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TMI Blog2009 (5) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to reject the application under section 154 filed by the assessee. Thus, the assessee's applications under section 154 stand allowed and the intimation issued under section 143(1)(a) by the Assessing Officer shall stand rectified accordingly for the year under appeal, appeals filed by the Revenue dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... tal receipt and adjusted against the pre-operative expenditure pending for capitalization. Since the receipt of Rs. 44,71,351 is not in nature of capital receipt, the same is taxable and not adjustable against expenses." 8. The assessee then filed an application under section 154 on June 6, 1994 in both the assessment years to rectify the intimation issued under section 143(1)(a) by the Assessing Officer with a prayer that the addition made by the Assessing Officer by way of prima facie adjustment in the intimation issued under section 143(1)(a) is beyond the scope of section 143(1)(a) of the Act, and the Assessing Officer had no power of authority to make such adjustment in the intimation issued under section 143(1)(a) of the Act inasmuch as it does not come within the ambit of prima facie adjustment as contemplated under section 143(1)(a) of the Act. 9. The assessee's application filed under section 154 of the Act requesting to delete the addition made by way of prima facie adjustment in the intimation under section 143(1)(a) was disposed of by the Assessing Officer by two separate orders dated July 12, 1994 for the assessment years 1992-93 and 1993-94 respectively. 10. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest on various deposits, and the interest income earned by the assessee is not incidental to the assessee's business or to the construction work that was under progress or installation of machinery, etc. The assessee's alternative relief to set off the interest income against the foreign currency transaction was also not accepted by the Assessing Officer as so done by him in the assessment year 1992-93. The various decisions discussed in the assessment year 1992-93 have also been referred to by the Assessing Officer in assessment year 1993-94. 13. Being aggrieved with the Assessing Officer's order passed under section 154 of the Act rejecting the assessee's application filed under section 154 of the Act to rectify the intimation issued under section 143(1)(a) of the Act, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) in both years. Be it stated here that the assessee also filed separate appeals against the intimations under section 143(1)(a), which were later withdrawn and stood dismissed on withdrawal vide order dated January 16, 1995 of the learned Commissioner of Income-tax (Appeals) in Appeal No. 280/RTK/1994-95 and Appeal No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made by the Assessing Officer under section 143(1)(a) and, thus, adjustment should have been rectified under section 154 by the Assessing Officer himself. The Assessing Officer's order for the assessment year 1992-93 was also upheld that the pre-operative expenditure is not to be set off against interest earned on the surplus funds invested during construction period. 18. Being aggrieved with the Tribunal's aforesaid order dated May 30, 2001, the assessee went in appeal before the hon'ble High Court of Punjab and Haryana at Chandigarh, and these two appeals filed by the assessee before the hon'ble High Court of Punjab and Haryana were registered as I. T. A. Nos. 159 of 2003 and 160 of 2003. The hon'ble High Court decided the I. T. A. No. 160 of 2003 on January 29, 2009, and since the controversy raised in I. T. A. No. 159 of 2003 was identical, I. T. A. No. 159 of 2003 was also disposed of in terms of the decision rendered by the hon'ble High Court in the I. T. A. No. 160 of 2003 filed by the assessee. The hon'ble High Court has decided the issue involved by observing and holding as under : "It is the vehement contention of learned counsel for the appellant that the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties are directed to appear before the Income-tax Appellate Tribunal on March 2, 2009." 19. Accordingly, these two appeals have again come up before us for adjudication in accordance with law as per the direction of the hon'ble High Court. We are, thus, confined to the controversy arising from the application under section 154 of the Act filed by the assessee for rectification of intimation issued under section 143(1)(a) by the Assessing Officer. 20. We have heard both the parties and have carefully gone through the orders of the authorities below. We have deliberated upon the relevant provisions of law contained in that behalf. 21. As already stated above, the Assessing Officer has made certain additions by way of prima facie adjustment to the returned income while making intimation under section 143(1)(a) of the Act. To decide the controversy in this appeal, we find it necessary to refer to the relevant provisions of section 143(1)(a) as they stood at the relevant point of time. 22. Section 143(1)(a), as it stood at the relevant time, reads as under : "143(1)(a). Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(1)(a) of the Act. Thus, where the issue involved is debatable, an intimation under section 143(1)(a) disallowing the claim based on such debatable issue on the ground that it is prima facie inadmissible, cannot be sustained. In the present case, the question as to whether the interest earned by the assessee before commencement of business is to be adjusted against the project cost or to be assessed under the head "Income from other sources" can only be decided after examining and verifying the nature of the work carried out by the assessee and the nature of the interest earned by the assessee. The change in the nature of source of income so as to take it in a different head is a matter of debate and argument, and can only be decided after examining and verifying the evidence and after hearing the assessee. The controversy involved in this case is of such a nature, which can only be decided in any given case in the light of the facts of that case, and no uniform approach or straight-jacket formula can be applied. Each case of earning interest on funds during construction period is to be decided on its own facts after giving the assessee an opportunity to lead evidence and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka Power Corporation [2001] 247 ITR 268 (SC)." 25. After considering the aforesaid decisions of the hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) and Bokaro Steel Ltd. (supra), the hon'ble Madras High Court in the case of VGR Foundations (supra) has taken a view as under (page 135 of 298 ITR) : "5. In our opinion, in view of the above clear cut ruling by the Supreme Court, it is necessary to give a finding of fact in regard to monies that were kept in deposit from out of the share application monies. In the light of the Supreme Court decision in Tuticorin Alkali Chemicals and Fertilizers Ltd. [1997] 227 ITR 172 (SC), it is only in the event of interest earned from out of deposits made from borrowed funds that it would be in the nature of income. Share application monies do not fall into the category of borrowed funds and do not involve payment of interest. In effect share application monies, etc., are gathered for being used in setting up of an industry, unit, purchase of assets, and so on. Till such time the money is required for deferment of various items, obviously the money has to be kept in deposit with a bank. Keeping the mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, that question is not involved. Here, the question involved is, as to whether the Assessing Officer can proceed to make such additions bringing the interest income, etc. to tax while making an intimation under section 143(1)(a) of the Act. As observed above, it was very much a debatable question, as to whether the assessee can be held liable to tax, on this count or not. If that were so, in view of the settled legal position, the provisions of section 143(1)(a) were not attracted with a view to bring the interest receipts, etc. to tax, and since the addition has been made by the Assessing Officer under section 143(1)(a), it is liable to be deleted. 27. We, therefore, hold that it is beyond the power of the Assessing Officer under section 143(1)(a) to make prima facie adjustments of controversial nature, and where by resorting to prima facie adjustments of controversial nature in purported exercise of power under section 143(1)(a), it can be said that the Assessing Officer over-stepped his jurisdiction thereby determining the income much higher than what was returned by the assessee. This has obviously introduced an error, which is apparent from record. When such an error ..... X X X X Extracts X X X X X X X X Extracts X X X X
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