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TMI Blog2020 (3) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, no such sum was credited or paid to any trust or institution. It is contended that amount was merely set apart but not in fact credited or paid to any trust or institution registered u/s 12AA of the Act. We find merit into this contention of the assessee. Therefore, set aside the impugned order and restore the same to the file of the Ld. CIT to decide it afresh after considering the submissions of the assessee and examining the records - Grounds raised by the assessee are allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue................ 2. In the instant case, Ld. CIT (Exemption), Bhopal vide the show cause notice issued u/s 263 has stated that the accumulation u/s 11(2) of the Act was not allowable to the Assessee. [PB 04] 3. For accumulation of income, the conditions laid down u/s 11(2) read with rule 17 of the Income Tax Rules, 1962 have to be satisfied to get exemption. The conditions as enumerated in section 11(2) are as follows - Clause of section 11(2) Condition as per the relevant clause of section 11(2) Fulfilment of the conditions mentioned by section 11(2) (a) Statement in prescribed form is submitted to assessing officer stating the purpose for which the income is being accumulated or set apart AND Period for which the income is to be accumulated or set apart which shall in no case exceed five years Form 10 has been submitted to the Assessing Officer stating the purpose for which the income is being accumulated or set apart. The income so accumulated or set apart shall be so kept till 31.03.2018. (i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 263(1)………………..There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue." [emphasis supplied] b. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied] d. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10(23C)(iv), 10(23C)(v), 10(23C)(vi) or 10(23C)(via) Income referred to in section 11(2) has been credited to a third party - 'M/s. Girija Colonizers' from whom land has been purchased by the assessee in its own name for construction of school building. The payment is not credited to any trust or institution as mentioned in section 11(3)(d) From the above table it is evident that none of the conditions as mentioned in section 11(3) have been triggered in the instant case. Even if it had been so, addition if any would have been made in the year in which the any of the above mentioned clauses of section 11(3) are not satisfied. In the instant case, none of the clauses of section 11(3) have been triggered. 9. The terms 'applied', 'accumulated' and 'spent' have different connotations which are detailed as under - a. Applied - The expression 'applied' is a broader term that comprises not only the amount spent but also extends to amount laid out and accumulated for future spending. This expression upholds all expenditure incurred for the purposes of charitable or religious. b. Accumulated - In common parlance it means surplus carried forward for future spending. It means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be against the principles of natural justice that a person who has not been confronted with any ground be saddled with the liability thereof. Consequently the Tribunal held that as the said issue did not form part of the show-cause notice and the assessee was not even confronted with it, even before the CIT, it cannot form the basis for revision of the assessment order under section 263" Para 11 - "On this aspect of the matter also, we are satisfied with the findings and the approach taken by the Income-tax Appellate Tribunal. No substantial question of law arises for our consideration." [emphasis supplied] 5. In the instant case, assessee was not confronted with the issue on the basis of which the assessment order passed u/s 143(3) has been set aside thereby directing assessing officer to reframe the order denovo and the issue on which the method of accounting regularly followed is being questioned. This would be against the principle of natural justice. Hence, the impugned order ought to be quashed. C. Application of mind by Ld. AO vis-à-vis Ld. CIT(Exemption) 1. Assessment proceedings u/s 143(3):- In the instant case, assessment proceedings were initiated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, in the instant case, the Tribunal had found that the assessee had furnished all the requisite information and that the ITO considering all the facts had completed the assessment. It was further held that in the circumstances of the case it could not be held that the ITO had made assessment without making proper enquiries. Accordingly, the Tribunal was justified in reversing the order passed by the Commissioner." [emphasis supplied] b. Hon'ble Delhi High Court in the case of Anil Kumar Sharma - [2010] 194 Taxman 504 - order pronounced on 24.04.2010 - Para 7 - "In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes" [emphasis supplied] e. Hon'ble Delhi High Court in the case of Sunbeam Auto Limited - [2010] 189 Taxman 436 - order pronounced on 11.09.2009 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of order prejudicial to interest of revenue - Assessment year 2001-02 - Whether if while making assessment, Assessing Officer has made an inadequate enquiry , that would not, by itself, give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes - Whether, therefore, impugned order of Tribunal was to be upheld - Held, yes" [emphasis supplied] D. Lack of enquiry versus inadequate enquiry conducted by Ld. AO: 1. Ld. AO during the assessment proceedings raised a specific query on admissibility of claim u/s 11(2). In response to which relevant documents including Form 10 were submitted. Ld. AO conducted necessary enquiries and was satisfied with the submission of assessee. If query was raised during scrutiny and was answered to the satisfaction of Ld. AO then mere non-discussion or non-mention thereof in the assessment order could not lead to assumption that Ld. AO did not apply his mind or he had not made inquiry on the subject matter 2. Ld. AO allowed the claim on being satisfied with the explanation of assessee, on an enquiry made during the course of assessment proceedings. Thus, the decision of Ld. AO cannot be held to be erroneous. It is the practice that whenever any claim of the assessee is accepted, Assessing Officer may not discuss the same in his assessment order. 3. Distinction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns must be such as to show that enhancement or modification of assessment or cancellation of assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to conclusion that order of Assessing Officer was not only erroneous but was also prejudicial to interest of revenue - Held, yes - Whether before exercising revisional powers, assessee must be called, his explanation sought for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interest of revenue, Commissioner may pass revisional orders - Held, yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision - Held, yes" [emphasis supplied] c. Hon'ble Delhi High Court in the case of Ashish Rajpal - [2009] 320 ITR 674 - order pronounced on 14.05.2009 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en we are not inclined to give our approval to such directions." "It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion." [emphasis supplied] E. Enquiry to be conducted by Pr.CIT before making an order under section 263 of the Income Tax Act, 1961: 1. Section 263(1) - ".....................after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify..............." To invoke provisions of section 263, Pr. CIT is required to conduct such enquiries as he deems to be necessary. 2. Show cause notice issued u/s 263 states the following reason for invoking provisions of section 263 - 'accumulation u/s 11(2) of the Act was not allowable to the assessee. However, the same was not disallowed in the scrutiny assessment by the AO' 3. From the above it is evident that in the assessment proceedings Ld. AO raised a specific query about admissibility of claim u/s 11(2). In response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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