TMI Blog2015 (7) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... upon a fresh issue which does not emanate from the notice issued by the Commissioner under section 263 of the Act, while making assessment under section 143(3) r.w.s. 263 of the Act. In the instant case the AO had not treated the entrance fees as revenue receipt despite the fact that the assessee, in the audit report annexed to the return of income, furnished the details with regard to the receipt of entrance fees from members of the club and the mode of recording the same in the books of account. Such being the case it could not have been considered in the proceedings under section 143(3) r.w.s. 263 of the Act. We, therefore, hold that the addition, towards entrance fees, made by the AO, in the proceedings under section 143(3) r.w.s. 263, is beyond the jurisdiction of the AO and therefore deserves to be deleted and we direct the AO accordingly. Though the learned CIT(A) has disposed of the appeals on merits, by following the decision of the Hon'ble Bombay High Court in the case of Diners Business Services P. Ltd.[2003 (4) TMI 56 - BOMBAY High Court] , we need not have to go into the nature of the entrance fees at this stage since the same cannot be subject matter of considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded to complete the assessment under section 144A of the Act whereby the income of the assessee was determined at Nil. 3. Similarly, in A.Y. 2006-07 assessee declared loss of ₹ 2,71,93,700/-. Assessment was completed under section 144 of the Act wherein the expenses claimed by the assessee were disallowed and determined the loss at Nil; in other words the total income of the assessee was determined at Nil. 4. It may be noticed that the assessee received a sum of ₹ 5,17,74,750/- and ₹ 2,02,97,000/- for the assessment years 2005-06 and 2006-07 respectively as entrance fees from the members. According to the assessee company the amount received from the Members as entrance fees is a capital receipt and, therefore, not liable to tax since it is a onetime payment made by the members. It was also submitted that the entrance fees is accounted for in the year in which the members are elected and the same is credited to the general Reserve; hence it does not have the character of revenue receipt. In Form 3CD, annexed to the return of income, the auditors have mentioned that the assessee treated it as capital receipt. During the course of proceedings under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cash deposit Rs.72,60,000/- e) Mutual Fund Investment Rs.1,45,00,000/- The assessee did not file any explanation in respect of the same. However, these amounts were not added/disallowed as unexplained investments, undisclosed receipts and the assessment order is also erroneous in so far as prejudicial to the interest of revenue on this account. (ii) Further, even though the assessee did not comply with the notices issued by the department, there has been no inquiry on the part of AO independently for verification of various expenses and claims of assessee. The expenses claimed are to the extent of ₹ 44,78,73,6961- as per P L A/c. Such lack of inquiry also made the assessment order erroneous in so far as prejudicial to the interest of revenue. (iii) In the assessment order, the AO mentioned that all the expenses except those pertaining to computation of Fringe Benefit Tax are disallowed. The expenses claimed as per P L A/c are ₹ 44,78,73,696/-. Out of these expenses only ₹ 1,29,15,512/- pertain to computation of Fringe Benefit Tax. However, the final assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted in exparte assessment by rejecting retuned loss which is not in accordance with law. The learned CIT(A) having dismissed the appeals filed by the assessee the matter was taken up in second appeal before the ITAT. The ITAT, in turn, restored the matters to the file of the CIT(A) to decide them afresh. Thus the appeals were taken up by the learned CIT(A) for hearing. It deserves to be noticed that by the time the matter was taken up for hearing the original assessment order was set aside by the Revisional Authority in exercise of the powers vested in him under section 263 of the Act. Though in the orders passed under section 144 of the Act there is no addition referable to entrance fees received from members, the learned CIT(A) made brief mention about it while disposing of the appeals. Therefore the assessee preferred appeals against the orders passed by the AO under section 144 contending, inter alia, that during the course of assessment proceedings under section 144 of the Act the AO having not added any amount on account of annual subscription, etc. it is not the subject matter of appeal and thus the CIT(A) is not justified in making a mention about the issues arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly proceed to consider the matters. The case of the learned counsel for the assessee is that the jurisdiction of the Revisional Authority, in exercise of powers vested in him under section 263 of the Act, is limited to the issues that were mentioned in the show cause notice or on such other matters which were specifically dealt with by the learned Commissioner upon putting it up to the assessee; in short the order passed by the AO outside the ambit of the issues mentioned in the show cause notice, deserve to be considered as illegal and bad in law. In other words before a Commissioner passes an order he should give the assessee an opportunity of being heard and thereafter record, prima facie, that the assessment order is erroneous in so far as it is prejudicial to the interests of the Revenue. The requirement of giving the assessee an opportunity of being heard is for the simple reason that the assessee may be able to refute, prima facie, the plea of the Commissioner which might have been formed on examination of the record. When the Commissioner s powers are limited to the issues which were put to the assessee, the AO, under guise of framing fresh assessment, cannot enlarg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specifically listed out in the order passed under section 263 of the Act and in this background the matter was set aside with a direction to the AO to make a fresh assessment and thus it has to be assumed that the direction was limited to the issues which were considered by the Revisional Authority. Such being the case the AO has no jurisdiction to touch upon a fresh issue which does not emanate from the notice issued by the Commissioner under section 263 of the Act, while making assessment under section 143(3) r.w.s. 263 of the Act. In the instant case the AO had not treated the entrance fees as revenue receipt despite the fact that the assessee, in the audit report annexed to the return of income, furnished the details with regard to the receipt of entrance fees from members of the club and the mode of recording the same in the books of account. Such being the case it could not have been considered in the proceedings under section 143(3) r.w.s. 263 of the Act. We, therefore, hold that the addition, towards entrance fees, made by the AO, in the proceedings under section 143(3) r.w.s. 263, is beyond the jurisdiction of the AO and therefore deserves to be deleted and we direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see against the order passed under section 144 dated 12.12.2007 and the order dated 02.07.2008 in respect of A.Y. 2005-06 the only issue is with regard to the addition of ₹ 1 lakh confirmed by the learned CIT(A) under section 14A r.w. Rule 8D. On this issue the learned counsel for the assessee submitted that in the proceedings under section 144 of the Act the AO has not disallowed any amount under section 14A of the Act and even in the order passed under section 263 of the Act there is no specific mention about this issue and thus, in the light of the decision of the Hon'ble Gujarat High Court (supra), the addition sustained by the learned CIT(A) is not in accordance with law. 19. Having regard to the circumstances of the case we accept the plea of the assessee and delete the impugned addition. In respect of A.Y. 2006-07 assessee filed an appeal against the order under section 263 of the Act as well as the order passed under section 144 of the Act. No arguments were advanced to challenge the order passed under section 263 of the Act except stating that sufficient opportunity was not given. We do not find any merit in the submissions of the assessee and accordingly dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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