M/s BHORUKA STEEL & SERVICES LIMITED vs THE JOINT COMMISSIONER OF INCOME TAX (OSD), & ORS.

This appeal is directed against the Judgment and order passed by the Income Tax Tribunal, ''C'' Bench, Bangalore (''Tribunal'' for short) in I.T.A.No.350/Bang/2013 relating to the assessment year 2009-10, whereby for the reasons recorded therein, the matter is remanded to the Assessing Officer for proper verification, examination and re-adjudication of the issue.

The appellant is a public limited company, engaged in the business of refractory manufacturing and site vending services. The appellant-assessee has transferred its land measuring 7 acres 26 guntas at Mahadevapura Industrial Area, K.R.Puram Hobli, Bangalore South taluk to its sister company M/s Bhoruka Park Private Limited (BPPL) (Developer) vide joint development agreement (JDA) dated 19.9.2006, supplementary agreements were entered thereafter. As per the terms and conditions of JDA and supplementary agreements, 74% share in the undivided interest would be transferred to the BPPL upon BPPL handing over 26% share in the super structure. At the time of transfer of the land, assessee had received interest free deposit of 7.5 crores from the Developer. The Developer constructed some commercial buildings and the same were let out on rent against which no rental income was declared by the Assessee from these let out buildings. The A.O. worked out the assessee''s share at 26% of the total gross rent received from the entire built up area amounting to Rs.3,35,82,700/- and the same was subjected to tax. The Assessee challenged the action of the A.O. before the CIT(A). The CIT(A) accepted the submission of the Assessee and deleted the addition made by A.O. on account of undisclosed income in respect of 26% share in the rent received from the let out portion of the constructed area. The revenue preferred appeal before the Tribunal challenging the said order passed by the CIT(A). The Tribunal allowed the appeal and remanded the matter to A.O. for proper verification and examination and readjudication of the issue particularly relating to the date on which the Assessee had received the amount of Rs.7.5 crore from BPPL, whether at the time of the executing of JDA or subsequent to the date of supplement agreement dated 1.11.2006 and whether M/s BPPL offering the rental income to tax for the same assessment year would preclude the A.O. to assess the correct income in the hands of the assessee. This order is challenged by the Assessee under Section 260-A of the Income tax Act, 1961.

Heard the learned counsel Sri.Chaithanya.K.K, appearing for the appellant and Sri.K.V.Aravind, learned counsel appearing for the respondents.

The substantial question of law that arises for decision before this Court is:

"Whether in the facts and circumstances of the case, the Tribunal was justified in making certain observations on the merits of the case while remanding the matter to the A.O. for readjudication of the issue ?"

The Assessee is placing reliance on certain supplementary agreement said to have been executed between the Assessee and the Developer subsequent to the original JDA dated 19.9.2006. The Tribunal has observed that CIT(A) has taken into consideration the documents including the supplementary agreement dated 29.2.2012, executed after passing the assessment order, which, in fact, is disputed by the Assessee. It is however further observed that until and unless the share of the Assessee was earmarked or demarcated, the Assessee remains the owner of the undivided share to the extent of 26% of the project. The learned counsel for the Assessee would submit that these observations made in the order of the Tribunal would influence the A.O. while reconsidering the issue. However, learned counsel for the revenue supports the impugned Judgment and order.

It is trite that the Tribunal has discretionary power to remand the matter to the A.O. for fresh consideration. However, any observation made by the Tribunal while remanding the matter for examination of certain issues would prejudice the rights of the Assessee resulting in violation of the principles of natural justice besides influencing the A.O. while re-examining the matter. In the circumstances, the object of remanding the matter is to enable the Authorities to examine the issue afresh with an open mind. Any observation in the remand order would defeat the same. The observations made by the Tribunal in the impugned Judgment and order would adversely affect the rights of the Assessee. It is for the A.O. to apply his mind and come to a conclusion, after proper examination of the issue involved. Hence, we are of the considered opinion that the observations made by the Tribunal at paragraph 7 of the Judgment on merits of the case deserves to be expunged and accordingly they are expunged.

Hence, the substantial question of law formulated above, is answered in favour of the Assessee and against the revenue. The matter is remanded to A.O. to reconsider the same afresh in accordance with law, without being influenced by any of the observations made by the Tribunal, in any manner whatsoever.

Appeal stands allowed in terms of the above. No order as to costs.