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Sarlaben Bhansali Charities Trust C/o. V.N. Purohit & Co. Versus CIT (Exemptions) , Kolkata

2017 (12) TMI 361 - ITAT KOLKATA

Revision of assessment u/s 263 - registration granted to the assessee trust u/s 12AA cannot be invoked retrospectively under section 12AA(3) - Held that:- Referring to Circular No. 1 of 2011 dated 06.04.2011 issued by the CBDT it is held that section 12AA(3) is applicable only from the assessment year 2011-12. Thus we hold that this ground on which an order under section 263 of the Act was passed by the Ld. CIT is bad in law. - Coming to the second reason for which the Ld. CIT (Exemption) in .....

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any prejudice or any error was committed by the Assessing Officer which caused prejudiced to the revenue. The Ld. CIT (Exemption) mentioned that these facts were considered by the Assessing Officer in his order, thus ruling out non-application of mind to this issue by the A.O. - Cancellation of registration granted to the under section 12AA by the Ld. CIT (Exemption) Kolkata by invoking his powers under section 12AA(3) - Held that:- Retrospectively cancellation of the registration granted to .....

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2010-11 under section 263 on the following ground. That the Commissioner of Income Tax (Exemption) has erred both in law and on the facts of the case in holding that assessment order passed on 27.03.2014 u/s. 147/143(3) by A.O. is erroneous and hence prejudicial to the interest of the revenue and directing A.O. do fresh assessment. 2. The assessee is a charitable trust. It filed its return for A.Y. 2009-10 on 11.10.2010 declaring NIL income. The Assessing Officer issued a notice under section 1 .....

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ssment order passed on 27.03.2014 is erroneous and prejudicial to the interest of the revenue. The A.O. was directed to modify this order and do a fresh assessment after giving the assessee adequate opportunity. 3. The learned counsel for the assessee submitted that the order under section 263 was passed on the ground that the registration granted to the assessee under section 12AA of the Act was cancelled and hence the assessee was not eligible to claim exemption under section 11and consequentl .....

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hat the order under section 263 is based on an erroneous interpretation of law that registration under section 12AA was not available to the assessee during the year. Hence he submitted that the order is bad in law and his appeal is to be allowed. 4. The departmental representative, on the other hand, argued that there is Ld. CIT(Exemption) had set aside the order under section 263 on two grounds, (a) the first being that the registration under section 12AA has been cancelled and the second bein .....

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wers under section 263 of the Ld. CIT (Exemption) Kolkata is bad in law as the second ground on which the assessment was cancelled holds. 5. After hearing rival contentions, we find that registration granted to the assessee trust under section 12AA cannot be invoked retrospectively under section 12AA(3) of the Act. 6. In the case of Agra Development Authority vs CIT 141 ITD 336, it is held as follows: 402. Cancellation under section 12AA(3) - Power of cancellation of registration under section 1 .....

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withdraw registration under section 12A. In absence of such power, the registration granted under s. 12A cannot be withdrawn or cancelled before 1st June, 2010. The power of cancellation of registration under s. 12A came to be incorporated by way of amendment introduced by Finance Act, 2010 w.e.f. 1st June, 2010. The CBDT Circular o. 1 of 2011 dt. 6th April, 2011 explains that this amendment will apply for assessment year 2011-12 and subsequent years. Whereas in the case under consideration, th .....

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2011 dated 06.04.2011 issued by the CBDT and held that section 12AA(3) is applicable only from the assessment year 2011-12. 8. Respectfully following the proposition of law laid down in these case laws, we hold that this ground on which an order under section 263 of the Act was passed by the Ld. CIT is bad in law. 9. Coming to the second reason for which the Ld. CIT (Exemption) invoking powers under section 263, we find that the Ld. CIT (Exemption) records that the facts as narrated by him has .....

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T (Exemption) mentioned that these facts were considered by the Assessing Officer in his order, thus ruling out non-application of mind to this issue by the A.O. 10. The Hone ble Andhra Pradesh High Court in the case of Spectra Shares and ScripsPvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the judgments as below : 24. In Malabar In .....

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enue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec.263 (1) of the Act. It also held at pg-88 as follows: The phrase 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 .....

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where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. RampyarideviSaraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC) . 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. (2 Supra) and observed that every loss of Revenue as a consequence of an order .....

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On the facts of that case, Sec.80HHC(3) as it then stood was interpreted by the Assessing Officer but the Revenue contended that in view of the 2005 Amendment which is clarificatory and retrospective in nature, the view of the Assessing Officer was unsustainable in law and the Commissioner was correct in invoking Sec.263. But the Supreme Court rejected the said contention and held that when the Commissioner passed his order disagreeing with the view of the Assessing Officer, there were two view .....

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sable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an erroneous judgment means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for .....

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cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional .....

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in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be ope .....

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held that the Commissioner in the exercise of revisional power could not have objected to the finding of the Assessing Officer that expenditure on tools and dies by the assessee, a manufacturer of Car parts, is revenue expenditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Office .....

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tion of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held that the Commissioner cannot initiate pro .....

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one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on the lower side and left to the Commi .....

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the revising authority to initiate proceedings for revision in every case and start re-examination and fresh inquiry in matters which have already been concluded under law. 29. In M.S. Raju(15 Supra), this Court has held that the power of the Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the .....

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directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre- .....

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ner u/s.263 of the Act can be culled out: a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec.263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be t .....

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s to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer .....

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s would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted .....

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e, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of examination .....

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as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the .....

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e term erroneous means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate t .....

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is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that .....

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same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided .....

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fficer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is e .....

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the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that t .....

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e can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessme .....

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e annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not .....

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Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distingu .....

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be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of ₹ 1 lakh was to be received for sale of permit. If t .....

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