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Case Law Details

Case Name : Shivalic Academy Society Vs CIT (E) (ITAT Delhi)
Appeal Number : ITA No. 3424/Del/2019
Date of Judgement/Order : 25/03/2022
Related Assessment Year : 2015-16

Shivalic Academy Society Vs CIT (E) (ITAT Delhi)

Settled position of law is that for the purpose of exercising jurisdiction u./s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry. If the Revisional authority is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Revisional Authority to conduct such enquiry. If the Revisional Authority does not conduct such basic exercise then he is not justified in setting aside the order u/s. 263 of the Act. Reliance can be placed for this on the judgement of Hon’ble Delhi High Court in PCIT Vs. Delhi Airport Metro Express Private Limited vide ITA No.705/2017 order dated 05.09.2017 as relied by Coordinate bench of Delhi ITAT in M/S. Dwarkadhis Buildwell Pvt. vs Cit, Hisar vide ITA No.3097/Del/2014 decided on 1 July, 2019. In the case in hand the Ld Revisional Authority has done no homework on its end but merely on basis of letter of JCIT pointing short comings, held that enquiry done by Ld. AO was not satisfactory. Infact where the Revisional Authority intends to set aside assessment order for lack of enquiry the direction in the order exercise of Revisional power should set or indicate the possible and prospective path of enquiry that the AO should follow further. Which is also not done in present case.

Consequently impugned order cannot be sustained. The appeal of assessee is allowed and the impugned order dated 26.03.2019 u/s 263 of the Act is set aside.

FULL TEXT OF THE ORDER OF ITAT DELHI

Assessee had filed return of income declaring income at NIL figure for the assessment year 2015-16. Notice u/s 143(2) of the Income Tax Act, 1963 ( hereinafter refered as the Act) was issued by the Ld. Assessing officer, Income Tax Officer (Exemption), Dehradun and after going through the submission put forth the assessment was completed at nil income. However, the Commissioner of Income Tax (Exemption) (hereinafter refered as Ld. Revisional Authority) invoked provisions of 263 of the Act and observed in para 7 of its impugned order dated 26.03.2019 as under :-

“7. On perusal of assessment order, records available and reply of the assessee it is observed that the AO has passed the order without making enquiries or verification which should have been made. These are as follows:

(a) Reasonableness of sums paid to specified persons has not been explained satisfactorily with evidence.

(b) The case of CIT Vs Amitabh Bachan (2016) is not applicable in this case.

(c) No evidence of submission of Form 10 has been submitted.

(d) No evidence regarding reasonableness of rent or salary paid to Shri Som DuttTyagi has been submitted.”

2. The assessee has come up before the Tribunal raising following grounds of appeal :-

“ The Ld. Commissioner of Income Tax (Exemption), Lucknow has has erred in passing an order u/s 263 of the Income Tax Act, 1961.

2. The order passed is arbitrary, against the provision of law and facts of the case.

3. Any other ground arising at the time of or before hearing of appeal.”

Heard the Ld. AR, Sh. S.K.Matta, CA and Ld. CIT-DR. It was submitted on behalf of the assessee by Ld. AR that the Ld. AO had sought information u/s 143(2) of the Act in regard to the transaction of Trust with specified persons and the same was provided to the ld. AO by letter dated 05.08.2016 (page no. 3 of the paper book) followed by letter dated 09.08.2016 (page no. 5 of the paper book). It is submitted that the Ld. AO was duly satisfied of all aspects regarding justification of payment of rent and salaries. It is also submitted that the ld. Revisional Authority did not give reasonable time to the assessee to contest the matter as notice u/s 263 of the Act was issued on 18.03.2019 and received at 5.30 PM on mail by CA and the date of hearing was fixed for 22nd March, 2019 wherein 20th and 21st March were intervening holidays on account of Holy Festival and the office of assessee was not operational. It was submitted by Ld. AR that only because the Ld. Revisional Authority had a possible different view the same was not sufficient for interference by invoking provisions of Section 263 of the Act. In this context, the judgment of Hon’ble Supreme Court of India in CIT vs. Amitabh Bachchan 2016, 384 ITR 200 (SC) was relied.

3.1 The Ld. DR defended the order of Ld. Revisional Authority on tax in law being correct.

4. Appreciating the arguments submitted and material available on record, it can be observed that a limited scrutiny notice was issued to the assessee on 26.07.2016 to which reply was filed on 05.08.2016 and this reply which is on paper book at page no. 3 gives detail of the transaction of the Trust with specified persons. It was informed to the Ld. AO that payment Som Dutt Tyagi, of Rs. 10,58,400/- was on account of rent of building. Copy of minutes of meeting of Society where building rent was finalized was enclosed and also it was affirmed that rent rates were not in excess as fixed by ADM(F), Dehradun. Thereafter, by letter dated 09.08.2016, which is on paper book on page no. 5 copy of land revenue record of Shri Som Datt Tyagi was also tendered to establish that the school affiliated by CBSC, New Delhi is running at the said address. The assessee also informed of the salary being paid to Sh. Som Dutt Tyagi who was the President of Society and looks after the account, finance and purchase of the school. Further, payment of salary to Rajni Tyagi as the Principal and Shivam Tyagi as the Administrative Officer of the School was explained. It can also be appreciated from the letter dated 09.08.2016 that in compliance of the queries raised by order sheet of 08.08.2016 the assessee had also informed the ld. AO about membership and subscription payments to another institution and that this payment was not covered under payment made to specify person. As with regard to non-submission of Form No. 10 it was specifically informed to the authority that the same has been filed and available on record.

5 Thus, what can be concluded is that the Ld. AO had gone into the inquiry calling for relevant information on record and being satisfied upon what was submitted by the assessee, the assessment was completed. However, ld. Revisional Authority invoked the powers u/s 263 of the Act on the basis of letter written by JCIT. However the assessment order cannot be said to be erroneous on face of it. There was sufficient and exhaustive inquiry on the issues by the Ld. AO and merely because the inquiry made were not considered satisfactory on higher or different parameters, the assessment order cannot be said to be prejudicial to the interest of revenue requiring exercise of Revisional powers. There is also nothing in the order of Ld. AO which can be considered to set a bad trend or pattern for similar assessments so to be taken as prejudicial to the interest of revenue administration.

Revisional power cannot be exercised without indicating possible & prospective path of enquiry

6. Furthermore, the settled position of law is that for the purpose of exercising jurisdiction u./s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry. If the Revisional authority is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Revisional Authority to conduct such enquiry. If the Revisional Authority does not conduct such basic exercise then he is not justified in setting aside the order u/s. 263 of the Act. Reliance can be placed for this on the judgement of Hon’ble Delhi High Court in PCIT Vs. Delhi Airport Metro Express Private Limited vide ITA No.705/2017 order dated 05.09.2017 as relied by Coordinate bench of Delhi ITAT in M/S. Dwarkadhis Buildwell Pvt. vs Cit, Hisar vide ITA No.3097/Del/2014 decided on 1 July, 2019. In the case in hand the Ld Revisional Authority has done no homework on its end but merely on basis of letter of JCIT pointing short comings, held that enquiry done by Ld. AO was not satisfactory. Infact where the Revisional Authority intends to set aside assessment order for lack of enquiry the direction in the order exercise of Revisional power should set or indicate the possible and prospective path of enquiry that the AO should follow further. Which is also not done in present case.

7. Consequently impugned order cannot be sustained. The appeal of assessee is allowed and the impugned order dated 26.03.2019 u/s 263 of the Act is set aside.

Order pronounced in open court on this 25th day of March, 2022.

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