U.P SAMAJ KALYAN NIRMAN NIGAM LIMITED (NOW KNOWN AS U.P STATE CONSTRUCTION AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD.),LUCKNOW vs. PRINCIPAL COMMISSIONER OF INCOME TAX-2, LUCKNOW

ITA 67/LKW/2016Status: DisposedITAT Lucknow28 November 2025AY 2011-1261 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Principal Commissioner of Income Tax (PCIT) correctly invoked Section 263 of the Income Tax Act, 1961, as the original assessment order was found to be erroneous and prejudicial to the interest of the revenue. The PCIT's direction to frame a fresh assessment was valid. The Tribunal found that the assessee failed to maintain separate books of account to segregate income derived from activities for the benefit of Scheduled Castes/Scheduled Tribes from its other activities. Citing the judgment in Harijan Avam Nirbal Varg Awas Nigam for AY 1979-80, the Tribunal held that for exemption under Section 10(26B), income from the specific object must be severable. Since the assessee could not demonstrate this severability, the exemption of Rs. 29,10,000/- was disallowed and added back to the assessee's income. The grounds related to the interpretation of the Section 263 order and the applicability of Explanation 2 were implicitly decided against the assessee by upholding the PCIT's action and the subsequent assessment.

What were the facts?

The appeals before the Income Tax Appellate Tribunal (ITAT), Lucknow Bench, involve M/s U.P. State Construction & Infrastructure Development Corporation Ltd. (the assessee) and the Dy. Commissioner of Income Tax, Range-6, Lucknow (the revenue). The assessment years under consideration span from 2009-10 to 2015-16. A key procedural event for Assessment Year (AY) 2011-12 was the setting aside of the original assessment order dated March 29, 2014, by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, directing a fresh assessment. Consequently, a revised assessment order was passed on September 14, 2016. The dispute also concerns the disallowance of exemption claimed under Section 10(26B) amounting to Rs. 29,10,000/- for AY 2011-12.

What were the issues?

1. Whether the Principal Commissioner of Income Tax (PCIT) erred in law and facts by holding that the order under Section 263 cancelled the order under Section 143(3) and that additions made to the income do not survive, despite the PCIT's direction for a fresh assessment based on material available on record? (Assessee's contention: The PCIT's order under Section 263 should be read in context and cannot be interpreted to mean cancellation of additions not prejudicial to revenue. The Assessing Officer (AO) correctly computed income in the revised order. The CIT(A) acted without jurisdiction. Reliance on CIT vs. Geo Industries and Insecticides, 235 ITR 541). (Revenue's contention: Not recorded). 2. Whether the PCIT erred in invoking Section 263 of the Income Tax Act, 1961, as the original assessment order dated March 29, 2014, was neither erroneous nor prejudicial to the interest of the revenue? (Assessee's contention: The AO accepted the assessee's contention regarding salary arrears and did not conduct 'necessary inquiry' regarding deduction of Rs. 281.74 Crores towards Work in Progress. Explanation 2 to Section 263 is not applicable as it was introduced later. The PCIT did not pass a speaking order. Reliance on Section 263(1)(c) regarding matters not considered in appeal). (Revenue's contention: Not recorded). 3. Whether the exemption claimed under Section 10(26B) of the Income Tax Act, 1961, amounting to Rs. 29,10,000/-, is admissible? (Assessee's contention: The AO's observation that records were not maintained to sever income from the main object is factually wrong. The assessee followed High Court directions and furnished G.O.s. Disallowance due to non-cooperation is unjustified). (Revenue's contention: The assessee did not maintain separate books of account for work related to Scheduled Castes/Scheduled Tribes, making income from such activities not severable from other objects, as per the judgment in Harijan Avam Nirbal Varg Awas Nigam for AY 1979-80).

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 10(26B),Section 263(1)(c)

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Cases cited in this judgment(5)Show list

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Heard together (2 matters)

I.T.A. No.617/Lkw/2019
C.O.No.01/Lkw/2020

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1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH `A', LUCKNOW BEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER AND SHRI SUBHASH MALGURIA, JUDICIAL MEMBER Assessment Year:2014-15 Dy.C.I.T. Range-6, Lucknow. (Appellant) Vs. M/s U.P. State Construction & Infrastructure Corpn. Ltd., Development TC/46V, Vibhuti Khand, Gomti Nagar, Lucknow. PAN:AAACU1932C (Respondent) C.O.No.01/Lkw/2020 (in I.T.A. No.617/Lkw/2019)

Assessment Year:2014-15 M/s U.P. State Construction & Vs. Dy.C.I.T. Infrastructure Corpn. Ltd., Development TC/46V, Vibhuti Khand, Gomti Nagar, Lucknow. PAN:AAACU1932C (Appellant) Range-6, Lucknow. (Respondent) Dy.C.I.T. Range-6, Lucknow. (Appellant) I.T.A. Nos.367 to 371/Lkw/2017

Assessment Years:2009-10 to 2012-13 Vs. M/s U.P. State Construction & Infrastructure Corpn. Ltd., Development TC/46V, Vibhuti Khand, Gomti Nagar, Lucknow. PAN:AAACU1932C (Respondent) 2 C.O.Nos.13 to 17/Lkw/2017 (Ι.Τ.Α. Nos.367 to 371/Lkw/2017)

Assessment Years:2009-10 to 2012-13 M/s U.P. State Construction & Vs. Dy.C.I.T. Infrastructure Corpn. Ltd., Development TC/46V, Vibhuti Khand, Gomti Nagar, Lucknow. PAN:AAACU1932C (Appellant) Range-6, Lucknow. (Respondent) I.T.A.

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