2019 (2) TMI 241 - HC - Income Tax

Revision u/s 263 - addition towards entrance fees and annual subscription made by the Assessing Officer in the proceedings under Section 143(3) read with Section 263 - Held that - This order would suggest that the Commissioner found fault with the Assessing Officer on clear four specific aspects arising out of the order of the assessment and require that the Assessing Officer passes fresh order after making proper inquiries. The question of the treatment to the entrance fees was by then nowhere in picture. The Assessing Officer on his own examined said issue. The Commissioner, undoubtedly, has powers under Section 263 of the Act to annul the entire assessment and required passing of fresh assessment order. However, when the Commissioner, as in the present case, requires the Assessing Officer to carry out inquiries with respect to specified issues, the jurisdiction of the Assessing Officer to pass fresh order must be confined to such issues, failing which we would be giving the power to the Assessing Officer to make reassessment. Gujarat High Court in similar background in the case of CIT Vs. D.N. Dosani 2005 (10) TMI 35 - GUJARAT HIGH COURT decided in the fresh assessment orders passed in pursuance of the consolidated order under section 263 of the Act, the Assessing Officer was entitled to consider only those two items which had been considered by the Commissioner of Income-tax and was not entitled to consider any other item afresh for making additions. The question referred at the instance of the Commissioner is, therefore, answered in the affirmative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
Challenge to Tribunal's judgment on addition towards entrance fees and annual subscription, Tribunal's justification in not adjudicating on the merits of entrance fee and subscription fee treated as revenue receipt.

Analysis:

Issue 1: Addition towards entrance fees and annual subscription
The case involved a revisional order passed by the Commissioner under Section 263 of the Income Tax Act, setting aside the assessment order and directing a fresh assessment. The Assessing Officer, pursuant to this order, made additions towards entrance fees and annual subscription. The Tribunal held that the addition towards entrance fees was beyond the scope of the revisional order. The High Court agreed with the Tribunal, emphasizing that the Assessing Officer's jurisdiction for a fresh assessment must be confined to the issues specified by the Commissioner. The Court cited the Gujarat High Court's observation that different authorities must exercise their powers in distinct settings as per legislative intent. The Court concluded that the Assessing Officer's action on the entrance fees was not warranted by the revisional order.

Issue 2: Tribunal's justification in not adjudicating on the merits of entrance fee and subscription fee
The Tribunal did not adjudicate on the merits of the entrance fee and subscription fee treated as revenue receipt. The Court found that since the first issue was decided against the Revenue, the subsequent questions on the merits of these fees automatically failed. The Court held that the Assessing Officer's action on the annual subscription fee, not part of the revisional order, was also incorrect. Consequently, the Income Tax Appeals were dismissed based on the findings of the Tribunal and the High Court.

In summary, the High Court upheld the Tribunal's decision regarding the jurisdiction of the Assessing Officer in making additions beyond the scope of the revisional order. The Court emphasized the need for authorities to act within specified limits and dismissed the appeals concerning the entrance fees and annual subscription issues due to the failure of the primary issue raised by the Revenue.