TaxTMI 
TaxTMI 
2015 (6) TMI 606
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....t years which reads as under : NOTICE U/S 263 FOR AY 01-02, 02-03, 03-04, 04-05 AND 05.06 On perusal of the case records of the aforesaid years, the following facts emerge: I. That the assessment orders completed/passed by the Assessing Officer for all the aforesaid years had been set aside by the Hon'ble ITAT (vide their order dated 24th April, 2009) directing the AO to decide the matter afresh. II. that the Ld Commissioner of Income Tax, Allahabad cancelled the registration granted to the assessee u/s 12A vide his order dated 08.03.2010. III. that in view of the order of the Ld Commissioner of Income Tax, Allahabad (cancelling the Registration granted to the assessee), the Assessing Officer passed orders for all these assessment years wherein he out rightly rejected the claim of the assessee u/s 11 of the I.T. Act, since there was no registration existing u/s 12A which is prerequisite for entertaining any claim u/s 11 of the Income Tax Act, and the income of the assessee for all the aforesaid years was assessed as per the normal provisions of the Income Tax Act. IV. that the Hon'ble ITAT (vide its order dated 21.06.2011) quashed the order of the Ld. Commissioner of Income ....
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....-02 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 2. 2002-03 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 3. 2003-04 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 4. 2004-05 143(3) 26.12.2006 ITO-Shri Vipul Sinha 5. 2005-06 143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha (1-2) Against the first appeals for all these years, the Hon'ble ITAT passed a consolidated order dated 24/04/2009 in ITA No. 28(Alld)/2009 of Assessment Year 2001-02; I.T.A. No.29 (Alld)/12009 of Assessment Year 2002-2003; I.T.A. No.30 (Alld)/2009 of Assessment Year 2003-2004; I.T.A. No.31 (Alld)/2009 of Assessment Year 2005-2006; I.T.A. No.73 (A!ld)/2008 of Assessment Year 2004-2005; and I.T.A. No.280(Alld)/2008 holding that the "Assessing Officer cannot reopen the question of the registration of the institution from year to year as it solely falls within the jurisdiction of the learned Commissioner of Income Tax." (1-3) Thereafter, the assessments were made afresh in terms of the directions of the Hon'ble ITAT as under- S. No. Asst. yr. Assessment section Date of Assessing Officer 1. 2001-02 143(3) 28.12.2010 Asstt. CIT-Shri S. Anbuselvam 2. 2002-03 14....
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....t of these impugned years under assessment and taxes worked out. The Hon'ble ClT passed this order to direct the AO to grant registration with retrospective effect. This order did not ask the assessing officer to examine the allowability of exemption u/s 11 as the income was to be determined on the basis of the income tax return and the accompanying annexure. This was basically done to put an end to the long drawn battle of seven years (five at that time) between the department and the assessee. Accordingly, the registrations were granted and the income recomputed. There was nothing wrong with this procedure. The direction, did not envisage passing of a speaking order to give effect as envisaged by the captioned notice. The notice dated 11.12.2013 only is a change in opinion of the directions given by the Hon'ble C1T dated 27.12.2011. It is a settled principle that a change in opinion is not tenable in law. It is therefore prayed that the proceedings may kindly be dropped. (3-1) Without prejudice to the above, in assessment year 2007-2008, registration was granted in the assessment. The Hon'ble CIT initiated proceedings in u/s 263 for the grant of registration in the asse....
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....he appeal effect as the record itself is sufficient for determination of income u./s 11. Thus, the reasons for which the revision of these appeal effects are sought are self-explanatory as per the record of all these years. The demand. revisions are thus not erroneous and therefore not prejudicial to the interest of the. revenue. It is thus prayed that the proceedings sought to be initiated u/s 263 may kindly be dropped. (5-1) Provisions of section 263 ere reproduced below - 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or r.10c!ifying the assessment, or cancelling the assessment and directing a fresh assessment. (5-2) it must be seen that the orders are both erroneous and prejudicial to the interest of the revenue. It has been held by the Hon'b....
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....herefore, the action under sec 24(2) of the Act cannot be assailed by the assessee. If this contention of the learned counsel were to be accepted, it would result in deprivation of a valuable right of appeal by the assessee. It was suggested by the learned counsel for the Revenue that the net effect of the order passed by the Commissioner of Gift-tax is nothing but reassessment. This prescribed by subsection (2) of section 16A of the Act. In view of the foregoing discussion, out answer to the question referred is in the negative, in favour (If the assessee and against the Department. There shall be no order as to costs. Since the impugned "orders" are not served on the assessee, these cannot be subject matter of revision u/s 263. It is therefore prayed that on this ground also, the proceedings may kindly be dropped. (7-1) it has been stated in the captioned notice in para VI- "That the revised demand was by issuing a revised ITNS 150 wherein the income was made BNIL in all the Assessment Years except in A.Y. 2003-04 wherein it was reduced from Rs. 5,15,81,970/- to Rs. 39,83,300/- and no speaking order was passed. Without prejudice to the above, ITNS 150 is only a sheet of calc....
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....ter dt. 21-11-2013 the assessee was requested to show cause as to why the order for A.Y. 2001-02 to 2005-06 as passed by the A.O. on 01-12-2011 (giving effect to the Hon'ble I.T.A.T.'s order dated 21-06-.2011) should not be revised u/s 263 of the I.T. Act 1961. In response, the assessee's Ld. A/R Sri Sanjay Khanduja FCA attended & filed a written submission. One of the submission made was that the Orders sought to be revised had not been served on the assessee and, therefore, there could be no occasion to revise such orders. This fact of non service was verified from the range office & after verification, the proceedings u/s 263 were dropped vide order sheet entry dated 09-12-2013. On 11-12-2013, the office of the ACIT Circle- II has informed the undersigned that such orders for all the aforesaid years had been duly served on the assessee on 10-12-2013 & copies of receipts were also submitted for the records. Since orders have now been served on the assessee, the preliminary objection of the assessee has been met out & accordingly a fresh notice u/s 263 is being issued. On perusal of the case records of the aforesaid years, the following facts emerge:- II. That the assessment....
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....ed the notice u/s. 263 of the IT Act before the ld.CIT and filed the reply before him which reads as under : "The Hon'ble Commissioner of Income-tax, Allahabad. Sub: The Board of Directors of the Allahabad Agricultural Institute, Allahabad - Notice us 263 - Assessment Years 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06 - Reply Your Honor, Kindly refer to the notice no. F. No. CIT! And 1263 I 20 13 -14 dated 11.12.2013 issued by your good-self u/s 263 for assessment years 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06 issued to The Board of Directors of the Allahabad Agricultural Institute, Allahabad to show cause why the orders of the these impugned years be not revised as they are "erroneous in so far as they are prejudicial to the interest of the revenue." Your Honor, it is important to go through the facts of the case (1) FACTS (1-1) The original assessment was framed as under :- S. No. Asst. yr. Assessment section Date of Asst AO 1. 2001-02 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 2. 2002-03 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 3. 2003-04 147/143(3) 31.12.2007 Asstt. CIT-Smt. Belu Sinha 4. 2004-05 143(3) 26.12.2006 ITO-S....
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....39;ble Allahabad High Court had already been pronounced on 24th February 2010 in the case of Commissioner of Income-tax v. Manav Vikas Avam Sewa Sansthan. Thus, the reassessment proceedings were prejudicial to the interest of the assessee and in favour of the revenue. . (1-6) The appeal against the order of cancellation of the registration passed u/s 12AA(3) was allowed by the Hon'ble ITAT vide order dated 21.06.2011 wherein the registration granted originally u/s 12A on 16- 08-1975 withdrawn by the Hon'ble CIT vide order dated 08-03-2010 was restored. SUBMISSIONS (2-1) The Hon'ble CIT passed an order u/s 254 / 12AA(3) of the Income Tax Act, 1961 on 27-12-2011 (copy enclosed as annexure "1") holding as under Respectfully, following the ITAT's order in ITA No.113/(Alld)/2010 dated 21-06-2011 in the case, registration under section 12A is granted to the .society with retrospective effect. Registration was denied in the assessment / reassessment of these impugned years under assessment and taxes worked out. The Hon'ble ClT passed this order to direct the AO to grant registration with retrospective effect. This order did not ask the assessing officer to examine th....
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....he order of the ITAT in ITNS 150 to restore the registration, originally granted on 16-08-1975 for the society registered w.e.f. 25.09.1950 i.e. before the Income Tax Act of 1961, a precondition to allow claim u/s 11.. The return of each year is accompanied with the computation of income u/s 11 and 12 as annexed with the income tax return for each year accompanied by the audit report in form 10B. In the circumstances, "allowability of exemption u/s. 11 of the I.T. Act" can very easily be determined from the record of any of lese years The income can very easily be determined to see whether 85% has been applied on the objects and whether the accumulation is within the 15% as laid down under the Act. Also, whether the accumulation u/s 11(2) (which is not there in any year) is. duly supported by form 10 duly furnished before the completion of the assessment proceedings. It cannot be said that the AO has not applied her mind in giving the appeal effect as the record itself is sufficient for determination of income u/s 11. Thus, the reasons for which the revision of these appeal effects ore sought are self-explanatory as per the record of all these years. The demand revisions are thus n....
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....n are not dealt with in reassessment. Thus, the "order" sought to be revised are time barred. It is therefore prayed that these proceedings u/s 263 may kinc1ly be dropped. (7-1) For the proceedings of section 261 to lie, all of the following conditions must be fulfilled - (a) there must be an order. (b) it must be communicated to the assessee before the initiation of the revision proceedings. (c) the order must be both erroneous and prejudicial to the interest of the revenue. (d) the proceedings must nut be barred by limitation. In the instant case, it is clear that the all the four legs essentials for initiation of proceedings u/s 263 are not being fulfilled. It is prayed that the assessee seeks to place more papers and written submissions in these proceedings. It is therefore prayed that three weeks may very kindly be provided to furnish the same. Yours Faithfully, sd/- San jay Khanduja (AR)" 5. Thereafter, Sri Sanjay Khanduja, FCA attended on 30.01.2014 and filed a further reply which reads as under: To The Hon'ble Commissioner of Income-tax, Allahabad. Sub: The Board, of Directors of the Allahabad Agricultural Institute, Allahabad - Notice us 263 - Assessment ....
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.... 12A for the impugned years - ' Particulars A.Y. 2001-02 A.Y. 2002-03 A.Y. 2003-04 A.Y. 2004-05 A.Y. 2005-06 Income as disclosed Nil Nil Nil Nil Nil Gross receipts 5,52,52,919 8,37,41,099 19,41,49,106 32,72,61,085 48,10,52,399 Less : Expenses for purpose of the objects 4,66,29,625 6,67,77,119 14,69,75,740 25,10,55,354 36,79,12,648 Add : Expenses disallowed 29,62,933 35,56,761 44,08,599 77,34,092 74,64,819 Total income 1,15,86,230 2,05,20,740 5,15,81,970 8,39,39,820 12,06,04,570 Demand raised 12,49,941 1,35,47,688 3,76,85,344 4,37,21,360 6,93,66,047 (9-3) The assessed income was revised vide ITNS 150 dated 01.12.2011 as under after granting relief with respect to the accumulation allowable u/s 11 and capital expenditure (which was denied in the. assessment framed on 2812~2010) Particulars A.Y. 2001-02 A.Y. 2002-03 A.Y. 2003-04 A.Y. 2004-05 A.Y. 2005-06 Assessed income 1,15,86,230 2,05,20,740 5,15,81,970 8,39,39,820 12,06,04.570 Total relief allowed on the basis of extension of benefits of registration under s. 12A 1,15,86,230 2,05,20,740 4,75,83,670 8,39,39,820 12,06,04,570 Net taxable income Nil Nil 39,98,....
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.... (1-12-11) Nil Nil 39,98,300 Nil Nil Expenses disallowed in assessment 29,62,932 35,56,761 44,08,599 77,34,092 74,64,819 Relief 16,28,854 25,41,196 22,22,036 71,95,447 60,53,670 Income after relief of CIT(A)'s order Nil Nil 17,76,264 Nil Nil (10-10) With all the disallowed expenses as such, the demands in four of the five years were nil. After considering the reduction in the expenses disallowed in terms of the first appellate orders, the taxes due still remain NIL for four of the five assessment year and would stand reduced for the assessment year 2003-04. (10-11) ITNS 150 has to be drawn up afresh post *the first appeal order and the ITNS 150 dated 01.12.2011 therefore does not survive. Thus, It cannot be said that the orders (post merger) are prejudicial to the interest of the revenue. . (11-1) In the fact's and circumstances of the instant case, the orders sought to be revised are not neither erroneous nor prejudicial to the interest of. the revenue. In view of the merger of the appellate orders, it also cannot be said that ho speaking orders were passed. (11-2) It is therefore prayed that these proceedings u/s 263 for the assessment ....
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....hat ITNS 159 is only a sheet of calculation and may not be equated to an "order", This objection also has no merits since there is no statutory prescribed proforma for passing orders or giving appeal effects. In these ITNS l50, the A.O. has effectively given the appeal effect by clearly writing as follows: "Relief allowed by ITAT Alld. Order No.113 / (Alld) /2010 dt 21.06.2011. Registration Certificate dated 16.08.1975 as had been issued by the Ld. CIT, Lucknow the name of Allahabad Agriculture Institute is maintained and held to be valid and effective. Thus, these ITNS 150 constitute "orders" passed by the A.O., which can be revised by the CIT. It is a trite law that Order giving effect to the appellate orders is also an "order" which can be revised by the CI.T. u/s 263 of the Act. v) The next objection is that the Asstt. Orders passed by the A.O. dated ----- had been subjected to appeal & the Ld. CI.T. (Appeal) had passed orders in those cases vide his orders dated 21.11.2013 and therefore, the "doctrine of merger" shall apply. This objection of the assessee also is devoid of any merit since the subject "orders" for these revisional proceedings are not the assessment orders bu....
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....o the interest of the Revenue since the A.O. allowed benefit u/s 11 without examining if the assessee had complied with all the statutory previsions of sec 11 to 13 of the I.T. Act. Such non-application of mind and failure to make due enquiries has rendered such orders erroneous and prejudicial to the interest of Revenue. In this regard reference is made to the following decisions: i) CIT v/s. Bhagawan Das 272 ITR 367 (Alld.) Wherein the Hon'ble Jurisdictional High Court had held that an order which has been passed without application of mind will also fall under the expression erroneous & prejudicial to the interest of Revenue. (ii) Malabar Industries 243 ITR 83 (SC) wherein it was held by the Hon'ble Supreme Court that in the same category fall orders passed without applying the principle of natural justice or without application of mind. iii) Rampyari Devi Sarogi vs CIT (1968) 67 ITR 84 (SC) iv) Srnt. Tara Devi Aggrawal v/s. CIT (1973) 88 ITR 323 (SC) The aforesaid two cases were analysed by the Hon'ble Delhi High Court in its decision: CIT v/s DLF Power Ltd. (345 ITR 446) wherein it has observed: "These two decisions show that it is not necessary for the Com....
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.... 31.12.2007 Also, appellant's regular assessment under s. 143(3) of the Act for asst. yr. 2005-06 was completed and the appellant was similarly assessed to tax by depriving it of the benefit of exemption as a charitable trust under s. 12A of the Act r/ws. 11 to 13 of the Act. 7. The appellant-carried the assessment orders in appeal to this Hon'ble Tribunal by means of five separate appeals being Appeal Nos. 28. 29, 30 and 31 of 2009 for asst. yrs. 2001-02 to 2003-04 and asst. yr. 2005-06, respectively and Appeal No. 73 of 2008 for asst. yr. 2004-05 8. 24.4.2009 This Hon'ble Tribunal allowed all the above appeals by-the appellant for asst. yrs. 2001-02 to 2005-06. Amongst others, it specifically held (i) the AO cannot open the question of registration on year to year basis (ii) jurisdiction of the AO is confined to exemption whether income had been applied towards the objects in respect of which registration had been granted (iii) assessment/reassessment orders against the appellant for all the assessment orders were set aside (iv) a direction was issued to the assessing authority to make de novo assessments. (Asst. yr. 2003-04 pp. 24-44 of paper book) 9.....
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.... given to the order dt. 21.11.2013 by the assessing authority and benefit of expenditure as has been accepted by the CIT(A) in his order dt. 31.12.2013 has to be provided and consequently the demand of tax has to be reduced. 15. 11.12.2013 The CIT, Allahabad, issued notice under s. 263 of the Act proposing to revise ITNS 150, dt. 1.12.2011 for asst. yr. 2001-02 to asst. yr. 2005-06 on the reasons that ss. 11 to 13 of the Act have not been examined while giving appeal effect. 16. 3.11.2013 and 30.1.2014 The appellant replied to the above notice and objected to notice on grounds of limitation, jurisdiction and illegalities. 17. 25.3.2014 CIT, Allahabad, has annulled the ITNS 150 (described by him as orders), all dt. 1.11.2011, for the asst. yrs. 2001-02 to 2005-06 and has directed the AO to examine the whole issue afresh on the after of the provision of ss. 11 to 13 of the Act. Hence, the present appeals. 9. It is contended on behalf of the assessee that ITNS 150 in reference dated 01.12.2011 is not an order to be revised u/s. 263 of the IT Act. The ld. Counsel for the assessee submitted that notice of demand u/s. 156 is not an order to be revised u/s. 263 of the IT....
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....tion under section 263 could not be accepted." 11. Considering the submissions of the parties, we are of the view that the contention raised by the assessee that ITNS 150 is not an order to be revised cannot be accepted. The ld.CIT u/s. 263(1) may call for and examine the record of any proceedings under this Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interests of Revenue, may after giving reasonable opportunity of being heard and after making enquiries, pass order in accordance with law. The significant words used in this provision are "any proceeding under this Act" and "any order" . Hon'ble Supreme Court in the case of Kalyankumar Ray (supra) held that ITNS 150 is form of determining the tax payable is certainly an order in writing within the meaning of section 143(3). Therefore, ITNS 150 being part of the assessment order shall have to be considered the order passed under any proceeding under the IT Act and as such could be subject to revision and if conditions of section 263 are satisfied then it could be revised by the ld. CIT. This contention of the assessee is, therefore, rejected. 12. It is further co....
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....ned the case of the assessee in the light of registration granted u/s. 12A of the Act and after elaborate discussion, income of the assessee was computed. Certain deductions were made which were not treated as application of income and in the computation of income, the AO has granted deduction to the assessee of the capital expenditure incurred during the year under consideration in a sum of Rs. 1,84,61,304/- and reduced the income by permissible accumulation at the rate of 15% in a sum of Rs. 2,91,22,365/-.Thus, the AO examined the applicability of provisions of section 11 to 13 in the original assessment order and granted relief to the assessee because the assessee was granted registration u/s. 12A of the IT Act. Thereafter, the history of the assessee, as noted above, shows that in the same assessment year 2003-04, the AO passed another order u/s. 143(3)/148 dated 31.12.2007 (PB-12). Considering that since there is change in the objects of the assessee, therefore, the assessee is not eligible for benefit u/s. 11 & 12 of the IT Act and after certain disallowances made, income was computed accordingly. The issue ultimately travelled to the Tribunal in ITA No. 28/Alld./2009 etc. an....
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....account of Tribunal order passed on 24.04.2009 because it was held that the AO cannot open the question of registration on year to year basis and jurisdiction of AO is confined to examine whether income had been applied towards the objects in respect of which registration had been granted. The reopening of assessment thus would not be adverse in nature against the assessee. It may also be noted here that the AO also passed order on 28.12.2010 (PB-50) after direction of the Tribunal and benefit u/s. 11 & 12 were denied because the registration granted to the assessee was cancelled. The said order remained under challenge before the ld. CIT(A) who vide order dated 21.11.2013 for the assessment year 2003-04 allowed certain relief to the assessee because the registration u/s. 12AA have been restored in favour of the assessee and disallowance of expenses were examined in the light of provisions of section 11 of the IT Act. Certificate of the auditor was also considered and at PB- 177 & 179 (internal pages of the order 23 to 25), the ld. CIT(A) examined the issue in the light of registration restored to the assessee u/s. 12A and examined the expenses with application of income u/s. 11 of....
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....the assessee relied upon the decision of the Supreme Court in the case of CIT vs. Shri Arbuda Mills Ltd., 231 ITR 50, in which on the head notes, it was held - "Powers of Commissioner of Income-tax shall extend and shall be deemed to have extended to matters not considered and decided in appeal filed by assessee to CIT(Appeals). The ld. DR, however, argued that the ld. CIT has not cancelled the order of the AO. 14.1 Section 263(1)(c) of the IT Act provides that where any order referred to in this sub-section and passed by the AO had been the subject matter of any appeal, the powers of CIT under this sub-section shall extend to such matters as had not been considered and decided in such appeal. Since the issue of registration u/s. 12AA has been decided in favour of the assessee and a valid registration u/s. 12A exists in favour of assessee, therefore, the assessee would be entitled for deduction of exemption u/s. 11 and 12 of the IT Act. The AO originally passed the order on 27.03.2006 granting relief u/s. 11 to 13 of the IT Act and after cancellation of registration, the AO again passed the order on 28.12.2010 denying benefit of section 11 & 12 to the assessee on cancellation of....
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....ust continue to operate and be binding between the assessee and the Revenue. In any event, the Commissioner could not have possibly come to the conclusion that the view of the Assessing Officer was erroneous or that it was prejudicial to the interests of the Revenue when the Assessing Officer had followed a binding ruling of the AAR. The assessment order which gave effect to a binding precedent, in this case of the AAR, could not be regarded as being erroneous or as being prejudicial to the interests of the Revenue. Since the invocation of the jurisdiction was not proper, the assessee should not be relegated to pursue the proceedings initiated under section 263.The notice dated March 18, 2010 was to be quashed and to be set aside." 15.2 Hon'ble Kerala High Court in the case of CIT vs. Palghat Shadi Mahal Trust, 212 ITR 287, held as under : "Held, dismissing the application, that what the Income-tax Officer did was to comply with the order of the Appellate Assistant Commissioner and to grant exemption to the assessee. In that event, the Commissioner could not invoke revisional jurisdiction under section 263.The Tribunal was correct in setting aside the order of the Commissioner of....
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....r ( (Appeals) was not maintainable as that would be nothing but a reiteration of the decision earlier taken by the Commissioner (Appeals). The Income-tax Appellate Tribunal held that the Commissioner (Appeals) erred in rectifying his earlier order. On a reference: Held, (i) that the judgments in Kulu Valley Transport Co. (P). Ltd.[1970] 77 ITR 518 (SC) and Presidency Medical Centre [1977] 108 ITR 838 (Cal) were available when the order dated March 7, 1988, was passed. The assessee chose not to file an appeal against the order of the Commissioner (Appeals). The Assessing Officer gave effect to the order of the Commissioner (Appeals) dated March 7, 1988. The appeal filed against the order of the Assessing Officer dated December 8, 1989, was not competent as the order of the Assessing Officer was made pursuant to the appeal order dated March 7, 1988, passed by the Commissioner (Appeals). (ii) That the Assessing Officer determined the loss for the assessment year in question, viz., 1982-83. The question whether or not it could be allowed to be carried forward in the subsequent years was dependent upon the fulfillment of the conditions prescribed in section 72 of the Income tax Act. I....