TMI Blog2015 (1) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for assessment years 2004-05 and 2005-06 are dismissed. - ITA No.724/Hyd/14, ITA No.725/Hyd/14, ITA No.726/Hyd/14, ITA No.727/Hyd/14, ITA No.728/Hyd/14, ITA No.729/Hyd/14, ITA No.730/Hyd/14 - - - Dated:- 9-1-2015 - Shri P. M. Jagtap And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Shri K.C. Devadas For the Respondent : Shri D.Sudhakar Rao, DR ORDER Per Bench : These seven appeals filed by the assessee are directed against a common order dated 26.3.2o014 passed by the learned Commissioner of Income-tax Central Circle 1, Hyderabad under S.263 revising the re-assessments made by the Assessing Officer under S.143(3) read with S.153A of the Act for the assessment years 2004-05 to 2010-11. 2. The assessee in the present case is an educational society, which is running a medical college and hospital. A search and seizure action under S.132 of the Act was conducted in the case of the assessee society as well as its trustees and other related persons on 10.9.2009. Subsequently, notices under S.153A of the Act were issued by the Assessing Officer on 13.7.2010 for the years under consideration in response to which returns were filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the scrutiny assessment has not called for the confirmation of the balances with reference to lenders from whom unsecured loans were obtained. S. No A.Y. M/s. Pact Securities Fin. Services Ltd. Sri B.Srinivasa Rao M/s. Pratima Estates Ltd. Net X Cell Ltd. 1 2004-05 1,02,76,822 1,14,89,581 2 2005-06 2,81,82,597 3 2006-07 1,12,11,163 4 2007-08 1,67,11,403 5 2009-10 1,28,80,000 92,15,777 (c) CORPUS RECEIPTS As seen from the Balance sheet, during the assessment years, following are the amounts received towards corpus fund. The AO while completing the assessment has rejected the claim u/s. 10(23)(C)(vi)/11. Hence, the AO should have brought the corpus fund to tax-net. S. No A.Y. Corpus Receipts 1 2006-07 4,00,66,991 2 2007-08 2,42,40,388 3 2008-09 3,89,75,045 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order is enclosed. 5) As things were standing as above, quantum appeals have come up for hearing before the Hon'ble Commissioner of Income tax (Appeals). After hearing the assessee society and taking into consideration the orders of Hon. ITAT, Madam Commissioner has deleted the most vexed additions, like, alleged collection of capitation fee, etc. It is worth noting here that these additions were the basis for rescinding of recognition under section 10(23C) and cancellation of registration under section 12AA. 6) The brief back ground for claiming the depreciation for income tax Rules and plea not to tax corpus donation is as follows: a) Before the assessment proceedings under section 153A were conducted, as submitted earlier, the Hon ble DGIT has already rescinded the grant of exemption given under section 10(23C) of the Act. Based on rescinding orders of the Hon'ble DGIT that were available on hand, the then learned AO proposed to decline not only the benefits of section 10(23C) of the Act but also of section 11 of the Act, meaning thereby that the learned AO intended to tax the assessee as an ordinary AOP. While doing so the learned AO has ignored the detailed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 11 and 13. This excludes voluntary contribution by way of corpus donation from the ambit of the section. c) Section 11 while listing out the receipts of the trust subject to tax specifically excludes voluntary contribution by way of corpus donation from the ambit of income under the said section. d) Section 13 also does not cover corpus donations which are specifically excluded by the provisions of section 12 and 11(1)(d). This section specifically lists out the infringements which would result in withdrawal of exemption. e) Thus for all purposes voluntary contribution by way of corpus donation does not come within the definition of income or within the ambit of section 11,12 and 13. The only requirement is that it should be received by a trust or institution from a donor with a specific direction that the same would constitute the corpus. It is not material whether the trust is registered under IT Act or not or registration under section 12AA or 10(23)(vi) has been cancelled or not. It is submitted that when the registration granted is cancelled, the same would not automatically lead to taxation of corpus donation. f) Without prejudice to above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de our letter dated 18.02.2014. 10)It is further submitted all the aspects relating to corpus donations were placed before Assessing officer who after due application of mind has excluded the same from the ambit of total income. The present proposal by the CIT would amount to a change of opinion. Law is well settled that an issue which is subjected to two interpretations - one held by the AO and the other held by the revising authority, such an order is not erroneous. As Hon ble CIT is well aware of, an order to come under the provisions of 263, the same should be erroneous and prejudicial to the interest of revenue. Cumulative satisfaction of both the conditions is a requirement under law. Satisfaction of the twin conditions is mandatory requirement under law to revise the assessment. In this regard the assessee places reliance on the following decisions. a) In the case of STATE OF KERALA V/s. KM CHERIA ABDULLA AND CO 1965 16 STC 875, the scope of revisional jurisdiction came up for consideration by the Apex Court. It was held that the revisional prerogative conferred by the statue has to be essentially subject to the scheme of the Act so much so that the revising authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order shows application of mind after examination of books. iii) In the case of CIT v Goyal Private family Specific Trust 1988, 171 ITR 698 701-202 Alld, it was held that the order of the Assessing officer may be brief and cryptic but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of revenue. Writing of an order may be a requirement but non fulfilling of the same, cannot be said to be erroneous and prejudicial to the interest of revenue. When the Assessing officer has completed the assessment after verification of books and other factual and legal issues, there is no room for invoking the jurisdiction under section 263. iv) The error envisaged under section 263 is not one which depends upon the possibility or probability of an issue. It should either be an error of fact or law. CIT v Trustees of Anupan Charitable Trust 167 ITR 129 Raj. The show cause notice does not point to any specific lapse that in the order passed by the Assessing officer. No objective material has been brought on record to support the finding. v) In the case of Appollo Consulting Services Corporation v. DIT(international taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial available on record, the learned Commissioner of Income-tax was of the opinion that the assessments made under S.143(3) read with S.153A were completed by the Assessing Officer in the case of the assessee without making proper and adequate enquiries on the issues pointed out by him. He held that the failure of the Assessing Officer to make such enquiries before allowing the corresponding claims of the assessee, made the assessments completed under S.143(3) read with S.153A erroneous as well as prejudicial to the interests of the Revenue. Accordingly, relying on the various judicial pronouncements discussed in his impugned order, the learned Commissioner set aside the assessments made by the Assessing Officer under S.143(3) read with S.153A for all the years under consideration, by exercising his powers under S.263 with a direction to the Assessing Officer to complete the same afresh, after examining all the issues pointed out by him and after making detailed enquiries and investigations relating to the said issues. He also directed the Assessing Officer to take into consideration the submissions made by the assessee during the course of revision proceedings for deciding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at while giving effect to the appellate order passed by the learned Commissioner of Income-tax for all the years under consideration, the Assessing Officer has finally allowed the depreciation as per the books and not as per the Income-tax Rules, and the error allegedly pointed out by the learned Commissioner in the orders of the Assessing Officer in allowing higher depreciation has not caused any prejudice to the interests of the Revenue. 7. As regards the error allegedly pointed out by the learned Commissioner in the orders of the Assessing Officer accepting the claim of the assessee of having obtained unsecured loans from three different parties without obtaining their confirmations, the learned counsel for the assessee reiterated before us that such confirmations were filed by the assessee during the course of assessment proceedings. He, however, agreed that there is no evidence available with the assessee to support and substantiate its claim. 8. As regards the error allegedly pointed out by the learned Commissioner in the orders of the Assessing Officer in not bringing to tax the corpus receipts in the hands of the assessee, even after rejecting its claim under S.10(23C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. 10. The Learned Departmental Representative on the other hand, strongly supported the impugned order passed by the learned Commissioner under S.263. He contended that the orders passed by the Assessing Officer under S.143(3) read with S.153A for all the years under consideration clearly suffered from specific errors, as pointed out by the learned Commissioner of Income-tax. He submitted that only specific items of hospital equipment are eligible for depreciation at higher rate of 40%, but the Assessing Officer allowed depreciation at higher rate of 40% on the entire block of hospital equipment of the assessee without verifying the relevant details to ascertain exactly the items eligible for higher depreciation at 40%. He submitted that similarly, depreciation at higher rate of 15% was allowed by the Assessing Officer on furniture as against the admissible rate of 10%, and there was thus obvious error in the orders of the Assessing Officer, which was clearly prejudicial to the interests of the revenue. He contended that the case-laws cited by the learned counsel for the assessee in support of his contentions on these issues are not applicable in the present case, as the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of the assessee for higher depreciation at 40% was allowed by the Assessing Officer on the entire block of hospital equipment, without verifying the details of the hospital equipment in order to find out the exact items on which such higher depreciation at 40% was allowable. As agreed by the learned counsel for the assessee at the time of hearing before us, the relevant details of the hospital equipment were not even called for by the Assessing Officer during the course of assessment proceedings. The claim of the assessee for higher depreciation at 40% on the entire block of hospital equipment thus was allowed by the Assessing Officer without making proper and adequate enquiry, as warranted in the facts and circumstances of the case and in our opinion, the orders passed by the Assessing Officer allowing the claim of the assessee for higher depreciation at 40% on the entire block of hospital equipment for assessment years 2004-05 to 2010- 11 were thus erroneous on this issue. 12. At the time of hearing before us, learned counsel for the assessee has relied on the decision of Hon'ble Bombay High Court in the case of CIT V/s. Nagri Mills Co. Ltd. (supra) and that of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52-53. 14. In the case of Excel Industries Ltd. (supra), the issue before the Hon'ble Supreme Court was whether the benefit of an entitlement to make duty free import of raw materials obtained by the assessee through Advance Licences and Duty Entitlement Pass Book issued against export obligations is income in the year in which the exports are made or in the year in which the duty free imports are made. In this context, it was noted by the Hon ble Supreme Court that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licences and duty entitlement pass book and paid tax thereon. It was held by the Hon'ble Supreme Court that it was not as if the Revenue has been deprived of any tax, and with the rate of tax remaining the same in the relevant assessment year as well as the subsequent year, the dispute raised by the Revenue was entirely academic or at best might have a minor tax effect. It was held that there was thus no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless but also that it may not have added anything much to the public coffer. The context in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10, were accepted by the Assessing Officer without even obtaining their confirmations. Although it was submitted on behalf of the assessee before the learned Commissioner as well as before us that such confirmations were filed during the course of assessment proceedings, no evidence whatsoever has been produced to prove the same. In our opinion, the claim of the assessee for unsecured loans thus was accepted by the Assessing Officer without making proper and adequate enquiry as warranted in the facts and circumstances of the case, and the orders passed by the Assessing Officer were clearly erroneous as well as prejudicial to the interests of the Revenue on this issue, as rightly held by the learned Commissioner requiring revision under S.263. 17. As regards the error pointed out by the learned Commissioner in the orders of the Assessing Officer for assessment year 2006-07 to 2010-11 in not bringing to tax the corpus receipts in the hands of the assessee, after having rejected the its claim under S.10(23C)(6)/11, it is observed that although the registration sought under S.12A was originally denied to the assessee, the same was subsequently granted by the Tribunal vide its o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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