TaxTMI 
TaxTMI 
1995 (10) TMI 54
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.... towards the objects of the trust for providing housing to the poorer section of Parsi community and therefore, the trust continues to retain its charitable character. 2. The facts as are noted in the order of assessment and the order of the DIT is brought out briefly below. The assessee-trust in its statement of income had sought for accumulation of Rs. 65 lakhs for the specific purpose of construction of buildings for housing the poor section of the Parsi community and this was stated pursuant to the resolution dated 16-10-1990. The appellant had leased out land owned by it to M/s Spenta Co-op. Housing Society Ltd., a Parsi society for fifty years at an annual rent of Rs. 75,000. On this land development was carried out followed by construction of sixty flats which flats was sold to richer class and a surplus of Rs. 7,09,13,678.75 was generated. The generated funds was treated as on capital account and so transferred vide a resolution dated 12-12-1990 to a composite scheme of housing. Of the above surplus the appellant utilized Rs. 4,96,38,106 in the construction of flats that were given on nominal rent to the poor section of the Parsi community. The balance of the surplus Rs. 2....
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....e assessments accordingly. He noted the DDIT had forwarded the DIT's letter dated 4-3-1993 to the Assessing Officer as his directions under section 144A of the Act and the present assessment order as such was framed. 4.1 DIT considered the notification dated 17-10-1989 issued by the Central Board of Direct Taxes in exercise of powers conferred on it by section 120 of the Act by which it had authorized the DIT to perform the functions of the Commissioner in respect of the class of cases of clauses (21), (22), (22A), (23), (23A) and (23C) of section 10, sections 11 and 12 of the Act, assessed or assessable by any Income-tax authority. He accordingly concluded that by virtue of the above stated notification, he has the necessary sanction of law to invoke the section 263 of the Act in respect of assessments framed with reference to sections 11 and 12 of the Act. He had also considered the sequence of events as brought out earlier like the series of advises issued by DIT at the first instance, the second time based on which the present assessment was framed and his present proposed action to revise the order of assessment. In para 8 of his order he concluded as under :-- " The DD....
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....e power of revision assigned to the Commissioner under section 263 of the Act. He placed reliance on the meaning of the term 'function', 'power' as defined in Jowitts Dictionary of English Law - 2nd edition, Volume 2 ; Venkataramayya's Law Lexicon and Blacks Law Dictionary - revised 4th edition. The learned counsel contended that the term function only extends to administrative functions and do not extend such other execution of filing of appeals or reference or revision and that since, section 263 grants a power of revision to the Commissioner which not having been extended to the DIT by the notification, his action of revising the order is beyond his jurisdiction. 5.1 The learned departmental representatives Mr. Tilakchand and Mr. Dixit referred to Sampath Aiyangar's Law of Income-tax, the notification and submitted that the notification had been so issued consequent to the decentralization by the CBDT and for effective implementation of the Act. Reliance was placed on the meaning of function given by Twentieth Century Chambers Dictionary. 5.2 On this jurisdictional aspect, we may observe that the Act defines the Commissioner and DIT with reference to th....
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....nder clause (b) of the notification of the Govt. of India in the Min. of Finance, Central Board of Direct Taxes, No. S.O. 358(E) dated 30-3-1988, so far as it relates to the jurisdiction of Directors, the Central Board of Direct Taxes hereby : (a) directs that the Directors specified in column (2) of the schedule hereto annexed shall exercise their powers vested in them under section 132 of the Act and perform their functions relating thereto in respect of the territorial areas of the whole of India 1. Director of Income-tax (Investigation), Delhi Union Territory of Delhi The notification by which DIT is appointed under section 132 of the Act gives them the power of impounding property found in the premises searched. Considering the special nature of functions under that section, the notification has the words 'power' in the notification appointing Directors to act under that section. The power referred in that section is magisterial powers and therefore, it had to be specifically so indicated because, without those powers vested on him specifically, he would not be in a position to authorize the seizure of property. It is worth noting that bo....
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....unction as the Commissioner with reference to the assessments falling under the provisions of sections 11 & 12 of the Act. The functioning as Commissioner within the provisions of sections 11 & 12 of the Act confers upon the power to grant registration as a charitable or religious trust because, every trust having income is required to get itself registered. In the exercise of his function as the Commissioner, if he comes across case/cases which have failed to comply with the provisions or has been wrongly granted the status as charitable trust then, he has the power to withdraw such registration. Therefore, a DIT when performs the function of the Commissioner with reference to sections 11 & 12 of the Act, as conferred upon by the CBDT, he acts as such and this action could be said to be complete only when he can correct the wrong implementation of the Act. In order to correct the wrong implementation of the Act in the assessment of persons, the Act has conferred upon the Commissioner the power to revise the order of assessment under section 263 of the Act. The DIT who is appointed to carry out the functions of the Commissioner of assessing persons and grant them the status of char....
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....mitted a report to DIT dated 19-1-1993 enclosing the report of Assessing Officer dated 23-12-1992 stating that the predecessor DIT had felt that the activity of the trust as not of charitable nature. The DIT replied to this report to DDIT vide his letter dated 4-3-1993 accepting the views of the Assessing Officer that the trust is charitable in nature which directions were enclosed by DDIT to Assessing Officer on the same date as his directions under section 144A of the Act and the assessment was accordingly framed on 11-3-1993. The counsel submitted that the DIT was closely involved with the assessment proceeding and the Assessing Officer was all through guided by him and acted in accordance with those guidance because he was subservient to the DDIT & DIT and has to act according to the directions issued under section 144A of the Act. Since, the Assessing Officer had framed the assessment according to the directions of DIT & DDIT, the error if any in the order of assessment could not be attributed to wrong application of mind by the Assessing Officer. He contended that the revision of an order is not possible which order is so made in the implementation of the directions issued b....
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.... following his first guidance dated 6-5-1992 holding that the activity of the trust was business activity and therefore, not covered by section 11(4A) of the Act. Further since, the successor DIT had revised the guidance dated 19-1-1993 holding that the trust's activity as wholly charitable despite he being invited to the directions of the predecessor DIT where he had held the trust's activity as a business, the DIT took upon himself that he could also revise his predecessor's views. This action of the DIT is therefore based on personal prejudice and since, the Act does not permit revision of an order of Assessing Officer with a view to revise the orders of his predecessor DIT, we have to strike down this basis of revision of the order as illegal and against the provisions of the Act. The Act does not contain any provision by which an order of Commissioner could be revised by another Commissioner and the decisions cited by both parties are in support of the view that the order passed in pursuance of a direction of a superior authority like the appellate authority, or the High Court or as a consequence of settlement arrived at by the Commissioner could not be the subjec....
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.... the Commissioner. 7. The contention of the assessee was that the order was framed on the direction given by DDIT under section 144A of the Act and to that extent the Assessing Officer could not be said to have applied his mind and therefore, that portion of the order based on the direction of DDIT under section 144A of the Act, could not be revised under section 263. According to the counsel the amendment to section 263 of the Act which permits revision of orders that are made in pursuance to the directions under section 144A of the Act is intended to cover all those cases and to that part of the order of assessment which is not guided by the directions under section 144A of the Act. The support of the argument was with reference to the earlier decisions which have held that the order could not be erroneous when he follows his superior orders. The Supreme Court decision in CIT v. Elphinstone Spg. & Wvg. Mills Co. Ltd. [1960] 40 ITR 142 was referred to for the proposition that fiction created by the section should not be carried beyond the purpose for which it was intended which was reiterated by the Supreme Court in CIT v. Moon Mills Ltd. [1966] 59 ITR 574, in CIT v. Ajax Product....
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....all have concurrent jurisdiction. The order of assessment passed by Assessing Officer or Assessing Officer under directions of Inspecting Assistant Commissioner (IAC) or by IAC all are performing the functions of an Assessing Officer. This is clearly brought out in the Notes on Clauses to the Taxation Laws Amendment Bill, 1984 by which the Explanation to section 263 was introduced covering the orders framed as per the directions received under section 144A of the Act. This is reproduced below for the sake of facility : " Sub-clause (a) seeks to insert an Explanation to sub-section (1) of section 263. Under the existing provisions, the Commissioner is empowered to revise any order passed by the Income-tax Officer under the Income-tax Act if he considers that such an order is erroneous insofar as prejudicial to the interests of the revenue. The Explanation seeks to clarify that, for the purposes of this section, an order of assessment passed by the Income-tax Officer, on the basis of the directions issued by the Inspecting Assistant Commissioner under section 144A or section 144B or an order passed by the Inspecting Assistant Commissioner in exercise of the powers or in performance....
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....bay Public Trusts Act, 1950 referring to a resolution passed on 3-1-1984 for the construction on Gibbs Road Plot, lease of the land to a co-op. society at an annual lease of Rs. 75,000, price fixed for the sale of flats. The said authority vide order dated 17-11-1990 accorded sanction to the lease of the land at an annual lease rent of Rs. 75,000 for fifty years to Spenta Co-op. Housing Society Ltd. 8.1 The assessee contended the same submissions as were made before the Assessing Officer, DDIT and DIT and had placed on our record all of such submissions at pages 3 to 69 of the paper book. It has also placed at pages 80 to 87 the copy of the resolutions of utilization of the surplus from sale of Spenta flats. The counsel submitted that conversion of an existing capital asset into another for acquisition of another capital asset for the objective of the trust could not be construed as a business activity. He supported his contention by relying on the decision of the Delhi High Court in CIT v. Lala Dewan Chand Trust [1991] 190 ITR 451. He contended that in that case the assessee had demolished its old building, constructed a multi-storeyed building and sold flats and the surplus real....
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.... flats, indicated the price at which it was proposed to be sold to the Charity Commissioner while seeking his approval for the lease. The Charity Commissioner was to ensure that surplus land owned by public charitable trust would be allowed to be retained by the trust only if it constructed flats to house the poor and for achievement of this objective it could sell, or lease land and construct houses thereupon and sell them at the market price because there was no other way to augment resources by such trusts. The Charity Commissioner had granted his approval of the low lease rent, permitted the sale of flats and realize the proceeds and utilize the proceeds for construction of flats for housing the poor Parsis. The fact that sixty flats were constructed on the leased land to Spent Coop. Housing Society which were sold to the richer sections of Parsi community realizing over Rs. 7 crores, out of which surplus little less than Rs. 5 crores was utilized in the construction of 350 flats which were let to the poor Parsis at a very nominal rent is not disputed by the revenue. It is not in dispute by the revenue that the 350 flats constructed which house the poor was possible because of....