CUTTACK DEVELOPMENT AUTHORITY,CUTTACK vs. CIT, CUTTACK, CUTTACK

` IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No. 361/CTK/2014 Assessment Year : 2009-2010

Cuttack Development Vs. CIT, Cuttack Authority, Arunodaya Market, Cuttack PAN/GIR No.AACHC 0247 F (Appellant) .. ( Respondent)

Assessee by : Shri B.K.Mohapatra AR Revenue by : Shri Piyush Kolhe, CIT DR

Date of Hearing : 28/02/ 2018 Date of Pronouncement : 5 /03/ 2018

O R D E R Per Pavan Kumar Gadale, JM 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.

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.

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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.

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.

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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.

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.

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before the Tribunal.

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 disallowance and, therefore, the CIT has erred in revising

the order though it is not prejudicial and erroneous to the interests of the

revenue. 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.

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.

authorities and materials available on record. The sole disputed issue is

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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 enquiries 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

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income. When the circumstances of the case are such so as to provoke an

enquiry, it is his duty to make proper enquiry. Failure to make enquiry 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 enquiries 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 enquiry.

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 enquiries as

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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.

Order pronounced on 5 /03/2018. Sd/- sd/- (N.S Saini) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIALMEMBER Cuttack; Dated 5 /03/2018 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : CDA, Cuttack 2. The Respondent. CIT, Cuttack 3. The CIT(A)- 4. Pr.CIT- 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

BY ORDER,

SR.PRIVATE SECRETARY ITAT, Cuttack