2015 (11) TMI 434 - AT - Income Tax

Revision u/s 263 - direct the Assessing Officer to make fresh assessment after keeping in view the law relating to charity in provisos to section 2(15) of the Income-tax Act with effect from April 1, 2009 and issue of application of accumulated income of the assessment year 2004-05 within the stipulated period up to March 31, 2008 - Held that - The Commissioner of Income-tax (Administration) cannot sit on the order of the Commissioner of Income-tax (Appeals) to decide the same issue differently. If the Department is having any grievance it would have filed an appeal before the higher forum. It is not appropriate to the Commissioner of Income-tax (Administration) to comment on the order of the Commissioner of Income-tax (Appeals). In our opinion, the issue relating to treating the income from kalyanamandapams, auditoriums, working hostel is subject-matter of appeal by the assessee before the Commissioner of Income-tax (Appeals). The said issue in assessment order merged with the order of the Commissioner of Income-tax (Appeals) as a whole hence the order was no more amenable to revisional jurisdiction of the Commissioner of Income- tax in view of Explanation (c) of section 263 of the Act and to that extent we are not agreeing with the order of the Commissioner of Income-tax passed under section 263 of the Act. It is mentioned in Form 10 that amount would be accumulated till the previous year ending March 31, 2008. The assessee was required to utilise the accumulated amount during such period. In case of non-application of the said accumulated sum for the purpose specified in Form 10, section 11(3) gets triggered and it would be taxed in the next year in which such period expired. But in this case, the Assessing Officer has failed to examine this aspect. There was no enquiry with regard to this issue. The order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue on the reason that there is wrong assumption of facts. We are inclined to agree with the findings of the Commissioner of Income-tax that the Assessing Officer is required to examine this issue afresh and gave a finding on this. Accordingly, to this extent, we confirm the order of the Commissioner of Income-tax. The issue of application of accumulated income of the assessment year 2004-05 within the stipulated period, i.e., up to March 31, 2008 is to be examined while framing the fresh assessment and decide fresh as directed by the Commissioner of Income-tax in his order. - Decided partly in favour of assessee for statistical purposes.

Issues Involved:
1. Assumption of jurisdiction by the Commissioner of Income-tax under section 263.
2. Assessing Officer's failure to apply correct provisions of law.
3. Classification of income from kalyanamandapams, auditoriums, working women's hostel, and hostel for girls.
4. Treatment of accumulated income for the assessment year 2004-05.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction by the Commissioner of Income-tax under Section 263:
The Commissioner of Income-tax (Exemptions) exercised revisional jurisdiction under section 263 of the Income-tax Act, 1961, on the grounds that the order passed by the Assessing Officer was "erroneous" and "prejudicial to the interests of the Revenue." The Tribunal referred to the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), which established that the Commissioner can exercise revisional jurisdiction if the order is both erroneous and prejudicial to the Revenue's interests. The Tribunal noted that an order is erroneous if it is based on an incorrect assumption of facts, incorrect application of law, or non-application of mind to obvious facts. The Tribunal affirmed that the Commissioner was within his rights to invoke section 263 if the Assessing Officer failed to make necessary inquiries or examine the claim properly.

2. Assessing Officer's Failure to Apply Correct Provisions of Law:
The Tribunal scrutinized whether the Assessing Officer had failed to apply the correct provisions of law to the facts of the case. It was observed that the Assessing Officer had not examined the issues related to the accumulation of income adequately. The Tribunal stated that the Assessing Officer's order was a non-speaking order on this issue, justifying the Commissioner's exercise of revisional jurisdiction. The Tribunal emphasized that the Assessing Officer must act fairly and protect both the interests of the assessee and the Revenue by making necessary inquiries and examining claims judiciously.

3. Classification of Income from Kalyanamandapams, Auditoriums, Working Women's Hostel, and Hostel for Girls:
The Tribunal considered the classification of income from kalyanamandapams, auditoriums, working women's hostel, and hostel for girls. The assessee argued that these incomes were not liable for tax as they were instrumental to the charitable objectives of the trust. The Tribunal noted that the Assessing Officer had classified the income from auditoriums as business income and brought it to tax. However, the Commissioner of Income-tax argued that the activities were commercial and should be taxed under the amended section 2(15) of the Act, effective from April 1, 2009. The Tribunal found that the Assessing Officer had already taxed the income from kalyanamandapams, and there was no revenue loss. Therefore, the order was erroneous due to incorrect assumptions but not prejudicial to the Revenue's interests.

4. Treatment of Accumulated Income for the Assessment Year 2004-05:
The Tribunal examined the issue of accumulated income for the assessment year 2004-05. The assessee had accumulated Rs. 1,23,41,310 for purchasing land and establishing educational institutions, which was to be utilized by March 31, 2008. The Tribunal observed that the Assessing Officer had failed to examine whether the accumulated amount was utilized within the stipulated period. The Tribunal agreed with the Commissioner that the Assessing Officer's failure to investigate this aspect rendered the order erroneous and prejudicial to the Revenue's interests. The Tribunal confirmed the Commissioner's direction for the Assessing Officer to re-examine this issue and make a fresh assessment.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes, confirming the Commissioner's order under section 263 regarding the examination of accumulated income but disagreeing with the Commissioner's comments on the classification of income from kalyanamandapams and auditoriums. The Tribunal emphasized the necessity for the Assessing Officer to make thorough inquiries and provide reasoned orders to ensure fairness to both the assessee and the Revenue.

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