TMI Blog2016 (12) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... ducation, filed its return for the assessment year 2010-2011 on 06/07/2010 declaring total income as NIL. The assessment was made under section 143(3) on 27/0/2013, by accepting the income as NIL as declared. 03. Subsequently, the Commissioner of Income Tax (CIT), Davangere, issued a notice u/s 263 dated 19/11/2013 stating, inter alia, as under : On verification of the assessment records, it is noticed that you have given a lease advance of ₹ 10,00,000/- for an accommodation of 1785 Sq. Ft. Apart from this, you are paying a rent of ₹ 10,000/- per month. Even if 10 months rent is considered as rental advance, which is usually paid in all similar cases, assessee could not have paid more than ₹ 1,00,000/- as advance. On going through the rental agreement it is noticed that the lessor (first party) Sri S.R. Girish is one of the authors of the trust. Hence, there is a violation of the provisions of section 13(3). In view of the interest at 12% per annum is required to be charges on the excess payment of advance of ₹ 9,00,000/- which works out to ₹ 1,08,000/- and brought to tax. The AO failed to examine this issue. Failure on the part of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected in the rental deed, as when the same is never paid and received by the land lord under the facts and circumstances of the case. 8. The Commissioner of Income Tax ought to have considered the facts that, the lease advance amount being ₹ 10,00,000/-, is a refundable advances and hence shown in the assets side of balance sheet under the head current assets, loans and advances under facts and circumstances of the case. 9. The Commissioner of Income Tax is not justified in stating that the lease advance amount being ₹ 10,00,000/- is non refundable in nature, had it been the case then the same would have been debited to Income and Expenditure Account in the year of payment under the facts and circumstances of the case. 10. The Commissioner of Income Tax has erred by not appreciating the settled position of law that were there are two opinions possible on an issue, section 263 cannot be exercised to invoke such an issue. 11. The learned CIT has grossly erred in revising the order passed by the learned assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefor the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Gabriel India Ltd 203ITR 108 (Mumb) , CIT v Vikas Polymers 194 Taxman 57 Delhi , Malabar Industrial Co Ltd v CIT SC etc. On merits, the AR submitted that this is the first year of commencement of college of their Trust. Initially, they wished to run the pre-university and degree college in the outskirts of city. As it is new college, if they start in outskirts , it was difficult to get good faculties as well as students. To overcome the problem of admission of students, finally they decided to run the college in the extension area. Getting permission to run college in extension area was difficult and it was difficult to get students in the outskirts area and hence finally they started functioning in Siddaveerappa Layout, Davangere. The assessee has taken this premise on rent from Sri S R Girish, one of the authors of the trust. It had an intention to take the complete building having cellar, Ground, first and second floors for running and maintaining the college. Hence, lease advance of ₹ 10 Lakhs was paid. However, during the year the assessee had occupied the ground floor admeasuring 1785 sq ft and paid a monthly rent of ₹ 10,000/-only. In the subsequent year for ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Non examination of this aspect renders the assessment erroneous and prejudicial to the interests of revenue. In so far as the AO failed to examine this aspect, the assessment order made on 27.03.2013 by the Income Officer, Ward-1, Davangere is erroneous and prejudicial to the interests of revenue. Accordingly, the assessment is set aside to be redone in accordance with law. For doing the above, the AO shall afford reasonable opportunity of being hearing to the assessee before coming to any conclusion . 6.1 From the above facts, the DR submitted that it is clear that the AO has not examined the impugned issue as it should have been and hence his order was erroneous and prejudicial to the interests of revenue as held by the CIT. With regard to the assessee s submission that the CIT has not followed his proposal to charge interest @ 12% p.a on the excess lease deposit of ₹ 9,00,000/- etc , the DR pointed out para 10 of the judgment in the case of CIT, Mumbai V Amitabh Bachchan 384 ITR 200, (2016) 69 taxmann.com 170 SC, (relevant portion only is extracted as under) : 10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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