Commissioner Of Income Tax (Exemptions v. Ahmedabad Urban Development Authority

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 284 of 2021 ========================================================== COMMISSIONER OF INCOME TAX (EXEMPTIONS) VersusAHMEDABAD URBAN DEVELOPMENT AUTHORITY ========================================================== Appearance:M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIand HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 06/12/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. Aggrieved by the order passed by the Income TaxAppellate Tribunal, Ahmedabad (“the ITAT” for short)on 25.03.2021 in ITA No.1083/Ahd/2018 for the A.Y.No.2012-13,the Revenue is before this Court raisingthe following question as substantial question of lawfor determination. “[A]Whether, on the facts and in the circumstancesof the case and in law, the Appellate Tribunal has erredin allowing the claim of the assessee for carry forward ofdeficit, ignoring the fact that there is no expressprovisions in the Income Tax Act, 1961 allowing suchclaim, and without appreciating the fact that this wouldhave the effect of granting double benefit to theassessee, first as accumulation of income u/s.11(1)(a) orcorpus donation u/s.11(1)(d) in earlier/current year, orexempt income u/s.10(34), and then as application ofincome u/s.11(1)(a) in subsequent years which is legally not permissible, without going into the merits? [B]Whether on the facts and in the circumstances of thecase and in law, the Appellate Tribunal is justified inallowing the claim of the assessee for carry forward ofdeficit holding that the proceedings u/s. 263 of the Actcould not be sustained thereby quashing the orderu/s.143(3) r.w.s. 263, without appreciating the factsthat the order in ITA No.1422/Ahd/2017 was appealedbefore this Hon’ble Court in Tax Appeal No.300 of 2018which was decided against the Revenue and theRevenue has filed SLP before the Supreme Court, whichis pending? [C]Whether on the facts and circumstances of the caseand in law, the Appellate Tribunal is justified in holdingthat the proceedings u/s. 263 of the Act could not besustained without appreciating that against the decisionof this Hon’ble Court in Tax Appeal No.214 of 2020, thedepartment has preferred SLP before the Hon’bleSupreme Court, which is pending?” 2. The assessee trust filed the return of income for Assessment Year 2012-13 and declared the totalincome as ‘Nil’. The scrutiny assessment took placeunder section 143(3) of the Income Tax Act, 1961 (“theAct” for short) and the order of assessment came to be passed on 16.03.2015. The Assessing Officer assessedthe total income of the respondent atRs.1,98,48,79,000/- where the addition had beenmade to the tune of Rs.42,77,29,078/-, under section11(1)(2) of the Act. While so doing the Assessing Officerhad disallowed the Capital Expenditure (General) andthe Capital Expenditure (Drainage). It also has disallowed the Capital Expenditure (EWS) and CapitalExpenditure (Nirmal Bharat/Vambhay). Expenditure (Nirmal Bharat/Vambhay). 3. During the course of the revision proceedings undersection 263 of the Act, the assessee was given anopportunity to be heard. The Assessing Officer, afteravailing the opportunity, had disallowed the claim ofthe assessee for setting off to brought forward lossesand determined the income at Rs.2,41,26,08,078/-, inhis order of assessment under section 143(3) of theAct read with section 263 of the Act. section 263 of the Act, the assessee was given anopportunity to be heard. The Assessing Officer, afteravailing the opportunity, had disallowed the claim ofthe assessee for setting off to brought forward lossesand determined the income at Rs.2,41,26,08,078/-, inhis order of assessment under section 143(3) of theAct read with section 263 of the Act. 3. During the course of the revision proceedings undersection 263 of the Act, the assessee was given anopportunity to be heard. The Assessing Officer, afteravailing the opportunity, had disallowed the claim ofthe assessee for setting off to brought forward lossesand determined the income at Rs.2,41,26,08,078/-, inhis order of assessment under section 143(3) of theAct read with section 263 of the Act. section 263 of the Act, the assessee was given anopportunity to be heard. The Assessing Officer, afteravailing the opportunity, had disallowed the claim ofthe assessee for setting off to brought forward lossesand determined the income at Rs.2,41,26,08,078/-, inhis order of assessment under section 143(3) of theAct read with section 263 of the Act. 4. The assessee carried the appeal before theCIT(Appeals), which allowed the appeal of the assesseevide order dated 26.02.2018, subject to the directionsissued to the Assessing Officer, wherein the AssessingOfficer has been directed to set off the deposit of earlieryears with current year in the following manner:CIT(Appeals), which allowed the appeal of the assesseevide order dated 26.02.2018, subject to the directionsissued to the Assessing Officer, wherein the AssessingOfficer has been directed to set off the deposit of earlieryears with current year in the following manner: “8.…..Relying on these judgements, the AO is directedto first set off the deficit of earlier years with the currentyear income. Thereafter, if any income is left thenappellant would be eligible for accumulation u/s 11(1)(a) ofthe Act to the extent of 15%. Thus the deficit, if any, wouldbe allowed to be carried forward subject to thesecalculations. Similarly the AO is also given detaileddirections with regard to computation of income whilecomputing the income of the appellat by treating it as anexempt entity while deciding the appeal filed by theappellant against the order passed by the AO while giving effect to the order of CIT (A) dated 08/03/2017. I havepassed the appellate order in the appeal against the orderpassed u/s 143(3) r.w.s. 250 for AY 2012-13 in this regardvide order No.CIT(A0-9/10095/DCIT(E), Cir-1/17-18 dated26/02/2018. Therefore, this appellate order is limited tothe issues addressed by the AO taking into account thedirection given in the order passed by the CIT(E) u/s. 263of the Act. The ground of appeal is thus allowed forstatistical purposes subject to the direction given to theAO.” 5. The Revenue, being aggrieved by this order of the CIT(Appeals), preferred the appeal before the Income Tax Appellate Tribunal (“the Tribunal” for short). Therewas a challenge of the order under section 263 in ITANo.978/Ahd/2017 and the Tribunal had allowed theappeal of the assessee as quantum appeal against theassessment order dated 16.03.2015, which had beenset aside and was sent to the Assessing Officer for re-adjudication. Therefore, the Tribunal had held that theproceedings under section 263 of the Act would not besustained and the order had become infructuous. 6. It is the say of the Revenue that against the decision ofthe Tribunal dated 09.10.2017, the departmentpreferred the Tax Appeal No.300 of 2018 before thisCourt, which was dismissed on 07.08.2018 followingthe decision rendered in the case of Ahmedabad Urbanthe Tribunal dated 09.10.2017, the departmentpreferred the Tax Appeal No.300 of 2018 before thisCourt, which was dismissed on 07.08.2018 followingthe decision rendered in the case of Ahmedabad Urban Development Authority vs. Asst. Commissioner ofIncome Tax (Exemptions), (2017) 396 ITR 323(Guj.),against which the department preferred the SLP before the Apex Court and the same is pending. 6. It is the say of the Revenue that against the decision ofthe Tribunal dated 09.10.2017, the departmentpreferred the Tax Appeal No.300 of 2018 before thisCourt, which was dismissed on 07.08.2018 followingthe decision rendered in the case of Ahmedabad Urbanthe Tribunal dated 09.10.2017, the departmentpreferred the Tax Appeal No.300 of 2018 before thisCourt, which was dismissed on 07.08.2018 followingthe decision rendered in the case of Ahmedabad Urban Development Authority vs. Asst. Commissioner ofIncome Tax (Exemptions), (2017) 396 ITR 323(Guj.),against which the department preferred the SLP before the Apex Court and the same is pending. 7. It is further the matter on record that the Tribunal,vide order dated 16.12.2019, has allowed the appeal ofthe assessee against the order under section 263 of theAct, where the Revenue preferred the appeal being TaxAppeal no.214 of 2020, where again, this Court,relying on the decision of the Ahmedabad UrbanDevelopment Authority vs. Assistant Commissioner(supra) has held against the Revenue, where also theSLP Diary No.8498 of 2021 is pending. 8. The challenge which had been made before the Tribunal is being elaborated in the following manner: “3.The Tribunal has held that original assessment orderdated 16.3.2015 was passed under section 143(3) of theAct by denying exemption under sections 11 and 12 of theAct on the ground that second proviso to section2(15) isapplicable in the case of the assessee, and its activities arenot charitable in nature. This dispute travelled upto theTribunal in the Asstt.Year 2012-13 and the Tribunal foundthat the CIT(A) in the impugned order dated 8.3.2017 hasfollowed order of the Tribunal dated 19.4.2016 passed inthe Asstt.year 2010-11 and 2011-12(ITA NO.712 and 711/Ahd/2013). This order of the Tribunal was reversed by theHon’ble Gujarat High Court and the decision of Hon’bleGujarat High Court is reported in 396 ITR 323. Thus, the Tribunal found that the ld CIT(A) has erred in principlerelying upon the order fo the ITAT for the Asstt.Year 2010-11 and 2011-12. The Tribunal has set aside this order ofthe ld.CIT(A), and restored all the issues to the file of theAO with the direction that income of the assessee berecomputed by keeping in mind judgement or f the Hon’bleGujarat High Court; in other words by giving benefit ofsections 11 and 12. During the pendency of the appealbefore the Tribunal, the AO has given effect to the order ofthe ld.CIT passed in appeal filed against the assessmentorder under section 143(3). This order giving effect hasbeen passed on 25.5.2017. Against this order, the assesseewent in appeal before the ld.CIT(A), and the ld .CIT(A) hasdecided the appeal of the assessee vide order dated26.2.2018. This order is impugned in ITANo.1084/Ahd/2018. Qua this appeal, we record thefollowing finding: 4.Controversy in this appeal has arisen on account ofgiving effect of the ld.CIT(A)’s order dated 8.3.2017 passedin the Asstt. Year 2012-13. This order of the CIT(A) hasbeen set aside by the Tribunal in ITA No.1422/Ahd./2017,meaning thereby, the very basis of the giving effect to thisorder of the CIT(A) stands extinguished. Hence, no ordergiving effect could be passed; if that be, there would not beany proceedings at the end of the CIT(A); and wholeproceedings becomes redundant, and accordingly thisappeal of the Revenue becomes infructuous. It isdismissed. 5.As far as ITA No.1083/Ahd/2018 is concerned, werecord the following finding: 6.This appeal has been arisen against an assessmentorder passed under section 143(3) read with section 263on 27.3.2017. Appeal against this order has been decidedby the CIT(A) vide order dated 26.2.2018. revenue haschallenged this order of the cit(a) by way of ITANo.1083/Ahd/2018. This appeal also becomes infructuousfor the following reasons: 5.As far as ITA No.1083/Ahd/2018 is concerned, werecord the following finding: 6.This appeal has been arisen against an assessmentorder passed under section 143(3) read with section 263on 27.3.2017. Appeal against this order has been decidedby the CIT(A) vide order dated 26.2.2018. revenue haschallenged this order of the cit(a) by way of ITANo.1083/Ahd/2018. This appeal also becomes infructuousfor the following reasons: 7.The order of the CIT dated 19.3.2017 passed undersection 263 was challenged in ITA No.978/Ahd/2017.TheTribunal has allowed the appeal of the assessee vide orderdated 16.12.2019 and held that since jurisdiction of ld.CITunder section 263 is dependent on the assessment orderi.e. order dated 16.3.2015, this order was set aside by theTribunal in the regular appeal travelled upto the Tribunalvide ITA No.1422/Ahd/2017. Thus, according to the Tribunal there could not be any 263 proceedings and theTribunal has held that 263 proceedings becomeinfructuous. The impugned assessment order dated27.3.2017 has been passed on the basis of 263 order of theCIT. That order no more available, hence there are no legto stand i.e. for second assessment i.e. for secondassessment order dated 27.3.2017. That be so, thesubsequent proceedings become redundant. It is alsopertinent to note that while deciding the appeal against theregular assessment order dated 16.3.2015, the Tribunalhas already observed that this assessment order waspassed by denying deduction under sections 11 and 12 ofthe Act, because, the AO has held that second proviso tosection2(15) is applicable in the case of the assessee andits activities are not of charitable nature. This reasoningdid not meet the approval of the ITAT on the ground thatHon’ble Gujarat High Court has reversed earlier view of theTribunal and held that the assessee is entitled for thebenefit under section 1 and 12 of the Act. The decision ofHon’ble Gujarat High Court is reported in 396 ITR 323.The Tribunal has already given direction for passing afresh assessment order treating the assessee as acharitable institution. Thus, the original assessment orderwas set aside by the Tribunal, and therefore, no 263proceedings could be sustained. Considering earlier orderof the Tribunal in ITA No.1422/Ahd/2017 and978/ahd/2017, we are of the view that both these appealsbecomes infructuous, accordingly dismissed.” 9. The Tribunal has committed no error. It has rightlypointed out that the original assessment order, sincehas been set aside, the proceedings under section 263of the Act cannot be sustained relying on the earlierorders of the Tribunal passed in ITAno.1422/Ahd/2017 and and ITA no.978/Ahd/2017. pointed out that the original assessment order, sincehas been set aside, the proceedings under section 263of the Act cannot be sustained relying on the earlierorders of the Tribunal passed in ITAno.1422/Ahd/2017 and and ITA no.978/Ahd/2017. 10.These appeals have been held to have becomeinfructuous. Rightly as noted above, the Tax Appealsinfructuous. Rightly as noted above, the Tax Appeals arising from both these appeals being Tax AppealNo.300 of 2018 and Tax Appeal No.214 of 2020 havebeen decided by this Court, where the appeals of theRevenue are not being entertained and are dismissed.The substantial questions have been answered infavour of the assessee against which, the SLP ispending, where no stay has been granted, resultantly,this appeal meets the very fate without giving anyseparate detailed reasons. 11.Tax appeal stands dismissed. (MS.SONIA GOKANI, J. ) SUDHIR (NISHA M. THAKORE,J)