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TMI Blog2016 (10) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The returns were processed u/s 143(1) of the Act. Subsequently, the assessments were re-opened u/s 147 of the Act, with a reason that the assessee has claimed exemption u/s 11 of the Act, without any registration u/s 12AA of the Act, accordingly, the income chargeable to tax has been escaped assessment for the assessment year 2007-08 to 2010-11. In response to notice u/s 148 of the Act, the assessee society has filed revised return of income for the assessment year 2007-08 to 2010-11 declaring nil total income after claiming exemption u/s 11 of the Act. The case has been selected for scrutiny and accordingly, notice u/s 143(2) of the Act and 142(1) of the Act along with questionnaire were issued to the assessee. In response to notices, the authorized representative of the assessee appeared from time to time and furnished relevant information. The A.O. after considering the information submitted by the assessee completed the assessment u/s 143(3) r.w.s. 147 of the Act and rejected exemption claimed by the assessee u/s 11 of the Act and assessed income as AOP. 3. The CIT, Vijayawada issued a show cause notice dated 23.1.2014 and asked to explain why the assessment order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous, in so far as it is prejudicial to the interest of the revenue, as the A.O. has examined all the issues pointed out in the show cause notice at the time of completion of assessment. The assessee further submitted that it has furnished books of accounts and other relevant information at the time of assessment, in response to a show cause notice issued by the assessing officer on various occasions. The A.O. has issued show cause notice and asked details about the corpus donations, income from house property and advance given to Gopisetty Mallaiah & Co. for which the assessee has furnished necessary details to the satisfaction of the A.O. The A.O. after examining the details furnished by the assessee has accepted the explanation and assessed the income which cannot be termed as erroneous in so far as it is prejudicial to the interest of the revenue. 5. The assessee further submitted that in respect of maximum marginal rate of tax, the assessee is a registered society under the provisions of Societies Registration Act with the main objective of charitable and religious activities cannot share its surplus among its members, accordingly, applicability of maximum marginal rate for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions which is necessary to prove the donations is with a specific direction or not. 7. The CIT, further, observed that the A.O. wrongly taxed income of AOP society under normal rate of tax applicable to individual/AOP, even though the assessee AOP is not registered under the provisions of section 12A of the Act and also the shares of its members are indeterminate. As regards advance given to Gopisetty Mallaiah & Co., the A.O. failed to examine as to whether any part of income or property of the assessee was directly or indirectly used for the benefit of the President or on what ground the assessees fund was advanced to the President. Without examining the relevant details, simply accepted the explanations offered by the assessee which renders assessment order erroneous in so far as it is prejudicial to the interest of the revenue. Similarly, the CIT further held that in so far as income from house property is concerned, there is a difference of Rs. 52,717/- in respect of income from house property. The A.O. without examining the above details simply accepted income of Rs. 1,77,834/- as against the correct income of Rs. 2,30,551/- which render the assessment order erroneous in so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee being a society registered under the Societies Registration Act is prohibited from distribution of any dividend/surplus among its members and hence, the question of distribution of surplus to its members and determination of share of each member does not arise. Once the society is registered under the Societies Registration Act, the income of such society shall be assessed as AOP and the rate of tax applicable to such society is normal rate of tax applicable to AOP/individual. In so far as advance to Shri Gopisetty Mallaiah & Co., the A.R. submitted that the assessee has advanced a sum of Rs. 10 lakhs for the purpose of construction of old age home on the site purchased by the Samiti during the financial year ending 31.3.2010. This fact was brought to the notice of the A.O. and the A.O. has verified this information and chosen to accept the explanation offered by the assessee. Similarly, as regard the income from house property, the A.R. submitted that there is a difference of Rs. 52,717/- in respect of income assessed by the A.O. to the income declared by the assessee under the head "income from house property" for which the assessee has no explanations to offer. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 13 of the Act. The A.O. not only failed to examine the issue, but also failed to apply his mind on various issues, which render the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. 12. It is the contention of the assessee that the A.O. has examined the issues pointed out by the CIT in the show cause notice. The Assessee further contended that all the issues pointed out by the CIT have been examined by the A.O., at the time of assessment by way of specific questionnaire on various dates. The assessee further contended that the A.O. had issued notices on 28.10.2011 and 8.10.2012 for which the assessee has furnished details vide its letter dated 8.11.2012 and 22.11.2012. The assessee has furnished all the details with regard to corpus donations and also explained why maximum marginal rate of tax cannot be applied to its income. Similarly, the assessee has explained the purpose for which advance of Rs. 10 lakhs given to the Gopisetty Mallaiah & Co., therefore, the CIT was not correct in coming to the conclusion that the A.O. has not conducted enquiry of the issues. We find force in the arguments of the assessee for the reason that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f each individual member does not arise. Hence, the CIT was not correct in coming to the conclusion that the rate of tax applicable to the assessee is maximum marginal rate of tax without understanding the provisions. 14. Similarly, as regards the advance given to Gopisetty Mallaiah & Co., the assessee vide its letter dated 24.3.2014 given details of advance given to Gopisetty Mallaiah & Co. and explained the purpose for which the advance is given. The assessee explained that it has given advance for the purpose of construction of old age home on the site belonging to the assessee. The A.O. after satisfied with the explanation of the assessee has accepted the explanation furnished by the assessee, which cannot be termed as erroneous. Even otherwise, assuming for a moment that the assessee has given advance to one of its members, the findings of the CIT is incorrect, as once the income of the society is assessed under the normal provisions of the Act denying benefit of exemption u/s 11 of the Act, the question of examination of diversion of funds directly or indirectly to the benefit of interested persons does not arise. In the present case on hand, on perusal of the facts availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained that it had filed all the details before the A.O. on the issues on which CIT wants further verification. It is the general presumption of law that once the A.O. has considered all the details before completion of assessment and the CIT cannot presume that the enquiries conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless the CIT proves that the assessment order passed by the A.O. is erroneous. 16. Now it is pertinent to discuss the case law relied upon by the assessee. The assessee relied upon the decision of coordinate bench of Visakhapatnam Tribunal, in the case of Shri Sai Contractors Vs. CIT, in ITA No.109/Vizag/2012 dated 30.9.2015. The coordinate bench of this Tribunal, under similar circumstances held that once the A.O. examined the issues on which the CIT wants further verification, the CIT cannot assume jurisdiction on the same issues which was already examined by the A.O. at the time of assessment, by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. Relevant portion of the order is reproduced hereunder: "10. To invoke the provisions of section 263 of the Act, the twin conditions must be satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a view to conduct fishing and revolving enquiry in the matters which are already examined by the A.O. The Department cannot do fresh assessment in the guise of revision on the matters which are examined and concluded by the A.O. The A.O. being a Quasi Judicial authority, shall have the authority to exercise right judgement and discretion on the basis of information available before him. In the present case on hand, the Assessing Officer after considering vouchers, made an round some addition of Rs. 1,00,000/- which is one of the possible view available for him, which the CIT shall not term it as lack of enquiry or non application of mind. Thus, it cannot be said that it is a case of lack of enquiry or non application of mind." 17. The assessee relied upon the decision of Visakhapatnam ITAT, in the case of Sri Vasavi Compounding Vs. ITO in ITA No.197/Vizag/2012 dated 29.7.2016. The coordinate bench of this Tribunal, under similar facts held as under: "11. The CIT has power of revising the assessment order u/s 263 of the Act, but, to invoke the provisions of section 263 of the Act, the twin conditions must be satisfied i.e. the order of the A.O. is erroneous and further it must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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