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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI S.K. YADAV & SHRI O.P. KANT
This appeal by the assessee is directed against order dated 23/11/2017 passed by the Ld. Commissioner of Income-tax (Appeals)- 40, New Delhi [ in short the Ld. CIT(A)] for assessment year 2009-10 raising following grounds :-
“1. That on the facts and circumstances of the case the Ld. CIT (Appeals) - 40 , Delhi has erred in law and in facts in treating the capital grant of Rs. 44.25 crores as taxable income of the trust in terms of Section 2 (24) of the Income Tax Act, 1961.
2. That on the facts and circumstances of the case the Ld. CIT(Appeals) - 2 ,Delhi has erred in law and in facts in holding that since the appellant trust was not registered u/s 12A during the year therefore exemption u/s 11(l)( d) was not admissible to the assessee trust with respect to the above said capital grant, which otherwise being a capital receipt was not taxable under the Income Tax Act, 1961, under the normal provision of taxability of income.
3. That on the facts and circumstances of the case the Ld. CIT(Appeals) - 2 ,Delhi has erred in law and in facts in upholding the capital grant of Rs. 44.25 crores as taxable income without considering the submission and the case laws relied upon by the appellant merely on the ground that the order under Section 263 of the Act, passed by the DIT (Exemptions) has been upheld by the Hon'ble ITAT Delhi in dated 14.08.2017.
That on the facts and circumstances' of the case the Ld. CIT (Appeals) - 2 ,Delhi has therefore has erred in law and in facts in "acting under dictation" of the Order of Hon 'ble ITAT Delhi in dated 14.08.2017, which was only with reference to the legal validity of the order of DIT(E) u/s 263 of the Act and thus the impugned appellate order suffers from non- application of judicial mind.”
Briefly stated facts of the case are that in the case of the assessee consequent to the filing of the return of income on 01/09/2009 declaring nil income , an assessment u/s 143(3) of the Income Tax Act, 1962 (in short the Act ) was completed on 19/12/2011 at nil income. The assessment order passed by the Assessing Officer was held to be erroneous in so far as prejudicial to the interest of the Revenue by the Director of Income Tax (Exemption) [ in short the DIT(E ) ] vide order dated 28/03/2014 passed u/s 263 of the Act, directing the Assessing Officer to pass a revised assessment order. The DIT(E) held that since the registration u/s 12A of the Act was denied to the assessee, the corpus donation received by it of Rs. 44.25 crore was taxable income in the hands of the assessee. Against the said order of the DIT (E ), the appeal filed by the assessee before the Tribunal was dismissed. The assessee has preferred appeal before the Hon’ble High Court against the order of the Tribunal, which is pending for final decision.
Meanwhile, the Assessing Officer in consequent to the order of the Ld.DIT( E) passed a revised assessment order on 20/03/2015 assessing the total income of the trust at Rs. 44,25,05,000/-. The assessee preferred appeal against the said order of the Assessing Officer, before the Ld. CIT(A) who dismissed the appeal of the assessee observing as under:
“4.2.1 The impugned order which is a subject matter of the appeal was passed on the basis of direction given by the Learned DIT(E), New Delhi vide order u/s 263 dated 28.3.2014.Since the order u/s 263 passed by the Ld. DIT(E), New Delhi has been upheld by the Hon’ble ITAT, the addition made is also upheld. Grounds of appeal nos. 1, 2 and 3 are dismissed.”
4. Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
5. Before us, the Ld. Counsel of the assessee submitted that appeal filed by the assessee before the Hon’ble Delhi High Court against the order of the Tribunal dated 14/08/2017 in relation to the proceeding under section 263 of the Act, is pending. Accordingly, this appeal may be kept in abeyance. The Ld. Counsel also submitted that appeal has been decided by the Ld. CIT(A) merely in view of the appeal of the assessee against order under section 263 dismissed by the Tribunal and issue has not been decided on merit.
6. The Ld. DR on the other hand submitted that order of the Ld. CIT(A) might be upheld.
7. We have heard the rival submission and perused the relevant material on record. We find that the Ld. CIT(A) has dismissed the appeal of the assessee merely on the ground that order under section 263 passed by the Ld. DIT(E ) has been upheld by the Tribunal in order dated 14/08/2017 in IT No. 3268/Del/2014. In our opinion the Ld. CIT(A) was required to decide the appeal on the merit of the case. The proceedings under section 263 undertaken by the DIT (E) on the premise that the order passed by the Assessing Officer is erroneous in so far as prejudicial to the interest of the Revenue. The order of the Assessing Officer may be erroneous due to many reasons including lack of Inquiry by the Assessing Officer in the facts and circumstances 4 of the case. In the order passed in compliance to the order under section 263 of the Act, the Assessing Officer has to take into consideration the direction of the CIT or DIT and pass a fresh assessment order. An appeal to the Ld. CIT(A) against such order has to be decided on the merit of the addition made by the Assessing Officer and it cannot be dismissed summarily merely on the ground that order under section 263 has been upheld by the Tribunal. The Ld. CIT(A) should hear the objection of the assessee on merit of the addition and adjudicate accordingly. Accordingly, we feel it appropriate to restore this appeal to the file of the Ld. CIT(A) for deciding the appeal on merit after affording adequate opportunity of being heard to the assessee.
8. In the result, the appeal of the assessee is allowed for statistical purposes. This decision was pronounced in the Open Court on 16th November, 2018. sd/- sd/- (S.K. YADAV) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER