Technopolis Knowledge Park Ltd, Mumbai vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण "ई ई" खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'E' BENCH सव ौी जोिग दर िसंह , याियक सदःय एवं राजे ि ,लेखा सदःय Before S/Sh.Joginder Singh, Judicial Member & Rajendra,Accountant Member आयकर अपील सं/.ITA No.199/Mum/2009,िनधा िनधा रण वष /Assessment Year-2004-05 M/s.Technopolis knowledge Park ltd. Commissioner of Income Tax- Eruchshaw Building,4th floor, बनाम 7,Aaykar Bhavan, 249,Dr.D N Road,Mumbai-400001 Mumbai-20 PAN:AABCT0524G (अपीलाथ&/ Assessee) (ू(यथ& / Respondent) िनधा )रती ओर से/Assessee by : Ms. Komal राजःव क, ओर से/ Revenue by : Shri Manjunatha Swamy सुनवाई क, तार-ख/ Date of Hearing : 03-02-2015 घोषणा क, तार-ख / Date of Pronouncement : 11-03-2015 आ यकर अ िधिनयम, िधिनयम 1961 क, धारा ( 1 ) 254 के अ तग त आदे श Order u/s.254(1)of the Income-tax Act,1961(Act) Per Rajendra, A.M.लेखा सदःय राजे ि के अनुसार:

Challenging the order of CIT-7,Mumbai,passed u/s.263 of the Act,the assessee has raised following grounds of appeal:

On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax has erred in holding that the assessment order dated 15/12/06 passed by Additional CIT was erroneous and prejudicial to the interest of revenue.

(i) The learned CIT erred in directing the Assessing Officer to work out the capital gains on sale of property, being 2nd floor -Philips area,adopting the sale consideration of Rs. 27,60,27, 127/- as against Rs.24,88,14,199/- adopted by the appellant.

(ii)(a)He erred in holding that the appellant was not justified in excluding the sale value of 41 garages amounting to Rs.1,23,00,000 from the total sale consideration of Rs. 27,60, 27,127/- as the same belonged to M/s THDC Ltd. and offered to tax by said company, who is also assessed to tax by the same officer under the same CIT.

(b)He failed to appreciate that the appellant was not the owner of garages and hence the consideration for garages was rightly reduced from the total sale consideration of the property while arriving at the capital gain/(loss) assessable in the hands of appellant.

(iii)(a)The learned CIT erred in holding that the appellant was not justified in reducing unexpired lease rent of Rs.1,49,12,928/- from the total sale consideration of the property while working out the capital gain/loss from sale of property.

(b)He failed to appreciate that cost of asset is deductible while arriving at capital gains and accordingly the appellant rightly reduced the cost of land i.e. unexpired lease rent of Rs.

1,49,12,928 from the sale consideration to arrive at taxable capital gains. He failed to appreciate that the appellant had taken the land on lease from Nelco Ltd. which further enabled it to effect construction thereon and as such the license fee was paid towards lease of land on which construction was effected through independent contract. He failed to appreciate that license fees was given for 11 years and hence each year it was being written off @ 1/1 1 in the books of accounts following Accounting Standards, though no expenditure was claimed as deductible for tax purposes.

The learned Commissioner of Income tax erred in directing the AO to modify the computation of house property income so as to exclude loan processing charges of Rs. 15,56,250/- from the interest on the ground that it is not deductible u/s. 24(b) of the Income tax Act not being interest proper ignoring the statutory provisions of law i.e. definition of interest u/s 2(28A) of the Income Tax Act, 1961.

ITA/199/Mum/09/TKPL-04-05

(i) The learned CIT erred in observing that the amount paid by the appellant company to Nelco and THDC Ltd. against the right to exploit premises and create market in respect of the said premises was capital in nature and was not deductible as expenditure against license fee receipt while working out the income from business.

(ii) He failed to appreciate that the amount paid to Nelco and THDC was in the nature of license fees and the same is spread over a period of 10 years for the purpose of claiming deduction in accordance with the matching concept.

(i) He erred in holding that the income being license fees from leased premises was assessable under the head income from other sources.

(ii) He failed to appreciate that the appellant is engaged in the business of managing a business centre and therefore license fees receipt was correctly assessed under the head profits and gains from business/profession.

The appellant craves to leave to add, alter, amend or delete any of the aforesaid grounds of appeal."

Before proceeding further,we would like to give the history of the adjournments sought by the assessee for last five years.

For the first time the matter was fixed hearing on 19.11.2009 and it was adjourned at the request of the assessee.On that day,both parties were informed that matter would be heard on 14.01.2010 but,at the request of the assessee,the matter was again adjourned to 02.02.2010.On that day assessee again requested for adjournment.Accordingly,the assessee was given last opportunity to argue the case and matter was adjourned to 05.04.2010.On that day assessee again requested for adjournment and matter was adjourned to 02.06.2010.After that on several occasions(02.06. 2010, 02.10.2011, 31.03.2011,21.11.2011,09.01.2012,06.02.2012,06.12.2012) the assessee requested for adjournment.On two or three occasions the bench did not function.The assessee has filed written submissions on 16.07.2012 and they have been placed on record.On 16.12.2014 the bench did not function and matter was adjourned to 03.02. 2015.On that day an adjournment application was again filed on behalf of the assessee stating that the person looking after the appeal was not in town.One of the juniors appearing on behalf of assessee was not in a position to explain anything except stating that matter could not be argued on that day.In these circumstances,we have been compelled to decide the case taking in to consideration he material available on record.

2.The assessment,for the year under appeal,was made vide order u/s.143(3) dated15.12.2006 by the Assessing Officer(AO)accepting the loss of the assessee at Rs.8,75,03,000/-,as shown by it in its return.During the relevant year, the assessee had shown income from house property, loss from business and loss from long term capital loss (LTCL).Perusal of the assessment records for the relevant period revealed that the LTCL shown from sale of the property, being the 2nd floor i.e. Philips area,had not been worked out as per the provisions of the capital gains under the Act.Accordingly,a notice u/s.263 was issued on 26.06.2008 holding the assessment to be,prima facie,erroneous and prejudicial to the interest of revenue.Determination of capital gains, computation of income from House Property and were the three the issues deliberated upon by the CIT in his revisionary order.The relevant part of the notice is reads as under:-

" Peru sa l o f th e a ssessm en t r eco rd s revea led th a t th e a ss ess men t o rd er u /s .1 43 (3 ) d a ted 1 5 .12 .2 0 0 6 p a ssed b y th e Ad d l. C I T, Ra n g e-7 (3 ), Mu mb a i (in co rr ectly m en tio n ed a s DC I T-7 (3 ) ) , Mu mb a i wa s defi cie n t in fu r th er fo llo w in g r esp ect a n d is co n sid er ed to b e erro n eo u s a n d p reju d icia l to th e in ter est o f r even ue :-

i) As p er th e P & L A/c. fi led w ith th e retu rn , licen se fe es r eceived (n et) is sh own a t Rs.7 ,3 9 ,0 9 ,1 98 /- a n d a fter r ed u cin g lice n s e fees p a id w ritten o ff o f Rs.2 ,5 3 ,8 8 ,54 6 /- , th e n et licen se fees sh o wn is Rs.4 ,8 5 ,2 0 ,65 2 /- . In th e sta temen t o f to ta l in co me, th e lic en s e fee i n co me in resp ect o f 2 n d flo or Ph ilip s a r ea h a s b een ta ken at R s.3 ,4 3 ,48 ,7 3 7 /- a n d t ha t o f 3 rd flo o r Ca str o l h a s b een sh own a t Rs ,1 ,9 0 ,98 ,2 8 8 /- wh ile a r rivin g in co me fr o m h o u se p r op erty . Ap a rt 2 ITA/199/Mum/09/TKPL-04-05

fro m th e sa m e, a n a mo u n t o f R s.2 ,2 3 ,09 ,0 1 1 /- h a s b een sh o wn a s licen se fe es fro m va rio u s p a r ties ( in clu d in g o th er in com e) wh ile co mp u tin g in co me/lo ss fro m in co me f ro m b u sin ess a nd p ro fes sio n . No r eco n cilia tio n o f th e a mou n t sh own in P & L a /c. a n d th a t in th e sta temen t o f to ta l in co m e wa s fi led o r even exam in ed b y th e A . O. It w a s n o t exa m in ed a s to h o w the licen s e fee w ritte n o ff ha s b een red u ced wh ile w o r kin g o u t th e in co me fr om ho u se p ro p erty. F u r th e r, in th e co mp u ta tion o f lo s s fro m bu sin es s a n d p ro fes sio n , p rop o rtio n a te licen se fees w ritten o ff is sh o wn a t Rs .2 ,3 7 ,11 ,1 8 8 /- wh ich d o es n o t reco n cile w ith fig u re g iven in th e P Et L AI c. a s a fo resa id . No r eco n cilia ti o n is fo un d to b e g iven in th is resp ect befo r e th e A.O .

ii) As p er in co me a n d exp en d itu re a c cou n t, in terest o n fixe d lo a n s a mo un ts to Rs.5 ,5 3 ,6 8 ,35 6 /- . In th e s ta temen t o f to ta l in co me, th e in ter est pa id to HD FC lo a n is sh own a s un d er: -

2n d flo o r i.e. Ph i lip s p ro p e rty R s . 1 ,4 0 ,2 9 ,9 2 4 3 rd floo r Ca s tro l p ro p erty R s . 1 ,4 9 ,60 ,8 9 8 Ag a in st in co m e fro m b u s in ess an d p ro fess io n R s.2 ,5 0 ,3 6 ,0 6 2

Plea se r eco n cile th e in ter est a mo un t c laim ed a t d iffer en t p la ces a n d a lso fu rn is h b a s is o f s u ch b ifu rca tio n .

Fro m th e ledg er a /c. o f in teres t to HD FC lo a n it is fo u nd th a t th e a mo u n ts d eb ited th ro u gh jo u rn a l en tr y o n va riou s d a tes in clu d e rep a ymen ts w ere p r in c ip le a n d in ter est EMI . I t mea n s th a t wha t wa s cla ime d a s in tere st in clu d ed p rin cip a l a mo un t a lso . Plea s e fu rn ish n ecessa ry cla r ifi ca tion in th is resp ect. S e con d ly, wh ile secu red lo a n s o f R s. 1 7 cro r es an d RS .9 .4 2 5 cro res wer e ta ken in ea rlier ye a rs, it a pp ea rs tha t n ew s ecu red Lo a n o f Rs .5 5 .70 cro res wa s a lso in cu r red fro m HS BC d u rin g th is ye a r . Th e A.O . h a s no t exam in ed the p u rp o se fo r wh ich th is n ew se cu r ed lo a n ha s b een ta ken an d wh eth er th e in terest rela ta b le th ereto wa s r ig h tly cla im ed a s b u sin ess exp end itu re d u rin g this yea r. Plea se co - rela te th e loa n s w ith th e p u rp o ses a nd fu rn is h ju stif ica tio n o f th e cla im m a d e a s p er th e sta temen t o f c o mp u ta tio n o f to ta l in co me.

ii i) Y o u h a ve sh o wn licen se fees fro m va r io u s p a rties o f Rs .2 ,23 ,0 9 ,0 1 1 /- ag a in st wh ich fo llow in g exp en s es h a ve b een cla im ed sh o wi n g a lo ss o f Rs.3 ,3 3 ,6 0 ,68 5 /- :-

a ) Pro po rtio n a te licen se fees w ritt en o ff Rs .2 ,3 7 ,11 ,1 8 8 /- b ) Loa n p ro ces sin g fees R s. 1 3 ,4 1 ,4 72 /- c) In teres t o n HD FC lo a n Rs .2 ,5 0 ,36 ,0 6 2 /- d ) O th er exp en ses Rs. 5 5 ,80 ,9 7 4 /-

T o ta l Rs. 5 ,5 6 ,6 9 ,6 96 /- = =============

It a p p ea r s th a t fig u res h a ve b een ta ken fro m d iffer en t h ea d s o f th e P & L A /c. Ho w ever, n o reco n cilia t io n wa s fi led a s th e f ig u res d o n o t a p p ea r to b e d ir ectly co - rela ta b le w ith th e item s d eb ited in P ft L a l c. Plea s e reco n cile th e sa me.

iv) Y ou h a ve c la im ed lo n g term ca p ita l lo ss o f Rs.5 ,8 8 ,1 6 ,6 36 /- o n sa le o f 2n d flo o r Ph ilip s a r ea . Th e co st o f g a ra g es h a ve b een exc lud ed . Th e a g reemen t with th e ten a n t sh ow s yo u w er e g e ttin g re n ta l in co me u n d er 3 d ifferen t ca tego rie s viz . (i) lic en se fee, (ii) ch a rg es fo r am en ities p ro vided ft ( ii i) ca r pa rk ing ch a rg es. Plea se s p ecify w h ich a r e th e ca r p a rkin g sp a ces fo r wh ich th e servic e ch a rg e s w ere b ein g received a n d wh y th is is n o t pa rt o f s a le a g reemen t da ted 1 2 .0 1 .20 0 4 .

3 ITA/199/Mum/09/TKPL-04-05

v) I t is fo u n d fr o m th e p a p ers filed d u rin g th e co ur se o f h ea r ing th a t th e p rop er ty wa s so ld b y N elco a nd TH DC b e ing a co n firmin g pa r ty wh erea s yo u w er e n ever a pa rt o f sa le a g reem en t d a ted 1 2 .1 .20 0 4 . I t is o n ly a fter th e s a le th a t a su p p lemen ta l ag re emen t wa s execu te d o n 1 2 .3 . 20 0 4 wh ere b y yo u su r ren d ered yo u r cla im in th e p ro p erty an d you fo rg o a ll yo u r rig h ts in th e p ro p erty fro m th e ve ry b eg in n in g . In th ese cir cu ms tan ces , ca n it b e sa id tha t wh a t wa s b ein g sh own b y you su rrend er o f rig h ts wa s th e sa le va lu e o f th e p ro p erty an d h o w ca n th is kin d o f a g reem en t a b rog a te wh a t ha d h a pp en ed in la st so ma n y y ea r s a n d sin ce th e b eg in n in g . Ha ve yo u r ea ll y a cted like an . in dep en d en t per so n ? And if n o t, th en wh y th e sa le co n s id e ra tio n a s p er th e s a le a g reemen t d a te d 1 2 .1 .2 00 4 itse lf b e n o t ta ken fo r th e p urp o s e o f co mp u ta tio n o f ca p ita l g a in s /lo s s"

3.The assessment records for the relevant period were further perused,while the proceedings u/s.263 were in progress and it was found by the CIT that there were certain other issues in respect of which the AO had either not got the necessary clarification from the assessee or the relevant details were not called for and examined to see as to whether the claim made by the assessee-with reference to different heads of income as per the statement of computa - tion of total income which was filed with the return and was the basis of the assessed total loss-was in accordance with the legal provisions of the Act or not.Accordingly,notice u/s.263 was issued subsequently on 25th September, 2008 mentioning such other issues on account of which the assessment order was considered to be,prima facie,erroneous and as much as prejudicial to the interest of revenue.

Vide the aforesaid notices,the assessee was asked to state as to why the assessment order dated 15.12.2006 be not set aside,enhanced or suitably modified.The assessee in its reply stated that the assessee and M/s.Nelco Ltd.(NL)entered into an agreement dated 15.11. 1999 wherein NL leased land owned by it for a period of 11 years,that thereafter it entered into a construction agreement,dated 16.11.1999,with M/s.Tata Housing Development Co.Ltd. (THDC) for a sum of Rs.25,90,22,500/-,that it sold the 2nd floor flat of building styled as Technopolis Knowledge Park(TKP)on 12.1.2004,that as per the agreement entered into between NL,THDC on one hand and Vishindas Holaram ,a partnership firm as the other party for a consideration of Rs.27,60,27,127/-,that the agreement was for the sale of office premises Nos. 1 to 16 together with the right to use open car parking space Nos. 4 to 16 and covered parking space Nos. B1, B2, B3, B18, B13 to B17 and 68 to 86.As regards excluding a sum of Rs.1, 23,00,000/- from the sale consideration mentioned in the agreement, it was stated that the assessee was not the owner of the car parking spaces. It was further submitted that the said amount had not been claimed as deduction u/s.48 of the Act,but had only been reduced from the sale price since the agreement was a composite one including the sale of premises as well as the car parking which did not belong to the assessee.Reference was also made to supplementary agreement entered into between assessee and THDC,dated 12.03.2004whereunder net sale conside -ration of Rs.26,37,27,127/-(27,60,27,127/-1,23, 00,000) had been transferred to the assessee.As regards reducing the sum of Rs.1,49,12,928/- from the sale price,it was submitted that the assessee had paid Rs.2,35,00,000/- as lease rent for 11 years to NL for the land on which TKP was constructed, that the lease was deferred in the books of account over a period of 11 years,that to arrive at capital gains/loss cost of assets sold was reduced from the sale price. According to the assessee,the net sale price as above was Rs.26,37,27,127/-from which the indexed cost of construction of Rs.30,76,30,835/- was reduced and the net figure was further reduced by the cost of land i.e. unexpired lease rent of Rs.1,49,12,928/- to arrive at the taxable capital gains/loss.

4.In response to further clarification asked in this connection, the assessee produced a title layout of the building TKP,vide letter dated 12.08.2008.The CIT found that the building had five floors 4 ITA/199/Mum/09/TKPL-04-05

of which area of 47095 sq. ft. on the 2nd floor and area of 22104.50 sq.ft.on ground floor and 3 rd floor were leased to the assessee,that the assessee leased a total area of 69,199.50 sq.ft.It was clarified vide the aforesaid letter that after the expiry of a period of 11 years, the assessee as licensee would have to renew the license granted for a further period of 11 years on the same terms and conditions as was mentioned in para 1(c) of the lease agreement dated 15. 11. 1999,that the assessee was to make out a clear and marketable title in respect of the 2nd floor of the building and the proportionate number of the parking spaces in respect of which it would have right,title, benefit and interest alongwith proportionate undivided share in the common areas and amenities provided on the said properties.With reference to the same,the assessee filed clarification,vide letter dated 12.08.2008,as to what was the proportionate share in the parking spaces and whether they were separate from the garages sold. It was stated that garages meant basement parking and as such covered parking area as against open car parks which meant parking area allotted to vehicles in the open spaces surrounding the building,that the open car parking spaces were not paid for,that the price of Rs.25,90,22,500/-paid as per para 5 of the agreement dated 16.11.1999 with THDC for development of the property was purely towards the cost of construction and was arrived at by calculating the rate of Rs.5,500/- per Sq. ft. and multiplying the same to the super built up area of 47,095 sq. ft. of the 2nd floor of the building. According to the assessee, the said cost did not include any further cost of open car park.Vide item (iv) of the notice u/s.263 dated 25.09. 2008 the assessee was asked to specify the car parking spaces for which the service charges as per the agreement with the tenants were being received which was being shown as rental income by it. Vide item (v)of the said notice u/s.263 of the Act, it was also pointed out that the 2nd floor Philips area was sold as per sale agreement dt.12.01.2004 in which THDC was the confirming party and the assessee who was the owner as licensee of the property was not made part of the same,that it was only after effecting the sale that a supplemental agreement was executed on 12.03.2004 whereby the assessee surrendered its claim in the property.

5.After considering the submissions of the assessee with regard to the transfer of parking spaces as per the sale agreement,dated 12.01.2004,the CIT held that he was not satisfied with the clarifi - cation and the replies given by it,that open parking spaces and covered parking spaces included as part of the sale agreement were not owned by the assessee,that the position was not clear in that respect from the documents which had been filed before the AO at assessment stage and now before him,that the most primary document was the agreement wherein the assessee was granted licensed area for a term of 11years subject to further renewal on the terms and conditions as enumerated therein,that the assessee was granted right to effect construction in respect of the licensed area by utilizing the FSI thereof in conjunction and conformity with the development of the said property being carried out by NL and THDC under the sale agreement (Clause (J) of the agreement),that pursuant to exercise of the said rights under the license agreement,the assessee was to effect construction together with provisions of parking spaces and other necessary ameniti

-es,facilities and services in respect of the same, for the purpose of selling, using or otherwise transferring the same to respective purchasers for commercial use.CIT referred to Clause 3(c) and Clasue 5 of the agreement in this regard.He held that the assessee was entitled to the proportionate number of parking spaces over which it had complete title,that the consideration of Rs.25,90,22,500/-paid to THDC was the entire consideration payable which meant that it was inclusive of the assessee's entitlement to the number of parking spaces and share in common facilities provided in the said property,that the assessee's rental income included rent as car parking charges as per agreement with tenants [Clause (iv) of notice u/s.263 dated 25.09.2008]. that as per enclosure to the reply dated 15.12.2006 given to the AO, the rent from Philips (I) Ltd. included Rs.1,35,000/- for car parks,that the assessee had not been able to reply to make clear as what happened to the parking spaces which the assessee was entitled to as per the agreement,that the agreement did not distinguish between open car parking spaces/covered car parking spaces, that if the 2nd floor of the building which was entirety owned by the assessee was the subject 5 ITA/199/Mum/09/TKPL-04-05

matter of the sale agreement dated 12.1.2004 and the assessee was not left with any car parking spaces pursuant to the sale agreement then the only presumption was that the share of proportionate number of the parking spaces as per the agreement and entitlement only had been transferred.He further observed that during the course of hearing, the assessee had submitted a certificate from THDC stating that THDC was the owner of 41 garages at TKP which were sold on 12.01.2004.The CIT was of the opinion that such a certificate could not be accepted unless it was accompanied with necessary documents.So,he held that the assessee was not justified in excluding the cost of 41 garages for which the value was estimated at the rate of Rs.3 lakhs each with the total amount at Rs.123 lakhs,that the basis of the value of Rs.3 lakhs per garage adopted by the assessee was not provided by it.As regards reducing the value of the land written off amounting to Rs.1 ,49,12,928/- the CIT did not find the assessee's reply acceptable due to the reason that the amount payable as per the agreement dated 16.11.

1999 to NL was being treated as deferred revenue expenditure by the assessee and proportionate amount worked out on the basis that the license granted was for 11 years was being written off in the books of account of the assessee.The assessee claimd that the payment had been made towards land which did not follow from the text of the agreement.The assessee had filed acopy of the agreement dated 15.11.1999 between NL and the assessee before the CIT.He observed that as per Clause 1(a)of the agreement,the assessee was granted permission as licensee to use and occupy specified area of the said property which would enable to him to effect construction equivalent to 47,095 sq. ft. of super built-up area for 11 years commencing from the date of the agreement. As per Clause 2(a) of the agreement, the assessee as licensee was liable to make payment to NL a sum of Rs.2,25,96,000/- as license fee for the license and permission granted in the aforesaid respect. Considering the same he held that it was not factually correct to say that the license fee paid was towards leased land,that if the right of license given was for 11 years and the property was sold by the Licensor before expiry of the period in question it was entitled to get refund from the Licensor the amount paid as license fee for the unexpired period.

In view of all these facts and also because amount under consideration was treated as revenue expenditure only by the assessee,the CIT held that there was no justification of reducing the amount of Rs.1,49,12,928/- from the sale consideration for working out the capital gain/loss from sale of the property, that the assessee was not able to answer satisfactorily as to why it was not a party to sale agreement dated 12.01.2004 when it was owner of the licensed premises and why it had to surrender its rights under a supplemental deed of agreement dated 12.03.2004,that the role of market maker in the joint venture did not in any way affect the assessee's right as owner of the licensed premises and the very fact that the assessee was made to surrender its rights later on showed that the tripartite agreement of joint venture including the assessee was not acted upon in true letter and spirit treating the assessee as an independent entity,that any loss having arisen out of surrender of rights in the said premises could not be treated as a bonafide loss.To put it differently,the CIT held that the assessee was supposed to have received the entire sale consideration of Rs.27, 60, 27,127/- as per the sale agreement dated 12.01.2004 and settling for any lesser amount under any arrangement with THDC and NL was only an internal affair and should not affect the taxability of the capital gains on transfer.Accordingly,he held that the assessment order dated 15.12.2006 was erroneous and in so far as it was prejudicial to the interest of revenue.He directed the AO to work out the capital gains adopting the sale consideration at Rs.27.60 Crores and the cost of the property at Rs.25,90,22,500/-,subject to allowing benefit of indexation.

6.With regard to Computation of income from House Property,the CIT observed that as per the statement of total income the assessee had claimed interest paid to HDFC loan of Rs.1,40, 29,924/- in respect of the 2nd floor of Philips area property and that of Rs.1,49,60,898/- as interest on HDFC loan in respect of 3rd floor Castrol- Part area. The assessee produced the details of the interest paid on HDFC loan during the course of hearing,before him. From the details,he found that apart from the interest paid to HDFC,the assessee had paid loan 6 ITA/199/Mum/09/TKPL-04-05

processing charges of Rs.28,97,722/- to HDFC. The total amount of interest debited in the P & L A/c. was Rs.5.53Crores out of which Rs.2.50 Crores were debited against income from business and profession and the balance amount was adjusted in the computation of House Property income.Scrutiny of the details filed before him showed that the total interest amount as per the P&L a/c. included loan processing fees of Rs. 28,97,722/- also,that out of the said amount,Rs. 15,56,250/- had been apportioned towards the House Property income and the balance amount of Rs.13,41,472/- had been debited against business income,that the said amount of Rs.15,56,250/-,which was relatable to the properties in respect of which the income had been shown as house property,was not deductible u/s.24(b) of the Act,that the said amount was also not deductible against income from business as the loan was incurred in respect of the property for which the income has been shown under the head 'House Property'.In its reply,dated 14.10.2008,the assessee filed explanation regarding the amount of loan taken from HDFC and treatment of the interest payable in computation of 'House Property' as well as the business income.It was clarified that the License fees being received in respect of the properties which were not owned by the assessee was being shown as business income,that the said premises on 3rd floor of the TKP were owned by THDC and NL.The CIT held that the assessment order dated 15.12.2006 was erroneous and was prejudicial to the interest of revenue to the aforesaid extent.He directed the AO to modify the computation of the House Property Income accordingly by excluding the aforesaid sum of Rs.15,56,250/- which related to the property on the 2nd floor and 3rd floor of TKP as shown in statement of total income.

7.Third issue of revision was treatment of proportionate License fee written off,amounting to Rs.2,37,11,8881/-.In the show cause notice dated 25.09.2008,while working out the income from business and profession the assessee had written off proportionate license fee of Rs.2.37Crores.On being asked to explain the transaction,the assessee filed copies of the tripartite agreements entered between THDC,NL and it.Vide letters dated 2.7.2008, 23. 10.2008 and 14.10.2008,the assessee made submissions in this regard.It was argued that in the supplemental agreement entered into by the assessee with TDHC,on12.03.2004,the net sale consideration of Rs.26,37, 27,127/- was transferred, that the necessary documents in this regard had been furnished before the AO,that the facts relating to reducing the unexpired lease rent of Rs.1,49,12,928/-from the sale price arrived at the taxable capital gains had also been submitted before the AO vide letter dated 15.12.2006,that the assessee had not claimed the benefit of set off of unabsorbed capital loss in the subsequent years.In support of the same,a copy of return for A.Y.2007-08 was enclosed.

8.After perusal of the agreements,the CIT observed that all the agreements were dtd. 01.03.2001except the supplemental agreements each dated 5.03.2001,that same were in respect of some of the premises,that parties to the agreement were NL and THDC, that the subject matter of the agreement was to finance NL and THDC,that the amount paid to NL and THDC was not in the nature of license fees but was purely a finance arrangements. Therefore the CIT held that the assessee's treatment of the amount by writing off the same for a period of ten years and claiming the same as deduction towards computation of income from business against the license fee receipt in respect of the premises which were not owned by the assessee was not factually and legally in order,that the amount payable in terms of the said agreement was capital in nature and was not deductible as expenditure while working out the income against license fee of leased premises, that the income as License fee from the leased premises was correctly assessable under the head income from other sources as the income was in the nature of rental income only against which expenditure which was exclusively incurred in earning of the said income was allowable. He held that the queries which were raised as per notice u/s. 263 originally vide letter dated 26.6.2008 and subsequently vide Letter dated 25.09.2008 were not raised by the AO,that the assessee had 7 ITA/199/Mum/09/TKPL-04-05

submitted most of the details as per questionnaire to notice u/s.142(1) of the Act,dated 21.8.2006,that the details furnished were never examined during the course of assessment proceedings on the lines of queries raised in the two notices u/s.263,that the order of the AO was cryptic as regards the application of mind on scrutiny of the details filed alongwith the return of income and the submissions made during the course of assessment proceedings,that the office note recorded was also very brief and did not touch upon any of the issues raised,that the copies of the 8 tripartite agreements which were filed before him during the course of this proceedings before him were never filed before the AO,that same were crucial to decide the admissibility of expenses claimed for computation of income under the business head shown by the assessee and accepted by the AO.He held that on account of non application of mind or non examination of the details crucial to record a logical finding,the order passed by the AO was erroneous and prejudicial to the interest of Revenue.He set aside the order of the AO with the direction that the AO would pass a fresh assessment order in conformity with the directions contained in the aforesaid paras on each of the issues dealt with. However, the AO was directed to allow adequate opportunity to the assessee of being heard in the matter.

9.As stated earlier,we are deciding the matter after considering the material available on record. Before us,the Departmental Representative supported the order of the CIT.In our opinion, here,it would be useful to deliberate upon the principles governing the provisions of section 263 of the Act.We can summarise the principles as under:

9.1.The Department has no right to appeal against the order of the AO.It is in these circumstances that power of revision were conferred on the CIT u/s. 263 of the Act with a view to correct the orders of the AO.Courts are of the opinion that whether or not exercise of revisional jurisdiction was called for is a question of law,on a given fact situation. 9.2.There are different aspects of the corrective power conferred by the provisions of the Act for application in different situation.Distinction between the power to reopen an assessment and the appellate or revisional power or the power to rectify have been reckoned by the courts.Provisions of one section cannot replace the other.Therefore,invoking the provisions of section 263,where sections 148/154 were applicable,has been held to be invalid by the Hon'ble Courts.

9.3.The CIT can exercise the jurisdiction u/s.263 of the Act suo motu.The pre-requisite condition for exercise of such jurisdiction is that the order of the AO is erroneous and prejudicial to the interests of the revenue.The twin conditions enshrined under the provisions are composite and cannot be segregated. Where the order of the AO appears to be erroneous, but is not prejudicial to the interests of the revenue or the order is otherwise valid but prejudicial to the interests of the revenue,that does not invite the invocation of such power by the CIT.Clearly,the revisional jurisdiction available to a CIT,u/s.263 of the Act, is essentially circumscribed by the determinant mentioned above i.e.error in the order and prejudice caused by it to revenue.In short,the statutory enjoinment carves out an extremely constricted ambit of the discretionary jurisdiction of the CIT.

9.4.There is a distinction between an order being erroneous and a mistake or error committed by the AO.An incorrect assumption of facts or improper application of law would satisfy the requirement of the order being erroneous.The order cannot be branded as erroneous if the CIT is not satisfied with the conclusion arrived by the AO.The order can be brought within the purview of an erroneous order,if it involves an error by deviating from law or upon erroneous application of the legal principle.The assumption of incorrect facts or incorrect application of law which is manifest from the materials available with the CIT may be brought within the purview of an erroneous order.

9.5.It is said that the expression prejudicial to the interests of the revenue is not an expression of art and is of wide import.The phrase should be understood in the context that because of the erro 8 ITA/199/Mum/09/TKPL-04-05

-neous order passed by the AO,the Revenue is deprived of the tax payable by the assessee under the law.

9.6.The word 'considers' applied in the statutory provision involved,signifies a genuine satisfa -

ction of that authority that the order of the AO is erroneous and that the interests of the Revenue are prejudiced thereby.Any exercise of the revisional jurisdiction,bereft of such satisfaction or finding that the order of the AO satisfies twin conditions and is also based on tangible materials on record,is impermissible rendering the resultant order void.

9.7.Initial words of section 263 any proceedings under the Act are of immense signification. The use of the words 'any order passed therein by the AO'also has its importance.Section 263 uses the words 'pass such order thereon as the circumstances of the case justify,including......'The word 'proceedings'hence,is a wider term compared to the word assessment.The word assessment has been used only after the word including towards the end of section 263 and in the earlier part of section 263,the only word used is proceedings.Hence, any proceedings in which an order is passed dropping penalty,is very much an order in any proceeding and thus,the order would come under the exercise of revisional jurisdiction of section 263.

9.8.Deciding the issue of justification with regard to revisionary order of the CIT what is to be seen as to whether there was application of mind before allowing the expenditure/deduction.If there was an inquiry,even inadequate that would not by itself give occasion to the CIT to pass orders u/s.263 merely because he has a different opinion in the matter.In short only lack of inquiry will not justify invoking of the provisions of section 263 of the Act.In other words,the CIT cannot initiate proceedings u/s.263 of the Act with a view to start fishing and roving inquiries in matters or orders which are already concluded.He is not permitted to begin a fresh litigation because of new views he entertains on the facts or new versions which he presents as to what should be the inference or proper inference either on the facts disclosed or the weight of the circumstance.

9.9.While the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each any every disallowance, deduction,etc.,it is incumbent upon the CIT not to exercise his suo motu revisional powers,unless supported by adequate reasons for doing so.The provisions of section 263 of the Act,when read as a composite whole, make it incumbent upon the CIT before exercising revisional powers to :(i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry,as he deems necessary.It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision.

9.10.Condition precedent in revisionary proceeding is that an opportunity to be heard should be given to the assessee.In such matters if the assessee is actually heard effectively,even if there is no proper notice the order of revision has to be treated valid.

9.11.Once the preconditions of invoking provisions of Sec.263 are fulfilled,it is open to the CIT to consider the case on merits and pass a final order.But,in his view,the matter requires some adjudication or enquiry,the matter can be remanded to the AO.Such a remand could be made only after setting out the facts showing existence of both the conditions. 9.12.There are two stages of the revisionary orders i.e. invoking the jurisdiction and passing a final order as per the provisions of the Act.While invoking the power u/s. 263 of the Act,the CIT has to clearly state that the order passed by the AO is both erroneous and prejudicial to the interests of the revenue.But,for passing an order of remand after holding that the order was erroneous,no specific finding is required to show that the same is prejudicial to the interests of the revenue.

9.13.There is nothing in section 263(1)to show that before passing the final order under that section, the CIT must necessarily and in all cases record final conclusions about the points in controversy before him.It is expected from the CIT that he should record final conclusions, which he thinks proper if he is to settle the assessment finally.But,if he does not settle the 9 ITA/199/Mum/09/TKPL-04-05

assessment finally and prefers to direct the AO to make an order for fresh assessment,it is proper that he does not express any final conclusions and recordes only prima facie conclusions at which he has arrived with reference to the facts of the case.In short,if an assessment is to be freshly made by the AO, the only proper course for him is not to express any final opinion as regards the controversial points.

9.14.It is not a requirement of section 263 of the Act that the CIT should record a final conclusion on the taxability of amounts.

9.15.Act had earmarked duties of various authorities and they are required to perform them.So,an order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous.Holding an order erroneous and prejudicial to reveneue is the duty of the CIT and he and only he can decide it.He cannot abduct it or assign the job to someone else.An order passed u/s.263 by the CIT,directing the AO to decide the error of an order or its prejudice to revenue is an invalid order.In other words a matter cannot be remitted for a fresh decision to the AO,u/s.263 of the Act,without a finding that the order is erroneous.In such matters,to remand the matter to the AO would imply that the CIT has not examined and decided as to whether the order is erroneous or not,but has directed the AO to decide the question.An order of remit cannot be passed by the CIT to ask the AO to decide whether the order is erroneous-it is not permissible.

9.16.A distinction has to be drawn in the cases where the AO does not conduct an enquiry and makes some inquiry,as lack of enquiry by itself renders the order erroneous and prejudicial to the interests of the revenue and cases where the AO conducts an enquiry but the finding recorded is erroneous and which is also prejudicial to the interests of the revenue.In the latter cases, the CIT has to examine the order or the decision taken by the AO on the merits and then form an opinion on the merits that the order passed by the AO is erroneous and prejudicial to the interests of the revenue.The order of the CIT should discuss as to how and in what manner the enquiry was lacking,what was the fault and what default was committed by the AO. 9.17.It is prerequisite that the CIT must give reasons to justify the exercise of suo motu revisional powers by him to reopen a concluded assessment.A bare reiteration by him that the order of the AO is erroneous in so far as it is prejudicial to the interests of the revenue,will not suffice.The reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the AO failed on both counts.While the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance or deduction,it is incumbent upon the CIT not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so.In short,the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for.

9.18.There is no bar in section 263 of the Act restricting the power of the CIT to revise only original orders issued by the AO.In fact,any proceedings by the AO,whether they be original assessment or revised assessment proceedings u/s.147 or even a rectification order u/s.154,could be revised in exercise of powers u/s.263.

9.19.Similarly his power is not limited only to the material which was available before the AO.In order to protect the interests of the revenue,the CIT is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. 9.20.If a query was raised during the course of the scrutiny by the AO, which was answered to the satisfaction of the AO,but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision.

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9.21.As per the provisions of section 263(2) of the Act no order shall be made under sub-section (1) of section 263,after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.Limitation has to be reckoned from date of assessment order,not date of rectification.

9.22.Where the jurisdiction under section 263(1)of the Act,is sought to be exercised with reference to an issue which is covered by the original order of assessment under section 143(3) and which does not form the subject-matter of the re-assessment,limitation must necessarily begin to run from the order under section 143(3).

9.23(i).An order cannot be termed erroneous unless it is not in accordance with law.If an AO acting in accordance with law makes a certain assessment, it cannot be branded as erroneous by the CIT simply because,according to him, the order should have been written more elaborately. 23(ii)If the AO adopts one of the courses permissible under the law or where two views are possible has taken one view with which the CIT does not agree,it cannot be treated as an order erroneous and prejudicial to the interests of the Revenue.

23(iii).While completing the assessment,the AO.s exercise quasi-judicial power vested in them in accordance with law and arrive at certain conclusions,therefore,such conclusions cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusions.But, the decisions by itself is not be enough to vest the CIT with the power of suo motu revision because the first requirement, namely,that the order is erroneous,is absent. Similarly,if an order is erroneous but not prejudicial to the interests of the revenue,then also the power of revision cannot be exercised.Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled.

23(iv).For holding an order erroneous,there must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.

23(v).The CIT,for various good reasons,may be inclined to view an assessment order from a negative standpoint.He may likewise disagree with the views of the AO in its interpretation of the law imposing the liability or the extent or quantum thereof.He may disagree with the AO with regard to the determination of the amount of tax to be paid.He may also disagree with the AO on matters relating to deductions allowable under the statute.All such situations,as aforesaid, may render the order of the AO wrong or erroneous as commonly understood.Such situations, however,would not be facets of an 'erroneous' decision.Judicial opinion is unanimous that the expression as appearing in section 263 must be confined to jurisdictional errors.Erroneous assessment refers to an assessment that deviates from the law and is,therefore, invalid.An order cannot be termed as erroneous,unless it is not in accordance with law.The section does not visualise a case of substitution of judgment of the CIT for that of an AO,who passed the order, unless the decision of the subordinate officer is held to be erroneous. 23(vi).When the AO takes a view but the view is not correct and is erroneous according to the findings recorded by the CIT,with the finding that the order passed by the AO was prejudicial to the interests of the revenue, then the order of the CIT cannot be set aside on the ground that the two views were possible or probable.It would be incorrect to state as a broad proposition that an order of the AO cannot be erroneous,if the AO has taken one of two possible views. In such cases the order of the AO can erroneous provided the CIT holds and is able to demonstrate that the view taken by the AO was not plausible,being legally unsustainable and incorrect.But,the finding must be recorded.

23(vii).There is difference between incomplete or inadequate verification and no verification whatsoever by the AO.Where the AO had adopted one of the two courses permissible and available to him and this has resulted in loss of revenue or two views were possible and the AO had taken one view with which the CIT may not agree,the order cannot be treated as an erroneous order or prejudicial to the interests of the revenue unless the view taken by the AO is 11 ITA/199/Mum/09/TKPL-04-05

unsustainable in law.If the CIT arrives at that conclusion,then the order of the CIT cannot be set aside on the ground that the two views were possible or probable.It would be incorrect to state as a broad proposition that an order of the AO cannot be erroneous,if the AO has taken one of two possible views.In such cases the order of the AO can erroneous,provided the CIT holds and is able to demonstrate that the view taken by the AO was not plausible,being legally unsustainable and incorrect-the only rider is that he should record such finding. 23(viii).Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the revenue,but orders which are passed after inquiry/investigation on the issue or question are not per se erroneous and prejudicial to the interests of the revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken.In cases where there is inadequate enquiry but not lack of enquiry,the CIT must record a finding that the order/inquiry made is erroneous i.e. that the order of the AO is unsustainable in law.

23(ix).A finding recorded by the CIT that 'order passed by the AO may be erroneous' vitiates the revisionary order.If he has doubts about any transaction,he should examine the aspect himself and give a finding that the order passed by the AO is erroneous.Use of word may does not show or establish that the assessment order is erroneous.

23(x).When the AO at the stage of making assessment fails to make inquiry into relevant details, such assessment has to be considered as erroneous.If fresh assessment is thereafter ordered by the revisional authority,the only proper course for the CIT would be to desist from expressing any final opinion on controversial points.

9.24(i).The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue.If due to an erroneous order of the AO,the Revenue is losing tax lawfully payable by a person,it will certainly be prejudicial to the interests of the revenue.

24(ii).The expression 'prejudicial to the interests of the revenue'is of wide import and is not confined to loss of tax.But,it means that due to an erroneous order of the AO,Department is losing tax lawfully payable by a person,it would be certainly prejudicial to the interests of the revenue.

24(iii).The expression 'resulted into an order which is prejudicial to the interests of the Revenue' in the notice issued by the CIT has to be held to be sufficient for the purpose of invoking the power u/s. 263 of the Act.Absence of word 'erroneous' in the notice does not invalidate the proceedings.

9.25(i).Where in response to the notice issued by the CIT u/s.263 of the Act,the CIT does not examine the merits of the case or the justification elucidated by the assessee,the ITAT should not allow the appeal on merits.In such matters the right and proper course for the Tribunal is to ask the CIT to examine the factual aspects rather than give its own factual finding without there being a factual examination and verification or full and proper rebuttal. 25(ii).The Tribunal,being the second appellate authority,cannot consider the validity of an assessment or reassessment order while considering the appeal filed against an order issued u/s.263 .

25(iii).Where the issue is not examined by the AO and on this ground the CIT revises the order without giving his own findings,but directes the AO to do the necessary exercise,it is not proper for the Tribunal to decide the issue on the merits and hold in favour of the assessee. While in cases where the AO takes a view,after applying his mind in accordance with settled norms,revisional jurisdiction may not be exercised.But,in cases where settled norms are ignored and assessment is made,it can certainly be exercised.

26(i).If a query is raised during the course of scrutiny by the AO,which was answered to the satisfaction of the AO,but neither the query nor the answer were reflected in the assessment order,this would not by itself lead to the conclusion that the order of the AO called for interference and revision.

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26(ii).When it comes on record that the AO had made reasonably detailed enquiries,collected relevant material and discussed various facets of the case with the assessee,the order of the CIT to direct fresh assessment by going deeper into the matter would not form a valid or legal basis to exercise jurisdiction under section 263 of the Act.

26(iii).In a case where the AO does not examine the cash credits of the partners or deposits of chit fund his order could be erroneous,but to invoke revisionary powers the CIT should state as to how it is prejudicial to the interests of the Revenue.He has also to deal with the explanation given by the assessee in the course of the section 263 proceedings.

26(iv).Where the AO while making an assessment examines the accounts, makes his enquiries, applies his mind to the facts and circumstances of the case and determines the turnover either by accepting the accounts or by making some estimates himself.The CIT,on a perusal of the records, is of the opinion that the estimate made by the officer concerned is on the lower side and left to the CIT he would have estimated the turnover at a higher figure than the one determined by the AO.That would not vest the CIT with power to re-examine the accounts and determine the turnover himself at a higher figure.

26(v).Where an income has not been earned and is not assessable,merely because the assessee wants it to be assessed in his or her hands in order to assist someone else, who would have been assessed for a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the Revenue and in such a situation, the CIT has ample justification to exercise his revisional power to cancel the assessment and initiate proceedings for assessment against some other assessee who, according to the Department,is liable for the income thereof. 26(vi).In search and seizure cases if the assessee shows lesser income than the admitted income and the AO does not discusses as to how and why the returned income was accepted against the surrendered income his order falls under the category of erroneous and prejudicial to revenue.In such matter the assessee is required to justify that the surrendered income had to be reduced to the declared income due to acceptable reasons.Failure of the AO to collect such details and non consideration and non analysis of them by the AO empowers the CIT to invoke his revisionary powers.Tribunal should not interfere with such orders of the CIT.

26(vii).In case of an industrial undertakings,claiming special deductions,allowance of deduction has to be allowed in light of a clear finding of the year of commencement of business.So,if the AO allows deduction without deciding the year of commencement of operation and the CIT directs him to pass fresh order to decide the issue,then the order passed by the CIT u/s.263 of the Act is within the jurisdictional limit.Tribunal should not decide such cases on merits in appellate proceedings.

26(viii).If an AO does not apply provision of section 40A(3)and40(a)(ia) in the cases where the assessees pay for purchase of non-agricultural produce in cash or make payment to transport contractors exceeding prescribed limit/without deducting tax at source,his order is erroneous. Such an order can be revised validly.

26(ix).It has to be seen that whether a particular case is of no investigation or a case where per se further investigation was required.If the CIT himself is tentative and hesitant in his order and does not decide as to whether the claim made by the assessee has been rightly allowed by the AO,he cannot invoke the provisions of section 263.Just taking note of the stand of the assessee before him and before the AO and refraining from forming any opinion as to whether the acceptance of the claim by the AO was erroneous or not will not justify passing a revisionary order.

26(x).If an assessee shows taxable and non taxable incomes in his return claiming interest expenditure, but does not show expenditure with respect to the non-taxable income and the AO accepts his claim then the exercise of power u/s. 263 of the Act by the CIT-directing the AO to pass a fresh order in accordance with law and to make appropriate disallowance u/s. 14A of the Act-is valid.

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26(xi).If in the statement recorded during search and seizure action,if an assessee offers his undisclosed income for taxation and does not offer the same in the return and the AO fails to examine that aspect during the assessment proceedings,then u/s.263 of the Act,the CIT can validly initiate revisionary proceedings.

26(xii).If an assessee makes a claim for deduction of payment twice and it was corrected by the CIT it cannot held that such an order is beyond his revisional jurisdiction.Similar objection of the audit party will not in any manner affect his powers,nor the fact that the error could be rectified by the AO or he could have taken resort to reassessment provision. 26(xiii).Without anything more,mere submission of a letter by an assessee to the AO,giving bifurcation of an account does not necessarily mean that proper verification and investigation was done and accepted by the AO.The averments made in the letter have to be verified and then accepted or rejected. If the AO keeps a letter on record and does not carry out necessary investigations which are per se required to verify the correctness of the averments,there is an error in the sense that the AO has failed to carry out the requisite enquiry which can be rectified in a revision.In such a situation,the CIT has to pass an order u/s.263 of the Act after hearing the assessee.The contentio -ns and issues raised by the assessee have to be dealt with by the CIT who has to examine whether the issue in question was raised before the AO and considered and verified or the course adopted was permissible.

26(xiv).When a circular is issued u/s.119 of the Act by the CBDT and its validity is upheld,it is binding on the AO.If he does not follow such circular and passes assessment order it would amount to making assessment without conducting proper inquiry and investigation.CIT will be justified in revising that order.

26(xv).If as per the order sheet no record is produced by the assessee and in the order a contrary statement is made by the AO about producing and examining the documents,the CIT can validly exercise revisionary powers u/s.263 of the Act.

26(xvi).If the AO fails to consider as to whether in computing profits derived from an industrial undertaking,the expenditure incurred by the assessee,inter alia,on research and development was proximately and directly connected with the business of the undertaking or not then the order passed by him is without application of mind.In such a situation it is a case where both the requirements of section 263 stand fulfilled.

26(xvii).If the procedure adopted by the AO is not fair and reasonable,then there is nothing wrong in the CIT directing to examine the assessment afresh in exercise of powers u/s.263-e.g. granting of depreciation of Rs.4 crores by the AO,without verifying whether the purchases were genuine,particularly when the assessee had not furnished the address of the parties from whom the goods were purchased 26(xviii).If transactions of purchase and sale of units for many years are considered to be genuine in prior and subsequent assessment years,the CIT cannot initiate revision proceedings on ground that transactions pertaining to relevant assessment year were speculative. 26(xix).When the AO is expected to make an enquiry of a particular item of income and if he does not make an enquiry as expected,that would be a ground for the CIT to interfere with the order passed by the AO u/s. 263 of the Act.In a case where the assessee makes claim with regard to provision of warranty expenses and the AO does not inquires as to whether the assessee satisfies the triple test laid down by the Hon'ble Apex court,the CIT can validly revise the order.

10.Now,we would like to decide the case keeping in mind the above mentioned principles.In the Paper book filed by the assessee,we find that it had filed the copies of the documents that were filed by it before the AO or the CIT.The assessee has referred to more than a dozen of cases.What is the relevance of the case laws and they are relevant to facts of the case has not been explained by the assessee though it has filed a paper book containing 156 pages.We are of the opinion that every case has its peculiar facts and until and unless it is not proved as to how the facts of both the case are identical,they should not be compared.Only on the basis of some observation passed by 14 ITA/199/Mum/09/TKPL-04-05

the Hon'ble court with regard to peculiar circumstances of the case it cannot be said that issue is settled in favour of the assessee by a particular decision.In the cases relied upon by the assessee certain principles have been enumerated regarding revisionary powers of the CIT,but that does not ipso facto prove that same are applicable to the facts of the instant case. We find that three issues were taken up by the CIT,while revising the order of the AO- determination of capital gains, computation of income from House Property and treatment of proportionate License fee written off.We find that the CIT has not only mentioned as to how the order were erroneous,but has also established,by giving convincing reasons,that it was prejudicial to interest of revenue.Thus,the twin conditions were satisfied.Reasons recorded by the CIT clearly show that capital gain was not determined as per the provisions of the Act and thus the order was erroneous and prejudicial to the interest of revenue.Similarly,he proved that other two issues were erroneous and adversely affected the interest of revenue.In case of writing off of proportionate license fee the CIT came across about eight agreements that were not considered by the AO and same had bearing on taxability of the assessee.Clearly,the CIT after considering the available material reached to certain conclusions.It is not a case where two views were possible and the AO had taken one of the possible views.It is also not a case where the CIT has not recorded reasons or has not given a finding that the order of the AO was liable to revisionary provisions on both counts i.e.it was not sustainable legally and it was prejudicial to the interest of revenue.He successfully established that there was non-application of mind as well as non examination of the details by the AO while framing assessment.In short,on the touch stone of the principles enumerated at paragraph no.9 of our order,the revisionary order passed by the CIT succeeds and hence we are of the opinion that it does not need any interference from us.Effective ground of appeal is decided against the assessee.

As a result, appeal filed by the assessee stands dismissed.

फलतः िनधा )रती 2ारा दा3खल क, गई अपील ukमंजरू क, जाती है .

Order pronounced in the open court on 11th,March,2015.

आदे श क, घोषणा खुले यायालय म6 7दनांक 11 ,माच ,2015 को क, गई ।

Sd/- Sd/- (जोिग दर िसंह /JOGINDER SINGH) (राजे ि / RAJENDRA) याियक सदःय / JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई/Mumbai,7दनांक/Date: 11.03.2015 SK आदे श क, ूितिल?प अमे?षत/Copy ?षत ?षत of the Order forwarded to : 1. /अपीलाथ& 2. Respondent /ू(यथ&

3.The concerned CIT(A)/संबA अपीलीय आयकर आयुB, 4.The concerned CIT /संबA आयकर आयुB

5. DR "E" Bench, ITAT, Mumbai /?वभागीय ूितिनिध ई खंडपीठ,आ.अ. याया.मुब ं ई

6. Guard File/गाड फाईल स(या?पत ूित //True Copy//

आदे शानुसार/ BY ORDER,

उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai

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