Case Law Details
Brief of the case:
ITAT Delhi held in Ambience Hotel & Resort Pvt. Vs CIT that if the AO had done his assessment ignoring the provisions of the IT act and TPA and ignoring the examinations/inquiry then that assessment was erroneous and prejudicial to the interest of the revenue irrespective of the fact that there was no financial loss to the revenue.
Facts of the case:
Ambience Developers & Infrastructure Pvt. Ltd had given interest free refundable deposit of Rs 75CR to its sister concern Ambience Hotel & Resort Pvt. And in return Ambience Hotel & Resort Pvt. gave rights in some retail spaces in the hotel premises for managing leasing and to receive appropriate revenue and receipts from said spaces. The AO taxed the lease rental income in the hands of Ambience Hotel & Resort Pvt. but assessee was of the view that the same would be taxable in the hands of Ambience Developers & Infrastructure Pvt. Ltd and that issue was not erroneous and prejudicial to the interest of revenue so sec 263 could not be invoked.
Contention of the assessee:
Assessee was of the view as whether the lease rentals would be taxable in the hand of Ambience Developers & Infrastructure Pvt. Ltd or in the hands of Ambience Hotel & Resort Pvt. there would not be any loss of tax to the revenue because both would be taxed at 30% so the above was not at all erroneous and prejudicial to the interest of revenue which would be necessary to invoke sec 263. If the above raised issue was not erroneous and prejudicial then sec 263 could not be invoked.
Moreover assessee was of the view that even if the one company was a loss company and other was profitable company then also sec 263 could not be invoked because the loss would be carried forward in the subsequent assessment years. So the order of AO was not erroneous and prejudicial to the interest of revenue.
Contention of revenue:
Revenue was of the view that the AO had ignored the facts and circumstances of the case due to which the order of AO was erroneous and prejudicial to the interest of revenue so sec 263 should be invoked. Moreover the leased rental income should be taxable in the hands of Ambience Hotel & Resort Pvt. not in the hands of Ambience Developers & Infrastructure Pvt. Ltd
Held by ITAT:
ITAT held that though there was not any loss of tax to the revenue but the order passed by the AO was without considering the provisions of sec 60 and sec 53A of TPA. So as AO had passed the order without full examining the case so that was erroneous and prejudicial to the interest of revenue. So the order of CIT u/s 263 was upheld.
Moreover ITAT held that the leased rental income should be taxable in the hands of Ambience Developers & Infrastructure Pvt. Ltd.
