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2015 (2) TMI 170 - AT - Income TaxRevision u/s 263 - car expenses where the Assessing Officer had disallowed expenses varying 40% to 80% - Held that - The Assessing Officer has made the aforesaid additions after referring to the facts in each of the assessment years involved and even considered the acquisition of new cars in each of the assessment years and thereafter, worked out the disallowance. The Assessing Officer also called for the details from the assessee i.e. log book maintained and also to justify whether the expenditure had been incurred for the purposes of business. In the absence of any evidence furnished by the assessee, the Assessing Officer made the disallowance on proportionate basis. Such disallowance made by the Assessing Officer cannot be invalid as the carwise details were not available, the Assessing Officer had no recourse but to resort to estimation to disallow the expenses, which were not relatable to carrying out of the business of the assessee Trust. - Decided in favour of assessee. Car expenses was the acquisition of cars from year to year - Held that - Where the Commissioner on the perusal of the record, was of the opinion that the estimate made by the Assessing Officer was on the lower side and should have been estimated at a figure higher than the one determined by the Assessing Officer, does not empower the Commissioner to re-examine the accounts and re-determine the estimation in the hands of the assessee, where the Assessing Officer during assessment proceedings had made estimated disallowance.- Decided in favour of assessee. Allowance of depreciation - Held that - Perusal of the assessment order reflects that the Assessing Officer has not allowed the claim of depreciation to the assessee and had reworked out the depreciation on the assets in the hands of the assessee, as per the special audit report. In view thereof, where the Assessing Officer had not allowed the claim of the assessee on account of depreciation on assets, we find no merit in the order of Commissioner in exercising the jurisdiction under section 263 of the Act.- Decided in favour of assessee. Depreciation on hospital building - Held that - Assessee had claimed depreciation on building valued at ₹ 21.29 crores, whereas the Assessing Officer had allowed the depreciation only on the value of ₹ 18.89 crores. The un-vouched expenses, if any, had been considered by the Assessing Officer and accordingly, we find no merit in the order of Commissioner in holding the assessment order to be prejudicial to the interest of Revenue.- Decided in favour of assessee. Unsecured loans raised by the assessee and interest thereon - Held that - AO had disallowed the loans relating to certain persons. However, interest paid on such loans was not disallowed by the Assessing Officer. This aspect of non-disallowance of interest relatable to loans, which had not been allowed by the Assessing Officer makes the order of Assessing Officer prejudicial to the interest of Revenue. We uphold the exercise of jurisdiction under section 263 of the Act by the Commissioner on this aspect.- Decided against assessee. Registration under section 12A - benefits of sections 11 and 12 denied - Held that - Once the Assessing Officer had come to a finding that the assessee was not entitled to the exemptions under sections 11 and 12 of the Act as it had no registration under section 12A of the Act, the violation of provisions of section 13 of the Act becomes immaterial as the said provisions of the Act are not applicable while computing income in normal course of business. Accordingly, we find no merit in the observations of the Commissioner in holding the assessment order to be prejudicial to the interest of Revenue and we reverse the same.- Decided in favour of assessee. Unvouched revenue and capital expenditure disallowed - Held that - The Commissioner was of the view that the Assessing Officer should have made proper enquiries to prove or link the cheque by means of which the payment was made for the expenses while exercising the power under section 263 of the Act. The Commissioner cannot step into the shows of Assessing Officer, who while conducting the assessment proceedings, had made certain enquiries and had come to the finding that the said expenses were to be disallowed. Once the expenses were disallowed by the Assessing Officer, we find no merit in the order of Commissioner in holding the same to be erroneous and prejudicial to the interest of Revenue - Decided in favour of assessee. Payment of advertisement expenses and telephone expenses of the Trustees and their relations - Held that - The Commissioner having failed to come to the conclusion as to how the disallowance made by the Assessing Officer makes the order prejudicial to the interest of Revenue and merely setting aside the matter to the Assessing Officer for making further enquiries had exceeded his jurisdiction in exercise of the powers under section 263 of the Act. Where the Commissioner has failed to record reasons for holding the order to be erroneous, then the exercise of such powers by the Commissioner are un-sustainable in law. - Decided in favour of assessee.
Issues Involved:
1. Validity of assessments under section 153C of the Income Tax Act. 2. Adequacy of enquiries conducted by the Assessing Officer (AO). 3. Disallowance of car expenses. 4. Depreciation on assets. 5. Depreciation on hospital building. 6. Unsecured loans. 7. Unvouched revenue and capital expenditure. 8. Advertisement and telephone expenses of Trustees. 9. Jurisdiction of the Commissioner under section 263 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of Assessments under Section 153C: The assessee contended that the assessments were void for the failure to serve notice under section 143(2), which is mandatory for assessments under sections 153A and 153C. The Commissioner rejected this contention, stating that the assessments were still valid even if the notice under section 143(2) was not served, as the present procedure of search proceedings does not mandate such notice. 2. Adequacy of Enquiries Conducted by the AO: The Commissioner held that the AO failed to make necessary enquiries and complete the assessment proceedings with proper appreciation of evidence, facts, and law. The Tribunal observed that the AO had made certain enquiries and disallowed some expenses, indicating that the AO had applied his mind. The Tribunal held that merely because the Commissioner had a different view does not render the AO's order erroneous. 3. Disallowance of Car Expenses: The AO disallowed a percentage of car expenses due to the lack of detailed records, indicating personal use by Trustees. The Commissioner argued that the AO's disallowance was arbitrary and lacked basis. The Tribunal found that the AO had made disallowances based on the available information and upheld the AO's method, rejecting the Commissioner's view. 4. Depreciation on Assets: The Commissioner found the AO's allowance of depreciation erroneous and prejudicial to revenue. However, the Tribunal noted that the AO had reworked the depreciation based on the special audit report and found no merit in the Commissioner's order. 5. Depreciation on Hospital Building: The AO allowed depreciation based on the District Valuation Officer's (DVO) report, which valued the building lower than the assessee's claim. The Commissioner noted un-vouched expenses and held the AO's order as prejudicial to revenue. The Tribunal observed that the AO had considered the DVO's report and disallowed depreciation on the un-vouched expenses, thereby rejecting the Commissioner's order. 6. Unsecured Loans: The AO had disallowed certain unsecured loans but not others, which the Commissioner found prejudicial to revenue. The Tribunal upheld the Commissioner's order only to the extent of interest on unsecured loans that were treated as bogus, while rejecting the rest of the Commissioner's findings. 7. Unvouched Revenue and Capital Expenditure: The Commissioner held the AO's disallowance of un-vouched expenses as insufficient, directing further enquiries. The Tribunal found that the AO had made necessary disallowances based on the available evidence and rejected the Commissioner's directive for further enquiries. 8. Advertisement and Telephone Expenses of Trustees: The Commissioner argued that the AO should have disallowed these expenses as they were payments to related parties under section 40A(2)(b). The Tribunal noted that the AO had already disallowed telephone expenses and found no merit in the Commissioner's additional disallowance. 9. Jurisdiction of the Commissioner under Section 263: The Tribunal emphasized that the Commissioner must find the AO's order both erroneous and prejudicial to revenue. It found that the Commissioner had failed to establish that the AO's order was erroneous, thus invalidating the Commissioner's exercise of jurisdiction under section 263, except for the issue of interest on unsecured loans. Conclusion: The Tribunal set aside the Commissioner's order under section 263 except for the disallowance of interest on unsecured loans, which were treated as bogus. The appeals of the assessee were partly allowed.
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