Ita/282/2019 Of The Commissioner Of Income Tax (Exemptions) v. Ms/.Love In Action Society Nalanchira

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM WEDNESDAY, THE 8 DAY OF SEPTEMBER 2021 / 17TH BHADRA, 1943 ITA NO. 282 OF 2019 AGAINST THE ORDER IN ITA 459/2018 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX (EXEMPTIONS),KOCHI. BY ADV CHRISTOPHER ABRAHAM RESPONDENT/S: MS/.LOVE IN ACTION SOCIETY NALANCHIRA,TRIVANDRUM.BY ADVS.SRI.M.GOPIKRISHNAN NAMBIARSRI.K.JOHN MATHAISRI.JOSON MANAVALANSRI.KURYAN THOMASSRI.PAULOSE C. ABRAHAM OTHER PRESENT: ADV RAJA KANNAN FOR THE RESPONDENT THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 08.09.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: S.V. Bhatti, J. J U D G M E N T Heard the learned Advocates Mr Christopher Abraham andMr Raja Kannan for parties. 2.The Commissioner of Tax (Exemptions),Kochi/Revenue is the appellant. M/s. Love in ActionSociety/assessee is the respondent. The assessee, on 07.10.2013filed income tax returns for the Assessment Year 2013-14. Theassessee is a Charitable Society registered under Section 12AAof the Income Tax Act, 1961 (for short, 'the Act'). On 29.03.2016the assessment for the subject year, under Section 143(3) wascompleted. The Commissioner of Income Tax (Exemptions)issued notice dated 02.03.2018 under Section 263 of the Act. Theassessee, in spite of receipt of notice, did not file reply or attend I.T.A. No.282/2019 the hearing before CIT (Exemptions). The CIT (Exemptions)hence was compelled to proceed ex parteand made the orderdated 19.03.2018, relevant portion reads thus: “Considering the claim of the assessee and the availability offund for application, it indicated that the balance amount offund of Rs.56,81,976/- was utilized from the corpus donationviolating the proviso to section 11(1)(d) of the Income Tax Act,1961. It is seen from the records that the Assessing Officer,while completing the scrutiny assessment, failed to considerthis issue. In view of the above, I am of the opinion that theimpugned order u/s143(3) dated 29.03.2016 is erroneous andprejudicial to the interests of revenue. I set aside theassessment order u/s 263 of the Income Tax Act forreconsideration of the issue by the Assessing Officer, asdelineated above, after giving full opportunity of being heard tothe assessee.” 2.1The assessee aggrieved by order in Annexure-B dated 19.03.2018 filed I.T.A. No.459/Coch/2018 before the Income Tax Appellate Tribunal (ITAT), Cochin Bench. It is a matter ofrecord that the assessee filed material before the Tribunal in I.T.A. No.282/2019 support of the assessee's argument that the order in Annexure-B does not satisfy the twin requirements of being erroneous andprejudicial to the interest of Revenue, in terms of Section 263 ofthe Act. Therefore, reassessment direction issued to theAssessing Officer is per seillegal. The issue noted by the CIT(Exemptions) arises under Section 11(1)d and the utilization ofcorpus donation for revenue expenditure allegedly incurred bythe assessee. The Tribunal, in the order under appeal, examinedthe circumstances discernible from the material brought onrecord by the assessee before it and recorded a finding inconclusive terms that one cannot appreciate the actual loss ofrevenue from the omissions noted by the CIT (Exemptions). Theconsideration resulted in setting aside Annexure-B order. 3. For the view we are proposing to take, we avoid getting into detailed discussion on each one of the aspects I.T.A. No.282/2019 -5- 3. For the view we are proposing to take, we avoid getting into detailed discussion on each one of the aspects I.T.A. No.282/2019 -5- considered by the Tribunal. Suffice to notice that Section 263confersrevisionalonthepowersPrincipalCommissioner/Commissioner, assessment orders which areerroneous, insofar as it is prejudicial to the interest of theRevenue. To begin with, Section 263 provides that at thecommencement of proceedings the Commissioner may call andexamine the record of any proceeding under the Act if heconsiders that any order passed by the Assessing Officer iserroneous insofar as it is prejudicial to the interest of theRevenue. The next stage in Section 263 is affording opportunitywhile making or causing enquiry as he deems necessary whichwould result in the Commissioner passing an order. In thecircumstances arising under Section 263, as pointed out by MrRaja Kannan, it is always possible that two views are plausibleon a definite set of circumstances and the Tribunal, being theAppellate Authority, has found the view of Commissioner as not I.T.A. No.282/2019 conforming to requirements of Section 263, and, withinTribunal’s jurisdiction, found that the order in Annexure-B isliable to be set aside. In other words, he suggests that theexercise, by dwelling into the merits of the conclusion of CIT(Exemptions), has been done by the Tribunal by having aconspectus of all relevant matters on the issue. Hence, theappeal is without merit. 4.We have some difficulty in appreciating theargument of the assessee. Explained, the assessee, when anopportunity was afforded by the Commissioner, did not availthe opportunity and/or participated in the enquiry beingcarried out by the Commissioner. The participation of theassessee is not an empty formality as could be appreciated fromthe language employed in Section 263 of the Act. Had theassessee placed reply, deliberated on the nuances involved in We have some difficulty in appreciating the I.T.A. No.282/2019 the circumstances noted by the Commissioner, then,legitimately it could be argued that an adverse order was passedby the Commissioner dehorsthe objections of the assessee. Butthe assessee having become an onlooker or complacent of theongoing procedure, now raises grounds on the findingsrecorded by the Commissioner before the Tribunal, on thematerial placed before the Tribunal. This Court is not observingthat the Tribunal ought not to have received material sought tobe relied on by the assessee. The material brought on recordbefore the Tribunal and a case for reconsideration underSection 263 is made out, the Tribunal would be doing well bysending the matter back to the Commissioner for considerationand decision afresh, instead of adjudicating on the merits of theconclusions recorded by the CIT (Exemptions). 5.By referring to the materials brought on record by I.T.A. No.282/2019 the assessee and for allowing the appeal, the reasons recordedby the Commissioner are set aside. The exercise virtuallyamounts to upsetting the satisfaction recorded by theCommissioner on the material examined by the Tribunal. Thematerial should be allowed to be considered by theCommissioner as the Commissioner is vested with the revisionalpower against the proceedings made under the Act forexercising his jurisdiction. Though an attempt has been madeto independently justify the conclusions recorded by theTribunal, the mistake we have noticed in the approach of theTribunal ought not to be ignored by us while examining thelegality of the order under appeal and pursue the sameapproach. In cases like the present, what constitutes thesubject matter of appeal before the Tribunal is the correctnessor legality of the opinion formed by the Commissioner from thematerial on record and the reply of the assessee. The I.T.A. No.282/2019 conclusion of the Commissioner is the subject matter of appeal, I.T.A. No.282/2019 conclusion of the Commissioner is the subject matter of appeal, but the Tribunal recorded, in the case on hand, primarysatisfaction under Section 263 of the Act. Such a course isimpermissible. Hence, we are of the view that the orders of the CIT (Exemptions) and the Tribunal in Annexures-B and C are setaside and the matter is remitted to the Commissioner forconsideration and decision afresh in accordance with law. (i)The assessee is given liberty to file a reply/produce record by enclosing a copy of the judgment within six weeks from today. (ii)The Commissioner enquires into the notice and passes anorder within six weeks thereafter. The questions are answered in favour of the Revenue and against the assessee. The Income Tax Appeal is allowed as indicated above. 6.After the judgment has been dictated, Mr RajaKannan stated that the consideration by this Court shall not beunderstood as a view on merits is expressed. 6.1We make it clear that this Court has not examinedthe merits of the case of the assessee or tenability of thefindings recorded by the Tribunal on the merits of the matter.The remand of the issues to the Commissioner is an openremand and the Commissioner proceeds and decides afterreceiving the reply etc of the assessee, in accordance with law. Sd/- S.V.BHATTIJUDGE Sd/- VIJU ABRAHAMJUDGE APPENDIX OF ITA 282/2019 PETITIONER ANNEXURE ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER UNDER SECTION 143(3) DATED 29.03.2016. ANNEXURE BTRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOCHI UNDER SECTION 263DATED 19.03.2018. ANNEXURE C CERTIFIED COPY OF THE ITAT'S ORDER IN ITA NO.459/COCH/2018 DATED 04.02.2019.