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Prathyusha Educational Trust Versus The Assistant Commissioner of Income-Tax, The Joint Commissioner of Income Tax, The Commissioner of Income Tax, The Director General of Income Tax (Investigation)

2016 (7) TMI 332 - MADRAS HIGH COURT

Rectification of mistake - Held that:- The first respondent has issued the impugned corrigendum in exercise of powers under Section 154 of the Act and it has to be seen whether notice is required to be issued to the petitioner in terms of sub-section (3) of Section 154 of the Act. The stand taken by the first respondent is that such notice is required to be issued only if the rectification has the effect of enhancing an assessment or reducing the refund. Further, in terms of Section 246(1)(c), a .....

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ckground facts and this has to be done by the petitioner before the appellate authority in the pending appeals. The effect of the rectification by way of the impugned corrigendum is equally an issue relatable and touching upon whether the assessment orders were passed on best judgment basis. Therefore, the petitioner should pursue their challenge to the impugned corrigendums before the Commissioner of Income Tax (Appeals)-II, before whom the appeals filed against the assessment orders are pendin .....

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th the other grounds already raised in the appeals and after hearing the parties, dispose of the appeals as expeditiously as possible preferably, within a period of three months from the date of receipt of a copy of this order - W. P. Nos. 23341 & 23342 of 2015 - Dated:- 5-7-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. P. S. Raman Senior counsel for M/s.Subbaraya Aiyar Padmanabhan & Ramamani For the Respondents : Mr. T. Pramod Kumar Chopda ORDER The petitioner, a public Charitable Tr .....

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to assess the total income for the assessment years 2010-11 and 2011-12. The petitioner was called upon to file their correct return of their total income in respect of those two years within a period of 15 days from the date of service of notice. The petitioner had filed their return of income on 09.11.2011, declaring the total income as NIL . Subsequently, notices under Section 143(2) and 142(1) of the Act, were issued for the assessment years 2010-11, and 2011-12. 2. The first respondent pass .....

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and subsequently, filed stay application before the Assessing Officer/first respondent under Section 220(6) of the Act on 26.04.2013. The prayer for stay was rejected by the first respondent by order dated 07.05.2013. The petitioner filed an application for stay before the second respondent dated 13.05.2013. The fifth respondent issued a show cause notice to the petitioner dated 16.07.2013, calling upon them to show cause as to why the approval granted under Section 10(23C)(vi) of the Act shoul .....

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f admission, without issuing any receipt and without entering in the regular books of accounts thereby setting apart the funds for the purposes other than the objects of the Trust and thus, the petitioner collected capitation fee for giving admissions under the management quota, which is a clear violation of law. The fifth respondent opined that the capitation fee are to be classified as business income falling under the ambit of Section 28(iv), thereby dis-entitling them for exemption. The swor .....

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ccounts and control. Further, it was stated that even accounted portion of the collection of the Trust were seen to have been not utilised as per the objects of the Trust. Therefore, the fifth respondent stated that the petitioner Trust has collected the capitation fee and is thus carrying on a profit making activity contrary to the objects for which it was established and approval under Section 10(23C)(vi) of the Act was granted. 3. The petitioner submitted their reply on 19.08.2013, stating th .....

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er Section 10(23C)(vi) of the Act. The details pertaining to the assessment orders passed for the relevant years and the pendency of the appeal before the Appellate Authority were set out in the reply, that apart, various factual issues were pointed out. 4. The fifth respondent after affording an opportunity of hearing, which appears to have prolonged for more than one year, passed the order dated 18.11.2014, withdrawing the approval granted and holding that the petitioner would not be eligible .....

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the prescribed authority, the contravention of the provisions of clause (23C) of Section 10 and only after such approval granted has been withdrawn, he can proceed to pass an order, denying the benefit of exemption on the ground of contravention and without complying with these mandatory provision, the Assessing Authority gets no jurisdiction to re-open the assessment made. On 01.12.2014, the petitioner filed a petition under Section 154 of the Act before the fifth respondent, to rectify the ord .....

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ave filed appeals before the Commissioner of Income Tax (Appeals)-II against the assessment orders, dated 28.03.2013 and 22.04.2013 respectively and also filed stay petition before the Assessing Officer on 24.04.2013 and the Assessing Officer by order dated 07.05.2013, directed the petitioner to pay a sum of ₹ 1,11,39,991/- and ₹ 2,44,51,454/- for both the assessment years to avail the benefit of stay of recovery. 7. During the course of hearing of the Writ Petitions, the learned Sta .....

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such orders are passed by the second respondent, the notices under Section 226(3) to remain stayed. The fifth respondent by order dated 06.02.2015, dismissed the rectification petition filed by the petitioner under Section 154 of the Act, dated 01.12.2014, holding that there is no mistake apparent on the record in the order cancelling the exemption granted. The fifth respondent has assigned reasons as to why he has come to such conclusion. While, the matters stood thus by corrigendum, dated 22. .....

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rent from the record is corrected and the assessment order for the assessment year 2010-11, dated 28.03.2013, shall read as an order passed under Section 144 of the Act. Similar corrigendum was issued for the assessment year 2011-12. The petitioner has filed these Writ Petitions challenging the said corrigendums. 9. Mr.P.S.Raman, learned Senior counsel appearing for M/s.Subbaraya Aiyar Padmanabhan & Ramamani, learned counsel for the petitioner submitted that the first proviso to Section 143( .....

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n hand, the Assessing Officer without intimating the Central Government/prescribed authority about the contravention of the provisions of Section 10(23C)(vi) has completed the assessments under Section 143(3) read with Section 153A on 28.03.2013. It is further submitted that this objection was raised by the petitioner in the Writ Petitions field by them challenging the notices under Section 226(3) of the Act, after which the first respondent/Assessing Officer has issued the impugned corrigendum, .....

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essment orders, it is submitted that the orders do not indicate that the assessment was made under Section 144 of the Act, as stated in the impugned corrigendum. It is further submitted that the assessment was passed consequent to a search and based on material seized during the search and the original Assessing Officer did not deem it fit to make the assessment to the best of his judgment in the absence of any material and therefore, the impugned corrigendum issued by the present Assessing offi .....

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is only to drag on the proceedings and to prevent the Commissioner (Appeals) from completing the appeals, which are pending since 2013. It is further submitted that the assessment orders are admittedly, best judgment assessments under Section 144 of the Act and the findings recorded in both the orders more particularly in paragraph 4 therein clearly show that the assessments were made under Section 144 of the Act and therefore, the Assessing Officer was well within his jurisdiction to issue the .....

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1, dated 04.03.2013, along with notice under Section 142(1), dated 12.02.2013. For the assessment year, 2011-12, notice under Section 143(2), was issued on 17.09.2012, which returned as unserved with remark left without intimation and notice was again sent through ITI for enquiry and one set of notices was sent to the college address at Tiruvallur on 26.09.2012. The ITI served the notice on 27.09.2012, at the changed address at Guindy and the notice dated 17.09.2012, was received by one Mr.N.Sri .....

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he petitioner was called upon to furnish the details in support of the return filed by them, however, on 13.03.2013, the authorised representative filed a letter withdrawing themselves from representing the petitioner. Subsequently, the General Manager/Finance appeared on 14.03.2013, and thereafter, the Chairman of the Trust appeared on 19.03.2013 and agreed to furnish the details called for by 21.03.2013. However, there was no further response. Inspite of it, once again, a letter was sent on 22 .....

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er Section 154(7) of the Act. The learned counsel referred to Section 292B of the Act and submitted that this defect will not invalidate the order of assessments which have been passed. Further, it is submitted that the petitioner has filed petition before the Commissioner of Income Tax (Appeals), in which they can canvass all grounds and it is also open to the petitioner to file a separate appeal. 13. In reply, the learned Senior counsel for the petitioner submitted that if it is the contention .....

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increasing the liability of the assessee and in the instant case, the mistake which has been rectified is in the preamble portion of the order and there is no other change in the assessment orders. 15. The learned Standing counsel has circulated the original files duly flagged to substantiate the contention that the petitioner did not co-operate in the assessment proceedings and the assessment orders are indeed best of judgment assessments. 16. I have elaborately heard the learned counsels appea .....

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18. It is not in dispute that as against the orders of assessment dated 28.03.2013, for both the years i.e., 2010-11 and 2011-12, the petitioner has filed appeals before the Commissioner of Income Tax (Appeals)-II/fourth respondent on 22.04.2013 and the appeals are pending. While the appeals were pending, the petitioner moved for stay before the first respondent/Assessing Officer by application, dated 26.04.2013, who passed a conditional order directing the petitioner to pay a portion of the tax .....

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tion of notices issued under Section 226(3), till orders are passed on the stay petition. It cannot be disputed that the impugned corrigendums have been issued after about two years, after the assessments were completed and orders passed. 19. In this factual scenario, it has to be seen as to whether this Court should exercise its extra ordinary jurisdiction under Article 226 of the Constitution of India and examine as to whether the first respondent was justified in issuing the impugned corrigen .....

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ch was raised by the learned Senior counsel is as to whether the Assessing Officer without giving effect to the provisions of Section 10(23)(vi), unless he has intimated the Central Government or the prescribed authority, the contravention of the provision of Section 10(23)(vi) and only after such approval granted, has been withdrawn, he could have proceeded to deny the benefit of exemption. This point is canvassed by the petitioner in the appeals, which are pending before the Commissioner of In .....

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he pending appeals. In such circumstances, it would be necessary to examine as to whether the petitioner should be permitted to canvass the effect of the impugned corrigendums on the assessment orders. For doing so, it has to be seen as to whether the assessment orders are best judgment assessment or otherwise. 21. To decide this issue, the Court would be required to examine the manner in which the Assessing Officer proceeded with the assessments. The respondents have pitched their case on the m .....

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lant. 22. It was argued by the learned Senior counsel for the petitioner that the corrigendum was issued only after the petitioner had pointed out in the earlier Writ Petitions that the Assessing Officer was not justified in withdrawing the benefit of exemption without having intimated the Central Government or the prescribed authority of the alleged contravention. 23. The learned Standing counsel for the respondents had referred to Section 154 of the Act which deals with rectification of mistak .....

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jurisdiction which confers validity upon it and not to a jurisdiction under which it would be nugatory. It cannot be disputed that the power conferred under Section 154 is a power to correct mistakes and not a power of review. Therefore, invoking the said power, the Assessing Officer cannot revise or review his earlier order. It is important to note that the power of rectification of mistakes under Section 154 is with a view to rectifying any mistake apparent from the record and it is not error .....

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facts of the case, or a mistake due to an overlooking of certain aspects of the case, or a mistake arising on account of a wrong construction of any provisions of the Act. 25. The Hon'ble Supreme Court in the case of Sankappa (S) vs. ITO reported in (1968) 68 ITR 706 (SC) observed that what the Assessing Officer does, is to correct errors in or rectify the orders of assessment made by him and orders making such corrections or rectification or, therefore, clearly part of the proceedings for .....

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