M/s UP Rajya Vidyut Utpadan Nigam Limited, Lucknow V. Principal Commissioner of Income Tax-2, Lucknow

ITA 213/LKW/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1484 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Assessee Lawyers: O P SHUKLA
• Keywords: Principle of natural justice; Revised return
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 213/LKW/2017 ASSESSMENT YEAR: 2012 - 13 M/S U.P. RAJYA VIDYUT UTPADAN NIGAM LIMITED SHAKTI BHAWAN 14, ASHOK MARG, LUCKNOW V. PRINCIPAL CIT - 2 LUCKNOW T AN /PAN : AAACU4749D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI O. P. SHUKLA, ADVOCATE RESPONDENT BY: SHRI S.K. MADHUK, CIT (DR) DATE OF HEARING: 07 03 2019 DATE OF PRONOUNCEMENT: 15 0 3 2019 O R D E R PER T.S.KAPOOR , A .M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL CIT, LUCKNOW, DATED 12/1/2017, PASSED UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. BECA USE THE LD. PRINCIPAL COMMISSIONER. OF INCOME TAX - 2 LUCKNOW WAS NOT JUSTIFIED TO PASS AN ORDER U/S 263 OF THE INCOME TAX ACT, DUE TO REASON THAT THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 143(3) OF THE INCOME TAX ACT, AFTER EXAMINED AND VERIFIED THE FA CTS OF THE CASE AND RECORDS AND RELEVANT DOCUMENTS PRODUCED DURING THE COURSE OF HEARING OF THE CASE. ITA NO .213/LKW/2017 PAGE 2 OF 16 2. BECAUSE THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW NOT JUSTIFIED TO PASS AN ORDER U/S 263 IT IS MANDATORY FOR INVOKED THE SAID PROVISION TH AT THE ORDER PASSED BY THE ASSESSING' OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ERRONEOUS MEANS THE ORDER PASSED BY THE ASSESSING OFFICER WRONG, NOT RIGHT BY MISTAKE INCORRECT EXEMPTION OF THE FACTS OR INCORRECT APPLICATION OF LAW WI LL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FOR ORDER PASS WITHOUT APPLYING THE PRINCIPAL OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MINED. INCORRECT EXEMPTION OF FACTS OR INCORRECT EXEMPTION OF LAW WOULD SATISFY REQUIRE MENT OF ORDER BEING ERRONEOUS U/S 263. PREJUDICIAL TO THE INTEREST OF REVENUE MEANS THE REVENUE IS LOOSING TAX LAW FULL PAYABLE BY A PERSON. BUT IN THE APPELLANT CASE THE APPELLANT IS SUFFERING HUGE LOSSES AND IF THE AMOUNT TAKEN IN THE NEXT YEAR NO TAX EF FECT WILL BE COMES IN THE APPELLANT CASE. 3. BECAUSE THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW WAS NOT JUSTIFIED TO INVOKE THE PROVISION OF SECTION 263 DUE TO THAT T HE APPELLANT HAS DISCLOSED THE TRUE UP ACCOUNT UNDER ACCOUNTING POLICY OF THE COMPANY IN CONFIRMATORY WITH ACCOUNTING STANDARD NOTIFIED U/S 145(2)(NO. 9949)(FN 132/7/95 - TPL) DATED 25.01.1996. THE APPELLANT CAN CHANGE THE EFFECT OF THE MATERIAL PERTAIN FROM THE YEAR IN ITS RETURNED WHICH HAS DULY BEEN FIELD U/S 139(1) OF THE INCOME TAX ACT, AND REVISED WITHIN STIPULATED TIME LIMITS. 4. BECAUSE THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW WAS NOT JUSTIFY TO INVOKE THE PROVISION U/S 263 OF THE INCOME TAX ACT, DUE TO THE APPELLANT HAS ALREADY SUBMITTED THE FINAL TRUE - UP ACCOUN T ON 14.03.2013 AND STATUTORY AUDIT OF THE APPELLANT HAS DULY BEEN COMPLETED ON 24.09.2013, HENCE THE PROVISION FOR THIS KNOWN LIABILITY AND LOSS WAS RIGHTLY MADE. IT IS ITA NO .213/LKW/2017 PAGE 3 OF 16 VERY SIGNIFICANT THAT THE TRUE - UP/REVIEW PETITION WAS APPROVED BY UTTAR PRADESH ELECTR ICITY REGULATORY AUT H ORITY COMMISSION VIDE ORDER DATED 14.11.2013 5. BECAUSE THE APPELLANT HAS DISCLOSED ALL THE INFORMATION REGARDING SALE OF ENERGY TRUE UP ACCOUNT/REVIEW PETITION FIELD WITH UPERC IN ACCOUNT POLICY PARA NO. 36 OF THE AUDITED BALANCE SHEE T. 6. BECAUSE THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW HAS PASSED THE ORDER U/S 263 ON THE BASIS OF SUGGESTION BY AUDIT PARTY BUT AS PER THE SAI D PROVISION N O NOTICE ISSUE BY HIM U/S 263 ON THE BASIS OF SUGGESTION OF AUDIT PARTY THE RELIANC E PLACED ON THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IN CASE OF JEEVAN LAI (1929) LIMITED VS ADDL. CIT (1977) 108 ITR 407 AND ON THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN CASE OF FESTO ELGE PVT LD. VS CIT (2002) 123 TAXMAN 537. 7. BECAUSE THE LD. PRI NCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW WAS NOT JUSTIFIED TO INVOKE THE PROVISION U/S 263 THE APPELLANT PALCED RELIANCE ON THE FOLLOWING JUDGEMENT: - I) THE HON'BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. VS CIT (2000) 243 ITR 83. II) THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HON'BE KARNATAK HIGH C OURT IN CASE OF CIT VS GOKUL D AS E XPORT (2011) 333 ITR 214 . III) THE HON'BLE KER A LA HIGH COURT IN CASE OF BISMILLAHA TRADING CO. VS INELEGANCE OFFICER (2001) 248 ITR 292 . IV) HON'BLE SUPREME COURT IN CASE OF CIT VS GREEN W ORD CORPORATION (2009) 181 TAXMAN 111. ITA NO .213/LKW/2017 PAGE 4 OF 16 V) HON'BLE GUJARAT HIGH COURT THE ASSESSEE PLACED RELIANCE ON THE GUJARAT HIGH COURT IN CASE OF SMT. LEELA CHOUDHAR Y VS . CIT (2008) 167 TAXMAN 1 . VI) THE HON'BLE MADRAS HIGH COURT IN CA SE OF HS MAHARAJ RAJA POWER DEVAN VS CIT (1982) 138 ITR 518 . VII) HON'BLE GUWHATI HIGH COURT IN CASE OF MEGHALAYA P OLYWOOD LTD. VS . CIT (2007) 160 TAXMAN 89. 8. BECAUSE THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 2 LUCKNOW WAS NOT JUSTIFY TO INVOKE THE PR OVISION U/S 263 OF THE INCOME TAX ACT, DUE TO THE APPELLANT HAS ALREADY DISCLOSED THE FACTS IN THE BALANCE SHEET FILED ALONG WITH RETURN. 9. BECAUSE, THE APPELLANT CRAVES FOR A RIGHT TO RAISE ANY ADDITIONAL GROUND DURING THE COURSE OF HEARING OF THE CASE. 10 . BECAUSE THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX IS ERRONEOUS, BAD IN LAW AND ON FACTS AND IS LIABLE TO BE QUASHED. 2 . AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE INVITED OUR ATTENTION TO THE FACT THAT THERE WAS A DELAY OF 14 DAYS IN FILIN G THE APPEAL AND OUR ATTENTION WAS INVITED TO THE DULY SIGNED AND SWORN IN AFFIDAVIT OF THE COUNSEL, SHRI O. P. SHUKLA WHEREIN HE HAS AFFIRMED THAT THE APPEAL COULD NOT BE FILED WITHIN THE PRESCRIBED PERIOD, AS HE WAS ILL. THE LD. A.R. OF THE ASSESSEE, TH EREFORE, PRAYED THAT THE DELAY IN FILING THE APPEAL MAY BE CONDONED. 3 . THE LD. D.R. HAD NO OBJECTION FOR CONDONING THE DELAY IN FILING OF THE APPEAL, THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, THE DELAY ITA NO .213/LKW/2017 PAGE 5 OF 16 WAS CONDONED AND THE LD. A.R. OF THE ASSESSEE W AS DIRECTED TO PROCEED WITH HIS ARGUMENTS. 4 . THE LD. A.R. OF THE ASSESSEE , AT THE OUTSET , EXPLAINING THE FACTS OF THE CASE , SUBMITTED THAT THE ASSESSEE IS A GOVERNMENT ORGANIZATION AND IS ENGAGED IN THE BUSINESS OF GENERATION AND SALE OF ELECTRICITY AND HAD FILED ITS RETURN OF INCOME ON THE BASIS OF PROVISIONAL FIGURES OF PROFIT & LOSS ACCOUNT. IT WAS SUBMITTED THAT AFTER COMPLETION OF STATUTORY AUDIT, THE AUDITORS SIGNED THE BALANCE SHEET ON 24/9/2013 WHEREIN FINAL FIGURES OF TRUE - UP PETITION FOR ADDITIONAL CAPITALIZATION WAS ALSO CONSIDERED AND THE AMOUNT OF ADDITIONAL CAPITALIZATION WAS REDUCED FROM THE SALE OF ENERGY AND A REVISED RETURN OF INCOME WAS FILED WITHIN THE PRESCRIBED PERIOD OF TIME . THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSE SSING OFFICER DURING THE ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO EXPLAIN THE DIFFERENCE BETWEEN THE ORIGINAL AND REVISED PROFIT & LOSS ACCOUNT AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO THE QUERY LETTER DATED 23/12/2014 WHERE IN VIDE QUERY NO. 5 , THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO CLARIFY THE POSITION. IT WAS SUBMITTED THAT THE ASSESSEE VIDE REPLY DATED 12/1/2015 HAD EXPLAINED THE ENTIRE POSITION AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAGES 8 TO 11 OF THE PAPER BOOK WH ERE IN THE COPY OF REPLY SUBMITTED BY THE ASSESSEE WA S PLACED. OUR SPECIFIC ATTENTION WAS INVITED TO THE ANSWER TO QUERY NO.5 PLACED AT PAGES 10 AND 11 OF THE PAPER BOOK . T HEREFORE, IT WAS ARGUED THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING S ITSELF HAD EXAMINED THE ISSUE RAISED BY THE PR. CIT AND HAD PASSED NECESSARY ORDER AFTER CONSIDERING THE SAME AND, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE ISSUE. IT WAS ARGUED THAT IN FACT THE ASSESSING OFFICER NOT O NLY TOOK A PLAUSIBLE VIEW, BUT TOOK A CORRECT VIEW KEEPING IN VIEW THE ACCOUNTING POLICIES OF THE ASSESSEE AND KEEPING IN VIEW THE ACCOUNTING STANDARDS. ITA NO .213/LKW/2017 PAGE 6 OF 16 5 . IT WAS SUBMITTED THAT T HE ASSESSEE IN EACH YEAR USED TO FILE TRUE - UP PETITION BEFORE UPERC AND USED T O TAKE FIGURES OF PETITION IN ITS ACCOUNTS FOR THE RELEVANT YEAR AND WHEREVER THE FIGURES APPROVED BY UPERC WERE DIFFERENT, THE DIFFERENCE WAS CONSIDERED IN THE YEAR IN W HICH THE ORDER PASSED BY UPERC WAS RECEIVED . IN THIS RESPECT, OUR ATTENTION WAS INVIT ED TO THE ACCOUNTING POLICY BEING FOLLOWED BY THE ASSESSEE. OUR SPECIFIC ATTENTION W AS INVITED TO THE REVENUE RECOGNITION POLICY PLACED AT PAGE 39 OF THE PAPER BOOK WHEREIN IT HAS BEEN MENTIONED THAT IF THE REVIEW PETITION IS FILED BY THE ASSESSEE, THE IM PACT THEREOF ON R EVENUE IS ACCOUNTED FOR ON THE BASIS OF PETITION FILED AND NECESSARY ADJUSTMENT, IF ANY, REQUIRED WILL BE CARRIED OUT IN THE ACCOUNT AFTER ISSUANCE OF FINAL ORDER ON THE PETITION. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT THOUGH THE ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME WITHIN THE PRESCRIBED PERIOD OF TIME ON THE BASIS OF PRO VI SIONAL FIGURES AND IN COMPLIANCE WITH THE PROVISIONS OF SECTION 44AB OF THE ACT, BUT THE STATUTORY A UDITORS HAD SIGNED BALANCE SHEET ON 24/9/201 2 AN D WHEREIN THEY HAD CONSIDERED THE IMPACT OF TRUE - UP PETITION FILED BY THE ASSESSEE ON 13/3/2013 AND, THEREFORE, THE ASSESSEE HAD REVISED THE RETURN OF INCOME AND HAD TAKEN THE IMPACT OF TRUE - UP PETITION WHICH WAS FILED BEFORE THE FINALIZATION OF BALANCE SH EET ON 24/9/2013. IT WAS SUBMITTED THAT AS PER THE ACCOUNTING POLICY BEING FOLLOWED BY THE ASSESSEE, THE SAME WAS TO BE CONSIDERED IN THE PROFIT & LOSS ACCOUNT IN THE YEAR IN WHICH THE PETITION IS FILED AND IF THERE IS ANY VARIANCE IN THE ORDER OF UPERC, THE EFFECT OF THE SAME HAS TO BE MADE IN THE YEAR IN WHICH THE ORDER IS RECEIVED. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THIS QUERY WAS RAISED BY THE ASSESSING OFFICER AND WAS DULY REPLIED BY THE ASSESSEE AND IN THIS RESPECT OUR ATTENTION WAS AGAIN I NVITED TO THE COPY OF NOTICE DATED 23/12/2014 UNDER SECTION 142(1) OF THE ACT PLACED AT PAGES 2 & 3 OF THE PAPER BOOK WHERE IN VIDE QUERY NO.5 , THE ITA NO .213/LKW/2017 PAGE 7 OF 16 ASSESSING OFFICER HAD RAISED THIS ISSUE AND VIDE REPLY DATED 12/1/2015 , THE ASSESSEE HAD REPLIED TO QUERY NO. 5, A COPY OF WHICH IS PLACED AT PAGES 8 TO 11 OF THE PAPER BOOK. THEREFORE, IT WAS ARGUED THAT THE ASSESSING OFFICER HAS TAKEN A CONSCIOUS VIEW AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND HAS NOT ONLY TAKEN A PLAUSIBLE VIEW, BUT HAS TAKEN A CORR ECT VIEW IN ALLOWING THE CLAIM OF THE ASSESSEE ON THE BASIS OF REVISED RETURN OF INCOME. THEREFORE, IT WAS ARGUED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS NEITHER ERRONEOUS N OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. A.R. OF THE ASS ESSEE FURTHER ARGUED THAT ERRONEOUS MEANS THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS WRONG ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW , WHICH SATISFIES THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IT WAS ARGUED THAT IN THE PR ESENT CASE, THE ASSESSING OFFICER HAS APPLIED THE CORRECT LAW AS PER THE ACCOUNTING POLICIES OF THE ASSESSEE AND, THEREFORE, THE ORDER CANNOT BE TERMED TO BE ERRONEOUS ORDER. R ELIANCE WAS PLACED ON THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF MAL ABAR INDUSTRY CO. LTD. VS. CIT, 243 ITR 83 (SC) WHEREIN THE HON'BLE COURT HAS DEFINED THE MEANING OF ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. A.R. OF THE ASSESSEE FURTHER RELIED ON A NUMBER OF JUDGMENTS PLACED IN THE PAPER BOOK FR OM PAGES 1 TO 79. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED DTHAT THE DECISION OF SHRI JAGDISH KUMAR GULATI VS. CIT, 269 ITR 71 PASSED BY THE HON'BLE ALLAHABAD HIGH COURT AND RELIED UPON BY THE CIT IS DISTINGUISHABLE, AS IN THAT CASE THE ASSESSING OF FICER HAD PASSED ORDER IN A CASUAL WAY AND HAD NOT EXAMINED THE POINTS WHICH HAD PROMPTED THE REVENUE AUTHORITIES TO SELECT THE CASE FOR SCRUTINY. IT WAS SUBMITTED THAT IN THE PRESENT CASE, COMPLETE SCRUTINY REGARDING THE ISSUE RAISED BY THE CIT WAS MADE BY THE ASSESSING OFFICER . ITA NO .213/LKW/2017 PAGE 8 OF 16 6 . THE LD. D.R., ON THE OTHER HAND, HEAVILY PLACED RELIANCE ON THE ORDER OF THE PR. CIT AND ARGUED THAT THE REVIEW PETITION WAS FILED ON 1 3 /3/2013 AND, THEREFORE, THE CLAIM OF THE ASSESSEE SHOULD HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER , AS THE PETITION ITSELF WAS FILED ON 13/3/2013 WHICH FALL IN SUBSEQUENT YEAR AND, THEREFORE, THE PR. CIT HAD RIGHTLY HELD THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7 . WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROU GH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE APPELLANT IS A GOVERNMENT ORGANIZATION AND IS ENGAGED IN THE BUSINESS OF GENERATION AND SALE OF ELECTRICITY. IT HAS FILED ORIGINAL RETURN OF INCOME ON 29/9/2012 ON THE BASIS OF PROVISIONAL TRUE - UP PETITI ON SUBMITTED TO THE UPERC. THE RETURN WAS FILED ON THE BASIS OF PROVISIONAL FIGURES TO COMPLY WITH THE PROVISIONS OF SECTION 44AB OF THE ACT ALSO . WE FURTHER FIND THAT FINAL TRUE - UP PETITION WAS FILED ON 13/3/2013 FOR THE YEAR UNDER CONSIDERATION. WE AL SO FIND THAT STATUTORY A UDITOR HAD TAKEN INTO ACCOUNT THE IMPACT OF FINAL TRUE - UP PETITION WHICH WAS FILED ON 13/3/2013 AND SINCE THE FINAL TRUE - UP PETITION WAS FILED BEFORE FINALIZATION OF BALANCE SHEET, THEREFORE, THE ASSESSEE HAD RIGHTLY TAKEN THE IMPAC T IN ITS BALANCE SHEET. THE IMPACT OF TRUE - UP PETITION HAS BEEN DECLARED UNDER THE HEAD REVENUE FROM SALE OF POWER IN THE PROFIT & LOSS ACCOUNT, A COPY OF WHICH IS PLACED AT PAGE 22 OF THE PAPER BOOK. AS PER THE ACCOUNTING STANDARDS NOTIFIED UNDER SECT ION 145(2) OF THE ACT, THE ACCOUNTING STANDARD I RELATING TO DISCLOSURE OF A CCOUNTING POLICIES, PARA 4 READS AS UNDER: - 4 . ACCOUNTING POLICIES ADOPTED BY AN ASSESSEE SHOULD BE SUCH SO A S TO REPRESENT A TRUE AND FAIR VIEW O F THE STATE OF AFFAIRS OF THE BUS INESS, PROFESSION OR VOCATION IN THE FINANCIAL STATEMENTS PREPARED AND P RESENTED ON THE BASIS OF SUCH ACCOUNTING POLICIES. ITA NO .213/LKW/2017 PAGE 9 OF 16 FOR THIS THE MAJO R CONSI DERATIONS GOVERNING THE SELECTION AND APPLICATION OF ACCOUNTING POLICIES ARE FO L LOWING, NAMELY : - (I) PRUDENCE - PROVISIONS SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION; (II) SUBSTANCE OVER FORM - THE ACCOUNTING TREATMENT AND P RESENTATION IN FINANCIAL STATEMENTS OF TRANSACTIONS AND EVENTS SHOULD BE GOVERNED BY THEIR SUBSTANCE AND NOT MERELY BY THE LEGAL FORM; (III) MATERIALITY - FINANCIAL STATEMENTS SHOULD DISCLOSE ALL MATERIAL ITEMS, THE KNOWLEDGE OF WHICH MIGHT IN F LUENCE THE D ECISIONS OF THE USER OF THE FINANCIAL STATEMENTS . 8 . THE ABOVE ACCOUNTING STANDARDS CLEARLY STATES THAT KEEPING IN VIEW THE PR U D EN CE, PROVISION SHOULD BE MADE FOR ALL KNOWN LIABILITIES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION . IN THE PRESENT CASE, IT WAS PRUDENT ON THE PART OF TH E ASSESSEE TO TAKE INTO ACCOUNT THE IMPACT OF KNOWN LOSSES, AS BEFORE THE DATE OF FINALIZATION OF BALANCE SHEET, THE INFORMATION W AS AVAILABLE WITH THE ASSESSEE THAT ENERGY SALES HAS TO BE REDUCED BY A PARTICULAR AMOUNT. MOREOVER, WE FIND THAT THE ASSESSEE IN ITS ACCOUNTING POLICIES FORMING PART OF THE BALANCE SHEET RELATING TO REVENUE RECOGNITION FOLLOWS THE FOLLOWING ACCOUNTING PO LICY: - 1 ) REVENUE FROM SALE OF VERIFIED ELECTRICITY UNITS BY UTTAR PRADESH POWER CORPORATION LTD. HAS BEEN ACCOUNTED FOR ON THE RATE ALLOWED IN TARIFF ORDERED BY UTTAR PRADESH ELECTRICITY REGULATORY COMMISSION (UPERC). ITA NO .213/LKW/2017 PAGE 10 OF 16 2 ) IF NIGAM HAS FILED TRUE UP/REVIEW PETITI ON ON UPERC TARIFF ORDER, AND ORDER AGAINST SUCH PE TITION HAS NOT BEEN AWARDED, IM PACT THEREOF ON REVENUE IS ACCOUNTED FOR ON THE BASIS OF PETITION FILED AND NECESSARY ADJUSTMENT, IF ANY, REQUIRED WILL BE CARRIED OUT IN THE ACCOUNT AFTER ISSUANCE OF FINAL ORDER ON THE PETITION. 9 . THE ABOVE ACCOUNTING POLICY BEING CONSISTENTLY FOLLOWED BY THE ASSESSEE CLEARLY DEMONSTRATES THAT ANY IMPACT OF TRUE - UP/REVIEW PETITION WILL BE TAKEN CARE OF ON THE BASIS OF PETITION FILED AND NECESSARY ADJUSTMENT, IF ANY, WILL BE CA RRIED OUT IN THE ACCOUNTS AFTER ISSUANCE OF FINAL ORDER ON THE PETITION. IN THIS RESPECT, WE FIND THAT THE ACCOUNTS OF THE YEAR UNDER CONSIDERATION WERE FINALIZED ON 24/9/2013 AND REVIEW PETITION WAS FILED ON 13/3/2013, THEREFORE, THE ASSESSEE HAD RIGHTLY TAKEN IMPACT OF REVIEW PETITION IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. MOREOVER , WE FIND THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS HAD REQUIRED THE ASSESSEE TO CLARIFY THE POSITION OF REVISED RETURN VIS - - VIS OR IGINAL RETURN VIDE NOTICE UNDER SECTION 142(1) OF THE ACT PLACED AT PAGES 2 & 3 OF THE PAPER BOOK WHERE IN VIDE QUERY NO.5 , THE ASSESSEE WAS REQUIRED TO EXPLAIN THE FOLLOWING: - 5. IN THE ORIGINAL P&L ACCOUNT YOU HAVE SHOWN REVENUE FROM SALE OF POWER AT RS. 45,91,98,36,390/ - , REVENUE SUBSIDIES AND GRANT AT RS.17,690/ - , AMORTIZATION OF CAPITAL GRANT AT RS.1,30,00,000/ - AND OTHER INCOME AT RS.47,70,74,526/ - , THUS TOTAL REVENUE RECEIPTS SHOWN AT RS.46,40,99,28,606/ - . BUT IN REVISED P&L ACCOUNT, YOU HAVE SHOWN REVENUE FROM SALE OF POWER AT RS.45,86,03,79,050/ - AND OTHER INCOME AT RS.57,23,08,178/ - . PLEASE EXPLAIN THE REASONS FOR ABOVE DIFFERENCE. 10 . THE ASSESSEE VIDE LETTER DATED 12/1/2015 HAD REPLIED TO THIS QUERY AS UNDER: - ITA NO .213/LKW/2017 PAGE 11 OF 16 THE ASSESSEE IS IN THE BUSINE SS OF GENERATION AND SALE OF ELECTRICITY. THE HEAD OFFICE OF THE ASSESS E E IS SITUATE D AT 8 TH FLOOR, SHAKTI BHAWAN ANNEXE E, 14, ASHOK MARG, LUCKNOW AND VARIOUS POWER STATIONS OF THE ASSESSEE ARE SITUATED AT DIFFERENT PLACES IN THE STATE . ALL THE POW ER STATIONS A RE KEEPING THEIR OWN BOOKS OF ACCOUNT AND AFTER FINALIZATION OF THEIR ACCOUNTS THESE ARE COMPILED AT HEAD OFFICE IN LUCKNOW WHICH TAKES TIME IN FINALIZING AND GET IT AUDITED FROM THE CHARTERED ACCOUNTANTS (AUDI T ORS) APPOINT E D BY THE COMPTROLLER AND AUDITOR S GENERAL OF INDIA . IN THE MEANWHILE, IN VIEW O F THE DUE DATE OF FILING THE RETURN OF INCOME WAS 30 TH SEPTEMBER, THE ORIGINAL RETURN OF INCOME WAS FILED ON 29.9.2012 ON THE BASIS OF AUDIT DONE U/S 44AB . HOWEVER, AFTER STATUTORY AUDIT, THE FIGURES AFTER STATUTORY AUDIT BECAME AVAILAB LE. FOR THIS REASON VARIOUS FIGURES IN THE ORIGINAL BALANCE SHEET AND PR OFIT AND LOS S ACCOUNT OF THE ASSESSEE AUDITED BY THE STATUTORY AUDITORS APPOINTED BY THE C & AG OF INDIA AND ADOPTED IN REVISED RETURN. HOWEVER, AS DESI RED WE ARE ENCLOSING HEREWITH FULL DETAILS OF VARIATIONS UNDER THE HEAD OTHER INCOME OF NOTE NO.23 AND ALSO NOTE NO.22 REVENUE FROM SALE OF POWER OF THE FINANCIAL STATEMENT UNDER ASSESSMENT IN RESPECT OF ACCOUNTS AS PER ORIGINAL RETURN COMPARED WITH TH E FINANCIAL STATEMENTS AS PER THE REVISED RETURN OF INCOME. WE HAVE ALSO EXPLAINED THE REASONS THEREOF IN THE ENCLOSED DETAILS. 11 . THE ABOVE ENQUIRY CONDUCTED BY THE ASSESSING OFFICER CLEARLY DEMONSTRATES THAT THE ASSESSING OFFICER DID CARRY OUT NECESSARY EXAMINATION AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE , HAD RIGHTLY NOT DISALLOWED THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER HAD IN HIS POSSESSION COMPLETE COPY OF BALANCE SHEET INCLUDING NOTES TO ACCOUNTS WHICH ALSO CONTAINED ACCOUNTING POLIC IES. THE SCHEDULE 36 FORMING PART OF FINAL ACCOUNTS PLACED AT PAPER BOOK PAGE 60 READS AS UNDER: - 36. THE NIGAM HAVE FILED PETITION WITH U.P. ELECTRICITY REGULATORY COMMISSION VIDE LETTER NO.142/UNL/CE(COMM)/TRUE - UP/REVISION ITA NO .213/LKW/2017 PAGE 12 OF 16 PETITION (FY 2009 - 14) DATED M ARCH 11, 2013 FOR TRUE - UP OF ADDITIONAL CAPITALIZATION FOR F.Y. 2009 - 10 & 2010 - 11, PROVISION TRUE - UP FOR F.Y. 2011 - 12 AND ASSOCIATED TARIFF COMPONENTS & PETITIONS FOR APPROVAL OF REVISED MYT ESTIMATED FOR F.Y. 2011 - 12 TO 2013 - 14 ON UPERC TARIFF ORDER DATE D 20.3.2012 AS PER CLAUSE NO. 8(I) (TRUE - UP) OF UPERC (TERMS & CONDITIONS OF GENERATION TARIFF) (FIRST AMENDMENT) REGULATION, 2012 DATED 5.3.2013. IN LINE WITH THE ACCOUNTING POLICY NO.1.1.2 THE IMPACT OF THE ABOVE TRUE - UP/REVIEW PETITION RS.500,85,00000.0 0 (PREVIOUS YEAR NIL) HAS BEEN ACCOUNTED FOR IN THIS ACCOUNTS. 12 . F URTHER WE FIND THAT NOTE NO.22 REGARDING REVENUE FROM SALE OF POWER WAS ALSO EXPLAINED TO THE ASSESSING OFFICER, WHICH READS AS UNDER: - ITA NO .213/LKW/2017 PAGE 13 OF 16 13 . THEREFORE, THE ASSESSING OFFICER AFTER CONSIDERING TH E ENTIRE FACTS AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAD RIGHTLY ALLOWED THE CLAIM TO THE ASSESSEE, AS THE CLAIM WAS RELATING TO THE YEAR UNDER CONSIDERATION THOUGH FILED IN SUCCEEDING FINANCIAL YEAR I.E. ON 13/3/2013. THE FINDINGS OF THE LD. CIT THAT THE CLAIM SHOULD HAVE BEEN CONSIDERED IN THE YEAR IN WHICH THE PETITION IS FILED ARE WRONG AS THE ACCOUNTING POLICY HAS TO BE READ IN RELATION TO THE YEAR FOR WHICH THE PETITION WAS FILED. IN THE CASE UNDER CONSIDERATION, THE PETITION FILED O N 11.3.2013 RELATED TO THE FINANCIAL YEAR 2011 - 12 FALLING IN ASSESSMENT YEAR 2012 - 13 AND THE PETITION HAD BEEN FILED BEFORE THE FINALIZATION OF ACCOUNTS BY STATUTORY AUDITORS AND FURTHER ITS IMPACT WAS RIGHTLY TAKEN IN THE ACCOUNTS AND THE ASSESSING OFFICE R AFTER EXAMINING THESE FACTS HAD RIGHTLY NOT DISALLOWED THE SAME. THE INTERPRETATION OF THE CIT REGARDING ACCOUNTING POLICY IS NOT CORRECT AND FURTHER THE CASE LAW RELIED BY HIM IS ALSO DISTINGUISHABLE ON FACTS. F OR AN ACTION UNDER SECTION 263 OF THE AC T, THE ORDER PASSED BY THE ASSESSING OFFICER HAS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 14 . THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS CIT (SUPRA) HAS HELD AS UNDER: - EXPLANATION - . . . A BARE READING O F THIS PROVISION MAKES IT CLEAR THAT THE PREREQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMIS SIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND ITA NO .213/LKW/2017 PAGE 14 OF 16 (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCOME - TAX OFFICER I S ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. I N THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY AND CO. V. S. P. JAIN [1957] 31 ITR 872, THE HIGH COURT OF KARNATAKA IN CIT V. T. NARAYANA PAI [1975] 98 ITR 422, THE HIGH COURT OF BOM BAY IN CIT V. GABRIEL INDIA LTD [1993] 203 ITR 108 AND THE HIGH COURT OF GUJARAT IN CIT V. SMT. MINALBEN S. PARIKH [1995] 215 ITR 81 TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BEN CH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE HIGH COURT HELD (PAGE 138) : IN THIS CONTEXT, IT MUST BE REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASSED BY THE INCOME - TAX OFFICER, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESSMENTS, WHICH ON A BROAD RECKONING, THE COMMISSIONER ITA NO .213/LKW/2017 PAGE 15 OF 16 MIGH T THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION. IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO MERIT ACCEPTANCE. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUS TED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME - TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE H AS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME - TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME - TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. 15 . SIMILARLY, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. GREENWORLD CORPORATION, 181 TAXMAN 111 (SC) HAS HELD THAT WHERE ANOT HER VIEW IS POSSIBLE, REVISION IS NOT PERMISSIBLE. THE HON'BLE SUPREME COURT HAS HELD THAT POWER TO EXERCISE SUO MOTU REVISION IN TERMS OF SECTION 263(1) OF THE ACT IS IN THE NATURE OF SUPERVISED JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRC UMSTANCES SPECIFIED THEREIN I.E. THE ORDER IS ERRONEOUS AND PREJUDICE HAS BEEN CAUSED TO THE REVENUE EXISTS. THE HON'BLE COURT FURTHER HELD THAT AN ORDER OF ASSESSMENT PASSED BY THE INCOME TAX OFFICER SHOULD NOT BE INTERFERED WITH ONLY BECAUSE ANOTHER VIE W IS POSSIBLE. ITA NO .213/LKW/2017 PAGE 16 OF 16 16 . IN THE PRESENT CASE, WE FIND THAT NECESSARY QUERY WAS RAISED BY THE ASSESSING OFFICER AND REPLY WAS ALSO FILED BY THE ASSESSEE AND THE ASSESSING OFFICER AFTER CONSIDERING THE REPLY TOOK A CORRECT VIEW AND, THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 17 . THEREFORE, THE ORDER PASSED BY THE LD. CIT IS QUASHED ON THIS POINT. THE SECOND ISSUE RAISED BY THE LD. CIT WAS NOT ARGUED BY THE LD. A.R. OF THE ASSESSEE, T HEREFORE, TO THAT EXTENT THE ORDER PASSED BY THE LD. CIT IS UPHELD. THE LD. A.R. OF THE ASSESSEE HAS NOT ARGUED GROUND NO.6, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 18 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED I N THE OPEN COURT ON 15 / 0 3 / 201 9 . SD/ - SD/ - [ A. D. JAIN ] [ T.S. KAPOOR ] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 15 /03/ 201 9 JJ: 1203 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTANT REGISTRAR