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TMI Blog2019 (3) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits from transfer of eligible business are eligible for deduction u/s 80 IA. One very important fact in this case is that, assessee has shown entire profit from sale of industrial profit as business income and once such business income has been accepted and no adverse comment has been given by Ld. CIT, then such a profit arising from sale of industrial park ostensibly falls within section 80 IA (4). Hence, there was no legal infirmity by Assessing Officer in allowing the claim of deduction on the profits earned from the sale of industrial park. In so far as the Ld. CIT observing that Assessing Officer has failed to examine applicability of section 80 IA(8) it is seen that it is not in dispute that the Assessing Officer during the course of assessment proceedings has examined the Approved Valuer s Report who has given a detailed report of the market value of the transfer of industrial park and also transfer pricing report by the accountant has also been furnished by the assessee. Thus, when transfer price is consonance with the fair market price then conditions of this section gets satisfied. Hence applicability of section 80IA (8) has been examined by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Technology Park at 15 16, Sector-16A, Noida, District Noida. It had applied for claim of deduction u/s 80 IA with the Ministry of Commerce and Industry in September, 2005. The said Ministry had granted approval to the assessee company vide notification dated 17.11.2006, whereby it was granted 100% tax exemption. Further it has received approvals in terms of Industrial Park Scheme 2002 in view of provision of section 80 IA (4) (iii). Since assessee company had fulfilled all the terms and conditions as laid down in the approval granted by the Government of India for setting up of an Industrial park, therefore, it started claiming deduction 80 IA from the assessment years 2008-09 onwards and no such deduction was claim in the assessment years 2005-06 to 2007-08. The assessments u/s 143 (3) were completed right from the assessment year 2008-09 to 2013-14, whereby assessee s claim for deduction u/s 80 IA was duly accepted after detail scrutiny and verification by the respective Assessing Officers. For the year under consideration also, assessee company has made a claim of deduction u/s 80 IA of ₹ 161,37,41,713/- u/s 80 IA which has been allowed by the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently irrespective of the fact that assessee has previously claimed deduction u/s 80IA or not in the instant case AO has not at all initiated the requisite enquiry with regards to deduction claimed u/s 80IA. It was incumbent on the AO to have noticed the distinguishing feature vis-a-vis the preceding year to the effect that while during preceding year the assessee received only rental/maintenance receipts, during the year under reference the whole infrastructure facility has been sold off for a substantial consideration and profit is claimed exempt. It was the duty of the AO to minutely examine the eligibility of claim and true eligible quantum of exemption to be allowed. AO completely failed in examining this aspect and in bringing any evidence on record in this behalf. Assessee has made specified domestic transaction of ₹ 208,47,12,830/- with Noida Towers Ltd. and assessee himself admitted that transactions were made much higher price then prevailing circle rate. In this regard, Assessing Officer failed to conduct requisite enquiry/investigation to find out the -arm s length price of the transaction and failed to make reference to TPO which was he was supposed to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee, Mr. R. S. Singhvi, first of all drew our attention to the details of the assessment history in the case of the assessee, right from the assessment years 2008-09 to 2012-13, wherein the claim of deduction u/s 80 IA has been allowed. The details of such assessment given by him are as under: - Detail of past assessments of deduction claimed and allowed u/s 80IA. No. Asst. Year Income as per ITR Claimed u/s 80 IA Exemption Allowed U/s 80 IA Mode of Assessment date of order 1 2008-09 4,28,81,519/- 4,28,59,132/- 4,28,59,132/- U/s 143 (1) dated 03.09.09 2 2009-10 9,67,17,690/- 9,67,07,521/- 9,67,07,521/- U/s 143 (3) dated 20.12.11 3 2010-11 13,56,83,504/- 13,42,94,655/- 13,42,94,655/- U/s 143 (3) dated 20.03.13 4 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to justify the ALP of the transaction. For ascertaining the correct market value of the property of the undertaking which was sold to the subsidiary, assessee had also filed detailed Valuation report from the Govt. Approved Valuer. It was after examining the entire documents which was submitted in response to various queries raised by the Ld. Assessing Officer from time to time, specifically with regard to the claim of deduction u/s 80IA, AO has allowed major amount. In view of these facts and assessment records that various queries were raised by the Assessing Officer on this point and had examined all the documents filed before him, goes to show that the Assessing Officer has not only carried out thorough enquiry but has also applied his mind before allowing the substantial amount of the claim. Thus, it cannot be held that no enquiry as was required by him has been conducted by him or there is no application of mind. 10. On the issue of claim of deduction u/s 14A, Ld. Counsel submitted that during the course of assessment proceedings, the assessee has filed the details of investments in mutual funds and also demonstrated before the Assessing Officer that money received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of Hon ble Delhi High Court in the case of DIT Vs. Jyoti Foundation was reported in (2013) 357 ITR 388. He also strongly relied upon the Judgment of Hon ble Delhi High Court PCIT Vs. Delhi Airport Metro Express Private Limited ITA No.705/Del/2017 order dated 05.09.2017. He further submitted that if Assessing Officer after making proper and detailed enquiry has taken view, then Ld. Commissioner cannot revised the assessment order so as to conduct enquiry once again and in support he relied on upon the judgment of Hon ble Bombay High Court in the case of CIT Vs. Nirav Modi (2017) 390 ITR 292. 12. On the Ld. CIT observation that assessee claim for deduction u/s 80 IA 4 (iii) cannot be allowed on sale of entire undertaking which has been claimed as exemption, he submitted that, first of all, there is no bar in claiming deduction on the profit from the sale of undertaking eligible u/s 80 IA in view of proviso below clause (iii) of sub section (4) of section 80 IA; and in any case this issue now stands squarely covered by the judgment of Hon ble Supreme Court in the case of PCIT Vs. Nila Baurat Engineering Limited (2018) 256 Taxman 291, wherein the judgment of Hon ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments relied by her were as under: - i. Income Tax officer Vs. DG Housing Projects Ltd. (Delhi High Court). ii. Commissioner of Income-Tax Vs. Jawahar Bhattachajee (Guwahati) iii. Commissioner of Income- Tax Vs. Malabar Industrial Co. Ltd. (Supreme Court of India) iv. Commissioner of Income-Tax Vs. Nagesh Knitwears (P.) Ltd. (High Court of Delhi). v. Addl. Commissioner of Income-Tax Vs. Gee Vee Enterprises (High Court of Delhi). 15. After referring to various observations of the Ld CIT, Ld. CIT DR also strongly relied upon the newly inserted Explanation 2 to section 263, which envisages that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as prejudicial to the interest of the revenue, if the order passed by the Assessing Officer is without making enquiries or verification which should have been made. Here in this case the Assessing Officer should have referred the entire specified domestic transaction to the TPO so as to examine the correct arms length price of the same. Thus, non-reference of specified domestic transaction by the Assessing Officer to the TPO shows that proper enquiry as required has not been done. She thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be any allegation of any non-compliance of CBDT Instruction by the Assessing Officer. He further brought to our notice that CBDT had issued another Instruction No.15/2015, dated 16.10.2015 which superseded the old Instruction No.3/2003 which too was applicable to international transaction u/s.92B only and not to specified domestic transaction u/s.92BA. In this instruction CBDT has explicitly recognized the absence of any instruction with reference to domestic transaction as defined u/s.92BA. Further, he drew our attention to the relevant guidelines of the CBDT in the Instruction No.15/2015, wherein CBDT has directed that in case of specified domestic transaction u/s.92BA, where the case has been selected on non TP parameter and the domestic transaction has been reported in form no.3CEB, the Assessing Officer is not required to refer the issue to the TPO for determining the Arm s Length Price. Hence, in these circumstances, it is evident that at the time of passing of the assessment order there was no CBDT instruction with reference to specified domestic transaction u/s.92BA, and therefore, Assessing Officer was not obliged to refer the matter to the TPO. In any case without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard -for example, Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. where the taxpayer has not filed the Accountant's report under Section 92E of the Act but the international transactions or specified domestic transactions undertaken by it come to the notice of the AO; where the taxpayer has not declared one or more international transaction or specified domestic transaction in the Accountant's report filed under Section 92E of the Act and the said transaction or transactions come to the notice of the AO; and where the taxpayer has declared the international tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that is, the assessment order though may be prejudicial to the interest of revenue but is not erroneous or vice-aversa, then CIT or PCIT cannot cancel the assessment. Another settled position of law is that, if the Assessing Officer after due diligence and enquiry has reached to a conclusion and has formed a particular opinion, then also Ld. PCIT or CIT cannot exercise powers u/s 263 to form a different opinion or take a divergent view. These principles are well settled by the judgments of Hon ble Supreme Court in the case of Malabar Industrial Company Limited vs. CIT (2000) 243 ITR 83; and CIT vs. Max India Limited (2007) 295 ITR 282 and reiterated by various courts. Now, in the light of the settled principles we have to see, whether the Ld. CIT was correct in law and in facts in cancelling the assessment order on the points raised by him in impugned order. As discussed above the issues raised by the Ld. CIT for canceling the assessment order and passing a fresh assessment are as under: - i. The Assessing Officer has not conducted substantial enquiry or investigation while allowing the claim of deduction of ₹ 161,37,41,713/- u/s 80 IA, as he has failed to conduct enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der taking shall provide all infrastructure facility for common use such as roads, water supply and sewerage, generation and distribution of power, air conditioning etc. Actual: The company was providing all these facilities at the IT Park which are verifiable from the balance sheet profit loss account of the company. V. Proposed Condition: Minimum number of industrial units shall not be less than four. Actual: Ten 23. It is further not in dispute that the initial assessment year for the claim made u/s 80IA was A.Y. 2008-09 and up till A.Y.2013-14, assessee was not only found to be eligible for deduction u/s 80 IA, but also exemption was given by the respective Assessing Officers mostly under scrutiny u/s 143 (3) after detailed examination and verification. The status of all the assessment has already been incorporated above. From the perusal of the records filed during the course of assessment proceedings, it is seen that, Ld. Assessing Officer from time to time has raised several queries to examine the claim/ deduction u/s 80 IA, which is evident from the fact that assessee had placed copy of audit report in Form No. 10 CCB in support of deduction u/s 80 IA alongw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction issued by the CBDT to the Assessing Officer for making any reference to the TPO for specified domestic transaction. From the perusal of the said Instruction no. 3/2003, which has been placed by the learned counsel before us, it is seen that guidelines for reference to the TPO has been made only in respect of determination of Arm s Length Price in relation to the international transaction u/s.92B. There is no whisper about specified domestic transaction; for the reason that, there was no concept of specified domestic transaction under the Income Tax Act when said instruction was issued on 20.05.2003. The specified domestic transaction for the purpose of determination of ALP has been brought in the statute only by Finance Act, 2012. Hence, we agree with the learned counsel that holding the assessment order erroneous for the reason that, Assessing Officer should have made a reference to the TPO in accordance with CBDT Instruction no. 3/2003 is wholly misconceived and misinterpretation. Once, there was no CBDT instruction or guidelines for reference to the issue involving specified domestic instruction to the TPO at the time of passing the assessment order, then where is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction by the Assessing Officer. Hence, it would be incorrect to ascribe any dereliction on the part of the Assessing Officer that he has failed to conduct requisite inquiry to find out the Arm s Length Price for the transaction, by failing to make reference to the TPO that he was supposed to make as per the CBDT guidelines. The observation of the ld. CIT for holding the assessment order to be prejudicial to the interest of the revenue, for the reason that the Assessing Officer has not followed the CBDT Instruction No.3/2003 cannot be sustained at all. 25. As regard the CBDT Instruction No.3/2016 dated 10.03.2016, first of all, this instruction was not applicable at all at the time of passing of the assessment order, because earlier, as stated above CBDT in its Instruction of 2015, itself has clarified there was no such guidelines for making a reference to the TPO was specified domestic transaction. The contention of the Ld. CIT-DR that such an instruction should be read into retrospectively, i.e., prior to the issue of such instruction, cannot be upheld for the reason that, the Assessing Officer at the time of passing the assessment has to see the instructions available a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant s report under Section 92E at all or has not disclosed the said transactions in the Accountant s report filed; (b) where there has been a transfer pricing adjustment of ₹ 10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by the Investigation Wing or the AO. 3.4 For cases to be referred by the AO to the TPO in accordance with paragraphs 3.2 and 3.3 above, in respect of transactions having the following situations, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO for determination of the ALP. [Emphasis added is ours] 27. From the bare reading of the aforesaid guidelines it is seen that the Assessing Officer can make reference to the TPO only under the situation and circumstances laid down in the said instruction. Thus, the key determination factors for making a reference by the Assessing Officer to the TPO for the determination of the ALP of international or specified domestic transaction have been provided in para 3.2 and 3.3. It lays down that in all the cases which are selected for scrutiny on the basis of transfer pricing risk parameters have to be referred to the TPO; and in cases where though not selected under scrutiny on transfer pricing risks but if any of the circumstances mentioned therein are found by the AO, then also same has to be referred to TPO. But under both the conditions the AO as jurisdictional requirement must record his satisfaction and seek approval in respect of transactions having the following conditions, which are: - firstly, where the taxpayer has not filed audit report u/s 92 E and such transaction comes to the notice of the Assessing Officer; secondly, taxpayer has not declared the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Sub section (1) of section 80 IA provides that, where the gross income of an assessee includes any profits and gain derived by an undertaking or an enterprise from any business referred to in sub-section (4) which are considered to be as eligible assessee, then subject to the provisions of this section there shall, in accordance with and subject to the provisions of this section, be allowed 100 % deduction of the profits and gains derived from such business for consecutive ten assessment years while computing the total income of the assessee. Sub-section (4) of section 80-IA in turn lays down the conditions upon fulfillment of which the said section would apply. Here clause (iii) is applicable where the deduction is allowed to any enterprise or to any undertaking which develops, develops and operates or maintains and operates an industrial park notified by the Central Government. The proviso below clause (iii) of sub section (4) of section 80 IA reads as under: - Provided in that case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom such sale is not eligible for deduction u/s 80 IA. This precise issue had come up for consideration before the Hon ble Gujarat High Court in the case of PCIT Vs. Nila Baurat Engineering Limited (supra), wherein their Lordships were discussing the similar proviso appearing below clause (i) of sub section 4 of section 80 IA. Their Lordships after discussing the similar proviso observed and held as under: - 5. As per the proviso, thus, where any infrastructure facility is transferred to another enterprise for the purpose of operating and maintaining such facility in accordance with the agreement of the Central or State Government or the local or statutory authority, the section would apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would be entitled to the deduction, had the transfer not taken place. 6. The proviso to sub-section (4) thus makes an enabling provision providing a deeming fiction whereby upon transfer of any infrastructure facility for the purpose of operating an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market value of such goods as on the date of transfer. It provides that the profits and gains from transfer or sale of the eligible business should be computed as if the transfer has been made at market value of such goods or services. This provision itself clarifies that profits from transfer of the eligible business is a business income eligible for deduction u/s 80 IA. In fact, this provision endorses our view that the profits from transfer of eligible business are eligible for deduction u/s 80 IA. 32. Further, one very important fact in this case is that, assessee has shown entire profit from sale of industrial profit as business income and once such business income has been accepted and no adverse comment has been given by Ld. CIT, then such a profit arising from sale of industrial park ostensibly falls within section 80 IA (4). Hence, there was no legal infirmity by Assessing Officer in allowing the claim of deduction on the profits earned from the sale of industrial park. 33. In so far as the Ld. CIT observing that Assessing Officer has failed to examine applicability of section 80 IA(8) it is seen that it is not in dispute that the Assessing Officer during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred relation to earning of exemption of income. If AO is satisfied or having regard to the accounts no expenditure can be attributed then no disallowance is called for. Nothing has been brought on record by Ld. CIT that satisfaction could have been arrived having regard to the accounts maintained by the assessee that some disallowance is called for. There is no whisper by the Ld. CIT as to why disallowance u/s 14 A was called for on the facts of the case. The disallowance under section 14A is not automatic whenever there is any kind of exempt income. It has to be seen with regard to nature of expenses debited and whether any expenditure can be calculated. Thus, simple observation that AO should have examine the applicability of 14A without any specific finding or examination of facts and material on record, Ld. CIT cannot set aside the assessment. 35. The revisionary jurisdiction u/s 263 cannot be exercised simply to make roving and fishing enquiry. It is a well settled law decided by the various Courts in the judgments relied upon by the Ld. Counsel that, the revisionary authority first of all should give a finding as to how the assessment order is erroneous and preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer made by the Assessee in this appeal, are as follows: 1. That the orders passed u/s 263 by the Pr. CIT, Central II on 31.03.2018 was perverse to the law and to facts of the case, on holding that the assessment order passed by the Assessing Officer on 10.08.2015 was perverse to the law in so far as it is prejudicial to the interest of revenue. 2. That on the facts and circumstances of the case, the orders passed by the Pr. CIT(A) U/s 263 of the Act were further not in consonance of the provisions of law contained u/s 263 of the Income Tax Act 1961, as the same were passed on having borrowed information / reference passed upon to him by the JCIT. 3. That the Ld. Pr. CIT(A) failed to consider that the assessment order as completed by the Assessing Officer after due process of law and only after taking into consideration the entire supporting evidence produced, filed and placed upon records by the appellant company during assessment proceedings. 4. That the orders passed u/s 263 of the Act for the A.Y. 2013-14 is not tenable merely because of having difference of opinion between the Ld. Pr. CIT and the Assessing officer while allowing the claim of deduction to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing officer while passing the order, therefore, the order passed could not be presumed and to have been opined either erroneous or prejudicial to the interest of revenue. 12. That the appellant company assails their rights to amend, alter or change any grounds of appeal of any time even during the course of hearing of instant appeal. PRAYER 1. That the orders passed u/s 263 by the Ld. Pr. CIT on 31.03.2018 thereby setting aside the assessment order passed by the Assessing Officer on 10.08.2015 thereby directing the Assessing Officer for conducting denovo enquiry with regard to the deduction allowed u/s 80-IA of the Income Tax Act 1961 to the appellant company, may please be quashed and the orders passed by the Assessing officer on 10.08.2015 may please be restored back. 1. That the other relief which this Hon ble course may please be deems fit and proper on the facts and in the circumstances of the case. (37.1.1) The facts of the case, and the submissions made by the two sides have been narrated by the esteemed Judicial Member in foregoing paragraphs 2 to 20. There is no need to repeat them. (37.1.2) For ready reference, the Assessment Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (-) 56,420/- 1.61,36,85,293/- 1,61,36,85,293/- Total Income 56,420 Assessed u/s 143(3) of the I.T, Act at total income of ₹ 56,420/-. Tax on ₹ 56,420 @ 30% = ₹ 16,926 Education Cess @ 3% = ₹ 508 Total Tax ₹ 17,434/- Calculation of MAT u/s 115JB Books Profit ₹ 44,35,247/- Tax on Book Profit of ₹ 44,35,247 @ 19.05 % MAT credit ₹ 8,45,137/- allowed to the assessee is ₹ 8,27,703/- Since the tax on Book Profit of ₹ 44,35,247/- u/s 115JB is more than the tax on regular income as assessed at ₹ 56,420/- above, the income u/s 115JB is assessed. Issue Demand not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records that the assessee had earned exempt income of ₹ 77,65,278/- during the relevant previous year. The AO has failed to make enquiry with regard to the expenses attributable to the earning of exempt income even the same had been a reason for selection the case under CASS. Thus the approach of AO in not calling for the details of expenses attributable to earning of exempt income prima facie appears to be erroneous so as to cause prejudice to the interest of Revenue. It is seen that from the records that the assessee has sold its undertaking to its 100% subsidiary M/s Noida Towers Private Limited during the relevant previous year, thus the provisions of domestic transfer pricing were applicable to such transaction. The AO has not scrutinized such transaction from DTP standpoint, thus the approach of AO in not scrutinizing such huge transaction prima facie appears to be erroneous so as to cause prejudice to the interest of Revenue. 3. The assessee was asked to show-cause as to why, in the light of above facts contained in the show-cause notice, the assessment order passed in its case by the Assessing Officer, Central Circle-16, New Delhi on 10.08.2015 may not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operating the industrial park and not only for operating and maintaining as contemplated in the SCN. Hence, while allowing the deduction u/s 80IA 4(iii) the Ld. AO has applied his mind and fully verified the facts before passing the order. The Ld. AO has allowed the deduction as per the provisions of this section only and order u/s 143(3) was not an erroneous order. For the exempt income claimed of ₹ 77,65,278/-, assessee submitted that exempt income earned from dividend earned from investment made in mutual fund and issue was examined during assessment proceeding. Further assessee submitted that assessee company has sold industrial park/undertaking to its 100% subsidiary M/s Noida Towers Pvt. Ltd. the undertaking was sold at much higher price than prevailing circle rate of Noida authority. The facts were discussed at the time of assessment and since there was no revenue effect further no documents were asked by the A.O. Further, the case was fixed for hearing on 10.01.2018, on the given date neither anybody attended nor any reply submitted by the assessee. On 08.02.2018 Sh. Vinod Sahni, CA AR Sh. Dinesh Kumar on behalf of the assessee company appeared and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm's length price. Thus, the action of the AO in completing the assessment without making an enquiry through reference to TPO as per CBDT guidelines and subsequently allowing deduction u/s 80IA made the assessment erroneous and prejudicial to the interest of the revenue. The AO also failed to examine applicability' or otherwise of Sec.801A(8), Further, the AO had not conducted requisite enquiry/investigation on exempt income earned by the assessee and applicability of the provision of section 14A of the IT Act, rws Rule 8D of the IT Rule. 5. Also, reliance on the issues of lack of enquiry may be placed on the apex court decision in the case of Ram Pyari Devi Saraogi Vs CIT (67 1TR 84) and in the case of Smt. Tara Devi Agarwal Vs CIT (88 ITR 323) that lack of enquiry would render order of the assessment as erroneous and prejudicial to the interest of revenue. The Hon'ble Delhi High has also held in the case of ITO versus DG Housing Projects Limited, (2012) 343 FIR 329 (Delhi) as under: 10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word erroneous in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. I, thus, hold that the assessment order passed in the case of the assessee by the Assessing Officer, Central Circle-16, New Delhi on 10.08.2015 u/s 143(3) is erroneous and prejudicial to the interest of revenue. Thus, the said assessment is set aside and the assessment proceedings are restored back to the file of the Assessing Officer on the issue of examination/verification/allowabilty of deduction u/s 801A and the quantum of deduction u/s 80IA, if at, all the claim itself is valid and applicability of Sec.14A on exempt income. The AO is directed to frame the assessment afresh as per the provisions of the Income Tax Act, after duly examining the specified domestic transactions through reference to the TPO as per Board s guidelines and considering the report of the TPO on receipt of order u/s. 92CA(3) of the l.T. Act 1961 and after affording due opportunity to the assessee. AO shall also consider the applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO failed to conduct requisite enquiry/investigation to find out the arm s length price of the transaction and failed to make reference to TPO which he was supposed to make as per the CBDT guidelines / instruction no 3/2003 and subsequent directions of CBDT. iii) The Ld. CIT has alleged that the condition for reference to TPO is squarely applicable to the facts of this case but the AO had passed assessment order without referring the issue of specified domestic transaction for determining arm s length price. iv) The Ld. CIT has alleged that the AO had not conducted requisite enquiry/investigation on exempt income earned by the assessee and applicability of the provision of section 14A of the IT Act, read with Rule 8D of the IT Rule. (38) Perusal of Assessment Order dated 20.03.2013 U/s 143(3) of IT Act shows that return of income declaring an income of ₹ 12,18,222/- was filed on 27.09.2010. The return was processed U/s 143(1) on 07.05.2011 at the returned income. Subsequently, the case was selected for scrutiny. Statutory notice U/s 143(2) and 142(1) were issued along with a detailed questionnaire. In response to notices, Authorized Representatives of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial disallowance of assessee s claim of deduction U/s 80IA of IT Act. Revision proceedings U/s 263 of IT Act were initiated by the Ld. CIT vide show cause notice U/s 263 of IT Act, dated 11.10.2017. During the revision proceedings U/s 263 of IT Act, the assessee made written submissions, running into a total of 198 pages, vide separate letters dated 11.12.2017, 08.02.2018 and 23.02.2018. A short gist of the submissions made by the assessee before the Ld. CIT is reproduced as under: (38.1.1) Gist of written submissions vide letter dated 11.12.2017 The assessee company has received show cause notice u/s 263 ( SCN ). Assessee company s point-wise reply is hereunder: 1) Reply to Point No. 2 (a): With regard to deduction U/s 80 IA, we draw your kind attention to the fact that the Ld. Assessing Officer had asked the assessee company to submit a detailed note and supporting documents for claiming deduction U/s 80IA. In Reply to that the assessee company submitted a letter dated 23/07/2015 providing detailed note along with five annexures which include notification by CBDT notifying the assessee company as Industrial Park eligible for deduction u/s 80 IA and au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking: Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words 31st day of March, 2006 , the figures, letters and words 31st day of March, 2011 had been substituted; This indicates that there are three distinct categories of profits contemplated as eligible for the benefit of the deduction under Section 80-IA(4)(iii), 1. Profits made by an assessee who builds / constructs / an industrial Park and immediately sells, it ( develops ) 2. Profits made by an assessee who builds / constructs an Industrial Park, leases it out for a period, and then sells it ( develops and operates ) 3. Profits made by an assessee who, without havingconstructed it, merely maintains and operates an Industrial Park ( maintain and operates ) In the instant case, the assessee company, as mentioned in point no. 2 above, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /required to be incurred to earn dividend income on such investment and the Assessing Officer was made well aware about these facts during the assessment proceedings. Since the Ld. Assessing Officer has cross checked all the above facts and AR has submitted he requisite details and documents with reference to investment, the question of no enquiry was made by the Ld. Assessing Officer is absolutely wrong, baseless and not tenable. In addition to above we also wish to submit that any additions of upto ₹ 3,86,28,233/- was of nil effect to revenue as there would have been be no change to taxable income of the assesse company for the relevant assessment year due to deduction u/s 80IA amounting ₹ 165,14,13,241/- which was restricted to the amount of gross total income of ₹ 161,27,85,008/-. Hence, even if there was any addition due to expenditure related to dividend income there would have not been any additional tax revenue for the year under reference. From the above it is evident that there was no erroneous assessment by the Ld. Assessing Officer with reference to exempt income of ₹ 77,65,278/- and there was no revenue loss either. 3) Reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the records produced before the Assessing Officer that no further explanation was needed by the Ld. Assessing Officer. Hence, the question of erroneous order by the Assessing Officer does not arise at all. 5) Reply to Point No. 2 (e): As submitted earlier the assesse company has sold industrial park / undertaking during the year under reference. The same was sold to its 100% subsidiary M/s Noida Towers Pvt. Ltd. The Assessing Officer asked the AR to produce documents in support of domestic transfer priding guideline. In response to that the AR filed copy of 3CEB Form and explained the transaction verbally. The undertaking was sold at much higher price than the prevailing circle rate of the Noida Authority. A valuation report was also obtained by the assesse company from the approved independent valued, who valued it at ₹ 205,94,90,864/- lower than the sale price which was ₹ 208,47,12,83C/-. The facts were discussed at the time of assessments and since there was no revenue effect further documents were not asked by the Ld. Assessing Officer. Hence, there is no loss of revenue and the basic documents with regard to domestic transfer pricing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearings during the assessment proceedings and hundreds of documents were submitted; b) All the details and documents were verified by the Ld. Assessing Officer and all his questions were answered; c) Books of accounts were produced and test check was done by the Ld. Assessing Officer; d) There was no loss of revenue on any issues raised in the SCN dated 11lh October 2017; e) The assessment order was not erroneous and also not prejudice to the interest of revenue on any account. On the above facts we hereby pray not to initiate proceedings u/s 263 of the Income tax Act, for the Assessment Year 2013-14 against the assessee company. ETT LIMITED ASSESSMENT YEAR 2013-14 Note for Claiming Deduction u/s 80IA:- ETT Limited (formerly known as Indian Express Multimedia Limited) was incorporated on November 11, 1993 and the name got changed to ETT Limited on 01/06/2007, a copy of the fresh certificate of incorporation consequent upon change of name is attached as Annexure-I. The company is engaged in developing, operating and maintaining the IT Park. ETT Limited had constructed and developed an IT Park at 15-16, Sector 16A, Noida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of Section 80-IA of the Income Tax Act, 1961 to declare area as an Industrial Park for 100% Income Tax exemption. A copy of the notification dated 17/11/2006 is attached as Annexure-ll. The assessee company has received the approval in terms of the Industrial park Scheme, 2002, notified by the department in exercise of powers u/s 80IA, sub section 4(iii) of the Income Tax Act-1961.The Industrial park at plot no-15 16, sector-16A, Noida is duly notified industrial park vide notification no. 347/2006.F.no-178/122/2006-ITA-l. The notification received by the assessee company clearly stated that now, therefore, in exercise of the powers conferred by clause (iii) of sub section (4) of section 80-IA of the said Act, the Central Government hereby notifies the undertaking, being developed and being maintained and operated by M/s Indian Express Multimedia Limited, Noida, as an industrial park for the purposes of the said clause (iii). The notification has given certain terms and conditions for such deduction under the Income Tax Act. The detailed conditions are specified in the Annexure to the notification. Few of the major conditions imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is attached as Annexure-iv The company has given part of the premises on rent in the financial year 2004-05, which shows the commencement of operation at the IT Park. However the approval from the Ministry came in the month of November 2006 and accordingly the company has not claimed any deduction u/s 80-IA in the Assessment Years 2005-06, 2006-07 and 2007-08. The company started claiming the deduction in the Assessment Year 2008-09 and claiming the same continuously thereafter. The assessment u/s 143(3) was completed in four of the last Seven years (i.e. period between A.Y. 2005-06 to A.Y. 2012-13). Out of these seven years the assesse company has claimed deduction u/s 80-IA only for the A.Y. 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 2013-14. The assessment for the a.y. 2012-13 was completed in July 2014 by your office only and the claim of the assessee for deduction u/s 80-IA has been accepted after detailed verification by the concerned officer. The assessee company has already submitted a detailed computation of deduction u/s 80-IA along with copy of the certificate issued by the Chartered Accountants required for claiming deduction. A copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng profit on Sales of Industrial Park: - The assessee company has developed only one industrial park till assessment year under consideration and has sold the same in this year. Till the date of sale the industrial park was rented out to various parties, all the rental incomes and maintenance charges are recognized as business income. Deduction u/s 80IA was claimed as per notification dated 17th November 2006 in all the years. The profit on sale of industrial park is shown under the head business income and deduction u/s 80IA is claimed under the same notification. The assessee company has got the notification for claiming deduction u/s 80IA for the undertaking being developed and being maintained and operated by the assessee company. The assessee company has developed the industrial park and after maintaining and operating for some years sold the same and has claimed the deduction. Copies of all previous assessment years are attached in support of claim of the assessee company of deduction u/s 80IAare attached as Annexure IV. On the above facts we hereby pray not to initiate proceedings u/s 263 of the Income tax Act, for the Assessment Year 2013-14 against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act 1999 states as under An undertaking or a project for (i) developing, (ii) developing and operating, or (Hi) maintaining and operating an industrial park which has been notified by the Central Government under clause (iii) of sub-section (4) of section 80-IA is also included in the definition of infrastructure facility and is, thus, within the scope of exemption under this clause . Copies of the relevant amendments and portion of memorandum to Finance Act 1999 is attached herewith as Annexure-2. From all the above amendments and the intention of the law to bring these amendments it is quite evident that the deduction u/s 80-IA (4)(iii) is allowable to the assessee company on the develop and sale of Industrial Park. b) Some judgments in which courts have allowed the deduction U/s 80-IA for developing infrastructure facilities are as follows : Please refer to our discussion on the allowability of deduction u/s 80-IA (4)(iii) to a developer of an Industrial Park and your quarries on any judgments on the matter, we are producing herewith copies of some of the judgments similar to the matter under assessment: i) Parnika Commercial Estates (P.) Ltd. v. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'road including toll road' - It entered into a concession agreement with TEA for development, operation and maintenance of six lane expressway/toll road - In terms of agreement, assessee- company was also granted by TEA, rights for land development of 25 million sq. mts. of land along proposed expressway for commercial, amusement, industrial, institutional, and residential development - Assessee's case was that since one of its avowed objects was residential and institutional development consisting of sale of plots and buildings, those activities of housing and sale of land etc. were an integral part of proposed highway project - Assessee filed its return claiming deduction under section 80-IA(4) in respect of income from sale or sub-lease of land assigned to it under concession agreement - Assessing Officer allowed assessee's claim - Whether on facts business activities of assessee-company fell within ambit of clause(a) of Explanation to section 80-IA(4)(i) and, thus, Assessing Officer was justified in allowing assessee's claim - Held, yes [Para 57], iii) ACIT v. Bharat Udyog Ltd. [2008] 24 SOT 412 (Mumbai): Section 80-IA of the Income-tax Act, 1961 - Dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant previous year is to be increased or decrease to arrive at the profit or loss to be considered for calculating the Minimum Alternate Tax (MAT) liability. Such adjustments however do not include increasing the book profits by the loss arising on account of sale of investment. The accounting loss on transfer of shares in Valley Computech is debited to the profit and loss account of the assessee company, based on the treatment prescribed as per the Accounting Standards and as duly certified by the statutory auditors of the company. As per the provisions of Income Tax Act the net profit as decreased by the loss on sale of capital asset and as certified by the statutory auditors of ETT Ltd. cannot be increased by the assessing officer and thus be made liable to MAT, placing reliance of the Supreme Court decision in the case of Apollo Tyres Ltd. (2000)255 ITR 273, wherein the Apex Court held that, where the accounts of the assessee are certified by the statutory auditors of the company, the assessing officer can make only adjustments which are specifically permitted u/s 115J of the Income Tax Act and cannot restate the book profits. A copy of judgment is attached he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made and materials placed by the assessee before the Ld. CIT vide aforesaid Letters dated 11.12.2017 and 23.02.2018, as per foregoing paragraphs (38.1.1) and (38.1.1.2) of this order. It is also found, in view of foregoing paragraph (37.2) (i) of this order, that the allegations of the Ld. CIT against the AO, narrated by him in paragraph 4 of the aforesaid order dated 31.03.2018, fluctuate in severity and description. From these features of the aforesaid order dated 31.03.2015 of Ld. CIT; it can be concluded that the order has been passed by Ld. CIT in a hasty manner, without due applications of mind, without fully taking into consideration the submissions made and materials placed by the assessee before Ld. CIT, and without dealing with the full force of assessee s submissions and contentions; and part of the order is also cryptic, summary and non-speaking in nature. An order such as this, is liable to be quashed. (40) As already mentioned in paragraphs (37.2)(i) and (39) of this order, the Ld. CIT has varyingly alleged that no substantial enquiry / investigation was conducted by the AO for assessee s claim of deduction U/s 80-IA of IT Act; that the AO has not at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified domestic transactions was not applicable for determining arm s length price. Useful reference may also be made to paragraph (38) of this order, containing a list of various details filed by the assessee during assessment proceedings. Further reference may also be made to paragraphs (38.1.1), (38.1.1.1) and (38.1.1.2) of this order, containing a gist of the submissions made by the assessee and the materials brought by the assessee for the consideration of the Ld. CIT during proceedings U/s 263 of IT Act. In view of the foregoing, once again, allegations made and conclusions of fact drawn by the Ld. CIT as per forgoing paragraphs (37.2)(ii) and (37.2)(iii) are such, which cannot be drawn by any reasonable person or authority on the disclosed state of facts. Therefore, these allegations and conclusions of fact are also held to be suffering from patent perversity. (40.1.1) Now, coming to the allegation and conclusion of fact expressed by the Ld. CIT as per paragraph (37.2)(iv) of this order, useful reference may be made to foregoing paragraphs (38.1.1) and (38.1.1.2), containing gist of assessee s submissions, including on applicability of Section 14A of IT Act read with Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned revision order dated 31.03.2018, as per paragraph (37.2) of this order, suffer from patent perversity. Thus, the allegation and conclusions of fact, which form the foundation of the aforesaid impugned revision order dated 31.03.2018 of Ld. CIT, passed U/s 263 of IT Act; suffer from patent perversity. Accordingly, the aforesaid impugned revision order dated 31.03.2018 passed U/s 263 of IT Act is held to be a perverse order, having no legitimate foundation on which it can stand, and is liable to be quashed. (41) Useful reference may be made to decided judicial precedents, in support of the view that a perverse order of an authority is wrong and is liable to be quashed. In the case of Kejriwal Enterprises and Another v. CIT 260 ITR 341 (Calcutta), the Hon ble High Court held: When an authority draws a conclusion which cannot be drawn by any reasonable person or authority on the disclosed state of facts, then a perverse decision is entered and a perverse decision is wrong . In the case of Pyarelal Mittal vs. ACIT 291 ITR 214 (Gauhati), the Hon ble High Court took the view that the appellate authority is competent to interfere when the findings of fact by the lower auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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