CELEBI DELHI CARGO MANAGEMENT INDIA PVT. LTD.,NEW DELHI vs. PR. CIT, NEW DELHI

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

“I draw your kind attention to the assessment proceeding u/s 143(3) of the I.T. Act, 1961 for the A.Y. 2011-12. dated 14,03.2014 in the case of M/s Celebi Delhi Cargo Terminal Management India Pvt. Ltd. The Company in the return of income/ acknowledge was filed declaring gross total income of Rs. 85.44,38.071/- against which it claimed deduction under chapter VIA at Rs. 83,15.39.056/-. T he total income declared was Rs. 2,28,99,015/- Assessment proceedings commenced on or after 19.07.2013. A Questionnaire dated 2.2.08.2011 was issued and duly served on the assessee. The assessing officer in the body of the assessment order in paragraph 2 had reported as under:-

"The company is engaged in the business of infrastructure Facilities Provider. Details with regard to the same were called for, examine placeder discussion, returned income of Rs. 2,28,99,015/- is accepted. ”

The assessee in this case has claimed deduction u/s 801A as reflected in the body of the assessment order. The DC IT Circle 5(1), New Delhi vide F. No. DCIT/Circle 5(2)/2015-16/714 dated 03.03.2016 has moved a proposal for invoking provision of section 263 of the I.T. Act, 1961 for the captioned A.Y. as the company had failed to place on assessment record all the supporting and relevant documents relating to the nature of business activities having been actually conducted during the F.y. 2010-11 relevant to A.Y. 2011-12. On account of non compliance and non submission of the documents asked for in this case from time to time vide notice u/s 142(1) of the I.T. Act dated 22.08.2013 issued in this case by the assessing officer and duly served upon the assessee. The company failed to adduce the supporting evidence as relevant to the deduction claimed u/s 80IA. In the return of income under the head taxes paid it has claimed credit for TDS of Rs. 8,78,93,767/- as Tax deducted at Source. The receipt of income under the corresponding provision of the I.T. Act, 1961 which were a subject matter of deduction of the TDS were not placed on record. Keeping all the above facts and the assessment record for the A.Y. 2011-12, the assessment order u/s 143(3) dated 14.03.2014 appears to be prejudicial to the interest of revenue.

In accordance with the section 263 of the Income Tax Act, 1961. I hereby require you to appear before the undersigned in Room No. 394, 3ld Floor, C.R. Building at 11 A.M. on 11.03.2016 and to it your reply on the issue on or before the said date.”

6 account all relevant facts and after making necessary enquiries and verification.

"A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous ".

“2. Please furnish the copy of Income tax return Ack for assessment year 2010-11 and 2011-12 alongwith its computation of income.

19. Details of deduction claimed from the taxable income.”

12. The assessee filed a detailed reply and submitted the documents with reference to the aforesaid questionnaire on 05.09.2013. At point No. 19, details of deduction claimed from the taxable income were furnished alongwith the following Note on the Business:

“The Airport Authority of India ("AAI"), an organization working under the Ministry of Civil Aviation that manages most of the airports in India, and Delhi International Airport Pvt. Ltd (DIAL} entered into an Operation, Management and Development Agreement dated 4 April 2006 (the "OMDA"} whereby AAI has granted to DIAL the exclusive right and authority during the term of the OMDA to operate, maintain, develop, design, construct, upgrade, modernize, finance and manage the Indira Gandhi International Airport at New Delhi, India.

Pursuant to the Concession Agreement dated 24 August 2009, DIAL granted Celebi Hava Servisi A.S ("Celebi") the rights for up gradation, modernization, financing, operation, maintenance and management of the cargo terminal at the airport for a term of 25 years.

Celebi was incorporated M/s Celebi Delhi Cargo Terminal Management India Private Limited (the Concessionaire) as a special purpose company for the sole purpose of implementing the Concession Agreement.

Pursuant to the Concession Agreement, Celebi is responsible to upgrade, modernize and finance the Cargo Terminal and operate, maintain and manage the Cargo Terminal (approximately 70,000 sq.mt area comprising of warehouses for handling export, import and perishable jcafgo) for a period of 25 years until 31 March 2034. The company earns its revenue from warehouse management.”

FY-2011-12 ; FY-2009-10 FY-2010-11 ; AY-2010-11 AY-2011-12 AY-2012 13 U/S 80 S ( 50% of Donation paid 250,000 U/s 80IA 831,539,055 154,863,614 Total Deductions 250,000 831,539,055 154,863,614

“A note on the claim of deduction claimed u/s 80IA of the Act mentioning exact clause and sub-section under which it is claimed and a copy of the agreement with the authority for execution of services rendered by your company. Also submit a copy of report of your Chartered Accountant on Form No. 10CCB.”

16. For further verification, the Assessing Officer once again issued a notice dated 8.1.2014 in which question No. 9 read as under:

“Detailed note of on the deductions u/s 80IA alongwith copy of agreement for operating and maintenance of infrastructure facility,” and

17. Question No. 13 read as under:

“The revenue from rental contract qualify for deduction u/s 80IA of the Act. Please explain the activities wise revenue income.”

“The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order

12 can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles".

It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the 15 authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority.

The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income- tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order.”

16 22. The Hon'ble High Court of Gujarat in the case of CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed as under:

“if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing . A.Y. 2009-10 Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The Respondent- Assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted.”

17 “The parameters and principles laid down by the Courts which govern the exercise power by the Commissioner under the provisions of Section 263 of the Act are as follows:

(i) The power is supervisory in nature, whereby the Commissioner can call for and examine the assessment records.

(ii) The Commissioner can revise the assessment order if the twin conditions provided in the Act are fulfilled, that is, that the assessment order is not only erroneous but is also prejudicial to the interest of the Revenue. The fulfilment of both the conditions is an essential prerequisite. [See Malabar Industrial Co. Ltd vs CIT (2000) 243 ITR 83(SC)]

(iii) An order is erroneous when it is contrary to law or proceeds on an incorrect assumption of facts or is in breach of principles of natural justice or is passed without application of mind, that is, is stereo-typed, in as much as, the Assessing Officer, accepts what is stated in the return of the assessee without making any enquiry called for in the circumstances of the case, that is, proceeds with „undue haste‟. [See Gee Vee Enterprises vs ACIT, Delhi-I & Ors. (1975) 99 ITR 375]

(iv) The expression "prejudicial to the interest of the Revenue" while not to be confused with the loss of tax will certainly include an erroneous order which results in a person not paying tax which is 18 lawfully payable to the Revenue. [See Malabar Industrial Co. Ltd. (supra)].

(v) Every loss of tax to the Revenue cannot be treated as being "prejudicial to the interest of the Revenue". For example, when the Assessing Officer takes recourse to one of the two courses possible in law or where there are two views possible and the Commissioner does not agree with the view taken by the Assessing Officer which has resulted in a loss. [See CIT vs Max India Ltd. (2007) 295 ITR 282 (SC)]

(vi) There is no requirement of issuance of a notice before commencing proceedings under Section 263of the Act. What is required is adherence to the principles of natural justice by granting to the assessee an opportunity of being heard before passing an order under Section 263. [See Electro House (supra)].

(vii) If the Assessing Officer acts in accordance with law his order cannot be termed as erroneous by the Commissioner, simply because according to him, the order should have been written „more elaborately‟. Recourse cannot be taken to Section 263 to substitute the view of the Assessing Officer with that of the Commissioner. [See CIT vs Gabriel India Ltd (1993) 203 ITR 108(Bom)]

(viii) The exercise of statutory power under Section 263 of the Act is dependent on existence of objective facts ascertained from prima facie material on record. The evaluation of such material

19 should show that tax which was lawfully exigible was not imposed. [See Gabriel India Ltd (supra)]

In the instant case, it was quite clear that after the assessee had filed his return on 31.10.2002, a notice under Section 143(2) of the Act was issued for the purposes of carrying out a scrutiny in respect of the return of income filed by the assessee. In the course of scrutiny, as indicated in the impugned judgment of the Tribunal, several communications were addressed by the assessee to the Assessing Officer whereby, the information, details and documents sought for, were adverted to and filed. The Tribunal in order to satisfy itself, as to whether the Assessing Officer had sought for details and carried out an enquiry in respect of transactions which were entered into by the assessee in the course of his business, called for the assessment record and scrutinized the same. The Tribunal returned a finding of fact that the assessee had submitted copies of documents and details with regard to various matters, including, in particular, with respect to the properties at Malviya Nagar as well as those located at Gitanjali Enclave and Defence Colony. The issue that has been raised before us is that, since the assessment order adverted to only Malviya Nagar property and was silent with respect to the properties located at Gitanjali Enclave and Defence Colony; on this short ground alone the Revisional order of Commissioner ought to be sustained. It would be important to remind ourselves that while the supervisory power of Commissioner is wide, it cannot be invoked to 20 substitute the view of the Assessing Officer. If upon a perusal of the record filed with the authorities below the Tribunal formed a view that there had been an enquiry which had not been conducted with „undue haste‟ surely we would be slow to hold otherwise. More so when, this conclusion, the Tribunal had arrived at after examining the record which the assessee filed with the Assessing Officer during the course of scrutiny. The point to be noted is that on a perusal of the record the Tribunal observed, by reference to a general practice in vogue, that merely because the assessment order did not refer to the queries raised during the course of the scrutiny and the response of the assessee thereto, it could not be said that there was no enquiry and hence the assessment was erroneous and prejudicial to the interest of the Revenue. This observation of the Tribunal, according to us, deserves due weight, as in its vast experience it would have come across several such orders.

21 that there was no „undue haste‟ in examining the material prior to the passing of the assessment order dated 24.03.2005. At least four letters dated 27.04.2004, 22.02.2005, 28.02.2005 and 18.03.2005 were addressed by the assessee to the Assessing Officer giving details, documents and information pertaining to various queries raised by the Assessing Officer. These have been examined by the Tribunal. We have no reason to believe that examination was less than exacting. Therefore, the conclusion of the Commissioner that there was "lack of proper" verification is unsustainable.

There is no requirement under Section 263 of the Act to issue a notice before embarking upon a revisionary proceedings. To that extent the submission of the learned counsel for the Revenue Mr Sanjeev Sabharwal has to be accepted. What is mandated under Section 263 of the Act is that once the Commissioner calls for and examines the record, pertaining to the assessee, and forms a prima facie view that the order passed by the Assessing Officer

22 is both erroneous and prejudicial to the interest of the Revenue, he is obliged to afford an opportunity to the assessee before passing an order, to the prejudice of the assessee. In the instant case, the Commissioner sought to accord such an opportunity to the assessee by putting him to notice as regards aspects which the Assessing Officer had failed to scrutinize. During the course of the revisionary proceedings this was conveyed to the assessee by way of a notice dated 11.05.2006. It is not disputed that in the order dated 18/19.01.2007 the Commissioner has referred to certain other issues which did not form part of the initial notice dated 11.05.2006. To our minds it was always open to the Commissioner to put such issues/discrepancies, found by him based on material on record, to the assessee. It is to be noted, however, that the learned counsel for the assessee vehemently denied that the assessee had been given any opportunity to meet issues other than those to which reference has been made in the Commissioner‟s notice dated 11.05.2006. For this purpose, the learned counsel for the assessee sought to place reliance on the impugned judgment passed by the Tribunal, wherein this aspect of the matter has been discussed elaborately. In order to satisfy ourselves we called upon learned counsel for the Revenue Mr Sanjeev Sabharwal to place on record any communication, order or any other document which would show that the assessee had been given an opportunity to deal with those aspects which did not form part of the initial notice dated 11.05.2006, but were taken into account by the Commissioner while passing his order dated 18/19.01.2007. In this regard, the learned

23 counsel for the Revenue placed on record order sheet entries of the proceedings conducted by the Commissioner. We have already extracted the order sheet entries commencing from 15.06.2005 to 28.06.2006. A perusal of those entries would clearly demonstrate that there is nothing on record which would show that the assessee was given an opportunity to respond to these discrepancies which formed part of the order-in-Revision dated 18/19.01.2007 but were not part of notice dated 11.05.2006. This was put to the learned counsel for the Revenue, who in response fairly conceded that there was nothing on record which would establish the contrary. It was, however, urged by the learned counsel for the Revenue Mr Sanjeev Sabharwal that the assessee would have his opportunity to give satisfactory replies to the discrepancies raised in the Revisional Order before the Assessing Officer and that such an opportunity would meet the requirements of the provision. We are afraid that that is not the position envisaged in law. If one were to permit correction of such a grievous error in the manner suggested it would tantamount to, in a manner of speaking, closing the stable doors after the horse has bolted. The assessments, unless reopened by paying faithful obeisance to statutory provisions and conditionalities provided therein, attain finality on their conclusion. The provisions of Section 263 mandate that an order for enhancing, or modifying the assessment, or cancelling the assessment and directing a fresh assessment can only be passed after giving the assessee an opportunity of being heard and after making or causing to be made

24 such enquiry as is deemed necessary. The threshold condition for reopening the assessment is that before passing an order an opportunity has to be granted to the assessee and, such an opportunity granted to the assessee is a necessary concomitant of the enquiry the Commissioner is required to conduct to come to a conclusion that an order for either an enhancement or modification of the assessment or, as in the present case, an order for cancellation of the assessment is called for, with a direction to Assessing Officer to make a fresh assessment. This defect cannot be cured by first reopening the assessment and then granting an opportunity to the assessee to respond to the issues raised before Assessing Officer during the course of fresh assessment proceedings. To buttress his submission the learned counsel for the Revenue has relied upon the judgment of the Supreme Court in the case of Rampyari Devi Saraogi vs CIT, West Bengal & Ors. (1968) 67 ITR 84. This is a case in which, the order issued by the Commissioner, itself revealed that the assessment was being reopened based on an additional supporting material. The Supreme Court in such fact situation thus ruled that non supply of additional supporting material would not effect the basic issue of assessment being carried out without adequate investigation. In the instant case the Order-in-Revision refers to issues and discrepancies which did not find mention in the initial notice dated 11.05.2006 and not to additional or supporting material as in the case of Rampyari Devi (supra). Therefore, to suggest that it would be sufficient compliance of the provisions of Section 263 of the Act, if an 25 opportunity to respond to the discrepancies mentioned in the Order-in-Revision is given to the assessee in reassessment proceedings before the Assessing Officer, is according to us is completely untenable. It is the requirement of Section 263 of the Act that the assessee must have an opportunity of being heard in respect of those errors which the Commissioner proposes to revise. To accord an opportunity after setting aside the assessment order, would in our view not meet the mandate the Section 263 of the Act. If such an interpretation is accepted it would make light of the finality accorded to an assessment order which cannot be reopened unless due adherence is made to the conditionalities incorporated in the provisions of the Act in respect of such powers vested in the Revenue.

18. In view of our discussion above, we are of the opinion that impugned judgment passed by the Tribunal deserves to be sustained. The findings returned by the Tribunal are pure findings of fact. No substantial question of law has arisen for our consideration. Resultantly, the appeal is dismissed. No order as to cost.”

“Non application of mind to relevant material or an incorrect assumption of facts or an incorrect application of law will satisfy the requirement order being erroneous.”

An enquiry which is just a farce or near pretence of enquiry cannot be said to be an enquiry at all, much less an enquiry needed to reach the level of satisfaction of the Assessing Officer on the given issue. The level of satisfaction would obviously mean that he has conducted the enquiry in a manner whereby he placed on record the material enough to reach satisfaction, which a rationale person, being informed of nuances of tax laws would read after due appreciation of such material.”

“We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently

28 does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because hp has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner.”

The order is pronounced in the open court on 23.10.2018.