MJSJ COAL LIMITED,ANGUL vs. ITO, WARD-1(3), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.140/CTK/2017 Assessment Year : 2012-13

MJSJ Coal Limited, At/PO: Vs. ITO, Ward 1(3), Bhubaneswar Balanda, Talcher, Angul. PAN/GIR No.AAGCM 1095 E (Appellant) .. ( Respondent)

Assessee by : Shri K.K.Bal/ S.K. Behera, ARs Revenue by : Shri Saad Kidwai, DR

Date of Hearing : 01/08/ 2019 Date of Pronouncement : 05 /08/ 2019

O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order of the PCIT,-

1, Bhubaneswar dated 22.2.2017 for the assessment year 2012-13.

exercising revisional power u/s.263 of the Act.

authorities, inter alia, paper book submitted by the assessee and other

relevant orders placed on the record of the Tribunal.

of the Act is arbitrary, illegal and without jurisdiction in the facts and

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circumstances of the case. Therefore, same may kindly be quashed.

Further, ld A.R. submitted that Pr. CIT has erred in exercising revisional

power available u/s.263 of the Act without having jurisdiction as the

completed assessment cannot be tinkered on the ground that order has not

been passed in accordance with the decision of the Hon’ble Supreme Court.

Ld A.R. submitted that the assessee has submitted all relevant documentary

evidences and documents, etc before the Assessing Officer during

assessment proceedings which were considered and perused by the AO

before framing assessment order. Therefore, order cannot be alleged as

erroneous and prejudicial to the interest of the revenue empowering the Pr.

CIT for exercising revisional jurisdiction u/s.263 of the Act. Ld A.R.

vehemently pointed out that Pr. CIT has erred in treating the interest

accrued to the assessee on share capital infused for the specific purpose,

having inextricably linked with the acquisition of capital asset and the same

is not revenue receipt but capital receipts. Ld A.R. submitted that the

Assessing Officer has completed the assessment proceedings by accepting

one out of the two possible views available before him. Therefore,

assessment order cannot be alleged as erroneous and prejudicial to the

interest of the revenue. Placing copy of the ITAT order dated 31.8.2018 in

assessee’s own appeals for the assessment years 2011-12, 2013-14 and

2014-15, ld A.R. submitted that Pr. CIT has picked up the issue of interest

on bank deposits which were shown by the assessee in the balance sheet

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under the head “ other current assets”. Ld A.R. strenuously contended that

this issue has been decided by the Tribunal in favour of the assessee for

earlier and subsequent assessment years by holding that interest earned by

the assessee should not be treated as income from other sources and the

claim of the assessee has been allowed by the Tribunal for all three

assessment years i.e, preceding assessment year 2011-12 and subsequent

assessment years i.e. 2013-14 & 2014-15. Ld A.R. submitted that in view of

above factual position, the impugned order u/s.263 of the Act may kindly be

quashed.

CIT and submitted that the Assessing Officer has not made any enquiry on

the issue of interest on bank deposit which was shown by the assessee in

the balance sheet under the head “other current assets”. Therefore, the Ld

Pr. CIT was right in invoking the revisional power available to him u/s.263

of the Act. Ld D.R. also submitted that when there is no enquiry on a

particular issue then the order has to be alleged as erroneous and

prejudicial to the interest of the revenue. Ld D.R. submitted that Pr. CIT

has passed order on 22.2.2017 whereas the Tribunal order for earlier and

subsequent assessment years in assessee’s case was passed on 31.8.2018.

Therefore, this order has no bearing while exercising revisional power

u/s.263 of the Act by the Pr. CIT.

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decision of the Tribunal dated 31.8.2018 (supra), the findings arrived at by

the Pr. CIT in the impugned order becomes perverse and hence, same may

kindly be quashed.

out that on being asked by the bench, ld A.R., in all fairness, submitted that

although the assessment order dated 25.3.2015 was passed u/s.143(3) of

the Act but there is no enquiry by the Assessing officer on the issue of

interest of bank deposits which were picked up by Pr.CIT for invoking the

jurisdiction of section 263 of the Act. It is also not in dispute that Pr. CIT

has passed the impugned order u/s.263 of the Act on 22.2.2017 whereas

the Tribunal order in assessee’s own appeals was passed subsequently on

31.8.2018, wherein, in para 12, the Tribunal on the issue of interest on

short term fixed deposit decided with the following observations:

“ 12. We find that the funds of the assessee company kept in the short term fixed deposits out of the share capital amount and not any surplus arising out of the running business, the interest earned on funds primarily brought for infusion in the business activity cannot be termed as income from other sources, whereas the interest income on bank deposits earned by the assessee company to commencement of its business is in the nature of capital receipt and accordingly be set off against pre-operative expenses. We considering the judicial precedence and the facts and circumstances of the present case, are of the substantive opinion that if the assessee company receives any amount which is inextricably linked with the process of setting up its plant and machinery, such receipts will go to reduce the cost of its assets. Hence such receipts are capital in nature and cannot be taxed as income under income from other sources. The assessee company was formed to set up a mining project and the process of setting up was got delayed and deposits of share capital amount received from the share applicants with the bank in the form of fixed deposits for short term, is to be considered as inextricably linked with the process of setting of its plant and machinery. Accordingly, we hold that the interest earned by the assessee should not be treated as income from other

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sources and we allow the grounds of appeal of the assessee. Therefore, the appeal of the assessee for assessment year 2011-2012 is allowed. “ 8. In view of above, we clearly observe that the Tribunal has taken a

view on the issue of interest earned by the assessee on short term fixed

deposit in favour of the assessee but this order of the Tribunal was not in

existence when the ld Pr. CIT invoked powers u/s.263 of the Act and

passed the impugned order revising the assessment.

assessee’s stand on the issue of interest earned by the assessee from short

term fixed deposit but while evaluating the legality of the revisional order

passed by Pr CIT u/s.263 of the Act, the Tribunal order (supra) cannot be

taken into consideration as has been passed anti-dated.

Officer has made addition in the reassessment order passed in pursuance to

the impugned order of Pr. CIT u/s.263 of the Act, wherein, addition has

been made in the hands of the assessee. Ld A.R. informed the bench that

the appeal of the assessee is pending before the CIT(A).

view that Pr. CIT has proceeded to invoke the powers available to him

u/s.263 of the Act and after perusal of the assessment records, he found

that there was no enquiry by the Assessing Officer on the issue of interest

earned by the assessee on short term fixed deposit with the bank.

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Thereafter, ld Pr. CIT issued notice u/s.263 of the Act and after considering

the reply of the assessee and after allowing opportunity of being heard to

the assessee, passed the impugned order by holding that the Assessing

Officer has failed to bring to tax the interest received as income of the

assessee from other sources and, thus, the assessment order is set aside to

the file of the AO on the above issue with a direction to examine same

afresh and do the assessment denovo. These findings and observations of

Pr. CIT in the order dated 22.2.2017 are quite correct and in accordance

with the mandate of section 263 of the Act as there was no enquiry by the

AO on the issue of interest earned by the assessee on short term fixed

deposit with the bank. Therefore, Pr. CIT was right in holding that the

order of the AO is erroneous and prejudicial to the interest of the revenue.

The cognizance of the subsequent order dated 31.8.2018 of the Tribunal

(supra) was not practically possible as this order was not in existence when

Pr. CIT passed the impugned revisional order. Consequently, we hold that

the Pr. CIT was right in revising the assessment order dated 25.3.2015

passed u/s.143(3) of the Act and directing the AO to pass the denovo

assessment order on the said issue.

para 12 is concerned, these findings may be considered by the revenue

authorities while deciding the issue but the same cannot be pressed into

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service in favour of the assessee while adjudicating the issue of validity and

sustainability of order of Pr. CIT u/s.263 of the Act.

we are not expressing any opinion on the merits of the issue and same is

left open to the CIT(A) while deciding the appeal of the assessee filed

against the reassessment order u/s.143(3)/263 of the Act in pursuance to

the impugned revisional order of Pr. CIT keeping in view the facts and

circumstances of the case and without being prejudiced from the

observations recorded by us in this order.

Order pronounced on 05/08/2019. Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 05/08/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : MJSJ Coal Limited, At/PO: Balanda, Talcher, Angul

By order

Sr.Pvt.secretary ITAT, Cuttack

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