2021 (2) TMI 173 - AT - Income Tax

Appeal Dismissed: Invalid Section 263 Order Leads to Departmental Setback

The Department's appeal against the assessment order for A.Y. 2010-2011, which was based on a previously set aside order under section 263 of the I.T. ... Revision u/s 263 - scope and powers under Section 263 of CIT - No enquiries during the course of the assessment proceedings. In the present case the tribunal found as a fact that the “Principle of Mutuality” - HELD THAT:- As decided in own case [2017 (2) TMI 1475 - DELHI HIGH COURT] order would be erroneous only when the assessing officer makes no enquiries during the course of the assessment proceedings. In the present case the tribunal found as a fact that the “Principle of Mutuality” had been examined threadbare by the assessing officer itself and therefore it was not a case where the Commissioner could have exercised jurisdiction under Section 263 of the said Act. In these circumstances, we do not feel that there is any substantial question of law which arises for the consideration, of this Court. - no substantial question of law. Issues:Appeal against the Order of the Ld. CIT(A)-40 for A.Y. 2010-2011.Analysis:Issue 1: Claim of Exemption under Section 11 of the I.T. Act, 1961The assessee filed a return of income claiming exemption under section 11 of the I.T. Act, 1961. However, the Assessing Officer (A.O.) rejected the claim after discussing the assessee's activities in detail. The A.O. held that income other than interest income, amounting to Rs. 75,73,939, was covered under the principle of mutuality and treated it as non-taxable. The assessment was completed under section 143(3) of the I.T. Act, 1961. Subsequently, the Ld. CIT(E) set aside the assessment order under section 263 of the I.T. Act, directing the A.O. to pass a fresh order. The A.O. then passed an assessment order under section 143(3)/263, determining the net taxable income at Rs. 3,14,39,000.Issue 2: Appeal before ITAT and High CourtThe assessee appealed before the ITAT against the order passed under section 263 of the I.T. Act. The ITAT, in its order dated 18.05.2016, set aside the order under section 263 and allowed the appeal of the assessee. The Tribunal's order was reproduced in the appellate order. The Revenue filed a Departmental Appeal before the Hon'ble Delhi High Court, which was dismissed on 06.02.2017. The Ld. CIT(A) noted that since the order under section 263, on the basis of which the impugned assessment order was passed, was cancelled by the Tribunal and the Departmental Appeal was dismissed by the High Court, the impugned order was liable to be cancelled, and the appeal of the Assessee had to be allowed.Issue 3: Dismissal of Departmental AppealAfter considering the submissions, it was concluded that no interference was warranted since the impugned order was passed based on the order under section 263, which had been set aside by the ITAT, and the Departmental Appeal had been dismissed by the High Court. Consequently, nothing remained in favor of the Revenue to pursue the present appeal, leading to the dismissal of the Departmental appeal.In conclusion, the appeal of the Department was dismissed, as the impugned order was based on a previously set aside order under section 263, and the Departmental Appeal had been rejected by the High Court.