TaxTMI 
TaxTMI 
2024 (12) TMI 552
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....ulative 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, 1955. 4. That the appellant craves leave to alter, amend and sub....
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....ent 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 benefit of exemption u/s 11 of the Act for all the subject assessment years. Copy of the order dated 10-10-2022 passed u/s 260....
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....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 filed by the Revenue, it was held that, "Any excess expenditure incurred by trust/charitable institution in earlier assessment year could be allowed to be s....
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....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 pronounced on 03-06-2024 wherein it was held that, 8. From this, it is clear that the legislature is of the opinion that only the amount in excess of 15% which is not applied and otherwise not allowed to be exempted is only taxed. In view of this discussi....
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....dings 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 to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;" On a perusal of the above section, it can be safely said that out of the income accruing to a trust in the previous year from property held by it wholly f....
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....operty 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 revenue contended that it was entitled to accumulate only twenty-five per cent of Rs. 87,010. 5. For the aforesaid reasons, the civil appeal is dismissed." (Emphasis supplied) Relying on the aforesaid judgments of the Hon'ble Supreme Court, the Hon'ble ITAT, Mumbai Bench in the case of ITO v. SethWalchandHirachand Memorial Trust vide order dated 29.03.2017(ITA LT.A. No.48....
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.... 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 15% of Gross receipts in its return of income, then also it is eligible to claim the benefit of statutory deduction of 15% of Gross receipts u/s11(1)(a) of the 1.T. Act, 1961 since the exemption available u/s 11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions, Article 265 of the Constitution of India lays down that no tax shall be levied except by authority of law. Hence only legitimate tax can be recovered and even a c....
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.... 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 supreme Court in the case of Goetz (India) Ltd. (supra) for sustaining the order of the AO u/s 154 of the Act. The Hon'ble Supreme Court in it's decision rendered in the case of Goetze (India) Lid vs CIT has clarified that the appellate authorities under the Act have the power to consider the claim even if the business of the revised return of items la my view, therefore the chain of the assessee that Long Term Capital Gain is exempt also 10(38) of the Act has to be the AQ. It is seen from the order of....
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....ved 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 huge tax liability. We find that the id CITA had duly examined the entire documents in this regard such as Demat statement, contract notes, Broker bill, and evidence for payment of STT etc. We find that Article 265 of the Indian Constitution states that 'no tax shall be collected or levied except by an authority of law. This goes to prove, that the government is empowered to collect tax from the citizens only as per the mandate provided in the love. If the statute provides certain relets to the assessee the even without any claim made there....
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....st 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 the revenue. Hence we do not find any infirmity in the order of the Id CITA. Accordingly, the grounds raised by the revenue are dismissed. 8. In the result, the appeal of the revenue is dismissed." Copy enclosed Reliance is also placed on the judgment of CIT v. Ramco International [2009] 180 Taxman 38-4 (Punjab &Haryana HC) wherein it was held that, 2. The assessee claimed deduction under section SO1B of the Act and though Form 10CCD and other requisite documents were furnished the Assessing Officer without referring to the said documents made ax appeal, the appellate authority ....
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....8,79,37,391 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 expenditure/application as per income and expenditure account Revenue expenditure (a) 2,11,78,99,644 2,12,95,68,377 2,39,41,39,182 Finance and miscellaneous expenditure (b) 1,15,86,87,910 90,85,05,584 1,15,06,34,621 Total revenue expenditure (a+b) 3,27,65,87,554 3,03,80,73,961 3,54,47,73,803 Capital expenditure application as per Schedule-3, fixed assets (c) 65,40,57,923 33,67,65,810 9,46,51,725 Repayment of capital loan (ADB) taken from Government of India refer Schedule 2 of the accounts (d) 1,06,01,00,000 49,97,00,000 Total application towards object of the trust (a + b + c + d) (B) 3,93,06,45,477 4,43,49,39,771 4,13,91,25,528 Excess applic....
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....intained 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 the Act which reads as follows Explanation For the purposes of this clause, "infrastructure facility" means (a) a road including toll road, a bridge or a mil system: (b) a highway project including housing or other activities being an integral part of the highway project, (c) a water supply project, water treatment systems, irrigation project, sanitation and sewerage system or solid waste management system, (d) a port, airport, inland waterway, inland port or navigational channel in the sea; Thus, the term used by the assessee in Form 108 and the audited accounts should be treated as one and not differently. In view of the above facts, it is evident that even if the assessment order is treated as erroneous, the same is not prejudicial to the interest of the revenue, hence the assumption of jurisdiction u/s 263 of the Act is not as per law since bot....
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....ught 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 bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the Prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the Income-tax 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, (1) the order of the Assessing Officer sought to be revised is erroneous; and (8) it is prejudicial to the Interests of the Revenue. If one of them is absent if the order of the Income-tuz Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot he had to section 263(1) of the Act "The phrase "prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of un order of the Assessing Officer, cannot be treated at prejudicing to the interests of the Revenue, for example, when a....
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....h was lawfully exigible has not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than what was just has been imposed From the above, thus, it is understood amply and the same, being a legal position well laid out by the Apex Court and followed by all other Courts and the revenue Department alike, that action u/s 263 of the Act cannot in any circumstances be taken by the CIT unless both the conditions of the assessment Order being erroneous and prejudicial to the revenue, are present. Since the assessment order is not prejudicial to the interest of the revenue, your goodself is requested to drop the present revision proceedings initiated for AYs 2003-04, 2004-05 and 2005-06 The assessee will be highly obliged for the same. 6. The main argument of the ld. AR is that the assessee has been granted registration w.e.f. 01.04.2002 in all the three years under appeal and it is entitled for exemption u/s. 11 of the Act. Since the assessee trust had already applied its receipts for charitable purpose, therefore, it is entitled for the exemption available to it. Ld. AR further submitted that in the order, the ld....
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....nclude- 3. an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner _ uthorized by the Board in this behalf under section 120; [(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; I where any order referred to in this sub-section and passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] had been the subject matter o....
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....in para 3.3 read as under :- 3.3 As per AR's submission, the assessee has established the application of fund in respective A.Ys. Though it was apparent from record that the order was erroneous, documents reveal that the assessee is not liable to tax because necessary application of fund has been made in accordance with the provisions of the I. T. Act. It is seen that only in A.Y. 2005-06, there is shortfall of Rs. 7.38 Crore in application of fund. However, in previous 2 A.Ys, there is excess application of Rs. 124.19 Crore. As per Hon'ble Supreme Court's decision in the case of CIT Vs Subros Educational Society shortfall in any year can be adjusted against excess application of fund in other years. Accordingly shortfall for A. Y. 2005-06 is adjusted against excess of other years and hence, there is no tax impact. In view of the above discussion, it is not prejudicial to the interest of revenue. Emphasis supplied. 4. It is judicially held that where an Assessing Officer, who is supposed to protect the interest of revenue as a tax collector and does not perform his job in the right spirit and has passed the assessment order perfunctorily which shows lack of application of....