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2019 (9) TMI 1651 - AT - Income TaxRevision u/s 263 by CIT - Re-assessment order to be set aside as the AO had failed to consider and examine the relevant clauses of the agreement between the M/s. A.R. Rahaman Foundation and M/s. LEBARA Ltd. which clearly establishes that the assessee had received the remuneration towards his professional services - whether or not the Principal Commissioner of Income Tax had justified in exercising the jurisdiction of revision u/s.263 of the IT Act? - HELD THAT - Admittedly this issue was examined by the AO during the course of the re-assessment proceedings and took a view that the contributions made by M/s. LEBARA Ltd. are not taxable in the hands of the assessee since the same were assessed to tax in the hands of M/s. A.R. Rahaman Foundation. It is a matter of record that even the Ministry of Home Affairs Government of India had accorded post facto approval in respect of this contribution. There is nothing on the record suggesting that it is taxable in the hands of the assessee. In these circumstances we are of the considered opinion that the re-assessment order cannot be held to be erroneous and prejudicial to the interest of Revenue so as to enable the Ld. CIT(A) to exercise the power of revision u/s.263. Therefore the Principal CIT was not justified in exercising the power of revision u/s.263. Appeal of assessee allowed.
Issues:
- Jurisdiction of Principal Commissioner of Income Tax under section 263 of the IT Act. - Validity of re-assessment order dated 28.03.2016. - Consideration of contributions received from M/s. LEBARA Ltd. - Application of Duke of Westminster principles and Calcutta Discount case. - Justification of exercising power of revision by Principal CIT. - Compliance with the twin conditions for jurisdiction under section 263. Jurisdiction of Principal Commissioner of Income Tax under section 263 of the IT Act: The appeal was against the Order of the Principal Commissioner of Income Tax, Central-2, Chennai, passed u/s.263 of the Income Tax Act for the AY 2011-12. The assessee contended that the assessment order was not erroneous and not prejudicial to the interest of the revenue, challenging the jurisdiction of the Principal CIT to exercise revisionary powers. The Tribunal held that the contributions from M/s. LEBARA Ltd. were not taxable in the hands of the assessee as they were assessed in the hands of M/s. A.R. Rahaman Foundation with post facto approval from the Ministry of Home Affairs. Consequently, the Tribunal concluded that the re-assessment order was not erroneous, and the Principal CIT was not justified in exercising revisionary powers under section 263. Validity of re-assessment order dated 28.03.2016: The re-assessment order dated 28.03.2016 was challenged by the assessee, arguing that the AO had already examined the issue adequately during the re-assessment proceedings. The Tribunal noted that the AO had considered the explanations provided by the assessee and decided not to make any addition regarding the contributions received. The Tribunal further emphasized that the Ministry of Home Affairs had approved the contributions, indicating that they were not taxable in the hands of the assessee. Consequently, the Tribunal held that the re-assessment order was not erroneous, thereby supporting the assessee's contention. Consideration of contributions received from M/s. LEBARA Ltd.: The contributions received from M/s. LEBARA Ltd. were a focal point of the dispute. The Tribunal highlighted that the contributions were not taxable in the hands of the assessee as they were assessed in the hands of M/s. A.R. Rahaman Foundation, with approval from the Ministry of Home Affairs. This crucial fact led to the Tribunal's decision that the re-assessment order was not erroneous, reinforcing the position taken by the assessee. Application of Duke of Westminster principles and Calcutta Discount case: The assessee argued that the principles established in the Duke of Westminster case and the dictum from the Calcutta Discount case were not duly considered by the Principal CIT. However, the Tribunal did not delve into the specifics of these principles in the judgment, focusing instead on the factual assessment of the contributions and the jurisdictional aspects under section 263 of the IT Act. Justification of exercising power of revision by Principal CIT: The key issue revolved around whether the Principal CIT was justified in exercising the power of revision under section 263. The Tribunal concluded that since the contributions from M/s. LEBARA Ltd. were not taxable in the hands of the assessee and were duly assessed elsewhere, the re-assessment order was not erroneous. Consequently, the Tribunal held that the Principal CIT was not justified in revising the assessment under section 263, thereby ruling in favor of the assessee. Compliance with the twin conditions for jurisdiction under section 263: The Tribunal analyzed whether the twin conditions for jurisdiction under section 263 were met. It was established that the contributions in question were not taxable in the hands of the assessee, as confirmed by the Ministry of Home Affairs. Therefore, the Tribunal found that the re-assessment order was not erroneous or prejudicial to the interest of revenue, leading to the conclusion that the Principal CIT lacked justification for invoking the revisionary powers under section 263. Consequently, the appeal filed by the assessee was allowed.
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