Association of Corporations & Apex, V. ADIT(E), Inv. Circle-1,

ITA 1676/DEL/2006

• Counselvise Citation: 167620114 RSA 2006
• Duration Of Justice: 5 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-08-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 12-05-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Assessee Lawyers: K S V S MANIAN
• Keywords: Charitable institution; Opportunity of being heard; Bonafide belief; Question of law; Reasonable cause; Difference of opinion; Condonation of delay; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 12A; 147; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A.NO. 1144/DEL/2005 ASSESSMENT YEAR : 2001-02 I.T.A.NOS. 1676,1677,1678/DEL/2006 ASSESSMENT YEAR : 1998-99 TO 2000-2001 ASSOCIATION OF CORPORATIONS VS. ASSTT. DIRECTO R OF INCOME TAX (E) & APEX, SOCIETIES OF HANDLOOMS, INV. CIRCLE 1, HANDLOOM PAVILION, MAYUR BH AWAN, NEAR GATE NO. 2, PRAGATI MAIDAN NEW DELHI. NEW DELHI 110 001. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.S.V.S. MANIAN , CA RESPONDENT BY : SMT. REENA S. PURI, CIT DR O R D E R O R D E R O R D E R O R D E R PER DIVA SINGH, JM PER DIVA SINGH, JM PER DIVA SINGH, JM PER DIVA SINGH, JM THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TH E ORDERS OF THE CIT(A) FOR 2001-02, 1998-99, 1999-2000 AND 2000-01 ASSTT. YEARS RESPECTIVELY. ALL THESE APPEALS ARE BEING DECIDED BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AS THEY WERE HEARD TOGETHER IN VIEW OF THE COMMO N STAND OF THE PARTIES BEFORE THE BENCH THAT THE ARGUMENTS ON FACTS AND C ASE LAW ON EITHER SIDE WOULD REMAIN THE SAME ON THE ISSUES AGITATED BY THE ASSESSEE. 2. ITA NO. 1114/DEL/05 IS FILED AGAINST THE ORDER DATED 5 TH NOVEMBER, 2004 OF CIT XXVI, NEW DELHI FOR 2001-02 ASSTT. YEAR. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 2 22 2 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 2.1 IN THE SAID APPEAL, ORIGINALLY THE ASSESSEE HAD FI LED 10 GROUNDS ALONG WITH THE MEMO OF APPEAL DATED 9 TH MARCH, 2003. HOWEVER SUBSEQUENTLY THEY WERE SUBSTITUTED BY 6 GROUNDS VIDE REVISED GROUNDS DATED 5.1 2.2006. 2.2 ACCORDINGLY AFTER TAKING NOTE OF THE FACT THAT L D. CIT DR HAD NO OBJECTION TO THE SUBSTITUTION OF REVISED GROUNDS FOR THE ORIGINAL GROUN DS RAISED BY THE ASSESSEE THE SUBSTITUTION IS ALLOWED AND THE PARTIES BEFORE THE BENCH WERE HEARD ON THE SAID GROUNDS. THE REVISED GROUNDS IN ITA 1144/DEL/2005 REA D AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE ADDITION MADE BY THE AO OF RS. 1,76,89,280/- AS ALLEGED INCOME. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE NEVER HAD THE RIGHT TO RECEIVE ANY ALLEGED INTEREST INCOME OF RS. 1,76,89,200/-. ALSO THERE SHOULD BE AN AWARD OF THE ARBITRATOR AND ALSO RULE OF THE COURT ALLOWING THE AWARD. NOTHING HAD HAPPEN ED OF THIS KIND IN THIS CASE. 3. UNDER THE CONTRACT BETWEEN THE ASSESSEE AND THE BIH AR GOVERNMENT DATED 5.3.1997 THE STATE GOVERNMENT HAS TO ADVANCE RS. 40 CRORES WHICH WAS KEPT AS FDR IN SYNDICATE BANK AND WAS COVERED BY A LIEN AS SECURITY FOR BANK GUARANTEE BY THE BANK TO THE GOVERNMENT OF BIHAR FO R RS. 40 CRORES. UNDER THE CIRCUMSTANCES OF FACTS AND LEGAL POSITION NO IN COME HAS ACCRUED OR ARISEN AS INCOME TO THE ASSESSEE SINCE THE CONTRACT WAS GO T FRUSTRATED. 4. THE BIHAR GOVERNMENT INVOKED THE BANK GUARANTEE ON 16.12.2000 OF SYNDICATE BANK WHICH HAD PAID THE AMOUNT NOT ONLY O F RS. 40 CRORES BUT ALSO PREMATURELY ENCASHING THE FDRS AND GETTING UPTO THE DATE OF PAYMENT TO THE BIHAR GOVERNMENT ON SUCH FDRS FROM SYNDICATE BANK A S ALLEGED INTEREST. CONSEQUENTLY BASED ON THE PRINCIPLE OF LAW BY THE A PEX COURT IN THE CASE OF E.D. SASSOON & CO. LTD. VS. VIT REPORTED IN (1954) 26 ITR 27 (S.C) NO INCOME HAS ACCRUED OR ARISEN IN THE CASE OF THE ASS ESSEE SO ASSESSMENT IS WRONG AND BAD IN LAW. 5. THE LEVY OF INTEREST U/S. 234B OF RS. 19,99,119/- I S NOT AT ALL LEVIABLE NO EVIDENCE THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AS HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF CIT VS. RANCHI CLU B REPORTED IN 247 ITR 209 (SC) UPHOLDING THE DECISION OF THE PATNA HIGH COURT JUDGMENT IN THE CASE OF UDAY MISTHANNA BHANDAR VS. CIT REPORTED IN 222 ITR2 2. 6. ON SEEING THE PAST HISTORY OF THE ASSESSEE HAS BEEN ASSESSED AS CHARITABLE INSTITUTION AND WAS ALLOWED EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 SINCE INCEPTION AND IS A GOVERNMENT OF INDIA SOCIET Y TRYING TO HELP AND COORDINATE VARIOUS SOCIETIES IN THE COUNTRY MANUFAC TURING BY MEMBER UNIT TOWARDS MARKETING OF THEIR HAND LOOMS PRODUCTS AND THE ASSESSEE WAS COVERED ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 3 33 3 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI UNDER SECTION 2(15) OF THE INCOME TAX ACT, 1961 AND ALSO REGISTERED UNDER SECTION 12A(A)OF THE INCOME TAX ACT 1961. 3. ITA 1676/DEL/2006 TO ITA 1678/DEL/2006 ARE FILED AG AINST SEPARATE ORDERS DT. 21.3.2006, 20.3.2006 AND 21.3.2006 OF CIT (A)-XI, NEW DELHI, WHEREIN 3 IDENTICAL GROUNDS IN EACH OF THE YEARS HAVE BEEN RAISED . 3.1. FOR READY REFERENCE WE REPRODUCE GROUNDS FROM ITA 167 6/DEL/2006. 1. 1.1. 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE INITIATION OF THE REASSESSMENT PROCEEDINGS MADE BY THE AO U/S 147 OF THE ACT WAS BASED ON MERE CHANGE OF OPINION AND THE REASSESSMENT ORD ER PASSED PURSUANT THERETO IS LIABLE TO BE QUASHED. 2. 2.2. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ADDITION MADE BY THE AO IN RESPECT OF INTEREST ON FDS MAINTAINED BY THE APPELLANT WITH THE BANK WITHOUT APPRECIATING THAT THE APPELLANT HAD NO CONT ROL OVER THE AMOUNTS OF SUCH FDS. 2.1 2.12.1 2.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT OWING TO A DISPUTE WITH THE GOVERNMENT OF BIHAR, THE INTEREST AMOUNT EARNED ON FD COULD NOT BE TREATED AS INCOME. 2.2 2.22.2 2.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT SINCE THE BANK HAD LIEN ON THE AMOUNT OF FDS AND INTEREST ACC RUED THEREON AS SECURITY AGAINST THE BANK GUARANTEE PROVIDED BY THE BANK TO THE GOVERNMENT OF BIHAR, THE INTEREST ON THE FDS COULD NOT BE TREATED AS INCOME OF THE APPELLANT, NOR THE INTEREST, THE SAME NEITHER HAVING ACCRUED NOR RECEI VED BY THE APPELLANT. 3. 3.3. 3. ALTERNATIVELY AND WITHOUT PREJUDICE, THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT GIVING DIRECTION TO THE AO TO CONSIDER FORM 10 FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS TO ALLOW THE BENEFIT OF ACCU MULATION OF INCOME. 3.1. 3.1. 3.1. 3.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE REQUIREMENT OF FILING FORM 10 ALONG WITH THE RETURN OF INCOME IS DIRECTORY AND NOT MANDATORY. 3.2. 3.2. 3.2. 3.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HOLDIN G THAT NO APPLICATION HAS BEEN FILED BY THE APPELLANT BEFORE CBDT FOR CONDONA TION OF DELAY IN FILING FORM 10. 3.2. IT IS SEEN THAT THE ISSUE ADDRESSED IN THE ABOVE 3 A PPEALS VIDE GROUND NO.2, 2.1 AND 2.2 IS IDENTICAL TO GROUND NO.1 IN ITA 1144/ DEL/2005 AND THE SAID APPEAL NAMELY ITA 1144/DEL/2006 IT WAS A COMMON STAND OF THE PARTIES THAT THE GROUND NUMBERS 2, 3, 4 AND 6 ARE FACTS AND ARGUMENTS IN SUPPO RT OF GROUND NO.1. VIDE THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 4 44 4 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI SAID GROUND THE ASSESSEE IS CHALLENGING THE ADDITION MADE ON ACCOUNT OF INTEREST INCOME STATED TO BE EARNED BY THE ASSESSEE. THE SAID ISSUE I S COMMON IN ALL THE FOUR APPEALS. THE ARGUMENTS ON FACTS IN REGARD THERETO ARE COMMON AS SUCH THE FINDING ON THE SAID ISSUE WOULD APPLY TO THE RESPECTIVE G ROUNDS IN THE REMAINING APPEALS UNDER CONSIDERATION. 3.3. APART FROM THE ABOVE COMMON ISSUE IN ALL THE APPEA LS, IN THE REMAINING 3 APPEALS FOR 1998-99 TO 2000-2001 A.Y. THE SECOND COMM ON ISSUE INVOLVED VIDE GROUND NO.1 IS THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 147. 3.4. THE THIRD COMMON ISSUE IN THESE REMAINING THREE APPEAL S IS THE CHALLENGE POSED TO THE ACTION OF THE CIT(A) IN NOT DIRECTING THE A .O. TO CONSIDER FORM NO.10 FILED DURING THE ASSESSMENT PROCEEDINGS TO ALLOW THE BENEFIT OF ACCUMULATION OF INCOME ADDRESSED VIDE GROUND NO.3. IN REGARD TO THE ISS UE ADDRESSED VIDE GROUND NO.3 IN THE REMAINING 3 APPEALS THE LD.AR HAS ALSO ADDR ESSED ARGUMENTS IN ITA 1144/DEL/2005 STATING THAT THESE HAVE BEEN ADDRESSED BEFOR E THE CIT(A) AND THEY SHALL BE ADDRESSED WHILE CONSIDERING THE SAID ISSUE. 3.5. THAT LEAVES US WITH GROUND NO.5 IN ITA 1144/DEL/0 5. NO ARGUMENTS WERE ADDRESSED ON THE SAID ISSUE BY THE LD.A.R. IT IS SEEN TH AT THE SAID GROUND IS CONSEQUENTIAL AND REQUIRES NO ADJUDICATION. HOWEVER SIN CE NO ARGUMENTS WERE ADVANCED IT IS DISMISSED AS NOT PRESSED. 4. HAVING THUS SUMMED UP THE GROUNDS IN THE APPEALS FIL ED BY THE ASSESSEE WE NOW PROPOSE TO CONSIDER GROUND NO.1 ALONG WITH SUPPOR TIVE GROUNDS AND ARGUMENTS IN ITA 1144/DEL/2005. FOR THE SAID PURPOSE WE FIRST PR OPOSE TO SET OUT THE FACTS AVAILABLE ON RECORD. 5. FACTS AS AVAILABLE IN THE ASSESSMENT ORDER : THE RELEVANT FACTS ARE THAT THE ASSESSEE AS PER ITS RETURN FILED ON 17.10.2009 DECLARED A T OTAL INCOME OF NIL. THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 5 55 5 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ASSESSMENT WAS CONCLUDED ON A POSITIVE INCOME OF RS. 1,3 0,81,281/- BY ASSESSMENT ORDER DATED 24.3.2004. 5.1. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS A SOCIETY WHOSE MAIN OBJECTS ARE TO COORDINATE AND DIFFUSE USEFUL KNOWLEDGE TO THE MEMBER UNITS TOWARDS MARKETING OF HANDLOOM PRODUCTS. HE ALSO OBSERVED THAT T HE AIMS AND OBJECTS OF THE SOCIETY ARE CHARITABLE WITHIN THE MEANING OF SECTION 2 (15 ) OF THE INCOME TAX ACT 1961. IT WAS ALSO OBSERVED BY HIM THAT THE SOCIETY IS REG ISTERED U/S 12A (A) OF THE INCOME TAX ACT 1961. BY APPLYING THE PROVISIONS OF SECTION 11 AND 12 OF ACT, IT WAS SEEN THAT THE ASSESSEE HAS DECLARED ITS INCOME AT NIL. 5.2. THE AO, FROM THE DETAILS FILED AND THE BOOKS OF A CCOUNTS PRODUCED BEFORE IT, OBSERVED THAT IT REVEALS THAT THE SOCIETY DURING THE ACCOUN TING PERIOD HAD RECEIVED BANK INTEREST ON FDR AMOUNTING TO RS. 9,80,81,363/- W HICH HAD NOT BEEN SHOWN AS ITS INCOME. 5.3. THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHY THIS INTER EST INCOME SHOULD NOT BE TAKEN AS THE INCOME OF THE SOCIETY. THE AO OBSERVED THAT A SSESSEE HAD TAKEN THE ENTIRE AMOUNT OF INTEREST OF RS. 9,80,81,363/- DIRECT LY IN THE BALANCE SHEET AS LIABILITY UNDER THE HEAD LOANS AND ADVANCES SHOWING A S INTEREST ON FIXED DEPOSITS UNDER LIEN AGAINST THE BANK GUARANTEE. 5.4. THE ASSESSEE STATED THAT AS PER THE INTEREST ACT, 1 978, THE RIGHT TO MAKE A DEMAND FOR THE INTEREST VESTS ONLY IF A NOTICE WAS SERVED A ND THE SAME EXPIRES THREE YEARS FROM THE DATE THE RIGHT TO RECEIVE INTEREST ACCRUES. A S SUCH IT WAS CONTENDED THAT AS ON 31.3.2001, THE RIGHT TO MAKE A DEMAND EXISTED WITH THE GOVERNMENT OF BIHAR. IT WAS ALSO AGITATED THAT ON 5.2.2001, THE GOV ERNMENT OF BIHAR, VIDE THEIR STATEMENT OF CLAIM BEFORE THE SECRETARY (TEXTILES) (SOLE ARBITR ATOR) IN THE MATTER BETWEEN THE ASSESSEE AND THE STATE OF BIHAR, MADE A CLAIM OF RS. 35.48 CRORES ON ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 6 66 6 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI THE AMOUNT OF RS. 40 CRORES ADVANCED TO THE ASSESSEE. ACCO RDINGLY, THE AMOUNT WAS SHOWN AS LOANS AND ADVANCES. 5.5. NOT CONVINCED WITH THE EXPLANATION OFFERED THE AO C ONCLUDED AS UNDER :- THE FACTS ARE THAT THE ASSESSEE HAS RECEIVED BANK I NTEREST ON DEPOSITS AMOUNTING TO RS. 9,80,81,363/- WHICH HAS NOT BEEN T AKEN AS INCOME IN INCOME & EXPENDITURE ACCOUNT. AS PER PROVISIONS OF INCOME TA X ACT, 1961 INSTITUTION OR TRUST AVAILING THE BENEFIT OF SEC. 11 & 12 SHOULD DECLARE EVERY RECEIPT EITHER BY WAY OF VOLUNTARY CONTRIBUTION, INCOME FROM PROPERTY HELD U NDER TRUST AND SERVICE CHARGES ON ACCOUNT OF SERVICE RENDERED BY THE EDUCATIONAL A ND MEDICAL INSTITUTE, AS INCOME EARNED DURING THE YEAR. ONLY EXCEPTION GIVEN IS COR PUS DONATION NOT TO BE TREATED AS INCOME. IN THE CASE UNDER REFERENCE, THE ASSESSE E RECEIVED RS. 9,80,81,363/- AS INTEREST FROM FDR WHICH COMES UNDER THE PURVIEW OF INCOME FROM THE PROPERTY I.E FDRS HELD UNDER TRUST. THUS ACTION OF THE ASSESSEE WITH REGARD TO SHOWING THE INTEREST INCOME, AS LIABILITY IS NOT IN ORDER AS PE R PROVISIONS OF SEC. 11 & 12 APPLICABLE TO THE ASSESSEE. SINCE THE INTEREST INCO ME COMES UNDER THE PURVIEW OF INCOME FROM THE PROPERTY HELD UNDER THE TRUST, THE SAME IS BEING TREATED AS INCOME. EXAMINATION OF BOOKS OF ACCOUNTS SHOWED THAT THE AS SESSEE MAINTAINS ITS BOOKS OF ACCOUNTS OF MERCANTILE SYSTEM OF ACCOUNTIN G AND OUT OF TOTAL INTEREST OF RS. 9,80,81,363/-, RS. 1,76,89,280/- ACCRUED DURING THE ACCOUNTING PERIOD 1-4- 2000 TO 31-3-2001. HENCE, THE SAME IS BEING TAKEN AS INCOME FOR THE YEAR UNDER CONSIDERATION. WITH THESE REMARKS, TOTAL INCOME IS COMPUTED AS UND ER :- EXCESS OF INCOME OVER EXPENDITURE AS SHOWN (-) RS. 46,70,999/- ADD :-INTEREST INCOME ACCRUED AND RECEIVED RS. 1,76,89,280/ AS DISCUSSED ABOVE. TOTAL INCOME RS. 1,30,18,281/- 6. AGGRIEVED BY THIS ACTION THE ASSESSEE CAME IN APPEAL B EFORE THE CIT(A). 7. ARGUMENTS BEFORE THE CIT(A): BEFORE THE CIT(A) IT WAS CONTENDED THAT THE ASSESSEE IS A SOCIETY CONSTITUTED BY THE DEVELOPMENT COMMISS IONER HANDLOOMS, MINISTRY OF TEXTILES, GOVT. OF INDIA IN 1984. AND IT IS ALSO A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 VIDE REGISTRATION DAT ED 28.6.1984. THE SOCIETY IT WAS STATED IS ALSO REGISTERED UNDER THE INCOME TAX ACT UND ER SECTION 12A AND ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 7 77 7 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI QUALIFIES FOR EXEMPTION U/S 11 AND 12 OF THE ACT. IT WA S EMPHASIZED THAT THE ASSESSEE IS A BODY NURTURED AND NOURISHED BY THE MINISTR Y OF TEXTILE, GOVERNMENT OF INDIA AND HAVING ITS OFFICE AT HANDLOOM PAVILION , NEAR GATE NO. 2, PRAGATI MAIDAN, BHAIRON MARG, NEW DELHI. THE OFFICE BEARERS I T WAS STATED AS WOULD BE EVIDENT FROM MEMORANDUM OF ASSOCIATION ARE ALL GOVERNMENT OFFICERS MOSTLY IAS OFFICERS WHO ARE ADMINISTERING THE WORK OF HANDLOOM IN VARIOUS PLACES. IT WAS ELABORATED THAT THE ASSESSEE COORDINATES IN THE MATTER OF EN COURAGING DEVELOPMENT OF HANDLOOM PRODUCTION IN THE COUNTRY AS A BODY FUNCTIONING AS A CONDUIT PIPE BETWEEN THE USERS AND THE MANUFACTURERS. THE US ERS WERE CLAIMED TO BE GOVERNMENT ORGANIZATIONS LIKE RAILWAYS, DEFENCE AND O THER DEPARTMENTS OF CENTRAL GOVERNMENT IN THE COUNTRY. IT WAS ARGUED THAT PRODUCERS OF HANDLOOM PRODUCTS THROUGH OUT THE COUNTRY GET THE BENEFIT OF THEIR SERVICES AS THE AVAILABILITY OF THE PRODUCTS AND QUANTITY ARE LOCATED BY THE ASSESSEE F ROM ITS MEMBER ORGANISATIONS LOCATED IN VARIOUS PLACES IN THE COUNTRY AND IT ARRANGES FOR THE PRODUCTION AND SUPPLY OF HANDLOOM PRODUCTS THROUGH THESE AGENCIES TO THE GOVERNMENTAL ORGANIZATIONS WHO MAKE THEIR REQUIREMENTS KNO WN TO THE ASSESSEE. 7.1. IT WAS FURTHER CONTENDED THAT IN THE YEAR UNDER CO NSIDERATION AS AGAINST THE NIL INCOME DECLARED BY THE ASSESSEE ASSESSMENT WAS COMPLETED A T AN INCOME OF RS. 1,30,18,281/- U/S 143(3). THE MAJOR ADDITION MAD E BY THE AO IT WAS STATED IS IN RESPECT OF RS. 1,76,89,280/- ADDED AS ALLEGED INTEREST IN COME ON FDRS IN THE COMPUTATION OF ASSESSABLE INCOME. 7.2. THE SAID ACTION WAS ASSAILED ON THE GROUND THAT T HE AO HAS ERRED IN TREATING THE SAID SUM AS INCOME OF THE ASSESSEE. IT WAS STATED THAT THIS AMOUNT DID NOT BELONG TO THE ASSESSEE. THE SAME WAS STATED TO BE AN INTERES T ON FDRS UNDER LIEN AGAINST WHICH BANK GUARANTEE HAD BEEN ISSUED TO THE GOVT . OF BIHAR BY THE BANK ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 8 88 8 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ON BEHALF OF THE ASSESSEE PURSUANT TO THE CONTRACT DATED 5.3.97 BETWEEN THE ASSESSEE SOCIETY AND THE GOVT. OF BIHAR. 7.3. ACCORDINGLY IT WAS PUT FORTH THAT THE ASSESSEE WAS LEGALLY NEITHER IN A POSITION TO ENCASH FIXED DEPOSITS RECEIPTS NOR THE INTEREST THEREOF SI NCE THE MATTER WAS SUBJUDICE AND HAD BEEN REFERRED TO THE SOLE ARBITRATOR NA MELY THE SECRETARY (TEXTILES) AND IS PENDING TILL DATE. THUS, IT WAS STATED THAT THE SAID AMOUNT CANNOT BE TAKEN AS ASSESEES INCOME. 7.4. ADDRESSING THE BACKGROUND IT WAS SUBMITTED THAT T HE GOVT. OF BIHAR THROUGH THE DIRECTOR OF HANDLOOM AND SERICULTURE, DEPARTMENT OF I NDUSTRIES, GOVT. OF BIHAR INVITED TENDERS IN THE MONTH OF JUNE, 1996 FOR SUPPLY OF COTTON DHOTIS AND HANDLOOM COTTON SAREES TO THE STATE OF BIHAR. 7.4.1. THE ASSESSEES TENDER, IT WAS STATED, WAS ACCEPT ED AND A FORMAL CONTRACT OF THE TOTAL VALUE OF RS. 199.854 CRORES WAS ENTERED INTO ON 5.3.97 FOR SUPPLY OF 124.52 LAKHS DHOTIS AND AN EQUAL NUMBER OF SAREES. 7.4.2. REFERRING TO THE CONTACT IT WAS URGED THAT AS PER THE STIPULATIONS IN THE CONTRACT AN AMOUNT OF RS. 40 CRORES WAS PAID TO THE A SSESSEE ON THE ASSESSEES FURNISHING A BANK GUARANTEE FOR AN EQUAL AMOUNT IN FAV OUR OF THE GOVERNMENT OF BIHAR. 7.4.3. THE SAID AMOUNT, IT WAS STATED WAS TO BE USED B Y THE ASSESSEE FOR DISTRIBUTION AMONGST VARIOUS STATE LEVEL COOPERATIVE WEAVER S SOCIETIES FOR INITIATING SUPPLIES. 7.4.4. IT WAS CLARIFIED THAT UNDER THE CONTRACT THE PARTIES HAD AGREED THAT ALL DISPUTES AND DIFFERENCES RELATING TO AND ARISING OUT OF THE CONTRACT EXCEPT REGARDING THE QUALITY AND QUANTITY OF THE GOODS SUPPLIED WOULD BE REFERRED TO A SOLE ARBITRATOR. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 9 99 9 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 7.4.5. IT WAS SUBMITTED THAT THE ASSESSEE FURNISHED A B ANK GUARANTEE THROUGH ITS BANKER NAMELY THE SYNDICATE BANK, I.P. ESTATE BRANCH, NEW DELHI ON 5.3.97. 7.5. IT WAS STATED THAT IN SEPTEMBER, 1997 A DISPUTE ARO SE BETWEEN THE PARTIES AS THERE WAS DELAY IN MAKING PAYMENTS FOR SUPPLIES BY THE GO VERNMENT OF BIHAR. IT WAS STATED THAT AS AGAINST THE TOTAL SUPPLIES OF HAND LOOM SAREES/DHOTIS WORTH RS. 35.98 CRORES THE ASSESSEE RECEIVED PAYMENT OF ONLY 7.96 CR ORES. THE ALLEGATION FROM THE OTHER SIDE WAS ALSO MADE APPARENTLY ON THE BASI S OF NEWSPAPER REPORTS THAT THE SAREES AND DHOTIS SUPPLIED HAD BEEN MADE ON P OWERLOOMS AND NOT ON HANDLOOMS. IT WAS FURTHER STATED ON BEHALF OF THE ASSESS EE THAT IN ORDER TO WRIGGLE OUT OF THE CONTRACT AN ORDER WAS PASSED BY THE CHIEF SECRET ARY, GOVT. OF BIHAR AND COMMUNICATED THROUGH DIRECTOR HANDLOOMS, GOVERNMENT OF BIHAR DATED 23.9.1997 WHEREBY THE SYNDICATE BANK, NEW DELHI WAS DIRECTED TO INV OKE THE BANK GUARANTEE AND REMIT RS. 40 CRORES TO THE GOVT. OF BIHAR. IT WAS STATED THAT IN VIEW OF THE ABOVE FACTS THE ASSESSEE HAD FILED THE WRIT PETITION BEFORE THE HONBLE DELHI HIGH COURT SEEKING TO RESTRAIN THE INVOCATION OF THE B ANK GUARANTEE AS DIRECTED BY THE GOVT. OF BIHAR. IT WAS CLARIFIED THAT SINGLE JU DGE OF THE HONBLE DELHI HIGH COURT VIDE ITS ORDER DATED 1.9.1999 DISMISSED THE WRIT PETITION OF THE ASSESSEE ON THE GROUND THAT THE JURISDICTION DID NOT LIE WITH THE DELHI HIGH COURT. IT WAS STATED THAT THE ASSESSEE THEN CONTESTED THE SAID ISSUE BEFORE THE DI VISION BENCH OF THE HONBLE HIGH COURT WHICH WAS ALSO DISMISSED BY THE HONBLE HIGH COURT FOR WANT OF JURISDICTION AND THE ASSESSEE WAS ADVISED TO MOVE THE H IGH COURT OF PATNA VIDE ORDER DATED 27.9.2000. 7.6. IT WAS STATED THAT THE DIRECTOR OF HANDLOOMS STATE OF BIHAR TERMINATED THE CONTRACT WITH THE ASSESSEE AND THE GOVT. OF BIHAR TOOK T HIS OPPORTUNITY AND PURSUED THE SYNDICATE BANK, DELHI FOR RELEASE OF PAYMENT OF RS. 40 CRORES. THE SAME WAS ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 10 1010 10 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI DULY DISCHARGED BY THE BANK ON 16.12.2000 AFTER ENCAS HING THE FDRS ALONG WITH INTERESTS DUE ON SUCH FDRS AND WAS INFORMED BY THE SAID BANK ON 18.12.2000. 7.7. IT WAS FURTHER STATED THAT THE ASSESSEE HAD ALSO REFERRED THE MATTER TO THE SOLE ARBITRATOR, SECRETARY (TEXTILES) ON 26.9. 1997. 7.8. ON 5.2.2001, IT WAS STATED THE GOVERNMENT OF BIHA R APART FROM THE REFUND OF RS. 40 CRORES ALSO LODGED BEFORE THE ARBITRATOR A CLAIM OF RS. 35.48 CRORES AS INTEREST ON ADVANCE MONEY AS WELL AS RECOVERIES OF EXPENDITU RE AND PUNITIVE COMPENSATION ALL AGGREGATING TO RS. 71 CRORES. THIS WA S CLAIMED IT WAS STATED OVER AND ABOVE RS. 40 CRORES WHICH WAS ALREADY IN DISPUTE. 7.9. IT WAS SUBMITTED THAT ON ACCOUNT OF THESE FACTS THE INTEREST DOES NOT BELONG TO THE ASSESSEE AS THE ASSESSEE WAS HOLDING THE SAME IN TRU ST ON BEHALF OF THE GOVERNMENT OF BIHAR. 7.10. IT WAS STATED THAT INTEREST INCOME EARNED ARISING OUT OF DEPOSITS OF SUCH ADVANCE DOES NOT HAVE TAXABLE CHARACTER IN THE HANDS OF THE ASSEEE. IT WAS FURTHER STATED THAT THE MATTER WAS SUBJUDICE. ON ACCOUNT OF T HIS FACT THE ASSESSEE HAS TREATED THE SUM OF RS. 9.80 CRORES AS A LIABILITY BEING INTEREST ON FIXED DEPOSITS UNDER LIEN AGAINST THE BANK GUARANTEE. IT WAS SUBMITTED T HAT THE BANK HAS MARKED A LIEN ON THIS AMOUNT OF FDR AS WELL AS THE INTEREST THEREO F AS SECURITY AGAINST THE BANK GUARANTEE PROVIDED TO THE GOVT. OF BIHAR AND THEREFORE IT CANNOT BE ENCASHED BY THE ASSESSEE NOR THE INTEREST IS AVAILABLE TO THE ASSESSEE. 7.11. ON ACCOUNT OF THESE FACTS IT WAS STATED THE IN TEREST INCOME DOES NOT BELONG TO THE ASSESSEE AS IT WAS STATED TO BE AN ADVANCE RECEIVED F ROM THE GOVT. OF BIHAR FOR EXECUTION OF THE CONTRACT AND THE ASSESSEE IS ONLY A T RUSTEE. THEREFORE THE PRINCIPLE AS WELL AS THE INTEREST HAS TO BE PAID TO THE GO VT. OF BIHAR. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 11 1111 11 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 7.12. IT WAS FURTHER STATED THAT SINCE THE ISSUES WERE S UBJUDICE BEFORE THE SOLE ARBITRATOR AND THE VIRUS OF TAX CAN BE ATTRACTED O NLY WHEN THE INTEREST INCOME BELONGS TO THE ASSESSEE. ON ACCOUNT OF THESE FACTS, IT WA S STATED THE ASSESSEE HAS REFLECTED THE SUM OF RS. 9.80 CRORES AS A LIABILITY. 7.13. ACCORDINGLY IT IS SUBMITTED THAT THE QUESTIO N OF APPLICATION OF FUNDS CAN ARISE ONLY IF THE INCOME BELONGS TO THE ASSESEE. SINCE THE SA ID AMOUNT IS NOT THE INCOME IN THE HANDS OF THE ASSESSEE AS SUCH IT WAS STATED CANNOT BE TAXED AS ON THE DATE IT CANNOT BE SAID TO BELONG TO THE ASSESSEE. IT IS O NLY WHEN THE INCOME CAN BE STATED TO BELONG TO THE ASSESSEE CAN THE ASSESSEE APPLY THIS TOWARDS ITS OBJECT. 7.14. IT WAS REITERATED THAT THE FDRS WERE PREMATURELY ENC ASHED ON 16.12.2000 AND THIS FACT WAS INFORMED TO THE ASSESSEE THROUGH LETT ER DATED 18.12.2000 BY THE SYNDICATE BANK. AS SUCH IT WAS REQUESTED THAT IT MAY BE APPRECIATED THAT NO SUM HAS ARISEN OUT OF THE FDRS AS INCOME, WHICH THE ASSESSEE I S ENTITLED TO. IT WAS CLARIFIED THAT ON ACCOUNT OF THIS REASON THE ASSESSEE HAD FILED NIL RETURN AS CHARITABLE INSTITUTION. IN SUPPORT OF ITS CLAIM, RELI ANCE WAS PLACED UPON E.D. SASSOON AND CO. LTD. AND OTHERS VS. CIT REPORTED IN 26 ITR 27 (SC) WHEREIN AT PAGE 51 THE THREE JUDGE BENCH HELD AS UNDER :- IF THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INC OME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM ALTHOUGH IT MAY BE RECEIVED LAT ER, ON ITS BEING ASCERTAINED. THE BASIC CONCEPTION IS THAT HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE THE INCOME. THERE MUST BE, A DEBT OWED TO HIM BY SOMEBODY. THER E MUST BE AS IS OTHERWISE EXPRESSED DEBTIUM IN PRESENT SOLVENDUM IN FUTURO; SEE W.S. TRY LTD. V. JOHNSON (INSPECTOR OF TAXES), AND WEBB V STENTON AND OTHERS , GARNISHEES. UNLESS AND UNTIL THERE IS CREATED IN FAVOUR OF THE ASSESSEE A DEBT D UE BY SOMEBODY IT CANNOT BE SAID THAT HE HAS ACQUIRED A RIGHT TO RECEIVE THE INCOME OR THAT INCOME HAS ACCRUED TO HIM. 7.15. IT WAS ALSO SUBMITTED THAT ALTHOUGH THE WORD EARNED DOES NOT APPEAR IN SECTION 4 OF THE ACT HOWEVER IT HAS VERY OFTEN BEEN USED BY THE COURTS. IT WAS STATED THAT THE CONCEPT CANNOT BE DIVORCED FROM INCOME ACCRUING TO THE ASSESSEE. IT WAS ARGUED THAT IF INCOME HAS ACCRUED TO THE ASSESSEE IT IS CER TAINLY EARNED BY HIM IN THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 12 1212 12 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI SENSE THAT HE HAS CONTRIBUTED TO ITS PRODUCTION AND OF THE PARENTHOOD OF THE INCOME WHICH CAN BE TRACED TO HIM. IT WAS ARGUED THAT IN ORDER THAT THE INCOME CAN BE SAID TO HAVE ACCRUED TO OR EARNED BY THE ASSESSEE IT IS NOT ONL Y NECESSARY THAT THE ASSESSEE MUST HAVE CONTRIBUTED TO THE ACCRUING OR ARISING BY RENDERING SERVICES OR OTHERWISE BUT HE MUST HAVE CREATED A DEBT IN HIS FAVOUR. A DEBT MUST HAVE COME INTO EXISTENCE AND HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE THE PAYMENT OR IN OTHER WORDS A DEBTIUM IN PRESENT SOLVENDUM IN FUTURO. 7.16. ON FACTS IT WAS ARGUED IT CANNOT BE SAID THA T ANY INCOME HAS ACCRUED TO HIM.. THE MERE EXPRESSION EARNED IN THE SENSE OF THE RENDER ING THE SERVICES ETC. BY ITSELF IS OF NO AVAIL. IT WAS STATED THAT IT IS A SETTLED POSITION AND HAS BEEN APPLIED TO UNDERSTAND WHAT IS AN AMOUNT RECEIVABLE UNDER THE MERC ANTILE SYSTEM OF ACCOUNTING IS ONLY THE AMOUNT TO BE TAKEN AS INCOME ONL Y IF THE PERSON ENTITLED TO RECEIVE IT IS IN A POSITION TO DEBIT THE ACCOUNT OF THE D EBTOR AND CREDIT IT TO THE PROFIT AND LOSS ACCOUNT. RELIANCE WAS PLACED UPON CIT VS. HIN DUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD. REPORTED IN 161 ITR 524 (SC) RELIA NCE WAS ALSO PLACED UPON THE FOLLOWING JUDGMENTS :- 243 ITR 451 (KER.), 238 ITR 740 (CAL.), 177 ITR 414 (KER.), 161 ITR 524 (SC), 157 ITR 711 (KER.) 7.17. IT WAS RE-ITERATED THAT FDRS UNDER LIEN AGAINST THE BANK GUARANTEE GRANTED BY THE BANKERS WERE ENCASHED AND TAKEN AWAY BY THE GOVT. O F BIHAR WAY BACK IN DECEMBER 2000 ITSELF. THE BANK GUARANTEE WAS REVOKED BY THE GOVT. OF BIHAR. AS THE FDRS WERE PREMATURELY ENCHASED THERE WAS NO RIGHT TO R ECEIVE ANY DUES ARISING OUT OF THE FDRS WHICH HAVE BEEN SO ENCASHED AND T AKEN AWAY BY THE BIHAR GOVERNMENT. 7.18. THE ALTERNATE ARGUMENT WAS PUT FORTH IF IT IS TO BE HELD AS ASSESSSEES INCOME THEN THE LIABILITY TOWARDS PAYMENT OF INTEREST ON THE ADVANCE TO THE GOVT. OF BIHAR WHICH HAS BEEN CLAIMED BY THE PERSON ADVANCING THE MONEY IS AN APPLICATION ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 13 1313 13 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI OF FUNDS AND SUCH LIABILITY FOR PAYMENT OF INTEREST IF RECKONED AS APPLICATION OF FUNDS WHICH AS PER CLAIM OF THE GOVT. OF BIHAR IS TO THE EXTEN T OF RS. 35.48 CRORES WOULD COMPLETELY DIGEST THE TOTAL INTEREST OF RS. 9.80 CRORES AND THERE WOULD BE NO INCOME LIABLE FOR ANY TAX. WHEN CONSIDERED FROM THIS P OINT OF VIEW, THE SUM OF RS. 1,76,89,230/- WOULD GO TO MEET THE CONTRACTUAL LIABILI TY NAMELY THE INTEREST AS DEMANDED BY THE GOVT. OF BIHAR. THEREFORE, THERE IS NO RESUL TING INCOME TO BE TAXED IN THE HANDS OF THE ASSESSEE. 7.19. IT WAS SUBMITTED THAT WHEN THE ALTERNATE CLAIM OF THE ASSESSEE IS CONSIDERED THEN THERE IS NO INCOME WHICH THE ASSESSING OFFICER CAN T AX. ACCORDINGLY IT WAS PLEADED THAT ADDITION OF RS. 1,76,89,230/- BE DELETED.. 8. FINDING OF CIT(A ): CONSIDERING THE ABOVE SUBMISSIONS THE CIT(A) CAME TO THE FOLLOWING CONCLUSION :- I HAVE CONSIDERED AT LENGTH THE FACTS OF THE CASE. I FIND THAT THE ASSESSING OFFICER HAS ACTED IN ACCORDANCE WITH LAW IN SUBJECT ING TO TAX A SUM OF RS. 1,76,89,280/- BEING ACCRUED INCOME DURING THE ACCOU NTING PERIOD 1.4.2000 TO 31.3.2001. THIS INTEREST INCOME, IS A PART OF RS . 9,90,81,363/-, BEING INTEREST ON FIXED DEPOSIT RECEIPTS, WHICH COMES UND ER THE PURVIEW OF INCOME FROM PROPERTY I.E, FIXED DEPOSIT RECEIPTS HELD UND ER TRUST. AS PER THE PROVISIONS OF THE INCOME-TAX ACT, 1961 AN INSTITUTI ON OR TRUST AVAILING THE BENEFIT OF SECTION 11 AND 12 SHOULD DECLARE EVERY RECEIPT E ITHER BY WAY OF VOLUNTARY CONTRIBUTION INCOME FROM PROPERTY HELD UNDER TRUST AND SERVICE CHARGES ON ACCOUNT OF SERVICE RENDERED BY EDUCATIONAL BY EDUCA TIONAL AND MEDICAL INSTITUTES, AS INCOME EARNED DURING THE YEAR. DURIN G THE COURSE OF APPELLATE PROCEEDINGS BEFORE ME, THE ASSESSING OFFICER HAS A FFIRMED THAT THERE IS NO STIPULATION IN THE CONTRACT THAT THE INTEREST ACCRU ED OR ARISEN ON THE FIXED DEPOSIT RECEIPT, CANNOT BE AVAILED OF BY ACASH. TAX ATION OF RS. 1,76,89,280/- BEING INTEREST INCOME ACCRUED AND REC EIVED, IS , THEREFORE HELD TO BE IN ACCORDANCE WITH LAW, AND CONFIRMED. 9. BEING AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 14 1414 14 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 10. SUBMISSIONS ON BEHALF OF ASSESSEE : LD. AR HEAVILY RELIED UPON THE SUBMISSIONS ADVANCED BEFORE THE AUTHORITIES BELOW AND REIT ERATED THE FACTS AS CANVASSED BEFORE THE AUTHORITIES BELOW. 10.1 ATTENTION OF THE BENCH WAS INVITED TO THE COPY OF THE WRITTEN SUBMISSIONS FILED BEFORE THE BENCH ON THE BASIS OF WHICH IT WAS CONTENDED TH AT NO INCOME HAS ACCRUED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. 10.2 FOR READY REFERENCE THE WRITTEN SUBMISSIONS ARE REPRO DUCED HEREUNDER :- THE ASSOCIATION OF CORPORATIONS AND APEX SOCIETIES OF HANDLOOMS (ACASH) IS A REGISTERED SOCIETY UNDER THE SOCIETIES REGISTRATION ACT 1860 VIDE REGISTRATION DATED 28.6.1984 AND ALSO REGISTERED U/S 12A (A) OF INCOME TAX ACT 1961 THEREBY CLAIMING EXEMPTION U/S 11 AND 12 OF THE INC OME TAX ACT 1961. THE SOCIETY WAS CONSTITUTED BY THE DEVELOPMENT COMMISSIONER, HANDLOOMS, . MINISTRY OF TEXTILES, GOVT. OF INDIA AND THE MEMBERSHIP IS OPENED TO STATE/NATIONAL LEVEL APEX COOPERATIVES AND CORPORATIONS. MEMORANDUM OF ASSOCIATION ALONG WITH RULES AND REGULAT IONS OF THE SOCIETY AND LIST OF MEMBERS ARE ENCLOSED IN THE PAPER BOOK. ON THE PERUSAL OF THE LIST IT MAY BE NOTED THAT STA TE HANDLOOM CORPORATIONS, WEAVERS COOPERATIVE SOCIETIES, STATE COOPERATIVES ARE THE MEMBERS. THE CHAIRMAN AND THE VICECHAIRMAN OF THE SOCIETY ARE THE DEVELOPMENT COMMISSIONER AND ADDITIONAL DEVELOPMENT COMMISSIONER FOR HANDLOOMS, UDHYOG BHAWAN, MINISTRY OF TEXTILES, GOVT. OF INDIA. THE APPEAL ITA NO.1144/DEL/05 RELATES TO A.Y. 2001-02 AGAINST ORDER U/S 143(3). THE ONLY GROUND OF APPEAL RELATES TO ADDITION BY THE AO. AS ALLEGED INCOME OF THE SOCIETY SUM OF RS.1,76,89,280/-. THE BRIEF FACTS ARE: ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 15 1515 15 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 1. ON 5.3.1997 ASSESSEE ENTERED INTO CONTRACT WITH GOVT. OF BIHAR FOR SUPPLY OF DHOTIS AND SAREES TO THE FAMILI ES LIVING BELOW THE POVERTY LINE. THE TOTAL VALUE OF THE CONTRACT WA S FOR RS.199.8546 CRORES (SEE PAPER BOOK 1 TO 6). 2. ON THE SAME DAY A SUM OF RS.40 CRORES WAS PAID BY THE GOVT. OF BIHAR TO THE ASSESSEE SOCIETY AGAINST WHICH B ANK GUARANTEE OF EQUAL AMOUNT WAS PROVIDED BY THE ASSESSEE THROUGH ITS BANKERS NAMELY SYNDICATE BANK (PAPER BOOK P AGE NO.7 AND 8). 3. OUT OF THE ABOVE ADVANCE, THE ASSESSEE GAVE FOR EXECUTION OF THE WORK ADVANCE TOTALING TO RS.11.69 CROR ES TO VARIOUS SUPPLYING AGENCIES NAMELY STATE HANDLOOM CORPORATIONS/STATE HANDLOOM APEX SOCIETIES /COOPERATIVE SOCIETIES WHO HAD IN TURN GIVEN BANK GUARANTEE IN FAVOUR OF THE ASSESSEE. A SUM OF RS.28.50 CRORES WAS KEPT AS FDR U NDER LIEN WITH SYNDICATE BANK AS A SECURITY DEPOSIT FOR ISSU ANCE OF BANK GUARANTEE TO BIHAR GOVT. 4. THE ASSESSEE SOCIETY HAD TO START SUPPLIES 45 DAYS AFTER RECEIPT OF THE ORDER FROM THE GOVT. OF BIHAR AND THEREAFTER COMPLETE THE SUPPLY WITHIN 6 MONTHS. 5. ASSESSEE SUPPLIED GOODS AMOUNTING TO RS.35.40 CRORES TO BIHAR GOVT. UPTO NOV. 1997 WITH A CORRESPONDING L IABILITY TO THE SUPPLIERS. AGAINST THIS SUPPLIES THE ASSESSEE RECEIVED ON LY OF RS.7.96 CRORES. 6. IN JULY 1997 ON THE BASIS OF NEWSPAPER REPORTS ALLEGI NG PRODUCTION OF SAREES AND DHOTIS ON POWER LOOMS INSTEAD OF HAND LOOM BY SOME OF THE SUPPLYING AGENCIES ENGAGED .BY THE ASSESSEE THE BIHAR GOVT. WANTED TO TERMINATE THE CONTRAC T.. THE CHIEF SECRETARY, GOVT. OF BIHAR INVOKED THE BANK GUARANTEE VIDE ORDER DATED 15.9.97, COPIES ENCLOSED AT PAPER BOOK PAGE NO.10 TO 14. CONSEQUENTLY, THE DIRECTOR (HANDLOOM) AND SERICULTURE, BIHAR, PATNA VIDE LETTER DATED 23.9.97, COPY ENCLOSED AT PAGE 9 OF THE PAPER BOOK DIRECT ED THE SYNDICATE BANK FOR PAYMENT OF RS.40 CRORES. 7. ON 21.11.97 THE UNDER SECRETARY, GOVT. OF BIHAR TERMINATED THE CONTRACT WITH ACASH VIDE LETTER ENCLOSED AT PAGE NO.15 AND 16 OF THE PAPER BOOK. 8. ASSESSEE FILED PETITION BEFORE THE HON'BLE DELHI HIGH COURT U/S 9 OF THE ARBITRATION AND CONCILIATION ACT 1996 FOR ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 16 1616 16 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI INTERIM RELIEF RESTRAINING THE ENCASHMENT OF THE BANK GUARA NTEE WHICH CAME UP BEFORE SINGLE JUDGE VIDE HIS ORDER DATED 1.9.99 DISMISSED THE APPLICATION FOR ADD INTERIM INJECT ION ON THE GROUND THAT THIS COURT HAD NO TERRITORIAL JURISDI CTION TO ENTERTAIN AND DECIDE THE PETITION. 9. ASSESSEE THEN FILED ANOTHER APPLICATION BEFORE THE DIVISION BENCH OF THE DELHI HIGH COURT BUT COULD NOT S UCCEED AS THE DIVISION BENCH ALSO VIDE THEIR ORDER 27.9.2000 UP HELD THE ORDER PASSED BY THE SINGLE JUDGE AND RETURNED THE PETITI ON TO THE APPELLANT FOR BEING PRESENTED IN APPROPRIATE COURT I.E. THE COURT WHO HAD THE JURISDICTION TO THE ENTERTAIN THE PETITION OF THE ASSESSEE (IN THIS CASE IS PATNA HIGH COURT). 10. THE GOVT. OF BIHAR IMMEDIATELY INSTRUCTED THE SYNDIC ATE BANK TO RELEASE THE BANK GUARANTEE OF RS 40-CRORES. THE SYNDICATE BANK VIDE LETTER DATED 18.12.2000 (PAPER BOOK PAGE NO.29 & 30) INTIMATED THE ASSESSEE THAT ON 16.12.200 0, IT HAS LIQUIDATED PRE-MATURELY ALL THE FDRS HELD AS SECU RITY I.E. 28.5 CRORES PLUS 9.8 CRORES AS INTEREST EARNED OVER THE YEAR S AND REPAID TO 'BIHAR GOVT. THE SUM OF RS.4O CRORES ON 16.12.2000. 11. THE AMOUNT OF RS. 4O CRORES WAS REFLECTED IN THE ACCOUNTS UNDER THE SUB HEAD LOANS & ADVANCES (SCHEDULE-8 ) UNDER THE MAIN HEAD CURRENT LIABILITIES AND PROVISION FO R THE YEAR ENDED 31ST MARCH 1998, 31ST MARCH 1999 AND 31ST M ARCH 2000. 12. THE INTEREST ON THE SAID FIXED DEPOSITS WHICH WERE HELD AS LIEN AGAINST THE BANK GUARANTEE WERE ALSO REFLECTED UNDER SUB-HEAD LOANS & ADVANCES (SCHEDULE-8) UNDER THE MAIN HEA D CURRENT LIABILITIES AND PROVISIONS IN THE BALANCE SHEET. THIS IS BECAUSE THE ASSESSEE WAS HOLDING THE ADVANCE RECEIVED FROM GOVT. OF BIHAR AS A TRUSTEE IN A FIDUCIARY CAPACITY. 13. THIS ASPECT HAS BEEN DULY DISCLOSED BY THE ASSESSEE I N THE NOTES TO THE ACCOUNTS FOR ALL THE YEARS UNDER CONSIDERATION. 14. THE ASSESSEE FILED PETITION BEFORE THE SECRETARY (TEXTILE) IN SEPT. 1997 AS RECORDED BY THE AO. IN HIS ORDER. THE GO VT. OF BIHAR AS WELL AS THE ASSESSEE BOTH FILED PETITIONS AS W ELL AS COUNTER PETITIONS FOR CLAIMS BEFORE THE ARBITRATOR NAMELY ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 17 1717 17 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI SECRETARY (TEXTILES) AND SINCE THEN THE PROCEEDINGS ARE IN PROGRESS FOR SETTLING THE DISPUTES BEFORE THE SOLE ARBITRA TOR. 15. THE ASSESSEE SOCIETY HAS ALWAYS MAINTAINED SEPARATE IDENTITY OF THE FUNDS RECEIVED FROM THE GOVT. OF BIHAR AS IT WAS ONLY A CUSTODIAN OF THE FUNDS AND COULD TAKE AS INCOM E ONLY ON COMPLETION OF THE CONTRACT. EVEN THE INTEREST ON FDRS WERE NEVER PHYSICALLY RECEIVED, IT WAS ALWAYS HELD IN LIEN WIT H THE BANK WHICH WAS SUBSEQUENTLY PRE-MATURELY ENCASHED AND UTILIZED FOR PAYING BACK TO BIHAR GOVT. 16. THE ASSESSING OFFICER HAS TREATED THE INTEREST ON THE FDRS HAVING ITS SOURCE TO THE ADVANCE RECEIVED FROM THE BIHAR GOVT. AS ASSESSEE'S OWN INCOME THEREBY RESULTING IN HUGE DEMANDS AGAINST THE ASSESSEE DESPITE THE SUBMISSIONS OF TH E ASSESSEE THAT THE PRINCIPAL AS WELL AS THE RESULTANT INTERES T THEREFROM DOES NOT BELONG TO THE ASSESSEE AS THE SOCIETY DOES NOT HAVE ANY RIGHT ON SUCH INCOME. THE INCOME TAXED BY T HE AO. AS ASSESSEE'S INCOME IS AS UNDER:- A Y. 2001-02 RS.1,76,89,280/- A.Y. 2000-01 RS.3,51,63,260/- A.Y 1999-2000 RS.2,10,46,130/- 17. THE CASE OF THE ASSESSEE IS THE ADVANCE RECEIVED FROM GOVT. OF BIHAR WHICH IS THE SOURCE FOR THE FDR WAS HELD BY THE ASSESSEE AS TRUSTEE IN FIDUCIARY CAPACITY. THE INTEREST THEREOF ON THE SAID FDRS THEREFORE IS ALSO HELD IN TRUST AND CANNOT BE REGARDED AS INCOME OF THE ASSESSEE AS T HE ASSESSEE HAS NO RIGHT ON THE SAID INTEREST INCOME 18. AS STATED ABOVE, THE ENTIRE TRANSACTION IS NOW BEFORE THE ARBITRATOR AND ISSUES WILL BE RESOLVED AFTER THE AWARD OF THE ARBITRATOR PROVIDED IT IS ACCEPTABLE BY THE PARTIES OTHER WISE THE MATTER WOULD HAVE TO BE FINALLY RESOLVED BY THE SUPERIO R COURTS. TILL SUCH TIME THE ASSESSEE HAS TO MAINTAIN STAT US-QUO. 19. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS FAIL ED TO APPRECIATE THAT LIABILITY TO INCLUDE AS INCOME OF THE AS SESSEE WOULD ARISE ONLY WHEN THE ASSESSEE HAS A RIGHT TO RECEIVE SU CH INCOME IN HIS CAPACITY AS OWNER OF THE INCOME. NEITHER ADVANCE RECEIVED CAN BE TREATED AS INCOME NOR THE ACCRUAL OUT OF SUCH ADVANCE CAN BE SUBJECTED AS ASSESSEE'S INCOME. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 18 1818 18 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 20. UNDER THE PROVISIONS OF SEC. 11 AND 12 THE INCOME DERIVED FROM PROPERTY HELD. UNDER TRUST AND VOLUNTARY CONTRIBUTIONS RECEIVED ARE TAKEN AS PART OF THE TOTAL INC OME. NEITHER THE ADVANCE RECEIVED OF RS.40-CRORES FROM BIHAR GOVT. NOR THE INTEREST INCOME BY HOLDING THE SAID SUM AS FDRS CAN BE SAID TO BE INCOME DERIVED FROM THE PROPERTY HELD UND ER TRUST AS THE ADVANCE CANNOT BE TERMED AS PROPERTY OF THE ASSESSEE SOCIETY. 21. THE INCOME WOULD ACCRUE AND ARISE TO THE ASSESSEE ONLY WHEN THE TRANSACTION IS COMPLETED BETWEEN THE PARTIES. SECTION 219 OF THE INDIAN CONTRACT ACT, ALSO PROVIDE TH AT IN THE ABSENCE OF ANY SPECIAL CONTRACT, PAYMENT FOR THE PERFO RMANCE OF AN ACT IS NOT DUE TO THE AGENT UNLESS THE COMPLETION O F SUCH ACT (PAGE 39 OF E.D. SASSON). 22. LIST OF CASE LAWS TO SUPPORT THE CASE OF THE ASSESSEE IS ENCLOSED SEPARATELY. 23. WITHOUT PREJUDICE, THE ASSESSEE SUBMITS THAT IF THE INTEREST IS TREATED AS PART OF THE TOTAL INCOME OF THE ASS ESSEE, THEN THE AO. SHOULD CONSIDER APPLICATION FILED IN FORM NO.10 BY THE ASSESSEE SEEKING ACCUMULATION U/S 11 (2) OF THE INC OME TAX ACT, 1961. THE APPLICATION FOR SEEKING ACCUMULAT ION CAN BE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS/AS WELL AS IN THE APPELLATE PROCEEDINGS:- THE SUPPORT IS DRAWN FROM THE GUJARAT HIGH COURT DECIS ION IN THE CASE OF CIT V. MAYUR FOUNDATION 274 ITR 562 (GUJ) . 10.3. IN SUPPORT OF THE CLAIM MADE, RELIANCE WAS PLACED UPON THE FOLLOWING JUDGMENTS :- 1. E.D SASSOON & COMPANY LTD. & OTHERS V. CIT, BOMBAY IN 26 ITR 27 (SC) 2. PARAGON CONSTRUCTION (INDIA) PVT. LTD. V. CIT (2005 ) 142 TAXMAN 215 (DELHI) 3. GODHRA ELECTRICITY COMPANY LTD. V. CIT (1997) 225 IT R 746 (SC) 4. SRIKANT G. SHAH V. ITO (2008) 300 ITR (AT) 324 (MUMBA I) 5. CIT V. TANUBAI D DESAI REPORTED IN 84 ITR 713 (BOM) 6. CIT V. HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LT D. (SC) (1986) 161 ITR 524 ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 19 1919 19 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 10.4. OVER AND ABOVE THE WRITTEN SUBMISSIONS ADDRESSED V IDE PARA 23 REPRODUCED ABOVE IT WAS ARGUED THAT THESE ARGUMENTS WERE ADV ANCED BEFORE THE CIT(A) ALSO WHO SHOULD HAVE ALLOWED THE ALTERNATE CLAIM RELYING ON CIT VS. MAYUR FOUNDATION 274 ITR 562 (GUJ.). IT WAS SUBMITTED THAT THE SAID ARGUMENT IS RECORDED IN THE IMPUGNED ORDER HOWEVER NO FINDING T HEREON HAS BEEN GIVEN. RELIANCE WAS PLACED ON CIRCULAR NO.100 DT. 24.1.1973 OF THE CBDT FOR THE CONTENTION THAT THE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. 11. SUBMISSIONS IN SUPPORT OF THE ORDERS BY THE LD.CIT, D.R . :THE LD. D.R., ON THE OTHER HAND, VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS BEEN CON TESTING BEFORE THE SOLE ARBITRATOR THAT THE RS. 40 CRORE HAS WRONGLY B EEN ENCASHED BY THE BIHAR GOVERNMENT AND THE SAID AMOUNT BELONGS TO IT. IT WAS H ER STAND THAT THE ASSESSEE HAS BEEN TAKING CONTRARY STANDS ON FACTS BEFORE EVERY FO RUM. 11.1 ON FACTS IT WAS HER ARGUMENT THAT THE ASSESSEE HAS VIOLATED THE TERMS OF THE CONTRACT WITH THE STATE OF BIHAR. THE FACT THAT THE AS SESSEE HAD MADE THE BANK GUARANTEE FROM THE ADVANCE OF RS.40 CRORES RECEIVED FROM T HE STATE OF BIHAR WAS STATED TO BE IN CLEAR VIOLATION OF THE TERMS OF THE CONTR ACT. TO SO INVEST THE FUNDS, IT WAS HER SUBMISSION, WAS ASSESSEES OWN DECISION. IT WAS HER ARGUMENT THAT HAVING SO INVESTED THE FUNDS IN FDR THE ASSESSEE CANNOT ESCAPE TAX LIABILITY AND SAY THAT THE FUNDS IN FACT BELONG TO THE STATE OF BIHAR. 11.2 IT WAS ALSO HER CONTENTION THAT OUT OF THE ADVANC E OF RS,40 CRORES RECEIVED BY THE ASSESSEE A SUM OF RS.38 CRORES ODD HAD BEEN KEPT IN FDRS AND THE REMAINING FUNDS WERE TRANSFERRED TO THE SAVING BANK ACCOUNT. THE LD. D.R. SUBMITTED THAT THE INTEREST EARNED IN THE SAVINGS BANK ACCOUNT WHERE SMALLER A MOUNT OF THE FUNDS WERE PARKED FOR SHORTER DURATIONS THE ASSESSEE HAS EARNED INTERES T AND THE SAID INTEREST HAS BEEN TREATED BY THE ASSESSEE AS ITS OWN INCOME. IT WAS HER CONTENTION THAT ON ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 20 2020 20 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI THE CONTRARY ON THE INTEREST EARNED FROM THE FDR FOR REASON S BEST KNOWN TO THE ASSESSEE IT IS BEING CLAIMED THAT IT BELONGS TO THE BIHAR GOVERNMENT. THIS CLAIM IT WAS REITERATED IS ONLY BEFORE THE TAX AUTHORITIES AS BEFOR E THE SOLE ARBITRATOR THE ASSESSEE IS CONTENDING THAT THE BANK GUARANTEE HAS BEEN WRO NGFULLY INVOKED. 11.3 IT WAS HER VEHEMENT CONTENTION THAT THIS DUAL STAND OF THE ASSESSEE SHOWS THAT THE CLAIM BEFORE THE TAX AUTHORITIES HAS NO LEGS TO STAND ON. A PERUSAL OF THE PAPER BOOK PAGES 139 TO 154 FOR THE YEARS UNDER CONSIDERA TION, IT WAS STATED WOULD BEAR OUT THESE FACTS AS WOULD BE EVIDENT FROM PAGE 138 OF THE PAPER BOOK CLAUSE V) & VI) AS PER SCHEDULE 17 NOTES TO THE ACCOUNTS. SCH.17 : NOTES TO THE ACCOUNTS CLAUSE IV) THE BANK IS CHARGING 1% BANK COMMISSION ON THE BANK GUARANTEE OF RS. 40.00 CRORES AGAINST THE NORMAL RATE OF 3% ON THE C ONDITION THAT ACASH WILL PAY THE DIFFERENTIAL GUARANTEE COMMISSION IF THE BANK IS RE QUIRED TO HONOUR ITS GUARANTEE OBLIGATIONS. HOWEVER, ACASH HAS REQUESTED THE BANK TO RECONSIDER ITS DECISION. V) AN AMOUNT OF RS. 2,41,82,691.00 HAS BEEN EARNED AS INTEREST ON FDS MADE OUT OF RS.40 CRORES ADVANCE MENTIONED ABOVE. IN VIEW OF T HE CASE FILED BY THE GOVT. OF BIHAR, THE ABOVE AMOUNT IS NOT TAKEN AS INCOME. TO TAL INTEREST ACCUMULATED ON SUCH FDS UPTO 31 ST MARCH, 1999 IS RS. 4,52,28,824.00. VI) INTEREST OF RS. 5,21,455.00 ON SAVINGS A/C WITH SYNDICATE BANK PERTAINING TO BIHAR SUPPLIES HAVE BEEN TAKEN AS INCOME. 11.4 IT WAS HER STAND THAT THE TREATMENT GIVEN BY THE AO IS CORRECT IN TERMS OF THE SETTLED LEGAL PRINCIPLES THAT ONCE THE ASSESSEE HAS RECEIVED A CERTAIN SUM AND AS PER ITS OWN WILL IT HAS DECIDED TO PUT A PORTION OF TH E SAME IN FDR AND CERTAIN PORTION IN HIS SAVING BANK ACCOUNT AND THE ASSESSEE AT EVERY STAGE KNEW HOW MUCH INTEREST WAS EARNED ON THE FDRS AS SUCH THE JUDGMENT OF A PEX COURT IN THE CASE OF E.D. SASOON AND CO. LTD. AND OTHERS VS. CIT ON WHICH LD. AR WAS HEAVILY RELYING UPON WOULD NOT BE APPLICABLE SINCE THAT IS A CASE OF A MANAGING AGENCY, AND FACTS AND ISSUES ARE DISTINGUISHABLE . SIMILARLY IT WAS ARGUED THAT THE OTHER CASES RELIED UPON BY THE LD.AR WOULD HAVE NO APPLICABILITY AS THE INTEREST BELONGED ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 21 2121 21 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI EXCLUSIVELY TO THE ASSESSEE AND THERE IS NO ORDER OF ANY ARB ITRATOR OR ANY COURT WHICH SAYS THAT THE SAID SUMS DO NOT BELONG TO THE ASSESSEE. 11.5 ADDRESSING THE ALTERNATE SUBMISSION ADVANCED BY T HE ASSESSEE ON THE APPLICATION OF INCOME, IT WAS HER SUBMISSION THAT TH IS ARGUMENT WAS NEVER MADE BEFORE THE AO AND THE ASSESSING OFFICER, AS SUCH, HAS NEV ER EXAMINED IT FOR WHICH REASON THE SAID ARGUMENT EVEN THOUGH ADDRESSED BEFORE THE CIT (A) HAS NOT BEEN CONSIDERED BY THE CIT(A). IT WAS HER CONTENTION THAT AS THE ASSESSEE HAS NOT MADE AN APPLICATION IN THE PROPER FORM IN TERMS OF SECTION 1 1 AND 12 OF THE ACT, THERE IS NO OCCASION TO CONSIDER THE SAME. IT WAS EMPHASIZED THAT NO APPLICATION FOR SUCH REQUEST HAS BEEN MOVED BY THE ASSESSEE ALONG WITH THE RETURN W HICH IS THE MANDATE OF LAW. THUS, IT WAS ARGUED THAT SINCE THE SAID PROC EDURE HAS NOT BEEN FOLLOWED THE ALTERNATE ARGUMENTS SHOULD NOT BE ACCEPTED AT THIS ST AGE. 12. SUBMISSIONS ON BEHALF OF ASSESSEE IN THE REJOINDER : IN REJOINDER ON THE ALTERNATIVE PRAYER ADVANCED ON BEHALF OF THE ASSESSEE IT WAS SUBMITTED BY THE LD.A.R. THAT THE OCCASION TO FILE A D ECLARATION IN FORM NO.10 U/S 11(2) ALONG WITH THE RETURN DID NOT ARISE AS ALL ALON G, IT HAS BEEN THE ASSESSEES CLAIM THAT THE SAID INCOME DOES NOT BELONG TO THE ASSESSEE, THUS THE OCCASION TO FILE THE SAID FORM, ALONG WITH THE RETURN DID NOT ARISE. IT WAS ALSO HIS ARGUMENT THAT THE ISSUE ON MERITS IS CONTESTED AS SUCH THE ALTERNATE ARGUMEN T OUGHT TO HAVE BEEN CONSIDERED. FINDINGS. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL AVAILABLE ON RECORD AND TAKEN INTO CONSIDERATION THE DECISIONS RELIED UPON BY THE PARTIES BEFORE THE BENCH. IN THE LIGHT OF THE ABOVE FACTS AND ARGUMENTS CONSIDERING GROUND NO.1 IN ITA 1441/DEL/2005 ALONG WITH THE SUPPORTIVE GROUNDS WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE TO REFER TO THE AGREEMENT DATED 5.3.199 7 ENTERED INTO BY THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 22 2222 22 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ASSESSEE WITH THE STATE OF BIHAR, COPY OF WHICH IS PLACED AT PAGES 10-15 OF THE PAPER BOOK. THE NEXT DOCUMENT WHICH NEEDS TO BE CONSIDERED IS ORDER DATED 23.9.1997 OF CHIEF SECRETARY, GOVT. OF BIHAR PLACED AT PAGES 20-23 OF THE PAPER BOOK ALONG WITH THE ACCOMPANYING LETTERS FROM DIRECTOR, HANDLOOMS&SERICULTURE, GOVT. OF BIHAR ADDRESSED TO THE SYNDICATE BANK I.E. THE GUARANTOR BANK PLACED AT PAGES 18 AND 19 OF THE PAPER BOOK. 13.1. BEFORE WE REFER TO THE DOCUMENTS MENTIONED ABOVE IT I S AN ACCEPTED FACT THAT THE ASSESSEE IS A SOCIETY CONSTITUTED BY THE DEVELOPMENT COMMISSIONER HANDLOOMS, MINISTRY OF TEXTILES, GOVT. OF INDIA IN 19 84 AND IS ALSO A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 VIDE REG ISTRATION DATED 28.6.1984. IT HAS ALSO BEEN CANVASSED THAT THE SOCIETY I S REGISTERED UNDER THE INCOME TAX ACT U/S 12A AND QUALIFIES FOR EXEMPTION U/S 11 & 12. IT IS ALSO THE UNREBUTTED STAND OF THE ASSESSEE THAT IT IS A BODY NURTU RED AND NOURISHED BY THE MINISTRY OF TEXTILES, GOVT. OF INDIA AND IT COORDINAT ES IN THE MATTER OF ENCOURAGING DEVELOPMENT OF HANDLOOM PRODUCTION IN THE COUNTRY AND F UNCTIONS AS A CONDUIT PIPE BETWEEN THE USER AND THE MANUFACTURER. IT IS A MATTER OF R ECORD THAT THE GOVT. OF BIHAR THROUGH THE DIRECTOR OF HANDLOOMS AND SERICULTURE, DEPT. OF INDUSTRIES, GOVT. OF BIHAR INVITED TENDERS IN THE MONTH OF JUNE 1996 FOR S UPPLY OF COTTON HANDLOOM CLOTH/SAREES TO THE STATE OF BIHAR. THE ASSESSEE SUCCEEDED I N ITS TENDER BEING ACCEPTED. THE SUCCESSFUL BID RESULTED IN AN AGREEMENT DT. 5 .3.1997 BETWEEN THE GOVERNMENT OF BIHAR AND THE ASSOCIATION OF CORPORATIO NS AND APEX SOCIETIES OF HANDLOOMS (REFERRED TO AS ACASH I.E. THE ASSESSEE) WHICH IS PLACED AT PAGES 10 TO 15 OF THE PAPER BOOK. 13.2. A PERUSAL OF THE SAID DOCUMENT SHOWS THAT AN ADVANCE OF RS. 40 CRORES WAS PAID BY THE GOVERNMENT OF BIHAR AND THE BANK GUARAN TEE OF THE SAID AMOUNT WAS TO BE GIVEN ON THE SAME DATE AS PER CLAUSE 1 OF THE SA ID AGREEMENT. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 23 2323 23 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 13.3. AS PER CLAUSE 7 OF THE SAID AGREEMENT THE ASSESSEE W AS REQUIRED TO FURNISH A PERFORMANCE GUARANTEE FOR RS. 20 CRORES WHICH COULD B E INVOKED BY THE CHIEF SECRETARY, BIHAR, IF THERE ARE SUFFICIENT REASONS TO DO SO AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13.4. A PERUSAL OF CLAUSE 13 OF THE SAID AGREEMENT F URTHER SHOWS THAT THE CHIEF SECRETARY, BIHAR AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO ACASH IF THERE WERE SUFFICIENT REASONS TO DO SO COULD INVOKE THE TWO BAN K GUARANTEES (FOR RS.40 CRORES AND RS. 20 CRORES). BY VIRTUE OF THE SAID CLAUS E IT WAS ENSURED THAT ACASH WAS TO BE GIVEN 7 WORKING DAYS TIME TO REFER THE MATTER TO THE ARBITRATOR. THE BANK GUARANTEES TO BE GIVEN BY ACASH WERE REQUIRED TO BE UNCON DITIONAL AND FROM NATIONALIZED BANKS THE VALIDITY OF WHICH WAS EITHER 9 MONTHS FROM THE DATE OF PURCHASE ORDER OR FOR 60 DAYS AFTER THE RECEIPT OF ENTIRE SUPPLY. 13.4.1. FOR READY REFERENCE CLAUSE 1, CLAUSE 7 AND 13 ARE REPRODUCED HEREUNDER FROM PAGES 12 AND 14 OF THE PAPER BOOK. CLAUSE CLAUSE CLAUSE CLAUSE 1 11 1: : : : ADVANCE TO BE PAID ADVANCE TO BE PAID ADVANCE TO BE PAID ADVANCE TO BE PAID THE GOVERNMENT OF BIHAR HAS AGREED TO ADVANCE A SU M OF RS.40 CRORES TO ACASH FOR COMMENCING THE EXECUTION OF THE CONTRACT. ACASH HAS AGREED TO GIVE A BANK GUARANTE E FOR RS.40 CRORES AGAINST THIS ADVANCE. CLAUSE 7: PAYMENT TERMS CLAUSE 7: PAYMENT TERMS CLAUSE 7: PAYMENT TERMS CLAUSE 7: PAYMENT TERMS THE TENDER SCHEDULE (PART B) VIDE CLAUSE NO.7 HAS STATED THAT THE SUCCESSFUL TENDERER WILL BE REQUIRED TO FURNISH SEC URITY AMOUNT AT THE RATE OF 5% OF THE VALUE OF THE TOTAL ORDER PLACED LESS THE AMOUNT OF EARNEST MONEY, IN THE FORM OF BANK DRAFT OR NATIONAL SAVING CERTIF ICATE, FIXED DEPOSIT CERTIFICATE PLEDGED TO THE DIRECTOR, HANDLOOM AND S ERICULTURE, GOVT. OF BIHAR, PATNA OR IN THE FORM OF BANK GUARANTEE ON AN Y NATIONALIZED BANK WITHIN A PERIOD OF 14 DAYS FROM THE DATE OF ACCEPTA NCE OF THE TENDER. IN THE EVENT OF THE FAILURE OF THE TENDERER TO FURNISH THE REQUISITE SECURITY, THE AMOUNT OF EARNEST MONEY SHALL STAND FORFEITED AND V IDE CLAUSE NO.11 DEDUCTION OF 5% WILL BE MADE FROM THE RUNNING BILL BY WAY OF PERFORMANCE GUARANTEE, WHICH WOULD BE PAYABLE ON SUCCESSFUL COM PLETION OF THE SUPPLY ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 24 2424 24 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI OF ORDER. AFTER NEGOTIATIONS, IT HAS BEEN MUTUALL Y AGREED THAT ACASH SHALL FURNISH A PERFORMANCE GUARANTEE FOR RS.20 CRORES IN LIEU OF ABOVE MENTIONED 5% SECURITY DEPOSIT AND 5% DEDUCTION FROM THE RUNNI NG BILL. CONSEQUENTLY, THE DIRECTOR, HANDLOOMS, GOVT. OF BIHAR SHALL PAY F ULL VALUE OF ACCEPTED GOODS AGAINST THE BILLS RAISED. THE PERFORMANCE GU ARANTEE MAY BE INVOKED BY THE CHIEF SECRETARY, BIHAR IF THERE ARE SUFFICIE NT REASONS TO DO SO AFTER GIVING AN OPPORTUNITY OF HEARING TO ACACH. IN THIS CASE, THE LIABILITY OF ACACH VARIES FROM 0.25% PER MONTH TO MAXIMUM 2% OF VALUE OF UNDELIVERED GOODS. (II) ON THE BASIS OF QRN RECEIVED FROM D.M., ACACH WILL SEND ITS BILL TO DIRECTOR, HANDLOOMS WITHIN SEVEN DAYS FOR THE PAYME NT. THE DIRECTOR (HANDLOOMS) SHALL RELEASE THE PAYMENT FOR THE FULL VALUE OF ACCEPTED GOODS WITHIN 23 DAYS FROM THE DATE OF THE RECEIPT OF GOOD S. ALL DRAFT CHARGES SHALL BE BORNE BY ACASH. DRAFT SHALL BE PAYABLE AT DELHI ON A NATIONALIZED BANK. (III) ACASH SHALL SEND THE MATERIAL THROUGH TRANSPO RTER ON PREPAID BASIS TO THE DISTRICT HEADQUARTERS. IN THE EVENT OF DEFAULT IN TIMELY PAYMENT BY GOVT. OF BIHAR IN ONE FORTNIGHT ACACH HAS THE RIGHT TO ST OP FURTHER SUPPLIES AND NO PENALTY WILL BE PAID BY ACACH FOR LATE DELIVERY IN THE EVENT OF NON PAYMENT OR DELAYED PAYMENT. (IV) IN CASE, ACASH MAKES THE SUPPLIES EARLIER THAN THE DELIVERY SCHEDULE, THE GOVT. OF BIHAR SHALL MAKE PAYMENT FOR THE FULL VALUE OF GOODS SUPPLIED WITHIN THE SAME TIME FOR THE EXTRA SUPPLIES ALSO. (V) THE ADJUSTMENT OF THE ADVANCE IS TO BE MADE FRO M THE BILLS OF LATER PART OF THE LAST TWO MONTHS OF SUPPLY @ RS.20 CRORES PER MO NTH. CLAUSE 13 : BANK GUARANTEE CLAUSE 13 : BANK GUARANTEE CLAUSE 13 : BANK GUARANTEE CLAUSE 13 : BANK GUARANTEE THE TWO BANK GUARANTEES (FOR RS.40 CRORES AND RS.2 0 CRORES) MAY BE INVOKED BY THE CHIEF SECRETARY, BIHAR IF THERE A RE SUFFICIENT REASONS TO DO SO, AFTER GIVING AN OPPORTUNITY OF HEARING TO ACACH , ACACH MAY BE GIVEN SEVEN WORKING DAYS TIME TO REFER THE MATTER TO THE ARBITRATOR. BANK GUARANTEE TO BE GIVEN BY ACACH WILL BE UNCONDITIONA L AND FROM A NATIONALIZED BANK. VALIDITY OF BANK GUARANTEES WIL L BE EITHER FOR 9 MONTHS FROM THE DATE OF PURCHASE ORDER OR FOR 60 DAYS AFTE R THE RECEIPT OF ENTIRE SUPPLY, WHICHSOEVER IS LATER. IN CASE OF EARLIER C OMPLETION OF SUPPLIES, THE BANK GUARANTEES MAY BE REVOKED ON THE BASIS OF MUTU ALLY CONSENT OF PARTIES. THE DISPUTES AND DIFFERENCES ARISING OUT IN RELATI ON TO THE SAID AGREEMENT SAVE AND EXCEPT ANY DISPUTE OR DIFFERENCE REGARDING QUALITY AND QUANTITY OF GOODS SUPPLIED AT THE TIME OF DELIVERY WERE TO BE R EFERRED TO THE SOLE ARBITRATION OF THE SECRETARY, MINISTRY OF TEXTILES, GOVT. OF INDIA, UDYOG BHAVAN, NEW DELHI AS PER CLAUSE 16. ON PERUSAL OF PAPER BOOK PAGES 16 ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 25 2525 25 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI AND 17 WOULD SHOW THAT IT CONTAINS THE COPY OF BANK GUARANTEE DT. 5.3.1997 BY SYNDICATE BANK FOR RS.40 CRORES ON THE REQUEST OF THE ASSESSEE I.E. ACACH WHICH WAS GIVEN AGAINST THE ADVANCE OF RS.40 CRORES RECEIVED FROM GOVT. OF BIHAR, DEPT. OF INDUSTRIES DIRECTORAT E OF HANDLOOMS AND SERI CULTURE FOR DUE FULFILLMENT BY THE CONTRACTOR I.E. THE ASSESSEE ON THE TERMS AND CONDITIONS CONTAINED IN THE SAID AGREEMENT. 13.4.2. PAPER BOOK PAGE NUMBERS 21 TO 23 IT IS SEEN IS AN ORDER OF CHIEF SECRETARY, BIHAR DT. 15.9.1997 WHEREBY THE SAID AUTHORITY ORDERS THAT THE BANK GUARANTEE BE INVOKED UNDER CLAUSE 13 OF THE CONTRACT AND DIRECTORATE OF HANDLOOMS, GOVT. OF BIHAR WAS DIRECTED TO TAKE NECESSAR Y ACTION ACCORDINGLY. 13.4.3. A PERUSAL OF THE SAID ORDER SHOWS THAT BOTH THE PARTIES WERE HEARD ON 15.9.1997 NAMELY SHRI G.B. RAI, ADDITIONAL ADVOCATE GEN ERAL ON BEHALF OF DEPARTMENT OF INDUSTRIES AND DIRECTOR OF HANDLOOMS AND AN UNNAMED ADVOCATE ON BEHALF OF ACASH. 13.4.4. A PERUSAL OF THE SAID ORDER FURTHER BEARS OUT T HE FACT THAT ON BEHALF OF THE GOVT. OF BIHAR IT WAS AGITATED THAT ACASH HAD NOT GIVEN PERFORMANCE GUARANTEE TILL DATE. THE CONTENTION OF THE OTHER SIDE THAT THE GOVT. OF BIHAR HAD ACCEPTED THE GOODS AND THEREFORE THE CONTRACTUAL OBLIGATIO N OF ACASH WAS FULFILLED WAS OBJECTED ON THE GROUND THAT AT NO POINT OF TIME THE GOVT. OF BIHAR WAIVED THE CONDITION OF PERFORMANCE GUARANTEE. IT WAS CO NTENDED THAT THE GOVERNMENT HAD BEEN INSISTING THAT ACASH SHOULD GIVE PERFO RMANCE GUARANTEE AND RELAXATION WAS GIVEN ONLY IN REGARD TO PAYMENT OF BILLS SUBMITTED TILL 30 TH JUNE, 1997 ON THE CONDITION THAT THE PERFORMANCE GUARANTEE WOUL D BE GIVEN ON OR BEFORE 30 TH JUNE, 1997. ACCORDINGLY IT WAS STATED ON THIS GROU ND ALONE THE BANK GUARANTEE COULD BE INVOKED. 13.4.5. IT WAS ALSO AGITATED THAT ACASH HAD NOT ADHERED TO THE SCHEDULE OF SUPPLY. ACCORDING TO THE SCHEDULE THE ENTIRE SUPPLY OUG HT TO HAVE BEEN COMPLETED BY 21 ST AUGUST, 1997 WHERE AS TILL 25 TH AUGUST, 1997 ONLY 20% OF THE TOTAL ORDERED ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 26 2626 26 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI QUANTITY WAS STATED TO HAVE BEEN SUPPLIED. IT WAS ALLEGED THAT THE VIOLATION OF THE CONTRACT WAS NOT LIMITED TO SUPPLY OF GOODS BUT ACA SH WAS ALSO FAULTED WITH ON THE GROUND OF FAILING TO PROVIDE A REVISED SUPPLY SCHED ULE WHICH IT WAS CLAIMED WAS ITSELF ALSO ADEQUATE AND SUFFICIENT GROUND TO INVOKE TH E BANK GUARANTEE. 13.4.6. ANOTHER OBJECTION WAS POSED ON THE GROUND THAT THE EVIDENCE AVAILABLE WITH GOVT. OF BIHAR SHOWED THAT POWER LOOM G OODS INSTEAD OF ONLY HANDLOOM PRODUCTS HAD BEEN SUPPLIED. THE CONTENTION THA T THE COLLECTORS HAD ACCEPTED THE GOODS AND DISTRIBUTED PART OF THE GOODS WAS CONTESTED TO BE NOT A VALID GROUND AND ACASH WAS ACCUSED OF HAVING CHEATED I N AS MUCH AS THE POWERLOOM PRODUCTS HAD BEEN WRONGLY STAMPED AS HANDLOO M PRODUCTS. THE SAMPLES HAVING BEEN TESTED IN THE ORGANIZATIONS UNDER THE T EXTILE MINISTRY OR LINKED TO THE SAID MINISTRY WERE RELIED UPON. THE RELIANCE PLACED UPON THE FACT THAT THERE IS NO FOOLPROOF METHOD IN ORDER TO ARRIVE AT FIRM CONC LUSIONS AS TO WHETHER THE PRODUCTS WERE MADE ON HANDLOOM OR POWERLOOM BY ACASH W AS ALSO FAULTED WITH. ABSENCE OF DUE DILIGENCE ON THE PART OF ACASH WAS STATED T O BE NOT ONLY A VIOLATION OF CONTRACT BUT ACCORDING TO THE ADDITIONA L ADVOCATE GENERAL ALSO RAISED SUBSTANTIAL QUESTIONS ABOUT THE METHODOLOGY OF OPERATIO N. 13.4.7. RELYING UPON A PRESS RELEASE ISSUED BY THE ACASH TH E ADDL. ADVOCATE GENERAL STATED THAT ACASH HAD RETAINED RS. 28.3 1 CRORES IN THEIR OWN ACCOUNTS AS SUCH IT CAN BE STATED THAT ACASH HAS NOT D ISTRIBUTED THE MONEY TO THE WEAVERS SOCIETY FOR PURCHASING YARN AND FOR PAYMENT OF W AGES AS PER COMMITMENTS IN THE MEETINGS DT. 22.8.1996 AND 3 RD DECEMBER, 1996 ON THE BASIS OF WHICH INTEREST FREE ADVANCES WERE MADE. THE ARGUMENTS ON BEHA LF OF ACASH THAT PAYMENTS WERE DUE FROM GOVERNMENT WAS STATED TO BE NOT A VALID ARGUMENT AS PAYMENT HAD BEEN WITHHELD ON ACCOUNT OF THE FACT THAT THE TERMS OF PERFORMANCE GUARANTEE FROM ACASH HAD NOT BEEN COMPLIED WITH AND THE FACT THAT POWER LOOM ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 27 2727 27 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI PRODUCT INSTEAD OF HANDLOOM PRODUCT WAS PROVIDED. IT WAS ALSO AGITATED BY THE ADDL.DIRECTOR GENERAL IN CASE ACASH IS AGGRIEVED WITH THE D ECISION THE PROPER FORUM WOULD BE TO APPROACH THE ARBITRATOR. 13.4.8. A CAREFUL PERUSAL OF THE SAID ORDER FURTHER BEA RS OUT THE FACT THAT ON BEHALF OF ACASH THROUGH ITS LAWYERS IT WAS CONTENDED THA T THE GOVERNMENT OF BIHAR HAD BEEN SUPPLIED HANDLOOM SAREES AND DHOTIS WORTH RS. 3 2.11 CRORES WHICH HAD BEEN ACCEPTED AND OVER AND ABOVE RS. 3 CRORES WORTH SUPPLI ES IN REGARD TO WHICH ACCEPTANCE REPORT HAD NOT BEEN RECEIVED. IT WAS CLAIMED THAT AGAINST THESE SUPPLIES OF RS.35.11 CRORES AN AMOUNT OF RS. 7.96 CR ORES ONLY HAD BEEN RECEIVED FROM THE GOVT. OF BIHAR. IT WAS CONTENDED THAT CLAUSE 7 OF THE CONTRACT HAD FOUR MAJOR CONDITIONS AND EACH CONDITION IS INTERRELATED TO THE OTHER. THE CONDITIONS INTER ALIA WERE THAT THE PAYMENTS WERE TO BE MADE WITHIN 23 DAYS OF THE RECEIPT OF GOODS; IF THE PAYMENTS WERE NOT MADE SUPPLIES COULD BE ST OPPED, AS PER CLAUSE 8 OF THE CONTRACT; SUPPLIES WERE STATED TO BE LINKED WITH THE PAYMENT AND ADJUSTMENT OF RS.40 CRORES ADVANCE AS PROVIDED IN THE CONTRACT AND WAS TO BE ADJUSTED FROM THE BILLS OF THE LATTER PART OF THE LAST T WO MONTHS OF SUPPLY. IT WAS ALSO CONTENDED THAT THE GOVT. OF BIHAR HAD TAKEN DELIVERY OF G OODS AND HAD ALSO APPROPRIATED THE GOODS. 13.4.9. IT WAS ALSO CONTENDED THROUGH THE ADVOCATE THAT THE RS.40 CRORES ADVANCES HAD BEEN GIVEN FOR COMMENCEMENT OF EXECUTION OF THE CONTRACT WHICH WAS TO BE GIVEN AS INTEREST FREE ADVANCES TO SUPPLYING ( HANDLOOM ORGANIZATIONS). HOW THE STATE HANDLOOM ORGANIZATIONS WERE TO APPROPRIAT E THESE ADVANCES IT WAS STATED WAS GOVERNED BY THE ARTICLES OF ASSOCIATION OF THE SAID HANDLOOMS ASSOCIATION. IT WAS STATED THAT THERE IS NO BAR FOR THE STATE ORGANIZATION TO ADVANCE TO PRIVATE PERSONS IF THEIR RULES PERMIT. HOWEV ER AS FAR AS ACASH IS ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 28 2828 28 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI CONCERNED NO ADVANCE HAD BEEN GIVEN TO TWO AGENCIES FROM H ARYANA OR TO ANY PRIVATE PARTY. 13.4.10. ON BEHALF OF ACASH THE SAMPLE TESTING WAS ALSO FAULTED WITH THE GROUND THAT THE SAMPLES WERE STATED TO HAVE BEEN TAKEN FROM SIX SUPPLIERS AND THE VALUE OF THE SAID LOT WAS ONLY RS.65 LAKHS RUPEES. THE SAMPLES WERE ALSO STATED TO HAVE NOT BEEN TAKEN IN THE PRESENCE OF THE REPRESENTATIVE OF ACASH. THE ENTIRE CONCLUSION HAVING BEEN BASED ON JUST TWO SAMPLES F ROM EACH SUPPLIER WAS ALSO FAULTED WITH. IT WAS POINTED OUT THAT UNDER CLAU SE 5 (III) OF THE CONTRACT CERTIFICATES OF ACCEPTANCE HAVE BEEN ISSUED AND NO DISPUTE H AD BEEN RAISED IN THIS REGARD. LETTER OF NITRA WAS RELIED UPON FOR THE PROPOSIT ION THAT THERE IS NO TEST OR STANDARD EQUIPMENT TO DISTINGUISH BETWEEN THE HANDLOOM OR POWER LOOM PRODUCTS. AS SUCH THEIR REPORT IT WAS STATED COULD NOT BE ACCEPTED . REFERRING TO CLAUSE 13 OF THE CONTRACT IT WAS STATED THAT SUFFICIENT REASONS MUS T EXIST TO INVOKE THE GUARANTEE. THE CONTRACT WAS STATED TO BE STILL ALIVE AS SUCH THE BANK GUARANTEE IT WAS STATED CANNOT BE INVOKED. CLAUSE 14 WAS ALSO RELIED UPON SO AS TO CONTEND THAT IT PROVIDES FOR MUTUAL NEGOTIATIONS WHICH HAD NEVER TAKEN PLACE. 13.4.11. CONSIDERING THE SUBMISSIONS CERTAIN QUERIES W ERE PUT TO ACASH IN REGARD TO THE ENQUIRY WHICH MAY HAVE BEEN CONDUCTED TO F IND OUT THE TRUTH OF THE NEWSPAPER REPORT. THE ASSESSEE RESPONDED THAT THEY HAVE ORD ERED AN ENQUIRY WHOSE REPORT IS AWAITED BUT THEIR OWN ENQUIRY REPORT INDI CATED THAT ONLY HANDLOOM PRODUCTS HAVE BEEN SUPPLIED. THE ASSESSEE WAS ALSO REQUIRED TO SPECIFICALLY ANSWER ITS POSITION VIS-A-VIS PERFORMANCE GUARANTEE. TH E ASSESSEES RESPONSE WAS CONSIDERED TO BE NOT A SATISFACTORY REPLY. 13.4.12. THE ADDITIONAL ADVOCATE GENERAL IN REPLY ON T HE OTHER HAND STATED THAT BIHAR GOVT. HAS GIVEN RS.40 CRORES AS ADVANCE AND RS. 7.96 CRORES AS PAYMENTS WHERE AS THE TOTAL VALUE OF SUPPLY ACCORDING TO ACASH IS FOR RS.35 ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 29 2929 29 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI CRORES. SIX ORGANIZATIONS WHOSE SAMPLES WERE TESTED IT WAS CONTENDED HAVE SUPPLIED GOODS WORTH RS.15 CRORES HE ALSO REITERATED THE EA RLIER POINTS THAT THE PERFORMANCE GUARANTEE HAD NOT BEEN GIVEN AND SCHEDULE OF SU PPLY WAS NOT ADHERED TO WHICH WERE STATED TO BE SUFFICIENT GROUNDS TO INVOKE THE BANK GUARANTEE. RELIANCE WAS ALSO PLACED UPON BY THE ADMISSIO N BY ACASH ITSELF THAT THEY HAD KEPT RS.28.31 CRORES IN INTEREST BEARING DEPOSI TS IT WAS AGAIN STATED THAT THIS IS A VIOLATION OF CONTRACT. RELIANCE WAS PLACED UPON THE MINUTES OF THE MEETING WHICH WAS STATED TO BE FORMING PART OF THE CONTRACT. RELYING ON THE SAME IT WAS SUBMITTED THAT THE ENTIRE DISCUSSIONS RELATING TO THE GRA NT OF INTEREST FREE ADVANCES TO ACASH WAS BASED ON THE NEED TO GIVE MONEY AS ADVANCE TO HANDLOOM ORGANIZATIONS FOR YARN AND WAGES AND THE CONDUCT OF A CASH IT WAS STATED WAS NOT IN CONFORMITY WITH THE ARGUMENTS MADE BY THEM DURING T HE MEETING. AS SUCH IT WAS CLAIMED THAT THERE IS A VIOLATION OF CONTRACT ON THIS SCORE ALSO. REFERENCE WAS ALSO MADE TO THE LETTER NO. 2255/CCS DT. 26 TH AUGUST, 1997 ADDRESSED BY THE STATE OF BIHAR TO ACASH REQUIRING THAT A DETAILED ENQUIRY BE MADE IN RESPECT TO THE IRREGULARITIES. 13.4.13. CONSIDERING THESE SUBMISSIONS THE CHIEF SECRETAR Y CONCLUDED THAT THERE WAS A VIOLATION IN THE TERMS OF THE CONTRACT BY AC ASH ON TWO GROUNDS NAMELY PERFORMANCE GUARANTEE NOT HAVING BEEN FINALIZED WITHIN THE STIPULATED TIME NOR IN THE EXTENDED TIME; AND NOT ADHERING TO THE DELIVERY SCHEDULE O R SUBMITTING ANY REVISED SCHEDULE. HOWEVER IN REGARD TO THE ISSUE WHETHER TH E SUPPLY WAS OF PRODUCTS PRODUCED BY POWER LOOM OR HANDLOOM HE TOOK T HE STAND THAT HE WAS NOT IN A POSITION TO TAKE A VIEW AS THE REPORT OF THE TEXTILE COMMISSIONER WAS AWAITED. 13.4.14. FOR READY REFERENCE WE REPRODUCE PARA 5 OF THE SA ID ORDER FROM PAGE 23 OF THE PAPER BOOK. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 30 3030 30 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 5. AFTER GOING THROUGH THE PAPERS AND ARGUMENTS OF BOTH THE PARTIES, I AM SATISFIED THAT ACASH HAS VIOLATED THE TERMS OF T HE CONTRACT AT LEAST ON TWO GROUNDS : (I) PERFORMANCE GUARANTEE WAS NOT GIVEN WITHIN THE STIP ULATED TIME AND EVEN AFTER EXTENSION OF THE TIME LIMIT UPTO 30.9.19 7. (II) THEY HAVE NOT ADHERED TO DELIVERY SCHEDULES, NOR WA S ANY REVISED SCHEDULE SUBMITTED. IN ADDITION, ACACH HAS, ADMITTEDLY KEPT RS. 28.31 C RORES IN INTEREST BEARING DEPOSITS IN THE BANK. EVEN THOUGH SOME TEST REPORTS SUGGEST POWERLOOM PRO DUCTS HAVE BEEN SUPPLIED INSTEAD OF HANDLOOM PRODUCTS, I AM NOT AT PRESENT TAKING A VIEW AS TO WHETHER THE PRODUCTS SUPPLIED ARE POWERL OOM OR HANDLOOM SINCE THE REPORT OF THE TEXTILE COMMISSIONER IS STI LL AWAITED. ACACH, MAY MAKE THIS REPORT AVAILABLE TO THE INDUSTRIES DE PT. GOVT. OF BIHAR AS AND WHEN RECEIVED. HOWEVER, THERE IS ENOUGH EVIDEN CE ON RECORD TO ARRIVE AT A PRIMA FACIE CONCLUSION THAT POWERLOOM P RODUCTS HAVE BEEN SUPPLIED INSTEAD OF HANDLOOM PRODUCTS. IN VIEW OF THE ABOVE, I AM SATISFIED THAT SUFFICIEN T GROUNDS EXIST FOR INVOKING THE BANK GUARANTEE UNDER CLAUSE 13 OF THE CONTRACT. IT IS HEREBY ORDERED THAT THE BANK GUARANTEE BE INV OKED UNDER CLAUSE 13 OF THE CONTRACT. DIRECTOR (HANDLOOM), GOVT. OF BIHAR IS DIRECTED TO TAKE NECESSARY ACTION ACCORDINGLY. 13.5. THE RECORD SHOWS THAT ACTING ON THE ABOVE ORDER DI RECTOR, HANDLOOMS, STATE OF BIHAR SENT A LETTER DT. 23.9.1997 TO THE ASSESSEES BA NK INVOKING THE BANK GUARANTEE AND DEMANDED RS.40 CRORES THROUGH BANKERS CHEQUE. THE ASSESSEE APPROACHED THE HONBLE HIGH COURT OF DELHI TWICE TO STAY THE INVOCATION OF THE BANK GUARANTEE UNSUCCESSFULLY. 13.6. CONSIDERING THE FACTS AS AVAILABLE ON RECORD AN D DISCUSSED HEREINABOVE WE FIND OURSELVES UNABLE TO AGREE WITH THE CONTENTION OF TH E LD.A.R. THAT ON THE BASIS OF ABOVE THE FACTS AND BACKGROUND THAT THE IN TEREST ARISING FROM THE FDRS CAN NOT BE THE INCOME OF THE ASSESSEE. THE ARGUMENT THAT FDRS WERE UNDER LIEN AGAINST THE BANK GUARANTEE DOES NOT HELP THE ASSESSEE, TH E ASSESSEE COULD OFFER IT FOR LIEN ONLY BECAUSE THE ASSESSEES OWNERSHIP WAS UNFETTERED. ASSETS WHOSE OWNERSHIP IS QUESTIONABLE CANNOT BE OFFERED AS LIEN. EVEN AFTER OFFERING THEM AS LIEN THE OWNERSHIP IS NOT TRANSFERRED AND ASSESSEES OWNERS HIP CONTINUES TO BE UNDISTURBED TILL THE OCCURRING OF THE EVENT BY VIRTUE OF WHICH THE OWNERSHIP PASSES TO ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 31 3131 31 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI THE PARTY WHO HAS A LIEN IN ITS FAVOUR WHICH EVENT HAS OCCURRED ON 16.12.2000 WHEN THE BANK GUARANTEE WAS INVOKED. AS ON THE DAY THE FI XED DEPOSITS WERE MAINTAINED THE OWNERSHIP IS UNDISPUTED. FUTURE EVENTS CA NNOT DICTATE THE TAXABILITY OF THE ISSUE IN THE PRESSED PROCEEDINGS. IT IS SEEN THAT T HE UNDISPUTED FACT ON RECORD IS THAT THE F.D.R. OF RS. 28.31 CRORES WHICH WAS MAINTAINED FROM THE RS.40 CRORES ADVANCE BY THE GOVT. OF BIHAR. THE SAID SUM WAS ADVAN CE AVAILABLE TO THE ASSESSEE FOR THE SPECIFIC PURPOSE OF FACILITATING/EXECUTING THE TERMS OF THE CONTRACT ENTERED. AS SUCH THE SAID SUM WAS AVAILABLE TO THE ASSESS EE TO BE USED ACCORDINGLY BY IT AT ITS OWN DISCRETION. ADMITTEDLY THE ASSESSEE MAINTAINED A PORTION OF THE ADVANCED FUNDS IN ITS SAVINGS BANK AN D ADVANCED THE FUNDS TO WEAVER SOCIETIES AS AND WHEN IDENTIFIED BY IT. THE INTEREST EARNED ON THE FUNDS MAINTAINED IN THE SAVING BANK ACCOUNT HAS BEEN TAKEN B Y THE ASSESSEE ITSELF AS THE INCOME AS SUCH THERE IS NO QUARREL ON THE SAID ISSUE WITH THE DEPARTMENT. HOWEVER A PORTION OF THE SAID RS.40 CRORES RECEIVED AS ADVANCE N AMELY RS. 28.11 CRORES ETC. HAS BEEN DEPOSITED IN FDRS. IT HAS BEEN CANVASSED THAT T HE DECISION TO DO SO WAS A PRUDENT DECISION AS WEAVER SOCIETIES CAPABLE OF DELIVERING THE HANDLOOM PRODUCTS HAD TO BE IDENTIFIED. THE PRUDENCE OF THE SAID DE CISION/ACTION IS ALSO NOT UNDER CHALLENGE AND IT WILL NOT IMPACT THE CONCLUSION THAT THE AMOUNT OF INTEREST IS TAXABLE IN THE HANDS OF THE ASSESSEE. THE CLAIM THAT IT BELONGS TO THE STATE OF BIHAR CANNOT BE ACCEPTED. THE DEPARTMENTAL STAND THAT IT IS A UNILATERAL DECISION OF THE ASSESSEE CANNOT BE FAULTED WITH. HAVING GIVEN OUR UTMOST CONSIDERATION WE HOLD THAT THE ARGUMENTS OF THE ASSESSEE DO NOT HAVE MERIT NOT O NLY ON THE GROUND THAT THE ACTION WAS UNILATERAL AND NOT CONTEMPLATED UNDER TH E CONTRACT BUT ALSO ON THE GROUND THAT EVEN IF THE ARGUMENT IS ACCEPTED IN THAT SI TUATION ALSO THE OWNERSHIP OF THE GOODS UNDER LIEN PASS ONLY AT THE TIME THE EVENT CONT EMPLATED DOES NOT OCCUR AND THE PARTY IN WHOSE FAVOUR THE LIEN HAS BEEN CREATED CAN UNDER LAW CLAIM ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 32 3232 32 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI OWNERSHIP ON THE GOODS/ASSET AS THE PARTY HAS FAILED TO PERFORM THE CONTRACTED TERMS. THUS WHEN THE FDRS WERE MAINTAINED OWNERSHIP VESTED C OMPLETELY WITH THE ASSESSEE EVEN IF THE ASSESSEE UNILATERALLY BINDS ITSELF BY WAY OF EXECUTING LIEN, THE OWNERSHIP PASSES ON 16.12.2000 WHICH FUTURE DEVELOPMENT W ILL NOT IMPACT THE TAXABILITY. 13.7. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE THE CONCURRENT FINDING OF THE AUTHORITIES BELOW ON FACTS CANNOT BE FAULTED WIT H. THE ARGUMENTS THAT ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT MAINTAINING FDRS FROM THESE FUNDS AND HOLDING THEM AS LIEN FOR THE STATE OF BIHAR IN TERMS OF T HE REQUIREMENTS OF THE AGREEMENT DOES NOT IMPACT THE TAXABILITY OF THE AMOUNT; I GNORANCE OF LAW IN TAX MATTERS CANNOT BE ACCEPTED. THE BONAFIDE OF THE ASSESSEE IN HOLDING THAT FDRS IN LIEN TOWARDS THE OBLIGATION UNDER THE CONTRACT IN FAVOU R OF STATE OF BIHAR ARE OF NO RELEVANCE IN THE PRESENT PROCEEDINGS. NO DOUBT THE OBJECT OF THE SOCIETY IS LAUDABLE THE SOCIETY MAY ALSO HAVE AN ARGUMENT THAT THE B ANK GUARANTEE WAS WRONGLY INVOKED. HOWEVER THESE FACTS AND ARGUMENTS QUA T HE ISSUE INVOLVED ARE OF NO HELP. THE ISSUE HAS TO BE SOLELY DECIDED ON THE BASI S OF FACTS ON RECORD, THE RELEVANT PROVISIONS OF THE ACT AND THE CASE LAW ON THE IS SUE WHICH WE WOULD SUBSEQUENTLY ADDRESS IS OF NO HELP TO THE ASSESSEE. 13.8. WE NOW PROPOSE TO DISCUSS THE CASE LAW RELIED UPON BEFORE US. . . . 13.8.1 IT IS SEEN THAT BEFORE US THE LD.A.R. HAS PLACED RELIANCE ON ED SASSOON & CO.LTD. AND ANOTHER VS CIT 26 ITR 27 (S.C.). SPECIFIC ATTENTION HAS BEEN INVITED TO PAGE 51 FOR THE PROPOSITION THAT UNLESS AND UNTIL THERE IS A DEBT DUE CREATED IN FAVOUR OF ASSESSEE BY SOMEBODY IT CANNOT BE SAID THAT HE HAS ACQUIRED THE RIGHT TO RECEIVE THE INCOME OR THAT THE INCOME HAS ACCRUED TO IT. THE LD.A.R. HAS CANVASSED THAT BY VIRTUE OF THE PRINCIPLE LAID DOWN BY THE APEX C OURT IN THE SAID JUDGEMENT THE INTEREST RECEIVED IS NOT THE INCOME OF THE ASSESSEE. THE S TAND HAS BEEN ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 33 3333 33 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI VEHEMENTLY OPPOSED BY THE LD.D.R. WHO HAS ARGUED THAT THE SAID JUDGEMENT HAS NO RELEVANCE TO THE FACTS OF THE PRESENT CASE AS IT IS PURELY I N THE CONTEXT OF THE CIRCUMSTANCES WHERE A MANAGING AGENCY CAN BE SAID TO HAV E EARNED COMMISSION OR NOT. A CAREFUL READING OF THE SAID JUDGEMENT SHOWS T HAT THEIR LORDSHIPS WERE CALLED UPON TO CONSIDER ONE COMMON QUESTION OF LAW IN ALL THE APPEALS VIZ., WHETHER IN THE CIRCUMSTANCES OF THE CASE THE MANAGING AGEN CY COMMISSION WAS REQUIRED TO BE APPORTIONED BETWEEN THE SASSOONS AND THEIR RESP ECTIVE TRANSFEREES IN THE PROPORTION OF THE SERVICES RENDERED AS MANAGING AGEN TS BY EACH ONE OF THEM AND THE DECISION TURNS UPON THE QUESTION WHETHER ANY INC OME HAD ACCRUED TO THE SASSOONS ON THE DATES OF THE RESPECTIVE TRANSFERS OF THE MAN AGING AGENCIES TO THE TRANSFEREES OR AT ANY TIME THEREAFTER. 13.8.2. CONSIDERING THE TERMS AND CONDITIONS OF THE AGR EEMENTS ENTERED INTO BY THE ASSESSEE AND OTHER MANAGING AGENTS IT WAS HELD THAT THE COMMISSION WERE NOT LIABLE TO APPORTIONMENT BETWEEN THE S COMPANY AND A IN THE PROPORTION OF THE SERVICES RENDERED AS MANAGING AGENTS BY EACH ONE OF THEM, BU T A WAS LIABLE TO PAY TAX ON THE WHOLE COMMISSION. THE RIGHT TO RECEIVE THE COMMISSION IT WAS HELD WOULD ARISE AND THE INCOME, PROFITS OR GAINS WOULD ACC RUE TO THE MANAGING AGENTS ONLY AT THE END OF THE CALENDAR YEAR WHICH WAS THE TERMIN US A QUO FOR THE MAKING UP OF THE ACCOUNTS AND ASCERTAINING THE NET PROFITS EARN ED BY THE COMPANY. 13.8.3. THEIR LORDSHIPS HELD THAT THE TRANSFEREES OBTAIN ED UNDER THE DEED OF ASSIGNMENT AND TRANSFER EXECUTED BY THE S COMPANY IN TH EIR FAVOUR WAS AN INCOME BEARING ASSET CONSISTING OF THE OFFICE OF MANAGING AGEN TS, THE MANAGING AGENCY AGREEMENT AND ALL THE RIGHTS AND BENEFITS AS SUCH MANAG ING AGENTS UNDER THE AGREEMENT AND NO PART OF THE CONSIDERATION PAID BY THE T RANSFEREES TO THE S COMPANY COULD BE ALLOCATED AS A RECEIPT OF INCOME BY REAS ON OF THEIR CONTRIBUTION TOWARDS THE EARNING OF THE COMMISSION IN THE SHAPE OF SERVICES RENDERED BY THEM AS ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 34 3434 34 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI MANAGING AGENTS OF THE U COMPANY FOR THE BROKEN PERIOD. WHAT THE TRANSFEREES OBTAINED UNDER THE DEED OF ASSIGNMENT AND TRANSFER WAS TH E EXPECTANCY OF EARNING A COMMISSION IN THE EVENT OF THE CONDITION PRECEDENT BY WA Y OF COMPLETE PERFORMANCE OF THE OBLIGATION OF THE MANAGING AGENCY UND ER THE MANAGING AGENCY AGREEMENT BEING FULFILLED AND A DEBT ARISING IN FAVOUR O F THE MANAGING AGENTS AT THE END OF THE STATED PERIOD OF SERVICE CONTINGENT ON THE ASCERT AINMENT OF NET PROFITS AS A RESULT OF THE WORKING OF THE U COMPANY DURING THE CAL ENDAR YEAR. 13.8.4. IN THE FACTS OF THE PRESENT CASE IT IS SEEN IT HA S NO RELEVANCE AS UNDISPUTABLY THE AMOUNT OF RS.40 CRORES WAS ADVANCED IN TERMS OF AGREEMENT BETWEEN THE PARTIES FOR ADVANCING TO THE COOPERATIVE AGENCIES WHICH WERE TO BE IDENTIFIED BY THE ASSESSEE FOR THE PURPOSE OF ITS CONTRAC T IN ORDER TO SUPPLY HANDLOOM SAREES/DHOTIS. THE FACT THAT THE ASSESSEE WAS REQ UIRED TO PROVIDE A BANK GUARANTEE TO THE EXTENT OF THE SAID AMOUNT OVER AND ABOVE PERFORMANCE GUARANTEE OF RS.20 CRORES WHICH IS ALLEGED TO HAVE NOT BEEN MADE AND THE FACT THAT IT IS ALLEGED THAT THE ASSESSEE HAS PROVIDED THE BANK GUARANTEE FROM THE ADVANCE OF RS.40 CRORES RECEIVED OR THE FACT THAT FROM TH E LOAN OF RS.40 CRORES RECEIVED THE ASSESSEE MAINTAINED FDRS OF RS.28.11 CRORES WH ICH IS VIOLATION OF THE TERMS OF THE CONTRACT ARE ISSUES ON WHICH WE ARE NOT REQUI RED TO GIVE A FINDING AS IT WILL NOT IMPACT THE FACT THAT AT THE TIME RS.40 CRORES WERE ADVANCED TO THE ASSESSEE THE PURPOSE WAS SPECIFIED NAMELY TO FACILITATE THE PERFORMANCE OF THE CONTRACT SO AS TO ENABLE THE ASSESSEE TO ADVANCE THE SAME TO THE CASH-STARVED WEAVER ASSOCIATIONS SO THAT THEY COULD MEET THEIR REQUIREM ENTS OF YARN AND WAGES COST. THE OWNERSHIP, CONTROL OVER THE SAID FUNDS OF TH E ASSESSEE WAS UNDISPUTED. THE ACT OF HOLDING THEM IN LIEN FOR THE STATE OF BIHAR DO ES NOT PASS THE OWNERSHIP/CONTROL OF THE SAID FUNDS FROM THE ASSESSEE. T HUS NEITHER AT THE TIME THE FUNDS WERE RECEIVED NOR DURING THE TIME THEY CONTINUED TO BE IN ASSESSEES ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 35 3535 35 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI POSSESSION TILL DECEMBER 2000. THE FACT THAT THE ASSESSEE A PPROACHED THE HONBLE DELHI HIGH COURT SEEKING TO RESTRAIN THE STATE OF BIHAR FROM REVOKING THE BANK GUARANTEE OR THE STAND BEFORE THE SOLE ARBITRATOR THA T THESE WERE FUNDS BELONGING TO THE ASSESSEE ARE FACTS WHICH MAY BE RELEVANT F OR CONSIDERING THE BONAFIDE. HOWEVER AS FAR AS QUANTUM PROCEEDINGS ARE CON CERNED IT HAS NO RELEVANCE. HOWEVER THE ADMITTED STAND OF THE PARTIES AS A PPEARING FROM DOCUMENTS AVAILABLE ON RECORD IS THAT THE FDS OF RS.28. 11 CRORES WERE MAINTAINED FROM ADVANCE OF RS.40 CRORES WHICH ADMITTEDLY WAS THE ADVANCE RECEIVED BY THE ASSESSEE FOR PERFORMING THE OBLIGATIONS OF THE CONTRACT THE INTEREST EARNED THEREON BELONGS TO THE ASSESSEE. THUS THE JUDGEMENT OF THE APEX COUR T IN ED SASSOON & CO. HAS NO RELEVANCE FOR DECIDING THE ISSUE. 13.8.5. WE HAVE ALSO TAKEN INTO CONSIDERATION THE JUDG EMENT OF THE APEX COURT IN THE CASE OF CIT VS. HINDUSTAN HOUSING AND LA ND DEVELOPMENT TRUST 161 ITR 524 (S.C.) WHEREIN THE ISSUE OF ENHANCED COMPENSATION WAS DISPUTED AND THE ASSESSEE WAS ALLOWED TO WITHDRAW THE SAID AMOUNT ONLY ON FURNISHING A SECURITY BOND FOR REFUNDING THE AMOUNT IN THE EVENT OF THE APPEAL BEING ALLOWED. IN THESE CIRCUMSTANCES IT WAS HELD THAT THE AMOUNT DID NOT ACCR UE TO THE ASSESSEE AS THERE WAS NO ABSOLUTE RIGHT TO RECEIVE THE AMOUNT AT THAT STA GE. IN THE FACTS OF THE PRESENT PROCEEDING IT IS AN UNDISPUTED FACT THAT THE FDRS HAVE BEEN MAINTAINED BY THE ASSESSEE FROM THE FUNDS ADVANCED TO THE ASSESSEE BY THE STA TE OF BIHAR TO BE FURTHER ADVANCED TO STATE HANDLOOM ORGANISATIONS FOR M EETING THEIR EXPENSES OF YARN AND WAGES. THE ACTION OF THE ASSESSEE TO MAINTAIN A PORTION OF RS.40 CRORES ADVANCED IN F.D. TILL A WEAVER SOCIETY IS IDENTIFIED AND A LSO TO OFFER THE VERY SAME FDS AS A SURETY TO STATE OF BIHAR ARGUED TO BE A VIOLAT ION OF THE TERMS OF THE CONTRACT BY THE CIT, D.R. RELYING ON THE ORDER OF THE CHIEF SECR ETARY OR CONTRARY TO THE NEGOTIATED TERMS OF THE CONTRACT WILL NOT IMPACT THE F ACT THAT THE ORIGIN OF THE FUNDS ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 36 3636 36 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI AND STATED PURPOSE OF THE ADVANCE OF THE FUNDS WAS SOLEL Y TO FACILITATE THE PERFORMANCE OF THE CONTRACT. THE INTEREST EARNED BY THE AS SESSEE ON THESE FUNDS HAS UNILATERALLY BEEN TREATED BY THE ASSESSEE AS BELONGING TO THE STATE OF BIHAR IN THE UNDISPUTABLE FACTS CANNOT LEAD TO THE CONCLUSION TH AT IT DID NOT BELONG TO THE ASSESSEE. THE RIGHT TO RECEIVE THE INTEREST WAS NOT OBSTRUCT ED BY EITHER ANY TERM IN THE CONTRACT OR BY ANY ORDER OF ANY COURT. TO PLEDGE T HE VERY SAME FDS AS PART OF THE PERFORMANCE OF THE CONTRACTUAL REQUIREMENTS DOES NOT A BSOLVE THE ASSESSEE AS UNDER THE CONTRACT THE ASSESSEE WAS DUTY BOUND TO DISBURS E THESE FUNDS TO THE STATE HANDLOOM ORGANISATIONS SO AS TO FACILITATE THE WEAVER O RGANIZATIONS TO MAKE AVAILABLE THE HANDLOOM DHOTIS/SARESS WHICH THE ASSESSEE WA S REQUIRED TO SUPPLY TO THE STATE OF BIHAR. THESE FUNDS WERE MADE AVAILABLE TO ENSUR E THAT THE CASH STARVED WEAVER SOCIETIES WOULD BE ABLE TO MEET THEIR COSTS OF YARN AN D WAGES FROM THESE FUNDS SO ADVANCED BY THE ASSESSEE. THE ASSESSEE HAD FULL RI GHT AND UNFETTERED OWNERSHIP OF THE SAID ADVANCE RECEIVED FOR THE SPECIFIC PUR POSE OF FACILITATING ITS CONTRACTUAL TERMS WHICH WERE IN HARMONY WITH ITS AIMS AND OBJECTS. 13.9. OUR ATTENTION IS ALSO INVITED TO THE CIT VS. RA O BAHADUR KALAWALA CUNNAN CHETTY CHARITIES ( 1982) 135 ITR 485 MADRAS FO R THE PROPOSITION THAT THE INCOME FROM THE PROPERTIES HELD UNDER THE TRUST WILL HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER. PERUSAL OF THE OBSERVATIONS M ADE BY THE HONBLE HIGH COURT WOULD SHOW THAT IN THE FACTS OF THE PRESENT CAS E IT DOES NOT ADVANCE THE CASE OF THE ASSESSEE IN ANY MANNER. THE RELEVANT OBSERVATIONS EXT RACTED FROM THE SAID JUDGEMENT ARE: WHEREEVER PARLIAMENT CONSIDERED THAT THE COMPUTATION OF IN COME SHOULD BE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T. ACT, 1961, IT INTRODUCED THE CONCEPT BY USING APPROPRIATE LANGUAGE. IN THE ABSENCE OF ANY SUCH LANGUAGE IN S.11(1) OF THE ACT, THE COMPUT ATION AS ENVISAGED BY THE OTHER PROVISIONS OF THE ACT CANNOT BE IMPORTED IN TO S.11(1). SECTION 11 CONTEMPLATES AN APPLICATION OF THE INCOME FOR CHARIT ABLE PURPOSES. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 37 3737 37 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI THE CHARITY CAN ACCUMULATE 25 PER CENT OF THE INCOME. TA KING INTO ACCOUNT THE PURPOSE FOR WHICH THE CONDITIONS OF S.11(1) (A) ARE IMPOSED, IT WOULD BE CLEAR THAT THE INCOME TO BE CONSIDERED WILL BE THA T WHICH IS ARRIVED AT IN THE CONTEXT OF WHAT IS AVAILABLE IN THE H ANDS OF THE ASSESSEE SUBJECT TO AN ADJUSTMENT OF ANY EXPENSES EXTRANEOUS TO TH E TRUST. THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES WILL HAV E TO BE EXCLUDED AND IT IS ONLY THE BALANCE THAT WOULD REQUIRE AN EXAMINA TION FOR FINDING OUT WHETHER THE ASSESSEE HAS COMPLIED WITH THE RULE OF ACCUM ULATION. ACCORDINGLY, THE INCOME FROM THE PROPERTIES HELD UNDER TRUST WILL HAVE TO ACCORDINGLY, THE INCOME FROM THE PROPERTIES HELD UNDER TRUST WILL HAVE TO ACCORDINGLY, THE INCOME FROM THE PROPERTIES HELD UNDER TRUST WILL HAVE TO ACCORDINGLY, THE INCOME FROM THE PROPERTIES HELD UNDER TRUST WILL HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO THE BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO THE BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO THE BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO THE PROVISIONS WHICH ARE ATT PROVISIONS WHICH ARE ATT PROVISIONS WHICH ARE ATT PROVISIONS WHICH ARE ATTRACTED BY S.14, RACTED BY S.14, RACTED BY S.14, RACTED BY S.14, AND 25 PER CENT THEREOF WILL HAVE TO BE ASCERTAINED, AND, IF THE ASSESSEE HAS ACCUMULATED MOR E THAN 25 PER CENT, THE CONSEQUENCES CONTEMPLATED IN S.11 WILL HAVE TO FOLLOW. (EMPHASIZED BY THE BENCH) 13.9.1. THE FINDING OF THE CIT(A) AND THE AO WHICH W E HAVE UPHELD ARE IN FACT SUPPORTED BY THE ABOVE JUDGEMENT. 13.10. RELIANCE HAS ALSO BEEN PLACED UPON THE JUDGEMENT OF HONBLE HIGH COURT IN THE CASE OF CIT VS. TRUSTEES OF HEH THE NIZAMS SUPPLEMEN T RELIANCE ENDOWMENT TRUST 127 ITR 378 (AP) WHEREIN AT PAGE 386 IT HAS BEEN O BSERVED THAT FOR THE PURPOSES OF SCHEDULE 11 (1)(A), IT IS THE BOOKS OF THE TR UST WHICH HAVE TO BE TAKEN INTO ACCOUNT IN DETERMINING THE INCOME AND EXPENDITURE OF THE T RUST. A PERUSAL OF THE SAID JUDGEMENT SHOWS THAT IT CONSIDERS FACTS PECULIAR T O ITS OWN. FOR READY REFERENCE THE RELEVANT EXTRACT FROM THE HEAD NOTE IS REPRODUCED HEREUNDER. HELD, (I) THAT WITH REGARD TO THE INCOME OF THE TRUS T AS SUCH, IT WAS THE ACCOUNTS OF THE TRUST ALONE THAT HAD TO BE TAKEN INTO CONSIDERATION. THOUGH THE PAYMENT OF INCOME-TAX AND WEALTH-TAX MADE D URING THE RELEVANT YEAR RELATED TO THE PREVIOUS ASSESSMENT YEARS, IT COULD NOT BE DISPUTED THAT SUCH EXPENSES WERE INCIDENTAL TO THE CARRYING OUT OF CHARITABLE PURPOSES OF THE TRUST. SUCH PAYMENTS WERE OUT GOINGS IN THAT PARTICULAR YEAR AND WERE INCIDENTAL TO THE CARRYING OUT OF THE OBJECTS OF THE TRUST. THEREFORE, THE PAYMENTS HAD TO BE EXCLUDED FROM THE INCOME OF THE TRUST. IF SO EXCLUDED, THE INCOME OF THE ASSESSEE FOR THE A.Y. 1966-67 WAS ONLY RS. 9,428.61 AND THE SAME BEING LESS THAN RS. 10,000, THE TRUST ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 38 3838 38 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI WAS NOT TAXABLE UNDER S.11(1)(A) OF THE I.T.ACT. FOR T HE A.Y. 1968-69, THE EXPENDITURE OVER INCOME WAS RS. 2,906.03 AFTER EXCLUDING T HE TAXES PAID DURING THE YEAR AND, THEREFORE, THERE WAS NO SURPLUS MONEY FOR THE PURPOSE OF INVESTMENT AND HENCE THE TRUST WAS NOT ASSESSAB LE UNDER THE I.T.ACT. 13.10.1. THE ARGUMENT THAT UNILATERAL ACTION OF THE AS SESSEE SHOULD BE GIVEN SOLE IMPORTANCE AND THE FACTS AVAILABLE ON RECORD BE IGN ORED IS NOT SUPPORTED BY THEIR LORDSHIPS IN THE CASE OF NIZAMS SUPPLEMENT RELIANCE ENDOWMENT TRUST. 13.11. BEFORE US RELIANCE WAS ALSO PLACED UPON THE JUDGMEN T OF THE DELHI HIGH COURT IN THE CASE OF PARAGAON CONSTRUCTION INDIA LTD. VS CIT 142 TAXMAN 215 DELHI. THE FACTS AS APPRECIATED BY THE HONBLE HIGH COURT AR E THAT THERE WAS A DISPUTE BETWEEN THE ASSESSEE AND THE NDMC IN REGARD TO THE CONTRACT ENTERED INTO WITH THE NDMC. THE DISPUTE WAS REFERRED TO THE ARBITRATOR WHO PASSED AN AWARD DIRECTING NDMC TO PAY CERTAIN SUM ALONG WITH SIMPLE I NTEREST TO ASSESSEE. THE ASSESSEE MOVED THE HONBLE HIGH COURT FOR MAKING THE AWARD RULE OF THE COURT. DESPITE FILING OBJECTIONS AGAINST THE AWARD THE NDMC DEPO SITED THE AMOUNT IN THE COURT. DURING THE PENDENCY OF THE PROCEEDINGS THE HONBLE HIGH COURT PERMITTED THE AMOUNT TO BE WITHDRAWN BY THE ASSESSEE AGAINST THE BA NK GUARANTEE WITH A FURTHER CONDITION THAT IN CASE THE NDMC SUCCEEDS ASSESS EE WOULD REFUND THE AMOUNT WITH INTEREST. THE ASSESSEE SUBSEQUENTLY WITHDREW TH E AMOUNT AND KEPT IT IN A F.D. WITH A BANK ON WHICH INTEREST WAS EARNED. THE A.O. HELD THAT INTEREST ACCRUED ON THE AMOUNT SO DEPOSITED IS TAXABLE INCOME FOR THE RELEVANT A.Y. THE AWARD WAS SUBSEQUENTLY CONFIRMED AND AFFIRMED BY THE HIG H COURT. IN THESE FACTS IT WAS HELD THAT IT WAS NOT A CASE WHERE MERE DATE OF PA YMENT WAS DEFERRED BUT IN FACT THE RIGHT TO RECEIVE THE SUM WAS IN JEOPARDY AND TH E RIGHT WAS SAID TO HAVE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 39 3939 39 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ACCRUED TO THE ASSESSEE WHEN THE SAID AWARD WAS AFFIRMED BY THE HIGH COURT AND THE DETERMINING DATE WAS HELD TO BE THE DECISION RENDERED BY THE HIGH COURT. 13.11.1. IN THE FACTS OF THE PRESENT CASE IT IS SEEN TH AT NO ORDER OF ANY HIGH COURT OR OF THE SOLE ARBITRATOR IS AVAILABLE ON RECORD WHICH H AS EITHER BEEN CALLED UPON TO CONSIDER OR HAS CONSIDERED THAT THE SAID SUM DOES NOT BEL ONG TO THE ASSESSEE. FURTHER NO FORUM IS SEIZED OF THE QUESTION WHETHER THE SUM WAS ADVANCED BELONG TO THE ASSESSEE FOR A SPECIFIC PURPOSE IN TERMS OF THE CONTRA CT BELONG TO ASSESSEE OR NOT WHAT IS IN DISPUTE IS WHETHER MAINTAINING FDRS OF RS. 28.11 LAKHS FROM THE ADVANCED FUNDS IS VIOLATION OF THE TERMS OF THE CONTRAC T OR NOT WHICH ISSUE IS NOT TO BE ADJUDICATED UPON BY US IN THE PRESENT PROCEEDINGS. APA RT FROM THAT THERE IS A FURTHER DISPUTE NAMELY THAT OVER AND ABOVE THE REQUIREMENT OF MAINTAINING THE BANK GUARANTEE OF RS.40 CRORES WHICH ACCORDING TO THE STATE O F BIHAR WAS NEVER PROVIDED BY THE ASSESSEE FROM ITS OWN FUNDS BUT WAS PROV IDED FROM THE VERY SUMS ADVANCED TO THE ASSESSEE THE NON PERFORMANCE GUARANTEE OF RS .20 CORRES NOT HAVING BEEN PROVIDED WAS ALSO ALLEGED TO BE A VIOLATION W HICH ISSUE IS ALSO NOT FOR US TO DECIDE. NO DOUBT COUNTER CLAIM OF THE ASSESSEE IS A LSO ON RECORD THAT MAINTAINING FDRS FROM THE RS. 40 CRORES ADVANCED IS N OT A VIOLATION OF THE TERMS OF THE CONTRACT SIMILARLY GRIEVANCES IN REGARD TO NOT RELEAS ING PAYMENT AS PER THE STIPULATED SCHEDULE ARE OTHER CLAIMS PUT FORTH APART FR OM THAT THERE ARE VARIOUS ISSUES ABOUT THE VIOLATION OF A CONTRACT IN VIEW OF T HE ALLEGATIONS BY THE STATE OF BIHAR THAT WHAT WAS SUPPLIED WAS POWER LOOM PRODUCTS AND NOT HANDLOOM PRODUCTS AND COUNTER CLAIMS BY THE ASSESSEE THAT THE PRO DUCTS WHICH HAVE BEEN SUPPLIED BY THE SOCIETIES IDENTIFIED BY THE STATE OF BIHAR A ND THE DEFECTS IN CERTIFICATION ETC. GIVEN BY THE SAID WEAVERS SOCIETIES CANN OT BE HELD AGAINST THE ASSESSEE AS THE ASSESSEE IS NOT A PRODUCER/MANUFACTURER OF T HE PRODUCT AND FAULTS HAVE BEEN FOUND WITH THE SAMPLING PROCEDURE AND THE SAMPLI NG AREA. THE FACT ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 40 4040 40 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI REMAINS THAT DESPITE THE MULTIPLICITY OF DISPUTES AND T HE ALLEGATIONS AND COUNTER ALLEGATION AS FAR AS THE FACTUM OF RS.40 CRORES ADVAN CED TO ASSESSEE IS CONCERNED BY THE STATE OF BIHAR THERE IS NO DISPUTE ON THE FACT THA T IT WAS ADVANCED TO THE ASSESSEE FOR A SPECIFIC PURPOSE IN TERMS OF THE CONTRACT. THE FACT THAT INTEREST HAS BEEN EARNED FROM THE FDRS OF RS. 28.11 CRORES MAINTAINED FROM A PORTION OF RS.40 CRORES THERE IS NO DISPUTE. WE SEE NO EVIDENCE OR DOCUMENT ON THE BASIS OF WHICH IT MAY BE SAID THAT THESE FUNDS BELONGED TO THE STATE OF BI HAR AS THEY WERE EXCLUSIVELY PUT FOR THE USE OF THE ASSESSEE TO PERFORM A CERT AIN TASK. BY VIRTUE OF THE SAID FACT THE INTEREST EARNED THEREON IT BECOMES THE INCOME OF THE ASSESSEE WHATEVER MAY BE THE TREATMENT GIVEN BY THE ASSESSEE IN ITS BO OKS OF ACCOUNTS. THE FACTS AND ISSUE CONSIDERED BY THE HONBLE HIGH COURT IN THE CASE OF PARAGAON CONSTRUCTIONS IS OF NO HELP TO THE ASSESSEE AS THE FACTS ARE ENTIRELY DISTINGUISHABLE. 13.12. RELIANCE IS ALSO PLACED UPON THE JUDGEMENT OF APEX COURT IN GODHRA ELECTRICITY CO.LTD. VS CIT 225 ITR 746 (S.C.) IN THE F ACTS OF THE SPECIFIC CASE IT IS SEEN THAT THE ASSESSEE COMPANY FOLLOWING THE MERCANTILE SYSTEM O F ACCOUNTING HAD MADE ENTRIES IN ITS BOOKS REGARDING ENHANCED CHARGES FOR THE SUPPLY OF ELECTRICITY MADE TO THE CONSUMERS WHEREAS ON FACTS NO REAL INCOME HAD ACCRUED TO THE ASSESSEE IN RESPECT OF THOSE ENHANCED CHARGES WHEREIN AFTER MULTIPLICITY OF LITIGATION BY THE ASSESSEE THEREIN AND THE CONSUMERS OF THE ELECTRICITY AND TH E INTERVENTION OF THE SECRETARY TO THE GOVT. OF GUJARAT INDUSTRIES, MINES AND P OWER DEPT. WHEREIN THE HONBLE HIGH COURT AND THE HONBLE APEX COURT HAD CONSI DERED THE ISSUES AT VARIOUS TIMES BEFORE THEM IN REGARD TO DISPOSAL OF VARI OUS SUITS BEFORE TRIAL COURT. SINCE THE SAID HYPOTHETICAL INCOME AS PER THE BOOKS OF ACC OUNTS OF THE ASSESSEE WAS BEING TREATED AS ASSESSEES INCOME THE HONBLE APEX COU RT HELD THAT THE TRIBUNAL HAS RIGHTLY HELD THAT THE CLAIM AT THE INCREAS ED RATES AS MADE BY THE ASSESSEE COMPANY ON THE BASIS OF WHICH NECESSARY ENTRIES WER E MADE REPRESENTED ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 41 4141 41 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ONLY HYPOTHETICAL INCOME AND THE AMOUNTS IN QUESTION BR OUGHT TO THE TAX BY THE A.O. DID NOT REPRESENT INCOME WHICH REALLY ACCRUED TO TH E ASSESSEE COMPANY. 13.12.1. IN THE FACTS OF THE PRESENT CASE THERE IS NO H YPOTHETICAL INCOME CONSIDERED BY THE DEPARTMENT SPECIFIC AMOUNT OF INTEREST HAS BEEN EARN ED ON THE FDR AMOUNTING TO RS. 1,76,89,280/- AND THERE IS NO DOCUMEN T ON THE BASIS OF WHICH IT CAN BE SAID THAT IT DOES NOT BELONG TO THE ASSESSEE AS SU CH THE SAID JUDGEMENT IS OF NO HELP. 13.13. LD .A.R. HAS ALSO RELIED UPON THE JUDGEMENT OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF NATIONAL GRINDLAYS BANK LTD. VS CWT 115 ITR 211 FOR THE PROPOSITION THAT A BANKING COMPANY WHICH HOLDS THE PROPERTY AS A TRUSTEE IS NOT ENTITLED TO EXEMPTION IN RESPECT OF PROPERTY HELD IN TRUST. IT WAS CONTENDED THAT ALTHOUGH THE JUDGEMENT IS IN THE CONTEXT OF WEALTH TAX, T HE PROPOSITION LAID DOWN THEREIN IS RELIED UPON TO CANVASS THAT THE INTEREST EARNED I S HELD BY THE ASSESSEE IN TRUST AND DOES NOT BELONG TO THE ASSESSEE. IN THE FACTS OF THAT CASE THE BANK HAD BEEN APPOINTED AS A TRUSTEE THE PROPERTY HELD BY THE BANK I N ITS CAPACITY AS A TRUSTEE IT WAS HELD CANNOT BE SAID TO BELONG TO THE BANK. IN THE FACTS OF THE PRESENT CASE THERE IS NO DOCUMENT ON THE BASIS OF WHICH IT CAN B E SAID THAT THE ASSESSEE IS HOLDING THE SAID FUNDS IN TRUST FOR THE STATE OF BIHAR . THE FUNDS ARE AT THE EXCLUSIVE DISPOSAL OF THE ASSESSEE AS AN ADVANCE IN TERMS OF THE AGR EEMENT WITH THE STATE OF BIHAR FOR ADVANCING THE SAME TO THE WEAVER SOCIETIES. TI LL THE SAID SUMS ARE NOT ADVANCED THEY ARE THE INCOME OF THE ASSESSEE AND AS AND WH EN THE SAID FUNDS ARE ADVANCED THEY ARE APPLICATION OF INCOME MAINTAINING F DS OF RS.38 CRORES FROM THE ADVANCE OF SAID FUNDS ON WHICH INTEREST HAS BEEN EARNED CA NNOT BE SAID TO BE APPLICATION OF THE INCOME. AS SUCH THESE JUDGEMENT DO NO T HELP THE ASSESSEE IN ANY MANNER. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 42 4242 42 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 14. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE THE GROU ND NO.1 IN ITA 1144/DEL/2005 ALONG WITH GROUNDS 2, 3, 4 & 6 ARE REJEC TED. GROUND NO.5 WAS NOT ARGUED BY THE PARTIES BEFORE THE BENCH. BEING CONSEQUENTIAL THE SAME IS REJECTED. 15. IN THE SAID APPEAL BASED ON PAGE 14 PARA 24 OF TH E IMPUGNED ORDER, ARGUMENTS WERE ADVANCED IN ITA 1144/DEL/2005 ALONG WITH ARGUMENTS IN SUPPORT OF GROUND NO.3 IN THE REMAINING 3 APPEALS. THESE SHA LL BE CONSIDERED WHILE ADJUDICATING GROUNDNO.3 IN ITA 1676, 1677 & 1678/DEL /2005. 16. IN THE REMAINING 3 APPEALS OF THE ASSESSEE GROUND NO .1 IS COMMON AND THE COMMON STAND OF THE PARTIES BEFORE THE BENCH WAS THAT FA CTS ARGUMENTS AND CASE LAW IS IDENTICAL WHICH WOULD APPLY TO ALL THE THREE YEAR S. 16.1. FACTS :- IN THE LIGHT OF THE ABOVE STAND IT IS SEEN THAT IN THE YEARS UNDER CONSIDERATION I.E. 1998-99, 1999-2000, 2000-201 THE RET URNS FILED BY THE ASSESSEE WERE PROCESSED U/S 143(1). AS A RESULT THE ASSESSMEN T FOR 2001-02 HAVING BEEN SELECTED FOR SCRUTINY THE ISSUE OF INTEREST EARNED ON FDR S WAS EXAMINED BY THE A.O. AND THE ADDITION MADE BY HIM WAS CONFIRMED BY THE CIT(A). IN VIEW OF THE FACT THAT IT WAS THE SAME ISSUE FOR THE ASSESSMENT YEARS U NDER CONSIDERATION THE AO INITIATED ACTION U/S 147 OF THE INCOME TAX ACT FOR TAX ING THE INTEREST INCOME OF RS. 2,10,46,133/-; RS. 2,41,82,691/- AND RS. 3,51,63,25 9/- RESPECTIVELY THE SAID ISSUE WHEN CHALLENGED BEFORE THE CIT(A) WAS REJECTED ON THE G ROUND THAT SINCE THE EARLIER RETURNS FILED FOR THE A.YS WERE ONLY PROCESSED U/S 1 43(1A) AS SUCH IT WAS NOT A CASE OF CHANGE OF OPINION ON THE SAME SET OF FACTS TH E CONTENTION THAT REASONS WERE NOT PROVIDED TO THE ASSESSEE WAS ALSO DISMISSED ON T HE GROUND THAT THE ASSESSEE HAS NOT SHOWN ANY EVIDENCE THAT DESPITE THE REQUEST THE REASONS FOR ACTION U/S 147 WERE NOT PROVIDED BY THE A.O. THE CIT(A) HELD TH AT IN EACH OF THESE YEARS THAT IT APPEARED TO BE A CASE WHERE REASONS WERE NOT PROVID ED TO THE APPELLANT SIMPLY BECAUSE NO SUCH REQUEST HAS BEEN MADE BEFORE THE A.O. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 43 4343 43 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 16.2. ARGUMENTS OF THE PARTIES :- AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD.A.R. CONTENDED THAT THIS WAS A C ASE OF CHANGE OF OPINION. HOWEVER IN THE FACE OF THE JUDGEMENT OF THE APEX COURT IN TH E CASE OF RAJESH JHAVERI STOCK BROKERS, HE DID NOT CONTEST THE ISSUE FURTHER AND MERELY RELIED UPON SARTHAK SECURITIES CO.LTD. VS. ITO 329 ITR 110 (DEL). L D.D.R. ON THE OTHER HAND HEAVILY RELIED UPON THE IMPUGNED ORDER AND THE JUDGEMENT OF THE APEX COURT CONTENDING THAT THE ISSUE IS SETTLED THAT IN THE CASE OF 143(1A) INTIMATION, THERE IS NO OCCASION TO APPLY THE MIND, AS SUCH THE GROUND OF ASS ESSEE DESERVES TO BE REJECTED. 16.3. FINDINGS:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. IT IS SEEN THAT BEFORE THE BENCH THE LD.AR DID NOT CANVASS THAT THE REASONS HAVE NOT BEEN PROVIDED. THE JUDGEMENT RELIED UPON BY THE LD.A.R. HAS NO APPLICATION IN THE PRESENT CASE SINCE THIS IS NOT A CASE OF 143(3) ASSESSMENT BUT WHERE INTIMATION IS ISSUED U/S 143(1A) OF THE I.T.ACT , 1961. THE LD.A.R. MERELY CONFINED HIS ARGUMENT TO THE FACT THAT IT WAS A CASE OF CHANGE OF OPINION WHICH IS NO LONGER RES INTEGRA BY VIRTUE OF THE JUDGEMENT OF THE APEX CO URT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS, 291 ITR 500 (S.C.). THE LD.D.R. ALSO RELIED UPON CIT VS. SIVASHAKTHI FLOOR MILLS LTD. 327 ITR 430 (GAUHATI). ACCORDINGLY IN THE LIGHT OF THE AFOREMENTIONED FACTS, ARGUMENTS AND POSITION OF LAW, THE FINDING ARRIVED AT IN THE IMPUGNED ORDER IS UPHELD ON THIS ISSUE AND GROUND NO. 1 OF THE ASSESSEE IN EACH OF THESE REMAINING 3 YEARS IS REJECTED. 17. GROUND NO.2 HAS BEEN CONSIDERED BY US IN THE EARLIER P ART OF THIS ORDER WHILE CONSIDERING GROUND NO.1 ALONG WITH SUPPORTING GROU NDS IN ITA 1144/DEL/2005. SINCE THE FACTS AND CIRCUMSTANCES REMAINED IDENTICAL FOR S IMILAR REASONS THE GROUND NO.2 OF THE ASSESSEE IS DISMISSED IN THESE REMAINING 3 APPEA LS. WE MAY ONLY MAKE A REFERENCE TO THE FACT THAT APART FROM THE ARGUMENTS ADV ANCED IN A.Y. 2000-2001 ANOTHER ARGUMENT WAS ALSO ADVANCED BEFORE THE CIT(A). T HE ASSESSEE HAD ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 44 4444 44 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ADVANCED THE ARGUMENT THAT AS PER ACCOUNTING STANDARDS 9 (A.S.-9) THE ASSESSEES CLAIM ON MERIT DESERVES TO BE ALLOWED ON THE BASIS OF REV ENUE RECOGNITION. THIS ARGUMENT IS RECORDED AT PAGES 19 TO 22 IN ITA 1678/DEL/ 2006 WHICH HAS BEEN APPLIED IN THE REMAINING TWO YEARS BY THE CIT(A). TH E SAID ISSUE HAS BEEN CONSIDERED BY THE CIT(A) IN PAGES 35 AND 36 WHEREIN RELIAN CE HAS BEEN PLACED UPON THE CIT(A)S ORDER FOR 2001-02. THE RELIANCE PLAC ED ON THE ACCOUNTING STANDARD-9 FOR REVENUE RECOGNITION DOES NOT HELP THE ASSESS EES CASE IN ANY MANNER WHATSOEVER. THE FACTS AND CIRCUMSTANCES BEING ID ENTICAL, GROUND NO.2 RAISED BY THE ASSESSEE IN EACH OF THE 3 REMAINING APPEALS I S ALSO REJECTED. 18. THE THIRD SURVIVING ISSUE ADDRESSED IN THE REMAINI NG THREE APPEALS I.E. ITA 1676 TO 1678/DE/2006 VIDE GROUND NO.3 IS THAT THE (A) CIT(A) ERRED IN NOT DIRECTING THE AO TO CONSIDER FORM NO.10 FILED BY THE ASS ESSEE DURING THE ASSESSMENT PROCEEDINGS TO ALLOW THE BENEFIT OF ACCUMULATION; (B) CI T(A) ERRED IN NOT APPRECIATING THAT THE REQUIREMENT TO FILE FORM NO.10 ALON G WITH THE RETURN IS DIRECTORY AND NOT MANDATORY; (C ) CIT(A) ERRED IN FACT S IN HOLDING THAT NO APPLICATION HAS BEEN FILED BY THE ASSESSEE BEFORE CBDT FOR CONDONATION O F DELAY IN FILING FORM 10. 18.1. FACTS: - A PERUSAL OF THE RECORD SHOWS THAT BEFORE THE CIT(A) I T WAS CONTENDED THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED FORM NO.10 FOR ACCUMULATION OF PROFITS AND SINCE THE A.O. DID NO T MENTION ANYTHING ABOUT THIS APPLICATION THE A.O. WAS REQUIRED TO OFFER HIS COMMENTS BEFORE THE CIT(A). THE A.OS RESPONSE VIDE LETTER DT. 27.2.2006 IN A.Y. 2000-20 01 WHICH HAS BEEN CONSIDERED IN EACH OF THE REMAINING 2 A.YS ALSO IS F OUND REPRODUCED AT PAGES 27 TO 29 OF THE IMPUGNED ORDER. A PERUSAL OF THE SAME SHO WS THAT THE A.O. OBSERVED THAT FORM NO.10 FOR ACCUMULATION OF INCOME OF RS.21 .14 CRORE WAS FILED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BUT NO FINDING H AS BEEN MENTIONED IN THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 45 4545 45 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI ASSESSMENT ORDER BECAUSE HE WAS OF THE VIEW THAT THE ASSESS EE DID NOT WARRANT ANY RELIEF. RELIANCE ON THE JUDGEMENT OF THE SUPREME COURT AND THE HIGH COURTS BY THE ASSESSEE WAS CONSIDERED TO BE MISPLACED. HE WAS OF THE VIEW THAT THEY DID APPLY IN VIEW OF THE FACT THAT FORM NO.10 WAS FILED ON 15.2.2005 WHEREAS RULE 17 CLEARLY STIPULATED THAT FROM NO.10 SHOULD BE DELIVERED BEF ORE THE EXPIRY OF THE TIME ALLOWED U/S 139(1) FOR FURNISHING THE RETURN. AS SUCH IT WAS STATED THE STIPULATED TIME EXPIRED ON 31.10.1998; 31.10.1991 AND 31.10.2000 FOR 1998-99, 1999-2000 AND 2000-2001 A.YS RESPECTIVELY HE WAS FURTHER OF THE VIEW THAT THE ASSESSMENT WAS NOT A NORMAL ASSESSMENT AND IT WAS AN ASSESSMENT U/S 14 7/143(3) AND THE DEPARTMENTS CIRCULAR NO.273 DT. 30 TH JANUARY, 1980 DEALT WITH MATTERS OF CONDONATION OF DELAY IN FILING FORM NO.10 UNDER WHICH THE CBDT HAS AUTHORIZED THE CIT TO ADMIT THE BELATED APPLICATION U/S11(2) READ WIT H RULE 17 FOR CONDONATION OF DELAY IN FILING FORM NO.10 U/S 119(2) OF THE INCOME TA X ACT, 1961. AND SINCE THE ASSESSEE HAS NOT SOUGHT ANY SUCH CONDONATION OF DELAY IN RESPECT OF THE THREE A.YS THE PLEA FOR ACCUMULATION OF INCOME U/S 11(2) READ WIT H RULE 17 WAS NOT TENABLE IN EACH OF THE YEARS. 18.1.1. THESE COMMENTS OF THE A.O. WERE FORWARDED TO ASSES SEE WHO FILED HIS SUBMISSIONS DATED 7.3.2006 WHICH ARE FOUND REPRODUCED A T PAGES 29 TO 34 OF THE IMPUGNED ORDER. 18.1.2. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE CONT ENDED THAT IN THE FACTS OF ASSESSEES CASE THERE WAS NO ASSESSMENT U/S 143(3) AND THE R ETURNS WERE PROCESSED U/S 143(1)(A). NO NOTICE U/S 143(2) WAS ISSUED FOR S CRUTINY ASSESSMENT. THUS THE REASSESSMENT U/S 147/143(3) IS INFACT THE FIRST ASSES SMENT OF THE ASSESSEE COMPANY. THE FACTS QUA THE ISSUE ON MERITS WERE REITERAT ED. IT WAS URGED THAT ONLY DURING THE REASSESSMENT PROCEEDINGS THE ASSESSEE CAME TO KNOW THAT THE A.O. WAS PROPOSING TO TREAT THE SAID INTEREST AMOUNT AS INCOME O F THE ASSESSEE AS SUCH THIS IS ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 46 4646 46 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI THE FIRST INSTANCE THE APPLICATION OF FORM NO.10 COULD BE MOVED. REFERRING TO CIRCULAR NO.273 IT WAS POINTED OUT IS BENEFICIAL TO T HE ASSESSEE AND THE ASSESSEE FULLY SATISFIES THE CONDITIONS LAID DOWN IN THE AFORE MENTIONED BOARDS CIRCULAR TO ENJOY THE BENEFIT DESPITE BELATED FILING OF FORM NO.10. TH E JUDGEMENTS OF VARIOUS COURTS RELIED UPON BEFORE THE A.O. IN THE REMAND PROCEEDIN GS WERE RELIED UPON AGAIN. RELIANCE WAS PALCED UPON SUN ENGINEERING WORKS P VT.LTD. 198 ITR 297 FOR THE MEANING OF THE TERMS AS CONSIDERED THEREIN OF ASSESSED OR REASSESSED THE ESCAPED INCOME. RELIANCE WAS ALSO PLACED UPON APOGEE I NTERNATIONAL LTD. VS UOI 220 ITR 248 (DELHI) AND CIT VS. PUNJAB NATIONAL BANK 249 ITR 763(DELHI) FOR THE PROPOSITION THAT OF INTIMATION U/S 143(1) DOES NO T AMOUNT TO ASSESSMENT AND THUS SINCE NO REGULAR ASSESSMENT WAS FRAMED PRIOR TO THE ISSUE OF NOTICE U/S 14 OF THE ENTIRE ISSUE WAS OPEN BEFORE THE A.O. RELIANCE WAS FURTHER PLACED UPON K.GOVINDAN & SONS VS CIT 247 ITR 192 FOR THE PROPOSIT ION THAT THE ASSESSMENT MADE FOR THE FIRST TIME U/S 147 IS A REGULAR ASSESSMENT. 18 .1.3. FINDINGS UNDER CHALLENGE :- CONSIDERING THESE ARGUMENTS THE CIT(A) AS PER PAGE 36 CAME TO THE FOLLOWING CONCLUSION. AS REGARDS THE ALTERNATE PLEA TAKEN BY THE APPELLA NT AS PER GROUND NO.6, IT IS NOTICED THAT THEY HAVE CONTENDED THAT THEY HAD FILE D NOTICE IN FORM NO.10 IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE A.O. FO R ACCUMULATION OF PROFITS AND IN CASE THE AFORESAID INTEREST IS TREATED AS TH ERE INCOME THEY SHOULD BE PERMITTED TO ACCUMULATE THE SAID INCOME U/S 11(2) O F THE INCOME TAX ACT, 1961. THE APPELLANT HAS RELIED UPON VARIOUS COURT DECISIO N AND DECISIONS OF THE APPELLATE TRIBUNAL AND HAS CONTENDED THAT IN THEIR CASE THE FIRST ASSESSMENT WAS MADE U/S 147/143(3) AND THEY HAVE FILED FORM NO.10 IN THE COURSE OF THESE ASSESSMENT PROCEEDINGS. RELYING ON THE DECISIONS O F VARIOUS COURTS & ITAT BENCHES THEY HAVE CONTENDED THAT THE TIME LIMIT FOR FILING OF FORM NO.10 PROVIDED IN RULE 17 OF THE I.T.RULES IS ONLY DIRECTOR AND TH AT THE DELAY IN FILING FORM NO.10 CANNOT BE FATAL SO AS TO DENY THE BENEFIT OF ACCUMU LATION. IN THIS REGARD IT IS NOTICED THAT RULE17 OF THE I. T.RULES CLEARLY STIPULATES THAT NOTICE IN FORM 10 IS REQUIRED TO BE SUBMITTED WITHI N THE TIME LIMIT PRESCRIBED U/S 139(1). IN THE INSTANT CASE THE DUE DATE FOR FILIN G OF RETURN FOR THE YEAR UNDER CONSIDERATION WAS 31.10.2000. THE APPELLANT HAS FI LED THE SAID FORM ON 25.2.2005 IN THE COURSE OF ASSESSMENT PROCEEDINGS I NITIATED U/S 147 OF THE INCOME TAX ACT, 1961. THUS THERE IS AN INORDINATE DELAY IN FILING OF FORM NO.10 ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 47 4747 47 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI AND HERE I AM INCLINED TO AGREE WITH THE OBSERVATIO NS OF THE AO IN HIS REPORT DT. 27.2.2006 THAT IF THE APPELLANTS CONTENTION IS ACC EPTED THEN THERE IS NO NEED TO FILE NOTICE FOR ACCUMULATION U/S 11(2) IN FORM N O.10 AND THE ASSESSEE CAN FILE THE SAID FORM AS AND WHEN POINTED OUT/DETECTED BY T HE DEPARTMENT. IT IS ALSO NOTICED THAT VIDE CIRCULAR NO.273 DT. 30.6.1980 THE CBDT HAS AUTHORIZED THE CIT TO ADMIT A BELATED APPLICATION AND CONDONE THE DELAY AFTER SATISFYING HIMSELF REGARDING THE GENUINENESS OF THE CASE. IN THE INSTANT CASE, HOWEVER, NO SUCH APPLICATION FOR CONDONATION OF DELAY HAS BEEN FILED BY THE APPELLANT. UNDER THESE CIRCUMSTANCES I AM INCLINED TO AGREE W ITH THE VIEW OF THE AO THAT THE APPELLANTS PLEA FOR DEEMED APPLICATION OF FUNDS U/S 11(2) FOR ACCUMULATION OF RS. 3.60 CRORES, IS NOT TENABLE AND IS LIABLE TO BE REJECTED. ACCORDINGLY, THIS GROUND IS DECIDED AGAINST THE APP ELLANT. 18.2. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 18.3. ARGUMENTS ON BEHALF OF THE PARTIES :- THE LD.A.R. CONTENDED THAT THE ALTERNATE PRAYER DESERVES TO BE ALLOWED AND THE ASSESSEE SHOULD BE ALLOWED TO GET THE BENEFIT OF ACCUMULATION U/S 11(2) AS EVEN IF IT IS HELD THAT THE INCOME BELONGS TO THE ASSESSEE THE SAME RESULTS IN NIL INCOME. THE DEPARTMENT IT WAS ARGUED SHOULD NOT BE ALLOWED TO OUTRIGHTLY REJECT THE CLAIM OF THE AS SESSEE. IT WAS ARGUED THAT THE APPLICATION FOR SEEKING ACCUMULATION CAN BE FILED BY TH E ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS/ AS WELL AS THE APPELLATE PRO CEEDINGS. IN SUPPORT OF THE SAID CLAIM RELIANCE WAS PLACED UPON CIT VS. MAYUR FOUNDATION 274 ITR 562 (GUJARAT). RELIANCE WAS ALSO PLACED UPON CIRCULAR NO .100 (F.NO. 195/1/72-IT(A-I) DATED 24.1.1973 WHICH HAS BEEN TAKEN INTO CONSIDERATION BY VARIOUS JUDICIAL PRONOUNCEMENTS. RELIANCE WAS PLACED UPON:- CIT VS. CUTCHI MEMON UNION (1985) 155 ITR 51 (KAR.) CIT VS. RAMCHANDRA PODDAR CHARITABLE TRUST (1987) 16 4 ITR 666 (CAL.) ITO VS. K.RAVINDRANATHAN NAIR (1992) 41 ITD 462 (CO CH.TRIB.) 18.4. LD.D.R. ON THE OTHER HAND CONTENDED THAT ON FA CTS CIT(A) IS JUSTIFIED TO REJECT THE CLAIM. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 48 4848 48 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 18.5. FINDINGS: - WE HAVE HEARD THE SUBMISSIONS ADVANCED BY THE PARTIES B EFORE THE BENCH AND TAKEN INTO CONSIDERATION THE MATERIAL AVAIL ABLE ON RECORD. WE FIRST PROCEED TO CONSIDER THE RELEVANT PROVISIONS TO WHICH OUR ATTENTION HAS BEEN INITIATED. THE ASSESSEE IS A CHARITABLE SOCIETY. IT IS S EEN THAT FORM NO.10 IS THE FORM CONSIDERED UNDER RULE 17 OF THE INCOME TAX RULES, 1962. THE MARGINAL NOTE FOR RULE 17 READS AS UNDER. NOTICE FOR ACCUMULAT NOTICE FOR ACCUMULAT NOTICE FOR ACCUMULAT NOTICE FOR ACCUMULATION OF INCOME BY CHARITABLE OR RELIGIOUS TRUST OR ION OF INCOME BY CHARITABLE OR RELIGIOUS TRUST OR ION OF INCOME BY CHARITABLE OR RELIGIOUS TRUST OR ION OF INCOME BY CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION OR ASSOCIATION REFERRED TO IN CLAUSES ( 21) AND (23) OF SECTION 10. INSTITUTION OR ASSOCIATION REFERRED TO IN CLAUSES ( 21) AND (23) OF SECTION 10. INSTITUTION OR ASSOCIATION REFERRED TO IN CLAUSES ( 21) AND (23) OF SECTION 10. INSTITUTION OR ASSOCIATION REFERRED TO IN CLAUSES ( 21) AND (23) OF SECTION 10. RULE17: THE NOTICE TO BE GIVEN TO AO OR THE PRESCRI BED AUTHORITY UNDER CLAUSE (21) OR (23) OF SECTION 10 SHALL BE IN FORM NO.10 AND SH ALL BE DELIVERED BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB SECTION (1) OF SECTION 139, FOR FURNISHING THE RETURN OF INCOME . THE FOOT NOTE 20 OF THE INCOME TAX RULES, 2010 (TAX MANS PUBLICATION 47 THE FOOT NOTE 20 OF THE INCOME TAX RULES, 2010 (TAX MANS PUBLICATION 47 THE FOOT NOTE 20 OF THE INCOME TAX RULES, 2010 (TAX MANS PUBLICATION 47 THE FOOT NOTE 20 OF THE INCOME TAX RULES, 2010 (TAX MANS PUBLICATION 47 TH THTH TH EDITION ALSO NEEDS TO BE REFERRED TO. THE EDITION ALSO NEEDS TO BE REFERRED TO. THE EDITION ALSO NEEDS TO BE REFERRED TO. THE EDITION ALSO NEEDS TO BE REFERRED TO. THE SAME REA DS AS UNDER. SAME READS AS UNDER. SAME READS AS UNDER. SAME READS AS UNDER. DELAY IN FILING THE NOTICE IS CONDONABLE BY COMMISS IONERS CIRCULAR 273 DT. 3.6.1980. CBDT CIRCULAR HAS AUTHORIZED COMMISSIONERS TO ADMIT APPLICATIONS U/S 11(2), READ WITH RULE 17, FROM PERSONS DERIVING INCOME FROM PRO PERTY HELD UNDER THE TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES FOR ACC UMULATION OF SUCH INCOME TO BE APPLIED FOR SUCH PURPOSES STIPULATED SUBJECT TO THE CONDITION INTER ALIA THAT THE FAILURE TO GIVE NOTICE TO THE INCOME TAX OFFICER U /S 11(2) AND INVESTMENT OF THE MONEY IN THE PRESCRIBED SECURITIES WAS ONLY DUE TO OVERSIGHT. OVERSIGHT MEANS ACCORDING TO OXFORD ADVANCED LEARNERS DICTIONARY, THE FACT OF MAKING A MISTAKE BECAUSE YOU FORGET TO DO OR YOU DO NOT NOTICE. WH ERE, ACCORDING TO THE PETITIONER, THERE WAS DELAY BY CHARTED ACCOUNTANT I N FINALIZING THE ACCOUNTS AND IT WAS FOR THAT REASON THAT THE NOTICE IN FORM NO.10 F OR ACCUMULATION WAS NOT FILED WITHIN THE TIME INDICATED IN RULE 17 AND THE COMMIS SIONER REJECTED THE APPLICATION FOR CONDONATION OF DELAY IN GIVING FORM 10 UNDER RU LE 17 AND THE COMMISSIONER REJECTED THE APPLICATION FOR CONDONATION OF DELAY I N GIVING FORM 10 UNDER RULE 17 THE AUTHORITY WAS DIRECTED TO PASS AN ORDER IN THE LIGHT OF THE CBDT CIRCULAR PRESCRIBING CONDITIONS FOR ADMITTING APPLICATIONS B Y THE COMMISSIONER UNDER SECTION 11(2) READ WITH RULE 17. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 49 4949 49 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI 18.5.1. IN THE FOOT NOTE 20 REFERRED TO ABOVE, FOLL OWING DECISIONS HAVE BEEN REFERRED TO. KERALA RURAL EMPLOYMENT & WELFARE SOCIETY VS ADIT (2009) 184 TAXMAN 93 (KER.) CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION (2001) 114 T AXMAN 255/247 ITR 201 (SC) CIT VS MAYUR FOUNDATION (2005) 274 ITR 562 (GUJ.) CIT VS. SHIMLA CHANDIGARH DIOCESE SOCIETY (2009) 318 ITR 96 (P&H) DIT VS. MITSUI & CO. ENVIRONMENTAL TRUST (2007) 211 CTR (DEL) 352 DIT(E) VS. DAULAT RAM EDUCATION SOCIETY (2005) 278 IT R 260 (DEL) BHARAT KALYAN PRATISTHAN VS. DIT (2007) 160 TAXMAN 216 (DEL) DIT(E) VS. MAMTA HEALTH INSTITUTE FOR MOTHER & CHOLDR EN (2007) 162 TAXMAN 235 (DEL). COTTON TEXTILES EXPORT PROMOTION COUNCIL VS ITO (2008 ) 20 SOT 187 (MUM) 18.5.2. ACCORDINGLY IT IS SEEN THAT THE STATUTES AND T HE PROVISIONS READ ALONG WITH THE BOARDS CIRCULAR CONTEMPLATE THAT THE DELAY IS CONDONABLE IN CERTAIN CIRCUMSTANCES. BEFORE US LD.A.R. HAS ALSO RELIED UPON T HE JUDGEMENT IN THE CASE OF CIT VS MAYUR FOUNDATION WHICH ALSO SUPPORTS THE ARGU MENT. HOWEVER ON FACTS IT IS SEEN THAT NO SUCH APPLICATION HAS BEEN FILED BY THE ASSESS EE FOR CONDONING THE DELAY BEFORE THE COMMISSIONER. AS SUCH THE OCCASION TO C ONSIDER AND THEREAFTER ACCEPT/REJECT THE SAME DID NOT ARISE. 18.5.3. ACCORDINGLY TO THE EXTENT THAT RELIANCE IS PL ACED UPON CIRCULAR NO.273 DT. 3.6.1980 THE ARGUMENT OF THE ASSESSEE CANNOT B E FAULTED. READ WITH RULE 17 OF THE INCOME TAX RULES IT IS SEEN THAT THE POWER T O CONDONED THE DELAY IS AVAILABLE WITH COMMISSIONER. HOWEVER THE OCCASION TO EX ERCISE THE POWER CAN ONLY ARISE IF APPROPRIATE PETITION IS BEFORE AN AUTHORIT Y. IN THE ABSENCE OF ANY PETITION MOVED ON BEHALF OF THE ASSESSEE THE ARGUMENTS THA T THIS WAS THE FIRST OCCASION WHEN THE REQUEST COULD HAVE BEEN MADE ON BEHALF OF THE ASSESSEE HAVE NO RELEVANCE. AS THE SAID REQUEST HAS TO BE PUT FORTH BEF ORE THE APPROPRIATE AUTHORITY COMPETENT TO CONSIDER THE REQUEST. IT IS NOT ASSESSEES CASE THAT THE ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 50 5050 50 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI APPLICATION FOR DELAY HAS BEEN MOVED WHICH IS NOT BEING CONSIDERED OR HAS WRONGLY BEEN REJECTED. THE ASSESSEE FOR REASONS BEST KNOWN TO ITSELF IS UNFORTUNATELY CONTINUING TO AGITATE THE ILL ADVISED STA ND OF SEEKING A REDRESSAL WHERE NO GRIEVANCE HAS BEEN FACED BY IT. IT IS NOT THE PRO CEDURAL REQUIREMENT THAT PETITION FOR CONDONATION OF DELAY BEFORE THE COMMISSIONER CAN BE MOVED ONLY AFTER PERMISSION OF THE TRIBUNAL HAS BEEN OBTAINED. WHAT THE A SSESSEE NEEDS TO DO AND CHOOSES TO DO OR NOT TO DO IS ENTIRELY ASSESSEES OWN W ISDOM AND IF THE ASSESSEE INSTEAD OF DIRECTLY APPROACHING THE CONCERNED AUTHORITY CHOOSES TO AGITATE THE ISSUE IN APPEAL, WE HAVE NO ALTERNATIVE BUT TO DISMISS THE ILL ADVISED STAND OF THE ASSESSEE POSED BY WAY OF GROUND NO.3 AS ON FACTS AS THEY STAN D WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE IMPUGNED ORDER. 18.6. IN THE FACTS OF ITA 1144/DEL/2005 IT IS SEEN THAT THE ASSESSEE HAS BY WAY OF AN ARGUMENT ADDRESSED THE ISSUE BEFORE THE CIT(A) AND ON T HE BASIS OF THE STRENGTH OF THE ARGUMENTS ADVANCED THEREIN HAS ALSO AGITATED THAT BENEFIT OF ACCUMULATION BE ALLOWED TO THE ASSESSEE IN A.Y. 2000-2001. 18.6.1. IT IS SEEN THAT HEREIN ALSO WHERE NECESSARY ST EPS HAVE NOT BEEN TAKEN BY THE ASSESSEE ITSELF THE OCCASION TO CONSIDER SOMETHING WHER E EFFORTS ON THE PART OF THE ASSESSEE ARE LACKING DOES NOT ARISE. AS SUCH WE ARE OF THE VIEW THAT THERE IS NO OCCASION FOR US TO GIVE ANY DIRECTION TO ANY AUTHORIT Y UNDER THE ACT IN THE FACTS OF THE PRESENT CASE AS NECESSARY STEPS HAVE NOT BEEN TAKEN BY THE ASSESSEE ITSELF. THE OCCASION TO CONSIDER VARIOUS JUDGEMENTS IN THE CONTEXT O F OVERSIGHT OR REASONABLE CAUSE DOES NOT ARISE AS SUCH THE SAID PLEA OF THE ASSESSEE I S MISCONCEIVED AND ILL ADVISED AND NOT SUPPORTED ON FACTS, AS SUCH REJECTED. 19. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE DISMI SSED. ORDER PRONOUNCED ON 31 ST JANUARY, 2012. ITA 1144/D EL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 ITA 1144/DEL/2005 PAGE PAGE PAGE PAGE 51 5151 51 A.Y. 2001 A.Y. 2001 A.Y. 2001 A.Y. 2001- -- -2002 2002 2002 2002 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 ITA NOS. 1676, 1677, 1678/DEL/06 A.YS: 1998 A.YS: 1998 A.YS: 1998 A.YS: 1998- -- -99 TO 2000 99 TO 2000 99 TO 2000 99 TO 2000- -- -2001 2001 2001 2001 ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS ASSN. OF CORPNS. & APEX SOCIETIES OF HANDLOOMS NEW DELHI NEW DELHI NEW DELHI NEW DELHI SD/- SD/- (B.K. HALDAR) (B.K. HALDAR) (B.K. HALDAR) (B.K. HALDAR) (DIVA SING H) (DIVA SINGH) (DIVA SINGH) (DIVA SINGH) ACCOUNTA ACCOUNTA ACCOUNTA ACCOUNTANT MEMBER NT MEMBER NT MEMBER NT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: 31 ST JANUARY, 2012 * MANGA/VEENA/KVTA COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT;RESPONDENT;CIT;CIT(A);DR BY ORDER DEPUTY REGISTRAR, ITAT.