TaxTMI 
TaxTMI 
2024 (12) TMI 552
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....o the interest of the revenue, thus the mandatory cumulative condition stipulated in section 263 of the Act that the order should be erroneous and prejudicial to the interest of the revenue is not met. 2. That on the facts and in the circumstances of the case, the learned PCIT failed to consider the submissions filed by the assessee during revision proceedings wherein the assessee submitted revised computation of income and substantiated that there is no short fall in application of funds in the relevant year, thus the order passed u/s 260 of the Act dated 1 0-10- 2022 is not prejudicial to the interest of the revenue. 3. That on the facts and in the circumstances of the case, the learned PCIT failed to consider the submissions of the assessee wherein it was submitted that accumulation of 15% of Gross receipts even if not made by the assessee in its return of income, still it is eligible for me benefit of statutory deduction of 15% on Gross receipts u/s. 11(1)(a) of the I.T. Act, 1961 by virtue of the judgment of the Hon'ble Supreme Court in the case of Addl.CIT Vs. A.I.N. Rao Charitable Trust (1995) 129 CTR 205 and CBDT Circular No: 14 (XL-35) dated April 11,....
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...., Hyderabad dated 23-03-2017. 2 The assessee filed revised returns for the above 3 assessment years claiming exemption u/s. 11 of the LT. Act. The revised returns for the A.Ys. 2003-04 to 2005-06 were filed on 15-07- 2021. 3. An application was moved before the Assessing Officer with a request to give effect to the benefit of 12AA registration in view of the Certificate issued by the CIT(E), Hyderabad for these three years considering the revised returns filed by the assessee. 3. However, on 28th September, 2021 an order was passed by the A.O., rejecting the application/request of the assessee for reassessment of the case for A.Ys. 2003-04 to 2005-06 on the ground that the revised returns are barred by limitation 4 Aggrieved, the assessee filed a Writ before the Hon'ble HC of Orissa. The Hon'ble High Court vide order dated 12-07-2022 disposed of the Writ Petition wherein the HC directed that the said delay should be condoned. 5. Consequent upon the order of the Hon'ble High Court of Orissa and after due consideration of the submission of the assessee, the total income of the assessee was computed as Rs. Nil after allowing the....
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....he revised computation prepared in accordance with the provisions of section 11(1)(a) of the Act, it may kindly be noted that there was excess application of funds in AY 2003-04 and AY 2004-05. In AY 2005-06, there was a short application of funds of Rs. 7,38,48,052/-. It was further submitted that the learned PCIT in his notice issued u/s 263 of the Act has himself admitted that the assessee has accumulated/set aside a sum of Rs. 16,29,46,025/- in Fixed Deposits under Port's Fund and Assistance for reconstruction and rehabilitation for the year, refer page 87 of the paper book. The sum of Rs. 16,29,46,025/- was included in the sum of Rs. 1,10,52,64,123/- declared in Form 10B for AY 2005-06, refer page 112 of the paper book. Thus, there was no short application of funds by the assessee in AY 2005-06. Without prejudice, even otherwise, the excess application of funds in AY 2003-04 and AY 2004- 05 is eligible to be setoff with the shortfall of AY 2005-06 by virtue of the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income-tax (Exemption) vs Subros Educational Society reported in [2022] 136 taxmann.com 236 (SC) wherein dismissing the review petition fil....
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.... CIT (1996) 226 ITR456(Del), wherein it has been held as under. "The ITO is not only an adjudicator, but also an Investigator. He cannot remain passive in the face of a return which is apparently in order but calls further enquiry It is incumbent on the AO to further investigate the facts stated in the return, when circumstances would makes such an enquiry prudent. The word "erroneous" in section 263 includes the failure to make such enquiry." 5. In the light of facts as narrated supra and on the arrvil of judicial view on the subject, I hold that the assessment order in this case dated 10.10.2022 is erroneous in so far it is prejudicial to interest of revenue & the AO is directed to examine the above issues for the limited purpose of which the case is remitted back to the AO to decide the matter after giving adequate opportunity of being heard to the assessee." 10 Aggrieved, the assessee is in appeal before Your Honours. 11. Reiterating the facts of the case, your kind attention is invited to the recent judgment of the Hon'ble jurisdictional Cuttack Bench in the case of Gyanodaya Educational Trust vs ITO (Exemptions) in ITA 304/CTK/2023 pron....
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....e of the learned AO is not sustainable in law and is liable to be quashed in limine. Hope the above submission is in order and to your satisfaction. 5. Besides the above written submissions, ld. AR also placed reliance on the submissions made before the ld. Pr.CIT during the course of proceedings u/s. 263 of the Act. The relevant extract of the submissions are as under :- In this regard, at the outset, it is humbly submitted that the computation filed by the assessee before the learned AO during assessment was incorrect as the assessee computed the statutory exemption of 15% u/s 11(1)(a) of the Act on Net Surplus as against Gross Receipts during the year. Here, it is first relevant to quote Section 11(1)(a) of the Act which reads as under." "11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India: and, where any such income is accumulated or set apart for application....
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....s. 1.70.369 leaving a balance of Rs. 87.010. The question is whether the assessee is entitled in accumulate twenty-five per cent of Rs. 2,57,376, as it contends, or twenty-five per cent of Re 87,010, as the revenue appeared to contend." Section 11(1)(a) reads thus: "11. Income from property held for charitable or religious purposes-(1)(a) Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India: and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the income from such property: "4. Having regard to the plain language of the above provision, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust. For the present purposes, the donations, the assessee received, in the sum of Rs. 2,57,376, would constitute its property and it is entitled to accumulate twenty-five per cent there out. It is unclear on what basis the ....
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....e. Accordingly this ground of appeal is allowed 8. We observe that Id CIT(A) has relied on the decision of Hon'ble Supreme Court in the case of A.I.N. Rao Charitable Trust(supra), wherein, it is held that exemption available u/s. 11(1)(a) i.c. 15% of income is unfettered and not subject to any conditions. In the case before us, assessee has claimed 15% accumulation w/s.11(1)(a) of the Act. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and reject ground of appeal taken by department." 6. On appraisal of the above mentioned order it is not in dispute that the matter of controversy has been decided in favour of the assessee by the Hon'ble Income Tax Appellate Tribunal by following the decision of the Hon'ble Supreme Court decision in case of CIT Vs. A.LN. Rao Charitable Trust (1995) 129 CTR 205. In view of the order passed by the co- ordinate bench we allowed this issue in favour of the assessee and delete the addition confirmed by the CIF(A) in question. Accordingly, this issue is decided in favour of the assessee against the revenue. It is further submitted that even if the assessee fails to claim accumulation of....
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.... return of income filed by him. The assessee had not filed the revised return of income claiming exemption of long term capital gain u/s 10(38) of the Act. The CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd Vs CIT 284 ITR 323 (SC) and was of the view that the assessee cannot make a claim which is not supported by a revised return of income. He therefore held that the AO rightly dismissed the application of the assessee u/s 154 of the Act. Aggrieved. the assessee went in appeal before the Hon'ble ITAT, Kolkata. The Hon'ble ITAT held that, "I have heard the rival submissions. The CBDT Circular No.14 of 1955 dated 11.04.1955 has taken a view that the officers of the department must not take advantage of ignorance of the assessee about his rights and it is their duty to assist the tax payer in every reasonable way particularly in the matter of claiming and securing reliefs. In my view therefore the revenue authorities ought not to have rejected the application u/s 154 of the Act on the ground that the assessee has not filed the revised return of income. The CIT(A) has placed reliance on the decision of the Hon'ble s....
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.... assessee is allowed. > The Hon'ble ITAT, Kolkata in the case of DCIT vs M/s TRFI Investment Pvt. Ltd (LT.A No. 1331/Kol/2014) relying on the Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955 held that, 7. We have heard the rival submissions. The Id DR vehemently relied on the order of the ld AO. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the assessee had sold certain shares and derived gains of Rs 3,37,52,643/-. It is not in dispute that the said shares were held for more than 12 months prior to the date of its sale and hence the resultant gains thereon would be Long Term Capital Gains. It is not in dispute that the said sale of shares had duly suffered STT and had been routed through recognized stock exchange. The only error committed by the assessee was mentioning the long term capital gains figure in the wrong column of the IT return, which had admittedly triggered this dispute. In our considered opinion, the error committed by the assessee is only a clerical error for which the assessee cannot be fastened with this h....
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....ue to him. This attitude would, in the long run. Benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should----- 6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasize that we should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him. Circular: No. 14(XL-35), dated 11-4- 1955. 7.1. We find that the Id CITA had rightly appreciated the facts of the case of the assessee together with its related documents and had granted relief in the form of claim of exemption u/s 10(38) of the Act by due appreciation of the aforesaid circular. It is well settled that the Circulars and Instructions issued by the CBDT are binding on ....
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....evised return of income filed by the assessee before the learned AO, relevant extract also reproduced in the present notice issued u/s 263 of the Act wherein exemption u/s 11(1)(a) of the Act was computed on net surplus as per Income and Expenditure A/c and not on gross receipts. The revised computation of these three assessment years is as follows: Sl. No. AY 2003-04 2004-05 2005-06 Income 1. Gross receipts as per income and expenditure account Income from operation (a) 3,81,22,44,658 4,12,72,82,943 4,71,38,34,002 Finance and miscellaneous income (b) 25,33,04,319 18,79,37,391 24,26,05,504 Total (a+b) 4,06,55,48,977 4,31,52,20,334 4,95,64,39,506 2. Less : 15% of gross receipts permitted to be accumulated under section 11(1)(a) and (c) 60,98,32,347 64,72,83,050 74,34,65,926 3. Balance amount required to be applied towards objects of the trust (a + b + c) (A) 3,45,57,16,630 3,66,79,37,284 4,21,29,73,580 Application of funds Revenue e....
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....d be allowed to be set-off against income of subsequent years by invoking section 11: Review petition dismissed." Further, w.rt your allegation that in Form 1018 the assessee has mentioned that the purpose for which the amounts have been accumulated or set apart is mentioned as "Infrastructure Development, it is submitted that the assessee trust is itself an infrastructure Project for development and maintenance of Paradip Port, Orissa under the Ministry of Shipping, Government of India. The term "Infrastructure Development is a wide term and the amounts set aside by the assessee under Port's Fund and Assistance for reconstruction and rehabilitation was nothing but part of infrastructure Development work of the Paradip Port only. The Port is now equipped with 17 (seventeen) berths, 3 (three) Single Point Moorings (SPM), (one) Ro-Ro Jetty, a well maintained Approach and Entrance Channel having 17.1 Mtrs minimum depth to handle a wide range of vessels up to maximum LOA of 300 Mtrs The funds of Rs. 16,29,46,025/- was utilised for pert infrastructure activities. Here, your kind attention is invited to the definition of infrastructure facility as stated in section 801A of t....
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....out inquiring into the claim (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. A simple reading of the section 263 of the Act quoted above makes it clear that the power of suo moto revision can be exercised by the Commissioner only if, en examination of records of any proceedings under this Act, he considers that any order passed by the Assessing Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue" The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous and (ii) it is prejudicial to the interests of the Revenue. Your kind attention is brought to the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. Commissioner of Income-tax (243 ITR 83) wherein it was held by the that: "A b....
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....t been defined, but it must mean that the orders of assessment challenged are such as are not in accordance with low, in consequence whereof the lawful rescue due to the State has not been realized or cannot be realized. It can mean nothing else PCIT vs Subhash Kabini Power Corporation Ltd [2016] 69 taxmann.com 394 (Karnataka HC) "It is settled legal position that one of the requirements for exercise of power under section 263 is that the order passed by the lower authority should not only be erroneous, but should also be prejudicial to the interest of the revenue, which is lacking in the instant case and rightly found so by the Tribunal. [Paru 13) Therefore, the order passed by the Tribunal deserved to be upheld [Para 14)" The Hon'ble Bombay High Court in the case of Commissioner of Income-tax. Gabriel India Ltd. 203 ITR 108 (Bom) held that "Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute,....
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....e Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or 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 [or the Transfer Pricing Officer, as the case may be,] 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, [including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.] Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- 3. an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include- 3. ....
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....the assessee or any other person. [Explanation 3.-For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.] (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 9. From the order of the ld. Pr.CIT, we find that in para 3.3 of the order ld. Pr.CIT himself has observed that the assessment order is not prejudicial to th....
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....to the assessee. 10. Since the ld. Pr.CIT himself is of the opinion that the assessment order may be erroneous but it is not prejudicial to the interest of revenue, therefore, as per the provisions of Section 263 of the Act, it does not satisfy the twin conditions for directing the AO for making further verification in the matter by taking shelter of Section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, reported in 243 ITR 83 (SC), has held as under :- "A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-- recourse cannot be had to Section 263....