TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 798
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....m Income Tax u/s 10(20) and 10(20A) as a local authority since its inception till AY 2003-2004. However, after the amendment made in the said sections w.e.f. 1.4.2003, the assessee was required to seek registration u/s 12AA of the Act to seek exemption u/s 11, on the ground that the objects enumerated in the SRA Act was for carrying out legal obligations which fell within the definition and ambit of "charitable purposes" as defined in section 2(15). The assessee was duly recognized as a "Charitable Institution" and Registration u/s 12AA was granted, w.e.f. AY 2003-04 onwards. Since then, the assessee was liable for benefit of exemption u/s 11. However, in all the assessments years since AY 2003-04, the consistent view of the AO had been that, the assessee is not a valid trust and therefore, the exemption/benefit available u/s 11 will not be applicable to the assessee. The Ld. AO for the impugned assessment year i.e. AY 2009-10 also, following the similar pattern and reasoning denied the assessee, claim for exemption u/s 11 completely and taxed the entire surplus amount of Rs. 83,98,10,894/- as per income & expenditure account. Such an exemption was denied by the AO in the assessmen....
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....of Rs. 83,89,10,394/- was held to be taxable by the AO in the assessment order dated 22.12.2011, which is the subject matter of revision u/s 263 here in this appeal. 4. Aggrieved by the said assessment order dated 22.12.2011 denying exemption u/s 11, the assessee had preferred an appeal before the CIT(A)-I, Mumbai, who vide order dated 25.06.2012 allowed the assessee's claim for exemption u/s 11 on the reasoning that, in the earlier years the first appellate authorities after following the decision of Hon'ble Supreme Court in the case of CIT vs Surat City Gymkhana [2008] 300 ITR 214 and CIT vs Gujarat Maritime Board [2007] 295 ITR 56, had allowed the assessee's appeal on the ground that the registration u/s 12AA has not been cancelled. Not only that the Tribunal has also decided this issue in favour of the assessee in the earlier years. The Ld. CIT(A) had referred and relied upon the order of the Tribunal for the AY 2007- 08. Thereafter, in the order giving effect to the first appellate order by the AO, the income of the assessee was revised and was determined at "nil". Against the first appellate order, the revenue had preferred second appeal before the Tribunal for the impugned ....
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....amended proviso to section 2(15) and came to the conclusion that the assessment order is erroneous and prejudicial to the interest of the revenue and, therefore, has to be set aside and to be framed afresh after considering the proviso to section 2(15). 6. Before us Ld. Senior Counsel, Shri S.E. Dastur, after explaining the entire background of the case, submitted that, here in this case the assessment was completed u/s 143(3) after denying the exemption u/s 11 and taxing the entire surplus income. The assessment order as a whole was challenged before the CIT(A) which has been allowed in favour of the assessee completely. Thus, the whole of the assessment order got merged with the CIT(A)'s order. Thereafter, when the revenue had preferred an appeal before the Tribunal, no such ground on account of proviso to section 2(15) was raised even though it was there in the statute. The Tribunal too confirmed the order of the CIT(A). This inter alia means that the assessment order finally got merged with the order of the Tribunal. After giving effect to the appellate orders, the income has been determined at "nil". At the time of issuing of the notice u/s 263 and passing of the impugned ord....
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....e fresh assessment again at the same figure, cannot be in any manner held to be prejudicial to the interest of the revenue. Here in this case, whether it can be said the assessment has been completed at a lesser tax, the answer would be negative, because in both the assessments the tax on the assessed income would be the same. Hence, no prejudice is caused to the revenue. In support of this contention, he relied upon a decision of Madras High Court in the case of CIT vs Shakti [2002] 244 ITR 246. 8. Mr. Dastur's third limb of argument was that, during the course of the original assessment proceedings, the assessee had submitted a detailed reply before the AO with regard to the amended section 2(15), that is, with reference to the proviso itself. This fact he pointed out is evident from the letter submitted before the AO on 30th November, 2011, a copy of which has been placed at pages 32 to 35 of the Paper book, wherein the assessee has specifically dealt with the amended provisions of section 2(15); Finance Minister's speech explaining the purpose of proviso to section 2(15) while introducing the said 'amendment' and also the CBDT Circular of 11 of 2008 dated 19.08.2008 explaining....
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....the order of the AO is definitely erroneous. The phrase "prejudicial to the interest of the revenue" has to be seen from the broader perspective and cannot be narrowed down in the terms of tax effect only as canvassed by Ld. Sr. Counsel, because ultimately if the matter goes against the assessee on Proviso, then the assessee would be liable to pay the tax on surplus. Here, the assessee might have submitted the reply to the AO on proviso to section 2(15), but the AO has neither raised any query nor applied his mind. Therefore, the order of the DIT setting aside the assessment is well within the scope and jurisdiction of section 263. Thus, Ld. DR strongly relied upon the impugned order of the DIT. 9. We have heard the rival contentions, perused the relevant finding given in the impugned order and the material placed on record. It is an undisputed fact that the entire exemption of claim u/s 11 was denied by the AO in the assessment order passed u/s 143(3) which is the subject matter of revision u/s 263 here in this appeal. As a result of such an order, the entire surplus amount revealed from income and expenditure account of Rs. 83.98 crores was assessed. The entire assessment order ....