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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 ..... accumulation u/s 11(2) at Rs. 5.50 crores was allowed by the learned A.O. in the scrutiny assessment after making enquiries and verification of the claim and, therefore, the order of the assessing officer is not erroneous in so far as it is prejudicial to the interest of revenue, hence the order of the CIT u/s 263 is unlawful and, therefore, be cancelled. 4. That on the facts & in the circumstances of the case and in law, that the assessee had satisfied all the relevant conditions as prescribed u/s 11(2) of the Act and, therefore, the claim of deduction of Rs. 5.50 crores u/s 11(2) is a fully admissible claim hence the A.O. was fully justified in allowing the claim in the assessment. 5. That on the facts & in the circumstances of the case and in law, the learned CIT erred and not justified in setting aside the assessment of the A.O. u/s 143(3) dated 3.3.2016 de-novo. 2. The only effective ground is against initiation of proceedings u/s 263 of the Income Tax Act, 1961 (hereinafter called as 'the Act'). The brief facts are that in this case assessment u/s 143(3) of the Act was framed vide order dated 3.3.2016. The A.O. accepted the return filed by the assessee. However, Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before the due date specified u/s 139(1) for furnishing the return of income Form 10 has been submitted on 20.09.2013. Due date of furnishing of return of income for A.Y. 2013-14 (impugned year) was 30.09.2013. From the above table it is evident that all the three conditions as mentioned in section 11(2) have been fully satisfied by the assessee. Thus, the claim of assessee u/s 11(2) is in accordance to law and validly claimed by assessee. 4. Ld. AO in the assessment proceedings has correctly allowed the claim of assessee u/s 11(2). Assessment order passed u/s 143(3) is in accordance to law allowing the claim of assessee u/s 11(2). 5. One of the twin conditions for invoking the provisions of section 263 i.e. prejudicial to the interest of revenue is not satisfied. Thus, provisions of section 263 cannot be invoked. Order passed by Ld. Pr. CIT -2, Indore u/s 263 has no legal sanctity. 6. It is a well settled law that to invoke the provisions of section 263 both the conditions that the order must be erroneous and prejudicial to the interest of Revenue must be satisfied. Reliance is placed on the following judicial precedents - a. Hon'ble Jurisdictional High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for 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 c. Hon'ble Gujarat Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facieerroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suo moto power of revision under section 263." [emphasis supplied] 7. In the instant case, since one of the conditions for invoking the provisions of section 263 the assessment order i.e. erroneous is not satisfied. Since the twin conditions are not satisfied the impugned order ought to be quashed. 8. Without prejudice to above, provisions of section 11(3) are triggered in following circumstances - Clause of section 11(3) Condition as per the relevant clause of section 11(3) when income referred to in section 11(2) is Fulfilment of the conditions mentioned by section 11(3) a Applied to purposes other than charitable or religious purposes as aforesaid or ceases to accumulated or set apart for application thereto Income referred to in section 11(2) has been utilised by assessee itself for purchase of land at Village Baghmugalliya, Patwari Halka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the accumulation u/s 11(2) was not allowable and the same was not disallowed in the scrutiny assessment by Ld. AO. [PB 04] 2. Ld. CIT(Exemption) while passing the order u/s 263 set aside the assessment order passed u/s 143(3) dated 03.03.2016 and directed assessing officer to reframe the assessment order denovo and after verifying the method of accounting actually followed on year to year basis. [order passed u/s 263 page 5] 3. Assessee submits that show cause notice issued by Ld. CIT(Exemption) did not raise the issue of assessment order itself being erroneous and prejudicial to the interest of the Revenue nor was the assessee confronted with the during the revisionary proceedings. No opportunity was given to meet the ground on which the order u/s 263 has been passed by Ld. CIT(Exemption). It will be against the principle of natural justice that an assessee who has not been confronted with any ground be saddled with the liability thereof. Hon'ble Apex Court in the case of Toyo Engg. India Limited [2006] 7 SCC 592 had noted that the Department cannot travel beyond the show cause notice. 4. Reliance is placed on following judicial precedents - a. Hon'ble Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O after considering and examining all these documents allowed the claim of assessee. Assessment order was passed u/s 143(3) on 03.03.2016 accepting the returned income as assessed income. 2. Revisionary proceedings u/s 263:- Show cause notice u/s 263 was issued on 13.03.2018 stating that the accumulation u/s 11(2) of the Act was not allowable to assessee. The same was not disallowed in the scrutiny assessment. Reply to the above mentioned show cause notice was submitted on 19.03.2018. In this assessee submitted that accumulation of fund u/s 11(2) has been correctly allowed by Ld. AO after examining the said claim during the assessment proceedings. Ld. CIT(Exemption) rejected the submission of assessee and passed the order u/s 263 on 21.03.2018 setting aside the assessment order passed u/s 143(3) on 03.03.2016. Ld. CIT(Exemption) directed assessing officer to reframe the assessment order denovo and after verifying the method of accounting actually followed on year to year basis. [Order u/s 263 page 5] 3. Ld. AO initiated assessment proceedings on 18.09.2014 and passed order u/s 143(3) on 03.03.2016. Ld. CIT(Exemption) issued show cause notice u/s 263 on 13.03.2018 and pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r our consideration. Consequently, the appeal is dismissed." [emphasis supplied] c. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Mehrotra Brothers - [2004] 270 ITR 157 - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Commissioner invoked provision of section 263 against assessment order passed in case of assessee-firm on ground that Assessing Officer did not make proper enquiry regarding genuineness of certain cash credits found in books of firm - However, Tribunal held that since assessee had explained satisfactorily cash credit in books of account and discharged burden and Department had not brought out material or evidence to rebut same, cash credits were not income of assessee-firm and, accordingly, set aside order of Commissioner passed under section 263 - Whether in view of finding of fact recorded by Tribunal, no substantial question of law arose out of impugned order - Held, yes - Whether, therefore, instant appeal was to be dismissed - Held, yes" [emphasis supplied] d. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred on tools and dyes as revenue expenditure - Commissioner, however, set aside assessment order in exercise of his powers under section 263 on ground that Assessing Officer had allowed aforesaid expenditure without making proper enquiry - He, accordingly, remitted matter back to Assessing Officer to re-examine issue - Whether when facts clearly showed that Assessing Officer had undertaken exercise of examining as to whether expenditure incurred by assessee in replacement of dyes and tools was to be treated as revenue expenditure or not and on being satisfied with assessee's explanation, he accepted same, it could be said to be a case of lack of inquiry - Held, no - Whether further, on facts and law, view taken by Assessing Officer was one of possible views and, therefore, assessment order passed by Assessing Officer could not be held to be prejudicial to interest of revenue - Held, yes - Whether, therefore, Tribunal was justified in setting aside order of Commissioner - Held, yes" [emphasis supplied] f. Hon'ble Delhi High Court in the case of Hindustan Marketing & Advertising Co. Limited - [2011] 196 Taxman 368 - order pronounced on 21.09.2010 - HEAD NOTE - "Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing judicial precedents - a. Hon'ble Allahabad High Court in the case of Krishna Capbox (P) Ltd - [2015] 60 taxmann.com 243 - order pronounced on 23.02.2015 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue (erroneous order) - Assessment year 2008-09 - Assessee filed its return - Case was selected for scrutiny and statutory notice was issued - Assessing Officer made certain queries, which were replied by assessee and after inquiry, being satisfied in respect to queries replied by assessee, Assessing Officer accepted declared income and passed assessment order - Commissioner, however, issued a notice under section 263 on ground that Assessing Officer had not made inquiry on certain aspects and accepted version of assessee without making any inquiry or verification, which was substantially prejudicial to revenue - Accordingly, he partly set aside assessment - Tribunal held that once inquiry was made, a mere non-discussion or non-mention thereof in assessment order could not lead to assumption that Assessing Officer did not apply his mind or that he had not made inquiry on subject and this would not justify interferenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being heard in respect of those errors which Commissioner proposes to revise - Held, yes - Whether to accord such an opportunity after setting aside assessment order would meet mandate of section 263 - Held, no - Whether where notice issued by Commissioner before commencing proceedings under section 263 referred to four issues and final order passed referred to nine issues, revisional proceedings were vitiated as a result of breach of principles of natural justice - Held, yes" [emphasis supplied] d. Hon'ble Mumbai Bench of ITAT in the case of Anil Shah - [2007] 162 Taxman 39 - order pronounced on 21.01.2006 - HEAD NOTE - "Section 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2000-01 - Whether if all relevant details have been filed by assessee and Assessing Officer allows assessee's claim, decision of Assessing Officer cannot be held to be erroneous simply because in his order he does not make any elaborate discussion in that regard - Held, yes" [emphasis supplied] 5. Ld. CIT(Exemption) has invoked the provisions of section 263 mainly for the reason that accumulation u/s 11(2) was not allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) to make further enquiry before passing the final order. This power of further enquiry is to enable to reach a conclusion that the order of the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Ld. CIT(Exemption) ought to have made the necessary enquiry. He has failed to do so. Instead he has directed the Ld. AO to reframe the assessment order denovo and to verify the method of accounting actually followed on year to year basis. Reliance is placed on the decision of Raghav Chandra ITA No. 425/Ind/2014 (Indore Trib) dated 04.08.2015 Considering the above facts and circumstances of the case, submissions made, documents on record and judicial precedents, appeal of the assessee be allowed and the order passed u/s 263 be quashed." 3. Ld. CIT(DR) opposed these submissions and has taken us through the various provisions of law. Ld. CIT(DR) submitted that the A.O. failed to take note of the provisions in vogue. He has drawn our attention to the provisions of section 11(2)&(3) of the Act to buttress his arguments. 4. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, (d) is credited or paid 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 subclause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid." 5. Ld. CIT invoked the provisions on the basis as set out in the show cause notice, which is as under: 6. During the course of hearing, Ld. Counsel for the assessee submitted that show cause notice was is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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