U.P Development System Corporation Ltd., Lucknow V. Principal Commissioner of Income Tax-2, Lucknow

ITA 198/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1095 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHARMENDRA KUMAR
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 198/LKW/2017 ASSESSMENT YEAR: 2012 - 13 U.P. DEVELOPMENT SYSTEM CORPORATION LIMITED 2 ND FLOOR, UPTRON BUILDING GOMTI NAGAR, LUCKNOW V. PR. CIT - 2 LUCKNOW T AN /PAN : (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI DHARMENDRA KUMAR, C.A. RESPONDENT BY: SHRI RAJIV MOHAN, D.R. DATE OF HEARING: 26 02 201 8 DATE OF PRONOUNCEMENT: 28 0 2 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW DATED 20/2/2017 UNDER SECTION 263 OF THE ACT. THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, THE CRUX OF THE GRIEVANCE IS AGAINST ASSUMPTION OF JURISDICTION BY THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW UNDER SECTION 263 OF THE ACT. 2 . THE FACTS IN THIS CASE AS APPEARING IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT ARE THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE - COMPANY HAS EARNED INTEREST INCOME OF RS.85,15,500/ - BY INVESTING UNUTILIZED FUNDS OF DIFFERENT GOVT. DEPARTMENTS IN FDR'S/DEPOSITS BUT HAS NOT SHOWN THE SAME AS ITS INCOME WHICH SHOULD ITA NO.198/LKW/2017 PAGE 2 OF 7 HAVE BEEN DONE. NOT ONLY THAT, THE TDS ON THIS INTEREST INCOME HAS ALSO BEEN CLAIMED BY THE ASSESSEE AND IT HAS BEEN AL LOWED BY THE ASSESSING OFFICER. 3 . THAT ASSESSEE COMPANY IS A U.P. GOVERNMENT UNDERTAKING AND ENGAGED IN ACTIVITY OF CONSULTANCY AND COMPUTER TRAINING. REGARDING THE SHOW CAUSE NOTICE, THE ASSESSEE'S COUNSEL HAS SUBMITTED THAT ASSESSING OFFICER EXAMINED THE ISSUE OF TREATMENT OF INTEREST INCOME ON UNUTILIZED FUNDS AMOUNTING TO RS.85,15,500/ - BY SPECIFIC QUERY. THE ASSESSEE FURNISHED THE EXPLANATION ALONG WITH DOCUMENTARY E VIDENCE SUCH AS GOVT. ORDER IN RESPECT OF SPECIFIC TREATMENT OF INTEREST INCOME ON UNUTILIZED FUNDS LYING IN FIXED DEPOSITS/OTHER DEPOSITS. THE GOVT. ORDER IS VERY CLEAR ON THIS SPECIFIC ISSUE, ACCORDING TO WHICH INTEREST ON UNUTILIZED FUNDS LYING IN FIXE D DEPOSITS OR OTHER DEPOSITS OF ASSESSEE SHALL BE TREATED AS COST OF PROJECT AND WHICH IS REQUIRED TO BE UTILIZED IN SAID PROJECTS ONLY. THE ASSESSING OFFICER HAS PERUSED THE GOVT. ORDER AND OTHER RELATED DOCUMENTS AND AFTER BEING SATISFIED WITH THE EXPLA NATION OF THE ASSESSEE THAT INTEREST INCOME ON UNUTILIZED FUNDS LYING IN BANK ACCOUNTS OF ASSESSEE ARE NOT FREE FUNDS, WHEREAS, G OVERNMENT BY SPECIFIC LETTER DIRECTED TO TREAT THE SAME AS COST OF PROJECT AND THE SAID INTEREST IS REQUIRED TO BE UTILIZED IN THE MANNER AS PER DIRECTION ISSUED BY GOVT . ORDER . THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW AFTER CONSIDERING THE FACTS OF THE CASE, REPLY OF THE ASSESSEE AND MATERIALS AVAILABLE ON RECORD , HELD THE ASSESSMENT ORDER TO BE ERRONEOUS INSOFAR AS PREJUDI CIAL TO THE INTEREST OF THE REVENUE AS PER THE REASONS APPEARING IN HIS ORDER. 4 . THE LD. A.R. OF THE ASSESSEE AT THE TIME OF HEARING BEFORE US INVITED OUR ATTENTION TO THE SHOW CAUSE NOTICE DATED 24/11/2016 UNDER SECTION 263 OF THE ACT, WHICH IS PLACED AT PA GES 76 & 77 OF THE PAPER ITA NO.198/LKW/2017 PAGE 3 OF 7 BOOK AND THE SUBMISSIONS OF THE ASSESSEE DATED 18/1/2017 BEFORE THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW, WHICH IS PLACED AT PAGES 78 & 79 OF THE PAPER BOOK. THE LD. A.R. OF THE ASSESSEE ALSO DREW OUR ATTENTION TO THE LETTER FROM COMMISSIONER AND SECRETARY, GOVT. OF U.P. DATED 5/6/2013 , WHICH IS PLACED AT PAGES 86 & 87 OF THE PAPER BOOK AND ALSO DETAILED SUBMISSION OF THE ASSESSEE DATED 29/1/2015 FILED BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS, WHICH IS PLACED AT PAGES 88 & 89 OF THE PAPER BOOK. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION WAS ENQUIRED IN DETAIL BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER A FTER TAKING INTO CONSIDERATION THE EVIDENCES AND MATERIAL IN THIS REGARD PLACED BY THE ASSESSEE ON RECORD, THEREFORE, THE SAME CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE . THEREFORE, ASSUMPTION OF JURISDICTION BY THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW UNDER SECTION 263 IS ILLEGAL AND LIABLE TO BE SET ASIDE. 5 . THE LD. D.R., ON THE OTHER HAND, PLACED RELIANCE UPON THE ORDER PASSED BY THE PR. COMMISSIONER OF INCOME - TAX - 2, LUCKNOW. 6 . WE HAVE PERUSED THE CASE RECORDS, ANALYS ED THE FACTS & CIRCUMSTANCES OF THE CASE AND WE FIND THAT THE ONLY ISSUE FOR WHICH 263 PROCEEDINGS WERE IN I TIATED WAS THAT THE ASSESSEE - COMPANY HAS EARNED INTEREST INCOME OF RS.85,15,500/ - BY INVESTING UNUTILIZED FUNDS OF DIFFERENT GOVT. DEPARTMENTS IN FDR 'S/DEPOSITS. WE FIND THAT FROM THE EVIDENCES FILED IN THE PAPER BOOK I.E. COPY OF ORDER SHEETS RECORDED BY THE ASSESSING OFFICER , IT IS CLEARLY EVIDENT THAT THE ASSESSING OFFICER HAS ENQUIRED ABOUT RS.85,15,500/ - EARNED ON INVESTMENT OUT OF UNUTILIZED F U NDS AND DETAILED ENQUIRY ON THIS ISSUE WAS MADE BY THE ASSESSING OFFICER. FURTHER , ASSESSEE WHILE ANSWERING THE SHOW CAUSE NOTICE UNDER ITA NO.198/LKW/2017 PAGE 4 OF 7 SECTION 263 OF THE ACT HAS CATEGORICALLY STATED THAT INTEREST EARNED CANNOT BE RECOGNIZED AS INCOME OF THE ASSESSEE SIN CE AS PER ORDER OF THE GOVERNMENT OF U.P. DATED 19/3/2010, INTEREST EARNED ON UNUTILIZED BALANCE BELONGS TO THE DEPARTMENT FROM WHOM FUND HAS BEEN ADVANCED TO THE CORPORATION FOR EXECUTION OF WORK WHICH IS CLEARLY MENTIONED IN THE GOVERNMENT ORDER THAT INT EREST EARNED SHALL BE INCLUDED IN THE PROJECT COST AND SHALL BE UTILIZED FOR THE WORK FOR WHOM FUND HAS BEEN RECEIVED. THE WORKING OF INTEREST EARNED ON UNUTILIZED BALANCE OF DEPARTMENT ALONG WITH COPY OF GOVERNMENT ORDER , IS FILED WITH THE REVENUE . THE ASSESSEE HAS FILED GOVERNMENT ORDER DATED 19/3/2010 ALONG WITH SUBMISSION DATED 29/1/2015. IN THE GOVERNMENT ORDER ITSELF, IT IS CLEARLY MENTIONED THAT AMOUNT LYING IN PROJECT BANK ACCOUNT IS TOWARDS COMPLETION OF PROJECT ONLY. THE INTEREST EARNED THEREO N SHALL BE INCLUDED IN PROJECT COST AND THE SAME SHALL BE UTILIZED AGAINST THAT PROJECT ONLY. THE ASSESSEE HAS ALSO FILED A LETTER BEFORE THE ASSESSING OFFICER STATING CLEARLY THAT IF FOR SOME REASONS BALANCE WORK OF PROJECT COULD NOT BE COMPLETED , THEN W ORK DONE SHALL BE DEEMED TO BE OF ZERO VALUE AND ENTIRE MONEY ALONG WITH INTEREST SHALL BE RETURNED TO THE GOVT. TREASURY. WE FIND FROM PERUSAL OF ORDER SHEET AND DOCUMENTS FURNISHED BY ASSESSEE, WHICH ARE ON RECORD, THAT THE ASSESSING OFFICER HAS EXAMINE D THE ISSUE OF TREATMENT OF INTEREST INCOME ON UNUTILIZED FUNDS AMOUNTING TO RS.85,15,500/ - BY SPECIFIC QUERY. THE ASSESSEE HAD FURNISHED DOCUMENTARY EVIDENCE SUCH AS GOVT. ORDER IN RESPECT OF SPECIFIC TREATMENT OF INTEREST INCOME ON UNUTILIZED FUNDS LYIN G IN FIXED DEPOSITS/OTHER DEPOSITS SHALL BE TREATED AS COST OF PROJECT AND WHICH IS REQUIRED TO BE UTILIZED IN THE SAID PROJECT ONLY. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSION S OF ASSESSEE , PERUSAL OF G OVERNMENT ORDER AND OTHER RELATED DOCUME NTS AND AFTER BEING SATISFIED WITH THE EXPLANATION OF ASSESSEE THAT INTEREST INCOME ON UNUTILIZED FUNDS LYING IN ITA NO.198/LKW/2017 PAGE 5 OF 7 BANK ACCOUNTS OF ASSESSEE ARE NOT FREE FUNDS, WHEREAS G OVERNMENT BY SPECIFIC LETTER DIRECTED TO TREAT THE SAME AS COST OF PROJECT AND THE SAID INTEREST IS REQUIRED TO BE UTILIZED IN THE MANNER AS PER DIRECTION ISSUED BY GOVT. ORDER, ACCEPTED THE CONTENTION OF ASSESSEE. WE, THEREFORE , FIND THAT THE ISSUE FOR WHICH PR. COMMISSIONER OF INCOME TAX HAS ASSUMED JURISDICTION UNDER SECTION 263 OF THE AC T WAS ALREADY DEALT IN DETAIL AND ENQUIRY WAS DONE AS IS EVIDENT IN THE ORDER SHEET FILED BEFORE US. THEREFORE, IT CANNOT BE SAID THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7 . IN THE CASE OF C IT VS. GANPAT RAM BISHNOI, 2005 (198) CTR 546 (RAJ), THE HON'BLE RAJASTHAN HIGH COURT HAS OBSERVED AND HELD THAT UNDOUBTEDLY THE JURISDICTION UNDER SECTION 263 IS WIDE AND IS MEANT TO ENSURE THAT DUE REVENUE OUGHT TO REACH THE PUBLIC TREASURY AND IF IT DOE S NOT REACH ON ACCOUNT OF SOME MISTAKE OF LAW OR FACT COMMITTED BY THE ASSESSING OFFICER , THE CIT CAN CANCEL THAT ORDER AND REQUIRE THE CONCERNED ASSESSING OFFICER TO PASS A FRESH ORDER IN ACCORDANCE WITH LAW AFTER HOLDING A DETAILED ENQUIRY. BUT WHEN ENQU IRY IN FACT HAS BEEN CONDUCTED AND THE ASSESSING OFFICER HAS REACHED A PARTICULAR CONCLUSION, THOUGH REFERENCE TO SUCH ENQUIRIES HAS NOT BEEN MADE IN THE ORDER OF THE ASSESSMENT, BUT THE SAME IS APPARENT FROM THE RECORD OF THE PROCEEDINGS, THE INVOCATION O F JURISDICTION BY THE CIT WAS UNSUSTAINABLE. T HE EXERCISE OF JURISDICTION BY THE CIT IS FOUNDED ON NO MATERIAL AND IT WAS LIABLE TO BE SET ASIDE. JURISDICTION UNDER SECTION 263 CANNOT BE INVOKED FOR MAKING SHORT ENQUIRIES OR TO GO INTO THE PROCESS OF ASSES SMENT AGAIN AND AGAIN MERELY ON THE BASIS THAT MORE ENQUIRY OUGHT TO HAVE BEEN CONDUCTED TO FIND SOMETHING. 8 . IN THE CASE OF CIT VS. INTERNATIONAL TRAVEL HOUSE LTD. IN ITA NO.94 /2010, THE HON'BLE DELHI HIGH COURT REFERRING TO THE DECISION OF ITA NO.198/LKW/2017 PAGE 6 OF 7 HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ARVNID JEWELLERS [2003] 259 ITR 502 (GUJ.) , HAS OBSERVED THAT SINCE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE ASSESSING OFFICER AND A PARTICULAR VIEW WAS TAKEN, MERE FACT THAT A DIFFERENT VIE W CAN BE TAKEN SHOULD NOT BE THE BASIS OF ACTION UNDER SECTION 263 AND SUCH AN ACT CANNOT BE HELD TO BE JUSTIFIED. 9 . IN THE PRESENT FACTUAL MATRIX OF THE CASE BEFORE US, THE ISSUE FOR WHICH 263 JURISDICTION WAS ASSUMED BY THE PR. CIT WAS ALREADY DEALT WITH B Y THE ASSESSING OFFICER BY CONDUCTING NECESSARY ENQUIRY AND ALL THE RELEVANT MATERIALS AND EVIDENCES WERE PERUSED BY THE ASSESSING OFFICER BEFORE COMING TO THE CONCLUSION. ONCE THIS HAS BEEN DONE, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF THE ASSESS ING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HEREIN WE HOLD THAT THE PR. CIT HAS INVOKED JURISDICTION UNDER SECTION 263 IN A CASE WHERE ONE VIEW WAS TAKEN BY THE ASSESSING OFFICER AND PR. CIT HAS MERELY TAKEN A DIFFERENT VIEW AND THIS CANNOT BE THE BASIS FOR 263 ORDER. IN VIEW OF THE FACTS AND REASONING AS ENUMERATED HEREIN ABOVE, WE SET ASIDE THE ORDER OF THE PR. CIT PASSED UNDER SECTION 263 AND ALLOW THE APPEAL OF THE ASSESSEE. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 / 0 2 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH FEBR UARY , 201 8 JJ: 2602 ITA NO.198/LKW/2017 PAGE 7 OF 7 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR