AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1107
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....2. The Id. CIT(E), Jaipur seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act without recording a specific and categorical finding that the subjected assessment order passed u/s 143(3) dated 12.12.2019 is erroneous and prejudicial to the interest of the revenue, in absence of which the entire proceedings u/s 263 is vitiated. Therefore, the impugned order dated 30.03.2022 u/s 263 of the Act kindly be quashed. 3. The Id. CIT(E), Jaipur seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the AO failed to examine the applicability of proviso to S. 2(15) and seriously erred in cancelling/ setting aside the subjected assessment order passed u/s 143(3) dated 12.12.2019, with a direction to the AO to examine the deduction so claimed by the assessee. The assumption of jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 30.03.2022 deserves to be quashed. 4. The Id. CIT(E), Jaipur seriously erred in law as well as....
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.... and development of areas and civic amenities including sale of land within Ajmer District. In this case, the assessment was originally completed vide order dated 12.12.2019 u/s 143(3) r.w.s. 147 by the ACIT, Circle (Exemption), Jodhpur (the AO), with NIL income. Thereafter, Proceedings have been initiated with reference to the said order on the following grounds: "On perusal of the assessment records, it is noticed that: (i) Assessee had a surplus income of Rs.1,46,35,981/-. It had further claimed capital expenditure of Rs.5,25,52,586/-. Thus after it has been concluded that assessee is hit by provisions of section 2(15) of the I.T. Act, 1961, the total taxable income comes to Rs.6,71,88,566/-. 3. In view of the above, it appears that the assessment order passed u/s 147 r.w.s. 143(3) of the IT. Act 1961 in your case for A.Y. 2012-13 on 12.12.2019 is erroneous in so far as it is prejudicial to the interest of the revenue." The grounds for invoking S. 263 are summarized as under: 1. That the assessee has a surplus income and had also further claimed capital expenditure. 2. That the assessee is hit by S. 2(15) of the Income Tax Act, 1961. In response to the show cause n....
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....st vide amended provisions of section 13(8)(effective from 01.04.2009) read with first and second proviso of section 2(15). However, on review of the said assessment order and records, for the relevant year, it was found that though the AO has denied the benefits of Section 11 and 12 of the Act to the assessee but at the same time, failed to tax the surplus income of Rs. 1,46,35,981/- and disallow the claimed capital expenditure of Rs.5,25,52,586/-. Since, the assessee was hit by provision of section 2(15) of the I.T. Act, 1961 the total taxable income comes to Rs.6,71,88,566/- (Rs.1,46,35,981/- + Rs.5,25,52,586/-), therefore, the assessment done at NIL income by the AO is erroneous as the final computation as per the order is not in line with the findings of the said Assessment Order. Consequently, the order of the Assessing Officer sought to be revised is erroneous; and it is prejudicial to the interests of the Revenue. 5.3 In view of the above discussion and legal position the order passed by the AO is set aside within the meaning of sec. 263 of the Act to AO to do de-novo assessment on the issues discussed after providing proper opportunity of being heard to the assessee and ....
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....r cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law." Ratio of these cases fully apply on the facts of the present case in principle. 2. No error at all committed by AO - Activates of ADA held Charitable: 2.1 At the outset it is submitted that the assessee is undisputedly registered u/s 12AA of the Act and eligible for exemption u/s 11 to 13 of the Act. In the order passed by the Hon'ble ITAT Jaipur vide ITA No. 1019/JPR/ 2011 dated 16.01.2015 (PB 15-18), it was held that various activities by the assessee are charitable in nature...: "2.4 We have heard the rival contentions and perused the material available on record. In our considered view, the registration cannot be refused on the basis of vague findings like the "scent of commercial activity" and accounts audit being as ....
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....e proviso below S. 2(15). The law as understood and declared thus by the Hon'ble Apex Court shall relate back to the date on which subjected assessment order was passed. No doubt the Hon'ble Apex Court made the effect prospective but the interpretation made by the Hon'ble court shall be applicable on all pending matters. Recently the Hon'ble apex court in the case of Principal CIT(Exemption) v Servants of People Society (2023) 330 CTR 617(SC) (DPB 40-43) has partly allowed the appeal of the department and restored the matter to AO for fresh consideration in the light of the decision of Ahmedabad Development Authority. In that view of matter, the AO has committed no error while assessing the income at nil. Therefore, there is no valid assumption of jurisdiction and consequently S. 263 cannot be invoked. 3. Due application of mind - Verification as required made: 3.1 It is submitted that the AO issues a show cause to which a detailed reply was submitted by the assesse vide letter dated 02.11.2019 starting from Pg. 4 till Pg. 14 of the assessment order wherein, reliance was placed on several case laws and detailed submission were made even on the aspect the provi....
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....eposits but finding that Ld. COIT had already granted registration u/s 254/ 12AA(1)(b) on 26.12.2018 (PB 49), assessed the income at nil vide order dated nil (PB 45-49). Accordingly, the department did not proceed further in any of these matters and they attained finality. All these admitted facts were available on record, when the AO passed the subjected order. 3.5 The law is well settled that where the AO acted following the decisions of the judicial High Court his order cannot be termed as erroneous. Kindly refer CIT v. G.M. Mittal Stainless Steel (P.) Ltd. [2003] 263 ITR 255 (SC), wherein it is held: "Precedent-Binding nature of judgment-Decision of the jurisdictional High Court-Where the decision of the jurisdictional High Court has not been set aside or at least has not been appended from it would be binding-In view of this CIT proceeding on the basis of the High Court other than jurisdictional High Court on the basis that jurisdictional High Court was erroneous and that the AO who had acted in terms of the High Court's decision had acted erroneously, was not justified" 3.6 It is under this background also the ld. AO, who was seized with similar controversy in the c....
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....of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 4. It is not the case of CIT that there was a complete/total lack of inquiry. Law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry. Unless there is an established case of total lack of enquiry. 4.1 Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), wherein Delhi High Court was considering the aspect, when there is no proper or full....
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....herefore, cannot be subject matter of revisionary proceedings u/s 263 of the Act. The facts are not disputed that in this case, the Assessment Order passed u/s 147 / 143 dt. 12.12.2019 has been subjected to revision u/s 263 by the Ld. CIT. A Notice u/s 148 was issued on 29.03.2019 for A.Y. 2012- 13 under consideration, and reasons to believe are recorded (PB 1) as communicated to the appellant by the AO vide his letter No. 128 dt. 08.05.2019. For a ready reference the same are being reproduced hereunder. "The assessee has not filed its return of income for the period in which it had deposited substantial cash, earned interest income 85 purchased immovable property. Since, the assesse has not filed its IT return for the relevant period i.e. A. Y. 2012-13, therefore, no benefit of section 11 & 12 can be given as filing of return of income in time is a pre-condition for availing benefit under section 12AA of the Act as per section 12A(1)(b) of the I.T. Act 1961. As such, cash deposited of Rs. 16,79,12,657/ -in bank accounts, earned interest income of Rs. 20,07,054/ - and purchase of immovable property to the tune of Rs. 17,76,51,821/ - has remained unexplained. In view of the above,....
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....re, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the CIT exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the CIT beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity." 6.2 CIT v. Bharti Airtel Ltd. [2013] 37 taxmann.com 218/218 Taxman 112 (Mag.) (Delhi), wherein: "33. This decision in Alagendran Finance Ltd. (supra) has been followed by the Delhi High Court in Bharti Airtel Ltd. (supra) wherein also reassessment order dealt with the issue of non-deduction of tax at source on payment of interest to ABN Amro Bank, Stockholm Branch. Second addition was made on account of ESOP expenses. Subsequently Commissioner of Income-tax issued order under section 263 for failure to deduc....
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....ent made under section 143(3) read with section 147, in substance and in essence, what was sought to be revised was the original order of assessment dated 27-12-2006 and since in respect of that order, the period of limitation for exercising the revisional powers had expired on 31-3-2009 having regard to the provisions of section 263(2), the notice issued on 30-4- 2009 was barred by limitation. 6.4 In Tata Power Company Ltd. Vs. PCIT (2021) 90 ITR TRIB (Trib) 554 (Mum), it was held that: "10. A perusal of the reasons recorded for reopening of assessment under s. 147 of the Act, as reproduced in the body of the re-assessment order, would reveal that the AO has reopened the assessment under s. 147 of the Act for the specific purpose of assessing the amount of Rs. 68,62,780, being the expenditure on furniture and tools. In the reasons recorded, the AO has mentioned that the amount in dispute is ineligible for deduction under s. 43B of the Act as per the report of the auditor. It is also a fact on record that the AO has ultimately completed the assessment under s. 143(3) r/w s. 147 of the Act by disallowing the amount of Rs. 68,62,780, i.e. the income which has escaped assessment a....
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.... AO has dealt with the issue of deduction claimed under s. 80IA of the Act at length in the final assessment order passed under s. 143(3) r/w s. 144C (13) of the Act. Thus, the issue relating to deduction claimed under s. 80IA of the Act, cannot be a subject matter of re-assessment under s. 147 of the Act, as, such reopening of assessment was for assessing a particular income, which escaped assessment. Pertinently, to justify his action of revising the re-assessment order, learned Principal CIT has referred to the third Proviso to s. 147 of the Act, which reads as under: - "Provided also that the AO may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment." 13. A careful reading of the aforesaid Proviso would make it clear that, though, it has come into effect from 1st April, 2008 however, it is not in the nature of an enabling provision. Rather, it restricts powers of the AO in assessing or re-assessing escapement of income, as, it excludes such incomes which are subject-matter of any appeal, reference or revision. Thus, in our considered....
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....urt in case of CIT vs. Alagendran Finance Ltd (supra) and the Hon'ble jurisdictional High Court in the case of Ashoka Buildcon vs. CIT (supra) clinches the issue in favour of the assessee. Further, a reading of the original assessment order would reveal that the issue relating to deduction claimed under s. 80IA was a subject-matter therein. In fact, the draft assessment order passed by the AO on the issue of deduction claimed under s. 801A of the Act was disputed before learned DRP and after passing of the final assessment order, the issue relating to claim of deduction under s. 801A of the Act is now pending in appeal before the Tribunal. Therefore, any attempt by the AO to deal with such issue in re-assessment proceedings would have amounted to review of the original assessment order, which is impermissible. Thus, in the aforesaid scenario, the assessment order passed under s. 143(3) r/w s. 147 of the Act cannot be considered as erroneous and prejudicial to the interest of revenue to subject it to proceeding under s.263 of the Act. If, at all, any order of the subordinate authority which could have been considered as erroneous and prejudicial to the interest of revenue in all....
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....s. Pertinently, even the ld CIT neither in the impugned show cause notice u/s 263, nor in the impugned Order u/s 263, whispered even remotely placing reliance on the Expin. III to s.147 of the Act which clearly implied that the ld. CIT has not taken the shelter of the said Explanation to find error in the impugned assessment order. In view of these admitted facts and legal positions, the AO could not have expanded the scope for the reassessment of the proceedings before him other than the issues already noted in the reasons to believe, which was a mandatory condition for the AO u/s 148(2) before issuing a notice u/s 148 and before completion the reassessment orders. This being the binding legal mandate, if the AO has not made any addition /disallowance on the issues mentioned in the reasons, no fault or error could be find in the subjected reassessment order. In other words, when the law itself did not require the AO to assess the income on the issues which were not part of the reasons to believe it was a legal impossibility placed upon him and therefore, it was a serious jurisdictional error committed by ld. CIT to invoke section 263 even in respect of those items of income which ....
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....t for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s. 147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under s. 147, the AO were to come to the conclusion, that any income chargeable to tax, which, according to his 'reason to believe, had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently in the course of proceedings under s. 147." 7.3.4 CIT Vs. Software Consultants 341 ITR 240 (DEL.) (DPB 59- 62) In that case pursuant to a notice u/s 148 ROI was filed declaring loss however, the reassessment order was made on 28.03.2002 making no addition and accepting the ....
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....eted the assessment under s. 143(3) without any adverse finding regarding the issues for which the matter was selected for limited scrutiny-Scope of enquiry in case of limited scrutiny is limited to the extent of the issues for which case is selected for scrutiny under CASS-However, in case during the assessment proceedings the AO is of the view that substantial verification of other issue is also required, then the case may be taken up for comprehensive scrutiny with the approval of the Principal CIT/ Director of IT concerned-Without following said procedure and necessary approval of the competent authority, conducting an enquiry on the issue which is outside the limited scrutiny would be beyond the jurisdiction of the AO-Therefore, where the matter is selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was originally vested with the AO while framing the assessment-For the purposes of converting limited scrutiny to complete scrutiny, what is relevant is that there must be some credible material or information on face of the record indicating that there is possibility of underassessment of income if the case is no....
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...."no formal notice under s. 143(2) has been issued to the assessee". Therefore, these facts clearly show that before framing the reassessment order under s. 147/ 148, no notice under s. 143(2) was prepared, issued and served upon the assessee. Therefore, reassessment order is illegal, invalid and bad in law and is liable to be set aside. It is well-settled law that assessee can challenge the validity of the reassessment proceedings in the collateral proceedings (relating to examination of validity of order passed) under s. 263. Since the reassessment order itself is bad in law, counsel for the assessee, rightly contended that the same cannot be revised under s. 263. Only valid reassessment order can be revised under s. 263. On this ground itself the proceedings under s. 263 are bad in law and liable to be quashed. Accordingly, the order of the Principal CIT passed under s. 263 is set aside and the same is quashed. -CIT vs. CPR Capital Services Ltd. (2011) 330 ITR 43 (Del), Principal CIT vs. Silver Line (2016) 283 CTR (Del) 148: (2016) 129 DTR (Del) 191 : (2016) 383 ITR 455 (Del) and Westlife Development Ltd. vs. Principal CIT (2016) 49 ITR (Trib) 406 (Mumbai) followed. (Para 6.1)" ....
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.... from the end of relevant assessment year i.e. AY 2012-13 which, in the present case falls on dated 31.03.2019 and therefore, no further action u/s 147 was permissible. The ld. CIT being conscious of this fact, issued the showcase notice under S. 263 on 23.02.2022, taking altogether new grounds, which were not part of reasons to believe and hence was unable, from taking any remedial action under s. 147 within the permissible time limit i.e. before 31.03.2019. The ld. CIT, having noted contrary decisions as mentioned in the subjected assessment order, raised altogether new issue (not being a part of the reasons to believe). Thus, the time limit having already gone for taking an action under legally appropriate provision of law, such an attempt on the part of the id. CIT in relation to the assessment year 20012-13, after a lapse of a long period of more than 9 years, is not permissible. It is settled that what cannot be done directly cannot be done indirectly. Needless to say, such an attempt, has got the effect of unsettling the right and obligations already settled between the parties long back. The legislature never intended and permits any party to take action after such a long p....
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....the institution. Commercial principal of business is to derive maximum price of the product/service of the business and the institution is following the same principal by selling property. Builders or real estate developers do the same activity which is being done by the assessee such as purchase and sale of land at commercial principles and rates, development of land and sale by auction or otherwise. There is no difference in the activity of the assessee arid businessman as both try to sell the property, If it were not doing activities in the nature of business, it would have been selling property at lesser rate to public charitable trust / institutions but this is not the case. No concession is given considering the purpose of the purchaser, which may be charity or personal use or commercial. The same principal is followed by the businessman then how the assessee can claim that its activities are not in the nature of trade, business or commerce. From the point of view of common man and general public, the institution is doing same activity which is being done by a builder or developer. This activity is considered by general public as business, trade or commerce. So this activity ....
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.... income of the assessee at Rs.NIL. Thus, the case laws relied by the Ld. Counsel for the assessee would not help as it is the clear case where the assessment order is erroneous and self-contradictory. Under these undisputed facts, there is no infirmity in the order of Ld.CIT(E) in revising the assessment under section 263 of the Act. Thus, grounds raised by the assessee are devoid of merit hence, dismissed. 10. In the result, the appeal of the assessee is dismissed. S.A.No.-03/Jodh/2023 [In ITA No.89/Jodh/2022] (ASSESSMENT YEAR- 2012-13) 11. Now, we take up Stay Application No.03/Jodh/2023 pertaining to AY 2012-13 filed by the assessee. By way of this stay application, the assessee is seeking stay of the operation of the impugned order. 12. Ld. Counsel for the assessee reiterated the submissions as made in the stay application. For the sake of clarity, the relevant contents of the submissions of the assessee are reproduced as under:- 1. "That the appellant derives income from maintenance and development of areas and civic amenities including sale of land within Ajmer District. In this case, the subjected assessment was completed vide order dated 12.12.2019 u/s 143(3) N.s. 14....
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....en raised in these reasons as done by the learned CIT(E) now is under challenge. In the reassessment proceeding u/s 147, the AO was supposed to have assessed the income in accordance with the reasons recorded only and not beyond that. On the contrary however, the Id. CIT(E) has not at all whispered/ applied his mind on the reasons to believe but proceeded to find faults of the AO on different grounds which were not part of reasons nor of the subject matter for reassessment. Further once, the alleged escaped income of 34.86 crores not having been added to the declared income, no other income could be added in any manner whatsoever (viz. surplus income of 1.46 crore and capital expenditure of 5.26 crore totalling to 6.77 crore) as noted by the CIT(E) based on which, the assessment order was held erroneous. Reliance is placed on CIT vs. Jet Airways (I) Ltd (2011) 239 CTR 0183 : (2011) 331 ITR 0236 and CIT vs. Shri Ram Singh (2008) 306 ITR 343 (Raj). 6.2 That otherwise also there has been due application of mind by the AO and detailed verification was made in as much as the AO issued a show cause to which a detailed reply was submitted starting from Pg. 4 till Pg. 14 of the assessmen....