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2016 (4) TMI 1041 - ITAT JABALPUR

2016 (4) TMI 1041 - ITAT JABALPUR - TMI - Revision u/s 263 - AO has not examined the genuineness of the trust and application of fund for charitable purposes - reference to DVO - Held that:- We find that there is no whisper in the notice issued by the Commissioner of Income Tax under sec. 263 of the Act for the same. No material has been brought before us to show that the assessee was allowed any opportunity of hearing in respect of the above issue before passing the impugned order. The Commissi .....

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ontimeters Electricals P. Ltd. [2008 (12) TMI 4 - HIGH COURT DELHI ], where it was held that the issue which did not form part of the show-cause notice and the assessee was not confronted with it, the same cannot form basis for revision of assessment order under sec. 263 of the Act. The order under sec. 263 cannot travel beyond the show-cause notice.

Coming to the issue of investment in construction, we find that the construction was not completed during the year under consideration. .....

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ble before us, it is obvious that the DVO inspected the property after 31/03/2010 and the expenditure was incurred by the assessee in the construction in Financial Year 2009-10 also. Therefore, it was not possible on the part of the DVO to quantify the exact expenditure which was incurred in the Financial Year 2008-09. Moreover, we find that no defect in the books of account maintained by the assessee for the year under consideration could be pointed out either by the Assessing Officer or by the .....

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assessee, to the effect that the investment made in the construction qualifies as exemption under sec. 11 of the Act being utilized for charitable purposes. The Departmental Representative could not controvert the above contention of the assessee and could not show how the issue under appeal resulted in any prejudice to the interest of the Revenue. - Decided in favour of assessee - ITA No. 86/JAB/2014 - Dated:- 7-4-2016 - Shri N. S. Saini, Hon ble Accountant Member And Shri N. K. Choudhry, Hon .....

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prejudicial to the interest of the revenue. The order passed under sec. 263 is without jurisdiction should be annulled. 2. That the order under sec. 263 is bad in law as the CIT is not permitted to substitute his opinion in preference to judicial discretion of the Assessing Officer. The order under sec. 263 should be quashed. 3. That there is no error in the assessment as no discrepancy was found either by the Assessing Officer or even by CIT in spite of survey under sec. 133A, no rejection of .....

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nt craves permission to raise any other ground or grounds at the time of hearing of this appeal. 3. In all the grounds of appeal, the assessee has challenged the jurisdiction of the Commissioner of Income Tax in passing the order under sec. 263 of the Act. 4. Authorized Representative of the assessee submitted that the Commissioner of Income Tax issued notice under sec. 263 of the Act on the ground that as per the valuation of building done by the DVO, the investment made by the assessee in Fina .....

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essing Officer should made enquiry about the genuineness of the trust and application of funds for charitable purpose before completing the assessment. The Assessing Officer should have made enquiry about the justification of investment made by the assessee for the construction of building and referred the matter to the DVO after verifying the books of accounts in accordance with law. Therefore, in exercise of his powers under sec. 263 of the Act, he set aside the order for the Assessment Year 2 .....

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e Court in the case of Sargam Cinema Vs. CIT (2010) 328 ITR 513 (SC), the Assessing Officer could not refer the matter to the DVO in a case where there was a categorical finding recorded by the Tribunal that the books of accounts were never rejected. He submitted that in the case of the assessee also books of accounts, maintained by the assessee, were not rejected by the Assessing Officer and therefore, he could not have referred the matter for valuation of the cost of construction of the buildi .....

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ing the course of assessment proceedings, the assessee trust was specifically required to explain the difference in cost of construction as shown and that determined by the DVO. It was explained that the cost of construction as shown by the assessee trust is duly supported with regular books of accounts and that all the expenses are supported with bills for construction materials and vouchers for labour etc. It was pointed out that the deductions given in the estimate for work not done and the p .....

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regular books of accounts maintained. The source of investment has also been explained. Having regard to the facts, no adverse inference is drawn in this regard. Thus he submitted that the Assessing Officer after considering the DVO s report accepted the cost of construction shown by the assessee in its books of accounts. This assessment order dated 14/03/2013 was available with the Commissioner of Income Tax, when he issued notice under sec. 263 of the Act on 13/01/2014. Therefore, Commissioner .....

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er was neither permissible nor the view taken by the Assessing Officer resulted in loss of Revenue which is prejudicial to the interest of the revenue. In absence of any such finding, the appellate Tribunal was right in setting aside the order of the Commissioner of Income Tax. He submitted that in the case of the assessee also there is no finding to the effect that the order of the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. Therefore, the order passed under .....

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iled to consider the report of the DVO, according to which the investment in construction made by the assessee during the year under review was ₹ 3,53,79,748/-, whereas as per the return of the assessee, the investment was ₹ 1,69,16,213/-. However, while passing the order under sec. 263 on 10/02/2014, the Commissioner of Income Tax has also set aside the order of the Assessing Officer inter alia on the grounds that the Assessing Officer has not examined the genuineness of the trust a .....

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ve issue and what was the submissions of the assessee, if any, in respect of the said issue. In the above circumstances, we find force in the contention of the assessee that the order of the Commissioner of Income Tax in respect of the above issue is bad in law. Our view finds support from the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Contimeters Electricals P. Ltd. [(2009) 317 ITR 249 (Del.)], where it was held that the issue which did not form part of the show-cause n .....

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n construction, we find that the construction was not completed during the year under consideration. The construction was continued in the next Financial Year relevant to the Assessment Year 2010-11 also. The Assessing Officer in the assessment made for the Assessment Year 2010-11 under sec. 143(3) on 14/03/2013, discussed his finding in respect of DVO s report as under:- During the course of assessment proceedings, the assessee trust was specifically required to explain the difference in cost o .....

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h type of construction for running the college. The assessee trust furnished a valuation report as per which the cost of construction of the building is only ₹ 2,18,93,375/-. It was further submitted that the addition in fixed assets is application of funds for charitable purposes exempt under sec. 11. The cost of construction as shown by the assessee is supported with regular books of accounts maintained. The source of investment has also been explained. Having regard to the facts, no adv .....

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