TaxTMI 
TaxTMI 
2015 (6) TMI 606
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....Act dated 21.11.2013 in all the above assessment 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.....
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....s framed s under :- S.N. Asst. yr. Asstt. section Date of Asstt. Assessing Officer 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-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....
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....under Respectfully, following the ITATs 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 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 ....
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....nder 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 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, in....
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.... Act, it does not provide for communication of the assessment order to the assessee. His further contention is that at any rate the assessee had in fact, acquired knowledge of the assessment order at least when proceedings under section 24(2) of the Act had been initiated. Therefore, 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....
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....ons of the assessee that no orders(which are sought to be revised) had been served upon the assessee, dropped the proceedings u/s. 263 of the IT act. Thereafter fresh notice was issued u/s. 263 of the IT Act dated 11.12.2013, which reads as under : "NOTICE U/S 263 FOR AY 01-02, 02-03, 03-04, 04-05 AND 05-06 Vide letter 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....
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....his view of the matter, I hereby provide you an. opportunity to explain/clarify as to why the aforesaid orders of the A.O. (at item no. V/VI) be not revised U/.5 263 of the IT Act. The date and time for compliance is 20th December, 2013 at 11.00 am. (Raj Kumar Lachhiramka) Commissioner of Income tax, Allahabad" 6. The assessee challenged 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 ....
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....antive rights and therefore only apply prospectively and not retrospectively. For these two arguments, many decisions were relied upon some of which are - Oxford Academy for Career Development v. Chief C1T [2009] 315 ITR 382 (All.); Society for the Promotion of Education, Adventure Sport & Conservator of Environment v. Commissioner of Income-tax, Central, Kanpur (2008] 171 Taxman 113 (All) and Welham Boys' School Society v. CBDT [2006] 285 ITR 74 (Uttaranchal). Also the decision of the Hon'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 (cop....
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.... examining the allowability of exemption u/s 11 of the I.T. Act. (emphasis supplied). The A.O. while revising the demands as aforesaid (at item no.V/VI) did not make any efforts/inquiries to find out as to whether the assessee had complied' with the provisions of section 11 and 13 of the IT Act. This non-application of mind by the A.O has rendered such orders erroneous in so far as they at e prejudicial to the interest of revenue." (4-2) Without prejudice to the above, the assessing officer has given appeal effect of the 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 with....
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....ove, the demands revised on the basis of the order of the Hon'ble ITAT restoring registration pertain to the ones passed u/s 143(3) for these years on 28.12.2010. These orders are barred by limitation for the purposes of their revision u/s 263. It has been held in the case of Commissioner of' Incometux, Delhi - I v. Bharti Airtel Ltd. [2013] 37 taxmann.com 218 (Delhi) that limitation for passing revisionary order is to begin from date of original order instead of reassessment order, where subject matter of additions made in revision 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....
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....s 12A is granted to the society with retrospective effect. (8-3) Hence in these circumstances, the "order". passed by the ACIT cannot be said to be erroneous. (8-4) Your Honor, without prejudice to the above, in view of the order of the Hon'ble CIT dated 27-12-2011, now to hold that the order passed by the AO was erroneous is a mere change of opinion which is not tenable in law. (9-1) The taxable income of the returns filed for the years under question was nil. (9-2) The assessments were framed as under on 28.12.2010 u/s 143(3)/254 after denying benefit of registration u/s 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 ....
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....point of view whether these can be treated as application of income. (10-7) According to the theory of merger, the orders of assessment merge with appellate orders. As such tile assessment orders and the orders of 01/12/2011 sought to be revised do not survive as on date. The notice dated 11.12.2013 issued by your good self has become infructuous in view of the appellate orders dated 21st November, 2013. As such, the same may kindly be dropped. . (10-8) The main basis of the revision of the orders u/s 263 that no speaking, orders have been passed therefore does not survive. (10-9) It is pertinent to mention that in the appellate proceedings, the expenses disallowed are reduced as follows -. Particulars AY. 2001-02 AY. 2002-03 AY. 2003-04 AY. 2004-05 AY. 2005-06 Income after revision (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,....
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....13 of the *Act. In absence of any such application of mind by the A.O., there is no question of formation of an opinion by the A.O. Accordingly, this objection of the assessee has no merit. iii) The. third objection is that the allowability of the exemption u/s 11 of the Act could be clearly determined from the records of any of the asstt. year. In this regard, it is to be stated that being "clearly determined from the records" and "having been verified by the A.O." are two separate things. I am not, even for a moment, prejudging the issue. I am only stating that the fact of non application of mind by the A.O. to the impugned issue has rendered his orders erroneous and prejudicial to the interest of the revenue and he is being directed to apply his conscious mind to the requirement of provisions of Sec. 11 to 13 before allowing the benefits u/s 11 of the Act. iv} The next objection is that 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....
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....on'ble ITAT (vide its order dated 21.06.2011), the A.O. passed orders modifying the demands (raised through earlier orders) by simply allowing the deduction u/s 11 of the I.T. Act. While passing such order (by giving benefits under section 11 the I.T. Act), the A.O. did not at all examine if the assessee had complied with all the legal requirements of sec 11 to 13 of the IT Act. The Hon'ble ITAT had simply restored the registration u/s 12A but that order never directed the A.O. to accept the claim of the assessee as such without making any enquiries in that regard. It is settled law that even if the assessee is registered u/s 12A, it was the bounden duty of the A.O. to examine the claim at the altar of the specific provisions of sec. 11 to 13 of the Act, which was not done by the AO. This inaction on the part of the A.O. rendered such orders erroneous. Further, these erroneous orders are prejudicial. to 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 a....
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....inafter referred to as the Act. 2. Asst. yr 2001-02 and 2002-03 Upon regular assessments, in view of its registration as a charitable trust under s. 12A of the Act, appellant's income was held to be exempt from tax. 3. 27.3.2006 The appellant was assessed to tax for asst. yr. 2003-04 under s. 143(3) of the Act. Again, appellant's claim for exemption was allowed, (asst. yr. 2003-04, pp. 1-11 of paper book). 4. 26.12.2006 Appellant was assessed for asst. yr. 2004-05 under s. 143(3) of the Act. In that assessment proceeding, the AO chose to disallow the claim of exemption of the appellant on the ground of view of change of its objects of formation. 5. 31.12.2007 Adopting the reasoning contained in the assessment order for asst. yr. 2004-05, the appellant's assessing authority reassessed the appellant for asst. yrs. 2001-02, 2002-03 and 2003-04 and similarly charged it to tax. (asst. yr. 2003-04 pp. 120-23 of paper book) 6. 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....
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....y the CIT, Allahabad under s. 12AA(3) of the Act. The Tribunal, thus restored the appellant's registration granted under s. 12A of the Act, dt. 16.8.1975. (asst. yr. 2003-04, pp. 76-153 of paper book) 12. 1.12.2011 The assessing authority of the appellant gave appeal effect in pursuance of the order-dt, 21.6.2011 passed by this Hon'ble Tribunal. The demands that had been created under the assessment order dt. 28.12.2010 were modified in view of the entitlement of exemption arising in favour of the appellant upon the order dt. 21.6.2011. (asst. yr. 2003-04, p. 154 of paper book) 13. 21.11.2013 Also, subsequently, CIT(A), Allahabad, has partly allowed the appellants appeals for asst. yrs. 2001-02 to 2005-06 against assessment/reassessment orders dt. 28.12.2010. Thus, he partly allowed the expenditure claimed by the appellant that had been disallowed by the assessing authority, vide his orders dt. 28.12.2010. (Asst. yr. 2003-04 pp. 155-210 of paper book) 14. Now appeal effect is to be 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 ....
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....s to be understood in the context of section 143(3).All that is needed is that there must be some writing initialed or signed by the Income-tax Officer before the period of limitation prescribed for completion of the assessment has expired in which the tax payable is determined. The form usually styled as the "assessment form" need not itself contain the computation of tax as well." 10. He has also relied upon the order of ITAT Mumbai Bench in the case of Board of Control for Cricket in India vs. DIT (Exemption), 278 ITR (AT) 83, in which it was held that - "The term "order" in the context of any proceeding under section 263 covers each and every order passed in any proceeding under the Act. Thus, the revisional jurisdiction of the Commissioner extends to revising any order which he considers to be erroneous and prejudicial to the interests of the Revenue. Therefore, the contention of the assessee that the authorization issued by the Assessing Officer was not an order within the meaning of section 263 and it was not amenable to revisional jurisdiction under section 263 could not be accepted." 11. Considering the submissions of the parties, we are of the view that the conte....
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....ed upon the decision of Bombay High Court in the case of M. Visvesvaraya Industrial Research and Development Centre vs. ITAT, 251 ITR852, in which it was held that registration does not preclude enquiry whether income of the trust had been applied for a charitable purpose in a particular year. 13. We have considered the rival submissions. It is admitted fact that the registration u/s. 12AA validly exists in favour of the assessee, through which the assessee is entitled for exemption u/s. 11 to 13 of the IT Act. There is no dispute that even if registration u/s. 12AA have been granted, the AO could examine the applicability of section 11 to 13 of the Act in assessment order while completing the assessment proceedings. It is, therefore, to be seen in the facts and circumstances of the case whether the AO has examined the issue of applicability of section 11 to 13 in the case of assessee. The assessee in the paper book filed copy of the assessment order in the case of assessee for the assessment year 2003- 04 u/s. 143(3) dated 27.03.2006 in which the AO examined the case of the assessee in the light of registration granted u/s. 12A of the Act and after elaborate discussion, income ....
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....t. The AO, thereafter passed the ITNS 150 on 01.12.2011, in appeal effect reference to order dated 28.12.2010, in which he has granted relief to the assessee by reducing the amount of Rs. 2,91,22,366/- on account of permissible accumulation at the rate of 15% and also reduced the capital expenditure incurred during the year in a sum of Rs. 1,84,61,306/- and reduced the demand in the case of assessee. It may be noted here that relief allowed by the AO in ITNS 150 noted above, is the same which was allowed by the AO while passing the original assessment order dated 27.03.2006 (PB-1). Thus, the AO had already examined the applicability of provisions of section 11 to 13 of the IT Act because registration was effective in favour of the assessee at the original assessment stage. Therefore, if the same relief is granted to the assessee on account of registration restored by ITAT in favour of the assessee, there is nothing wrong in ITNS 150 order dated 01.12.2011. The reopening of assessment u/s. 148 and resultant order dated 31.12.2007 thus would not be relevant on account of Tribunal order passed on 24.04.2009 because it was held that the AO cannot open the question of registration on ye....
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....Supreme Court in subsequent decision in the case of CIT vs. Max India Ltd., 295 ITR 282. Hon'ble Gujrat High Court in the case of CIT vs. Amit Corporation, 21 Taxman.com 64 held that where the AO after detailed verification of records and making enquiry had framed assessment, the Commissioner could not revise the order of AO. Considering the above discussion, it is clear that the AO as well as the ld. CIT(A) have examined that the assessee has fulfilled the requirement of section 11 to 13 of the IT Act, therefore, while giving appeal effect, if the AO has granted relief to the assessee in ITNS 150, the appeal effect order dated 01.12.2011 in ITNS 150 would not be treated as erroneous in so far as it is prejudicial to the interests of Revenue. 14. It is further contended on behalf of the assessee that the original orders including order dated 28.12.2010 stood merged in the order of ld. CIT(A) dated 21.11.2013 specifically on the issue of exemption u/s. 11 to 13 of the IT Act. Therefore, the order u/s. 263 on the same issue is void ab initio . The ld. Counsel for the assessee relied upon the decision of the Supreme Court in the case of CIT vs. Shri Arbuda Mills Ltd., 231 ITR 50, i....
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....oning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject matter of a reference in the High Court or that the High Court's order is under appeal before the Supreme Court. Hence, where the Assessing Officer follows the decision of an appellate authority, it cannot be said that his decision is erroneous. Such a decision cannot be revised by the Commissioner of Income-tax under section 263." 15.1 Hon'ble Bombay High Court in the case of Prudential Assurance Company Ltd. Vs. DIT and Another, 324 ITR 381 held - "Held, allowing the petition, that the invocation of the jurisdiction under section 263 was improper. The Commissioner had ex facie made a determination contrary to the plain language of section 245S when he held that the ruling of the AAR in the case of Fidelity Northstar Fund would apply to the case of the assessee. Unless the binding ruling in the case of the assessee was displaced by pursuing requisite procedures under the law, that ruling must continue to operate and be binding between the assessee and the Revenue. In any event, the Commission....
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....the original assessment order and also as per the direction of the Commissioner (Appeals). Aggrieved thereby, the assessee once again filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) in his order dated March 8, 1991, held that there could not be any interference in the Assessing Officer's order dated December 8, 1989 which merely gave effect to the appellate order since the appeal on that ground with regard to carry forward of loss was dismissed by the order dated March 7, 1988. However, relying upon the judgment of the Supreme Court in CIT vs. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518 and that of the Calcutta High Court in the case of Presidency Medical Centre (P) Ltd. Vs. CIT [1977] 108 ITR 838, the Commissioner (Appeals) opined that the refusal to carry forward loss was contrary to the aforesaid decisions and held that the appeal order dated March 7, 1988, was to be rectified and accordingly rectified the same. The Tribunal held that the appeal by the assessee against the order of the Assessing Officer giving effect to the order of the Commissioner ( (Appeals) was not maintainable as that would be nothing but a reiteration of the decision e....