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2016 (10) TMI 711 - ITAT VISAKHAPATNAM

2016 (10) TMI 711 - ITAT VISAKHAPATNAM - TMI - Reopening of assessment - exemption claimed by the assessee u/s 11 denied - corpus donations and advance given to Gopisetty Mallaiah & Co. - revision u/s 263 - Held that:- In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined the issues pointed out by the CIT in his show cause notice. The assessee explained each and every issue pointed out by the CIT with nece .....

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t order passed by the A.O. is erroneous. - The assessment order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, is not erroneous in so far as it is prejudicial to the interest of the revenue in so far as three issues pointed out by the CIT in his order with regard to corpus donations, applicability of maximum marginal rate and advance given to Gopisetty Mallaiah & Co. In so far as determination of income from house property, the CIT has rightly revised the assessment order, as the A.O. .....

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. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant by : Shri A.C. Gangaiah, AR For The Respondent by : Shri G. Gurusamy, DR ORDER PER G. MANJUNATHA, Accountant Member: These 8 appeals filed by two different assessees are directed against separate, but identical orders of the CIT, Vijayawada u/s 263 of the Income Tax Act, 1961 (hereinafter called as 'the Act') for the assessment years 2007-08 to 2010-11. Since, the facts are identical and issues are common, they are heard together and disp .....

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ssessee 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 t .....

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4 and asked to explain why the assessment order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, shall not be revised under the provisions of section 263 of the Act. The CIT, proposed to revise the assessment order, for the reason that on examination of assessment records, certain omissions and commissions were noticed which rendered the assessment order erroneous, in so far as it is prejudicial to the interest of the revenue within the scope of section 263 of the Act. The CIT, in the said s .....

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not taxed the income at the maximum marginal rate for any of these assessment years when assessee s status is an AOP in the absence of registration u/s 12A of the Act ad also the shares of its members are indeterminate. Similarly, the CIT further observed that on verification of statement of computation of total income filed along with return of income, it is noticed that the assessee has admitted income from house property of ₹ 2,30,551/- whereas the A.O. has assessed income from house pr .....

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terms of section 263 of the Act. With these observations, issued a show cause notice dated 23.1.2014 and asked to explain why the assessment order passed u/s 143(3) r.w.s. 147 of the Act for the assessment year 2007-08, 2008-09, 2009-10 & 2010-11 shall not be revised under the provisions of section 263 of the Act. 4. In response to show cause notice, the assessee submitted that the assessment order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act is not erroneous, in so far as it is prej .....

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iven 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 Registr .....

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oneous in so far as it is prejudicial to the interest of the revenue. As regards the corpus donations, the assessee submitted that the society has collected corpus donations from members of public for the purpose of establishment of old age homes and construction of temple building and the donors have donated the amount with a specific direction to use the funds for the objects of the trust and accordingly it has rightly treated specific donations received from the public as corpus donations. Th .....

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the interest of the revenue. 6. The CIT after considering the submissions of the assessee held that the assessment order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act is erroneous in so far as it is prejudicial to the interest of the revenue, as the assessing officer has failed to examine the issues pointed out in the show cause notice with reference to necessary details before allowing exemption towards corpus donations and also taxing the income under normal rate of tax applicable to in .....

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the assessee without going into the details such as testamentary instructions 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., th .....

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concerned, there is a difference of ₹ 52,717/- in respect of income from house property. The A.O. without examining the above details simply accepted income of ₹ 1,77,834/- as against the correct income of ₹ 2,30,551/- which render the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. With these observations, set aside the order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, for the assessment years 2007-08 to 2010-11, with a direct .....

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cause notice. The A.R. further submitted that the CIT was not correct in directing the A.O. to conduct further enquiries with regard to the issues which were already examined by the A.O. by issuing detailed questionnaire at the time of assessment. It is further submitted that the A.O. has examined the issue of corpus donations, applicability of maximum marginal rate of tax in respect of surplus income, and advance given to Gopisetty Mallaiah & Co.. The A.O. after satisfied with the details .....

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ants further verification, a general presumption is drawn that the A.O. has verified the details and after satisfied with the explanation furnished by the assessee accepted the explanation and accordingly, the CIT is not correct in stating that the A.O. has not conducted proper enquiry of the issue at the time of completion of assessment. 9. The A.R. further submitted that as regards corpus donations is concerned; the assessee has collected corpus donations from members of public for the purpose .....

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r 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 ₹ 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 .....

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mitted that the CIT rightly assumed jurisdiction to revise the assessment order, as the A.O. has failed to examine the issues of corpus donations, maximum marginal rate of tax and income from house property. The D.R. further submitted that in respect of income from house property, the A.R. conceded that he has no explanation to offer which evidenced that the A.O. has not examined the issue at the time of assessment; therefore, the CIT rightly assumed jurisdiction and his order should be upheld. .....

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ompleted the assessment without examining the various issues which caused prejudice to the interest of the revenue. The CIT, further, was of the opinion that the A.O. has completed the assessment without examining the issue with regard to allowability of exemption to corpus donations, applicability of maximum marginal rate of tax to AOP, determination of income from house property and advance given to Gopisetty Mallaiah & Co., President of the Society. The CIT, further, observed that the ass .....

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he A.O. has failed to examine the issue of advance given to one of the members of the society without examining the applicability of whether any part of income or property of the assessee was directly or indirectly used for the benefit of interested persons, thereby any violation of the provisions of 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 .....

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d 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 ₹ 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 t .....

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ance given to Gopisetty Mallaiah & Co. Therefore, the CIT was not correct in coming to the conclusion that the A.O. has not conducted proper enquiry of the issues before completion of the assessment. 13. The CIT, assumed jurisdiction to revise the assessment order on the ground that there is a lack of enquiry on the part of the A.O. in examining the issues referred to in the show cause notice. The CIT questioned the issues right from verification of corpus donations to examination of advance .....

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A.O. has called for the details about corpus donations, a general presumption is drawn that the A.O. has verified all the details and also satisfied with the explanations furnished by the assessee. The CIT cannot presume that the A.O. has not examined the issues unless he points out that the A.O. has not examined the issue. As regards the applicability of maximum marginal rate of tax is concerned, the CIT was of the opinion that the A.O. ought to have applied maximum marginal rate of tax to the .....

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g 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 .....

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r indirectly to the benefit of interested persons does not arise. In the present case on hand, on perusal of the facts available on record, we find that the A.O. has examined all the issues i.e. corpus donations, applicability of maximum marginal rate of tax and advance given to Gopisetty Mallaiah & Co., except the issue with regard to difference in income from house property of ₹ 52,717/-. In respect of difference in income from house property of ₹ 52,717/-, the assessee himself .....

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ept income from house property, have been thoroughly examined by the A.O. at the time of assessment, therefore, the CIT was not correct in coming to the conclusion that the A.O. has not examined the issues before completion of assessment. 15. The CIT, has power to revise 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. (1) the order of the CIT is erroneous (2) further it must be prejudicial to the interest .....

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assessment order, this is because the twin conditions i.e. the order is erroneous and the same is prejudicial to the interest of the revenue are co-exist. In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined the issues pointed out by the CIT in his show cause notice. The assessee explained each and every issue pointed out by the CIT with necessary evidences. The CIT cannot assume jurisdiction to revise th .....

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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 .....

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der which is prejudicial to the interest of revenue is also erroneous. Unless the A.O s order is not erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin conditions i.e. (1) the order is erroneous and (2) the same is also prejudicial to the interest of the revenue are not coexists. In the present case, the A.O. has conducted enquiry before allowing deduction towards wages and centering expenses and also examined the points on which the CIT wants further verif .....

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here is an inadequate enquiry that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion in the matter. The CIT can do this only, when there is a lack of enquiry by the assessing officer. In the present case, the assessment order is detailed one and also, the A.O. has passed a remarks in the assessment order on two issues, on which the CIT assumed jurisdiction, i.e. disallowance of round some expenditure of ₹ 1,00, .....

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sue on which he assumed jurisdiction. This fact had not been disputed by the revenue. The Commissioner cannot initiate revision proceedings, with 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 o .....

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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 be prejudicial to the interest of the revenue. Unless both the conditions are satisfied, the CIT cannot assume jurisdiction u/s 263 of the Act. It is not nec .....

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deduction claimed u/s 80IB of the Act and other issues pointed out by the A.O. The assessee explained that though filing of audit report in form no.10CCB is mandatory in nature, it is not necessary to file the same along with return of income in view of the changes in filing of income tax return from paper return to e-filing of income tax returns. In the new system of e-filing of income tax returns, filing of physical copy of any reports or statements is done away with. Similarly, as regards th .....

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