Santokba Durlabhji Trust Fund, Jaipur vs Assessee

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 449 & 450/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2005-06 & 2010-11. M/s. Santokba Durlabhji cuke Commissioner of Income-tax Trust Fund, Vs. (Exemption), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AADFS 7665 N vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra, CA jktLo dh vksj ls@ Revenue by : Shri Man Singh Meena (CIT)

lquokbZ dh rkjh[k@ Date of Hearing : 14.07.2015. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/7/2015. vkns'k@ ORDER

PER SHRI R.P. TOLANI, J.M.

These are two assessee's appeals filed against two separate orders of CIT

(Exemptions) dated 30/31.03.2015 passed under section 263 of the I.T. Act,

1961 for the assessment years 2005-06 & 2010-11. The common grounds raised in

both the appeals are as under :-

1) That the ld. CIT (Exemption) is wrong and has erred in law in invoking the provisions of section 263 of I.T. Act, 1961 in case of assessee Trust is as much as the assessment order passed by ld. AO is neither erroneous nor prejudicial to the interest of revenue. The impugned order passed by ld. CIT (A) (Exemption) is without jurisdiction.

2 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

2) That the ld. CIT (Exemption) is wrong and has erred in law in not considering the contention of assessee Trust that even by holding the shares of TISCO by assessee Trust in contravention of section 13(1)(d) was not tantamount to denial of exemption u/s 11 & 12 of the total income of assessee Trust but only that part of income derived from holding of those shares is not entitled to exemption u/s 11 & 12 of I.T. Act, 1961 and that part of income derived from holding of shares will thereafter be subject to other provisions of I.T. Act, 1961 such as section 10 of I.T. Act, 1961 and dividend income from shares and gain derived from sale of shares will be exempt respectively u/s 10(34) & 10(38) of I.T. Act, 1961.

3) That the ld. CIT (Exemption) failed to appreciate that in accordance with law the income of assessee Trust will work out to NIL as assessed by ld. A.O. at NIL in assessment order. Thus assessment order passed by ld. A.O. can neither be called erroneous nor prejudicial to the interest of revenue and provisions of section 263 of IT Act, 1961 are inapplicable.

2. The brief facts are that the assessment for A.Y. 2005-06 was framed by ld. AO

under section 148 read with 143(3) of the IT Act on 28.03.2013 and for A.Y. 2010-11

under section 143(3) also on 28.03.2013. In the impugned assessment orders the ld.

AO held that the assessee society is registered under section 12A(a) vide order dated

2815 dated 13.01.1977 by CIT-I, Jaipur and is running a public charitable hospital

under the name Santokbha Durlabhji Hospital & Research Centre. In view thereof

after discussion NIL return of income of the assessee were accepted.

2.1. The ld. CIT-I called for the record and issued show cause notice alleging that the

exemption u/s 11 was wrongly allowed by the AO by following observations :-

" 2. In view of the aforementioned facts the order passed by the Assessing Officer is found erroneous is as much as it is prejudicial to the interest of the revenue. Therefore, a show cause notice u/s 263 was issued by the CIT-I Jaipur vide letter No. 165 dated 13/16.05.2014 to 3 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

furnish explanation on the issue of attracting provisions of section 13(1)(d)(iii) of I.T Act, 1961 fixing the hearing on 29.05.2014 as under :-

" In the balance sheet as on 31.03.2005, assessee has shown Rs. 51,45,915/- as investment in shares of TISCO Ltd., which is not a public sector company. In view of the provision of section 13(1)(d)(iii) of the Act, it held during the year under consideration, non public sector company's shares and has not disposed of or converted them into govt. company shares up to 30th Nov. 1983 or 31st March, 1993, as per provisions of section 13(1)(d). Due to this violation, assessee trust is not entitled to exemption u/s 11. On the similar issue addition has been made in A.Y. 2004-05, 2008-09 & 2009-10. In the year under consideration, this issue was not examined and the exemption u/s 11 was wrongly allowed by AO.

In view of the above facts, the CIT-I, Jaipur is of the opinion that the assessment order passed in your case u/s 143(3) for the A.Y. 2005-06 on 28.03.2013 is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, the CIT-I, Jaipur proposes to revise the aforesaid assessment order for A.Y. 2005-06 in respect of above mentioned point in exercise of the power vested u/s 263 of the Act."

2.2. Assessee relied on the ITAT Judgment in its own case for A.Y. 2004-05 and A.Y.

09-10 holding that there was no violation of section 13(1)(a) and assessee was eligible

for benefit under section 11 by following observations :-

" Even otherwise the law has now been settled on the issue that holding of shares of a company held in violation of section 13(1)(a) of I.T. Act, 1961 does not result in denial of exemption u/s 11 of I.T. Act, 1961 in 4 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

respect of total income of assessee and only result in denial of exemption only in respect of income derived from shares and that income is subject to other provisions of I.T Act such as section 10 of the Act. The assessee received dividends or gain on sale of shares held by it which are exempt u/s 10(34) & 10(38) of I.T. Act, 1961 which will result in NIL taxable income of the Trust as assessed by ld. A.O. Thus there is no tax payable therefore assessment at NIL income of Trust is not prejudicial to the interest of Revenue. This legal position is supported from the decision of Hon'ble Supreme Court and from ITAT, Jaipur Bench, Jaipur order in case of assessee Trust for A.Y. 2008-09 (order dated 5.11.2014 in ITA No. 169/JP/12) and for A.Y. 2004-05 & 2009-10 (order dated 841-42/JP/12).

Besides, assessee further submitted as under :-

" It is apparent from the above said reasons that the proceedings u/s 263 have been started on the same issue which have already been considered and examined by the than AO in proceedings u/s 148. Thus the proceeding u/s 263 is a step to start again a second scrutiny/investigation of facts without there being any material to hold even prima facie that the assessment order passed by AO is erroneous which is not valid in the eyes of law (CIT vs. Trustees Anupam Charitable Trust (1987) 167 ITR 129) (Rajasthan), CIT vs. Godawari Sugar Mills Ltd. (1993)203 ITR 108 (Bom.) and CIT vs. Shakti Charities (2000) 160 CTR 107 (Mad.). In this connection it is also submitted that the notice u/s 263 has been issued only on the basis of CITR Appeals orders for the A.Y. 2004-05 and 2008- 09 in the assessee's case which is only a change in opinion which not a valid reasons in the eyes of law. As now it is finally settled position of law that no order u/s 263 can be passed on the basis of change in opinion. The Supreme Court in the case of CIT vs. Green World Corporation (2009) 314 ITR 81 (SC) held that "The jurisdiction under section 263 can be 5 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible." The Rajasthan High Court in a recent judgement in case of CIT vs. Chambal Fertilisers and Chemicals Ltd. (2013) 258 CTR (Raj.) 540 has held " The law is that the CIT cannot invoke the powers to correct each and every mistake or error committed by the AO. Every loss to the Revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the course permissible under the law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an order erroneous and prejudicial to the interest of the Revenue, the AO exercises quasi judicial power vested in him and if he exercises such powers in accordance with law, arrives at a just conclusion such conclusion cannot be termed to be erroneous only because the CIT does not feel satisfied with the conclusion." The Delhi High Court in case of CIT vs. Kelvinator of India Ltd. (2011) 332 ITR 231 (Delhi) it has held that Assessing Officer taking one of two possible views with which commissioner not agreeing the assessment order cannot be treated as an erroneous order prejudicial to interest of revenue. The Karnataka High Court after considering various judicial pronouncements in the case of CIT vs. Gokul Das Exports (2011) 333 ITR 214 (Kar) has held that assessing officer taking one out of two views the assessment order is not prejudicial to interest of revenue. In view of the above judicial pronouncements and various other judgements on the issue the assessment order passed by A.O. cannot be treated as an erroneous and prejudicial to the interest of revenue. In the case of CIT vs. Vodafone Essar South Ltd. (2013) 2012 Taxman 184 Hon'ble Delhi High Court held 6 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

that assessing officer before passing assessment order made an enquiry and directed his mind on all aspects. View adopted by him was clearly one among two plausible views that could have been taken. Commissioner did not specifically furnish any reasons to say why original order was unsupportable in law. Commissioner could not have validity exercised his revisionary power u/s 263 in instant case."

3. The ld. CIT (Exemptions), however, denied exemption by observing as under :-

"4.3. From the aforementioned provisions of law it is imperative to mention that the only requirement for attracting the provisions of section 13(1)(d)(iii) is shareholding and nothing more than that. It is also worthwhile to discuss that similar issue was raised in the assessee's case in A.Y. 2004-05 wherein the AO has held that the provisions of section 13(1)(d)(iii) are applicable and based on these findings the assessee's exemption u/s 11 was rejected. The appeal filed by the assessee was dismissed by the CIT (A) and against order of the ld. CIT (A), the assessee filed an appeal before the ITAT. The Hon'ble ITAT in the assessee's case in A.Y. 2004-05 and 2009-10 in ITA No. 241 & 242/JP/2014 vide order dated 13.03.2015 has accepted the assessee's contention and held that the provisions of section 13(1)(d)(iii) are not applicable for the reasons discussed therein. In this regard it is also worthwhile to mention that the order of Hon'ble ITAT in A.Y. 2008-09 in ITA No. 169 dated 05.11.2014 and in A.Y. 2004-05 and 2009-10 in ITA No. 241 & 242/JP/2014 vide order dated 13.03.2015 has been received by the department and it will be examined on merits and then the decision will be taken by the department whether the order is acceptable on merits or the department will file appeal u/s 260A in Hon'ble Rajasthan High 7 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

Court, as such the assessee's contention that the issue has got finally in its favour is not correct.

4.4. Furthermore the order of ld. CIT (A) for A.Y. 2004-05 in ITA No. 599/2011-12 dated 31.10.2014 is detailed one wherein the issue has been dealt with after considering the AO's order for A.Y. 2011-12 where the assessee has been allowed benefit of exemption u/s 11 and also the other relevant aspects as has been furnished by the assessee and thereafter the ld. CIT (A) has upheld the AO's order on the basis of Hon'ble Delhi High Court's decision in the case of Shri Radha Krishan Charitable Trust in ITA No. 303 of 2008. As such I am satisfied that by virtue of holding of shares of TISCO Ltd. for part of the year provisions of section 13(1)(d)(iii) are applicable in the assessee's case and accordingly the assessee is not eligible to claim exemption u/s 11 of the Act.

5. In view of the above discussion and legal position it is held that the assessee's case is squarely covered within the provisions of section 13(1)(d)(iii) of the Act as such the assessee is not eligible for claiming exemption u/s 11 and 12 of the Act. Accordingly the AO is directed to examine the issue of holding of shares of TISCO Ltd. in the light of above discussion and also to consider the final outcome of appeal order available in the case of assessee at the time of finalization of reassessment proceedings. As such the order passed by the AO is set aside within the meaning of sec. 263 of the Act to AO to do de-novo assessment on the issues discussed after providing proper opportunity to the assessee and making proper inquiry and arrive at a factually and legally correct finding on these issues."

8

ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

4. Aggrieved, the assessee is before us.

4.1. The ld. Counsel for the assessee contends that the very issue has been recently

examined by ITAT Jaipur Bench in ITA No. 169/JP/2012 vide order dated 05.11.2014

holding as under :-

"4.7 We find merit in the contention of ld. Counsel for the assessee that the proposition of apportionment of income eligible for benefits u/s 11 and 12 between exempted or non exempted income is upheld by Hon'ble Supreme Court in Dawoodi Bohra Trust (supra). Thus Hon'ble Supreme court has rationally dealt with this situation and instead of denying the entire benefits of sec 11 and 12 even for a technical, venial or smaller breach a sound and reasonable proposition has been laid down. In view of the foregoings we have no hesitation to hold that the entire benefits of sec. 11 and 12 cannot be forfeited from the trust and the corresponding dividend income from TISCO shares will not be eligible for Benefits of sec. 11 and 12."

Thus the issue in question stands decided in favour of the assessee.

4.2. The ld. CIT (Exemptions) is totally unjustified in holding that the order of ITAT

will be examined on merits and a decision will be taken by the department whether the

order is acceptable on merits or an appeal will be filed under section 260A in Hon'ble

Rajasthan High Court. Thus the ld. CIT (Exemptions) himself has accepted that two

views are possible - one which is taken by the ITAT in favour of the assessee and one

which may be taken by the Department for filing an appeal after examining the order of

ITAT. According to ld. Counsel, this amounts to a perfunctory order in revising the 9 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

validly passed assessment order only on a surmise and ignoring the fact that ITAT has

taken a considered, reasoned and detailed view in this matter. The observations of the

ld. CIT (Exemptions) itself reflected that the view adopted by AO is one of the justified

and plausible view. The ld. CIT may have any other view on this matter or a

hypothetical assumption about holding a view. But this does not detract from the fact

that the view adopted by AO was one of the possible and plausible and justified view.

In view of the Hon'ble Supreme Court judgment in the case of Malabar Industries, 243

ITR 83, if the view adopted by the AO is one of the possible view in the eyes of law, the

order passed by him cannot be called erroneous and prejudicial to the interest of

revenue. Merely because CIT holds a hypothetically divergent opinion, cannot make a

valid assessment order into erroneous order. Reliance is placed on written submissions

and a catena of case laws mentioned therein laying down propositions similar to

Malabar Industries (supra) and for another proposition that assessment orders cannot

be held as erroneous to start enquiry ignoring the judicial discipline of following the

ITAT judgments in favour of the assessee which are taken note of by the ld. CIT and

instead of respecting the judgment merely possibility of filing an appeal has been held

to be a reason to hold the assessment orders erroneous and prejudicial to the interest

of the revenue.

4.3. The ld. D/R supported the order of ld. CIT (Exemptions).

5. We have heard rival contentions and perused the material on record. The

assessee is a charitable trust running a hospital. The technical issue about holding of

TISCO shares and dividend earned thereon has been decided by a detailed order by this 10 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.

very bench. Thus AO's view of allowing exemption under section 11 to assessee on

merits is supported by ITAT orders. We find merit on the reliance of Hon'ble Supreme

Court judgment in the case of Malabar Industries (supra) squarely holding that if the

view adopted by AO is the possible view and tenable in law, the order cannot be held to

be erroneous and prejudicial to the interest of revenue. More so in the instant case

where the ld. CIT (Exemptions) perfunctorily held that as there is a possibility of

appealing against the order of ITAT, therefore, the order of AO becomes erroneous and

prejudicial to the interest of revenue, in our considered opinion, it reflect non-

application of mind towards the meaning and spirit of provisions of section 263. We

find merit in the argument of ld. Counsel that the powers enshrined by section 263

cannot be utilized to unsettle what is settled by the higher authorities discipline and to

start rowing and fishing enquiry again and again.

6. In view of the foregoing paras, we quash the order of ld. CIT (Exemptions)

under section 263 as untenable and unjustified. In view thereof, assessee's appeals are

allowed.

7. In the result, appeals of the assessee are allowed.

Order pronounced in the open court on 24.07.2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 24/7/ 2015 Das/ 11 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11. M/s. Santokba Durlabhji Trust Fund, Jaipur.

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s. Santokba Durlabhji Trust Fund, Jaipur.

2. izR;FkhZ@ The Respondent- CIT (Exemptions), Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 449 & 450/JP/2015)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar 12 ITA NO. 449 & 450/JP/2015 A.Y. 2005-06 & 2010-11.

M/s. Santokba Durlabhji Trust Fund, Jaipur.