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TMI Blog2024 (12) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... anted registration u/s. 12A of the Act w.e.f. 01.04.2002 and the income was duly applied for the designated purposes as per law, thus, it does not satisfied the twin conditions as provided u/s. 263 of the Act to invoke this section. Therefore, the action of the ld. Pr.CIT in directing the Assessing Officer to decide the matter afresh, has no legs to stand. Thus, the order passed by the ld.Pr.CIT u/s. 263 of the Act is hereby quashed. Assessee appeal allowed. - Shri George Mathan, Judicial Member And Shri Manish Agarwal, Accountant Member For the Assessee : Shri S.K. Tulsiyan, Advocate For the Revenue : Shri Saroj Kumar Dubey, CIT-DR ORDER PER BENCH : These three appeals are filed by the assessee against the separate orders of the ld. PCIT, Bhubaneswar-1, all dated 30.03.2024, for the assessment years 2003-2004, 2004-2005 2005-2006, respectively. 2. Similar and identical grounds have been raised by the assessee in all the appeals. Therefore, for the sake of convenience, we shall first take up the appeal for the assessee for A.Y.2003-2004 in ITA No.208/CTK/2024, wherein the assessee has raised the following grounds :- 1. That on the facts and in the circumstances of the case and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue was decided by the Hon ble High Court of Orissa vide its order dated 12.07.2022, wherein the Hon ble High Court has held that the revised return should be admitted as the period of delay is beyond the control of the assessee and should be ignored. Consequent upon the order of the Hon ble High Court of Orissa, the AO passed the order u/s. 260 of the Act, dated 10.10.2022 and assessed the income of the assessee for the three years at Nil after allowing the exemption u/s. 11 of the Act. Against this order of the AO passed u/s. 260 of the Act, ld. Pr.CIT, Bhubaneswar-1 has initiated proceedings u/s. 263 of the Act by issue of notice dated 12.07.2023 by observing that the said order is erroneous as well as prejudicial to the interest of revenue as the AO has not examined the application of funds as claimed by the assessee while allowing the exemption u/s. 11 of the Act for all the years. He, accordingly passed the orders u/s. 263 dated 30.03.2024 in all the three years. Against this order, the assessee is in appeal before us. 4. During the course of hearing, ld. AR filed his written submissions which read as under :- Please refer to the facts and submissions of the case below: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible to claim the exemption u/s 11(1)(a) of the Act. However, inadvertently, the assessee computed the statutory exemption of 15% u/s 11(1)(a) on net surplus instead of gross receipts during the year. The same is evident from the revised return of income filed by the assessee before the learned AO, relevant extract also reproduced in the notice issued u/s 263 of the Act for all the years wherein exemption u/s 11(1)(a) of the Act was computed on net surplus as per Income and Expenditure A/c and not on gross receipts. 8 Therefore, the assessee submitted revised computations for all the years before the learned PCTT taking statutory exemption of 15% on the gross receipts u/s 11(1)(a) of the Act. In doing so, reliance was placed on the judgments of the Hon'ble Apex court in the case of Addl. CIT Vs. A.L.N. Rao Charitable Trust (1995) 129 CTR 205 and CIT vs. Programume for Community Organisation [2001] 116 Taxman 608 (SC). The original computation as per the revised return and revised computation filed before the learned PCIT is enclosed with the submissions. It was requested before the learned PCIT to consider the revised computation of income filed with the submissions. 8.1 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in this regard was placed on the following judicial precedents. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. Commissioner of Income-tax (243 ITR 83) Hon'ble Supreme Court in the case of CIT v. Max India Ltd [2007] 295 ITR 0282-SC Calcutta High Court in Dawjee Dadabhoy and Co. v. S. P. Jain [1957] 31 ITR 872 (Cal), PCIT vs Subhash Kabini Power Corporation Ltd [2016] 69 taxmann.com 394 (Karnataka HC) Hon'ble Bombay High Court in the case of Commissioner of Income-tax v. Gabriel India Ltd. 203 ITR 108 (Bom) The learned PCIT perused the submissions of the assessee and remitted the case back to the file of the AO holding that, 4 It is judicially held that where an Axsexsing Officer, who is supposed to protect the interest of reverse as a tax collector and does not perform his job in the right spirit and has passed the assessment order perfunctorily which shows lack of application of mind, failure to conduct enquiry with due diligence before passing the order would make the order erroneous Reference in this conted to brevited to the decision of Delhi High Court in the case of Duggal Co v. CIT (1996) 226 ITR456(Del), wherein it has been held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) which is law of the land as per Article 141 of the Constitution, the revised computation filed by the assessee taking into consideration statutory exemption of 15% of the gross receipts is as per law and thus the order passed by the learned AO dated 10-10-2022 is not prejudicial to the interest of the revenue to invoke the rigors of section 263 of the Act. This mistake was apparent from records and the same should have been rectified u/s 154 of the Act. 12. The assessee has duly substantiated that the order passed by the learned AO dated 10-10- 2022 for the subject assessment years are not prejudicial to the interest of the revenue and hence assumption of jurisdiction u/s 263 of the Act is not sustainable. 13. Hence, in the backdrop of the above facts, since the order passed u/s 263 of the Act is not prejudicial to the interest of revenue, the mandatory twin conditions mentioned in section 263 of the Act are not met, the order passed by the learned PCIT dated 30-03-2024 u/s 263 of the Act remitting the case back to the file of the learned AO is not sustainable in law and is liable to be quashed in limine. Hope the above submission is in order and to your satisfaction. 5. Besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o applied during the previous year is concerned, it least 25 per cent of such income or Rs 10,000, whichever is higher, will be permitted to be accumulated for charitable or religious purpose and it will also get exempted from the tax net. (Emphasis supplied) Again, the Hon'ble Supreme Court in the case of CIT vs. Programme for Community Organization (2001) 116 Taxman 608 (SC) has held that 3. The question that really requires consideration is whether, for the purposes of section 11(1)(a) of the income-tax Act, 1961 ('the Act'), the amount for the grant of exemption of twenty-five per cent should be the income of the trust or it should be its total income determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts, the assessee-trust received donations in the aggregate sum of Rs. 2.57.376. It applied there out for its charitable purposes the aggregate sum of Rs. 1.70.369 leaving a balance of Rs. 87.010. The question is whether the assessee is entitled in accumulate twenty-five per cent of Rs. 2,57,376, as it contends, or twenty-five per cent of Re 87,010, as the revenue appeared to contend. Section 11(1)(a) reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the total income to the extent to which it is applied for such purposes in India and where it is accumulated for such application to the extent whichever is higher. The exemption of accumulated income to the extent of 25% or Rx.10,000/-, whoever is higher, is unqualified and unconditional. Further to that, I also place reliance to the judgment of Hon'ble Supreme court in the case of Addl. CIT VS. A.IN. Rao Charitable Trust (1995) 129 CTR 205, wherein it is held that exemption available u/s 11(1)(a) i.e 15% of income is unfettered and not subject to any conditions. 6.4. Considering all the above factual position as well as the case laws referred as above. I consider a proper and appropriate to hold that the A.O. was not justified in denying the claim of the appellant for ITA No. 4852/M/2016 . .2010-11 accumulation of income. Accordingly this ground of appeal is allowed 8. We observe that Id CIT(A) has relied on the decision of Hon'ble Supreme Court in the case of A.I.N. Rao Charitable Trust(supra), wherein, it is held that exemption available u/s. 11(1)(a) i.c. 15% of income is unfettered and not subject to any conditions. In the case before us, assessee has claimed 15% ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers should (e) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other, (b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. Placing reliance on this Circular, the Hon'ble ITAT, Kolkata in the case of Madhavi Nag vs ACIT (ITA No.512/Kol/2015) has held that the appellate authorities under the Act have the power to consider the claim of the assessee even if the same is not reported in the return of income filed for the year. In this case, the CIT(A) was of the view that the assessee offered to tax the long term capital gain in the return of income filed by him. The assessee had not filed the revised return of income claiming exemption of long term capital gain u/s 10(38) of the Act. The CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd Vs CIT 284 ITR 323 (SC) and was of the view that the assessee cannot make a claim which is not supported by a revised return of income. He therefore held that the AO rightly dismissed the application of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question has to be answered in the light of these facts the assessee that received donations in the aggregate sum of Rs. 2,57,376/- It applied thereof for its charitable purpose the aggregate sum of Rs. 1.70.369. Leaving a balance of Rs. 87,910. The question is whether the assessee is entitled to accumulate twenty five percent of Rs. 2.57,376 contends, or twenty five percent of Rs. 87,010 as the revenue appeared to contend. 2. Considering the facts of the case and ratio laid down by the Hon'ble Apex Court we are inclined to direct the AO to allow the accumulation u/s 11(1)(a) of the Act on the gross receipt of the assessee and not on the net receipt. Accordingly ground raised by the assessee is allowed. The Hon'ble ITAT, Kolkata in the case of DCIT vs M/s TRFI Investment Pvt. Ltd (LT.A No. 1331/Kol/2014) relying on the Circular issued by the Central Board of Direct Taxes Circular No: 14 (XL-35) dated April 11, 1955 held that, 7. We have heard the rival submissions. The Id DR vehemently relied on the order of the ld AO. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is not in dispute that the assessee had sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs. (3) Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run. Benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should----- 6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement for fling any revised return. The judgment relied upon was not applicable. 6. Accordingly, we are unable to hold that any substantial question of law arises. 7. The appeal is dismissed In the present case, undoubtedly the assessee is a trust registered u/s 12A of the Act and thus is eligible to claim the exemption u/s 11(1)(a) of the Act. However, inadvertently, the assessee computed the statutory exemption of 15% u/s 11(1)(a) on net surplus instead of gross receipts during the year. The same is evident from the revised return of income filed by the assessee before the learned AO, relevant extract also reproduced in the present notice issued u/s 263 of the Act wherein exemption u/s 11(1)(a) of the Act was computed on net surplus as per Income and Expenditure A/c and not on gross receipts. The revised computation of these three assessment years is as follows: Sl. No. AY 2003-04 2004-05 2005-06 Income 1. Gross receipts as per income and expenditure account Income from operation (a) 3,81,22,44,658 4,12,72,82,943 4,71,38,34,002 Finance and miscellaneous income (b) 25,33,04,319 18,79,37,391 24,26,05,504 Total (a+b) 4,06,55,48,977 4,31,52,20,334 4,95,64,39,506 2. Less : 15% of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e institution in earlier assessment year could be allowed to be set-off against income of subsequent years by invoking section 11: Review petition dismissed. Further, w.rt your allegation that in Form 1018 the assessee has mentioned that the purpose for which the amounts have been accumulated or set apart is mentioned as Infrastructure Development, it is submitted that the assessee trust is itself an infrastructure Project for development and maintenance of Paradip Port, Orissa under the Ministry of Shipping, Government of India. The term Infrastructure Development is a wide term and the amounts set aside by the assessee under Port's Fund and Assistance for reconstruction and rehabilitation was nothing but part of infrastructure Development work of the Paradip Port only. The Port is now equipped with 17 (seventeen) berths, 3 (three) Single Point Moorings (SPM), (one) Ro-Ro Jetty, a well maintained Approach and Entrance Channel having 17.1 Mtrs minimum depth to handle a wide range of vessels up to maximum LOA of 300 Mtrs The funds of Rs. 16,29,46,025/- was utilised for pert infrastructure activities. Here, your kind attention is invited to the definition of infrastructure facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. A simple reading of the section 263 of the Act quoted above makes it clear that the power of suo moto revision can be exercised by the Commissioner only if, en examination of records of any proceedings under this Act, he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous and (ii) it is prejudicial to the interests of the Revenue. Your kind attention is brought to the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. Commissioner of Income-tax (243 ITR 83) wherein it was held by the that: A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the Prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an mean nothing else PCIT vs Subhash Kabini Power Corporation Ltd [2016] 69 taxmann.com 394 (Karnataka HC) It is settled legal position that one of the requirements for exercise of power under section 263 is that the order passed by the lower authority should not only be erroneous, but should also be prejudicial to the interest of the revenue, which is lacking in the instant case and rightly found so by the Tribunal. [Paru 13) Therefore, the order passed by the Tribunal deserved to be upheld [Para 14) The Hon'ble Bombay High Court in the case of Commissioner of Income-tax. Gabriel India Ltd. 203 ITR 108 (Bom) held that Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than what was just has been imposed From the above, thus, it is understood amply and the same, being a legal position well laid out by the Apex Court and followed by all other Courts and the revenue Department alike, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interests of the revenue, he may, 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, [including, (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.] Explanation 1. For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, 3. an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include 3. an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] conferred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation. In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 9. From the order of the ld. Pr.CIT, we find that in para 3.3 of the order ld. Pr.CIT himself has observed that the assessment order is not prejudicial to the interest of revenue. The relevant observations of the ld. Pr.CIT as contained in para 3.3 read as under :- 3.3 As per AR s submission, the assessee has established the application of fund in respective A.Ys. Though it was apparent from record that the order was erroneous, documents reveal that the assessee is not liable to tax because necessary application of fund has been made in accordance with the provisions of the I. T. Act. It is seen that only in A.Y. 2005-06, there is shortfall of Rs. 7.38 Crore in appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-- recourse cannot be had to Section 263(1) of the Act. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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