JITF Water Infra (Naya Raipur) Ltd., New Delhi V. ITO, Ward-13(3), New Delhi

ITA 1102/DEL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3752 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEFALI SWAROOP
• Assessee Lawyers: ROHIT JAIN SH DIVYAM MITTAL
• Keywords: Opportunity of being heard; Capital receipt; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 263

Judgement Text

I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 1 OF 17 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER . . /. I.T.A NOS.1102 & 1103/DEL/2018 / ASSESSMENT YEARS:2013-14 & 2014-15 JITF WATER INFRA (NAYA RAIPUR) LTD., 28, SHIVAJI MARG, WEST DELHI, NEW DELHI. VS. ITO, WARD 13(3), NEW DELHI. APPELLANT / RESPONDENT PAN NO. AACCJ2374D /ASSESSEE BY SH. ROHIT JAIN, ADVOCATE SH. DIVYAM MITTAL, CA /REVENUE BY MS. SHEFALI SWAROOP, SR. DR / DATE OF HEARING: 2 7 .11.2019 /PRONOUNCEMENT ON 2 8 .11.2019 /O R D E R PER N.K. BILLAIYA, A.M. 1. THESE ARE TWO SEPARATE APPEALS BY THE ASSESSEE P REFERRED AGAINST TWO SEPARATE ORDERS OF THE PCIT-5, DELHI DATED 18.1 2.2017 PERTAINING TO AYS. 2013-14 & 2014-15 FRAMED U/S 263 OF THE INCOME TAX ACT, 1961. 2. SINCE, THE UNDERLINE FACTS IN THE ISSUES IN BOTH THESE APPEALS ARE IDENTICAL, THEREFORE, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 2 OF 17 3. WE HEARD THE RESPECTIVE REPRESENTATIVES ON THE F ACTS OF AY 2013- 14. CASE RECORDS CAREFULLY PERUSED AND WITH THE AS SISTANCE OF THE LD. COUNSEL, WE HAVE CONSIDERED THE RELEVANT DOCUMENTAR Y EVIDENCES BROUGHT ON RECORD IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. 4. APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS O F PROVIDING WATER FOR HUMAN CONSUMPTION OR INDUSTRIAL PURPOSES FOR RE SIDENTIAL AREAS, INDUSTRY AND MUNICIPALITY AND FOR THAT PURPOSE LAID DOWN/SET UP/WATER TREATMENT PLANTS AND DISTRIBUTION SYSTEM IN THE ARE AS WHERE THERE IS A NEED FOR ADEQUATE WATER SUPPLY AND DISPOSE OF THE W ASTE WATER. 5. WATER CONCESSION AGREEMENT DATED 05.11.2009 ENTE RED WITH NEW RAIPUR DEVELOPMENT AUTHORITY (NRDA), THE APPELLANT WAS GRANTED CONCESSION BY NRDA TO DESIGN, CONSTRUCT AND DEVELOP FACILITIES FOR EXTRACTION OF RAW WATER, PRODUCTION OF TREATED WATE R AND ITS SUPPLY AND STORAGE IN THE WATER STORAGE RESERVOIR IN THE SERVI CE AREA BY INSTALLING PLANT AND EQUIPMENT AND TO DO CIVIL WORK. THE APPE LLANT WAS AWARDED THE CONTRACT ON BUILD, OPERATE AND TRANSFER (BOT) B ASIS FOR DEVELOPMENT AND OPERATION OF THE WATER SUPPLY SYSTEM. THE AGRE EMENT WAS ENTERED INTO FOR A PERIOD OF 8 YEARS COMMENCING FROM 05.11. 2009 AND THE DATE OF EXPIRY OF THE CONCESSION PERIOD WAS 04.11.2017. IN THE AGREEMENT IT HAS BEEN MADE ABUNDANTLY CLEAR THAT OWNERSHIP OF THE SI TE AND THE PROJECT FACILITIES SHALL THROUGHOUT THE CONCESSION PERIOD R EMAIN WITH NRDA AND THE APPELLANT WAS GRANTED RIGHT TO USE THE SAME. I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 3 OF 17 6. IT IS FURTHER PROVIDED THAT NRDA SHALL PAY TO TH E APPELLANT TOTAL AMOUNT OF RS. 115.60 CRORES AS FINANCIAL ASSISTANCE FOR THE CONSTRUCTION OF PROJECT FACILITIES DURING THE PERIOD COMMENCING FROM APPOINTED DATE TO COMMERCIAL OPERATION DATE. THIS FINANCIAL ASSIS TANCE WAS LINKED TO AND PAYABLE IN ACHIEVEMENT OF SPECIFIC MILESTONES A S PRESCRIBED IN THE AGREEMENT. IN CONSIDERATION OF THE APPELLANT ACCEP TING THE CONCESSION, THE APPELLANT WAS ENTITLED TO RECEIVE CONCESSION PA YMENT OF RS. 84 LAKHS PER QUARTER FROM COMMERCIAL OPERATIONS DATE. AS IN CREASED ON ACCOUNT OF COLLECTION EFFICIENCY AS PRESCRIBED IN THE AGREE MENT. THE DETAILS OF FINANCIAL ASSISTANCE RECEIVED ALONG WITH EXPENDITUR E INCURRED FROM AY 2010-11 TO 2014-15 IS AS UNDER: PARTICULARS ASSESSMENT YEA R 2010 - 11 2011 - 12 2012 - 13 2013 - 14 2014 - 15 TOTAL FINANCIAL ASSISTANCE RECEIVED [A] - 18,40,00,000 52,10,00,000 18,50,00,000 6,48,80,000 95,48,80,000 EXPENDITURE INCURRED [B] 14,64,893 28,36,30,167 62,63,75,732 20,87,13,117 12,75,21,326 124,77,05,237 EXCESS OF EXP OVER FINANCIAL ASSISTANCE [C=A-B] (14,64,893) (9,96,30,167) (10,53,75,732) (2,37,13,117) (6,26,41,326) (29,28,25,237) 7. FROM THE AFOREMENTIONED CHART IT CAN BE SEEN THA T IN AY 2013-14 THE APPELLANT RECEIVED A SUM OF RS. 18.50 CRORES AS FINANCIAL ASSISTANCE FROM NRDA AND IN AY 2014-15 THE APPELLANT RECEIVED RS. 6.48 CRORES. I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 4 OF 17 8. THE TREATMENT OF THIS FINANCIAL ASSISTANCE IS TH E CAUSE OF QUARREL BETWEEN THE APPELLANT AND THE REVENUE. THE AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THIS FINANCIAL ASSI STANCE BEING A CAPITAL RECEIPT HAS RIGHTLY BEEN TREATED AS SUCH BY THE APP ELLANT IN ITS BOOKS OF ACCOUNT AS PART OF CAPITAL WORK IN PROGRESS. ASSUM ING JURISDICTION U/S 263 OF THE ACT THE PCIT IS OF THE OPINION THAT THE AO HAS NOT MADE ANY THOROUGH INVESTIGATION/ENQUIRY AND HAS SIMPLY ACCEP TED THE CONTENTION OF THE ASSESSEE. IN THE OPINION OF THE PCIT THIS F INANCIAL ASSISTANCE IS OF REVENUE IN NATURE AND SHOULD HAVE BEEN TAXED AS INC OME OF THE ASSESSEE AND IN NOT DOING SO THE ASSESSMENT ORDER HAS BECOME ERRONEOUS AND PRE- JUDICIAL TO THE INTEREST OF THE REVENUE. 9. BEFORE US, THE COUNSEL FOR THE ASSESSEE VEHEMENT LY STATED THAT A THOROUGH ENQUIRY WAS MADE BY THE AO. IT IS THE SAY OF THE COUNSEL THAT SPECIFIC QUERIES WERE RAISED DURING THE COURSE OF T HE ASSESSMENT PROCEEDINGS ITSELF TO WHICH SPECIFIC REPLIES WERE G IVEN BY THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT NO ENQUIRY WAS MA DE BY THE AO. THE COUNSEL FURTHER CONTENDED THAT THE ROOT CAUSE IS WH ETHER THE FINANCIAL ASSISTANCE RECEIVED BY THE APPELLANT IS CAPITAL REC EIPT OR REVENUE RECEIPT. THE COUNSEL STRONGLY CONTENDED THAT IT IS THE NATURE OF THE GRANT WHICH IS THE DETERMINATIVE FACTOR AND WHAT HA S TO BE SEEN IS THE PURPOSE OF WHICH THE FINANCIAL ASSISTANCE WAS RECEI VED. SINCE, THE FINANCIAL ASSISTANCE WAS RECEIVED FOR THE SET UP OF FACILITIES FOR EXTRACTION OF RAW WATER, PRODUCTION OF TREATED WATER AND SUPPL Y AND STORAGE IN THE I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 5 OF 17 WATER STORAGE RESERVOIR BY INSTALLING PLANT AND EQU IPMENT THE FINANCIAL ASSISTANCE IS A CAPITAL RECEIPT AND HAS BEEN RIGHTL Y ACCEPTED BY THE AO. IT IS THE SAY OF THE COUNSEL THAT THE VIEW TAKEN BY THE AO IS A PLAUSIBLE VIEW AND, THEREFORE, PROCEEDINGS U/S 263 OF THE ACT ARE UNWARRANTED AND DESERVES TO BE SET ASIDE. THE COUNSEL FURTHER STAT ED THAT IT IS INCUMBENT UPON THE PCIT BEFORE SETTING ASIDE THE ASSESSMENT H E IS REQUIRED TO RECORD THE PRIMA FACIE FINDING ON THE MERITS OF THE MATTER AFTER CONDUCTING NECESSARY ENQUIRIES AND THE PCIT IS NOT EMPOWERED TO BLANKETLY SET ASIDE THE ASSESSMENT ORDER. STRONG R ELIANCE WAS PLACED ON SEVERAL JUDICIAL DECISIONS WHICH ARE IN THE FORM OF CASE LAW PAPER BOOK. 10. PER CONTRA, THE DR STRONGLY SUPPORTED THE FINDI NGS OF THE PCIT. IT IS THE SAY OF THE DR THAT THE AO DID NOT MAKE NECES SARY ENQUIRIES AND HAS ACCEPTED THE RETURNED INCOME OF THE ASSESSEE AND TH E ENTIRE ASSESSMENT ORDER IS DEVOID OF ENQUIRY. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS. THE NATURE OF BUSINESS ACTIVITY OF THE APPELLANT HA S ALREADY BEEN MENTIONED ELSEWHERE ALONG WITH THE CONCESSION AGREE MENT DATED 05.11.2009 ENTERED INTO BETWEEN NRDA AND THE APPELL ANT. 12. AS MENTIONED ELSEWHERE THE BONE OF CONTENTION I S THE TREATMENT OF FINANCIAL ASSISTANCE RECEIVED BY THE ASSESSEE FROM NRDA. IN OUR CONSIDERED OPINION, TAXATION OF GRANT/SUBSIDY BY WH ATEVER NAME CALLED IS DETERMINED BY THE PURPOSE FOR WHICH THE GRANT/SUBSI DY IS GRANTED. THIS I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 6 OF 17 VIEW IS FORTIFIED BY THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF V.S.S.V. MEENAKSHI ACHI 60 ITR 253 IN WHICH THE HONBLE SUPREME COURT HELD THAT THE CHARACTER OF THE SUBSIDY IN THE HANDS OF THE RECIPIENT IS TO BE DETERMINED HAVING REGARD TO THE PURPOSE FO R WHICH THE SUBSIDY HAS BEEN GIVEN. THIS PRINCIPLE HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF SAHNI STEEL & PRESS WO RKS LTD. 228 ITR 253, WHEREIN THE HONBLE SUPREME COURT HELD THAT THE CHA RACTER OF A SUBSIDY IN THE HANDS OF THE RECIPIENT WHETHER REVENUE OR CA PITAL IS TO BE DETERMINED HAVING REGARD TO THE PURPOSE FOR WHICH T HE SUBSIDY IS GIVEN. IT WAS FURTHER HELD THAT IF THE PURPOSE OF THE SUBS IDY IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJE CT THE SUBSIDY IS TO BE TREATED AS HAVING BEEN RECEIVED FOR CAPITAL PURPOSE S, WHEREAS IF THE SUBSIDY IS GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATIONS AND IS GIVEN ONLY AFTER AND CON DITIONALLY BEEN COMMENCEMENT OF PRODUCTION SUCH SUBSIDY IS TO BE TR EATED AS ASSISTANCE FOR THE PURPOSE OF THE TRADE AND WOULD CONSTITUTE R EVENUE RECEIPT. THIS PRINCIPLE WAS ONCE AGAIN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS 306 ITR 392. 13. CONSIDERING THE AFORE-STATED RATIO LAID DOWN BY THE HONBLE SUPREME COURT AND CONSIDERING THE NATURE OF FINANCI AL ASSISTANCE GIVEN BY NRDA TO THE APPELLANT, WE ARE OF THE CONSIDERED VIE W THAT THE FINANCIAL ASSISTANCE IS CAPITAL IN NATURE AND THE AMOUNT RECE IVED BY THE APPELLANT IS CAPITAL RECEIPT. I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 7 OF 17 14. HAVING SAID ALL THAT LET US NOW SEE WHAT ENQUIR IES WERE MADE BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDI NGS. THE FIRST QUERY LETTER DATED 21.04.2015 CONTAINED 47 POINTS AND THE SAID QUERY LETTER IS PLACED AT PAGES 239 TO 243 OF THE PB. A DETAILED R EPLY WAS FILED VIDE REPLY DATED 01.07.2015 AND THE SAME IS PLACED AT PA GES 367 TO 371 OF THE PB. THE SECOND QUERY LETTER IS DATED 21.09.2015 WH ICH IS PLACED AT PAGE 364 OF THE PB AND THE REPLY HAS PLACED AT PAGE 361 OF THE PB DATED 08.10.2015 IN WHICH THE ASSESSEE SPECIFICALLY EXPLA INED THE TREATMENT OF RECEIPTS FROM NRDA AND POINTED OUT THAT THE NATURE OF RECEIPTS HAS ALREADY BEEN EXPLAINED IN NOT ON BUSINESS ACTIVITIE S. BY ANOTHER REPLY DATED 30.10.2015 WHICH IS PLACED AT PAGE 356 OF THE PB THE ASSESSEE EXPLAINED THAT THE FINANCIAL ASSISTANCE RECEIVED FR OM NRDA IS IN THE NATURE OF CAPITAL RECEIPT AND CANNOT BE CONSIDERED AS REVENUE RECEIPT. IT WAS SPECIFICALLY EXPLAINED THAT FINANCIAL ASSIST ANCE IF RECEIVED FOR CREATION OF AN ASSET IS NOT TAXABLE BEING CAPITAL R ECEIPT. IT WAS POINTED OUT THAT ANY RECEIPT WHICH IS INTRINSICALLY CONNECT ED WITH CONSTRUCTION OF ASSESSEES PLANT WOULD BE CAPITAL RECEIPT. A FURTH ER REPLY WAS FILED ON 19.02.2016 GIVING THE DETAILS OF CAPITAL WORK IN PR OGRESS AND TREATMENT OF AMOUNTS RECEIVED FROM NRDA THIS REPLY IS PLACED AT PAGES 299 TO 302 OF THE PB. CONSIDERING THESE PLETHORA OF EVIDENCES IT CANNOT BE SAID THAT NO ENQUIRY WAS MADE BY THE AO DURING THE COURSE OF THE ASSESSMENT I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 8 OF 17 PROCEEDINGS. IN FACT WHILE FRAMING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AO HAS CONCLUDED AS UNDER: 3. THE COMPANY IS STATED TO BE CONCESSIONAIRE FOR DEVELOPMENT OF WATER SUPPLY SYSTEM IN NAYA RAIPUR C ITY. DURING THE YEAR UNDER CONSIDERATION THE WORK OF THE ASSESSEE IS UNDER FIRST STAGE OF PROJECT I.E. DEVELOPMENT OF WATER TREATMENT SYSTEM. TOTAL EXPENSES INCURRED ON THIS PROJECT, REDUCED BY THE ENTIRE GRANT RECEIVED DURING THE YEA R ARE SHIFTED INTO CAPITAL WORK IN PROGRESS. THEREFORE, NO PROFIT AND LOSS ACCOUNT IS MADE BY THE ASSESSEE DURING THE YEA R UNDER REFERENCE. THE NECESSARY DETAILS IN THIS REGARD AS CALLED FOR WERE FILED, EXAMINED AND PLACED ON RECORD. BOOKS O F ACCOUNT WERE PRODUCED AND EXAMINED ON TEST CHECK BASIS. 15. WITH THE UNDERSTANDING OF THE FACTS AS CONSIDER ED AT THE ASSESSMENT STAGE LET US NOW CONSIDER SOME JUDICIAL DECISIONS ON THIS POINT WHICH READ AS UNDER: 31. THE HON'BLE SUPREME COURT IN MALABAR INDUSTRIA L CO. LTD., 243 ITR 83, HAS LAID DOWN THE FOLLOWING RATIO: 'A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MO TU UNDER IT, IS THAT THE ORDER OF THE INCOMETAX OFFICE R IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED O F TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSES SING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT--IF THE ORDER OF THE INCOME-TAX OFFI CER IS I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 9 OF 17 ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-- RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT . THE PROVISION 60 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATIS FY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS '. 32. THE CO-ORDINATE BENCH IN THE CASE OF TECHNIP UK LTD, ITA NO. 1116/DEL/2014 VIDE ORDER DATED 17.12.2018 HAS H ELD AS UNDER: 62. WE FIND THE HON'BLE DELHI HIGH COURT IN THE CA SE OF CIT VS. ANIL KUMAR REPORTED IN 335 ITR 83 HAS HELD THAT WHERE IT WAS DISCERNIBLE FROM RECORD THAT THE A.O H AS APPLIED HIS MIND TO THE ISSUE IN QUESTION, THE LD. CIT CANNOT INVOKE SECTION 263 OF THE ACT MERELY BECAUSE HE HAS DIFFERENT OPINION. RELEVANT OBSERVATION OF THE HIGH COURT READS AS UNDER: 63. WE FIND THE HON'BLE DELHI HIGH COURT IN THE CAS E OF VIKAS POLYMER REPORTED IN 341 ITR 537 HAS HELD AS U NDER: WE ARE THUS OF THE OPINION THAT THE PROVISIONS OF S. 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, AN D (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 THE SE TWIN CONDITIONS THAT THE CIT MAY PASS AN ORDER EXERCISING HIS POWER OF REVISION. MINUTELY EXAMINED , THE I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 10 OF 17 PROVISIONS OF THE SECTION ENVISAGE THAT THE CIT MAY CALL FOR THE RECORDS AND IF HE PRIMA FACIE CONSIDERS THA T ANY ORDER PASSED THEREIN BY THE AO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE M AY AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY. THE TWIN REQUIRE MENTS OF THE SECTION ARE MANIFESTLY FOR A PURPOSE. MERELY BECAUSE THE CIT CONSIDERS ON EXAMINATION OF THE REC ORD THAT THE ORDER HAS BEEN ERRONEOUSLY PASSED SO AS TO PREJUDICE THE INTEREST OF THE REVENUE WILL NOT SUFF ICE. THE ASSESSEE MUST BE CALLED, HIS EXPLANATION SOUGHT FOR AND EXAMINED BY THE CIT AND THEREAFTER IF THE CIT S TILL FEELS THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE, THE CIT MAY PASS REVISIONA L ORDERS. IF, ON THE OTHER HAND, THE CIT IS SATISFIED , AFTER HEARING THE ASSESSEE, THAT THE ORDERS ARE NOT ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY CHOOSE NOT TO EXERCISE HIS POWER OF REVISION. THIS IS FOR THE REASON THAT IF A QUERY IS RAISED DURING THE COU RSE OF SCRUTINY BY THE AO, WHICH WAS ANSWERED TO THE SATISFACTION OF THE AO, BUT NEITHER THE QUERY NOR T HE 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. IN THE INSTANT CASE, FOR EXAMPLE, THE CIT HAS OBSERVED IN THE ORDER PASSED BY HIM THAT THE ASSESSEE HAS NOT FILED CERTAIN DOCUMENTS ON THE RECORD AT THE TIME OF ASSESSMENT. ASSUMING IT TO BE SO, IN OUR OPINION, T HIS DOES NOT JUSTIFY THE CONCLUSION ARRIVED AT BY THE C IT THAT I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 11 OF 17 THE AO HAD SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INVESTIGATING THE CASE. MORE SO, IN VIEW OF THE FAC T THAT THE ASSESSEE EXPLAINED THAT THE CAPITAL INVESTMENT MADE BY THE PARTNERS, WHICH HAD BEEN CALLED INTO QUESTIO N BY THE CIT WAS DULY REFLECTED IN THE RESPECTIVE ASSES SMENTS OF THE PARTNERS WHO WERE I.T. ASSESSEES AND THE UNSECURED LOAN TAKEN FROM M/S STUTEE CHIT & FINANCE (P) LTD. WAS DULY REFLECTED IN THE ASSESSMENT ORDER OF THE SAID CHIT FUND WHICH WAS ALSO AN ASSESSEE. 64. SINCE IN THE INSTANT CASE THE A.O AFTER CONSIDE RING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE FROM T IME TO TIME AND HAS TAKEN A POSSIBLE VIEW, THEREFORE, M ERELY BECAUSE THE DIT DOES NOT AGREE WITH THE OPINION OF THE A.O, HE CANNOT INVOKE THE PROVISIONS OF SECTION 263 TO SUBSTITUTE HIS OWN OPINION. IT HAS FURTHER BEEN HEL D IN SEVERAL DECISIONS THAT WHEN THE A.O HAS MADE ENQUIR Y TO HIS SATISFACTION AND IT IS NOT A CASE OF NO ENQUIRY AND THE DIT/CIT WANTS THAT THE CASE COULD HAVE BEEN INVESTIGATED/ PROBED IN A PARTICULAR MANNER, HE CAN NOT ASSUME JURISDICTION U/S 263 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE ASSUMPTION OF JURISDICTION BY THE DIT U/S 263 OF THE ACT IS NOT I N ACCORDANCE WITH LAW. WE, THEREFORE, QUASH THE SAME AND GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 33. IN YET ANOTHER CASE, JUBILANT ENERGY [P] LTD I TA NO. 3927/DEL/2016 ORDER DATED 04.07.2018, THE CO-ORDINA TE BENCH UNDER SIMILAR FACTS AND CIRCUMSTANCES, HAS HELD AS UNDER: 19. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD 203 ITR 108 HAS HELD AS UNDER: I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 12 OF 17 THE POWER OF SUO MOTU REVISION UNDER SUBSECTION (1 ) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE S AME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIE D THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENAB LE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDE R THIS SUB-SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS B EEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN O RDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSIONS 'ERRONEOUS', 'ERRONEOUS ASSESSMENT' AND 'ERRONEOUS JUDGMENT' HAVE BEEN DEFINED IN BLACK'S L AW DICTIONARY. ACCORDING TO THE DEFINITION, 'ERRONEOUS ' MEANS 'INVOLVING ERROR; DEVIATING FROM THE LAW'. 'ERRONEOUS ASSESSMENT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, A ND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DO ES NOT REFER TO THE JUDGMENT OF THE ASSESSING OFFICER IN F IXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, 'ERRONEOUS JUDGMENT' MEANS 'ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES'. 12. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NO T IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTIN G IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. TH IS I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 13 OF 17 SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION O F THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME - TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISI ON IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONE R, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION TH AT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON T HE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HA VE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NO T VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EX ERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANC E WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCL USION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN T HE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT TH AT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN A LSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT-MAT TER I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 14 OF 17 OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUS T BE FULFILLED. 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. WE, THEREFORE, HOLD THAT IN ORDER TO EXERC ISE POWER UNDER SUB-SECTION (1) OF SECTION 263 OF THE A CT THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY THE INCOME-TAX OF FICER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE HAVE ALREADY HELD WHAT IS ERRONEOUS. IT MUST BE AN ORDER WHICH IS NOT IN ACCORDANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE INCOME-TAX OFFICER WITHOUT MAKING ANY ENQUIRY I N UNDUE HASTE. WE HAVE ALSO HELD AS TO WHAT IS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. AN ORDER CAN BE SA ID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF I T IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF T HE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIS ED OR CANNOT BE REALISED. THERE MUST BE MATERIAL AVAILABL E ON THE RECORD CALLED FOR BY THE COMMISSIONER TO SATISF Y HIM PRIMA FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL-SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIV E FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER M UST I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 15 OF 17 HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGA RD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE TH E COURT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHE THER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIR IES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY , THE CLAIM WAS ALLOWED BY THE INCOMETAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUC H DECISION OF THE INCOME-TAX OFFICER CANNOT BE HELD T O BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, I N THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE C LAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDIT URE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME-TAX OFFI CER TO RE-EXAMINE THE MATTER. THAT, IN OUR OPINION, IS NOT PERMISSIBLE. HENCE THE PROVISIONS OF SECTION 263 OF THE ACT WERE NOT APPLICABLE TO THE INSTANT CASE AND, THEREFORE, THE COMMISSIONER WAS NOT JUSTIFIED IN SE TTING ASIDE THE ASSESSMENT ORDER. I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 16 OF 17 16. CONSIDERING THE FACTS OF THE CASE IN HAND IN TO TALITY IN THE LIGHT OF JUDICIAL DECISIONS DISCUSSED HEREINABOVE SUPPORTED BY A VORTEX OF EVIDENCES EXAMINED AND ANALYZED BY THE AO DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS, WE ARE OF THE CONSIDERED VI EW THAT THERE REMAINS NOTHING FOR THE PCIT TO ASSUME JURISDICTION U/S 263 OF THE ACT TO SAY THAT ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ARE OF THE CONSIDERED VIEW THAT THE PCIT HAS WRONGLY ASSUMED THE JURISDICTION U/S 263 OF THE ACT. HENCE, HIS ORDER FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERA TION DESERVES TO BE SET ASIDE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE PCIT AND RESTORE THAT OF THE AO. 17. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.201 9 SD/- SD/- (SUCHITRA KAMBLE) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH NOVEMBER, 2019 *KAVITA ARORA, SR. PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR, ITAT: DELHI BENCHES-DELHI I.T.A.NOS.1102 & 1103/DEL/2018/A.YS.2013-14 & 2014- 15/JITF WATER INFRA (NAYA RAIPUR) LTD. PAGE 17 OF 17