TaxTMI 
TaxTMI 
2017 (11) TMI 1695
X X X X Extracts X X X X
X X X X Extracts X X X X
....e circumstances of the case and in law, the ld. ITAT was correct in mentioning in respect of confirming disallownace of Rs. 93,73,063/- out of CER disallowances that- "This ground is not survived as the AO has already assessed the income at NIL." inspite of the fact that the ITAT itself not allowed the exemption u/s 10(20) for the year under consideration and appeal of the department is pending before the Hon'ble High Court on the issue of 10(20) for the A.Y. 2005- 06?" 3. This Court while admitting the ITA No. 194/2017 on 17.08.2017, framed following substantial questions of law "i) Whether on the facts and circumstances of the case and in law, the ld. ITAT was correct in allowing exemption u/s 11 of the IT Act, 1961 to the assessee without appreciating the fact that AO has given detailed reason in the assessment order to establish the activities of the assessee are not charitable in view of the amended provisions of Section 2(15) of the IT Act, 1961 despite it being registered u/s 12AA by the CIT and therefore, it is not entitled for benefit of exemption u/s 11?" ii) Whether, on the facts and in the circumstances of the case and in law, the ld. ITAT was corre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould deny to allow benefit of section 11 to the assessee in view of newly inserted proviso to Section 2(15) and the AO did not allow benefit of section 11 observing that the assessee is hit by the proviso to Section 2(15)?" 6. This Court while admitting the ITA No. 200/2017 on 17.08.2017, framed following substantial questions of law:- "i) Whether on the facts and circumstances of the case and in law, the ld. ITAT was correct in allowing exemption u/s 11 of the IT Act, 1961 to the assessee without appreciating the fact that AO has given detailed reason in the assessment order to establish the activities of the assessee are not charitable in view of the amended provisions of Section 2(15) of the IT Act, 1961 despite it being registered u/s 12AA by the CIT and therefore, it is not entitled for benefit of exemption u/s 11?" ii) Whether, on the facts and in the circumstances of the case and in law, the ld. ITAT was correct in not appreciating the fact that even if the assessee was registered u/s 12A by the CIT in pursuance of order of Hon'ble ITAT dated 31.3.2009 & 4.5.2012, the AO could deny to allow benefit of section 11 to the assessee in view of newly inserted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily59 amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irement which must be fulfilled where an assessment is sought to be reopened beyond a period of four years. The existence of the jurisdictional condition must be indicated in the reasons which are furnished to the assessee. The fulfillment of the condition is a pre-requisite and if it is absent, assessment cannot be reopened beyond four years. The AO cannot improve upon the reasons for reopening the assessment or bridge the lacunae later. If the reasons disclosed do not indicate the fulfillment of the jurisdictional requirement, the reopening is invalid. In the present case the reasons as recorded by the AO for reopening the case u/s 148 of the Act reads as under :- "Facts of the case are that the assessee filed the return of income for the A.Y. 2005-06 on 29.10.2005 declaring total income at Rs. 1053790/- and the assessment was completed vide order u/ 143(3) dated 22.10.2007 at income of Rs. 40797633/-. The matter is before High Court on the issue of status. The department treated it as AOP while Tribunal has treated it as Local authority. The case records were examined in connection with assessment proceedings for AY 2009-10. As per the account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ility which I not allowable. Thus apparently income to the extent of Rs. 52766150/- has escaped assessment. This escapement was on account of failure of the assessee to disclose the accounts in proper Income from auction of plots- Besides this it is also seen that the assessee does not show profit from auction of plots. It is seen that substantial part of sale is from auction of properties. In auction, properties fetch more price than the normal price. As stated above, a sale price is determined by the Board on anticipation basis covering the cost of project. This sale price which is accounted for in the P&L/Works account can be called anticipated sale price (ASP). Or in other words ASP is the price realized on sale which includes profit. This profit on property constructed in the current year is realized in the current year or in subsequent year by way of adjusting of sale price in the works account. But in case of auction the profit is more which is not accounted for in P&L. Before auction properties, Reserve price is based on ASP which in normal circumstances would be more than ASP. In case of auction, the property will fetch much more price than the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trary to the decision of Bombay High Court as well as the decision of Gujarat High Court. 9. Learned counsel for the appellant placed reliance in Praful Chunnilal Patel vs. M.J. Makwana or His Successor Assistant Commissioner of Income Tax, 1999 (236) ITR 832, wherein it has been observed as under:- "11. The cases of underassessment or excessive relief which are deemed cases of escapement of income leave no scope for an argument that they are not the cases of income having escaped assessment. If the AO prima facie finds or discovers that the case falls in any of the clauses of Expln. 2, then those cases will be of deemed cases of income that has escaped assessment and without anything more beyond such find or discovery, he can initiate the proceedings under s. 147 of the Act. On a proper interpretation of s. 147 of the Act, it would appear that the power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion on the question whether there was a transfer on 19th September, 1990, of the land in question to the firm and that the amounts credited to the accounts of the partners who had contributed the lands to the firm, were meant to be the price of the land which was to be actually paid from the collections received by the firm from membership fees as soon as received, as was envisaged admittedly in para. 11 of the partnership deed, there was no question of any change of opinion when on the relevant facts being found the AO, while protectively assessing the petitioner-assessee for the year 1993-94, noted that this was a case for issuance of a notice under s. 148, which came to be issued thereafter. When the amount of taxable income and of the tax payable thereon were not ascertained at all by the AO in respect of the transfer made by the assessee in favour of the firm on 19th September, 1990, there obviously was no opinion formed in that regard and consequently, there would not arise any question of a mere change of opinion. In cases where the AO had overlooked something at the first assessment, there can, in our opinion, be no question of any change of opinion when the income which wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, though he may have taken an erroneous view of the law with regard to the mistake committed at the first assessment proceedings that he has found out. Therefore, unless it is shown that the AO never enquired into the matter at all or that he never honestly believed that a mistake has been made, the result of his investigation and initiation of the proceedings under s. 147 of the Act cannot be challenged on the ground of want of jurisdiction. The AO has to determine the facts and the law in order to give him jurisdiction to proceed and if in the determination of this he goes wrong, the proper remedy for the assessee would be to go up in appeal and to have the case referred to the High Court under the provisions of the Act. A writ of prohibition under Art. 226 cannot be issued against the AO in such cases." in another case, Dr. Amin's Pathology Laboratory vs. P.N. Prasad, Joint Commissioner of Income Tax and Ors. (No.1), 2001 (252) ITR 673, wherein it has been observed as under:- 8. Mr. Dastur, learned counsel for the assessee, next contended that, in the present matter, the period of four years elapsed on March 31, 1999, whereas, notice under Section 148 is issued on M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l v. M.J. Makwana [1999]236ITR832(Guj) . However, in the present case, the period of four years has since elapsed. Therefore, the proviso to Section 147 comes into the picture. Under the said proviso, no action can be taken after four years unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, it was contended on behalf of the assessee that, in the present case, there is no allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the present matter, as stated above, the assessee has been following the mercantile system of accounting for all items of expenditure and income except for all collections which are under cash basis. A reading of the assessment order clearly shows that the Assessing Officer failed to notice an important item, viz., an amount of Rs. 6,70,758 which represented unpaid purchases. The assessee-firm had claimed expenses in respect of all purchases. However, an amount of Rs. 6,70,758 represented unpaid purchases. It is for this reason that the Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons. 14. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT vs. DLF Powers Limited, ITA 973/2011 decided on 29th November, 2011 and BLB Limited vs. ACIT Writ Petition (Civil) No. 6884/2010 decided on 1st December, 2011. In the last decision it has been observed: 13. Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked. 15. Thus where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reasse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was accepted, merely because a certain element or angle was not in the mind of the Assessing Officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. Therefore, in our view, the Assessing Officer cannot change his opinion, which he has already accepted in his assessment order. We are of the opinion that the Tribunal has committed an error in reversing the finding of CIT (A). Accordingly, we answer the question posed for our consideration in favour of the assessee and against the revenue and the Tribunal has committed an error in holding that the reopening proceedings are valid, legal and within the jurisdiction of the Respondent. Even otherwise, the method of valuation is in order and since the valuations are made under two different Acts, they cannot be made basis for reopening of valuation. Accordingly, all these appeals are allowed. 11. Taking into consideration, the argument is hopelessly time barred. 12. In view of decision in D.B. Income Tax Appeal No.568/2009, CIT vs. Raj Housing Board Jaipur, decided on 26.05.2017, wherein it has been observed as under:- 3. While admitting the appeals, this Court has framed the su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of Section 51 of the JDA Act, for the purpose of discharging the statutory functions, "The Jodhpur Region Development Fund" is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es schemes for improvement of the specified urban area, which inter alia may provide for the acquisition of any land or other property necessary or effected by the execution of the scheme; the re-laying out of any land comprised in the scheme; the construction and re-construction of the buildings; the formation, construction and alteration of streets; the closure or demolition of dwellings or portion of the dwellings unfit for human habitation; the draining, water supply and lighting of the streets; the forming of open spaces for the benefits of the area comprised in the scheme or any adjoining area; all or any of the sanitary arrangements required for the area comprised in the scheme; the establishment and construction of the markets and other places of public requirement and convenience; the division of any land into plots for the erection of buildings for residential purposes; the provision of facilities for communication; the reclamation or reservation of the land for garden, afforestation and provision of fuel and grass supply and other needs of population; the planting and preservation of trees and plantation and any other matter for which in the opinion of the State Governme....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In Lucknow Development Authority's case (supra), while examining the question regarding applicability of proviso to Section 2(15), Allahabad High Court observed: "29. For the applicability of proviso to Section 2(15), the activities of the trust should be carried out on commercial lines with intention to make profit. Where the trust is carrying out its activities on noncommercial lines with no motive to earn profits, for fulfillment of its aims and objectives, which are charitable in nature and in the process (6 of 6) [ITA-568/2009] earn some profits, the same would not be hit by proviso to section 2(15). The aims and objects of the Mere selling some product at a profit will not ipso facto hit assessee by applying proviso to Section 2(15) and deny exemption available under Section 11. The intention of the trustees and the manner in which the activities of the charitable trust institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15)". 26. Coming to the decision of Jammu & Kashmir High Court in Jammu Development Authority's case (supra), relied upon by learned counsel for the Revenue, reveals ....