1. This is an appeal by the assessee against the order of the CIT passed under Section 263 of the IT Act, 1961 (hereinafter referred to as "Act") dt. 28th March, 2002.
2. We have heard the parties, but, before dealing with the same, it is desired to state the brief facts, as have been revealed from the records and are necessary for the decision of this appeal as under: The brief facts are that the assessee is carrying on the business of running various resorts at various places and is offering the occupation of the various huts/flats/suites to the public on time sharing basis for different time period and against the payment of different quantum of charges, called fee, and payable in lump-sum and once for all. Against such allotment of time sharing the assessee retains the liability to provide the agreed type of accommodation and other services/facilities agreed upon as per the written agreement arrived at the time of allotment of such time sharing occupation for whole of the period of the scheme-called lease period.
During the period relevant to the assessment year under appeal the assessee had received a total fee, on account of sale of such time sharing periods, of Rs. 1,27,81,072 from 459 members and out of 459 members, only 249 members had paid full amount of the time share, amounting to Rs. 54,68,088.
During the course of assessment proceedings the AO, after referring to the assessment of another assessee M/s Sterling Resorts, who was carrying on the same business as was of the appellant, came to the conclusion that 45 per cent of the total receipts were attributable to assessee's liability to provide stay to the members and therefore, was attributable to the fixed assets such as building and other infrastructure which the assessee had permanently acquired and consequently considered that 45 per cent part of the receipts as capital receipts liable to be adjusted against the cost of such permanent assets. The assessee agreed to this conclusion of the AO and consequently, 45 per cent of the receipts were considered as capital receipts and were adjusted against the building cost. The balance 55 per cent was considered as revenue receipt but attributable to the assessee's liability for whole of the period of lease i.e.; for 99 years; and therefore, only l/99th part of 55 per cent of the receipts was considered as revenue receipt for the assessment year under appeal. Depreciation on fixed assets was allowed after deducting an amount equal to 45 per cent of the receipts.
3. The first objection, argued by Mr. Gupta, after referring to the document placed at p. 3 of the assessee's paper book, which is a photocopy of notice under Section 263 of the IT Act, 1961 (hereinafter referred to as "Act"), was that a notice under any of the provisions of the Act has to be addressed in accordance with the provisions of Section 282(2) of the Act and may be served on the person either by post or as if it were a summons issued by a Court under the Code of Civil Procedure, 1908 [under Section 282(1) of the Act]. According to Mr. Gupta if in a case, the notice is not addressed as provided under Section 282(2) of the Act or is not served as provided under Section 282(1) of the Act, the concerned authority has no legal jurisdiction to proceed with the matter and if it does, all the subsequent proceedings/observations/findings/orders will be bad in law. Pointing out to the copy of notice under Section 263 placed at p. 3 of the assessee's paper book, Mr. Gupta submitted that since this notice has not been addressed to principal officer of the appellant (who is a limited company) and also has not been served on the principal officer--according to him the notice was served on some employee of the appellant company; the notice itself was bad in law, i.e., the assumption of the jurisdiction by the CIT to exercise its jurisdiction under Section 263 of the Act itself was bad in law, and therefore, all subsequent actions, and the order passed under Section 263 of the Act were illegal and bad in law which may be quashed. In support of these submissions Mr. Gupta stated that there are so many decisions on this point and since the issue is well settled there is no need to refer to a specific citation.
Against the aforesaid submissions of Mr. Gupta the learned Departmental Representative submitted that according to the provisions of Section 263 of the Act what is required to be done by the CIT is to provide an opportunity of being heard to the assessee. According to the learned Departmental Representative, the CIT is not required to issue any notice which can be said to be a notice under Section 263 of the Act because an opportunity of being heard can be given just by an intimation or a simple letter asking the assessee to explain the case with respect to the issues which the CIT is making the basis for considering the order to be erroneous and prejudicial to the interest of the Revenue. He, therefore, submitted that the proposition of law that if a notice is found to be bad in law, the subsequent proceedings will be bad in law is not applicable to the communication made by the CIT for giving the assessee an opportunity of being heard, as required under Section 263 of the Act. Relying on the decisions of Hon'ble Supreme Court in Geeta Devi Agarwal v. CIT (1970) 76 ITR 496, 499 (SC) and GZT v. Electro House (1971) 82 ITR 824 (SC) the learned Departmental Representative submitted that under Section 263 of the Act, which corresponds to Section 33B of the IT Act, 1922, there is no requirement to issue any notice by the CIT before he assumes jurisdiction to proceed to revise an order passed by any IT authority subordinate to him. He, therefore, reiterated that the CIT is to give an opportunity of being heard to the assessee and that too not before assuming jurisdiction to proceed with the revision proceedings.
According to him even such an opportunity is to be given before passing of the final order. Coming to the present case the learned Departmental Representative submitted that the CIT had allowed the proper opportunity to the assessee as per communication dt. 28th March, 2002.
The learned Departmental Representative further submitted that it is not assessee's case that opportunity was not allowed. In view of these submissions and the decisions relied upon, the learned Departmental Representative submitted that CIT had proceeded lawfully and had met the requirement of Section 263 of the Act before passing a final order under Section 263.
4. We have considered the rival submissions, the facts and circumstances of the case and the decisions relied upon by the parties and after thoughtful consideration of the 'same are of the opinion that there is no dispute that a notice required to be issued under any provisions of the Act has to be addressed as per the requirement of law and in case of a company, the notice must be addressed to the principal officer and if this requirement is not met with, then the notice in question cannot be said to be a valid notice, i.e., a notice not addressed in accordance with the requirement of law will be a bad notice, and consequently all the subsequent proceedings taken thereon and the findings or the orders will also be bad in law and cannot be sustained, however, we are also conscious of the fact that the different provisions of the Act require or prescribe issuance of different type of notices in accordance with the intent, the purpose and the context of the provisions. In other words, some notices are to be issued for assuming jurisdiction to proceed with the relevant proceedings prescribing issuance of the notices whereas some notices are required to be issued not to assume the jurisdiction to proceed under the provisions, but, only to provide the assessee an opportunity of being heard. For example, the notices under the provisions of Section 143(2) of the Act where limitations is provided and also the notice under Section 148 of the Act are to be issued prior to proceedings with the making of an assessment under Section 143(3) of the Act or making the assessment of escaped income under Section 147 of the Act respectively and therefore, these are the notices which must be addressed in accordance with provisions of Section 282(2) of the Act.
On the other hand, some provisions require simply the giving of an opportunity of being heard and the communication used for that purpose, though, generally is called and is known as notice, but it is not a notice as required under Section 143(2) or under Section 148 of the Act and it is so, because, giving of an opportunity is not relevant for assuming jurisdiction to proceed with the proceedings. In other words, in the case of provisions requiring giving of an opportunity to the assessee before passing the order the authority is already vested with the jurisdiction to proceed with the proceedings but it is in the interest of natural justice that the provisions have provided giving of an opportunity of being heard to the assessee. For example the authorities have jurisdiction to initiate the penalty proceedings under various sections of Chapter XXI of the Act but, the provisions of Section 274(1) specifically require that no order imposing penalty under Chapter XXI shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard which otherwise means that it is only before passing of an order of penalty, and not before initiating the penalty proceedings, that the assessee has to be given an opportunity of being heard. Similarly the provisions of Section 263 of the Act also provide for an opportunity to be given to the assessee not before initiating or assuming jurisdiction to proceed with the proceedings under Section 263 of the Act, but after satisfying himself that the order to be revised is erroneous so far as prejudicial to the interest of the Revenue, but before making an order under Section 263 of the Act. It is, therefore, this another category of the notices, which, in our opinion, do not require to be addressed in accordance with provision under Section 282(2) of the Act.
Though, the procedure for giving an opportunity of being heard to the assessee under Section 263 or as in case for imposition of penalty under Chapter XXI of the Act, are generally called or known as giving of notices, but, these communications are, in the strict sense of the matter, not "notices" as understood in the strict legal sense or by the Courts or as is envisaged in the provisions of Section 282 of the Act and it is so because, in both these cases the officer has already vested with the jurisdiction to proceed with the matter and the requirement of giving an opportunity of being heard is to be fulfilled only before passing the order. In other words, under these provisions the officer can proceed with the proceedings even before giving an opportunity of being heard but it is before passing the final order that the assessee has to be given an opportunity of being heard and therefore, we are of the opinion that mode of communication used for giving an opportunity of being heard can't be equated to a 'notice' as envisaged in the provisions of Section 282 of the Act as is generally understood by the Courts.
5. It is this difference between two types of notices, in our opinion, which is very crucial, because, if a notice falls in the earlier category it has to be addressed in accordance with the provisions of Section 282(2) of the Act, if it falls in the latter category there is no necessity to address the notice as per requirement of Section 282(2) of the Act and the requirement of giving an opportunity can be met with by way of any mode of communication which can make the assessee to know his burden/obligation.
6. So far as the present case is concerned, we are of the opinion that decisions relied upon by the parties are good decisions at their own places, but since a notice giving opportunity of being heard before passing the order under Section 263 of the Act is, in our opinion, covered by the notice of the second category, the decision relied upon by Mr. Gupta is not applicable whereas the decisions relied upon by the learned Departmental Representative supports our view that a notice under Section 263 is not required to be addressed as provided under Section 282(2) of the Act. Mr. Gupta's plea that notice under Section 263 of the Act dt. 28th March, 2002 having been not addressed in accordance with the provisions of Section 282(2) is an invalid notice, therefore, fails.
7. The second plea raised by Mr. Gupta was that the order under Section 263 of the Act having been made after the expiry of limitation available under Section 263(2) of the Act was barred by limitation.
According to Mr. Gupta the assessment order under Section 143(3) was passed on 29th Feb., 2000 and therefore, as per the provisions of Section 263 of the Act the CIT could pass or make an order under Section 263 of the Act on or before 31st March, 2002. According to Mr.
Gupta though the order under Section 263 is shown to be dt. 28th March, 2002 but having been served upon the assessee on 2nd April, 2002, the order cannot be said to have been made on or before 31st March, 2002, i.e., cannot be said to have been made on 28th March, 2002 as has been made to look. Explaining the reasons as to how the order dt. 28th March, 2002 and served upon the assessee on 2nd April, 2002 was barred by time, Mr. Gupta submitted that the order of any authority cannot be said to have been passed unless it in some way has been pronounced or published or the party affected has the means of knowing it. According to Mr. Gupta it is not enough if the order is passed and is kept in the custody of the officer, because, in that case the order is still liable to change by the authority. Mr. Gupta further submitted that for an order to be complete and effective the order must be beyond the control of the authority making it because, in that case the authority shall not be able to change or make any modification in it and this can be done only if the order is issued or pronounced or published or dispatched to the party before the expiration of the limitation. In support of the submissions the learned counsel relied upon the following observations of the Hon'ble Supreme Court at p. 69 in B.J.Shelat v. State of Gujarat AIR 1978 SC 1109, which were relied upon by the High Court of Kerala in case of Government Woodwork Shop v. State of Kerala (1988) 69 STC 62 (Ker) and subsequently relied upon by the same High Court in case of CIT v. Sree Narayana Chandrika Trust (1995) 212 ITR 456, 471 (Ker) : "The order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period." The learned Departmental Representative, on the other hand, submitted that the decision of Hon'ble High Court of Kerala (supra) relied upon by Mr. Gupta nowhere says that the order cannot be said to have been made before the limitation unless it is served upon by the assessee.
According to him service of order before expiry of limitation is never a condition for making an order to be within limitation. Referring to the present case the learned Departmental Representative submitted that the order having been typed on 28th March, 2002 and having been served on the assessee on 2nd April, 2002 it has to be taken that the order was dispatched to the assessee before 31st March, 2002 . because postal authorities take at least three or four days for delivery and if that is the case then it has to be taken that it was pronounced before the limitation. He, therefore, submitted that the CIT's order under Section 263 is not barred by time.
8. We have considered the rival submissions and the facts and circumstances of the case as well as decision of Hon'ble Court of Kerala (supra) relied upon by Mr. Gupta with out most care.
9. After careful consideration of the law laid down by the Hon'ble Supreme Court in B.J. Shelat, (supra) and followed by Kerala High Court in Government Woodwork Shop v. State of Kerala (supra), specially the observations at p. 69 and the decision in case of Shree Narayana Chandrika Trust (supra); we have no hesitation to hold that the proposition of law that "the order of any authority cannot be said to.
be passed unless it is in some way pronounced or published or the party affected has the means of knowing it", still holds good, but the question, before invoking this proposition of law, arises as to whether the party, who is alleging a particular order to having not been made within the limitation, is able to establish that the order in question was neither pronounced nor published nor the affected party had the means of knowing it or had not been dispatched before the limitation expired or not. The onus to prove all these ingredients is on the party who alleges so.
In the present case, since it is the assessee who is alleging that the CIT's order under Section 263 dt. 28th Feb., 2002 was not made either on 28th Feb., 2002 or on or before 31st March, 2002--the day when the limitation expired; the onus to prove that the order in question was neither pronounced nor published nor dispatched or had not been issued so as to be beyond the control of the CIT, for any possible change or any modification therein, on or before 31st March, 2002 lay on the assessee but Mr. Gupta has, except raising the plea, not brought any material to our notice which may support his allegation. Since, it is well settled law that the onus to prove that the state of affairs is not same as it appears to be is on the person who alleges so, it is for that person to establish his point of view with cogent material, i.e., the onus to prove that the state of affairs is not same as it appears to be is on the party which alleges so. So far as present case is concerned, we are of the opinion that the assessee has not discharged this vital onus and consequently, the state of affairs has to be taken on the basis of record. In other words, the CIT's order under Section 263 being dt. 28th Feb., 2002 and having been served upon the party at a remote place on 2nd April, 2002 has to be presumed to have been dispatched on or before 31st March, 2002, we again reiterate that specially in view of the fact that assessee has not brought any material to our notice which may prove otherwise; and therefore, the impugned order is taken to have been passed or made well before the expiry of the limitation. Since for an order under Section 263 to be within limitation the requirement is to make or pass the order within limitation and not to serve the order within limitation and therefore, in the facts and circumstances of the present case, we have no hesitation to hold that CIT's order under Section 263 which is under appeal before us having been passed before the limitation prescribed under Section 263 of the Act and consequently, Mr. Gupta's plea that order is barred by time fails.
10.1 The next plea advanced by Mr. Gupta was that the CIT had assumed jurisdiction to revise the assessment order dt. 28th March, 2002 wrongly, because the assessment was framed after making detailed enquiries and on relying on assessment on M/s Sterling Resorts which was carrying on same type of business as that of assessee. Not only this, Mr. Gupta further submitted, that the assessment order was passed with the directions of Addl. CIT. According to Mr. Gupta, the CIT can assume jurisdiction to take action under Section 263 of the Act if the order is erroneous as well as prejudicial to the interest of the Revenue and the order can be termed as erroneous only if it is not in accordance with the law, i.e., if the AO acts in accordance with law and makes assessment the same cannot be (termed) as erroneous by the CIT. Simply because according to him the order should have been written more elaborately, it can't be said the order is erroneous. Mr. Gupta further submitted that this section does not visualise the case the substitution of the judgment of the CIT for that of the AO. Referring to the present case Mr. Gupta read over the assessment order to drive home his point that the AO had completed the assessment absolutely in accordance with the law and therefore, the same cannot be said to be erroneous. For this purpose reliance has been placed on the decision in CIT v. Ratlam Coal Ash Company (1988) 171 ITR 141 (MP) and in case of CIT v. Gabriel India Ltd (1993) 203 ITR 108 (Bom).
10.2 With regard to the issue as to when an erroneous order can be said to be prejudicial to the interest of the Revenue, Mr. Gupta submitted that if the erroneousness of the order results in loss to the Revenue only then it can be said to be prejudicial to the interest of the Revenue. According to Mr. Gupta, if the order is not erroneous than even loss to Revenue will not make the order prejudicial to the interest of the Revenue and in the present case, the order being not erroneous there was no question if it being prejudicial to the interest of the Revenue. Mr. Gupta further submitted that since it is settled law that for invoking jurisdiction under Section 263 by the CIT the order must be erroneous so as to be prejudicial to the interest of the Revenue, i.e., before assumption of jurisdiction by the CIT to proceed under Section 263 of the Act both the conditions--that the order must be erroneous as well as prejudicial to the interest of the Revenue must be satisfied simultaneously and in the present case, none of them having been satisfied there was no question of invoking the provisions of Section 263(2) of the Act.
10.3 Coming to the present case Mr. Gupta submitted that the order in question being neither erroneous nor prejudicial to the interest of the Revenue, the assumption of jurisdiction by the CIT to make order under Section 263 is not valid in law and to support his submissions he further relied on the decision of Hon'ble Supreme Court in Malabar Industrial Company Ltd. v. CIT (2000) 243 ITR 83 (SC) where the Hon'ble apex Court while dealing with the meaning of "prejudicial nature" has observed that the phrase "prejudicial to the Revenue" must be read in conjunction with an erroneous order and on order of Tribunal, Pune Bench (Third Member) in Jamunadas T. Mehta v. ITO (2002) 75 TTJ (Pune)(TM) 843 : (2002) 81 ITD 103 (Pune) (TM).
10.4 The learned Departmental Representative on the other hand submitted that as per Explanation to Section 263 the CIT has powers to revise order of any of the subordinate authorities even if such order has been passed with the directions of Addl. CIT and in support of the same relied on decision cited on p. 8198 of volume 5 of Income-tax Law by Chaturvedi and Pitisaria. With regard to the erroneous nature of the assessment order the learned Departmental Representative pointed out that AO has attributed 45 per cent of the receipts towards fixed assets and has considered the same as of capital nature stating and following the assessment order in case of Sterling Resorts, but if one goes through the assessment order in case of Sterling Resorts there is no such finding or observation or attribution. According to the learned Departmental Representative the assessment order of M/s Sterling Resorts does not speak of consideration of 45 per cent of the receipt as of capital nature. According to the learned Departmental Representative the reliance by the AO, while framing assessment of appellant before us, on the assessment order in case of M/s Sterling Resorts for attributing 45 per cent of the receipts to fixed assets and considering the same as of capital nature was wholly misplaced and assessment order on this point, having being passed without any material, was definitely erroneous one. The learned Departmental Representative further submitted that since attribution of 45 per cent of receipts towards fixed assets resulted in loss of revenue, the assessment order with respect to that issue was certainly 'prejudicial' to the interest of the Revenue also, The learned Departmental Representative therefore, submitted that so far as consideration of 45 per cent of the receipts as of capital nature and exempt from, tax is concerned, the assessment order was certainly erroneous so as to be prejudicial to the interest of the Revenue. With regard to balance receipts the learned Departmental Representative submitted that consideration of same as relatable to whole of the lease period was erroneous as Well as prejudicial to the interest of the Revenue.
11. After having considered the rival submissions and the facts and circumstances of the case and various decisions, we are of the opinion that so far as AO's reliance on the assessment order of M/s Sterling Resorts for attributing 45 per cent of the receipts towards fixed assets and considering the sum as of capital nature is concerned, the assessment order of M/s Sterling Resorts is really silent on this point. It may be that in the P&L a/c of M/s Sterling Resorts the assessee might have credited only 1/99th part of the 55 per cent of the receipts as income and AO may have accepted the same because while computing the taxable income in that case the AO has taken the net profit as per P&L a/c and the AO while framing the assessment of the appellant before us might have taken note of that, but since the assessment order in case of M/s Sterling Resorts as well as in appellant's case are completely silent on this point and the assessee has also not filed the copy of P&L a/c of M/s Sterling Resorts, we have no option but to accept the submissions of the learned Departmental Representative that the actions of the AO considering 45 per cent of the receipts as of capital nature by relying on assessment order in case of M/s Sterling Resorts was. misplaced and had rendered the assessment order to that extent erroneous in nature. Further, this erroneousness having resulted in loss of revenue, the assessment to that extent was erroneous so as to be prejudicial to the interest of the Revenue. We therefore uphold the validity of the order under Section 263 to that extent, though, subject to our further findings on the issue.
12. Another objection raised by Mr. Gupta was that the directions of the CIT are not specific and in consonance with the terms of notice under Section 263 of the Act. Elaborating these points Mr. Gupta, after referring to the copy of notice under Section 263 placed on p. 3 of the paper book, submitted that the proceedings were initiated by the CIT with the intention that the total receipts--including 45 per cent attributed by the AO towards fixed assets; were of revenue nature and related to whole of the period of lease, i.e. 99 years, but in the order under Section 263 he has considered the whole of the receipts as income of current year alone. Mr. Gupta further submitted that observations of the CIT that fees received by the assessee is not refundable is not correct and for this purpose he referred to the terms and conditions of the agreement under which if the allottee commits breach of terms and conditions the assessee was bound to refund the total fees after deducting only 10 per cent subject to maximum of Rs. 1000 towards its expenses. In support, reliance was placed on the decision of Punjab and Haryana High Court in CIT v. R.K. Metal Works (1978) 112 ITR 445 (P&H) and CIT v. Kanda Rice Mills (1989) 178 ITR 446 (P&H).
The learned Departmental Representative on the other hand submitted that the order under Section 263 has been passed on the same grounds as were stated in the notice under Section 263 and, therefore, there is no infirmity in the order of the CIT. With respect to decisions relied upon by Mr. Gupta, the learned Departmental Representative submitted that the same are not applicable to the present case.
13. We have considered the facts and circumstances of the case, the rival submissions as well as the decisions relied upon by the parties and after careful consideration of the same, are inclined to agree with the submissions of Mr. Gupta that an order under Section 263 must be on the basis of same grounds as have been stated in the notice issued under Section 263 and if it is found that the basis or grounds for decision given in the order of the CIT are wrong or different on the facts or are not tenable in law or are not the same, the Tribunal has no option, but, to accept the appeal and to set aside the order of the CIT, but so far as present case is concerned, we are of the opinion that to decide the objection raised by Mr. Gupta it is necessary to consider the grounds stated in the notice under Section 263 for revising the assessment order and the grounds for decision in the order of the CIT and for this purpose we reproduce the relevant part of both these documents as under: "3. On perusal of the assessment order in the case of Sterling Hotel Resorts India Ltd., I find that the 45 per cent component has not been recorded as a capital receipt but a revenue one, which is taxable in the year of accrual. It has not been adjusted against the written down value of the block of assets and thus, the treatment given by the AO was erroneous as well as prejudicial to the interest of the Revenue. Even otherwise, the non-refundable fees received from a member is constituted of 2 parts--one is towards the free stay in the hotel and other is for the other facilities agreed to be provided. As regards the stay, the infrastructure is already in existence and on which the assessee is claiming depreciation. The fee towards this, which, of course, is to be estimated and in this case has been estimated at 45 per cent has accrued for good and against which there is no recurring liability. As regards the second part, which again is a revenue receipt but is fastenes with a recurring liability the same can be regarded as belonging to the entire period.
4. The treatment so given by the AO of taking of the fees to be a capital receipt prima facie is erroneous and prejudicial to the interest of Revenue. In view of these facts, I intend to review the assessment order for the asst. yr. 1997-98 under Section 263 of the IT Act for which you are afforded an opportunity of being heard by fixing the case for hearing on 27th March, 2001 at 11.00 a.m. in my office at Dandi Swami Chowk, Civil Lines, Ludhiana". (Emphasis, italised in print, by us).
"I have considered the submissions of the assessee. The issue under debate is not related to the method of accounting being followed by the assessee, but to the nature of the receipt and also the year in which this receipt has accrued to the assessee. The AO has stated in the impugned assessment order that 45 per cent of the receipt is of capital nature and the rest to be revenue one. This 45 per cent component has been adjusted against the block of assets and the balance as the advance received for the entire period. Treatment as given by the AO is patently erroneous since no part of the receipt by any stretch of imagination can be regarded to be of capital nature. Further, it is also seen on going through the terms and conditions of this time share scheme, it shows that this receipt is of non-refundable nature. It is being so, the whole of the receipt gets accrued in the year it is received and becomes taxable. Thus, as a matter of fact, the whole of the receipt is taxable in the year this membership fee received.
The treatment so given by the AO thus was erroneous and prejudicial to the interest of the Revenue in view of which the order is set-aside to make it de novo". (Emphasis, italised in print, by us).
13.1 After careful analysis of aforesaid relevant part of the notice as well as the order under Section 263 it is quite clear that so far as 55 per cent of the receipts are concerned the CIT, in the notice itself, had expressed his intention to consider the same as revenue receipt and relatable to the total period of lease, i.e., for 99 years; but, while passing the order he has considered the whole of the receipts as income for the current year only which, in our opinion, is absolutely contrary to the grounds stated in the notice under Section 263 of the Act and not sustainable in law.
13.2 In a binding decision of Hon'ble Punjab High Court in CIT v.Jagadhri Electric Supply Company (1983) 140 ITR 490 (P&H). at p. 502 and 503 the Hon'ble Court has specifically held that "at the time of hearing if the assessee can satisfy the Tribunal that the grounds for decision given in the order by the CIT are wrong on fact or are not tenable in law, the Tribunal has no option, but to accept the appeal and to set aside the order of the CIT". Following the decision of Hon'ble High Court, we are of the opinion that CIT's decision to consider the 55 per cent portion of the receipts as income for the current year, instead of considering the same as for 99 years, is contrary to his intention with which he had initiated the proceedings under Section 263 of the Act and therefore, the same is bad in law and liable to be struck down. Respectfully following the decision of the Hon'ble High Court of Punjab and Haryana (supra) and in the facts and circumstances of the case, we strike down that portion of the order under Section 263 of the Act, i.e.; the findings of the CIT relating to consideration of 55 per cent of the receipts as income for the current year are set aside/deleted.
14. Another plea taken by Mr. Gupta was that the assessment order for the asst. yr. 1996-97 has been completed under Section 143(3) of the Act where the whole of the receipts have been considered for 99 years.
In view of this fact, Mr. Gupta submitted that since the facts and circumstances for both the assessment years were same, the doctrine of res judicata came in to play and therefore, the CIT was not justified in revising the assessment order for asst. yr. 1996-97 for the purpose of consideration of the total receipts (including the 45 per cent portion) as income for the current year alone and in support of the same relied on the decision of Haryana High Court in case of CIT v.Dalmia Dadri Cement Ltd. (1970) 77 ITR 410 (P&H) of Calcutta High Court in Russel Properties (P) Ltd v. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal). The learned Departmental Representative, on the other hand, supported the order of the CIT.15. After careful consideration of the rival submissions, facts and circumstances of the case and the decisions relied upon by Mr. Gupta, we are of the opinion that the acceptance of the whole of the similar receipts as relatable to whole of the period of lease in asst, yr.
1996-97 by the Department also goes to show that the Department itself was of the opinion that the receipts in assessee's case, though were of revenue nature, but were relatable to the whole of the period of lease, i.e., for 99 years.
At the same time, the assessee also having accepted the position that whole of the receipts were of revenue nature and relatable to 99 years, the outcome of Mr. Gupta's submission is that both the parties had, in asst. yr. 1996-97, accepted the receipts to be of revenue nature and relatable to 99 years and therefore, the view expressed by CIT, so far as consideration of whole of the receipts as income for the year of receipt is concerned, is nothing but a 'change in opinion', which cannot be a basis for invoking the provision of Section 263 of the Act.
16. Coming to the 45 per cent part of the receipts, which has been considered by the CIT not only as of revenue nature but also as income in the current year alone, we, so far as revenue nature is concerned, have already upheld the order of the CIT (para 10), but so far as the period to which the receipts relate is concerned, we, in view of the Revenue's own stand in assessee's own case for asst. yr. 1996-97 and the fact that there is neither a provision of law to support the CIT's stand that 45 per cent of the receipts were relatable to stay part of the agreement and assessee has no incurring liability on that account nor such a presumption of the CIT is sustainable on facts because, even if it is made relatable to the stay part of the agreement than also the assessee is bound to have incurring liability in the future, such as, repair, maintenance, renovation, replacement and safety of the infrastructure for 99 years, are of the opinion that there is no justification for segregating the receipts in two parts. Even otherwise, the whole of the receipts being related and part of a composite agreement applicable to whole of the period of lease and the assessee's liability being to fulfil the terms and conditions of the agreement throughout the period of lease, such an opinion of the CIT, which is otherwise also not supported by facts or in law, can't be sustained.
17. In view of above discussion, we are unable to uphold the view expressed by the CIT on this point and therefore, we modify his directions to the effect that the 45 per cent of the receipts are relatable to the whole of the period of lease which may be 33 years or 49 years or 99 years, as the case may be and therefore, the 45 per cent part of the whole receipts may also be dealt with in the same manner (taxed) by the AO as the balance 55 per cent of the receipts have been dealt with (taxed).
18. Before ending with the matter, we would like to submit that Mr.
Gupta had objected to the admission of the documents placed at page Nos. 7 and 8 and 9 to 12 of Revenue's paper book on the ground that these documents were not before any of the Revenue authority below, hence assessee has not been given an opportunity to defend itself.
After hearing both the parties we have decided not to admit any of these documents and therefore, we have not taken note of these documents while deciding various issues involved in this appeal.
19. In view of above discussion the order of the CIT is modified as per observations/conclusion/findings/directions in the foregoing part of this order and the AO is directed to consider only the proportionate part of the total receipts, keeping in view the period of lease, in this assessment year and similarly in subsequent assessment years.