M/S Leo Township Developers India ... vs Assessee

"The appeal was against an order dated 28.03.2011 passed by learned Commissioner of Income Tax-IV, Hyderabad, exercising powers under section 263 of the Income Tax Act, 1961 (hereinafter "the Act"). The Commissioner in the order impugned before the Hon'ble Tribunal, dealt with the issue of taxability of Rs.5,01,60,000 in respect of which the

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appellant had entered into Agreement of Sale dt.02.11.2005 with M/s. Leo Edibles and Fats Limited and received advance amount of Rs.36,55,000/-.The advance was towards agreement to sell land to the extent Ac 22.32 Gts for a total consideration of Rs.5,01,60,000/-. The Appellant has not offered the above amount of Rs.5,01,60,000 as the Agreement to sell was conditional upon securing certain permissions, which eventually were not secured, and the Agreement to sell was cancelled with mutual agreement. Though the Appellant has established the above facts with documentary evidence, the learned Commissioner of Income Tax has set aside the assessment and has ordered the Assessing Officer to redo the assessment in the light of findings, observations and directions made by the learned Commissioner. In sum and substance, the direction was to make a de- novo assessment keeping in view the order of the learned commissioner".

3. When the petitioner challenged the order of the ld CIT

before the Tribunal, the Tribunal at para 31 of its order held

as follows:

"31. Even on merit, in our opinion, through the Agreement of Sale dated 2.11.2005, the assessee is entitled to receive Rs. 5,01,60,000/- towards sale consideration of the property and it is accrued to the assessee as the assessee has right to receive the same. As the assessee has been following the mercantile system of accounting and the whole amount of sale should be considered as accrued to the assessee. The CIT is justified in directing the Assessing Officer to examine the issue afresh. It is also on record that the amount accrued to the assessee during current year is Rs. 5,01,60,000 and assessee received Rs. 36.55 lakhs on the date of signing the agreement and the balance is to

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be paid within 9 months and get the final conveyance deed is to be registered and land is to be handed over to the purchaser. It is true that the agreement mentions a time frame in which the disputes are to be settled, if any. The Sale Agreement cited supra is not yet cancelled and it is still in force. It is valid and enforceable by law. If there is any dispute it could be settled mutually or before a court of law. It is also be noted that the Sale Agreement was entered 2.11.2005. By 31st March, 2006 i.e., during the financial year relevant to assessment year 2006- 07 nothing has been brought on record to show that the Sale Agreement has become invalid or cancelled or advance money has been refunded by the assessee to the purchaser. In view of the above, we direct the Assessing Officer to carry out the direction given by the CIT and pass consequential order in accordance with law, if it is not already passed.

4. It has been submitted in this petition that findings of

fact in paragraph 31 of the order of the Hon'ble Tribunal

were not required for disposal of grounds of appeal

before it and to that extent the Hon'ble Tribunal has over

stepped its jurisdiction and committed an error. It is

submitted that the Hon'ble Tribunal in this process has put

the assessee in a much worse situation, than what the

assessee was, before filing of appeal. In other words, the

order of the Hon'ble Tribunal resulted into enhancement as

it had straight away come to the conclusion that the

income of Rs.5,01,60,000/- accrued to the assessee.

5. It was further submitted that Commissioner of Income

Tax directed the Assessing Officer to pass an assessment

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order in a particular fashion, which in itself, is illegal. But

it was not a direction to make an addition. However, the

Hon'ble Tribunal by giving finding on facts in

paragraph 31 of its order has over stepped its jurisdiction

which resulted in enhancement of income. It is submitted

that the Hon'ble Tribunal under the provisions of section

254 of the Act has no power to enhance the

income. To this extent, there is an apparent error in the

order of the Hon'ble Tribunal which requires necessary

modification. Further, the observations and findings of the

Hon'ble Tribunal in paragraph 31 of its order were not

required for disposal of appeal before it and therefore

entire paragraph 31 in the order passed by the Hon'ble

Tribunal has to be expunged from the order of the Hon'ble

Tribunal.

6. In the aforesaid circumstances, it was prayed by the

petitioner that the Tribunal may rectify the apparent error in

paragraph 31 of its order dated 18.05.2012 passed by it in ITA

No.1080/Hyd/2011 for A.Y 2006-07 which has the effect of

enhancing the assessment, by expunging the entire findings and

observations contained in Paragraph 31 of its order and limiting

its order to the directions contained in the order of the ld CIT -IV

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Hyderabad (which the Tribunal did in last sentence of Para 30 of

its order) and pass such other order(s) in the interest of justice.

7. We have gone through the order of the Tribunal and

perused the records. We find merit in the petition filed in this

regard. We note that the Tribunal enhanced the income and

therefore, there is an apparent error in the order of the Tribunal

dated 18.05.2012 which requires necessary modification. Further

the grounds of appeal filed by the assessee read as follows:

"1. The ld CIT-IV Hyderabad has completely erred in law and in the facts and circumstances of the case in setting aside the assessment for the A.Y 2006-07 and directing the AO to redo the same in the light of findings, observations and directions in the impugned order u/s 263 dated 28.03.2011.

2. The ld CIT-IV has failed to establish any error in the assessment order dated 24.12.2008 much less any prejudice to the revenue and consequently the assumption of the power u/s 263 as well as the impugned order u/s 263 are without jurisdiction, void ab initio, not sustainable in law and liable to be quashed.

3. The ld CIT-IV ought to have noted that the fact of execution of agreement of sale and receipt of advance for sale of land, the subsequent cancellation of the Agreement of Sale and refund of the monies stands fully proved beyond any doubt. All the evidences on record, including evidences for payments through Bank, the information and explanations furnished during the course of hearings u/s 263 proceedings, the verifications of original documents and records as required by the CIT and produced before him, prove the above facts and there is no scope for any adverse finding. The CIT in such circumstances ought to have dropped the proceedings initiated u/s 263. The CIT is completely

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unjustified in directing the AO to re-do the assessment just to make further roaming and fishing enquiries, when there is not even an iota of evidence available on record to support the suspicion that the advance for sale of land amounting to Rs.5.01 crores received by the assessee is a concluded sale assessable to tax.

4. The ld CIT ought to have noted that an order u/s 263 cannot direct the AO to carry out enquiries and assessment in any particular manner, interfering with the quasi judicial authority of the AO.

5. The ld CIT ought to have noted that in the existence of error and prejudice to the revenue are sine qua non (which have not been established in this case). In such circumstances the order u/s 263 cannot revive the assessment proceedings only to make roaming enquiries and investigations and only to examine whether a particular receipt is assessable to tax.

6. The impugned order u/s 263 is passed on mere suspicions and surmises, extraneous, irrelevant and baseless findings and observations, arbitrary assumption of power and therefore cannot disturb the assessment which has reached a quietus after due process of law.

7. For this, and other ground or grounds of appeal may be argued at the time of hearing it is prayed that (a) the impugned order u/s 263 dated 28.03.2011 be quashed and the assessment order u/s 143(3) dated 24.12.2008 be sustained and (b) the AO be restrained from carrying out any assessment proceedings in pursuance of the impugned order u/s 263 till the disposal of this appeal filed before the Hon'ble ITAT".

8. From the reading of the grounds of appeal, we are of the

opinion that para 31 of the order dated 18.05.2012 is not

required for disposal of appeal before the Tribunal. In these

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circumstances, we are of the opinion that the entire para 31 of

the Tribunal's order be deleted and the Tribunal order shall end

with Para No.30 and Para No.31 shall be read as follows:

"31. In the result appeal of the assessee is dismissed".

9. In the result miscellaneous application filed by the assessee

is allowed.

Order pronounced in the Open Court on 20th March, 2015.

Sd/- Sd/- (B. Ramakotaiah) (Asha Vijayaraghavan) Accountant Member Judicial Member

Hyderabad, dated 20th March, 2015.

Vnodan/sps Copy to:

1. M/s. Leo Township Developers India Pvt. Ltd Flat No.304, Minar Apartments, Deccan Towers, Basheerbagh Hyderabad 500001

2. The Income Tax Officer Ward 16(1) Hyderabad

3. The CIT(A)-IV Hyderabad

4. The CIT - IV Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

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