THE COMMISSIONER OF INCOME TAX vs. VENKATESHA EDUCATION SOCIETY

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ITA/572/2007HC KarnatakaKAHC01042606200718 February 2014Author: B.MANOHAR,DILIP B.BHOSALE9 pages
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the order of the Tribunal dated February 3, 2006. It restored the order of the revisional authority dated February 21, 2003, and the subsequent order of the Assessing Officer dated March 30, 2004. The High Court directed the Commissioner of Income Tax (Appeals) to decide the appeal filed by the assessee against the March 30, 2004 order on merits. The reasoning was that the Tribunal's finding that the issues were already considered was factually incorrect, and it was improper for the Tribunal to decide on merits when the revisional order had been acted upon. The Court noted that the Assessing Officer's original order was cryptic. The High Court emphasized that all contentions of the parties on merits concerning the appeal before the CIT(A) were kept open and directed the CIT(A) to decide the appeal expeditiously, preferably within eight months. No coercive steps for recovery would be taken until the appeal is disposed of.

What were the facts?

The Commissioner of Income-Tax and the Assistant Director of Income-Tax (Exemptions) appealed against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 1998-99. The ITAT had set aside an order passed by the Director of Income Tax (Exemptions) under Section 263 of the Income Tax Act, 1961. The revisional authority had previously set aside an order passed by the Assessing Officer under Section 143(3), deeming it erroneous and prejudicial to the revenue, and remanded the matter for further inquiries. The assessee, Venkatesha Education Society, had filed an appeal against the revisional order, which was pending. The Assessing Officer, after the remand, passed a detailed order on March 30, 2004. The assessee also filed an appeal against this order before the CIT(A), which was pending when the ITAT passed its impugned order on February 3, 2006, setting aside the revisional order. The High Court noted that the Assessing Officer's original order dated November 24, 2000, was cryptic.

What were the issues?

1. Whether the Tribunal erred in setting aside the revisional authority's order dated February 21, 2003, which had remanded the matter to the Assessing Officer for further inquiries, when the revisional authority found the Assessing Officer's original order dated November 24, 2000, to be erroneous and prejudicial to the interest of the revenue. Assessee's Contentions: The assessee argued that the points on which the revisional authority had remanded the matter were already considered and enquired into by the Assessing Officer while passing the original order dated November 24, 2000. The assessee also contended that the revisional authority's order was acted upon, and the Assessing Officer passed a fresh order on March 30, 2004, against which an appeal was filed before the CIT(A). Revenue's Contentions: The revenue contended that the Tribunal's observation that the issues were already considered was factually incorrect and that it was improper for the Tribunal to decide the matter on merits when the revisional order had already been acted upon and a fresh assessment order was passed. The revenue also highlighted that the Assessing Officer's original order was cryptic and lacked detailed consideration of the assessee's submissions.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 10(22),Section 143(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 18TH DAY OF FEBRUARY 2014

PRESENT

THE HON'BLE MR.JUSTICE DILIP B.BHOSALE

AND

THE HON'BLE MR.JUSTICE B.MANOHAR

ITA No.572/2007

BETWEEN:

1.

The Commissioner of Income-Tax, Central Circle, C.R Building, Queens Road,

2.

The Assistant Director of Income-Tax (Exemptions) Circle -17(2),

…Appellants

(By Sri.K.V.Aravind, Advocate)

AND:

Venkatesha Education Society, No.125, Armstrong Road, Shivaji Nagar,

…Respondent

(By Sri.S.Parthasarathi, Advocate)

This ITA is filed u/Sec.260-A of I.T.Act, 1961, arising out of order dated 03-02-2006 passed in ITA No.1778/Bang/2004, for the Assessment Year 1998-99, praying this Hon’ble Court to:

i. formulate the substantial questions of law stated therein.

ii. allow the appeal and set aside the orders passed ITAT, Bangalore in ITA.No.1778/Bang/2004 dated 03/02/2006 and confirm the order of the Appellate Commissioner confirming the order passed by the Assistant Director of Income Tax (Exemptions), Circle -17(2), Bangalore.

This appeal is coming on for Hearing this day, DILIP B. BHOSALE J., delivered the following:

P.C.

This income tax appeal is directed against the order dated 3rd February 2006 passed by Income Tax Appellate Tribunal (for short ‘the Tribunal’ ) in ITA No.1778/Bang/04 for the assessment year 1998-99. By this order, the Tribunal allowed the appeal which was directed against the order dated 21-02-2003 passed in exercise of the revisional power conferred under Section

263 of the Income Tax Act, 1961 (for short ‘the Act’), by the Director of Income Tax (Exemptions), Bangalore (for short ‘the Revisional Authority’). By this order, the authority, set aside order 24-11-2000 passed by the Deputy Commissioner of Income Tax (for short ‘the Assessing Officer’) holding that the order under Section 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue and remanded the matter to the Assessing Officer with a direction to make further enquiries on the basis of the observations made therein. In the order, the revisional authority, made detailed reference to the points, on which show cause notice was issued Commissioner dated 08-01-2003. The concluding paragraph in the order of the revisional authority reads thus: “In view of the aforesaid the order u/s.143(3) dated 24.11.2000 being erroneous and prejudicial to the interest of Revenue is hereby set aside with a direction to the present AO to make further enquiries on the

lines directed above earlier and also to take note of the fact of diversion of funds, and lack of existence of a genuine society as laid down under the Memorandum of Association etc., into account and pass a fresh order on the claim of assessee for exemption u/s.10(22) and determine the total income accordingly”.

2.

After the order of revisional authority dated 21-02-2003, it appears that the Assessing Officer passed a detailed order, after having taken into consideration the observations made by the revisional authority in the order dated 21-02-2003 and disposed of the matter vide order dated 30-03-2004. At the same time, the order of the revisional authority dated 21-02-2003 was also challenged by the assessee before the Tribunal and the Tribunal, after the order of the revisional authority was acted upon, set aside the same by the impugned order holding that the points on which, the revisional authority had set aside the order dated 24-11-2000 passed by the Assessing Officer and remanded the matter to hold fresh enquiry were already

considered and enquired by the Assessing Officer while passing the said order (24-11-2000). This observation, in our opinion, was factually incorrect. More over, it was not proper on the part of the Tribunal to decide the matter on merits and set aside the order passed in the revision dated 21-02-2003, despite the fact that the said order had already been acted upon and the Assessing Officer had decided the matter vide order dated 30-03-2004.

3.

It is pertinent to note that the assessee did not seek stay of the proceedings pending before the Assessing Officer, after filing of the appeal before the Tribunal, against the order passed by the revisional authority dated 21-02-2003. As a result thereof, the Assessing Officer proceeded to hear and decide the matter on merits in the light of the observations made authority in his order 30-03-2004. That apart, the assessee then had filed an

appeal before the CIT (A) against the order dated 30-03-2004 and the appeal was also pending when the Tribunal decided the appeal vide order dated 3rd February 2006. However, in view of the order passed by the Tribunal, CIT (A) instead of deciding the appeal on merits disposed it of vide order dated 16-02-2006 as infructuous.

4.

We have perused the order dated 24-11-2000 and find that the order passed by the Assessing Officer was cryptic and running into hardly one page and he had not considered the particulars furnished by the assessee in pursuance of the notice issued under Section 143(2) of the Act. In the circumstances, we are satisfied that no prejudice whatsoever will be caused to the assessee if the order of the Tribunal is set aside and the appeal that was filed by the assessee against the order dated 30-03-2004 bearing ITA No.14/Trust/CIT

(A)-V/03-04 is restored to file with a direction to decide it on merits.

5.

We deem it appropriate to adopt this course in view of the fact that after the order of remand passed by authority 21-02-2003, Assessing Officer passed a detailed order taking into consideration the directions issued and the observations made by the revisional authority in the said order (dated 21-02-2003). It is pertinent to note that the assessee also participated in the said proceedings with full vigor and seems to have contested the matter seriously. The order of the Assessing Officer dated 30-03-2004, in our opinion, is reasoned order which was the subject matter of the appeal before the CIT (A) filed by the assessee. Since the appeal was disposed of as infructuous, we deem it appropriate that this appeal can be conveniently disposed of by the following order:

(a) The order dated 03-02-2006 passed by the Tribunal is set aside and order 21-02-2003 passed by the revisional authority is restored to file.

(b) The order dated 30-03-2004 passed by the Assessing Officer in view of the order of remand vide order dated 21-02-2003, passed by the authority, also stands restored to file. Similarly the appeal filed by the assessee against the said order (30-03-2004) bearing ITA No.14/Trust/CIT (A)-V/03-04 is also restored to file. The Commissioner of Income Tax (Appeals) is directed to decide the said appeal on merits in accordance with law after giving an opportunity of being heard to the parties, in particular, the assessee.

All contentions of the parties on merits, insofar as that appeal is concerned are kept open.

The Appellate Authority shall endeavor to decide the said appeal as expeditiously as possible, preferably within a period of 8 months from the date of receipt of this order.

It is needless to mention that since the order dated 30-03-2004 is the subject matter of the appeal before the CIT (A), the Assessing Officer shall not take any coercive steps to recover the amount, till the appeal is disposed of.

With these observations, the appeal is disposed of.

Sd/-

JUDGE

Sd/-

JUDGE

mpk/-*

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