Shri Hari Ashram, Sokhada V. The CIT (Exemptions), Ahmedabad

ITA 84/AHD/2022

AI Insights

The case revolves around an appeal by Shri Hari Ashram against the order of the Commissioner of Income Tax (Exemption), Ahmedabad, which was based on a revision under section 263 of the Income Tax Act, 1961. The revision was concerning the assessment order under section 143(3) for the assessment year 2015-16, which the CIT deemed erroneous and prejudicial to the interest of revenue due to non-verification of corpus donations received. The assessee contested that the revision was initiated without proper application of mind by the CIT, as it was based on a proposal from the AO. The Tribunal examined various precedents and found that the initiation of proceedings under section 263 by the CIT based on the AO's proposal, without his own independent application of mind, was not in accordance with the law.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135995 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 05-04-2022
• Other Referred Cases: Ashokkumar Shivpuri v. CIT, Yes Bank Ltd. vs. ACIT, Rupayan Udyog vs. CIT, Shanti Exim Ltd vs CIT, Adishwar K. Jain vs CIT, Vinay Pratap Thacker vs CIT, Span Overseas Ltd vs CIT, Pune
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIRUDOLFDSOUZA
• Assessee Lawyers: SHRIUMEDSINGHBHATI

Judgement Text

आयकरअपीलीयअधिकरण,अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’C’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And Ms.MADHUMITAROY,JUDICIALMEMBER आयकरअपीलसं./ITANo.84/AHD/2022 धििाधरणवरध/ Asstt.Year:2015-2016 ShriHariAshram, 1,HaridhamSokhada, Sokhada. PAN:AAATS7057H Vs. TheCommissionerof IncomeTax(Exemption), Ahmedabad (Applicant)(Respondent) Assesseeby:ShriUmedsinghBhati,with ShriAbhimanyuSingh,A.Rs Revenueby:ShriRudolfD’Souza,CIT.D.R सुनवाईकीतारीख/DateofHearing:13/07/2023 घोषणाकीतारीख/DateofPronouncement:23/08/2023 आदेश/ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Exemption),Ahmedabad, (inshort“Ld.CIT(E)”)arisinginthematteroftherevisionalorderpassedunders. 263oftheIncomeTaxAct1961(here-in-afterreferredtoas"theAct")relevantto theAssessmentYear2015-16. ITAno.84/AHD/2022 Asstt.Year2015-16 2 2.TheonlyissueraisedbytheassesseeisthattheLd.CIT(Exemption)under section263oftheAct,erredinholdingtheassessmentframedu/s143(3)ofthe Act,aserroneousinsofarprejudicialtotheinterestofrevenue. 3.Theassesseeintheyearunderconsiderationhasshownthereceiptof corpusdonationof₹32,54,74,693.00includingtheforeigncorpusdonationof ₹10,22,01,696.00.AsperthelearnedCITundersection263oftheAct,the amountshownascorpusdonationshallnotformpartofthetotalincomeofthe assesseeifitwasreceivedwiththespecificdirection.However,theAOhasnot verifiedthecorpusdonationtoensurethecomplianceoftheprovisionsofsection 11(1)(d)oftheAct.Accordingly,thelearnedCITissuedashowcausenoticedated 9 th ofMarch2021proposingtheassessmentframedundersection143(3)ofthe Actaserroneousinsofarprejudicialtotheinterestofrevenue.Theassessee,in responsetosuchshowcausenoticesubmittedthatithasmaintainedallthe necessaryrecordsofthedonorsalongwiththename,address,PANandthe declarationwithrespecttothecorpusdonationreceivedbyit.Theassesseealso claimedtohavereceivedconfirmationfromtheallthedonors. 4.However,thelearnedCITdisagreedwiththecontentionoftheassessee andheldthattheassessmenthasbeenframedinaroutinemannerandwithout necessaryverification.Thus,theissuewithrespecttothecorpusdonation requiresin-depthenquiryandscrutinywhichhasnotbeendone.Finally,the learnedCITheldthattheorderframedundersection143(3)oftheActas erroneousinsofarprejudicialtotheinterestofrevenueonaccountofnon- verification.Accordingly,thelearnedCITdirectedtheAOtocarryoutthe necessaryverificationonrandombasissoastoverifytheveracityofcorpus donationreceivedbytheassesseeaftergivingthenecessaryopportunityofbeing heardtotheassessee.Assuch,itwasdirectedbythelearnedCITtotheAOto framedenovoassessmentafterconsideringtheclaimoftheassessee. ITAno.84/AHD/2022 Asstt.Year2015-16 3 4.1BeingaggrievedbytheorderofthelearnedCIT,theassesseeisinappeal beforeus. 5.ThelearnedARbeforeusfiledabriefnoterunningintovariouspages whichisavailableonrecord.Attheoutset,theLd.Counselfortheassessee beforeussubmittedthattheproceedingsinthecaseonhandu/s263oftheAct, havebeeninitiatedbasedontheproposalreceivedfromtheAO.Therefore,theLd. ARcontendedthattherewasnoapplicationofmindbytheLd.CIT(E)whichwas mandatoryforinvokingtheprovisionofsection263oftheAct.Accordingly,the assessmentorderhasbeenrevisedbytheLd.CIT(E),u/s263oftheAct,atthe behestoftheAOandwithouthisapplicationofmind.Thus,theorderpassedu/s 263oftheAct,isliabletobequashed. 6.Ontheotherhand,theLd.DRcontendedthatnoadverseinferencecanbe drawnagainsttheproceedingsinitiatedundersection263oftheActthatthere wasnoapplicationofmindoftheLd.CIT(E)merelyonreceiptoftheproposal fromtheAO. 7.AccordingtotheLd.DR,itisroutineforAssessingofficerstobringtothe noticeoftheLd.CITu/s263oftheAct,forthemistakeinvolvingtheinterestof therevenue.Thus,itwascontendedbytheLd.DRthattheorderpassedbythe Ld.CIT(E)u/s263oftheAct,isbadinlawandfacts. 8.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.TheLd.PCITinhisorderu/s263oftheAct,dated 24/03/2021hasrecordedasunder 2.TheproposalfromtheAssessingOfficeri.eDCIT(E),Circle-2,Ahmedabadwassubmitted totheCIT(Exemption),AhmedabadthroughtheAddl.CIT(E),Range-2,Ahmedabadwhoin turn,hasforwardedthesamevidehisofficeletterno.Addl. CIT(E)/Ahd/Proposal/263/SHA/2020dated12.05.2021 Note:thecorrectdateis09-03-2023asevidentfromthesubmissionfrom theassesseewhichwasnotdisputedbytheld.DR. ITAno.84/AHD/2022 Asstt.Year2015-16 4 8.1OnperusaloftheaboveobservationoftheLd.CITu/s263oftheAct,itis transpiredthattheproceedingswereinitiatedontheproposalreceivedfromthe AO.Thus,itisinferredthattherewasnoapplicationofmindoftheLd.PCITfor initiatingtheproceedingsu/s263oftheAct.Insimilarfactsandcircumstances, thevariousTribunalshavequashedtheproceedingsinitiatedundersection263of theAct.Someofthecasesarelistedbelow: (1)AshokkumarShivpuriv.CITdated07-11-2014,inITANo.631(M)of2014 Ithasbeenobservedbyusthattheassessmentwasframedsubjecttovaluationbythe DVO.This,byitselfisadeficiencyintheorderundersection143(3).Wefurtherfindthat theproposalwasreceivedbytheCITfromtheAO,whichclearlymeansthattherehas beennoindependentapplicationofmindbytheCIT,becausesection263(1)clearlysays, "TheCommissionermaycallforandexaminetherecordsofanyproceedingsunderthis Act,andifheconsiders...".whichmeansthatproposalforinitiationofrevisionproceedings mustbeinitiatedbytheCIT,because,itistheCITwhohastocallforandexaminethe records.ButintheinstantcasetheproposalcamefromtheAOandonreceiptofthe proposal,theCITinitiatedrevisionproceedings.Therefore,inouropinion,theproceeding getsflaggedatthethreshold.-We,therefore,holdthattheproceedingswerebadinlaw andthussubsequentproceedingsareannulled. (ii)YesBankLtd.Vs.ACITITANo.23/Mum/2012[05.12.2014] TheCITdidnotinitiatetheproceedingshimselfbutinitiatedtheproceedingsonthe proposalreceivedfromtheAO.Thisinouropinion,isagainstthelegislativespirit,because, theprovisioncontemplatesindependentapplicationofmindbytheCIT,becausethe sectionsays"Commissionermaycallforandexaminetherecordsofanyproceedings undertheActandifheconsiders...",whichmeansthattheproposalforinitiationof revisionproceedingsmustbeinitiatedbytheCIT,because,itistheCITwhohastocallfor examinetherecord",asheldbytheCoordinateBenchinthecaseofAshokKumarShivpuri inITAno.631/Mum/2014(whereoneofuswastheparty)... (iii)RupayanUdyogVs.CITITANo.1073/Kol/2012dated28.11.2013 ThepowervestedintheCITisthatofrevisionaljurisdictiontointerferewiththeorderof AO,ifitiserroneousinsofarasprejudicialtotherevenueandtherefore,thepowerto exercisetherevisionaljurisdictionisvestedonlywithPr.CIT/Commissionerifheconsiders theorderoftheAOtobeerroneousinsofarasprejudicialtotheinterestoftherevenue. ThepowercannotbeusurpedbytheAOtotriggertherevisionaljurisdictionvestedwith theCITaspertheschemeoftheActwhichgivesvariouspowerstovariousauthoritiesto exerciseandtheyhavetoexercisepowersintheirrespectivegivenspherewhichisclearly ear-markedandspelledoutbythestatute.Here,wenotethattheAOwhoisempowered bytheActtoassessasubjectwithinaprescribedtimeperiodhasfirstassessedthe assesseeandlaterafterpassingoftimehastakenupaproposalwiththeCITtoexercise hisrevisionaljurisdictioncannotbecountenancedforthesimplereasonthatwheninthe firstplacetheAOnoticingthathefailedtoproperlyenquirebeforeassessingtheassessee withinthetimelimitprescribedbythestatutecannotbeallowedtogetfreshinningsto reassessbecauseitwashisdutytoenquireproperlywithinthetimelimitprescribedbythe statute. ITAno.84/AHD/2022 Asstt.Year2015-16 5 (iv)ShantiEximLtdVsCIT(2017)88taxmann.com361(Ahd.Tribunal) TheCommissionersetasideassessmentorderinexerciseofhispowerundersection263 onthegroundthattheAssessingOfficerdidnotmakeanyindependentverificationto establishthegenuinenessofthepurchasetransactionoftheassessee-companywitheight parties. Heldthattheactionundersection263initiatedonthebasisofrecommendationbythe concernedAssessingOfficer/JointCommissioner.ThesaidAssessingOfficerhas categoricallyheldthattheorderofhispredecessoriserroneousandprejudicialtothe interestoftherevenue.ThereafterthecaserecordwascalledforbytheCommissioner.If therecommendationwouldnothavereceivedfromthesuccessortheAssessingOfficer, thentheCommissionerwouldevennothaveinitiatedtheproceedingsundersection263. Therefore,itcouldnotbetermedthattheCommissionerhimselfhascalledfortherecords. Inthiscase,therecordhasbeencalledforonlyaftertherecommendationreceivedfrom thesuccessorAssessingOfficer.Insimilarsituation,theITAT,Mumbai"A"Benchinthe caseofAshokkumarShivpuriv.CITdated07-11-2014,inITANo.631(M)of2014,held thattherevisionproceedingssimplyonthebasisofproposalfromtheAssessingOfficeris notvalid,becausesection263(1)saysthatproposalforinitiationofrevisionproceedings mustbeinitiatedbytheCommissioner.ItistheCommissionerwhohastocallforand examinetherecords;butintheinstantcasetheproposalcamefromtheAssessingOfficer andonreceiptoftheproposal,theCommissionerinitiatedrevisionproceedings,whichis notjustified. (v)AdishwarK.JainVs.CITITANo.3389/Mum/2014dated12.03.2018 Wemayrefertoapleaset-upbytheassesseebasedonthedecisionofourco-ordinate BenchinthecaseofAshokKumarShivpuri,ITANo.631/Mum/2014dated07.11.2014.In thiscase,theTribunalfoundthattheCommissionerinvokedSec.263oftheActbasedon aproposalreceivedfromtheAssessingOfficer.TheTribunalfounditinconsistentwiththe requirementofSec.263(1)oftheActandheldthattheinitiationofproceedingsu/s263of theActwasbad-in-law.Theaforesaidpropositionalsosupportstheinfirmityintheaction oftheCommissionerinasmuchaspara2oftheimpugnedorderbringsoutthatthe initiationofproceedingsu/s263(1)oftheActisbasedontheproposaloftheAssessing Officerdated03.01.2013. (vi)VinayPratapThackerITANo.2939/Mum/2011[27.02.2013] AsperSection263(1),theCITmusthimselfcometoaconclusion,afterapplyinghisown mind,because,thewordsusedinthesectionare".....andifheconsiders.....",here, applicationofhisownmindbecomesimportant.Itisimportanttoexaminethesimilarityof theexpressionusedundersection147(1)and263(1).Undersection147(1),the expressionusedis"hasreasontobelieve"andundersection263(1),theexpressionused is"ifheconsiders".Thoughtheexpressionsusedarenotverbatimparimateria,butthe meaningwhichistobedrawninboththeexpressionsareparimateria,i.e.,anindependent, unpollutedandun-adoptedapplicationofmindbytheofficer,invokingtheprovision. WehaveseenfromtheimpugnedorderoftheCIT,dated11.02.2011,theCITadmits,"A proposalwasreceivedon10.06.2010fromtheAOundersection263oftheIncomeTax Act,1961,pointingoutsomediscrepancies/shortcomingsintheassessmentorder".This clearlyshowsthatinsofarastheCITwasconcerned,hedidnotapplyhisownmind........ WeareoftheconsideredopinionthattheCITcouldnothaveinvokedthejurisdiction undersection263withouthisownindependentapplicationofmind. ITAno.84/AHD/2022 Asstt.Year2015-16 6 (vii)SpanOverseasLtd.Vs.CIT,PuneITANo.1223/PN/2013[21.12.2015] TheCommissionerofIncomeTaxhasinvokedtheprovisionsofsection263without applyinghisownindependentjudgmentandmerelyatthebehestofproposalforwarded bytheDy.CommissionerofIncomeTaxisagainstthespiritofAct.Thus,theimpugned orderisliabletobesetaside. 8.2AtthetimeofhearingtheLd.DRhasnotbroughtanycogentmaterialto countertheargumentadvancedbytheLd.ARfortheassessee.Accordingly,we notethattheproceedingsu/s263oftheAct,initiatedatthebehestoftheAOis notsustainableforthereasonasdiscussedabove. 8.3Goingforward,itisthesettledpositionoflawthattheorderpassedbythe AOcannotbetermedaserroneousinsofarprejudicialtotheinterestofrevenueon accountofnon-verificationifitwaspassedafterdueapplicationofmind.On perusalofthefindingofthelearnedCIT,wenotethatithasbeenheldthatthe assessmentframedundersection143(3)oftheActiserroneousinsofarprejudicial totheinterestofrevenueonaccountofin-depthnon-verification.Thisfactcanbe ascertainedfromthefindingofthelearnedCITwhichisreproducedasunder: Fromassessmentrecords,itisobservedthattheAssessingOfficerhaspassed orderinaroutinemannerwithoutmakingnecessaryverification.Fromthesubmission madebytheassessee,itisobservedthatithasrelevantdonationsinkind,Cashand throughbankingchannelsfromnumerousdonors.Thisissuesrequiresindepthscrutiny. 8.4Fromtheabove,itisrevealedthatthelearnedCIThasdirectedonlyto carryoutthein-depthenquiry,buthefailedtospecifytheenquirywhichtheAO wassupposedcarryoutinthemannerprovidedunderexplanation2tosection 263oftheAct.Accordingly,weareoftheviewthattheassessmentframedunder section143(3)oftheActcannotbedisturbedonthereasoningthatthe assessmenthasbeenframedwithoutnecessaryverification. 8.5Movingfurther,itistheadmittedpositionoflawthatbothconditionsbeing theordererroneousandprejudicialtotheinterestofrevenueshouldbesatisfied soastoinvoketheprovisionsofsection263oftheAct.However,onperusalof ITAno.84/AHD/2022 Asstt.Year2015-16 7 theoriginalassessmentorderwefindthatthetotalincomewasassessedatnilby denyingthecarriedforwarddeficitof₹6,76,86,136whichwasalsoagreedbythe assessee.Therelevantfindingasemergingfromtheassessmentorderframed undersection143(3)oftheActreadsasunder: Inviewoftheabove,videordersheetentrydatedon22.09.2017ARofthe assesseewasagreedwiththeviewtakenbyanassessingofficerandalsoagreedwiththe disallowanceofcarriedforwarddeficitofRs.6,76,86,136/-.Accordinglycarriedforward deficitofRs.6,76,86,136/-hasbeendisallowedinthecaseofassessee. 8.6Inconsequencetothedirectionsprovidedundersection263oftheAct,the assessmentwasframedbydenyingthecarriedforwardofthedeficitamountingto ₹3,81,92,172.00andaccordinglytheassessmentwasframedatRs.NIL.Assuch, underboththesituations,thereisnoprejudicetotheinterestofrevenue. Accordingly,themandatoryrequirementoftheprovisionsofsection263oftheAct beingtheordererroneousinsofarprejudicialtotheinterestofrevenuehasnot beencompliedwith.Accordingly,weareoftheviewthatassessmentframed undersection143(3)oftheActcannotberevisedundersection263oftheActin thegivenfactsandcircumstances.Accordingly,weholdthattheorderpassedby Ld.PCITisnotsustainableandaccordinglywequashthesame.Hence,the groundofappealoftheassesseeisherebyallowed. 9.Intheresult,theappealfiledbytheassesseeisallowed. OrderpronouncedintheCourton23/08/2023atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated23/08/2023 Manish