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TMI Blog2014 (9) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (9) TMI 65 - MADRAS High Court] - since the AO failed to enquire into the matter thoroughly the assessment order passed u/s 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue - the order of the CIT u/s 263 of the Act is upheld in directing the AO to complete the assessment afresh – Decided against assessee. - ITA No.113/Mds/2014 - - - Dated:- 31-7-2014 - A Mohan Alankamony And Challa Nagendra Prasad, JJ. For the Appellant : Mr R Vijayaraghavan, Adv. For the Respondent : Mr Pramod Nangia, CIT ORDER :- PER : Challa Nagendra Prasad This appeal is filed by the assessee against the order of the Commissioner of Income Tax-III, Chennai dated 09.12.2013 for the assessment year 2009-10 passed under section 263 of the Act. 2. The assessee raised the following grounds of appeal:- 2. The Commissioner of Income Tax erred in assuming jurisdiction u/s.263 and holding that the assessment order is erroneous and prejudicial to the interest of revenue merely because the decision of the Assessing Officer is not inconsonance with the view of the CIT. 2.1 The Commissioner of Income Tax failed to appreciate that the scrutiny assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TIDCO ) filed its original return of income for the assessment year 2009-10 on 30.09.2009 admitting income of ₹ 69,20,07,360/- and was revised on 27.9.2010 admitting income of ₹ 69,00,36,070/-. Counsel for the assessee submits that assessment was completed under section 143(3) of the Act on 30.12.2011 determining income at ₹ 1,95,22,64,791/-. Counsel submits that in the course of assessment proceedings assessee furnished lease agreement entered into between the assessee and M/s. TRIL Infopark Ltd. to which land was leased by the assessee. Counsel submits that this land was originally alienated by the Government of Tamil Nadu to the assessee and assessee in turn leased out the land to M/s. TRIL Infopark Ltd. and assessee offered ₹ 5.5 crores as remuneration in respect of lease transaction with M/s. TRIL Infopark Ltd., though the assessee received upfront lease rent of ₹ 1412.80 crores. Counsel submits that except ₹ 5.5 crores retained by the assessee as remuneration balance of ₹ 1407.30 crores was payable to the Government of Tamil Nadu, out of which ₹ 1320.95 was paid to Government of Tamil Nadu and ₹ 86.95 crores was converted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 crores to the Government of Tamil Nadu and out of balance of ₹ 91.84 crores, ₹ 86.34 crores was treated as term loan from Government of Tamil Nadu and the remaining balance of ₹ 5.5 crores treated as income was accounted as service fee of the assesse. The Assessing Officer while completing the assessment accepted ₹ 5.5. crores as income offered by the assessee as its service fee. The Assessing Officer did not examine the nature of transaction between the assessee TIDCO and M/s. TRIL Infopark Ltd. at any stage. In the circumstances, Commissioner of Income Tax issued a show cause notice invoking the provisions of section 263 of the Act observing as under:- 2. On perusal of records, it is seen that the assessee has entered into lease agreement with M/S.TRIL Infopark, and TRIL has paid ₹ 1412.79 crores as upfront lease rent. The assessee offered only ₹ 5.50 crores in its Profit and Loss account, and claimed the balance as being paid to Govt.of Tamilnadu towards sales consideration. The assessee had not sold the land and continues to be the owner. Though the land has been received from Govt.of Tamilnadu on 24/08/2007, whether the proceeds ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for invoking provision of section 263 of the LT.Act is not valid. The assessee has offered only ₹ 5.5 crores as remuneration in respect of the lease transaction with M/s.TRIL Infopark Limited though the upfront lease rent received is ₹ 1412.79 Crores. The assessee claimed that the balance of ₹ 1407.30 (Rs.1320.95 paid plus RS.86.95 converted into term loan) being paid to Govt account as Sale consideration. In fact, the assessee had not sold the impugned land and continue to be the owner of such land. The sale consideration paid to acquire such land cannot be treated as being expense u/s 37 of the Act since it is a capital expenditure. Such an asset has to appear in the balance sheet of M/s.TIDCD. The proportionate lease income should have been brought to tax in the assessment order u/s 143(3) dated 30/12/2011. Hence, it has been felt that the order prima facie appeared to be erroneous and prejudicial to the interest of revenue. The invoking of provisions u/s 263 is in order relying on the decisions in the following cases. a) In the case of M/s.Ashok Leyland Ltd vs CIT (2003) 260 ITR 599 (MAD), the Madras High Court held that ''It was, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 3.3 the assessee in his written submission furnished the objection for revision under section 263 relying on the following citations under the presumption that the objection raised by audit was the root cause of issue of show cause notice u/s.263 of the Act. i) Sirpur Paper Mills Ltd. Vs.CWT (1970) 77 ITR 6 ii) Jeewanlal Ltd Vs Addl.CIT(1977) 108 ITR 407(Cal.) 3.3.1 The above objections require no further discussion since they are raised under the presumption that the provisions u/s 263 was invoked due to Audit objection. 3.4 The assessee along with the written submission furnished the copies of various G.Ds of Govt. of Tamilnadu with regard to this transaction. It is contended as follows: Even if the transfer of the lands from Government of Tamilnadu to TIDCO were to be treated as Capital Gain, then the cost of acquisition of the asset from GOT to TIDCD would be the amount paid by TIDCO to Govt viz ₹ 1412.80 crores would be treated as short term Capital Gains in the hands of TIDCO and this treatment would not make any difference and there would be no loss of revenue 3.4.1. The assessee's above objection i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TIDCO is the absolute owner of the land during the lease period. Hence it cannot be regarded as sale or transfer resulting in short term capital gains. 3.5 The assessee submitted that the benefit derived from the TIDCO was only ₹ 5.50 crores and it has been rightly assessed by the assessing officer after considering the details furnished by the assessee. 3.5.1. The assessee, in fact furnished the details of the transaction during the course of Scrutiny assessment proceedings. But the assessing officer failed to make further enquiries and examine the tax liability arising out of the transaction. Assessee has leased out 25.27 acres of land for ₹ 1412.80 crores for a period of 99 years from 13/8/2008. Even if it is considered in the most conservative way, the proportionate lease amount for the Financial year 2008-09 is ₹ 3.55 crores and ₹ 14.27 crores from the Financial year 2009-10 as detailed below: Total lease amount for 99 years (A) RS.1412.80 crores Lease amount for one year (A) 199 =8 RS.14.27 crores Lease amount for 2008-09 From 13/08/2008 to 31/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- ''It was, therefore, necessary for the Assessing Officer to have examined in depth the claim of the assessee and his failure to do so was not only erroneous but also prejudicial to the revenue. The Commissioner was/ therefore right in exercising his power of revision under section 263 and directing the Assessing Officer to examine that aspect thoroughly and in accordance with law. 9. In the case of Indian textiles Vs Commissioner of Income-tax, (1986)157 ITR 112 MAD.), the Madras High Court held as under: The ITO gave relief to the assessee in respect of certain matters which according to the Commissioner was not justified. Once that finding was reached by the Commissioner; the revisional jurisdiction under Section 263 could validly invoked by the Commissioner .. 10. The Hon'ble Madhya Pradesh High Court in the case of CIT Vs Kohinoor Tobacco Products P.Ltd. (234 ITR 557) held as under:- ........ This failure on the part of the Assessing Officer to make necessary enquiry rendered the assessment erroneous and also prejudicial to the interests of the Revenue .. 11. The Hon'ble Allahabad High Court in the case of Swaru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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