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M/s Surajmal Memorial Education Society Versus Commissioner of Income Tax (Exemptions)

2016 (6) TMI 177 - ITAT DELHI

Revision u/s 263 - entitlement of assessee u/s 11(1)(a) allowed by AO - Held that:- Unable to agree that the A.O. has not made any independent inquiry or verification of details and documentary evidences furnished by the assessee during the course of assessment proceedings. A perusal of the copies of documentary evidences filed by the assessee as placed by it in the paper book show that the A.O. accepted the claim of corpus donations on the basis of confirmations and documentary evidences which .....

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eof in the assessment order passed by him. In view of the voluminous documentary evidences filed by the assessee in support of the claim on corpus donation, it cannot be said that the fact of corpus donation has been accepted by the Assessing Officer without verification, more so when the learned CIT(E) has not pointed out any specific discrepancy in the documentary evidences in respect of any donor. It is a settled law that once the quasi judicial power vested in A.O. has been exercised by him .....

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ineness of the corpus donations given by them. Therefore it cannot be said that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue on this issue.

Regarding the issue of room rents, it is found that the assessee society is engaged in the activity of providing education and therefore the provision of hostel to the students is an incidental activity and therefore the room rent receipts from hostel are found to be covered by section 2(15) of th .....

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> The investment made by the assessee society in this land is duly included in the fixed assets schedule forming part of the audited accounts which are drawn from the books of accounts examined by the Assessing Officer during the course of assessment proceedings. Therefore we are unable to agree with the contention of the D.R. that the source of acquisition of land has not been verified. In our opinion the conclusion of the Assessing Officer cannot be held to be erroneous and prejudicial to the .....

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he assessment order cannot be said to be erroneous and prejudicial to the interests of Revenue on this ground as the expenditure has been incurred as per the Aims & Objects of the assessee society to perpetuate the memory of Shri Surajmal in whose name the assessee society was set up and the Assessing Officer has accepted the expenditure on statue only after examination of all bills and vouchers of this expenditure.

Thus the assessment order passed u/s 143(3) of the Act by the A.O. in .....

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ed 23.03.16 passed u/s 263 of the Income Tax Act, 2961 (hereinafter referred as the Act) by the Commissioner of Income Tax(Exemption), New Delhi on the following grounds:- 1. That the learned CIT(Exemptions) has erred in invoking the jurisdiction under section 263 of the Act in the instant case. 2. That the learned CIT(Exemptions) has erred in holding that the assessment order passed u/s 143(3) of the Act on 24.03.14 by the Assessing Officer is erroneous in as much as it is prejudicial to the in .....

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g the fact that the assessing Officer has made all due and necessary inquiries on all the issues raised in the notice u/s 263 and has passed the order only after being satisfied with the explanation and evidences filed by the assessee and after examining the books of accounts, bills vouchers etc. during the course of assessment proceedings. c) That the learned CIT(Exemp.) has erred in drawing adverse inference against the assessee only on the basis of suspicion without pointing out any specific .....

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.) has erred in invoking the jurisdiction u/s 263 of the Act only on the basis of whims and fancies and has also erred in setting aside the order of the A.O. for making fishing and roving inquiries. f) That the learned CIT (Exemp.) has erred in passing the impugned order without verifying the details and documentary evidences filed by the assessee before the A.O. which are available on the assessment record. 3. That the appellant craves the right to amend, append, delete any or all grounds of ap .....

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assessment order dated 24.3.2014 passed u/s. 143(3) of the I.T. Act, the AO has stated that the Assessee Society is registered u/s. 12A of the Income Tax Act, 1961 vide order dated 31.3.1973 and has also notified u/s. 80G of the Act vide order dated 14.1.2008. The necessary details were called for and submitted from time to time as per the order sheet entries. The books of accounts alongwith supporting vouchers / bills were produced and test checked. After verification, the AO observed that the .....

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ues relating to the assessment of the case. Therefore, a notice u/s. 263 was issued to the assessee on 19.2.2015 requiring it to show cause as to why the assessment order should be set aside u/s. 263 of the Act to be made afresh. In response to the same, Assessee filed its reply dated 11.3.2015 objecting to the proceedings initiated u/s. 263 of the Act. After considering the reply filed by the Assessee-Society, the Ld. Commissioner of Income Tax(E) has passed the impugned order u/s. 263 of the I .....

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ssessee. 4. Against the above order of the Ld. CIT(E) dated 23.3.2016 passed u/s. 263 of the I.T. Act, the assessee appealed before the Tribunal. 5. We have heard the arguments of both the parties and have carefully perused the relevant materials placed on record before us. The learned Counsel of the assessee submitted that the original assessment for relevant assessment year 2012-13 was framed u/s 143(3) of the Act on 24.03.14 and thereafter the CIT(E) had issued a notice u/s 263 of the Act on .....

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E) had passed an order u/s 263 of the Act and that such notice and order u/s 263 of the Act stood quashed by the order dated 2.03.16 passed by G Bench of Delhi ITAT in ITA No. 2011/Del/2015. He further submitted that a copy of this order is placed at page No.227 to 235 of the paper book and drawing our attention to the same he pointed out that the Hon ble ITAT while allowing the appeal of the assessee had quashed the notice u/s 263 for that year and had also quashed the order u/s 263 for that ye .....

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estionnaire issued by the Assessing Officer during the course of assessment proceedings, a copy where of has been placed in the assessee s paper book at pages No. 57 to 61 and pointed out that all required inquiries were duly conducted by the Assessing Officer including in respect of all the four issues raised by the CIT(E) in his notice u/s 263 of the Act for the instant year. The learned Counsel pointed out that regarding the first issue of corpus donations the assessee had submitted its reply .....

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the specific query raised by the A.O. in his notice dated 23.01.14, a copy whereof is placed at page No.57 to 60 of the assessee s paper book. It was further contended by him that all such donations were corpus donations and each of the donor had confirmed before the A.O. that the amounts donated by them were towards corpus donation for the assessee society and thus were covered by the provisions of section 11(1)(d) of the Act. It was contended by him that the allegation of the learned CIT(E) th .....

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nation received by the assessee society, that the A.O. had accepted the same and had recorded a finding in the assessment order passed by him that the corpus donation of ₹ 2,36,40,000/- is allowed as exempt u/s 11(1)(d) of the Act. The learned Counsel for the assessee further contended that the CIT(E) in his order passed u/s 263 of the Act has also not found any discrepancy in any of the documentary evidences filed by the assessee in support of the claim of corpus donations and it is merel .....

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ed the claim of the assessee only when he was satisfied with the voluminous documentary evidences filed by the assessee, wherein no discrepancy was found by the CIT(E). It was further contended by him that a revision order u/s 263 of the Act could not be made by the CIT(E) only to carry out fishing and roving inquiries with the objective of substituting his own views with that of the Assessing Officer without bringing on record any material to show that the view taken by the A.O. was not sustain .....

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uch material on the basis of which it could be alleged that any further inquiry was required to be made and therefore the acceptance of the claim of the assessee by the A.O. is neither erroneous nor prejudicial to the interest of Revenue. 5.1 Regarding the second issue relating to room rent receipts amounting to ₹ 41,93,810/- raised by the CIT(E) in his show cause notice, the A.O. submitted that these room rent receipts were in respect of hostel fee received by the assessee society from it .....

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sessee has not filed details to explain the nature of these receipts and whether these are eligible u/s 11 of the Act, is also factually wrong and not borne out of any material on record. The A.R. pointed out that the Assessing Officer in his questionnaire dated 23.1.14 has raised a specific query in question No.26 whereby he has required the assessee to justify the hostel receipts in the light of amended provisions of section 2(15) of the Act. He further submitted that reply to this query had b .....

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e has earned income from room rent receipts in addition to tuition fees, admission fees etc. It was further contended by him that such income was earned by the assessee in all the earlier years also and has been consistently accepted to be eligible for exemption u/s 11 of the Act being an activity incidental to education carried out by the assessee society in all the earlier years. It was further contended by him that the CIT(E) in his order passed u/s 263 has also not brought on record any mate .....

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all the earlier years. 5.2 Regarding the third issue raised by the CIT(E) relating to capital work in progress of land at Bahadurgarh, the A.R. pointed out that the A.O. had duly made inquiries in relation to all additions to fixed assets during the instant year when he raised two questions namely Question No.8 and Q. No.21 in his show cause notice dated 23.01.14 requiring the assessee to submit the details of all assets purchased and additions to fixed assets along with bills / vouchers. He dre .....

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assessee society in addition to the land purchased by it in the same location in the immediately preceeding year for expansion of the assessee s educational activity. The A.R. pointed out that the assessee had duly submitted a copy of the registered sale deed before the Assessing Officer and a copy thereof is placed at pages No.78 to 83 of the assessee s paper book. It was contended by him that the observation of the CIT(E) that no evidence in support of the expenditure has been submitted is fa .....

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ank account with Indian Overseas Bank, Janakpuri, New Delhi. It was further contended by the A.R. that during the course of assessment proceedings the details of bank accounts as well as bank statements were duly verified by the Assessing Officer along with books of accounts and therefore there is no valid basis for the CIT(E) to hold in the impugned order that the source of acquisition of land at Bahadurgarh has not been verified. The A.R. further contended that the source of acquisition as wel .....

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ered sale deed which was executed in favour of the assessee society and all details of payment contained therein were found in order then it was not necessary to conduct any further inquiry regarding prevalent market rate and the collector rate of the area or surrounding area so as to ascertain if there has been any under statement or over statement in the land purchase. It was contended by him that on the basis of the order of ITAT for assessment year 2011-12 in the case of the assessee itself, .....

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77; 20,13,652/- incurred on statue, the A.R. submitted that all documentary evidences relating to the same were duly filed before the A.O. when the A.O. had required the assessee to specifically give details of additions to fixed assets along with bills / vouchers etc. in his questionnaire issued during the course of assessment proceedings. The A.R. pointed out that a copy of the ledger account in respect of the statue and all the bills which are placed at pages No. 192 to 203 of the paper book .....

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ut that under the Aims & Objects of the assessee society it was clearly stated that the society is a non political and non Sectarian organisation formed to perpetuate the memory of the great Indian Hero and patriot Surajmal of Bharatpur. It was contended by the A.R. that the name of the assessee society was also after the same Indian Hero and Patriot Shri Surajmal of Bharatpur and therefore the expenditure incurred by the assessee society on installation of his statue was in accordance with .....

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f statue of Maharaja Surajmal was on record in the immediately preceeding year namely assessment year 2011-12, no objection had been taken by the CIT(E) in that year while issuing the notice u/s 263 or even while passing the order u/s 263 of the Act for that year. He thus submitted that there was no justification for the CIT(E) to hold that the order of the assessment was either erroneous or prejudicial to the interest of Revenue as all the necessary inquiries had been duly conducted by the Asse .....

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.O. in response to specific queries of the A.O. raised in his questionnaire issued to the assessee during the course of assessment proceedings, and the A.O. has framed the assessment after due examination of the same and therefore it cannot be said that the assessment was framed by the A.O. without carrying out necessary verification or without application of mind. It was further contended by him that the CIT(E) has alleged that no independent inquiries and verifications were carried out without .....

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the assessment order to be erroneous and prejudicial to the interest of Revenue by directing the A.O. to examine the issues afresh and that it results into an order to carry out roving and fishing inquiries which is not permissible in law. He relied on the decisions of Hon ble Delhi High Court in the case of DIT vs. Jyoti Foundation reported in 357 ITR 388 as also the judgment of Hon ble Supreme Court in the case of CIT vs. Malabar Industries reported in 243 ITR 83. The A.R. also relied on the o .....

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rying out any independent inquiry and verification. She further referred to the order of the CIT(E) and submitted that the CIT(E) had found the assessment order to be erroneous as well as prejudicial to the interest of Revenue on all the four issues raised by him in his notice u/s 263 of the Act. The learned DR supported the action of the CIT(E) by pointing out that the assessment order was passed by the A.O. in undue hurry and without verification of the details submitted by the assessee and th .....

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t the CIT(E) could not have given any finding on the various documentary evidences claimed to have been filed by the assessee before the A.O. and that the direction of the CIT(E) was merely to pass a fresh assessment order in accordance with law after allowing due opportunity of hearing to the assessee. She also stated that no prejudice is caused to the assessee because of this order of CIT(E). The learned D.R. also filed a compilation of the case laws in support of her contentions that the CIT( .....

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3 of the Act should be upheld. 5.6 The learned A.R. in rejoinder pointed out that it is not a case of no inquiry or lack of inquiry as all relevant and required inquiries that should have been made in this case were infact carried out by the A.O. when he issued questionnaire on all the relevant points including the four issues raised by the CIT(E) in the notice u/s 263 of the Act. It was further submitted by him that once the A.O. was satisfied with the documentary evidences filed by the assesse .....

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see as also the bank accounts and books of accounts which were duly produced and examined by the Assessing Officer during the course of assessment proceedings. The A.R. further submitted that the learned CIT(E) had also erred in drawing adverse inference against the assessee by holding in para 5 of the impugned order that the assessee had not produced supporting documents in his office. He contended that the entire supporting documents were available on the assessment record, and the learned CIT .....

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f the conclusions of the A.O. were found to be unsustainable in law and also when there was no finding regarding assumption of any wrong fact or wrong application of law by the A.O. while passing the assessment order. 5.7 We have heard the rival contentions and perused the records. We find that the Hon ble Supreme Court of India in the case of Malabar Industrial Company Ltd. reported in 243 ITR 83 has held as under:- A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that .....

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dicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed witho .....

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tax lawfully payable by a person, it will certainly be 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 an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Incom .....

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the documents filed by the assessee in its paper book that the assessee has duly filed its reply along with supporting documentary evidences in respect of all the issues raised by the Ld. CIT(E) in his notice and order u/s 263. We note that the AO has taken note of room rent receipts, corpus donations as well as additions to fixed assets in the assessment order passed by him, which clearly indicates that all these four issues were duly considered by him while passing the assessment order. There .....

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ces filed by the assessee as placed by it in the paper book show that the A.O. accepted the claim of corpus donations on the basis of confirmations and documentary evidences which contained the complete names, addresses, PAN numbers, copies of account payee cheques, audited accounts, audit reports and other documents proving the identity and credit worthiness of all the donors. The genuineness of the donation is also proved from the specific direction in each of the confirmation that the amount .....

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cific discrepancy in the documentary evidences in respect of any donor. It is a settled law that once the quasi judicial power vested in A.O. has been exercised by him in accordance with law and in exercise of such power he has arrived at a conclusion, then merely because the CIT does not feel satisfied with the conclusion it cannot be said that the assessment order is erroneous. In the instant case the A.O. has required the assessee to furnish confirmations of each of the donors along with thei .....

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the provision of hostel to the students is an incidental activity and therefore the room rent receipts from hostel are found to be covered by section 2(15) of the Act and the order of assessment cannot be said to be erroneous and prejudicial to the interests of Revenue when the claim of the assesse was accepted only after making inquiry on this point. It is also seen that such room rent receipts have been earned by the assessee society in all the earlier years also and exemption u/s 11 of the Ac .....

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assessee society from which payments have been made are duly reflected. It is further seen that the investment made by the assessee society in this land is duly included in the fixed assets schedule forming part of the audited accounts which are drawn from the books of accounts examined by the Assessing Officer during the course of assessment proceedings. Therefore we are unable to agree with the contention of the D.R. that the source of acquisition of land has not been verified. In our opinion .....

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d in its Memorandum of Association. We agree with the contention of the learned A.R. that the assessment order cannot be said to be erroneous and prejudicial to the interests of Revenue on this ground as the expenditure has been incurred as per the Aims & Objects of the assessee society to perpetuate the memory of Shri Surajmal in whose name the assessee society was set up and the Assessing Officer has accepted the expenditure on statue only after examination of all bills and vouchers of thi .....

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in law. On the contrary it appears that the learned CIT(E) has simply expressed the view that the A.O. should have conducted inquiry in a particular manner as desired by him. Such a course of action of the learned CIT(E) is not in accordance with the mandate of provisions of section 263 of the Act. In this case the A.O. is found to have passed the assessment order after making all inquiries or verifications which should have been made including on all four issues raised by the CIT(E) and theref .....

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