Case Law Details
Cuttack Development Authority Vs. CIT (ITAT Cuttack)
The sole disputed issue is with respect to setting aside the assessment order by the CIT in respect of land premium of Rs. 3.,50,00,000/-. On perusal of assessment order u/s.143(3) of the Act dated 30.11.2011, we find that no discussion was made by the Assessing Officer regarding land premium paid of Rs. 3,50,00,000/- to Government of Odisha. No enquiries were also made by the Assessing Officer. Prima facie, it appears that the CIT found that the order passed u/s.143(3) of the Act is without making inquiries on this particular disputed issue, which is raised in the revision proceedings. Ld A.R. submitted that the order of the Assessing Officer is not erroneous and prejudicial to the interests of the revenue and only demonstrated before us that Rs. 3,50,00,000/- was paid to Government of Odisha towards land premium which were sold in earlier years, which is fully allowable expenditure u/s.37 of the Act as the land is not a fixed asset but stock in trade. We are of the considered opinion that the explanations submitted before us are to be verified by the Assessing Officer and the CIT having dealt on this issue and has remitted to the file of the Assessing Officer for fresh adjudication as the facts are not emanating out of assessment order. We rely on various judicial pronouncements, wherein, it was held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. It was also held that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return of income. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper inquiry. Failure to make inquiry in such circumstances would make the assessment order erroneous. The Hon’ble Apex Court in the case of Smt. Tara Devi Aggarwal vs. CIT, 88 ITR 323 (SC), has held that the CIT may consider an order of the AO to be erroneous not only it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make enquirers which are called for in the circumstances of the case. Recently, the Hon’ble Apex Court in the case of Denial Merchants Pvt Ltd. vs ITO in Special Leave (C) No.(s) 23976 /2017 and others order dated 29.11.2017 has upheld the judgement of Hon’ble Calcutta High Court passed on 10.4.2017 in G.A. No. 599/2016, dismissing the special leave petition observing that the CIT after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry.
11. In the present case, the CIT has directed the Assessing Officer to make necessary examination regarding the extent of land acquired by the assessee with reference to which land premium of Rs. 3,50,00,000/- was demanded and rate at which said land was acquired and to whom the lands were sold and land premium was received and such receipts on account of transfer fees and stamp duty would constitute capital receipts. We are of the opinion that the Assessing Officer will make inquiries as directed by the CIT and make fresh assessment. Accordingly, we uphold the order of the CIT and dismiss the ground of appeal of the assessee.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is an appeal filed by the assessee against the order of the CIT, Cuttack u/s.263 of the Income Tax Act dated 11.3.2014 for the assessment year 2009-2010.
2. Although various grounds of appeal have been raised by the assessee in its grounds of appeal, but the only issue required to be adjudicated before us is as to whether the CIT is justified in assuming jurisdiction u/s.263 of the Act setting aside the order of the assessment under section 143(3) and directing the Assessing Officer to redo the assessment.
3. The facts in brief are that the assessee is a local body authority assessed in the status of artificial juridical person. For the assessment year under consideration, the return of income was filed on 30.9.2009 disclosing total income of Rs. Nil after setting off of the brought forward losses of earlier years. The Assessing Officer completed the assessment u/s.143(3) of the Act on 30.1.2011 determining the total income at Rs. Nil after setting off of brought forward losses, inter alia, disallowing Rs. 40,482/- towards deduction of FBT.
4. The Commissioner of Income Tax, on verification of records of the assessee, found that the assessee had debited Rs. 3,50,00,000/- in the profit and loss account towards land premium. However, in the profit and loss account, neither any sale proceed of land was credited nor the premium value of the land was disclosed as the closing stock. The CIT was of the opinion that the land premium paid and debited to profit and loss account is not a revenue expenditure but a capital expenditure and hence the same is not admissible for deduction u/s.37(1) of the Act. He, therefore, opined that the Assessing Officer has not examined the above aspects while completing the assessment. Hence, he considered the assessment order u/s.143(3) is erroneous insofar as prejudicial to the interests of the revenue. Accordingly, a show cause notice u/s.263 of the Act was issued to the assessee directing to explain as to why the assessment order dated 30.11.2011 should not be cancelled.
5. The assessee submitted that the land premium of Rs. 3,50,00,000/- was paid to the Government of Odisha towards enhanced cost of land for the lands already acquired in earlier years and the lands were already sold to different persons. Therefore, no lands were left to be shown as closing stock.
6. The CIT considered the submissions of the assessee and noted that it has been judicially settled that premium paid for land is capital expenditure and periodical rentals paid is revenue expenditure and referred to the judicial decisions in the impugned order. He observed that the Assessing Officer has not examined this aspect while framing the assessment order u/s.143(3) of the Act. Therefore, in the opinion of the CIT, the assessment order is erroneous in so far as it is prejudicial to the interests of the Revenue. Hence, he in exercise of his power conferred u/s.263 of the Act, set aside the assessment order and restored the same to the file of the Assessing Officer with a direction to redo the assessment after affording reasonable opportunity of hearing to the assessee after examining the following issues:
“1. When and what is the extent of land acquired by the assessee from Government of Odisha with reference to which land premium of Rs.3,50,00,000/- has been demanded and the rate at which said land was acquired.
2. When and to whom such lands were sold/distributed.
3. When the demand notice for payment of land premium was received from the Government of Odisha.
4. If land premium payments are considered capital expenditure whether the receipts on account of transfer fees and stamp duty would constitute capital receipt.
7. Aggrieved by the order of the CIT, the assessee has filed appeal before the Tribunal.
8. Before us, ld A.R. submitted that the assessment was completed u/s.143(3) of the Act and the Assessing Officer called for the books of account and been verified and examined. The Ld A.R. filed the assessment order u/s.143(3) of the Act and submitted that the Assessing Officer made dis allowance and, therefore, the CIT has erred in revising the order though it is not prejudicial and erroneous to the interests of the Ld A.R. explained that Rs. 3,50,00,000/- was paid to Government of Odisha towards lands premium which were sold in earlier years, which is fully allowable expenditure u/s.37 of the Act as the land is not a fixed asset.
9. Contra, ld D.R. relied on the order of the CIT and explained that in the assessment proceedings, the Assessing Officer has not discussed regarding land premium paid to Odisha Government and, therefore, the CIT is justified in setting aside the assessment order by invoking his power conferred u/s.263 of the Act.
10. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. The sole disputed issue is with respect to setting aside the assessment order by the CIT in respect of land premium of Rs. 3.,50,00,000/-. On perusal of assessment order u/s.143(3) of the Act dated 30.11.2011, we find that no discussion was made by the Assessing Officer regarding land premium paid of Rs. 3,50,00,000/- to Government of Odisha. No enquiries were also made by the Assessing Officer. Prima facie, it appears that the CIT found that the order passed u/s.143(3) of the Act is without making inquiries on this particular disputed issue, which is raised in the revision proceedings. Ld A.R. submitted that the order of the Assessing Officer is not erroneous and prejudicial to the interests of the revenue and only demonstrated before us that Rs. 3,50,00,000/- was paid to Government of Odisha towards land premium which were sold in earlier years, which is fully allowable expenditure u/s.37 of the Act as the land is not a fixed asset but stock in trade. We are of the considered opinion that the explanations submitted before us are to be verified by the Assessing Officer and the CIT having dealt on this issue and has remitted to the file of the Assessing Officer for fresh adjudication as the facts are not emanating out of assessment order. We rely on various judicial pronouncements, wherein, it was held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. It was also held that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return of income. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper inquiry. Failure to make inquiry in such circumstances would make the assessment order erroneous. The Hon’ble Apex Court in the case of Smt. Tara Devi Aggarwal vs. CIT, 88 ITR 323 (SC), has held that the CIT may consider an order of the AO to be erroneous not only it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make enquirers which are called for in the circumstances of the case. Recently, the Hon’ble Apex Court in the case of Denial Merchants Pvt Ltd. vs ITO in Special Leave (C) No.(s) 23976 /2017 and others order dated 29.11.2017 has upheld the judgement of Hon’ble Calcutta High Court passed on 10.4.2017 in G.A. No. 599/2016, dismissing the special leave petition observing that the CIT after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry.
11. In the present case, the CIT has directed the Assessing Officer to make necessary examination regarding the extent of land acquired by the assessee with reference to which land premium of Rs. 3,50,00,000/- was demanded and rate at which said land was acquired and to whom the lands were sold and land premium was received and such receipts on account of transfer fees and stamp duty would constitute capital receipts. We are of the opinion that the Assessing Officer will make inquiries as directed by the CIT and make fresh assessment. Accordingly, we uphold the order of the CIT and dismiss the ground of appeal of the assessee.
13. In the result, appeal filed by the assessee is dismissed.
Order pronounced on 5/03/2018.
