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1995 (10) TMI 54 - AT - Income TaxAppellate Authority, Assessing Officer, Charitable Trust, High Court, Income From Property, Orders Prejudicial To Interests, Powers Of Commissioner, Religious Trust, Tax Authorities
Issues Involved:
1. Jurisdiction of DIT in invoking section 263 of the Income-tax Act. 2. Validity of the DIT's order holding the assessment as erroneous and prejudicial to the interests of revenue. 3. Revising the order passed in pursuance to the directions issued under section 144A of the Act. 4. Whether the leasing of land, its development, and sale of flats was a business venture or a charitable activity. Issue-wise Detailed Analysis: 1. Jurisdiction of DIT in Invoking Section 263 of the Income-tax Act: The appellant challenged the jurisdiction of the Director of Income-tax (Exemption) [DIT] in invoking section 263 of the Income-tax Act, 1961. The appellant argued that the DIT did not have the power to revise the assessment order as per the notification by the Central Board of Direct Taxes (CBDT), which authorized the DIT to perform functions of the Commissioner in respect of certain sections but did not extend the power of revision under section 263. The tribunal observed that the notification by CBDT authorized the DIT to perform all functions of the Commissioner concerning sections 11 and 12 of the Act, which inherently includes the power to revise orders under section 263. Thus, the tribunal rejected the appellant's claim, stating that the DIT had the necessary jurisdiction to invoke section 263. 2. Validity of the DIT's Order Holding the Assessment as Erroneous and Prejudicial to the Interests of Revenue: The appellant contended that the assessment was framed under the close scrutiny of the DIT and DDIT, and any error in the assessment could not be attributed to the Assessing Officer (AO). The tribunal noted that the DIT had issued directions under section 144A of the Act, and the AO had followed these directions. The tribunal held that the DIT's action to revise the assessment order based on a change of opinion was not permissible, as the Act does not allow the revision of an order of a Commissioner by another Commissioner. The tribunal struck down the basis of the revision as illegal and against the provisions of the Act. 3. Revising the Order Passed in Pursuance to the Directions Issued Under Section 144A of the Act: The appellant argued that the assessment order framed on the directions given by DDIT under section 144A of the Act could not be revised under section 263. The tribunal observed that sections 144A and 144B were introduced to contain litigation and ensure proper assessment. The Explanation to section 263 includes orders made as per the directions under section 144A, allowing their revision if found erroneous and prejudicial to the interests of the revenue. Therefore, the tribunal rejected the appellant's argument and held that the assessment order could be revised under section 263. 4. Whether the Leasing of Land, Its Development, and Sale of Flats Was a Business Venture or a Charitable Activity: The appellant contended that the leasing of land, its development, and sale of flats were not business ventures but activities carried out towards providing housing to the poorer section of the Parsi community, retaining the trust's charitable character. The tribunal noted that the trust had leased land to a Parsi society, developed it, constructed flats, and sold them to the richer class, generating a surplus of over Rs. 7 crores. The surplus was utilized for constructing flats for the poor Parsi community. The tribunal held that the activity was a means to achieve the objective of housing the poor, in line with the scheme evolved by the Maharashtra State. The tribunal concluded that the activity was not a business venture but a charitable activity, and the provisions of section 11(4A) were not attracted. Conclusion: The tribunal allowed the appeal in part, holding that the DIT had the jurisdiction to invoke section 263, but the assessment order could not be revised based on a change of opinion. The tribunal also held that the leasing, development, and sale of flats were charitable activities, not business ventures, and the provisions of section 11(4A) were not applicable.
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