2019 (11) TMI 335 - AT - Income Tax

Revision u/s 263 - as per CIT-E AO has omitted to consider valuation made by the DVO for capital gains, hostel expenses and bonus to the staff and thus set aside the order of the Assessing Officer and directed him to redo the assessment in accordance with law - HELD THAT - Valuation made by the DVO for capital gains - During the appeal hearing the ld.DR could not submit any reason for making reference to the DVO. Section 50C provides for reference to valuation of the property in a situation where the assessee objects for adoption of 50C value. In the instant case the department has not made out case that the sale consideration was less than the value determined by the Stamps Registration Authorities. From the sale deed it is found that the sale consideration declared by the assessee is equivalent to the value of Stamps and Registration Authorities and thus there is no case for reference to the DVO. Since the Assessing Officer has considered all the facts and accepted the sale consideration of ₹ 2,55,94,000/- which is on par with the value of SRO there is no error in the order passed by the Assessing Officer, hence, there is no case for revision u/sec. 263 Disallowance of hostel expenses and bonus to staff - assessee had accepted the disallowance in view of the fact that even though the expenses are disallowed, the increases in income, is entitled for exemption u/sec. 10(23C)(iiiad) of the Act and does not result into taxable income - HELD THAT - Assessing Officer has called for various information as per the questionnaire issued during the assessment proceedings. The assessee s gross receipts did not exceed the prescribed limit as mentioned in section 10(23C) of the act, hence, granting of exemption u/sec. 10(23C) is not required in assessee s case. There is no discussion with regard to the disallowance of expenses in the assessment order. In the instant case, the assessee contended that increased income due to disallowance of expenses also gets exemption and net the result would be zero taxable income. As per the act, the assessee is entitled for exemption of income u/sec. 10(23)(iiiad) of the Act. Thus, the assessee is also eligible for exemption of the increased income since, it is carrying on educational activity. During the appeal hearing, ld.AR has submitted that the assessee had explained before the Assessing Officer that the disallowance relating to hostel expenses, bonus to the staff though increases the income, the same was exempt u/sec. 10(23C)(iiiad) of the Act which the Assessing Officer had accepted. Therefore, there is no error in the order passed by the Assessing Officer and we are of the view that the ld.CIT(E) has erroneously assumed the jurisdiction u/sec. 263 Even if it is presume for the sake of argument that the rental income, hostel expenses and bonus needs to be added to the total income since the assessee stated to have agreed before the AO, the assessee had returned the loss of ₹ 21,87,886/- against which the AO made the assessment on total income of ₹ 30,51,396/- relating to the movable assets, without considering the loss declared by the assessee in the return of income. The assessee is entitled for set off the loss against the additions made in the scrutiny assessment - Against which the Assessing Officer computed the total income of ₹ 30,51,400/- without allowing the set off the current year loss. The assessed income was more than the correct income of the assessee. Thus, there is no under assessment which caused prejudice to the revenue and hence, there is no case for revision u/sec. 263 - Decided in favour of assessee

Summary

Issues Involved:
1. Capital gains
2. Disallowance of hostel expenses
3. Disallowance of bonus to staff
4. Exemption under section 10(23C)(iiiad)

Detailed Analysis:

1. Capital Gains:
The primary issue was the sale of an immovable property by the assessee, an educational institution, to another society for ?2,55,94,000/-. The Department Valuation Officer (DVO) valued the property at ?3,54,27,090/-, but the Assessing Officer (AO) did not consider this difference for capital gains tax. The assessee argued that the sale consideration was more than the value determined by the Stamps & Registration Authorities, and thus, there was no need for reference to the DVO. The Tribunal agreed, stating that if the sale consideration is higher than the stamp duty value, there is no requirement for a DVO reference. The Tribunal found no error in the AO’s acceptance of the sale consideration and ruled that there was no basis for revision under section 263.

2. Disallowance of Hostel Expenses:
The CIT(E) raised concerns about the hostel expenses of ?6,84,708/- claimed by the assessee, noting that there were no students during the first quarter of the financial year 2012-13. The AO proposed to restrict these expenses but did not disallow them in the final assessment. The assessee contended that these expenses were necessary for salaries and mess expenses for staff, even in the absence of students. The Tribunal found that the AO had considered these explanations and accepted them, concluding that there was no error in the AO’s decision not to disallow these expenses.

3. Disallowance of Bonus to Staff:
The AO proposed to disallow a bonus of ?6,85,000/- to the staff, which the Secretary of the assessee society had agreed to. However, this disallowance was omitted in the final assessment. The Tribunal noted that the AO had considered the explanations provided by the assessee and decided not to disallow the bonus. The Tribunal ruled that there was no error in the AO’s decision and no basis for revision under section 263.

4. Exemption under Section 10(23C)(iiiad):
The CIT(E) questioned the eligibility of the assessee for exemption under section 10(23C)(iiiad), based on the observations of the Chief Commissioner of Income Tax (CCIT). The Tribunal noted that the AO had completed the assessment after considering the CCIT’s order and had accepted the assessee’s explanations regarding the exemption. The Tribunal found that the assessee’s gross receipts did not exceed the prescribed limit, and thus, the exemption was rightly granted. The Tribunal concluded that the CIT(E) had erroneously assumed jurisdiction under section 263.

Conclusion:
The Tribunal ruled that there was no error in the assessment order passed by the AO that was prejudicial to the interest of the Revenue. The AO had considered all relevant facts and explanations provided by the assessee. The Tribunal set aside the order of the CIT(E) and allowed the appeal of the assessee. The final assessed income was more than the correct income of the assessee, indicating no under-assessment that could cause prejudice to the Revenue. The appeal filed by the assessee was allowed, and the order was pronounced in open Court on October 31, 2019.