The Willingdon Charitable Trust, CHENNAI V. DIT, CHENNAI

ITA 1044/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90356 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ I R S
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Revision of order; Charitable institution; Principle of natural justice
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1044/MDS/2014 ( / ASSESSMENT YEAR : 2009-2010) M/S. THE WILLINGDON CHARITABLE TRUST, NO.603, 6 TH FLOOR, RANI SEETHAI HALL, CHENNAI 600 006. [PAN: AAATT 0683N] ( %& /APPELLANT) VS THE DIRECTOR OF INCOME TAX EXEMPTIONS, CHENNAI ( !'%& /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI. N. RENGARAJ, IRS, CIT. /DATE OF HEARING : 16.04.2015 ! /DATE OF PRONOUNCEMENT : 15.05.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHENNAI U/ S.263 OF THE INCOME TAX ACT, VIDE ORDER DATED 31.03.2014. I.T.A.NO.1044/MDS/2014 :- 2 -: 2. THE GROUND IN THIS APPEAL WITH REGARD TO ASSUMPTIO N OF JURISDICTION OF COMMISSIONER OF INCOME TAX AND THEREAFTER, OBSERVIN G THAT THERE IS FAILURE ON THE PART OF THE ASSESSING OFFICER TO APPLY THE CORRECT PROVISIONS OF LAW TO THE FACTS OF THE ASSES SEE CASE, AND HENCE PASSED THE ASSESSMENT FOR THE YEAR 2009-2010 BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND DIREC T THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AFTER KEEPING IN V IEW THE LAW RELATING TO CHARITY IN PROVISOS TO SECTION 2(15) OF THE INCO ME TAX ACT WITH EFFECT FROM 01.4.2009 AND ISSUE OF APPLICATION OF A CCUMULATED INCOME OF ASSESSMENT YEAR 2004-05 WITHIN THE STIPULATED PE RIOD UPTO 31.03.2008. 3. THE LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFIC ER HAD COMPLETED ASSESSMENT BY TAKING A CONSISTENT VIEW THAT THE ASSESSEE WAS A CHARITABLE TRUST AND INCOME FROM KALYANAMANDAPAMS, AUDITORIUMS, WORKING WOMEN HOSTEL AND HOSTEL FOR GI RLS IS NOT LIABLE FOR TAX. 4. THE LD. COUNSEL SUBMITTED THAT THE ACTIVITIES AR E CARRIED ON BY THE ASSESSEE WHICH IS INSTRUMENTAL TO THE OBJECT OF THE ASSESSEE . ACCORDING TO LD. COUNSEL THE ASSESSING OFFICER HAD GONE INTO THE DETAILS I.T.A.NO.1044/MDS/2014 :- 3 -: OF THE ACTIVITIES OF THE TRUST AND TAKEN THE CONSCI OUS DECISION THAT INCOME OF THE ASSESSEE FROM KALYANAMANDAPAMS, AUDIT ORIUMS, WORKING WOMEN HOSTEL AND HOSTEL FOR GIRLS ARE NOT L IABLE FOR TAXATION. HE SUBMITTED THAT THE DECISION TAKEN BY THE ASSESS ING OFFICER IS IN CONFORMITY WITH THE EARLIER ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE AND JUDGMENT OF HONBLE HIGH COURT IN ASSESSEES OW N CASE IN DIT(E) VS. WILLINGTON CHARITABLE TRUST 330 ITR 24, WHEREIN IT WAS OBSERVED THAT SEC 11(4A) OF THE ACT DOES NOT EXCLUDE SEC 11( 4). THE EXEMPTION U/S.11(4A) WOULD BE AVAILABLE ONLY WHEN THE BUSINES S WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST. THE REFORE, THE MATTER IS TO BE REMITTED TO THE ASSESSING OFFICER TO DECIDE A S TO WHETHER THE SAID BUSINESS INCOME IS USED FOR THE OBJECT, IN ACC ORDANCE WITH LAW. 5. HE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS A DOPTED ONE COURSE OF POSSIBLE VIEW UNDER LAW WHEN TWO VIEWS AR E POSSIBLE. THE LD. COUNSEL SUBMITTED THAT THE COMMISSIONER OF INCO ME TAX IS NOT RIGHT WHEN HE HELD THAT THE ASSESSMENT ORDER IS BOT H ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE RELI ED ON THE VARIOUS JUDGMENTS FOR THIS PROPOSITION ESPECIALLY IN CIT VS. MAX INDIA LTD (243 ITR 83) (SC). HE SUBMITTED THAT MERELY BECAUSE THE ASSESSEE EARNED PROFITS, IT WOULD NOT BE DECIDING FACTOR TO CONCLUDE THAT ASSESSEE ENGAGED IN TRADE, COMMERCE OR BUSINESS. A CCORDING TO HIM, I.T.A.NO.1044/MDS/2014 :- 4 -: BEFORE DENYING THE EXEMPTION U/S.11, IT HAS TO BE ASCERTAINED WHETHER THE ASSESSEE HAS BEEN APPLYING ITS PROFITS ONLY AND EXCLUSIVELY TO THE OBJECT OF THE ASSESSEE AND IT IS ESTABLISHE D FOR THIS PURPOSE. HE RELIED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF M/S. QUEENS EDUCATIONAL SOCIETY VS. CIT IN CIVIL APPEAL NO.5167/2008 DATED 16 TH MARCH, 2015 . FURTHER, HE SUBMITTED THAT ACTIVITIES CARRIED ON BY THE ASSESSEE DID NOT FALL WITHIN THE AMBIT OF TR ADE, COMMERCE, BUSINESS OR FALL WITHIN AMBIT ANY ACTIVITIES OR REN DERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. FURTHER, HE RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION VS. DIRECTOR GENERAL OF INCO ME TAX (EXEMPTIONS) & OTHERS IN W.P.(C) 1872/2013 DATED 22.01.2015 FOR THIS PURPOSE. 6. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRES ENTATIVE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX. 7. WE HAVE HEARD BOTH THE PARTIES AND PURSUED THE MATERIAL ON RECORD. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US AND ALSO GON E THROUGH ALL THE JUDGMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP THE LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF INVOKIN G THE PROVISIONS OF I.T.A.NO.1044/MDS/2014 :- 5 -: SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHE ME OF THE IT ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ER RONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFUL LY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INT EREST OF THE REVENUE. AS HELD IN THE CASE OF MALABAR INDUSTRIES CO. LTD., VS. CIT (243 ITR 83) (SC), THE COMMISSIONER CAN EXERCISE REVISION JURISDICTIO NAL U/S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFF ICER SOUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE WORD ERRONEOUS HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLA CKS LAW DICTIONARY (SEVENTH EDITION) THUS; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW. THE WORD ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TR UE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LEXICON REPRINT 2002, THE WORD ERROR HAS BEEN DEF INED TO MEAN- ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE TRUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTERS OF JUD GEMENT ERROR IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCEEDING TO JUDGEMENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CAL LED A NULLITYIE (TERMS DELAY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INA DVERTENCE S.99 CPC AND S.215 CR.PC. I.T.A.NO.1044/MDS/2014 :- 6 -: ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPEC T THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 8. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCO PE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS : AN ERROR IS ANY DEVIATION FROM THE STANDARD OR CO URSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INT ENTIONAL. A MISTAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSI ON OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE, A MISTAKE IS FROM INSUFFI CIENT OR FALSE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IGNORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR M AY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIE D, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRICTLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION, THE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SCIENCE TO M ATTERS OF SENSATION, WHETHER THERE IS NO CORRESPONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACC OUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMAR KABLE OTHERWISE FOR ACCURATE INFORMATION AND RIGHT DECISI ON. IT IS EXCEPTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVED. 9. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN WHETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VIEW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERRONEOUS AND FALL IN TH E AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA, BASED ON AN INCORREC T ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON-APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATION OF MIND OR BAS ED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AN D THEREBY CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. I.T.A.NO.1044/MDS/2014 :- 7 -: 10. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE T HE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABL E ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANTED. THE COMMISS IONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONE OUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSIN G OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE CL AIM MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLI KE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICE R UNDER THE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJUDICATOR B UT ALSO OF AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN, WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUI RY. HE MUST DISCHARGE BOTH THE ROLES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIR E AND ALSO DECIDE THE MATTER JUDICIOUSLY ON THE BASIS OF MATERIALS CO LLECTED BY HIM AS ALSO THOSE PRODUCED BY THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT I.T.A.NO.1044/MDS/2014 :- 8 -: DESERVES TO BE NOTED THAT THE PRESENT ASSESSMENT WA S MADE U/S. 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE A SSESSING OFFICER WAS STATUTORILY REQUIRED TO MAKE THE ASSESSMENT UND ER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER A S CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BULK OF THE RETU RNS FILED BY THE ASSESSEES ACROSS THE COUNTRY IS ACCEPTED BY THE DEP ARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTINY. ONLY A FEW CAS ES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER IS THEREFORE, R EQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSE SSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOULD BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF THAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, H E HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THA T NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMA TE TAX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS O N HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCE S OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING I.T.A.NO.1044/MDS/2014 :- 9 -: OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NO T BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHER E THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHIN G WRONG WITH HIS ORDER IF ALL THE FACTS STATED OR CLAIM MADE THE REIN ARE ASSUMED TO BE CORRECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY WHEN IT CONTAINS S OME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHA T THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH ARE CALLED FOR IN TH E CIRCUMSTANCES OF THE CASE. IN TAKING THE AFORESAID VIEW, WE ARE SUPP ORTED BY THE DECISIONS OF THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. CIT (67 ITR 84) (SC), SMT. TARA DEVI AGGARWAL V. CI T ITR 323) (SC), AND MALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC) . 11. IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'BLE COU RT HAS HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL THE ORDERS PAS SED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR I.T.A.NO.1044/MDS/2014 :- 10 -: WITHOUT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARINESS IN DECISION-MAKING WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PREJUDIC E TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATURE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HA VE SUCH PREJUDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS A ND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSE D TO THE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER S ECTION 263. ARBITRARINESS IN DECISION-MAKING CAUSING PREJU DICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND A ND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO COUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFIC ER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PRO TECT THE INTEREST OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIR LY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS C AN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE A SSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE INSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE M AKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. H E IS THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATOR HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIRES INTO A SUBSTANTIAL M ATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON T HE RELEVANT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASO NS THEREFOR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1 990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'BLE SUPREM E COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICI AL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHOR ITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDE RATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRA TIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXC LUDES CHANCES OR ARBITRARINESS AND ENSURES A DEGREE OF FA IRNESS IN THE PROCESS OF DECISION-MAKING. THE SAID PURPOSE WO ULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE I.T.A.NO.1044/MDS/2014 :- 11 -: DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HO WEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOU LD BE AS ELABORATE AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULA R FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE RE ASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTRO VERSY. THE NEED FOR RECORDING OF REASONS IS GREATER IN A C ASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. TH E APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SU CH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELL ATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAI NED IN THE ORDER UNDER CHALLENGE. 12. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPRE ME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785 . IT IS SETTLED LAW THAT WHILE MAKING ASSESSMENT ON ASSE SSEE, THE ITO ACTS IN A QUASI-JUDICIAL CAPACITY. AN ASSESSMENT ORDER I S AMENABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER ON A SUBST ANTIAL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINTS TO THE SAME DIRECTION. THEY HAVE HELD THAT ORDERS, WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE, MUST BE REGARDED AS ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF THE REVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBITRARY MANNER, AS HAS BEEN DON E IN THE CASE BEFORE US, THE ADMINISTRATION OF REVENUE IS BOUND T O SUFFER. IF WITHOUT DISCUSSING THE NATURE OF THE TRANSACTION AND MATERI ALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDITION TO THE INCOME OF THE I.T.A.NO.1044/MDS/2014 :- 12 -: ASSESSEE, THE SAME WOULD HAVE BEEN CONSIDERED ERRON EOUS BY ANY APPELLATE AUTHORITY AS BEING VIOLATIVE OF THE PRINC IPLES OF NATURAL JUSTICE WHICH REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD NOT BE TAKEN WHEN AN ORDER IS AGAINST THE INTERESTS OF THE REVENUE. AS A MATTER OF FACT SUCH ORDERS ARE PREJUDICIAL TO THE I NTERESTS OF BOTH THE PARTIES, BECAUSE EVEN THE ASSESSEE IS DEPRIVED OF T HE BENEFIT OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CASE. 13. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAI D THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN T HE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON INCORREC T ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW . IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. I.T.A.NO.1044/MDS/2014 :- 13 -: 14. WE SHALL NOW TURN TO THE FACTS OF THE CASE TO SEE W HETHER THE CASE BEFORE US IS COVERED BY THE AFORESAID PRINCIPL ES. A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SH OW THAT APPLICATION OF MIND ON HIS PART ON THE ISSUE OF TRE ATING THE INCOME OF ASSESSEE FROM AUDITORIUMS AND HOSTEL. THE EVIDENCE AVAILABLE ON RECORD IS ENOUGH TO HOLD THAT THE RETURN OF THE ASS ESSEE WITH REFERENCE TO THIS INCOME WAS OBJECTIVELY EXAMINED OR CONSIDER ED BY THE ASSESSING OFFICER. IT IS BECAUSE OF SUCH CONSIDERAT ION OF THE ISSUES ON THE PART OF THE ASSESSING OFFICER THAT THE RETURN F ILED BY THE ASSESSEE NOT AUTOMATICALLY ACCEPTED. THE ASSESSMENT ORDER PL ACED BEFORE US WAS PASSED AFTER EXAMINATION OR ENQUIRY OR VERIFICA TION OR OBJECTIVE CONSIDERATION OF THE CLAIM MADE BY THE ASSESSEE. HO WEVER, THE ASSESSING OFFICER HAS OMITTED TO EXAMINE THE ISSUE S RELATING TO ACCUMULATION OF INCOME. HIS ORDER IS A COMPLETELY N ON-SPEAKING ORDER ON THIS ISSUE. IN OUR VIEW, IT WAS A FIT CASE FOR T HE LEARNED COMMISSIONER TO EXERCISE HIS REVISIONAL JURISDICTIO N UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CANCELLING THE ASSESS MENT ORDER AND DIRECTING THE ASSESSING OFFICER TO PASS A FRESH ORD ER CONSIDERING THIS ISSUES RAISED BY THE CIT. IN OUR VIEW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 263 OF THE IT ACT WITH REFERENCE TO THIS ISSUE. I.T.A.NO.1044/MDS/2014 :- 14 -: 15. IT WAS HOWEVER CONTENDED BY THE LEARNED COUNSEL THAT THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCE PTING THE RETURN OF THE ASSESSEE WITH REFERENCE TO THE ISSUE RAISED BY THE CIT AND HENCE, THE COMMISSIONER WAS NOT JUSTIFIED IN ASSUMING THE REVISIONAL JURISDICTION UNDER SECTION 263. WE HAVE GIVEN OUR T HOUGHTFUL CONSIDERATION TO THE AFORESAID SUBMISSIONS. AS ALRE ADY STATED EARLIER, AN ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BEEN MADE ON THE FACTS OF THE CASE, WERE NOT MADE A ND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE F ACTS STATED OR THE CLAIMS MADE IN THE RETURN ARE ASSUMED TO BE CORRECT . THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAK E THE NECESSARY INQUIRIES OR TO EXAMINE THE CLAIM MADE BY THE ASSES SEE IN ACCORDANCE WITH LAW, WHICH RENDERS THE RESULTANT ORDER ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. NOTHING MORE IS REQ UIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOULD NOT KNOW AS T O WHAT WOULD HAVE HAPPENED IF THE ASSESSING OFFICER HAD MADE THE REQU ISITE INQUIRIES OR EXAMINED THE CLAIM OF THE ASSESSEE IN ACCORDANCE WI TH LAW. HE COULD HAVE ACCEPTED THE ASSESSEE'S CLAIM. EQUALLY, HE COU LD HAVE ALSO REJECTED THE ASSESSEE'S CLAIM DEPENDING UPON THE RE SULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESSEE. THUS , THE FORMATION OF ANY VIEW BY THE ASSESSING OFFICER WOULD NECESSARILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND CONSCIOUS, AND NOT PASSI VE, EXAMINATION INTO I.T.A.NO.1044/MDS/2014 :- 15 -: THE CLAIM OF THE ASSESSEE. IF THE ASSESSING OFFICER PASSES AN ORDER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORDER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJ ECTIVE CONSIDERATION OF THE RELEVANT MATERIALS. IT IS THER EFORE, THE MERE FAILURE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES OR NOT EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE W ITH LAW THAT PER SE RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. NOTHING ELSE IS REQUIRED TO BE ESTABLI SHED IN SUCH A CASE TO SHOW THAT THE ORDER SOUGHT TO BE REVISED IS ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 16. FURTHER IN THE PRESENT CASE, THE ASSESSMENT O RDER 29.12.2011, THE ASSESSING OFFICER CONSIDERED THE INCOME OF AUDI TORIUMS AS BUSINESS INCOME AND BROUGHT THE SAME INTO TAXATION. THE COMMISSIONER OF INCOME TAX WHILE PROCEEDING U/S.263 OF THE ACT VIDE ORDER DATED 31.03.2014 OBSERVED THAT THERE WAS AN A MENDMENT TO SECTION 2(15) OF THE ACT WITH EFFECT FROM 01.04.200 9. THE ASSESSEE IS ENGAGED IN COMMERCIAL ACTIVITIES IN RUNNING KALYANA MANDAPAMS, AUDITORIUMS, WORKING WOMEN HOSTEL AND HOSTEL FOR GI RLS WHICH HAVE AIMED AT ADVANCING OTHER OBJECTS OF GENERAL PUBLI C UTILITY. IN OUR OPINION, THIS FINDING OF THE COMMISSIONER OF INCOME TAX IS I.T.A.NO.1044/MDS/2014 :- 16 -: UNWARRANTED AND THE ASSESSING OFFICER ALREADY BROUG HT THE ENTIRE INCOME FROM KALYANA MANDAPAM FOR TAXATION IN HIS AS SESSMENT ORDER. THERE IS NO PREJUDICIAL TO THE INTEREST OF REVENUE THOUGH HE HAS NOT PROPERLY APPLIED PROVISO OF SECTION 2(15) OF THE AC T. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AGAINST OF WRONG ASS UMPTION OF FACTS. HOWEVER, IT IS NOT PREJUDICE TO THE INTEREST OF REV ENUE AS THERE IS NO REVENUE LOSS TO THE DEPARTMENT. MORE SO, THE COMMI SSIONER OF INCOME TAX IN HIS ORDER COMMENTING ON THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR THE SAME ASSESSMENT YEAR STATING THE COMMISSIONER OF INCOME TAX (A) IS NOT JUSTIFIED IN GRANTING EXEMPTION U/S.11 OF THE ACT. IN OUR OPINION, THE COMMISSIONER OF INCOME TAX (ADMN) CANNOT SIT ON THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) TO DECIDE THE SAME ISSUE DIFFERENTLY. IF THE DEPARTMENT IS HAVING ANY GRIEVANCE IT WOULD HAVE FILED AN APPE AL BEFORE THE HIGHER FORUM. IT IS NOT APPROPRIATE TO COMMISSIONER OF IN COME TAX (ADMN) TO COMMENT ON THE ORDER OF THE COMMISSIONER OF INCO ME TAX(APPEALS). IN OUR OPINION, THE ISSUE RELATING T O TREATING THE INCOME FROM KALYANAMANDAPAMS, AUDITORIUMS, WORKING HOSTEL IS SUBJECT MATTER OF APPEAL BY ASSESSEE BEFORE THE COMMISSIONE R OF INCOME TAX (APPEALS). THE SAID ISSUE IN ASSESSMENT ORDER MERG ED WITH THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AS A WHOLE HENCE THERE WAS NO MORE AMENABLE TO REVISIONAL JURISDICTION OF COMM ISSIONER OF INCOME I.T.A.NO.1044/MDS/2014 :- 17 -: TAX IN VIEW OF EXPLANATION (C) OF SEC 263 OF THE A CT AND TO THAT EXTENT WE ARE NOT AGREEING WITH THE ORDER OF COMMISSIONER OF INCOME TAX PASSED U/S.263 OF THE ACT. 17. COMING TO THE OTHER POINT, THE ISSUE RAISED BY COMMISSIONER OF INCOME TAX IS THAT THE ASSESSEE HAD ACCUMULATED A S UM OF M1,23,41,310/- BY FILING FORM NO.10 FOR ASSESSMENT YEAR 2004-05 IS AS UNDER:- TO PURCHASE LAND AND PUT THE BUILDING TO ESTABLIS H RUN OR MAINTAIN EDUCATIONAL, TECHNICAL OR TECHNOLOGICAL INSTITUTIONS OF ALL KINDS IN INDIA FOR THE BENEFIT OF THE PUBLIC. IT IS MENTIONED IN THE FORM NO.10 THAT AMOUNT WOULD BE ACCUMULATED TILL THE PREVIOUS YEAR ENDING 31.03.2008. THE ASSE SSEE WAS REQUIRED TO UTILIZE THE ACCUMULATED AMOUNT DURING SUCH PERI OD. IN CASE OF NON APPLICATION OF THE SAID ACCUMULATED SUM FOR THE PUR POSE SPECIFIED IN FORM NO.10, SECTION 11(3) GETS TRIGGERED AND IT WOU LD BE TAXED IN THE NEXT YEAR IN WHICH SUCH PERIOD EXPIRED. BUT IN THIS CASE, THE ASSESSING OFFICER HAS FAILED TO EXAMINE THIS ASPECT. THERE WA S NO ENQUIRY WITH REGARD TO THIS ISSUE. THE ORDER OF THE ASSESSING O FFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON T HE REASON THAT THERE IS WRONG ASSUMPTION OF FACTS. WE ARE INCLINED TO AGRE E WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX THAT ASSESSING OF FICER IS REQUIRED TO EXAMINE THIS ISSUE AFRESH AND GAVE A FINDING ON THIS. ACCORDINGLY, I.T.A.NO.1044/MDS/2014 :- 18 -: TO THIS EXTENT, WE CONFIRM THE ORDER OF THE COMMIS SIONER OF INCOME TAX. THE ISSUE OF APPLICATION OF ACCUMULATED INC OME OF ASSESSMENT YEAR 2004-05 WITHIN STIPULATED PERIOD I.E. UPTO 31 .03.2008 IS TO BE EXAMINED WHILE FRAMING THE FRESH ASSESSMENT AND DEC IDE FRESH AS DIRECTED BY COMMISSIONER OF INCOME TAX IN HIS ORDER . 18. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 15TH DAY OF MAY, 2015, AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER '# /CHENNAI. $% /DATED:15.05.2015. KV %& '( )( /COPY TO: 1. /APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. (+, - /DR 6. ,. / /GF.