Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
PER PAWAN SINGH, JUDICIAL MEMBER:
1. This appeal by assessee under section 253 of the Income-Tax Act (“The Act”) is directed against the order of ld. Principle Commissioner of Income- Tax (for short the ld. PCIT (A)-6), Mumbai dated 03.03.2015 passed under section 263 of the Act for Assessment Year (AY) 2010-11. The assessee has raised the following grounds of appeal:
The order passed by the learned Commissioner of Income Tax u/s 263 of the Income Tax Act, 1961 is void ab-initio because of lack of jurisdiction on the part of the learned Commissioner of Income Tax in as much as the Assessment Order sought to be revised by him, is neither erroneous nor prejudicial to the interest of revenue.
2. On the facts and circumstances of the case, the order of the learned Commissioner of Income Tax u/s 263 of the IT Act, 1961 is wrong, invalid, illegal & bad in law.
- M/s CR Retail Malls (India) Ltd.
Brief facts of the case are that the assessee-company is engaged in Film exhibition, Cinema Advertisement etc., filed its return of income for relevant AY on 15.10.2010 declaring total income at Rs. 8,26,784/-. The assessment was completed on 18.03.2013 under section 143(3) of the Act. The Assessing Officer passed the assessment order by making certain additions/disallowances. Subsequently, the assessment was revised by ld. PCIT on 03.03.2015. Notice under section 263 dated 22.07.2014 was served on the assessee. In the notice, the ld. PCIT raised the following issue: (i) That assessee claimed credit of TDS of Rs. 2,54,69,821/-. In support of TDS credit attached TDS certificate. The credit was claimed on details available as per Form-26AS. However, the advertisement income in respect to those entities was neither offered to tax nor any explanation was given as to why credit for those TDS shown in Form 26AS claimed through income was not offered to tax. It was further mentioned that it would be reasonable to infer that from the facts on record, no explanation with regard to “Income not offered to tax” of Rs. 61,31,808/- has been obtained in the course of assessment proceeding. Further, credit based on TDS certificates when no credit
(less credit) is available in the Form 26AS, has been given without due and proper verification.
- M/s CR Retail Malls (India) Ltd. (ii) The assessee claimed depreciation of Rs. 6,03,92,623/- on Cinema Building. The value of the lease-hold building includes premium of Rs. 46,87,50,000/- for obtaining lease of 900 years, which does not require knowledge rocket science to conclude that no building can survive for 900 years. The premium has been paid for acquiring possession for land for 900 years on which superstructure has been built and not for obtaining “lease for superstructure, simplicitor” for 900 years. The payment of consideration of Rs. 46,87,50,000/- is paid as a premium for obtaining lease for 900 years for purchase/possession of land alone. Depreciation of superstructure would amounts to granting of depreciation on the amount paid for land. The AO failed to carry out relevant and meaningful enquiry as warranted by the facts of the case which tantamount to assessment order being erroneous and prejudicial to the interest of Revenue. (iii) The assessee claimed deduction for portion of ticket amount as entertainment tax. The assessee not offered the same as income and treated as capital receipt covered by Capital subsidy scheme of Government of Maharashtra for Multiplex Theatre. The AO treated it as revenue receipt without examining the scheme. The AO concluded on the basis of ticket issued by assessee, wherein no separate collection for entertainment tax. Thus, there is failure on the part of - M/s CR Retail Malls (India) Ltd.
AO to carry out this relevant and meaningful enquiry and the order passed is erroneous and prejudicial to the interest of Revenue. 3. The assessee filed its reply dated 05.10.2014. In the reply the assessee contended that the assessee has entered into agreement with M/s Phoenix Mills Ltd. on 22.07.2015 whereby M/s Phoenix Mills Ltd. granted a sub- lease of Multiplex Cinema unit to the assessee for a period of 900 years.
After making alteration to the Multiplex cinema unit, installing the fit out (fixture) equipment and other asset necessary for running Multiplex Cinema. From AY 2009-10, the assessee has started exhibition of films from the said Multiplex cinema. The assessee claimed depreciation to Multiplex Cinema unit for the first time in 2009-10 and thereafter reducing amount from cost of Multiplex cinema, net written down value (WDV) was carried forward to AY 2010-11. For AY 2010-11, the WDV of Multiplex cinema was carried forward as per the provision of section 43(6) and depreciation was claimed. During the assessment, the AO called various details and particular regarding the working of depreciation on fixed asset, which was furnished along with Audit Report. Depreciation for the first time claimed in the year under consideration, is not the first year in which the depreciation for building is claimed. Such claim was made in AY 2009-
10. Therefore, for AY 2010-11, the AO was not required to make any enquiry in view of the specific provision of section 43(6) of the Act defining the WDV of depreciable asset. The AO has simply to follow it in the 4 M/s CR Retail Malls (India) Ltd. following order which the AO has done no error was committed by the AO, as the AO has no occasion to make such enquiry. In alternative, the assessee has also made detailed note below the schedule of fixed asset in its Audit Report about the claim of depreciation and the AO being satisfied therewith has thought it fit not to discuss the same elaborately in the assessment order, the assessee also placed on record the copy of sub-lease etc. On other issue related with claim of TDS, it was contended that the assessee also filed TDS certificate in Form-16A. Before revising the order the Revenue authorities has to show that order is erroneous and prejudicial to the interest of Revenue. The show-cause notice dated 22.07.2014 reveals that the AO erred in not considering the difference of income reported in Form 26AS and corresponding income of books of account. The assessee has furnished all TDS in the form of Form 16A. The assessee furnished proper reconciliation of income as per Form 26AS and as per books. The AO has not committed any error as he has verified the books and certify himself with the returned income. For third issue, with regard to treating the entertainment tax as revenue receipt, the assessee contended that the assessing officer decided issue after examining the nature of subsidy being capital in nature. 4. The contention of assessee was not accepted by ld. PCIT. The ld PCIT concluded that the assessee obtained the sub-lease for 900 years which includes a bundle or right over the piece of land with superstructure in form of Multiplex cinema unit is constructed. The assessee has right to mortgage, 5 ITA No. 2583/M/2015- M/s CR Retail Malls (India) Ltd. charge, transfer, assign, sub-let income encumber, create third party right over the Multiplex cinema unit, the assessee is free to construct whatever superstructure they wants over the land during the lease period. About of objection of assessee that assessee also claimed depreciation on lease-hold building during the AY 2009-10. The ld. PCIT concluded that the case was not taken up for scrutiny for AY 2009-10 and the only occasion with the AO to examine was in course of assessment for AY 2010-11. Thus, the AO was duty bound to look into the substance of transaction on first available occasion. It was further concluded that the AO was duty bound to examine the income offered for tax corresponding with TDS certificate attached along with return of Form No. 26AS. The AO acted in a mechanical way and failed to co-relate income corresponding to TDS certificate in Form 26AS. There is discrepancy to the tune of Rs.61,31,808/-, to the details which were given in the show-cause notice. The AO has not examined the scheme of Government granting subsidy for relief to the Multiplex Theater.
The AO on the basis of cinema ticket issued by the assessee-company disallowed the claim of deduction for Entertainment Tax; the assessee has shown income net of “Entertainment Tax” from ticket sales. Ticket sales do not show any portion towards Entertainment Tax. Thus, entire amount was required to be offered for tax, the AO was duty bound to examine and bring the said tax to the income. The ld. PCIT set-aside the assessment order and directed the AO to re-frame the assessment order after examining all three 6 M/s CR Retail Malls (India) Ltd. issues. Aggrieved by the order of ld. PCIT, the assessee has filed the present appeal before us.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The learned AR of the assessee argued that assessment order under section 143 (3) was passed on 08.03.2013. The assessing officer passed the order after examining all the issue raised by learned PCIT in its notice under section 263. The order passed by assessing officer is neither erroneous not prejudicial to the interest of revenue. The mare facts that the assessment order passed by assessing officer was short would neither mean failure on his part in not examining the matter as examined by ld PCIT. It was argued that learned PCIT cannot delegate his power to the assessing officer to examine the issues. It is the power of ld Commissioner of Income -tax only to examine the issue himself, if the order is erroneous or it is prejudicial to the interest of the revenue. To support his contention the learned AR of the assessee relied upon the decision of Delhi High Court in case of CIT Versus Vikas polymers[2012] 341 ITR 537 (Delhi). It was argued that before setting aside the issue the learned PCIT should examine the issue first and then to set aside the same to the assessing officer. To support his submission the learned AR of the assessee relied upon the decision of Tribunal in Gaurav Mathrawala Vs CIT in ITA 2378/M/2015 dated 6 January 2016, AV Industries Versus ACIT in ITA 7 ITA No. 2583/M/2015- M/s CR Retail Malls (India) Ltd. 3469/M/2010, HSBC Asset Management Versus DCIT in ITA 2028/M/2009 dated 15 June 2001, Bharat Homes Ltd Vs CIT in ITA 6792/M/2011 dated 27 May 2016 and the decision of Hon’ble Gujarat High Court in JMC Projects (India) Ltd Versus ACIT in ITA 3434 of 2015 dated 21 December 2015. On merit it was argued that assessee entered into agreement with Phoenix Mills Ltd whereby Phoenix Mills Ltd agreed to grant sub-lease of Multiplex Cinema unit to the assessee for a term of 900 years. After availing the sub-lease and making necessary improvements in Multiplex units and installing the fit outs equipment fixture and other asset necessary for running the Multiplex cinema the assessee started its business of exhibiting films from the said Multiplex cinema. The assessee claimed depreciation on Multiplex Cinema unit for the first time in assessment year 2009-10 and thereafter, reducing the depreciation amount from the cost of Multiplex Cinema unit; net written down value was carried forward for assessment year 2010-11. During the assessment proceedings the assessing officer called the detail particulars from time to time about working of depreciation on fixed asset in accordance with the Income-tax Rules. The assessee filed all details along with Audit report. The assessing officer after examining all the details allowed the depreciation. The assessee also furnished the all TDS certificates issued in the form No. 16A. With regard to third issue relating to entertainment tax treated as Capital subsidy, it was argued that assessing officer decided the nature of the subsidy after 8 M/s CR Retail Malls (India) Ltd. ascertaining from the scheme. The assessing officer was conscious about the nature of subsidy being capital in nature; the issue was properly examined by the assessing officer while passing assessment order. It was argued that the order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue.
On the other hand the learned DR for the revenue supported the order of learned PCIT. It was argued that no details were called by assessing officer nor the assessing officer examined such claims of the assessee, on which the order is set-aside. Section 263 of Income tax Act empowers the Pr CIT or CIT to examine if the order passed by the assessing officer is in accordance with law or not or the assessing officer has not made adequate enquiry necessary related with the claims. It is not necessary even to issued notice to the assessee on a specific charge. The Commissioner of income tax has to give opportunity of hearing before revising the order, in case the order passed by assessing officer is erroneous and prejudicial to the interest of revenue. It is the duty of Pr Commissioner of income tax to examine whether the assessing officer has examined the issue which was incumbent upon the assessing officer to examine the same. It was further argued that this was the first year for scrutiny assessment for examination of alleged sub-lease of Multiplex. The learned DR further supported the order of Pr Commissioner of income tax Act on the remaining two issue revised in the impugned order. In support of his submission the learned DR for the 9 ITA No. 2583/M/2015- M/s CR Retail Malls (India) Ltd. revenue relied upon the decision of Hon’ble Supreme Court in case of CIT Versus Amitabh Bachchan [2016] 69 taxmann.com 170(SC) and decision of Andhra Pradesh High Court in CIT versus Varanasi Khanta Rao [2015] 59 taxmann.com 175(Andhra Pradesh).
We have considered the rival submission of parties and have gone through the orders of authorities below. We have also perused the various decision relied by the respective learned representative of the parties. The perusal of grounds of appeal
raised by assessee in the present appeal reveals that the assessee has challenged only the validity of order passed by learned PCIT under section 263 of Income tax Act. The assessing officer passed the order of assessment under section 143(3) on 18. March 2013. The perusal of assessment order reveals that assessing officer has not made any reference with regard to the verification of TDS certificates and the claim of depreciation of asset, claimed by assessee with respect to superstructure of multiplex cinema. The perusal of the assessment order reveals that the assessing officer has not raised any query with regard to the nature of asset, lease hold period of building of Multiplex Theater. Further, the assessee claimed credit of TDS of Rs. 2,54,69,821/-, the assessing officer has not made any inquiry nor verified the TDS certificates and the books of account.
The assessee has not offered the advertisement income to tax. The assessee claimed deduction of portion on ticket amount as entertainment tax without offering it to income by treating it as capital receipt. The assessing officer 10 M/s CR Retail Malls (India) Ltd. allowed the payment as revenue expenditure without examining the scheme of subsidy of Maharashtra Government for entertainment tax vis a vis its taxablity. The assessing officer impliedly allowed the relief to the assessee without making any discussion on the issues.
The assessing officer is a quasi judicial authority and his order is amenable to appeal or revision. If nay finding of the assessing officer goes against the assessee, the order is amenable to statutory appeal provided under the Act. However, if the order is prejudicial to the interest of revenue, the remedy of appeal is not available to the revenue. Therefore section 263 is enacted to empower the Commissioner to exercise the power to invoke jurisdiction conferred under section 263 of the Act. Therefore, the order passed by assessing officer must be speaking and substantial. If the order passed by assessing officer is subversive of the administration of revenue, it must be regarded as erroneous and prejudicial to the interest of revenue. And the revenue is bound to suffer. In our considered view the order is prejudicial to the interest of revenue as per the provision of section 263; (i) if the order sought to be revised was passed without considering and referring the facts or contains error of facts or law, on the face of it, (ii) If the order is based on incorrect assumption of law or facts or allowed the relief silently, or (iii) If the order passed by assessing officer in a mechanical way thereby accept what the assessee has stated while furnishing the return of 11 ITA No. 2583/M/2015- M/s CR Retail Malls (India) Ltd.
income and failed to make requisite enquiries or does not examine the genuineness or legitimacy of the claim which may be called for as per the facts of the case. 9. In the present case the assessing officer mechanically accepted the claim with regards to the depreciation on fixed asset/ Multiplex Building and on the issue of TDS certificate, if the corresponding income was offered to tax as no reconciliation was made. Further the assessing officer without calling and examining the scheme of Government of Maharashtra on entertainment tax treated the entertainment tax same as revenue receipt.
The ld. AR for the assessee argued that the assessing officer had considered the relevant facts and the material while passing the assessment order. According to ld AR for the assessee, the mare fact that assessment order passed by assessing officer was short is neither mean failure on his part in not examining the matter carefully nor would be erroneous so long as view taken by him was possible view. In our view the submission of ld. AR for the assessee is not correct and must fail for the reasons we have explained hereinabove.
In Malabar Industrial Co. Ltd Vs CIT (243 ITR 83) the Hon’ble Apex Court held; “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake 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 12 M/s CR Retail Malls (India) Ltd.
satisfy the requirement of the order being erroneous. In the same category falls the order passed without applying the principles of natural justice without application of mind.” 12. In the present case the order sought to be revived reflects that it was passed in mechanical way and without application of mind by assessing officer.