SAHARA INDIA MUTUAL BENEFIT CO.LTD.,LUCKNOW vs. ACIT, CENTRAL CIRCLE - I, LUCKNOW, KANPUR

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: ‘D’, NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 607/Alld/2000 AY: 1995-96 Sahara India Commercial vs. ACIT, CC-1 Corporation Ltd. Lucknow (erstwhile Sahara India Mutual Benefit Co.Ltd.) Sahara India Sadan 2A, Shakespeare Sarani Kolkata 700 071 (Appellant) (Respondent)

Appellant by : Sh. Percy Pardiwala, Sr.Adv. & Sh. Kardeep Singh, C.A. Respondent by : Sh. J.K.Mishra, CIT, D.R.

Date of Hearing : 06/03/2019 Date of Pronouncement: 31/05/2019 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER

Present appeal has been filed by assessee against order dated 24/03/2000 passed by Ld.CIT(Central), Kanpur, under section 263 of the Income Tax Act, 1961 (the Act) for assessment year 1995-96 on following grounds of appeal:

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow “1. The Commissioner of Income Tax (Central), Kanpur has erred against law and facts on record in framing the order dated 24.3.2000 u/s 263 of the Income Tax Act contrary to Law & Facts on record. 2.The Commissioner of Income Tax (Central) is in error in passing an order u/s 263 with respect to order of assessment dated 20.3.98 despite the facts that the order of assessment dated 20.3.98 was neither erroneous nor prejudicial to the interests of the revenue on the facts and circumstances of the case. 3. The Commissioner of Income Tax while framing the order u/s 263 has failed to take cognizance of the record available at the time of its examination by the learned Commissioner of Income Tax (Central) in accordance with the Section 263 explanation Clause (b) of the Income Tax Act, 1961. 4. The order passed u/s 263 by the Commissioner of Income Tax (Central), Kanpur is without jurisdiction as the Commissioner of Income Tax (Central) failed to appreciate that the order of the assessment dated 20.3.98 had merged with the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 1995-96 and that the order u/s 263 passed by the C.I.T. was contrary to the provisions of section 263 Explanation Clause (c) of the Income Tax Act, 1961, and that the Commissioner of Income Tax (Appeals) in the appellate order for A.Y. 1995-96 had considered the matters in respect of which the order u/s 263 has been passed, as issue of deposits as well as interest payable on them was subject matter of appeal before the CIT(A) and consequentially the CIT had

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow no jurisdiction u/s 263 for revising the assessment order on that issue. 5. The Commissioner of Income Tax ought to have considered while framing the order u/s 263 that the assessment had been framed by the Assessing Officer after making all necessary enquiries after examining the terms and conditions of each schemes and after considering the law applicable in the circumstances of the case and therefore the order of assessment was not passed in undue haste and without proper enquiry and therefore such order could not be considered as erroneous within the meaning of section 263 of the Income Tax Act. 6. The Commissioner of Income Tax while framing the order u/s 263 has failed to appreciate correctly the facts and circumstances of the case with respect to provisions of interest on deposits and has erred against law and facts on record in setting aside the order of assessment made by the Assessing Officer for the purpose of considering the allowance / disallowance of the interest. 7. The Commissioner of Income Tax (Central) has not correctly appreciated and understood the terms and conditions of the various deposits scheme run by the Appellant particularly with regard to charge of interest the contractual relationship between the depositor and assessee company and therefore the various observations made in the order u/s 263 with regard to provisions of interest are not correct / have not been properly understood in the facts and circumstances of the case.

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow 8. That the Commissioner of Income Tax, Central is not justified in concluding that the liability on account of interest payable on deposits under GGF and GFDA Schemes was not even a contingent liability. 9. That the Commissioner erred in law and facts in presuming that the Assessing Officer did not investigate the issues relating to the correctness of the liability provided on account of interest payable on deposits under GGF and GFDA schemes and the allowability of such liability on accrual basis. 10. That the CIT Central have erred in holding that the liability on account of interest payable on deposits under GGF and GFDA schemes could be determinate or ascertainable only if individual accounts of depositors were credited and are even in the nature of contingent liability. 11. That the Commissioner of Income Tax, Central was not justified in considering the assessment order as erroneous and prejudicial to the interest of revenue without pointing out as to how the action of the Assessing Officer allowing the liability on account of provision of interest payable on deposits under GGF and GFDA Schemes has rendered the assessment order as erroneous and prejudicial to the interest of revenue. 12. The Commissioner of Income Tax order u/s 263 of the Income Tax Act does not fulfill the jurisdictional conditions necessary for framing such order. 13. That without prejudice, the Commissioner of Income Tax is not justified in setting aside the entire order and giving directions that

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow

the re-assessment should be made denovo after considering all the facts and circumstances of the case as may obtain at the time of re- assessment. 14. That without prejudice, the setting aside of the entire order under the disguise of provisions of Sect. 263 is nothing else but only a change of opinion and tantamount to allowing a second innings to the department which is not envisaged by the provisions of Sec. 263 of the Income Tax Act. The appellant prays that the appeal be admitted and allowed. The appellant craves, leave to add, to alter or to amend any of the grounds of appeals at or before the time of hearing.” 2. Brief facts of the case are as under: Assessee filed its return of income on 13/11/1995 showing net loss of Rs.3,93,53,221/-. Notice under section 143(2) of the Income Tax Act, 1961 (the Act) was issued followed by notices under section 142(1) and 143(2) along with questionnaire was issued. In response to statutory notices assessee partly replied. Subsequently special audit under section 142 (2A) of the Act was directed vide office letter F.No.ACIT/CC-III/Lko/97 dated 24/01/97. Assessee had also defaulted for non-compliance to terms of conditions of section 142 (2) and therefore Ld. AO completed assessment under section 144 of the Act, by making following additions: Net Profit as per P&L Rs.4,79,99,555 account Add: Rs. 3,73,968/- (a)Depreciation for separate consideration (b)Provision for interest tax not

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow

allowable u/s 43B & added by the assessee Rs.18,41,751/- also c)As discussed above: i. Disallowance of expenses in excess of 2% of deposits collected, remitted to agents as per para Rs. 7,70,18,843/- 5.3 ii. Unexplained deposits u/s 68 as discussed Rs.151,65,62,780/- iii. Proportionate interest on the deposits added u/s 68 as per para 4.1 Rs. 17,19,37,752/- iv. Disallowance of interest on the amounts advanced to sister concerns with the interest as per para 7.5 Rs. 8,68,67,750/- v. Disallowance of intt. On delay in remittances as per para 8.1 Rs.4,92,08,656/- vi. Disallowance of intt. On borrowed money to the extent advanced as float fund/capital fund to Sahara India (firm) as per para 9.3 Rs. 4,80,30,000/- vii. Extra profit on sale of stocks/shares as per para 10.2 Rs.1,87,57,445/- viii.Disallowance u/s 40A(2)(a) as per para 11 above Rs. 30,48,000/- 197,36,46,945/- 202,16,46,500/- 19,67,481/- Total income: 201,96,79,019/- OR 201,96,79,020/-

Assessed on total income of Rs.201,96,79,020/-. 3. Aggrieved by order of Ld.AO assessee preferred appeal before Ld. CIT (A).

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow 4. Be that as it may Ld. CIT Kanpur on 17/01/2000 issued notice under section 263 of the Act. Relevant notice is placed at page 1 of paper book and for the sake of convenience the same is reproduced hereunder:

Dt. 17.01.2000 To The Principal Officer Sahara India Mutual Benefit Co.Ltd. Lucknow.

Sub : Notice u/s 263 of the I.T.Act, 1961 - Asst. Year 1995-96 On examination of the records and the assessment proceedings for AY. 1995-96, it is seen that the assessment order n/s 144 passed by the Assessing Officer on 20 3.1998 is erroneous in so far as it is prejudicial to the interest of revenue for the following reasons : 1. The Co. had made a provision for interest of Rs.34,38,75,505/- and claimed it as a deduction out of its taxable income although according to the terms and conditions of Company's scheme and rules, interest on deposit is payable to the depositors only on maturity and that no interest is payable on un-claimed accounts even though such deposits had matured It is also seen that interest at lesser rate is payable on comparatively short term accounts and no interest is payable in respect of deposits claimed pre-maturely. It is also seen that the actual amount of interest payable on maturity can not be determined in advance in terms of the agreements between the Co and the depositors, therefore the claim made for deduction of

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow so called provision of interest is erroneous which was erroneously allowed by the Assessing Officer. 2. While making the provision for so called interest there does not appear to be a corresponding credit to the accounts of the individual depositors. 3. On account of these facts the liability claimed by tire Co. may only be contingent liability which was unascertainable in tire accounting period, hence it is not an allowable claim. It is, therefore, proposed to pass necessary orders u/s 263 of the I.T.Act, 1961 but before doing so, you are hereby allowed an opportunity of being heard on 8.2.2000 in the office of the undersigned at 11.30AM Please note that in case of non-compliance on your part, the order shall be passed on merits without allowing the Co any further opportunity. Sd/- : RPM Tripathi, CIT (Central),Kanpur” 4.1. In reply to notice issued, assessee vide letter dated 08/02/2000 filed reply which is placed at pages 2-11 of paper book. After considering reply and submissions made by assessee, Ld. CIT framed order under section 263 of the Act, dated 24/03/2000, by holding that assessment order framed by Ld.AO has never examined details of interest filed by assessee during assessment proceedings as to how much amount was actually due for year under consideration and how much amount was not due during year and therefore assessment order so passed was erroneous and prejudicial to interest of revenue.

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow 5. Aggrieved by order passed by Ld. CIT under section 263 of the Act assessee is in appeal before us now. 6. Ld.Counsel submitted that during year under consideration there were 2 schemes which were in operation being: a) G.G.F. Scheme, i.e. Golden Growth Fund Scheme wherein a deposit 120 months or 10 years was received by the assessee company which bore interest @ 15% on half yearly basis compounding. This scheme was launched from January, 1991 and as such it will be appreciated that there are no matured accounts in this scheme. b) G.F.D.A. Scheme This Scheme was of five tenures, i.e. 12,24,36,48 and 60 months. The interest payable on this scheme was 12%, 14%, 14.5%, 15% and 16% respectively on quarterly compounding basis. The scheme had a provision of pre-matured payment to the declared tenure only after completion of 12 months from the date of opening of the account, in such situation on taking pre-maturity the payable interest shall be reduced by 2% from the 1applicable rate of interest on that stage. 6.1. He submitted that working of interest provision made in GFDA scheme are on quarterly compounding basis and that interest at the rate of 12% per annum has only to be provided which is minimum amount of interest payable under the scheme. Ld.Counsel submitted that observations made by Ld. CIT in order passed under section 263 regarding interest payable on such deposit is contingent and unascertained is not correct. He submitted that as per terms and conditions:

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow  interest on deposit is payable to depositors only on maturity, and;  interest at lesser rates are payable on comparatively short term accounts; and  no interest is payable in respect of deposits claimed pre maturely; and  therefore actual amount of interest payable on maturity cannot be determined in advance in terms of agreement between assessee and depositor; and  no interest is payable on unclaimed accounts even though deposits have matured. 6.2. Ld.Counsel submitted that, the moment deposit is accepted by assessee, liability to pay interest accrues from day to day, which is ascertained and known liability, in terms of contract and by no said stretch of imagination can it be termed as a contingent and unascertained liability. He submitted that interest has been correctly provided by assessee on deposits, based upon principles of accounting, as assessee follows Mercantile system of accounting, as per which liability is allowable on the basis of its accruals and not payment. He submitted that there is no change in the system of interest provision as in earlier years vis-à-vis, year under consideration. 6.3. Ld.Counsel submitted that, observation of Ld.CIT regarding liability claimed by assessee on unclaimed matured account on which no interest is payable after date of maturity is incorrect as

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow under the scheme there are negligible overdue deposits that too for very short period of few days. 6.4. He submitted that a detailed questionnaire was issued by Ld.AO during assessment proceedings in reply to which working of interest provision was filed by assessee and it was only after that he was duly satisfied with working by assessee of interest, that due deductions were allowed by Ld.AO. It has further been submitted that Ld.AO made substantial disallowance of interest claimed by assessee as expenditure on accrual basis, as per accounts and returns filed by assessee. 6.5. Ld.Counsel submitted that assessment completed by Ld. AO after considering all facts and circumstances of an issue cannot be substituted as Assessing Officer has exercised quasi judicial powers vested in him in accordance with the law and arrived at a conclusion and such a conclusion cannot be considered erroneous. Ld.Counsel emphasised that exercising powers of jurisdiction under section 263 under such a situation would amount to re- examination which cannot tantamount to an error in order of Assessing Officer to be prejudicial to interest of revenue within meaning of section 263 of the Act. He submitted that section 263 is to be invoked not as jurisdictional corrective or as review of a subordinate order in exercise of supervisory power, but it is to be invoked and employed only for purposes of setting right distortions and prejudices to the revenue which is a unique conception to be understood in the context of and in the interest of revenue

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow administration. Ld.Counsel placed reliance upon the following decisions in support of his arguments:  Marico Industries Ltd vs ACIT reported in (2008) 115 TTJ 497  Sonal Garments vs DCIT reported in (2005) 95 ITD 363  CIT vs Nirma Chemicals Work Pvt. Ltd., reported in (2009) 182 Taxman 183 (GUJ) 6.6. Ld.Counsel submitted that Allahabad Bench of this Tribunal in assessee’s own case for assessment year 1994-95 in ITA No. 509/ALL/1999, on identical issue held order passed under section 263 to be bad in law and void ab initio. He submitted that issue that was considered by Coordinate Bench of this Tribunal was similar to present issue under consideration. He placed reliance upon said order of this Tribunal which is placed at page 12-109 of paper book. Ld.Counsel submitted that, against order passed by this Tribunal, revenue filed appeal before Hon’ble Allahabad High Court in ITA No. 112/2000. Hon’ble Allahabad High Court, vide order dated 19/10/16 dismissed revenue’s appeal. 6.7. He thus submitted that liability of interest provided and claimed by assessee has been subject matter of appeal before Ld. CIT (A), Lucknow as Assessing Officer had disallowed substantial portion of interest claimed by assessee as an expenditure on accrual basis as per accounts and return filed. And therefore in light of Explanation (c) to section 263, a reconsideration of ‘interest’ provision made by assessee, is beyond ambit and scope of provisions of section 263 of the Act, as the same was under consideration and dealt with by Ld.CIT (A), Lucknow.

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow 7. On the contrary, Ld. CIT DR submitted that following were additions made by Ld.AO on account of disallowance of interest expenses claimed by assessee: i. Proportionate interest on deposits added u/s 68 : Rs.17,19,37,752/- ii. Disallowance of interest on the amounts advanced to sister concerns without interest : Rs. 8,68,67,750/- iii. Disallowance of interest on delay in remi- ttance as per para 8.1 of the order : Rs.4,92,08,656/- iv. Disallwoance of interest on borrowed money to the extent advanced as float fund/capital fund to Sahara India (Firm) : Rs.4,80,30,000/-

7.1. In support of order passed by Ld.CIT, he submitted that assessee had made provision of interest amounting to Rs.34,38,75,565/-without crediting interest to individual accounts of depositors. He submitted that interest amount was to be paid only on maturity and no interest was payable on unclaimed account in Golden FD scheme. He submitted that assessee had only made a gross provisioning of interest which was debited to P&L account and Ld.AO did not examine this issue at all and even terms and conditions of deposit schemes were not looked into. He submitted that there is no mention regarding scheme and manner in which assessee had made provision of interest has been not even discussed by Assessing Officer in assessment order. He thus submitted that Ld.CIT rightly held, assessment order to be erroneous in so far as prejudicial to the interest of revenue. Ld.CIT DR submitted that, the bone of contentions raised by Ld.Counsel regarding assessment order not being erroneous and prejudicial to interest of revenue, and that interest payable was subject matter of appeal before Ld.CIT (A) and therefore assessment order was 13

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow merged with order of Ld.CIT (A), thereby jurisdiction assumed by Ld. CIT under section 263 is bad in law, would depend upon nature of interest that has not been dealt with by Ld.AO in assessment order. He submitted that assessee merely made provision of interest and no interest was credited to respective depositor account it was also submitted that no TDS was made on such provision of interest which shows that it was merely a provisioning of expenses and not an ascertained liability and such claim of expenditure could not be allowed. Ld. CIT DR vehemently submitted that since Assessing Officer failed to even examine such provisions as terms and conditions of scheme, expenses as to how much was actually due and allowable and how much amount was not due and allowable during year under consideration, and therefore assessment order is erroneous in as much as prejudicial to interest of revenue. 7.2. Regarding applicability of doctrine of merger, Ld.CIT DR submitted that disallowance of interest expenses on account of provisioning of interest expenses was never considered by Ld.AO and consequently said issue was not before Ld.CIT (A). In support of his argument he placed reliance upon decision of Hon’ble Supreme Court in case of CIT vs Sh.Arbuda Mills Ltd., reported in 98 Taxmann 457. He submitted that decision of Hon’ble Supreme Court was not brought to notice of Hon’ble Gujarat High Court while deciding similar case that arose during assessment year 1994-95 in assessee’s own case. He placed reliance upon following decisions in support of his arguments:

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow  CIT vs Amitabh Bachchan 384 ITR 200 (SC)  BSESE Rajdhani power Ltd vs DCIT reported in 339 ITR 228 (Del)  CIT vs Rathee Lal Bacharilal and Sons reported in (2006) 153 Taxmann 86 (BOM)  CIT vs Panna Knitting Industries reported in (2002) 123 Taxmann 216 (Gujarat)  CIT vs Mill Stones Pvt. Ltd (2002) 120 taxman 859 (Madras)  Aditi Technologies Pvt.Ltd vs ITO reported in (2014) 47 taxman.com 166 (BANG-Trib)  Pragati Financial Management Pvt.Ltd vs CIT reported in 82 Taxmann.com 12 (Calcutta) 7.3. Ld. CIT DR submitted that all the aforestated decisions has applied the ratio laid down by Hon’ble Supreme Court in case of CIT vs Arbuda Mills Ltd (supra), and a recent decision by Hon’able Delhi High Court in case of BSES Rajdhani Power Ltd vs Pr.CIT, reported in (2017) 88 Taxmann.com 25 is squarely on the issue under consideration. He also submitted that decision of Coordinate Bench of Allahabad Tribunal, in assessee’s own case, for assessment year 1994-95, has considered decisions, which were passed prior to insertion of Explanation (c) to section 263 of the Act. He also placed heavy reliance upon decision of Coordinate Bench of Bangalore Tribunal in case of Aditi Technologies (supra) and submitted that language used in Explanation (c) to section 263 (1) of the Act is, “Power shall extend to such matters as had not been considered and decided in such appeal”. 15

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow Ld. CIT DR further submitted that Hon’ble Delhi High Court in case of BS ESE Rajdhani power Ltd (supra) has held that; “15………As far as the 1st aspect with respect to exercise of power under section 263 is concerned, the issue stands concluded, in the light of the amendment w.e.f. 1989 by insertion of explanation (c) to section 263 (1). The nonconsideration of the largest claim for rupees 298.93 crores as depreciation and the consideration of only a part of it (Rs.6,44,81,091/-) by the assessing officer, who did not go into the issue with respect to the whole amount, was an error, that could be corrected under section 263. CIT vs Aruba Mills (1998) 231 ITR 50 (SC) is decisive, in that the provision of section 263 (1) explanation (c) was introduced to cater to precisely this kind of mischief.” 8. In rejoinder, Ld.Counsel while distinguishing decisions relied upon by Ld. CIT DR submitted as under: 8.1. Ld.Counsel submitted that main contention before Hon’ble Supreme Court was, whether or not order of Assessing Officer regarding items in respect of which assessee had no occasion to prefer an appeal had merged with that of order passed by Commissioner (Appeals), so as to exclude jurisdiction of Ld.CIT under section 263 of the Act. He submitted that Hon’ble Supreme Court while dealing with issue applied amended provision of section 263 (1) of the Act, to items which were not subject matter of appeal before Commissioner (appeals) and held as under: “the consequence of the said amendment with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid 3 items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by assessee.” 8.2. He submitted that in decision of Hon’ble Supreme Court in case of CIT vs Sh.Arbuda Mills Ltd (supra), the issue that was considered by Ld.CIT in Sec. 263 proceedings were accepted by Ld.AO in assessment proceedings and no disallowances were made. He thus submitted that fact before Hon’ble Supreme Court is distinguishable with that of facts in case of present assessee. 8.3. Ld.Counsel further submitted that all the other decisions relied upon by Ld. CIT DR are distinguishable on facts. 9. We have perused submissions advanced by both sides in light of records placed before us. 9.1. It is the case of revenue that Ld. AO had not looked into aspects of deposits and has not even obtained copies of terms and conditions of deposits, and therefore assessment order has not been passed after proper verification of facts. Ld.CIT has opined that for such reasons assessment order is prejudicial to interest of revenue because interest was debited to P&L account in respect of these schemes on a hypothetical basis, which is in utter disregard of principles of accounting and assessment order of Assessing Officer alarming such erroneous debit was obviously therefore erroneous insofar as prejudicial to interest of revenue.

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow 9.2. On the other hand, assessee submitted that all the issues that has been raised by Ld.CIT DR has been considered in detail in assessee’s own case for assessment year 1995-96 by coordinate bench of this Tribunal in ITA No. 509 /AAL/1999, vide order dated March 2000. It is also been submitted that the order passed by this tribunal for assessment year 1995-96 has been upheld by Hon’ble Allahabad High Court vide order dated 19/10/16 in ITA No. 112/2000. 10. We have perused the order relied upon by assessee in its own case for assessment year 1995-96 placed at page 12-109 of paper book, wherein the Tribunal formulated following issues: Issue No. 1 Was the notice under section 263 of the Act dated 22-2-1999, issued without proper examination/consideration/perusal of assessee’s assessment records by the CIT, and therefore, there was no application of mind as well as exercise of quasi-judicial discretion and judgment by the CIT and, if that being the case, were the notice under section 263, dated 22-2-1999, and consequently the order under section 263, dated 22-3-1999, bad in law and void ab initio. Issue No. 2 Was the assessment order dated 27-3-1997, was neither erroneous nor prejudicial to the interest of the Revenue, as claimed by the assessee? Issue No. 3 If the assessment order was erroneous so far as prejudicial to the interest of the Revenue, than the CIT having not given any reason as to how the action of the Assessing Officer allowing the liability on account of interest payable on deposits under two schemes, namely, ‘Golden Fixed Deposits Account (called as GFDA) and ‘Golden Growth Fund (called as GGF) has rendered the assessment order erroneous 18

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow and prejudicial to the interest of Revenue, could the order under section 263 of the Act cannot be sustained. Issue No. 4 Had the assessment order dated 27-3-1997, on the issue of allowability of deduction of expenditure on account of interest payable on deposits received under the two schemes, merged with the order of CIT(A), dated 1-1-1999? If it had merged then had the CIT’s jurisdiction to revise the assessment order with respect to the issue of allowability of the interest. Issue No. 5 Was the CIT not justified to observe that the liability on account of interest payable on the deposits under these two schemes was a contingent liability and that the Assessing Officer has not investigated the issue, and that liability on account of interest payable could be said to have been ascertained only if individual accounts of the depositors were credited? Issue No. 6 Was the CIT justified in concluding that Assessing Officer has not disallowed the interest payable on lapsed and unclaimed matured accounts, without making any enquiry or pointing out as to which of the specific accounts were "lapsed" or were "unclaimed matured accounts". 10.1. Admittedly it has been agreed by assessee & Ld. CIT DR the facts and issues that were considered by this Tribunal in assessment year 1995-96 are identical. 10.2. Only objection raised by Ld. CIT DR is in respect of non- consideration of decision by Hon’ble Delhi High Court in case of BSES Rajdhani power Ltd (supra) which has considered while passing order for assessment year 1995-96 in assessee’s own case. Ld.CIT DR vehemently stated that the issue is squarely covered in

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow favour of revenue by decision of the Hon’able Delhi High Court in case of BSES Rajani Power Ltd., vs Pr.CIT (supra), wherein it has been held that that Ld.CIT has power to consider all aspects, which was subject matter before Ld.AO, if in his opinion, they were erroneous, despite assessee’s appeal on that or some other aspect. Therefore it stated that assessment order has not merged with order of Ld.CIT (A). 10.3. We have carefully considered argument of Ld.CIT DR and are not able to convince ourselves, for the reason that, as per facts in paragraph 3 of order passed by Hon’ble High Court in case of BSES Rajani Power Ltd., vs Pr.CIT (supra) related to depreciation, wherein issue was regarding nonconsideration of larger claim for Rs.29,89,300,000/- as depreciation vis-a-vis consideration of only a part of it, being Rs.6,44,81,091/– by Ld.AO, who did not go into the issue with respect of whole amount, and therefore was in error, that could be corrected under section 263 of the Act. Facts therein shows that Ld.AO made disallowance of Rs.6,44,81,091/–, being depreciation capitalised for reinstalling fixed assets. Addition was challenged by assessee before Ld.CIT(A), who decided the issue with respect to disallowance of depreciation of Rs.66,27,782/– on capitalisation of installation cost of fixed assets. Ld.CIT assumed jurisdiction under section 263 of the Act, holding that, there was variation in cost of fixed assets, which aspect had not been verified or examined by Ld.AO. Ld.CIT therefore held that order passed by Ld.AO is erroneous and prejudicial to the interest of revenue and directed him to reconsider the issue of depreciation claimed in

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow respect of fixed assets to the extent of Rs.29,89,300,000/-. Contention of assessee therein was that as issue of depreciation has in fact, merged with decision of Ld.CIT(A), therefore Ld.CIT cannot assume jurisdiction on the issue which has been considered and decided by Ld.CIT(A). The fact in that particular case, as mentioned in para number 7 of order passed by Hon’ble High Court, shows that, Ld.CIT(A), was to decide whether, expenditure incurred by assessee, including inter alia, installation cost, borrowing cost and other charges etc., were relating directly or indirectly to installation of transformer and are therefore, eligible to be included in actual cost of relevant block of fixed assets, and, Ld.AO was directed to allow depreciation on cost of recapitalised assets. In these circumstances, where Ld.CIT directed Ld.AO to examine depreciation allowance which was not the subject matter of appeal before Ld.CIT(A), but only with respect to capitalisation of fixed assets vis-a-vis claim of depreciation on assets. It was on these facts that Hon’ble High Court held that issue regarding allowability of total claim of the depreciation, was never considered and decided by Ld.CIT (A). 10.4. In view of above distinguishable facts, the reliance placed by Ld.DR on the decision of Hon’able Delhi High Court is misplaced. Based upon aforestated discussions, in our considered opinion assessment order stood merged with order passed by Ld.CIT (A), and Ld. CIT could not assume jurisdiction on same issue under section 263 of the Act. We therefore agree with the submissions of Ld.Counsel that the decisions relied upon by Ld.CIT DR of Hon’ble

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow Supreme Court, Hon’ble High Courts as well as Coordinate Benches of this Tribunal are distinguishable factually. 10.5. Reliance placed by Ld.Counsel on decision of Coordinate Bench of this Tribunal in assessee’s own case for assessment year 1994-95 is also decided on the similar allegations raised hear in above, which has been upheld by Hon’ble Allahabad High Court, vide order dated 19/10/16 (supra). Respectfully following the same, we allow grounds raised by assessee and set aside and quash the notice dated 17/01/00 issued by Ld.CIT under section 263 of the Act, thereby upholding the order passed under section 263 to be bad in law. 11. In the result appeal filed by assessee stands allowed. Order pronounced in the open court on 31st May, 2019.

Sd/- Sd/- (PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dt. 31st May, 2019 *GMV

ITA 607/Alld/2000 AY 1995-96 Sahara India Mutual Benefit Company Ltd. Vs. ACIT, CC-1, Lucknow