TMI Blog2015 (1) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... is held to be erroneous. The Jurisdictional pre-condition stipulate that the Commissioner of Income Tax must come to the conclusion that the order is erroneous and is unsustainable in law. It is well settled that the order u/s 263 can be termed erroneous only if the Commissioner holds and decides that it is contrary to law. In the facts of the present case the Commissioner in the exercise his powers u/s 263 has come to the conclusion that the assessment order dt. 16.11.2010 is erroneous and prejudicial to the interests of the Revenue based on the legal position as set out in his order which has not been distinguished on facts by the Ld. AR. - Decided against assessee - I.T.A .No.2556/Del/2013 - - - Dated:- 28-1-2015 - SMT DIVA SINGH, JUDICIAL MEMBER AND SH. T.S.KAPOOR, ACCOUNTANT MEMBER Appellant by Sh. Sudhanshu Sharma, CA Respondent by Smt. Poonam Khaira Sidhu, CIT DR ORDER PER DIVA SINGH, JM By the present appeal pertaining to 2009-10 Assessment year the assessee assails the correctness of the order dated 23.03.2011 passed by the CIT, Dehradun u/s 263 on the following grounds:- 1. On facts and under circumstances, Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. vs CIT [1978] 113 ITR 84 (SC) CIT vs Sterling Foods [1999] 237 ITR 0579 (SC) Liberty Indian vs CIT [2009] 317 ITR 1218 (SC) 3. Aggrieved by this the assessee is in the appeal before the Tribunal. 4. Ld. AR relying upon the decisions cited before the CIT, Dehradun contended that in the facts of the assessee s case the earning of interest is directly linked to the business income and is of the first degree as the assessee who is in the business of manufacture and supply of electric meters for supply and installation by Uttaranchal Power Corporation Ltd. was required to furnish guarantees in favour of the power corporation in the form of bank deposit cum performance guarantee which would remain pledged in faovur of the power corporation during the entire period for which the guarantee is applicable and it is these FDRs which have been pledged as a security which have earned the bank interest. In this background relying upon the decisions of the Delhi High Court in the case of CIT vs Arvind Constructions Co. Ltd. [2009] 317 ITR 275 (Del.) CIT vs Japee DSC Ventures Ltd. [2011] 335 ITR 132 again of the Delhi High Court wherein considering the fact that the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. Before we proceed to address the specific arguments of the parties before the Bench, it is appropriate to first reproduced from the record how the assessment has been concluded. For the said purpose, the body of the assessment order is reproduced hereunder:- Assessment Order dated 16.11.2010 Assessee firm filed its return electronically on 26.09.2009 declaring total income of Rs. Nil. The case was selected for scrutiny through CASS and notice u/s 143(2) of the Income Tax Act 1961 was issued on 20.08.2010 which was duly served upon the assessee. Notice u/s 142(1) along with questionnaire was issued on 13.09.2010. In response to these notices Shri Sudhanshu Sharma, CA attended and filed replied from time to time. The case was discussed with him. 2. The assessee derives it s income from the manufacturing and sale of electronics power meters, Installation and equipments. The books of accounts were produced which were verified on test check basis. The assessee earned a net profit of ₹ 54,31,995/- and claimed deduction of entire amount u/s 80 IC of the I.T.Act, 1961. This was the fifth year of claim of this deduction by the assessee. 3. After verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd CIT vs Karnal Coop. Sugar Mills Ltd. (cited supra) came up for consideration. The decision that it reduced the project expenses and the amount was not taxable as income from other sources does not help the assessee s case in any manner and reliance thereon is misplaced. Reliance has also been placed on the decision of the Jurisdictional High Court in the case of CIT vs Nectar Life Sciences Ltd. (cited supra). The said decision operates on the peculiar facts of the case and the issue under consideration was allowability of netting of expenses where the AO had himself held that FDRs were business income of the assessee. The Ld. AR has also relied upon another decision of the Jurisdictional High Court in the case of CIT vs Arvind Constructions Ltd.. A perusal of the same shows that although the decision was rendered on 04.12.2007 however the settled legal position by way of the judgements of the Apex Court in Cambay Electric Supply Indstl. Co. Ltd., Sterling Foods and Pandian Chemicals Ltd. were not referred by the Revenue. In the facts of the present proceedings the decisions have been considered and confronted and cannot be ignored. In the aforesaid peculiar facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the Assessing Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes failure to make such an inquiry. No doubt it is equally clear that a Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded. However it is equally well settled that the order cannot be termed as erroneous unless it is not in accordance with law. The section does not visualize a case of substituting the judgement of the Commissioner for that and the Assessing Officer who passes the order unless the decision is held to be erroneous. The Jurisdictional pre-condition stipulate that the Commissioner of Income Tax must come to the conclusion that the order is erroneous and is unsustainable in law. It is well settled that the order u/s 263 can be termed erroneous only if the Commissioner holds and decides that it is contrary to law. In the facts of the present case the Commissioner in the exercise his powers u/s 263 has come to the conclusion that the assessment order dt. 16.11.2010 is erroneous and prejudicial to the int ..... 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