DPR Charitable Trust, V. Commissioner of Income tax-II,

ITA 86/JAB/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5611 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R LATHORIYA
• Assessee Lawyers: G N PUROHIT
• Keywords: Charitable institution; Valuation report
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY , HONBLE JUDICIAL MEMBER ITA NO. 86 / J AB /201 4 (ASST. YEAR : 200 9 - 1 0 ) DPR CHARITABLE TRUST, C/O VITS KARAHI ROAD, AMOUDHA, SATNA. VS. CIT - II, JABALPUR. PAN NO. AAATD 7518 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.N. PUROHIT A R . DEPARTMENT BY : S HRI D.R. LATHORIYA - DR DATE OF HEARING : 04 / 0 4 /201 6 . DATE OF PRONOUNCEMENT : 07 / 04 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX - II , JABALPUR , DATED 10 /0 2 /201 4 . 2. THE GROUNDS OF APPEAL OF THE ASSESSEE READS AS UNDER: - 1. THE LD. CIT HAS ERRED IN LAW AND ON FACTS OF THE CASE IN INVOKING SEC. 263 OF THE INCOME TAX ACT, 1961 . THE ORDER MADE B Y THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ORDER PASSED UNDER SEC. 263 IS WITHOUT JURISDICTION SHOULD BE ANNULLED. 2. THAT THE ORDER UNDER SEC. 263 IS BAD IN LAW AS THE CIT IS NOT PERMITTED TO SUBSTITUTE HIS OPINION IN PREFERENCE TO JUDICIAL DISCRETION OF THE ASSESSING OFFICER. THE ORDER UNDER SEC. 263 SHOULD BE QUASHED. 3. THAT THERE IS NO ERROR IN THE ASSESSMENT AS NO DISCREPANCY WAS FOUND EITH ER BY THE ASSESSING OFFICER OR EVEN BY CIT IN SPITE OF SURVEY UNDER SEC. 133A, NO REJECTION OF ACCOUNTS THUS THE REFERENCE UNDER SEC. 142A WAS ILLEGAL AB INITIO COULD NOT BE RELIED ON FOR MAKING ANY ADDITION , THE ORDER OF 2 ITA NO. 86 / JAB /201 4 ASSESSING OFFICER IS PERFECTLY VAL ID IN LAW COULD NOT BE CANCELLED UNDER SEC. 263. THE ORDER SHOULD BE CANCELLED. 4. THE ORDER OF ASSESSMENT IS VALID IN LAW AND THE COURSE SUGGESTED BY CIT IN 263 ORDER IS REVENUE NEUTRAL, THERE IS NO LOSS OF REVENUE. THE CONDITION OF PREJUDICIAL TO THE REVENUE IS NOT SATISFIED. ORDER UNDER SEC. 263 IS LIABLE TO BE QUASHED. 5. THE APPEL LANT CRAVES PERMISSION TO RAISE ANY OTHER GROUND OR GROUNDS AT THE TIME OF HEARING OF THIS APPEAL. 3 . IN ALL THE GROUND S OF APPEAL, THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF THE COMMISSIONER OF INCOME TAX IN PASSING THE ORDER UNDER SEC. 263 OF THE ACT. 4 . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX ISSUED NOTICE UNDER SEC. 263 OF THE ACT ON THE GROUND THAT AS PER THE VALUATION OF BUILDING DONE BY THE DVO, THE INVESTMENT MADE BY THE ASSESSEE IN FINANCIAL YEAR 2008 - 09 IS SHOWN AT RS. 3,53,79,748/ - AS AGAINST RS. 1,69,16,213/ - . THUS, THERE IS A DIFFERENCE OF RS. 1,84,63,535/ - IN THE INVESTMENT MADE IN BUILDING CONSTRUCTION , WHICH WAS NOT DISCLOSED. THEREFORE, HE PASSED THE ORDER UNDER SEC. 263 OF THE ACT ON 10/02/2014 HOLDING THAT HE WAS SATISFIED THAT THE ASSESSMENT COMPLETED UNDER SEC. 143(3) ON 26/11/2011 WAS MADE , IN HASTE , WITHOUT MAKING NECESSARY ENQUIRIES WARRANTED AND ALSO NOT APPRECIATED THE CORRECT SET OF FACTS. THE ASSESSING OFFICER SHOULD MADE ENQUIRY ABOUT THE GENUINENESS OF THE TRUST AND APPLICATION OF FUNDS FOR CHARITABLE PURPOSE BEFORE COMPLETING THE ASSESSMENT. THE ASSESSING OFFICER SHOULD HAVE MADE ENQUIRY ABOUT THE JUSTIFICATION OF INVESTMENT MADE BY THE ASSESSEE FOR THE CONSTRUCTION OF BUILDING AND REFERRED THE MATTER TO THE DVO AFTER VERIFYING THE BOOKS OF ACCOUNTS IN ACCORDANCE WITH LAW. THEREFORE, IN EXERC ISE OF HIS POWE R S UNDER SEC. 263 OF THE ACT, HE SET ASIDE THE ORDER FOR THE ASSESSMENT YEAR 2009 - 10 AND DIRECTING THE ASSESSING OFFICER TO COMPL E TE THE ASSESSMENT AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE BY HIM. 3 ITA NO. 86 / JAB /201 4 5 . AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER RECEIVED DVOS REPORT ON 26/12/2011 AND PASSED THE ASSESSMENT ORDER UNDER SEC. 143(3) ON 26/12/2011 ITSELF. THUS, THE DVOS REPORT WAS AVAILABLE WITH THE ASSESSING OFFICER WHILE PA S SING THE ASSESSMENT ORDER. IT WAS FURTHER SUBMITTED THAT IN VIEW OF THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (2010) 328 ITR 513 (SC), THE ASSESSING OFFICER COULD NOT REFER THE MATTER TO THE DVO IN A CASE WHERE THERE WAS A CATEGORICAL FIN DING RECORDED BY THE TRIBUNAL THAT THE BOOKS OF ACCOUNTS WERE NEVER REJECTED. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO BOOKS OF ACCOUNTS , MAINTAINED BY THE ASSESSEE , WERE NOT REJECTED BY THE ASSESSING OFFICER AND THEREFORE, HE COULD NOT HAVE REFERRED THE MATTER FOR VALUATION OF THE COST OF CONSTRUCTION OF THE BUILDING TO THE DVO UNDER SEC. 142 A OF THE ACT. 6 . FURTHER, IT WAS SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE CONSTRUCTION OF THE BUILDING UNDE R QUESTION WAS DONE IN ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 . THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2010 - 11 PASSED UNDER SEC. 143(3) DATED 14/03/2013 IS P L A CED AT PAGE NO. 42 OF THE PAPER BOOK. HE SUBMITTED THAT THE ASSESSING OFFICER AFTER CONSIDERING THE DVOS REPORT FOR THE COST OF CONSTRUCTION OF THE BUILDING HELD AS UNDER: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE TRUST WAS SPECIFICALLY REQUIRED TO EXPLAIN THE DIFFERENCE IN COST OF CONSTRUCTION AS SHOWN AND THAT DETERMINED B Y THE DVO. IT WAS EXPLAINED THAT THE COST OF CONSTRUCTION AS SHOWN BY THE ASSESSEE TRUST IS DULY SUPPORTED WITH REGULAR BOOKS OF ACCOUNTS AND THAT ALL THE EXPENSES ARE SUPPORTED WITH BILLS FOR CONSTRUCTION MATERIALS AND VOUCHERS FOR LABOUR ETC . IT WAS POINTED OUT THAT THE DEDUCTIONS GIVEN IN THE ESTIMATE FOR WORK NOT DONE AND THE PLINTH AREA, RATES ADOPTED ARE ON THE HIGHER SIDE INSTEAD OF ADOPTING THE LOCAL PWD RATES WHICH SHOULD BE APPLICABLE IN SUCH TYPE OF CONSTRUCTION FOR RUNNING THE COLLE GE. THE ASSESSEE TRUST FURNISHED A VALUATION REPORT AS PER WHICH THE COST OF CONSTRUCTION OF THE BUILDING IS ONLY RS. 2 , 18 , 93 , 375/ - . IT WAS FURTHER SUBMITTED THAT THE ADDITION IN FIXED ASSETS IS APPLICATION OF FUNDS FOR CHAR I T ABLE 4 ITA NO. 86 / JAB /201 4 PURPOSES EXEMPT UNDER SEC. 11. THE COST OF CONSTRUCTION AS SHOWN BY THE ASSESSEE IS SUPPORTED WITH REGULAR BOOKS OF ACCOUNTS MAINTAINED. THE SOURCE OF INVESTMENT HAS ALSO BEEN EXPLAINED. HAVING REGARD TO THE FACTS, NO ADVERSE INFERENCE IS DRAWN IN THIS REGARD. THUS HE SUBMITTED THAT THE ASSESSING OFFICER AFTER CONSIDERING THE DVOS REPORT A CCEPTED THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS . THIS ASSESSMENT ORDER DATED 14/03/2013 WAS A VAILABLE WITH THE COMMISSIONER OF INCOME TAX , WHEN HE ISSUED NOTICE UNDER SEC. 263 OF THE ACT ON 13/01/2014. THEREFORE, COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE DVOS REPORT BEFORE FINALIZING THE ASSESSMENT ORDER FOR THE ASS ESSMENT YEAR 2009 - 10. HE FURTHER SUBMITTED THAT IN THE CASE OF CIT VS. MEPCO INDUSTRIES LTD. (2007) 294 ITR 121 (MAD.) , T HE HON'BLE HIGH COURT HELD THAT THE COMMISSIONER OF INCOME TAX WHILE EXERCISING THE POWER S UNDER SEC. 263 OF THE ACT, HAD NOT RENDERED AN INDEPENDENT FINDING TO THE EFFECT THAT THE COURSE ADOPTED BY THE ASSESSING OFFICER WAS NEITHER PERMISSIBLE NOR THE VIEW TAKEN BY THE ASSESSING OFFICER RESULTED IN LOSS OF REVENUE WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN ABSENCE OF ANY SUCH FIN D ING, THE APPELLATE TRIBUNAL WAS RIGHT IN SETTING ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO THERE IS NO FI N D ING TO THE EFFECT THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE ORDER PASSED UNDER SEC. 263 BY THE COMMISSIONER OF INCOME TAX CANNOT BE SUSTAINED IN LAW. 7 . ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE FULLY JUSTIFIED THE ORDER OF THE COMMISSIONER OF INCOME TA X UNDER SEC. 263 OF THE ACT. 8 . WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFU L LY PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT IN THE INSTANT CASE , NOTICE DATED 1 3/01/2014 UNDER SEC. 263 WAS ISSUED BY THE COMMISSIONER OF INCOME TAX ON THE GROUND THAT THE 5 ITA NO. 86 / JAB /201 4 ASSESSING OFFICER FAILED TO CONSIDER THE REPORT OF THE DVO, ACCORDING TO WHICH THE INVESTMENT IN CONSTRUCTION MADE BY THE ASSESSEE DURING THE YEAR UNDER REV IEW WAS RS. 3,53,79,748/ - , WHEREAS AS PER THE RETU RN OF THE ASSESSEE, THE INVESTMENT WAS RS. 1,69,16,21 3/ - . HOWEVER , WHILE PASSING THE ORDER UNDER SEC. 263 ON 10/02/2014, THE COMMISSIONER OF INCOME TAX HAS ALSO SET ASIDE THE ORDER OF THE ASSESSING OFFICER INTER ALIA ON THE GROUNDS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE GENUINENESS OF THE TRUST AND APPLICATION OF FUND FOR CHARITABLE PURPOSES AND WE FIND THAT THERE IS NO WHISPER IN THE NOTICE ISSUED BY THE COMMISSIONER OF INCOME TAX UNDER SEC. 263 OF THE ACT F OR THE SAME. NO MATERIAL HAS BEEN BROUGHT BEFORE US TO SHOW THAT THE ASSESSEE WAS ALLOWED ANY OPPORTUNITY OF HEARING IN RESPECT OF THE ABOVE ISSUE BEFORE PASSING THE IMPUGNED ORDER. THE COMMISSIONER OF INCOME TAX HAS NOWHERE RECORDED IN THE IMPUGNED ORDE R THAT THE ASSESSEE WAS ALLOWED ANY OPPORTUNITY OF HEARING IN RESPECT OF THE ABOVE ISSUE AND WHAT WAS THE SUBMISSIONS OF THE ASSESSEE, IF ANY, IN RESPECT OF THE SAID ISSUE. IN THE ABOVE CIRCUMSTANCES, WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE THAT T HE ORDER OF THE COMMISSIONER OF INCOME TAX IN RESPECT OF THE ABOVE ISSUE IS BAD IN LAW. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CONTIMET E RS ELECTRICALS P. LTD. [ (2009) 317 ITR 249 (DEL.) ] , WHERE IT WAS HELD THAT THE ISSUE WHICH DID NOT FORM PART OF THE SHOW - CAUSE NOTICE AND THE ASSESSEE WAS NOT CONFRONTED WITH IT, THE SAME CANNOT FORM BASIS FOR REVISION OF ASSESSMENT ORDER UNDER SEC. 263 OF THE ACT. THE ORDER UNDER SEC. 263 CANNOT TRAVEL BE YOND THE SHOW - CAUSE NOTICE. TO THE S AME EFFECT , IS THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASHISH RAJ PAL [ (2009) 320 ITR 674 (DEL.) ] AND THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. D.N. DOSANI (2006) 280 ITR 275 (GUJ.) . 9 . COMING TO THE ISSUE OF INVESTMENT IN CONSTRUCTION, WE FIND THAT THE CONSTRUCTION WAS NOT COMPLETED DURING THE YEAR UNDER 6 ITA NO. 86 / JAB /201 4 CONSIDERATION. THE CONSTRUCTION WAS CONTINUED IN THE NEXT FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2010 - 11 ALSO. THE ASSESSING OFFICER IN THE ASSESSMENT MADE FOR THE ASSESSMENT YEAR 2010 - 11 UNDER SEC. 143(3) ON 14/03/2013 , DISCUSSED HIS FINDING IN RESPECT OF DVOS REPORT AS UNDER: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE TRUST WAS SPECIFICALLY REQUIRED TO EXPLAIN THE DIFFERENCE IN COST OF CONSTRUCTION AS SHOWN AND THAT DETERMINED B Y THE DVO. IT WAS EXPLAINED THAT THE COST OF CONSTRUCTION AS SHOWN BY THE ASSESSEE T RUST IS DULY SUPPORTED WITH REGULAR BOOKS OF ACCOUNTS AND THAT ALL THE EXPENSES ARE SUPPORTED WITH BILLS FOR CONSTRUCTION MATERIALS AND VOUCHERS FOR LABOUR ETC. IT WAS POINTED OUT THAT THE DEDUCTIONS GIVEN IN THE ESTIMATE FOR WORK NOT DONE AND THE PLINTH A REA, RATES ADOPTED ARE ON THE HIGHER SIDE INSTEAD OF ADOPTING THE LOCAL PWD RATES WHICH SHOULD BE APPLICABLE IN SUCH TYPE OF CONSTRUCTION FOR RUNNING THE COLLEGE. THE ASSESSEE TRUST FURNISHED A VALUATION REPORT AS PER WHICH THE COST OF CONSTRUCTION OF THE BUILDING IS ONLY RS. 2,18,93,375/ - . IT WAS FURTHER SUBMITTED THAT THE ADDITION IN FIXED ASSETS IS APPLICATION OF FUNDS FOR CHARIT ABLE PURPOSES EXEMPT UNDER SEC. 11. THE COST OF CONSTRUCTION AS SHOWN BY THE ASSESSEE IS SUPPORTED WITH REGULAR BOOKS OF ACC OUNTS MAINTAINED. THE SOURCE OF INVESTMENT HAS ALSO BEEN EXPLAINED. HAVING REGARD TO THE FACTS, NO ADVERSE INFERENCE IS DRAWN IN THIS REGARD. THE CONTENTION OF THE ASSESSEE THAT THIS ASSESSMENT YEAR OF 2010 - 11 HAS BECOME FINAL , AND WAS BEFORE THE COMMISSIONER OF INCOME TAX WHILE PASSING THE IMPUGNED ORDER ON 10/02/2014 , IS NOT DISPUTED BY THE REVENUE . FROM THE RECORDS AVAILABLE BEFORE US, IT IS OBVIOUS THAT THE DVO INSPECTED THE PROPERTY AFTER 31/03/2010 AND THE EXPENDITURE WAS INCURRED BY THE ASS ESSEE IN THE CONSTRUCTION IN FINANCIAL YEAR 2009 - 10 ALSO. THEREFORE, IT WAS NOT POSSIBLE ON THE PART OF THE DVO TO QUANTIFY THE EXACT EXPENDITURE WHICH WAS INCURRED IN THE FINANCIAL YEAR 2008 - 09. MOREOVER, WE FIND THAT NO DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION COULD BE POINTED OUT EITHER BY THE ASSESSING OFFICER OR BY THE COMMISSIONER OF INCOME TAX. IN THE ABOVE CIRCUMSTA N CES, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA (SUP RA) , AS POINTED OUT 7 ITA NO. 86 / JAB /201 4 BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE , IS FOUND TO BE APPLICABLE . THE DEPARTMENTAL REPRESENTATIVE COULD NOT CITE ANY REASON AS TO WHY THE SAID DECI SI ON OF THE HON'BLE APEX COURT IS NOT APPLICABLE IN THE INSTANT CASE. THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, IN OUR CONSIDERED VIEW, THE REFERENCE MADE TO THE DVO ITSELF WAS NOT VALID IN THE INSTANT CASE. STILL FURTHER , WE FIND FORCE IN THE CONTENTION OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE ISSUE INVOLVED IN THIS APPEAL IS REVENUE NE U TRAL . THE CONTENTION OF THE ASSESSEE IS SUPPORTED BY THE FI N DING OF THE ASSESSING OFFICER RECORDED IN THE ASSESSMENT OF THE ASSESSMENT YEAR 2010 - 11 . THE ASSESSING OFFICER QUOTED WITH APPROVAL , THE SUBMISSION OF THE ASSESSEE , TO THE EFFECT THAT THE INVESTMENT MADE IN THE CONSTRUCTION QUALIFIES AS EXEMPTION UNDER SEC. 11 OF THE ACT BEING UTILIZED FOR CHARITABLE PURPOSES . THE DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE ABOVE CONTENTION OF THE ASSESSEE AND COULD NOT SHOW HOW THE ISSUE UNDER APPEAL RESULTED IN ANY PREJUDICE TO THE INTEREST OF THE REVENUE. 10 . IN THE ABOVE FACTS AND CIRCUMSTANCES , WE FIND THAT THE COMMISSIONER OF INCOME TAX COULD NOT POINT OUT HOW THE ORDER OF THE ASSESSING OFFICER WAS B OTH ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER PASSED UNDER SEC. 263 OF THE ACT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 1 1 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 /04/ 201 6 AT JABALPUR . S D/ - SD/ - ( N.K. CHOUDHRY ) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 07 TH APRIL , 201 6 . 8 ITA NO. 86 / JAB /201 4 VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY, ITAT, JABALPUR.