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TMI Blog2022 (7) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... The return of income for the year under consideration was filed by it on 05.10.2015 declaring a total income of Rs.1,30,24,380/-. In the assessment completed under Section 143(3) of the Act vide an order dated 18.12.2017, the total income of the assessee was determined by the Assessing Officer at Rs.10,72,87,310/- after making the following disallowances:- a) Disallowance of land vacation compensation charges - Rs.2,00,92,889/- b) Disallowance of excess cost of land sold - Rs. 20,67,990/- c) Disallowance of employees benefit expenses - Rs. 20,56,412/- d) Disallowance of purchases - Rs.7,00,45,639/- 3.1 The records of the assessment completed by the Assessing Officer under Section 143(3) of the Act came to be examined by the learned PCIT and on such examination, he was of the view that there were following errors in the assessment made by the Assessing Officer under Section 143(3) of the Act which were prejudicial to the interest of the Revenue:- "2. On verification of the case records, it is noticed that you had debited a sum of Rs.10,14,45,263/- as 'other expenses' mainly comprising land vacation compensation' charges of Rs.10,00,00,000/-. Such land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 263 of the Act to the assessee pointing out the above errors and giving the assessee an opportunity to show-cause as to why the order passed by the Assessing Officer under Section 143(3) of the Act should not be revised by treating the same as erroneous and prejudicial to the interest of the Revenue. In reply, the following explanation in writing was offered by the assessee:- i) During the course of scrutiny assessment proceedings for A.Y. 2015-16, the assessee had furnished the required details/information/explanation with supporting documentary evidences on each and every issue raised by the A.O. who, after considering these details and evidences, made certain additions/disallowances after discussion in the body of the assessment order. She also assigned the reasons for not accepting the submissions and explanation of the assessee furnished during the course of assessment proceedings. ii) The CIT(A)-8, Ahmedabad had dismissed the appeal filed by the assessee and on appeal filed by the assessee before the Hon'ble ITAT, Ahmedabad, it has been directed to set aside all the issues for reconsideration by the CIT(A)-8, Ahmedabad for fresh adjudication and decision. iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment between the assesses and M/s. Bosch Rexroth India Limited that land vacant compensation charges of Rs.10,00,00,000/- was for vacating both the lands i.e. Survey No.324/1 at Vinzol and Survey No.1037 at Vatva and not for single land at Survey No.324/1. " h) After observing the above facts, the A.O. had made a part disallowance of Rs.2,00,92,889/- on the basis of total area of both pieces of lands as not allowable and added the same to the total income of the assessee-company. i) In view of the above-mentioned facts, it cannot be held that the A.O. did not inquire into the issue in depth properly. In fact, the AO had raised all the possible queries in connection with the claim of land vacating compensation expenses of Rs.10 crores after obtaining necessary details and explanation with supporting documents from the assessee-company. The A.O. had framed the assessment order u/s 143(3) of the Act wherein explanation furnished by the assessee was not accepted in its entirety and she made the disallowance of Rs.2,02,92,889/-. j) On the above premises, it has been contended by the assessee-company that the action to consider the issue of disallowance of land vacant compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bosch Rexroth India Limited. The following main features of the said agreement are noted as under:- a) M/s. Bosch Rexroth India Limited had obtained certain land falling in Survey No.324/1 of Vinzol and Survey No. 1037 of Vatva admeasuring 40087 sq.mtrs. and 10080 sq. mtrs. respectively for the period of 99 years from S.L.M. Maneklal Industries Ltd through a lease agreement dated 30.07.1997 for running of its business. b) This company had thereafter made investments in the form of office cum factory (collectively referred as "building" in the said lease agreement) along with various fixtures and furniture etc. It also planted many trees so as to create greenery and thus increased the value of land structure & building within the leased premises. c) The assessee-company had informed the M/s Bosch Rexroth India Limited that it was the current and legal owner of the leased property and there were no other owners in the leased premises and it was desirous to sale the leased premises to the prospective buyers. d) For getting the vacant possession of the said land with the buildings, the assessee-company would pay compensation for all its investments made by M/s Bosch Rexroth I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement that the company M/s Bosch Rexroth India Ltd. had entered into lease agreement dated 30.07.1997 with S.L.M. Maneklal Industries Ltd. However, the A.O, did not call for the copy of this lease agreement so as to verify the terms and conditions of that lease agreement and particularly in a situation when the owner of the leased premises is changed. iii) The A.O. has not inquired into as to how M/s Bosch Rexroth India Ltd continued to be the lessee after the purchase of the said land in the financial year 2007-08 and as to whether fresh lease agreements were made after the purchase of the said land and if so, what was the lease rental as per the said agreement and as to whether the same had been recognized as revenue receipts in the assessment years 2014-15 and earlier years or not? iv) Since the land has been purchased in an auction in pursuant to the orders of the Debt Recovery Tribunal passed in the case of M/s. S.L.M. Maneklal Industries Ltd, there should be a mention of occupying the said land premises together with the plant & machinery, super-structure etc. in the order passed by the D.R.T. and therefore, the copy of D.R.T.'s order was also required to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our attention to the copies of submissions made in writing before the Assessing Officer during the course of assessment proceedings vide letters dated 04.10.2017, 24.11.2017, 01.12.2017 and 05.12.2017 to point out that the issue relating to the assessee's claim for deduction on account of land vacation compensation charges amounting to Rs.10 crore was duly examined by the Assessing Officer. He submitted that the assessee is in the business of real estate and had purchased land situated at Vinzol bearing Survey No.324/1 admeasuring 40,087 sq. mtrs. and the land situated at Vatva bearing Survey No. 1037 admeasuring 10,080 sq. mtrs. in the previous year relevant to AY 2008-09 from SLM Maneklal Industries Limited. He submitted that this entire land was in possession of one party namely M/s. Bosch Rexroth India Ltd. as lessee vide an indenture of lease dated 30.07.1997 entered into with SLM Maneklal Industries Limited for a period of 99 years. M/s. Bosch Rexroth India Ltd. had constructed various buildings for office-cum-factory on the land at Vatva and had also installed some plant and machinery. They had also planted many trees and created greenery which in turn increased the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and the learned PCIT is fully justified in directing the Assessing Officer to withdraw the said credit vide his impugned order passed under Section 263 of the Act. 5. The learned DR, on the other hand, strongly supported the impugned order passed by the learned PCIT under Section 263 of the Act. He contended that no inquiry whatsoever was made by the Assessing Officer on specific issues relating to the assessee's claim for deduction on account of land vacation compensation charges of Rs.10 crores as specifically pointed out by the learned PCIT in his impugned order passed under Section 263 of the Act. He contended that the order passed by the Assessing Officer under Section 143(3) of the Act without making such inquiry and verification, which should have been made by him as pointed out by the learned PCIT in his impugned order, thus was erroneous insofar as it was prejudicial to the interest of the Revenue as per Explanation 2(a) to Section 263 of the Act inserted by Finance Act, 2015 w.e.f. 01.06.2015 and the learned PCIT was therefore fully justified in revising the same by exercising powers conferred upon him under Section 263 of the Act. 6. We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings and extracted in the order passed under Section 143(3) of the Act revealed the factual position as under:- "A. Bosch Rexroth (erstwhile Rexroth Maneklal Industries Limited) by an indenture of lease dated 30th July 1997 (hereinafter referred to as "Lease Agreement") had taken on lease from SLM Maneklal Industries Limited, a company incorporated under Companies Act 1956 having its office at Shafi Manzil, Ashram Road, Ahmedabad 380 009 certain land situated at Vinzol admeasuring 40,087 square meters forming part of Survey no .324/1 and in Vatva admeasuring 10,080 square meters forming part of Survey no. 1037 for a period of 99 years ( hereinafter collectively referred to as "Leased Premises) for running its business. B. Bosch Rexroth had invested in various office cum factory (hereinafter collectively referred to as "Buildings" and more fully detailed out under Annexure A to this Agreement) buildings along with various fixtures and machines within the Leased Premises in order to enable it to run its business and also planted many trees, created greenery etc. which in turn increased the value of the land structures and buildings within the Leased Premises. C. Company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the issue relating to the land vacation compensation charges claimed by the assessee in the year under consideration was duly examined by the Assessing Officer by making the necessary inquiries and after satisfying himself on perusal of the relevant details and documents placed on record by the assessee, the claim of the assessee for land vacation compensation charges was allowed by the Assessing Officer partly by applying his mind. It is noted that, in reply to the notice issued by the learned PCIT under Section 263 of the Act, a detailed submission was made on behalf of the assessee by pointing out the inquiries made by the Assessing Officer on the issue and the details and documents submitted by it during the course of assessment proceedings. It appears that the learned PCIT, however, overlooked the same and held the order passed by the Assessing Officer under Section 143(3) of the Act on the issue as erroneous and prejudicial to the interest of the Revenue on the ground that the Assessing Officer did not inquire into certain specific issues. In our opinion, these issues pointed out by the learned PCIT in his impugned order were not that material or relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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