9 to 12 of Revenue's paper book on the ground that these documents were not before any of the Revenue authority below, hence assessee has not been given an opportunity to defend itself. After hearing both the parties we have decided not to admit any of these documen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
