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2022 (12) TMI 785 - AT - Income TaxRevision u/s 263 by CIT - assessment of trust - vehicle in question i.e. Innova car is the sole passenger vehicle and purchase of the car was for the benefit and use of the school - actual ownership of a vehicle - whether disallowance should be made for vehicle purchased in the name of the Chairman if the vehicle is being used for the purpose of the trust? - HELD THAT - These are undisputed facts clearly emerging from the records as so stated by the CIT(E) and we fail to understand what is the ambiguity involved and what further verification is required as so stated by the CIT(E) in the impugned order as we find that these facts adequately demonstrate that the ownership of the vehicle is with the assessee society. Therefore on this account itself the impugned order deserves to be set-aside. As far as usage of the vehicle is concerned we find that the vehicle has been purchased towards the fag end of the financial year on 28/03/2017 and it has been submitted by the assessee that the Chairman who is aged 88 years has his own two vehicles in personal capacity and doesn t require any school vehicle for his personal usage and the said vehicle was not used by him rather the vehicle was used by the Principal and other staff members. CIT(E) has acknowledged the said explanation of the assessee where he held that there appears to be no evidence regarding any wrong use of the vehicle and the AO must remain cognizant that Shri. Rajinder Nath Chairman already has other vehicles in his personal name and appears otherwise financially well-endowed and well settled. Therefore on this account as well the impugned order deserves to be set-aside. We are of the considered opinion that there is no justifiable basis to invoke the provisions of section 263 as the order passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the order so passed by the ld. CIT(E) is hereby set-aside and that of the AO is sustained. - Decided in favour of assessee.
Issues Involved
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) to issue notice under Section 263 of the Income Tax Act, 1961. 2. Adequacy of the Assessing Officer's (AO) inquiry during the original assessment proceedings. 3. Verification of the use of the car for the purposes of the school. 4. Reliance on audit objections for assuming jurisdiction. 5. Applicability of judgments relied upon by the PCIT. Detailed Analysis 1. Jurisdiction of the PCIT to Issue Notice under Section 263 The assessee challenged the jurisdiction of the PCIT (Central), Ludhiana, to issue a notice under Section 263 of the Income Tax Act, 1961. The PCIT had canceled the assessment framed by the AO and directed a fresh assessment. The tribunal found that the PCIT's assumption of jurisdiction was not justified as the AO had already conducted a thorough inquiry during the original assessment proceedings. 2. Adequacy of the AO's Inquiry The assessee argued that the AO had considered various replies and documents during the assessment proceedings, including the addition of fixed assets and the purchase of a new vehicle. The tribunal noted that the AO had indeed verified the records and accepted the assessee's submissions. The tribunal found that the PCIT's claim that no inquiry was made by the AO was factually incorrect. 3. Verification of the Use of the Car The PCIT had set aside the issue for verification of the use of the car, which was registered in the name of the society's chairman. The tribunal found that the AO had already examined this issue during the assessment proceedings. The tribunal noted that the vehicle was used exclusively for official activities and not for personal use. The tribunal also referenced the decision of the Bombay High Court in CIT v. Dilip Singh Sardarsingh Bagga, which held that registration under the Motor Vehicles Act is not essential for determining ownership. 4. Reliance on Audit Objections The assessee contended that the PCIT assumed jurisdiction based on audit objections, which is void-ab-initio as per the binding judgment of the Jurisdictional High Court in the case of Sohana Woollen Mills. The tribunal found merit in this argument and noted that the PCIT's reliance on audit objections was not justified. 5. Applicability of Judgments Relied Upon by the PCIT The assessee argued that the judgments relied upon by the PCIT were not applicable to the facts and circumstances of the case. The tribunal agreed with the assessee and found that the PCIT had not properly considered the replies filed during the proceedings. Conclusion The tribunal concluded that there was no justifiable basis for invoking the provisions of Section 263 as the AO's order was neither erroneous nor prejudicial to the interest of the Revenue. The tribunal set aside the order passed by the PCIT and sustained the original assessment order by the AO. The appeal of the assessee was allowed. Order The appeal of the assessee is allowed, and the order pronounced in the open Court on 06/12/2022.
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