TMI Blog2023 (3) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee at Rs.NIL. Thus, the case laws relied by the Ld. Counsel for the assessee would not help as it is the clear case where the assessment order is erroneous and self-contradictory. Under these undisputed facts, there is no infirmity in the order of Ld.CIT(E) in revising the assessment under section 263 of the Act. Thus, grounds raised by the assessee are devoid of merit hence, dismissed. - S.A.No.-03/Jodh/2023 [In ITA No.89/Jodh/2022] And ITA No.89/Jodh/2022] - - - Dated:- 22-3-2023 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member For the Assessee : Shri Mahendra Gargieya, Adv. For the Revenue : Shri O.P.Meena, CIT DR ORDER PER KUL BHARAT, J.M.: The assessee has filed the present appeal challenging the order dated 30.03.2022 passed by the Ld. CIT(E), Circle, Jaipur/Jodhpur alongwith Stay Application No.03/Jodh/2023 for the assessment year 2012-13. For the sake of convenience, appeal and stay application filed by the assessee, were taken up together and decided by this consolidated order. ITA No.89/Jodh/2022] (ASSESSMENT YEAR- 2012-13) 2. First we take up ITA No.89/Jodh/2022 pertaining to AY 2012-13. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Facts giving rise to the present appeal are that in this case, Ld.CIT (Exemption) after examining the records issued a show cause notice u/s 263 of the Income Tax Act, 1961 ( the Act ), calling upon the assessee as to why assessment order framed u/s 147 r.w.s. 143(3) of the Act, dated 12.12.2019 should not be revised. In response to the notice issued to the assessee, Ld. Authorized Representative ( AR ) of the assessee attended the proceedings and filed submissions. However, the submissions filed by the assessee was not found acceptable by the Ld.CIT(Exemption) and he set aside the assessment order and directed the Assessing Officer ( AO ) to frame denovo assessment as directed in the order. 4. Aggrieved against this, the assessee preferred appeal before this Tribunal. 5. Ld. Counsel for the assessee, Shri Mahendra Gargieya, Advocate vehemently argued that Ld.CIT(Exemption) exceeded his jurisdiction in issuing notice u/s 263 of the Act. He submitted that ex facie the order was revised on the ground different from the ground of re-opening of the assessment. He further reiterated the submissions as made in the written submissions and relied upon various case laws as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ambit of section 263 of the Act. 5. The submissions of the assessee dated 14.03.2022 and 16.03.2022 have been duly considered, the facts of the case laws cited are not similar to the case under consideration. However, the assessee has laid major stress on the point that that ADA falls within the definition of Local Authority as in specifically defined in the Explanation (iii) reading as under S. 10(20) of the IT Act, 1961. The contention of the assessee is not acceptable in the light of the judgement of the Hon'ble Supreme court in the case of Urban Improvement Trust, Kota (Civil Appeal No. 10577 of 2018) wherein the Apex court stated that, The High Court based its decision on the fact that functions carried out by the assessee are statutory functions and it is carrying on the functions for the benefit of the State Government for urban development. The said reasoning cannot lead to the conclusion that it is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii). The High Court has not adverted to the relevant facts and circumstances and without considering the relevant aspects has arrived at erroneous conclusions. Judgments of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue's interest, then the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Kindly refer Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). 1.2 Also kindly refer C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Decisions: It is further submitted that AO has not committed any error in assessing the income at nil also for the reason that recently in the case of ACIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 329 CTR 297 (SC)/ [2022] 449 ITR 1(SC) (DPB 20-39), it was held as under: ----190. In light of the above discussion, this court is of the opinion that: (i) The fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption under section 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 1-4-2003, does not ipso factopreclude their claim for consideration for benefit as GPU category charities, under section 11 read with section 2(15) of the Act. (ii) Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the advancement of objects of general public utility, therefore are entitled to be considered as charities in the GPU categories. (iii) Such statutory corporations, boards, trusts authorities, etc. may be involved in promoting public objects and also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment authority are also similarly placed were decided in their favor. 3.3 No doubt the AO has made discussion against the assesse but at the end, he assessed the income at Nil because the important undisputed facts available on the record and in the knowledge of the AO, were that the assesse was granted the registration u/s 12AA of the Act, it has complied with mandatory condition of incurring expenditure of minimum threshold of 85% and audit report in form 10B was filed together with the binding decision of honorable ITAT Jaipur dated 30.09.2014 which was available before the AO. Pertinently all these facts and the legal position, prevailed over the mind of assessing officer when he passed the subjected order and it cannot be denied that the AO is bound by the decision of the jurisdictional Hon'ble ITAT 86 High Court as per Rule of Precedence. The assessing officer therefore, made no error assessing income at Nil. 3.4 Past history supports the AO: Fairly speaking, from the point of a quasi-judicial authority (the AO), the past history of the case does have a binding value. It is also pertinent to mention here that the department issued several notices under S. 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate discussion in that regard. 3.7.2. In CIT v/s Ganapati Ram Bishnoi (2005) 198 CTR (Raj) 546 held that from the record of the proceedings, in the present case, no presumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on suspicious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking jurisdiction u/s 263. Jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 3.7.3 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): . . . From a reading of sub- section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more probably, when he did not invoke explanation (Expl. 2(a)) to Sec 263 4.2 In CIT vs. Chemsworth Pvt. Ltd. (2020) 275 Taxman 408 (Kar), it was held that: Revision Erroneous and prejudicial order AO taking plausible view A0 completed the assessment without considering expenditure which was not allowable under s. 14A CIT held that non-consideration of disallowable expenditure under s. 14A was erroneous and is prejudicial to the interest of the Revenue Not correct CIT has held that the enquiry conducted by the AO was inadequate and has assumed the revisional jurisdiction Assessee has filed all the details before the AO and AO has accepted the contention of the assessee that no expenditure was attributable to the exempt income during the relevant assessment year Thus, while recording the said finding, the AO has taken one of the plausible views in allowing the claim of the assessee Therefore, CIT could not have set aside the order of assessment merely on the ground of inadequacy of enquiry Order passed by the CIT was not sustainable in law hence, the Tribunal rightly set aside the impugned order of the CIT. 5. Beyond the scope of enquiry contemplated u/s 263: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,76,51,821/- and thus, remained unexplained. (iii) Thus, total amount of Rs.34,75,71,532/- has escaped assessment to tax for the A.Y. 2012-13 within the meaning of provisions of section 147 of the Income Tax Act, 1961. 5.2 The AO thus, having recorded specific reasons, could not have enquired into and examined any issue other than those already recorded in the reasons to believe, as above. A specific amount was categorically mentioned of the escaped income being Rs. 34.76 crores based on certain items beyond which, the AO was not supposed to have gone in as much as the entire assessment was not thrown open before him. Hence, consequently AO was supposed to complete the assessment u/s 147/148 r/w s.143(3) of the Act as per reason to believe only. The issues are raised now by the Ld. CIT in the impugned Order u/s 263 being failure of the AO in making disallowance/addition of the surplus income of Rs. 1,46,35,981/- and of the capital expenditure of Rs. 5,25,52,586/-totaling to Rs 6.72 Crores in view of the proviso of s.2(15) of the Act, were not part of the reasons to believe. In other words, the ld. CIT did not touch or did not even whisper anything stated in the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147 in relation to a particular ground or in relation to certain specified grounds and subsequent to passing of order of reassessment, jurisdiction under section 263 is sought to be exercised with reference to issues which did not form subject of reopening of assessment or order of reassessment, period of limitation provided for in section 263(2) would commence from date of order of assessment and not from date on which order of reassessment has been passed - Held, yes Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General - Whether where assessment is sought to be reopened only on one or more specific grounds and reassessment is confined to one or more of those grounds, original order of assessment would continue to hold field, save and except for those grounds on which a reassessment has been made under section 143(3) read with section 147 - Held, yes Fact: For the relevant assessment year, the assessee's original order of assessment under section 143(3) dated 27-12-2006 was sought to be reopened on 6-3-2007 solely on the basis that the benefit of section 72A had been wrongly allowed to the assessee. In the order of reassessment, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich comes to his notice subsequently in the course of proceedings under the aforesaid provision. Expin. 3 to s. 147 of the Act further clarifies the substantive provision by saying that the AO may assess or re-assess the income in respect of any issue which has escaped assessment and such issue comes to his notice subsequently in the course of proceedings under s. 147 of the Act, notwithstanding that such issue does not form part of reasons recorded for reopening of assessment. Thus, on a holistic reading of s. 147 of the Act it becomes very much clear that along with escaped income for which the assessment was reopened, the AO can assess other escaped income which subsequently comes to his notice in course of re-assessment proceedings. In the facts of the present case, undisputedly, the issue relating to claim of deduction under s. 80IA of the Act neither was a subject matter of reopening as per reasons recorded, nor did such matter come to the notice of the AO in course of re- assessment proceedings. 12. The reopening of assessment as contemplated under s. 147 of the Act is for the specific purpose of assessing the escaped income. Therefore, in a reassessment proceeding, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an obstacle before the AO in dealing with the issue of deduction claimed under s. 801A of the Act, as, it is a subject-matter of appeal pending before the Tribunal. At this stage, we must deal with certain judicial precedents cited before us. 15. In case of CIT vs. Alagendran Finance Ltd. (supra), the Hon'ble Supreme Court, while dealing with more or less an identical issue of revisionary power exercised under s. 263 of the Act in respect of an assessment order passed under s. 143(3) r/w s. 147 of the Act, has held in the following manner: - xxxxxxxxxxxxxxx15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the CIT exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-s. (2) of s. 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the CIT beyond the period of limitation, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdle of limitation. This, in our view, is impermissible. Thus, based on the foregoing reasoning, we hold that the impugned order of learned Principal CIT revising the order passed under s. 143(3) r/w s. 147 of the Act is unsustainable. Accordingly, we quash it. 21. In the result, appeal is allowed, as indicated above . 6.5 Chhabra Syncotex (P) Ltd. Vs. Assistant Commissioner Of Income Tax Ita No. 239/Jp/2018; Asst. Yr. 2008-09 (DPB 91- 95) If the exercise of revision jurisdiction under s. 263 in respect of issues which formed subject-matter of reassessment after the original assessment was reopened, the commencement of the limitation would be with reference to the order of reassessment, but if the CIT has exercised the jurisdiction under s. 263 on an issue which was not subject-matter of reassessment, then the limitation would reckon from the original assessment order passed under s. 143(3) and not from the reassessment order. Even if an order of assessment is reopened, the whole proceedings would start afresh but it would not disturb the issues which were not subject-matter of reopening of the assessment and even not falling under the purview of Expin. 3 to s. 147. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting Case Laws: Similar issue had arisen. 7.3.1 Ranbaxy Laboratories Ltd. vs. CIT (2011) 242 CTR (Del) 117, (2011) 336 ITR 136 (Del). In the said case, the Division Bench had also examined Expin. 3 to s. 147, which was inserted by Finance (No. 2) Act of 2009 with retrospective effect from 1st April, 1989. 7.3.2 CIT vs. Jet Airways India Ltd. (2011) 239 CTR (Born) 183: (2011) 331 ITR 236 (Born) in which it has been held as under : The effect of s. 147 as it now stands after the amendment of 2009 can, therefore, be summarized as follows : (i) the AO must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or precomputations, the AO has to serve on the assessee a notice under sub-s. (1) of s. 148; (iii) the AO may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section; and (iv) though the notice under s. 148(2) does not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of the Revenue. In the present case, the AO did not make any addition for the reasons recorded at the time of issue of notice under s. 148. This position is not disputed and disturbed by the CIT in his order under s. 263. Sequitur is that the AO could not have made an addition on account of share application money in the assessment proceedings under s. 147/148. Accordingly, the assessment order is not erroneous. Thus, the CIT could not have exercised jurisdiction under s. 263 of the Act. 7.3.5 Also kindly refer Vipin Khanna 255 ITR 220 (PLisH) 8. Analogous law also supports the contention: 8.1 A somewhat similar legal factual position arose in the cases where assessment has been selected for limited scrutiny purposes. The law is well settled that in the limited scrutiny assessment, the AO cannot be expected to make enquiry only to the extent of the reason/ basis of selection of the case for the limited scrutiny and therefore, the CIT cannot invoke S. 263 on the issues, which were not made basis for selection of the case. Obviously for the reason that the AO is not legally entitled to enter into those issues, not selected for first scrutiny. Here also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s far as matters for which case was selected for limited scrutiny in terms of mismatch of sales turnover is concerned the Principal CIT has not recorded any adverse findings in terms of lack of enquiry or inadequate enquiry on part of the AO Therefore, the order passed by the Principal CIT under s. 263 is set aside and the order of the AO is sustained. 8.2.1 CIT v/s Smt. Padmavathi (2020) 4 NYPCTR 682 (Mad) 8.2.2 Su-Raj Diamond Dealers (P) Ltd. v/s PCIT (2020) 203 TTJ (Mumbai) 137 8.2.3 Nayek Paper Converters vs. ACIT (2005) 93 TTJ (Cal) 574 9. No valid assessment order in existence - Sec.263 Cannot be invoked 9.1 It is submitted that the law u/s 263 contemplates the existence of a legally valid order. If there is no order, there cannot be any revision and hence sec.263 cannot be invoked w.r.t. such invalid non-existent order. In the instant case also, AO has not at all made any discussion on issues in the reasons to believe (reproduced above), what to talk of making additions thereon. Consequently, therefore, the subjected re-assessment order dated 30.03.2022 subjected to revision, is completely non-existent being legally invalid and therefore the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee . Therefore, these facts clearly show that before framing the reassessment order under ss. 147/ 148 of the IT Act, no notice under s. 143(2) have been prepared, issued and served upon the assessee. Therefore, reassessment order is illegal, invalid and bad in law and is liable to be set aside. V is well settled Law that assessee can challenge the validity of the reassessment proceedings in the collateral proceedings (relating to examination of validity of order passed) under s. 263 of the IT Act. We rely upon the order of Tribunal, Mumbai Bench in the case of Westlife Development Ltd. vs. Principal CIT (2016) 49 ITR (Trib) 406 (Mumbai) in which it was held allowing the appeal (i) that jurisdiction aspect of the order passed in the primary proceedings can be examined in collateral proceedings also. Thus, the assessee could be permitted to challenge the validity of the order passed under s. 263 on the ground that the assessment order was non est. Since the reassessment order itself is bad in law, therefore, learned counsel for the assessee, rightly contended that the same cannot be revised under s. 263 of the IT Act. Only valid reassessment order can be revised under s. 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of common man and general public, the institution was doing same activity which was done by a builder or a developer. This activity was considered by general public as business, trade or commerce so this activity is in the nature of business, trade or commerce. He submitted that despite having concluded that the activity is hit by mischief of section 2(15) of the Act, the AO proceeded to assess income u/s 143(3) of the Act at Rs.NIL. Hence, he submitted that ex facie the assessment order is erroneous insofar as it is pre-judicial to the interest of the revenue. He further contended that case laws as relied by the Ld. Counsel for the assessee, are distinguishable on the facts. He placed reliance on the judgement of Hon ble Supreme Court in the case of ACIT(E) vs Ahmedabad Urban Development Authority [2022] 329 CTR 297 (SC). 7. We have heard Ld. Authorized Representatives of the parties and perused the material placed on record. We find that Ld.CIT(Exemption) in notice issued u/s 263 of the Act observed as under:- Assessee had a surplus income of Rs.1,46,35,951/-. It had further claimed capital expenditure of Rs.5,25,52,586/-. Since the assessee hit by provision of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced here for the sack of convenience. Section 13(8) says that Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year. Thus, fact that the assessee, Ajmer Development Authority is registered under 12AA or not does not make any difference as the first and second proviso of section 2(15) and the amended provisions of section 13(8) are applicable. 9. However, in para 5, the AO assessed income of the assessee at Rs.NIL. Therefore, it is not the case that the issue related to section 2(15) of the Act, was not under consideration before the Assessing Authority. In our considered view, any issue which was considered by the AO in the assessment order, such order would be open for revision u/s 263 of the Act, if such order is erroneous and prejudicial to the interest of justice. The controversy related to application of section 2(15) of the Act, has now been set at rest by the decision of the Hon ble Supreme Court in the case of ACIT(E) vs Ah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(E), Jaipur. The Id. CIT(E), Jaipur however, feeling dissatisfied, rejected the contentions and held the assessment order u/s 143(3) dated 12.12.2019 erroneous and prejudicial to the interest of revenue vide impugned Order u/s 263 dated 30.03.2022 holding that though the AO has denied the benefits of Section 11 and 12 of the Act to the assessee but at the same time, failed to tax the surplus income of Rs. 1,46,35,981/- and disallow the claimed capital expenditure of Rs.5,25,52,586/-. Since, the assessee was hit by provision of section 2(15) of the I.T. Act, 1961 the total taxable income comes to Rs.6,71,88,566/- (Rs.1,46,35,981/- + Rs.5,25,52,586/), therefore, the assessment done at NIL income by the AO is erroneous. Accordingly, the subjected assessment was set aside to the AO to do de novo assessment on the issues discussed in the order. 4. That feeling aggrieved, the appellant filed an appeal before the Hon'ble ITAT Jaipur on dt. 02.06.2022 vide acknowledgement no. 1652955419 and registered as ITA no. 89/JODH/2022. [However thereafter, the appeal was transferred to the Hon'ble ITAT Jodhpur] 5. That the said appeal is lying pending before the Hon'ble IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he past from AY 2005-06 to 07-08 and AY 2009 10 to 2011-12, also notices were issued u/s/ 148 of the Act in the case of the then U IT, Ajmer (predecessor of ADA). However, considering the fact that the applicant assessee was enjoying benefit of S.11 12 having registration u/s 12AA, assessments were completed at Nil income and have attained finality. The AO thus, acted in accordance with the law and took a plausible view. 13. On the other hand, Ld.CIT DR opposed these submissions and submitted that the assessee by way of present stay application is misusing the process of law as the issue has been decided against the assessee by the Hon ble Supreme Court. 14. We have heard Ld. Authorized Representatives of the parties and perused the material available on record. The present stay application has been filed in Appeal No.89/Jodh/2022 pertaining to AY 2012-13. The hearing of the appeal has been concluded. Therefore, considering the rival submissions and material placed before us and in the light of the judgement of Hon ble Supreme Court and clear contradiction in the finding of Assessing Authority, the assessee has not made prima facie case in its favour. We therefore, dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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