AI Drafter 
TaxTMI 
TaxTMI 
2019 (3) TMI 398
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....without appreciating the fact that the facts of the present case are distinguishable with the facts of the case laws? (c) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in holding that the assessment order was not erroneous and prejudicial to the interest of revenue when the record of the assessee in A. Y. 2009-10 show that the Assessing Officer failed to call for information as per the requirement of CBDT Instruction dated 23.03.2010 regarding foreign exchange connections?" 2. Though three different questions are framed, only central issue is of the correctness of the order passed by the Commissioner of Income Tax in exercise of revisional power under Section 263 of the Income Tax Act, 1961 (in short "the Act"), calling for further enquiries with respect to the assessee's claim of certain gain being in a nature of capital receipt. 3. Brief facts are as under: (i) Respondent-Assessee is a registered company and was constituted as a special purpose vehicle to facilitate the acquisition of land and complete preliminary formalities for setting up a power project at Mundra, based on imported coal at Mundra in Distr....
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.... of the opinion that, similar treatment should have been given to the notional gain claimed by the assessee. (vi) The assessee appeared before the Commissioner and opposed for proposal for revision. It was pointed out as under: " 3.3:In this regard, we would like to submit that CGPL was incorporated in 2006 as a special purpose vehicle formed to facilitate the acquisition of land and complete preliminary formalities including the required statutory clearances for establishing the 4000 MW (5 units x 800 MW) Ultra Mega Power Project (UMPP) based on imported coal at Mundra in the state of Gujarat. The business of the Company had not commenced during AY 2009-10. 3.4:The company is required to purchase/ acquire offshore equipment. Bypass Valves Systems etc. to set up a power plant. The said imports/ purchases form part of project capital of the Company which is reflected as capital work-in-progress during the pre-commencement period. The Company also enters into the forward contracts in respect of such payments to be made to the overseas suppliers. 3.5: The gain arising on forward contracts is on account of cancellation of forward contracts entered....
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.... is a fit case for revision u/s. 263 of the Act. I, hereby, set aside the assessment order u/s. 263 of the Act with direction to the AO to redo the assessment de novo, as per law after verifying the facts pointed out above and after giving reasonable opportunity of hearing to the assessee." 4. The assessee carried the matter in appeal. The Tribunal by the impugned judgment allowed assessee's appeal. The Tribunal referred to and relied upon the decision of the Supreme Court in case of Challapalli Sugars Ltd v/s. CIT reported in 98 ITR 167 - wherein it was held that, the expenses incurred in connection with the acquisition of plant during recommencement period, forms part of actual cost of plant and the same should be capitalized. The Tribunal was, therefore, of the opinion that, the Commissioner was not justified in exercising revisional powers. The Tribunal held that, the imports made by the assessee were part of the project of setting up power plant. It was recorded that, the business of the company had not commenced during period relevant to Assessment Year 2009-10. The Tribunal also referred to the judgment of the Supreme Court in case of Sutlej Cotton Mills Ltd., v/s.....
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.... can be exercised by the Commissioner only if it is found that, the order of assessment is erroneous and prejudicial to the interest of the Revenue. Both the conditions have to be satisfied. In the present case, the controversy is whether the Assessing Office was justified in not disturbing the assessee's claim that, the gain was on capital account and, therefore, correctly not offered to tax. 9. The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power. In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing Officer and not the Tribunal. He had argued that even if the Tribunal was right in law, since the Assessing ....
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...., therefore, capital in nature and not income of the assessee from the other source. 12. In case of CIT v/s. Karnal Cooperative Sugar Mills Ltd., reported in 243 ITR 2, the facts were that, the assessee had deposited amounts to open letter of credit for purchase of machinery required for setting up a plant. The assessee earned interest out of said investment. It was held that, the interest on said amount was directly connected and incidental to construction of the plant and, therefore, the situation was one covered by the Supreme Court in case of Bokaro Steel Ltd., (supra). 13. In case of Bongaigaon Refinary and Petrochemicals Ltd. v/s. CIT reported in 251 ITR 329, the facts were - the business of the assessee was of oil refinery and petrochemicals. The assessee had earned income from house property, guest house, charges for equipment and recoveries from contractors for supply of water and electricity etc. during the period of formation. It was held that, said receipts were capital in nature and not income of the assessee. Such receipts would be adjusted against project cost of the main business of the assessee. 14. In case of Sutlej Cotton Mills Ltd.,v/s. CIT, West Bengal....