DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS) LUCKNOW, LUCKNOW vs. UTTAR PRADESH WATER SUPPLY AND SANITATION MISSION, LUCKNOW

(A) These are the cross appeals filed by the assessee and Revenue for the assessment year 2017-18 against the impugned appellate order dated 29/03/2024 (DIN & Order No.ITBA/NFAC/S/250/2023-24/1063656488(1)

& 288/Lkw/2024 Assessment Year:2017-18 2 learned Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The original grounds taken in assessee’s appeal are as under:

(Assessee’s appeal) A.Y.2017-18 & 288/Lkw/2024 Assessment Year:2017-18 3 & 288/Lkw/2024 Assessment Year:2017-18 4 & 288/Lkw/2024 Assessment Year:2017-18 5 & 288/Lkw/2024 Assessment Year:2017-18 6 (A.1.1) Subsequently, the assessee filed concise grounds of appeal in substitution of the original grounds of appeal. Concise grounds of appeal are as under:

& 288/Lkw/2024 Assessment Year:2017-18 7 & 288/Lkw/2024 Assessment Year:2017-18 8 (A.1.2) In the aforesaid concise grounds of appeal, ground -1 of appeal was not pressed by learned A.R. for the assessee; at the time of hearing. Accordingly, this ground of appeal is dismissed as not pressed.

(Revenue’s appeal) A.Y.2017-18 Grounds of appeal are as under:

& 288/Lkw/2024 Assessment Year:2017-18 9 (B) In this case assessment order dated 30/12/2019 was passed under section 143(3) of the I.T. Act whereby the assessee’s total income was determined at Rs.6,98,01,31,350/- as against the returned income of nil. In the aforesaid assessment order, an addition of Rs.2,69,23,00,312/- was made on account of surplus of income over expenditure in income & expenditure account. A further addition of Rs.3,34,64,76,831/- was made by the Assessing Officer on account of unutilized balance lying with implementing agency. Moreover, an addition of Rs.94,13,54,207/- was made on account of funds in transit. The relevant portion of the assessment order is reproduced as under:

& 288/Lkw/2024 Assessment Year:2017-18 10 & 288/Lkw/2024 Assessment Year:2017-18 11 & 288/Lkw/2024 Assessment Year:2017-18 12 & 288/Lkw/2024 Assessment Year:2017-18 13 & 288/Lkw/2024 Assessment Year:2017-18 14 & 288/Lkw/2024 Assessment Year:2017-18 15 (B.1) The assessee’s appeal was partly allowed by the learned CIT(A) in impugned appellate order dated 29/03/2024. The learned CIT(A) confirmed the aforesaid addition of Rs.94,13,54,207/-. However, the aforesaid additions of Rs.3,34,64,76,831/- and Rs.2,69,23,00,312/- were deleted. The relevant portion of the order of learned CIT(A) is as under:

& 288/Lkw/2024 Assessment Year:2017-18 16 & 288/Lkw/2024 Assessment Year:2017-18 17 & 288/Lkw/2024 Assessment Year:2017-18 18 & 288/Lkw/2024 Assessment Year:2017-18 19 & 288/Lkw/2024 Assessment Year:2017-18 20 & 288/Lkw/2024 Assessment Year:2017-18 21 & 288/Lkw/2024 Assessment Year:2017-18 22 & 288/Lkw/2024 Assessment Year:2017-18 23 & 288/Lkw/2024 Assessment Year:2017-18 24 & 288/Lkw/2024 Assessment Year:2017-18 25 (B.1.1) In the course of appellate proceedings in Income Tax Appellate Tribunal, the following documents were furnished from the assessee’s side:

& 288/Lkw/2024 Assessment Year:2017-18 26 & 288/Lkw/2024 Assessment Year:2017-18 27 & 288/Lkw/2024 Assessment Year:2017-18 28 & 288/Lkw/2024 Assessment Year:2017-18 29 Copy of Hon'ble Supreme Court decision in the case of Additional Commissioner of Income-tax vs. A.L.N. Rao Charitable Trust [1995] 83 Taxman 252 (SC) was also furnished from the assessee’s side.

(B.1.2) In addition, a break-up cum reconciliation of total utilization of fund during the year was also submitted from the assessee’s side, which is reproduced below:

(C) At the time of hearing, the learned A.R. for the assessee placed reliance on the aforesaid documents referred to in foregoing paragraphs (B.1.1) and (B.1.2) of this order. Moreover, he also relied on the impugned appellate order of learned CIT(A) in respect of appeal filed by Revenue. He also placed reliance on CBDT Circular No. 7/2018; dated 20/12/2018. He contended that even if the aforesaid amount of Rs.94,13,54,207/- is treated as assessee’s income; the excess of income over expenditure would still be within the permissible limit of 15%. The learned CIT, D.R. placed reliance on the assessment order. He also placed reliance on the impugned appellate order of learned CIT(A) in respect of appeal filed by the assessee.

& 288/Lkw/2024 Assessment Year:2017-18 30 (D) We have heard both sides. We have perused materials on record. We have given our keen consideration to the break-up cum com reconciliation referred to in foregoing paragraph (B.1.2) of this order filed from the assessee’s side. Further we have also respectfully considered the aforesaid order of Hon'ble Supreme Court referred to in foregoing paragraph (B.1.1) of this order reported at Additional Commissioner of Income-tax vs. A.L.N. Rao Charitable Trust [1995] 83 Taxman 252 (SC). Moreover, we have also considered the CBDT Circular No. 7/2018 in F.No. 197/55/2018-I. T. Act-1; dated 20/12/2018 and the submissions made by learned A.R. for the assessee at the time of hearing to the effect that even if the aforesaid amount of Rs.94,13,54,207/- is treated as assessee’s income, even then the excess of income over expenditure would fall within the permissible limit of 15%. We are of the view that combined effect of these submissions require detailed factual verification. We find from the order of the Assessing Officer as well as the learned CIT(A) that these aspects have not been given combined consideration by them in their respective orders. We are also of the view that these aspects need proper factual verification at the level of the Assessing Officer. The materials on record are insufficient to take a conclusive decision on these aspects of the case. In view of the foregoing, we set aside the impugned appellate order of learned CIT(A) and restore all the matters of dispute regarding various additions made in the assessment order, back to the file of the Assessing Officer with the direction to pass de novo assessment order after taking all relevant materials including the aforesaid materials into consideration, and after providing reasonable opportunity to the assessee. All the grounds of appeal in both appeals, & 288/Lkw/2024 Assessment Year:2017-18 31 except ground-1 in concise grounds of appeal of assessee, are treated as disposed of in accordance with aforesaid directions.

(E) In the result, both appeals are partly allowed.

(Order pronounced in the open court on 28/11/2025)