2015 (10) TMI 2113 - AT - Income Tax

Revision u/s 263 - no enquiry and no application of mind for allowing huge amount as exempted u/s 11 - an order which is erroneous as well as prejudicial to the interest of Revenue - Held that - Assessing Officer himself has observed in the assessment order that the assessee s entire income is not eligible for exemption u/s 11 and even after making this observation, he has allowed deduction of two huge amounts u/s 11 of the Act and under these facts, it was held by learned CIT that the order of Assessing Officer is erroneous as well as prejudicial to the interest of Revenue. Regarding merit of allowability of exemption, he has not decided the issue and has asked the Assessing Officer to pass a de novo assessment order after examining all aspects and after providing reasonable opportunity of being heard to the assessee. None of the judgments cited by Learned A.R. of the assessee is rendering any help to the assessee and we have also seen that that the assessment order is erroneous as well as prejudicial to the interest of Revenue because of the observation of the A.O. in the assessment order that the entire income of the assessee is not exempt and his action of allowing deduction u/s 11 of two huge amounts and therefore, we find no reason to interfere in the order of learned CIT. - Decided against assessee.

Issues:
1. Validity of order passed by the Assessing Officer under section 263 of the Income-tax Act for the assessment year 1996-97.
2. Allowance of deductions under sections 11(1)(a) and 11(2) of the Act by the Assessing Officer.
3. Contradiction in the Assessing Officer's observation regarding the exemption of the entire income of the corporation under section 11.
4. Interpretation of the registration of a trust under section 12A of the Income-tax Act.
5. Relevance of the registration under section 12AA of the Income-tax Act in computing income under section 11(4).
6. Compliance with Instruction No. 7 of 2011 issued by the CBDT for assessments in consequence to remand orders of the Tribunal.

Analysis:
1. The appeal raised concerns about the order passed by the Learned CIT(A)-I under section 263 of the Income-tax Act for the assessment year 1996-97. The appellant argued that the order was not erroneous and not prejudicial to the revenue's interest. The appellant contended that the Assessing Officer's order, in compliance with the Tribunal's direction, was lawful and should not be revised under section 263.

2. The appellant challenged the Assessing Officer's allowance of deductions under sections 11(1)(a) and 11(2) of the Act. The appellant argued that the deductions were in line with the Tribunal's remand order and should not be considered erroneous. However, the Learned CIT(A)-I found the deductions to be in contradiction with the Assessing Officer's own observation that the entire income was not exempt under section 11, leading to a finding of error and prejudice to revenue.

3. An issue arose regarding the discrepancy in the Assessing Officer's observation about the exemption of the corporation's entire income under section 11. The Learned CIT(A)-I highlighted this contradiction and deemed the Assessing Officer's actions as erroneous and prejudicial to revenue, warranting a de novo assessment order.

4. The interpretation of the registration of a trust under section 12A of the Income-tax Act was debated. The appellant argued that once registration is granted, the income should be computed under section 11. However, the Learned CIT(A)-I found that the Assessing Officer's actions did not align with this interpretation, leading to a finding of error and prejudice.

5. The relevance of registration under section 12AA of the Income-tax Act in computing income under section 11(4) was discussed. The appellant contended that the income calculation was as per the provisions of section 11(4) due to registration. However, the Learned CIT(A)-I found discrepancies in the Assessing Officer's approach, leading to a decision of error and prejudice.

6. Compliance with Instruction No. 7 of 2011 issued by the CBDT for assessments in consequence to remand orders of the Tribunal was examined. The appellant argued for adherence to the instruction, emphasizing the monitoring role of the Commissioner in such cases. However, the Learned CIT(A)-I found the Assessing Officer's lack of proper examination and application of mind, necessitating a de novo assessment order.

In conclusion, the Tribunal dismissed the appeal, upholding the order of the Learned CIT(A)-I under section 263, citing errors and prejudice in the Assessing Officer's actions and emphasizing the need for a fair and thorough examination of the issues.

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