TaxTMI 
TaxTMI 
2014 (8) TMI 675
X X X X Extracts X X X X
X X X X Extracts X X X X
....) of the Act accepting the returned income. Subsequently, it was noticed by the AO that assessee has diverted the Trust fund to the Trustees and Family members without reasonable consideration, thereby attracting the provisions of section 13(1)(c) of the I.T. Act. The AO, therefore, issued notice u/s.148 of the I.T. Act. dated 09-03-2010. Subsequently, the AO completed the assessment u/s.143(3) r.w.s.147 vide order dated 31-12-2010 determining the income of the assessee at Rs. 15,08,339/-. 2.1 Subsequently, the Ld.CIT, on perusal of the records, noticed that during the year under consideration, the assessee had incurred expenditure of Rs. 30,35,565/- towards purchase of capital assets and the entire amount was claimed as deduction as it was applied for charitable purpose. He noted that the assessee has also claimed depreciation of Rs. 3,58,156/- on the assets purchased during the year as well as on the written down value of the assets on which 100% deduction was claimed in the previous assessment year on account of application for charitable purposes. According to Ld.CIT, this claim of depreciation, which was allowed by the AO during the assessment, tantamounted to double deduct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....finalizing the assessment proceedings and has simply accepted the assessee's claim of depreciation made in the return of income. The AO had not issued even a single show cause notice in this matter. This, according to the Ld.CIT, shows that the issue had slipped below the eyes of the AO and he did not have any occasion to consider as to whether the amount allowed as expenses on account of application of income is still be amenable to claim such depreciation. The AO had mechanically completed the assessment on the erroneous assumption of the correctness of the assessee's claim of exemption and deduction. Referring to the decision of the Hon'ble Delhi Court in the case of Gee Vee Enterprises Vs. Addl.CIT reported in 99 ITR 375 and the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT reported in 109 Taxmann 66 he held that the order passed by the AO has become erroneous. According to the Ld.CIT the view taken by the AO without making requisite enquiries or examining the claim of the assessee will per se be an erroneous view and hence will be amenable to revisional jurisdiction u/s.263 of the I.T. Act. 3.2 He further noted that taking one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ercise of revisional jurisdiction u/s.263 of the I.T. Act 1961 by the Ld.CIT, the impugned revision order passed by the Ld.CIT is bad in law, patently illegal, void ab-initio and being without jurisdiction the same may please be vacated/quashed. 2. The appellant may please be awarded cost u/s.254(2B) of the I.T. Act 1961 for arbitrary, perverse and malicious exercise of judicial powers by the Ld.CIT in sheer disregard to the decision of the jurisdictional Bombay High Court. 3. The appellant craves the permission to add, amend, modify, alter revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal". 5. The Ld. Counsel for the assessee strongly objected to the order passed by the CIT. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Institute of Banking Personnel Section reported in 264 ITR 110 he submitted that the Hon'ble High Court in the said decision has clearly held that depreciation is allowable on the assets the cost of which has been fully allowed as application of income u/s.11 in past years. The Hon'ble Bombay High Court has followed its ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issue stands covered by the decision of this Court in the matter of CIT Vs. Institute of Banking reported in (2003) 264 ITR 110 (Bom.). We note that the Tribunal has followed the decision of this Court in the Institute of Banking (Supra). In the circumstances, we see no reason to entertain the present appeal. Accordingly, the appeal is dismissed with no order as to costs". 5.3 He submitted that in view of these decisions, it is clear that the jurisdictional High Court has decided the issue in favour of the assessee. The above decision of the jurisdictional High Court has not been challenged by the Revenue. Therefore, it is binding on the department. He submitted that even though these decisions were brought to the notice of the Ld.CIT, he, instead of dropping the 263 proceedings, set-aside the matter to the file of the AO which was not proper. He accordingly submitted that the order of the CIT being bad in law, patently illegal and void ab-initio and being without jurisdiction should be vacated/quashed. 5.4 Referring to ground of appeal No.2 he submitted that the assessee should be awarded costs u/s.254(2B) of the I.T. Act for the arbitrary, perverse and malicious exercise o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er she submitted that the AO has not at all made any enquiry nor the assessee submitted any explanation regarding the claim of depreciation of the assets, the cost of which has already been claimed as deduction u/s.11 of the I.T. Act by treating the same as applied for charitable purposes. No enquiry whatsoever was made by the AO. There was complete non application of mind by the AO. Therefore, the Ld.CIT was fully justified in restoring the issue to the file of the AO for reexamination of the issue of claim of depreciation of fixed assets. 6.1 So far as the decisions of the Hon'ble Bombay High Court relied on by the Ld. Counsel for the assessee are concerned she submitted that the Hon'ble High Court in the case of Charanjiv Charitable Trust (Supra) following the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. (Supra) has held that allowing depreciation in respect of assets, the cost of which was earlier allowed as deduction as application of income of the trust would actually amount to double deduction. She submitted that the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. (Supra) was not brought to the notice of the Hon'ble Bombay High Court....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is concerned, she submitted that the ground raised by the assessee on this issue should be rejected outright. She submitted that the Ld.CIT while exercising his quasi judicial authority has only set aside the issue to the file of the AO and the assessee has been given an opportunity. While doing so, he has relied on the decision of the Hon'ble Supreme Court in the case of Rampyari Devi Saraogi Vs. CIT reported in 67 ITR 84 (SC) where it is held that no prejudice is caused to the assessee if the order is set aside since the assessee is getting an opportunity of being heard. 7. The Ld. Counsel for the assessee in his rejoinder referring to the decision of the Hon'ble Supreme Court in the case of Union of India and others Vs. Kaumudini Narayanan Dalal and another reported in 249 ITR 219 drew the attention of the Bench to the following observations of the Hon'ble Supreme Court : "If the Revenue did not accept the correctness of the judgment in the case of Pradip Ramanlal Sheth (1993) 204 ITR 866 (Guj.), it should have preferred an appeal thereagainst and instructed counsel as to what the fate of that appeal was or why no appeal was filed. It is not open to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; "13. The judgment of the Supreme Court in Escorts Limited Vs. Union of India (supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charitable trust/institution involving the question as to whether its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-D of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under normal commercial accounting principles, there is authority for the proposition that depreciation is a necessary charge in computing the net income. Secondly, the Supreme Court was concerned with the case where the assessee had claimed deduction of the cost of the asset under Section 35(1) of the Act, which allowed deduction for c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble issue, therefore, the Ld.CIT was not at all justified in invoking the provisions of section 263. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the only issue on which the Ld.CIT invoked jurisdiction u/s.263 is that the AO while framing the assessment u/s.143(3)/147 has not examined the claim of depreciation made by the assessee on assets, the entire amount of which was claimed as deduction on account of application for charitable purposes. 8.1 From the copy of the assessment order as well as the submission of the assessee before the AO during the course of assessment proceedings, we find the AO has not at all examined the issue of claim of depreciation on account of such assets the cost of which has been claimed as application of income for charitable purpose. Under such circumstances, the CIT was justified in issuing the notice u/s.263 to the assessee asking it to explain as to why the order should not be set aside under the provisions of section 263 of the I.T. Act. Howev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portunity of being heard, no prejudice is caused to the assessee if the order is set-aside. Now the assessee has come up before us for awarding cost u/s.254(2B) of the I.T. Act. We find identical ground was taken by the assessee vide ITA No.861 and 1423/PN/2012. We find the Tribunal vide order dated 31-07-2014 (where both of us are parties) has rejected the claim of award of cost by observing as under : "13. We have considered the rival arguments made by both the sides. In our opinion the Ld.CIT has passed an order u/s.12AA(3) of the Act during the course of discharge of her duty as CIT. While discharging her duty, her action might have caused some hardship to the assessee due to error of judgement but that in our opinion does not warrant levy of cost on the department. The Hon'ble Supreme Court in the case of Pooran Mal Vs. Director of Inspection (Investigation), Income Tax, New Delhi and others reported in 93 ITR 505, while adjudicating relief claimed in respect of action taken u/s.132 of the I.T. Act has observed as under (at page 518 and 519) : "We are, therefore, to see what are the inbuilt safeguards in section 132 of the Income tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....opinion, the safeguards are adequate to render the provisions of search and seizure as less onerous and restrictive as is possible under the circumstances. The provisions, therefore, relating to search and seizure in section 132 and rule 112 cannot be regarded as violative of articles 19(1)(f) and (g). A minor point was urged in support of the above contention that section 132 contains provisions which are likely to affect even innocent persons. For example, it was submitted, an innocent person who is merely in custody of cash, bullion or other valuables, etc., not knowing that it was concealed income is likely to be harassed by a raid for the purposes of search and seizure. That cannot be helped. Since the object of the search is to get at concealed incomes, any person, who is in custody without enquiring about its true nature, exposes himself to search. Sub section (4) of section 132 shows the way how such an innocent person can make the impact of the search on him bearable. All that he has to do is to tell the true facts to the searching officer explaining on whose behalf he held the custody of the valuables. It will be then for the Income tax Officer to as....