TaxTMI 
TaxTMI 
2015 (11) TMI 434
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....s to section 2(15) of the Income-tax Act with effect from April 1, 2009 and issue of application of accumulated income of the assessment year 2004-05 within the stipulated period up to March 31, 2008. 3. Learned counsel submitted that the Assessing Officer had completed assessment by taking a consistent view that the assessee was a charitable trust and income from kalyanamandapams, auditoriums, working women's hostel and hostel for girls is not liable for tax. 4. Learned counsel submitted that the activities are carried on by the assessee which is instrumental to the object of the assessee. According to learned counsel the Assessing Officer had gone into the details of the activities of the trust and taken the conscious decision that income of the assessee from kalyanamandapams, auditoriums, working women's hostel and hostel for girls are not liable for taxation. He submitted that the decision taken by the Assessing Officer is in conformity with the earlier order of the Tribunal in the assessee's own case and the judgment of the hon'ble High Court in the assessee's own case in Director of Income-tax (Exemptions) v. Willington Charitable Trust [2011] 330 ITR 24....
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....learned Commissioner of Income-tax. The scheme of the Income-tax Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to erroneous order of the Assessing Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. As held in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), the Commissioner can exercise revisional jurisdiction under section 263 if he is satisfied that the order of the Assessing Officer sought to be revised is (i) erroneous ; and also (ii) prejudicial to the interests of the Revenue. The word "erroneous" has not been defined in the Income-tax Act. It has been however defined at page 562 in Black's Law Dictionary (seventh Edition) thus' ; "'erroneous, adj. Involving error, deviating from the law'. The word 'error' has been defined at the same page in the same dictionary thus : 'Error No. 1 : A psychological state that does not conform to objec tive reality ; a brief that what is false is true or that what is true is false'. At page 649/650 in P. Ramanatha Aiyer's Law....
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....ing which was obvious and required application of mind or based on no or insufficient materials so as to affect the merits of the case and thereby cause prejudice to the interests of the Revenue. 10. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the Revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo motu proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the civil court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparen....
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.... a stereotyped order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid view, we are supported by the decisions of the hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC), Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC), and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). 11. In Malabar Industrial Co. Ltd.'s case the hon'ble court has held as under (page 87) : "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall the orders passed without applying the principles of natural justice or without application of mind." 12. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or....
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....appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge.'" 13. Similar view was earlier taken by the hon'ble Supreme Court in Siemens Engg. and Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the Income-tax O....
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....he Assessing Officer show that application of mind on his part on the issue of treating the income of the assessee from auditoriums and hostel. The evidence available on record is enough to hold that the return of the assessee with reference to this income was objectively examined or considered by the Assessing Officer. It is because of such consideration of the issues on the part of the Assessing Officer that the return filed by the assessee was not automatically accepted. The assessment order placed before us was passed after examination or enquiry or verification or objective consideration of the claim made by the assessee. However, the Assessing Officer has omitted to examine the issues relating to accumulation of income. His order is a completely non-speaking order on this issue. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order considering these issues raised by the Commissioner of Income-tax. In our view, the assessee should have no grievance in the action of the learned Commissioner in exe....
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....rder dated December 29, 2011, the Assessing Officer considered the income of auditoriums as business income and brought the same into taxation. The Commissioner of Income-tax while proceeding under section 263 of the Act vide order dated March 31, 2014 observed that there was an amendment to section 2(15) of the Act with effect from April 1, 2009. The assessee is engaged in commercial activities in running kalyanamandapams, auditoriums, working women's hostel and hostel for girls which have aimed at advancing "other objects of general public utility". In our opinion, this finding of the Commissioner of Income-tax is unwarranted and the Assessing Officer already brought the entire income from kalyanamandapam for taxation in his assessment order. There is no prejudice to the interests of the Revenue though he has not properly applied proviso of section 2(15) of the Act. The order of the Assessing Officer is erroneous against wrong assumption of facts. However, it is not prejudicial to the interests of the Revenue as there is no revenue loss to the Department. Moreso, the Commissioner of Income-tax in his order commenting on the order of the Commissioner of Income-tax (Appeals) fo....