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2023 (3) TMI 760 - AT - Income TaxRevision u/s 263 - Accumulation of income u/s 11(2) - Deemed income accumulation - debatable issue - whether income once accumulated u/s. 11(2) of the Act for capital expenditure was added to revenue u/s. 11(3) of the act can accumulate once again be claimed u/s. 11(2)? - HELD THAT - The Hon'ble Calcutta High Court in the case of CIT vs. Natwarlal Chowdhury Trust 1989 (8) TMI 19 - CALCUTTA HIGH COURT has held that the assessee is entitled to accumulate 15% of the total income which is inclusive of the deemed income specified under Section 11(3) of the Act. Thus, from the above judgment, it is transpired that the assessee can claim the benefit of accumulation even on the deemed income specified under the provisions of Section 11(3) of the Act. Assessee has already claimed the benefit of exemption under Section 11(2) of the Act with respect to the deemed income specified under Section 11(3) of the Act and if the same is allowed to accumulate again, then the assessee will be claiming the benefit twice and if the same continues, perennially. We find that the issue has been examined in Circular No. 29; R. No. 20/22/CS-IT(AI), dated 23.08.1360 and Circular 5P (LXX-6) of 1968 dated 19.06.1968. In the former Circular it is categorically mentioned that when the amounts are taxed u/s. 11(3) the benefit which would have been available to trust in respect of 25% of its income or Rs. 10,000/- u/s. 11(1) (a) would also be lost. In the later circular issue has been re-examined and legal position has been clarified stating that only the Income disclosed in the account will be eligible for exemption u/s. 11(1) and will be eligible for permitting accumulation of 25%. As categorically explained that deemed income charged u/s. 11(3) is in excess of income shown in its account. Thus, from both these circulars it can be seen that the exemption u/s. 11(1) is not available for the deemed income u/s. 11(3). The Bombay High Court in the case of Bajaj Auto Finance Ltd. 2018 (2) TMI 1716 - BOMBAY HIGH COURT has also held that Once, reliance is placed upon a decision of a Court and/or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable. As decided in MAX INDIA LTD. 2007 (11) TMI 12 - SUPREME COURT where there are two views on an issue, if LD AO takes one of the views, it could not be said that order passed by him is erroneous and prejudicial to the interest of revenue. Therefore, the view taken by LD AO is debatable therefore, the powers u/s. 263 of the act of the Ld. PCIT are ousted - Decided in favour of assessee.
Issues Involved
1. Breach of the Principles of Natural Justice 2. Legality of the Revision Order under Section 263 3. Merits of the Case Detailed Analysis 1. Breach of the Principles of Natural Justice The assessee argued that the revision order under Section 263 of the Income-tax Act, 1961 was framed without giving a proper, sufficient, and effective opportunity of being heard. It was submitted that the order was passed in breach of the principles of natural justice and with non-application of mind to the facts and contentions brought on record by the assessee. 2. Legality of the Revision Order under Section 263 The assessee contended that the revision order passed by the Commissioner of Income Tax (Exemption) [CIT(E)] was illegal and void as the necessary pre-conditions for initiating and completing the revision proceedings were not fulfilled. The CIT(E) held that the assessment orders for A.Y. 2015-16 and 2016-17 were erroneous and prejudicial to the interest of the Revenue due to the following reasons: - The assessee had given advances for the purchase of land, which were later returned. The CIT(E) argued that the amount received back should have been considered as income but was not assessed as such. - The CIT(E) claimed that the assessee violated the provisions of Section 11(3)(c) by re-accumulating the returned amount, which was initially accumulated under Section 11(2). The assessee argued that these issues were examined during the original assessment proceedings, and the view taken by the Assessing Officer (AO) was one of the possible views. Therefore, the revision under Section 263 was not justified. 3. Merits of the Case The assessee argued that the re-accumulation of the returned amounts was in accordance with law and that the provisions of Section 11(3) were not applicable. The assessee cited judicial precedents, including the decision of the Calcutta High Court in Natwarlal Chaudhary Trust, which allowed the benefit of accumulation even on deemed income specified under Section 11(3). However, the Revenue argued that allowing such re-accumulation would lead to non-taxation of income once accumulated perennially. The tribunal examined various judicial precedents and circulars issued by the CBDT. It was noted that the deemed income under Section 11(3) is different from the income contemplated under Sections 11(1)(a) and 11(2), and thus, the assessee is not entitled to claim the benefit of accumulation out of such deemed income. Conclusion The tribunal concluded that the view taken by the AO was debatable and one of the possible views. Therefore, the powers under Section 263 of the Act could not be invoked by the CIT(E). The orders of the CIT(E) for both years were quashed, and the appeals of the assessee were allowed.
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