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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER PER SUSHMA CHOWLA, JM:
The appeal filed by the assessee is against the order of CIT-I, Pune, dated 28.03.2013 relating to assessment year 2008-09 passed under section 263 of the Income Tax Act 1961 (in short the ‘Act’).
The assessee has raised the following grounds of appeal:-
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The ld. CIT-1 erred on facts and in law in holding that the assessment order for AY 2008-09 u/s 143(3) is erroneous and prejudicial to the interests of the Revenue, and erred in invoking his powers u/s 263 for setting aside the said assessment order and directing a fresh assessment. 2. The Id. CIT erred on facts and in law in inferring that the AO had not applied his mind to the nature of the receipts from BCCI viz. Share in TV Rights, Infrastructure Subsidy and Advance against expenses of Stadium. In the course of assessment proceedings the AO had called for details and specific submissions had been addressed to the AO on these very points, who after due consideration had taken a possible view of the matter. In any case the Id. CIT erred in holding that voluntary contributions from BCCI are not in the nature of voluntary contributions. 3. The Id. CIT erred on facts and in law in concluding that Sponsorship Receipts were given a go-by by Assessing Officer. In the course of Assessment Proceedings Profit & Loss A/c and Balance sheet was submitted to Assessing Officer. After verifying the same only the Assessing Officer concluded that these were not business receipts. 4. The Id. CIT erred on facts and in law inferring that capital expenditure allowed to assessee as application while calculating Income under Section 11 should be re-considered on the ground that it is not apparent from records that BCCI had not treated the Infrastructure Subsidy as capital Expenditure in its own hands. He failed to appreciate the factual and legal position in this behalf in its proper perspective. He also failed to appreciate that whatever treatment given by BCCI in its books is an irrelevant consideration for the issue at hand. 5. The Id. CIT erred on facts and in law in holding that Assessing Officer did not apply her mind while carrying out assessment proceedings in case of change of accounting policy resulting into under-statement of income over expenditure. This point is properly referred by the assessee and is suitably furnished during the course of assessment. Merely because no queries are raised by Assessing Officer, will not render the order passed erroneous. 6. The Id. CIT erred on facts and in law in invoking his jurisdiction u/s 263 on the issue of subsidies being directly credited to Reserves instead of routing the same through Profit & Loss A/c, especially when the said issue was properly addressed and clarified at the time of assessment. 7. The Id. CIT fell in error in invoking his powers u/s 263 on the basis of administrative and clarificatory amendments in the Constitution of the Assessee (particularly when the amendments were all admitted before the AO at the time of passing the assessment order), and completely failed to appreciate the distinction between an objects of the assessee and powers of the Trustees/Managing Committee. 8. In the alternative and without prejudice to the above, the CIT ought to have directed the AO to verify whether any of the amendments in the Constitution have a bearing on the income of the assessee, and ought not to have directed a completely fresh assessment.
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The issue raised in the present appeal is against exercise of jurisdiction by the Commissioner under section 263 of the Act.
Briefly, in the facts of the case, the assessee for the year under consideration had furnished return of income declaring total income at Nil. The assessee had claimed deduction of Rs.54,72,67,637/- under section 11 of the Act. The case of assessee was taken up for scrutiny. The Commissioner on perusal of assessment records noted that specific queries were raised by the Assessing Officer with regard to applicability of proviso to section 2(15) of the Act, which has been brought on Statute vide Finance Act, 2008. As per the Commissioner, the Assessing Officer completed scrutiny on the submissions of assessee that the said amendment was prospective in nature and proviso to section 2(15) of the Act was not applicable to assessment year 2008-09. The Commissioner on subsequent examination of records was of the view that the Assessing Officer had failed to raise any query regarding the issue of computation of income within mechanism of section 11 and 12 of the Act. The Commissioner noted that the assessee during the year had shown certain receipts i.e. share in TV rights in BCCI, sponsorship receipts, etc., which were prima facie not in the nature of voluntary contribution nor could be treated as ‘Income derived from property held under trust’. As such, the said receipts were not includable in the computation of income under section 11 of the Act.
Similarly, as per the Commissioner, the assessee had included capital expenditure of Rs.43,97,58,754/-. The said expenditure was incurred out of amounts received / receivable from BCCI and as per the Commissioner, it was not apparent whether BCCI had not treated sums thus given to the assessee as
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its own capital expenditure. Further, substantial amounts received from BCCI both by way of subsidy as well as expenditure were not shown by the assessee as its income, instead the same were directly taken to the Balance Sheet without routing through Income & Expenditure Account. The Commissioner was of the view that under sections 11 and 12 of the Act, voluntary contribution not being contributions to the corpus would form part of income of trust or institution. He observed that the amounts received from BCCI were not in the nature of contribution to the corpus. Another point noted was that because of change in method of accounting, the assessee had under-stated its income by Rs.1,07,99,963/-, which the Assessing Officer failed to take cognizance of. In view of the above said errors and omissions on the part of Assessing Officer, the Commissioner observed that the assessment vide order dated 29.12.2010 was erroneous in so far as it was prejudicial to the interest of revenue. Accordingly, show cause notice under section 263 of the Act was issued to the assessee. The said notice is reproduced at pages 3 to 6 of the order passed under section 263 of the Act.
The assessee in response to the said notice, furnished written submissions. In written submissions furnished, the assessee pointed out that the Assessing Officer had enquired and examined the nature of receipts from BCCI and other sponsors and detailed submissions were made vide letter dated 28.12.2010, wherein clarification was given on subsidy termed as ‘TV subsidy’. It was explained that the assessee along with other State Associations were receiving subsidies solely at the discretion of BCCI and the assessee had no bargaining right or any role to play therein. It was further clarified that the said subsidy was in the nature of financial assistance given to promote public
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objective and hence, the subsidy was not the same thing as remuneration. Referring to the decision of Ahmedabad Bench of Tribunal in the case of Baroda Cricket Association Vs. ITO (2006) 8 SOT 735 (Ahd.), it was pointed out that the Assessing Officer had taken possible view in the matter and just because there was no detailed discussion in the assessment order, it could not be said that the Assessing Officer had not applied her mind. The assumption of jurisdiction under section 263 of the Act on this count was challenged by the assessee relying on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Max India Ltd. (2007) 295 ITR 282 (SC). The assessee further explained that even on merits, subsidy was a benefit given and was considered to be in the interest of public. It was a voluntary payment made by one person to another, wherein BCCI gave subsidies voluntarily and gratuitously to all State Cricket Associations, which were affiliated to it, including the assessee. It was further explained that the Association had neither canvassed for the subsidy nor had any right over the same. Only when BCCI declares and grants the subsidy after finalization of its accounts, the associations gets to own and control the use of money. The assessee explained that the object in granting subsidy was to develop cricket in all parts of the country and hence, the same were in the nature of voluntary contributions covered under sections 11 and 12 of the Act. It was further pointed out that in the assessment for assessment years 2002-03, 2003-04 and 2004-05, the predecessor Assessing Officer had accepted the subsidy as voluntary contribution and the Assessing Officer in the present assessment year had also taken a similar view.
Regarding change in the method of accounting, it was pointed out that clear reference was made to the change in audit report as well as in the Notes to
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accounts. The said documents were enclosed along with return of income and were available for verification by the Assessing Officer. In such circumstances, the assessee pointed out that it could not be said that the Assessing Officer had not applied her mind to the said documents. Even on merits, it was pointed out that on shifting from cash system of accounting to mercantile system of accounting, the assessee merely improved its system of accounting, where the mercantile system of accounting was more appropriate method to ascertain the income on commercial principles. Reliance was placed on series of decisions in this regard.
The assessee challenged the notice issued under section 263 of the Act, wherein it was alleged that the Assessing Officer had failed to make enquiry in relation to sum of Rs.43,97,58,754/- being capital expenditure claimed as application of income. It was pointed out that since the assessee had the benefit of registration under section 12A of the Act for assessment year 2008-09, the assessee’s claim of capital expenditure as an application of income was perfectly legal, well founded and well settled. Hence, the Assessing Officer was not in error in allowing the said claim. The proposition of Commissioner that capital expenditure could be allowed only if the same was not treated as expenditure in the hands of BCCI, was held to be incorrect, as the assessee had duly claimed it as part of its expenditure and the admissibility of expenditure in the hands of one does not depend on whether or not the same claim be allowed in the hands of assessee. The assessee also pointed out that since registration under section 12A of the Act was in force for the assessment year, the claim of deduction under section 11 of the Act was correct and there was no error on the part of Assessing Officer in allowing the same, where the Assessing Officer had made proper
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enquiries regarding various aspects of the issues. The main plea of the assessee before the Commissioner was that subsidy received from BCCI was solely at its discretion and the assessee had no legal right to demand the subsidy and hence, it was a voluntary grant. It was also explained that staging or non- staging of matches was not relevant consideration for BCCI in deciding to grant subsidies to the State Associations. The assessee from financial year 2004-05 to 2011-12 had not conducted any international match, yet the assessee was receiving subsidy from BCCI. It was explained that nine IPL matches were conducted between 08.04.2012 to 31.05.2012 and India-England T20 match was held on 20.12.2012. It was stressed that the issue of subsidy in the earlier years was never disputed, hence the settled position should not be disturbed.
The Commissioner after going through the submissions of assessee, assessment records observed and reiterated that the Assessing Officer had raised queries exclusively with reference to proviso to section 2(15) of the Act and the applicability of said proviso to the assessee’s case. Hence, the reply given by the assessee vide letter dated 28.12.2010 had to be seen in the said context. The Commissioner further observed that the Assessing Officer completed assessment by holding that proviso would not apply to assessment year 2008-09. In such circumstances, the Commissioner held that the assessee’s contention that the Assessing Officer had applied her mind to the subsidy issue and was convinced that it was voluntary contribution was not correct. On the other hand, the Assessing Officer considered subsidy given by BCCI as payment made by BCCI to assessee for hosting several tournaments. In other words, she considered the subsidy to be business receipts. He was of the view that she had not taken the enquiries to the logical conclusion and never
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asked whether the subsidies were in the nature of voluntary contribution so as to be included in the computation of income or application thereto under section 11 of the Act. He was of the view that the Assessing Officer had not applied her mind thereof. Further, even in respect of sponsorship rights, as per the Commissioner, the Assessing Officer had given a go-by and no enquiry was made into the nature of sponsorship receipts. The plea of assessee that the fact of change in method of accounting was reported in audit report and the presumption that the Assessing Officer must be said to have applied her mind thereof, found no favour with the Commissioner as the Assessing Officer had failed to ask any question on the said issue. Referring to the decision the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT reported in 109 Taxman 66 (SC), wherein the Hon'ble Supreme Court had mentioned about assumption of facts resulting in erroneous assessment, the Commissioner held that even if the Assessing Officer had gone through audit report on this point, in the absence of any question raised, the Assessing Officer must be said to have assumed the facts in the matter, which was erroneous within meaning of section 263 of the Act. As regards, the admissibility of capital expenditure in assessee’s hand, the Commissioner observed that it is not assessee’s argument that the Assessing Officer had applied her mind to this issue as well, hence this issue shall be taken up separately. The Commissioner thus, held that arguments advanced by the assessee questioning assumption of jurisdiction under section 263 of the Act were devoid of merit and were thus, rejected.
The Commissioner thereafter, dealt with the issue on merits. With regard to share in TV shares received from BCCI and sponsorship and other receipts were in the nature of voluntary contribution was dealt by the Commissioner first.
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He was of the view that deficiencies which were pointed out in show cause notice have not been made good. The assessee has not filed any details or documentary evidence except for one line communication, to establish that TV rights share received from BCCI were voluntary. The Commissioner observed that even the query raised during the course of proceedings as to whether the assessee having received his share of subsidies from year to year could say no to BCCI in the matter of hosting matches, was not answered by the assessee. The explanation of assessee that BCCI gave share / subsidy at its own discretion, voluntarily and with a view to promoting the game of cricket, was not accepted by the Commissioner. The main objections were that no details were filed by the assessee and no evidences were called for by the Assessing Officer. Then, he elaborated upon the role of BCCI and State Associations at page 17 and observed that where the distribution of shares / subsidies to the members was after finalization of accounts, gives an impression of distribution of profits to the members. He further observed that TV rights share could also be treated as TV right / media rights profit or income of disbursing member including the present assessee. If the TV rights share were accepted as voluntary contribution, the Commissioner held that burden was heavily on the assessee to prove the same to the hilt and the assessee has failed to do so in any manner, during the course of proceedings. In view of the discussion, the Commissioner observed that though the facts strongly indicate that TV rights share received from BCCI were not in the nature of voluntary contribution but he would not decide the issue conclusively at this end. He was of the view that the same could be decided only after collecting, appraising and evaluating all the relevant facts and evidences. He was of the view that the issue needs to go back to the Assessing Officer to decide afresh after collecting and examining all the facts and
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evidences having a bearing thereon and also making enquiries from others i.e. BCCI. The Commissioner thus, set aside the order of Assessing Officer with direction to decide the issue relating to nature of TV rights / shares, sponsorship receipts, etc. in the light of observations made and guidelines suggested. The Assessing Officer was free to make any further enquiries as deemed warranted and after giving reasonable opportunity of being heard to the assessee to make fresh assessment.
Coming to the fact of change in accounting method on the income of trust, which as per the remark of auditor in the audit report, resulted in under-statement of income over expenditure by Rs.1,07,99,963/-, the Commissioner observed that since assessment was being set aside, the Assessing Officer shall examine and consider the fact of change in method of accounting as well.
With regard to the issue of capital expenditure of Rs.43.97 crores, the Commissioner observed that he was conscious of the fact that the assessee had registration under section 12A of the Act, which was cancelled w.e.f. assessment year 2009-10. He elaborated that query which needs to be addressed is that where it was not apparent from record that BCCI had not treated infrastructure subsidy, etc. as capital expenditure in its own hands. Since the matter was being set aside, the Assessing Officer was directed to ascertain the facts relating to impugned capital expenditure as well and decide the admissibility thereof accordingly on the issue of various subsidies having been directly credited to the Capital Reserve Account instead of being routed through Income & Expenditure Account, the plea of assessee that the said issue was addressed by the
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Assessing Officer, was found to be not correct. This issue was also set aside to the Assessing Officer.
The Commissioner also made reference to the order of his predecessor dated 30.07.2012 under section 263 of the Act relating to assessment year 2009- 10, wherein the matter was set aside to the Assessing Officer on the issue of automatic grant of benefits under sections 11 and 12 of the Act, wherein there was change in the objects of assessee trust, which had been granted registration under section 12A of the Act. The Commissioner followed the stand taken by the predecessor Commissioner for the present order as well and set aside the said issue also to the file of Assessing Officer. Hence, the assessment was set aside with direction to Assessing Officer to do it afresh after collecting, appraising and evaluation all the relevant facts and evidences and also after giving the assessee reasonable opportunity of being heard.
The assessee is in appeal against the order of Commissioner.
The learned Authorized Representative for the assessee pointed out that show cause notice under section 263 of the Act was issued on five issues i.e. whether subsidies received from BCCI were voluntary in nature; whether capital expenditure on infrastructure and stadium was to be allowed; whether infrastructure subsidy directly credited to the Capital Reserve Account and not routed through Profit and Loss Account was correct or not; whether change in objects was informed to the Department and whether change in method from cash to mercantile system was not looked into by the Assessing Officer. He
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further pointed out that as per the Commissioner, there were no enquiries by the Assessing Officer on all the issues and show cause notice was issued.
With regard to first issue, the learned Authorized Representative for the assessee pointed out that the assessee was receiving subsidies from BCCI since 1994 i.e. infrastructure subsidy and also TV rights subsidy. He referred to the chart filed in respect of TV subsidy from BCCI for the past several years which has been accepted as voluntary contribution in the hands of assessee by Assessing Officer vide order passed under section 143(3) of the Act. He stressed that what was not prejudicial for two decades could not now be held to be prejudicial to the interest of revenue. In this regard, he placed reliance on the decision of Hon’ble High Court of Madras in CIT Vs. Pathy Cine Enterprises (2007) 292 ITR 495 (Mad). He further pointed out that under section 12 of the Act, voluntary contributions can be held as property under trust and the assessee had received such voluntary contribution from BCCI. He stressed that the principle was that you have to follow consistency. He stressed that where there was no change in facts how can the order of Assessing Officer, following the same could become erroneous or prejudicial to the interest of revenue. The learned Authorized Representative for the assessee stressed that consistency principle had to be applied. He further pointed out that even otherwise, the issue was whether the Assessing Officer made enquiries or not. Our attention was drawn to order sheet entries which are placed at pages 15, 24 and 27 of Paper Book. He stressed that the Commissioner in his order states that reply was given, but, Assessing Officer made no enquiries to look into, except the amendment to section 2(15) proviso of the Act. The Commissioner was of the view that the Assessing Officer should have looked into the nature of subsidies.
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He stressed that this observation of Commissioner was without any basis where query was raised by the Assessing Officer, explanation was given by the assessee and the Assessing Officer accepted the same as the same accounting was done for the past twenty years; in such circumstances, it could not be said that no enquiry was made by the Assessing Officer. He further stated that there was difference in lack of enquiry and inadequate enquiry. Referring to the decision of the Hon’ble High Court of Delhi in CIT Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), he stressed that it could not be said that there was inadequate enquiry in the case of assessee.
Coming to the next stand of Commissioner, wherein he alleged that since BCCI retains some money, it could not be said that it was voluntary contribution. The learned Authorized Representative for the assessee pointed out that conduct of tournament and grant of subsidy had no connection. He further stressed that the assessee conducts national level matches and the question was whether the subsidy received from BCCI was voluntary or not. In this regard, he placed reliance on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Gem & Jewellery Export Promotion Council (1983) 143 ITR 579 (Bom) for the proposition that what was ‘voluntary contribution’ with special reference to pages 6 and 7 of the said judgment. He further pointed out that where BCCI was giving subsidy for building of stadium and there would be supervision and there is no merit in the stand of Commissioner in this regard. Further, reliance was placed on the decision of Delhi Bench of Tribunal in Delhi & District Cricket Association Vs. DIT (E) in ITA No.3095/Del/2012, order dated 13.01.2015, he stressed that similarly for contribution, it does not take the voluntary nature of contribution.
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Coming to the next observation of Commissioner that the Assessing Officer had not elaborately discussed the issue, he stated that under similar circumstances, the proposition laid down by the Hon’ble Bombay High Court in CIT Vs. Design and Automation Engineers (Bombay) P. Ltd. (2010) 323 ITR 632 (Bom) was relevant.
The next objection of Commissioner was that capital expenditure incurred by the assessee of Rs.43,97,58,754/-. The learned Authorized Representative for the assessee pointed out that the receipts from BCCI were being booked and utilized as per law and what BCCI was doing for accounting the said payments was not the business of assessee. He stressed that where capital expenditure has been incurred by the assessee, then the same is allowable under section 11 of the Act and if that was loss, then how can the order of Assessing Officer be erroneous?. In respect of next query of the Commissioner where the infrastructure subsidy was directly credited to the Capital Reserve Account, it was pointed out that specific query was raised by the Assessing Officer in this regard and it was explained that this subsidy was for investment in land and stadium building, which the assessee booked to his Capital Reserve Account. He stressed that query was raised by the Assessing Officer and note was given and our attention was drawn to the Paper Book-2, backside of page 21 in this regard.
Coming to the next issue of change in objects of assessee trust, he pointed out that on this ground, my registration was cancelled and the Tribunal had decided the issue and allowed registration under section 12A of the Act. Referring to the additional objects of the trust, he pointed out that the same do
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not enlarge objects of the assessee trust, wherein it was provided to establish, purchase, built on land the building. The Tribunal vide deliberation at page 21 of the order said that it was enabling power, wherein though the change was in assessment year 2006-07, no action was taken. The said change in objects was noticed in assessment year 2009-10 and registration was cancelled. The Commissioner in assessment year 2008-09 refers to the same and hence, it was pointed out by the learned Authorized Representative for the assessee that the issue does not survive in assessment year 2008-09.
Coming to the last stand of Commissioner i.e. change in accounting policy from cash to mercantile system. The learned Authorized Representative for the assessee stated that there was express Notes in the Balance Sheet and the assessee also filed reconciliation at page 26 of Paper Book-2, of the profit being under-stated. He further clarified that the said reconciliation was given during assessment proceedings and the Assessing Officer did not raise any query in this regard. However, the assessee had declared the intention and the details were evident from Notes to the Balance Sheet and Notes to the accounts. He stressed that the Commissioner could not exercise the power under section 263 of the Act for making enquiries in a particular manner.
The learned Departmental Representative for the Revenue referred to the ratio laid down by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (supra) and in CIT Vs. Amitabh Bachchan in Civil Appeal No.5009 of 2016 (arising out of SLP (C) No.11621 of 2009), judgment dated 11.05.2016, where the Assessing Officer had accepted submissions of assessee without making enquiries, then the order of Assessing Officer was held to be erroneous. She
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referred to the order sheet entries and pointed out that it was very clear from entries itself that the Assessing Officer had not looked at the details nor any verification was carried out in respect of capital subsidy, which was straightaway taken to Balance Sheet and she stressed that income had to be seen on the basis of receipts and application of income under section 11 of the Act was not touched by the Assessing Officer. She further stressed that the Assessing Officer had failed to even reconcile and look into the net effect of the change in system from cash accounting to mercantile system. In respect of voluntary contribution, the learned Departmental Representative for the Revenue referred to the report of Lodha Committee and pointed out that corporate veil had to be lifted and it has been seen how expenses had been incurred and the Assessing Officer had failed to look into the nature of receipts and expenditure incurred under section 11 of the Act. She stressed that there were no enquiries by the Assessing Officer, hence the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue.
The learned Authorized Representative for the assessee in rejoinder pointed out that the Commissioner can exercise the jurisdiction where there was incorrect assumption of facts and incorrect assumption of law but what has been accepted in the hands of assessee for past several years could not be said to be incorrect assumption. Reference was made to para 21 of the decision of the Hon'ble Supreme Court in CIT Vs. Amitabh Bachchan (supra), wherein the Apex Court held that where a plausible view was taken by the Assessing Officer, then the same cannot be held to be void. With regard to the reference to Lodha Committee, the learned Authorized Representative for the assessee pointed out that the said Committee had given its report in 2016, whereas the order of
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Assessing Officer was passed in 2010. He stressed that observations were mere hearsay and there were no comments about the assessee and the issue which had been arising in the present appeal was with regard to exercise of jurisdiction under section 263 of the Act. Another point which was raised by the learned Authorized Representative for the assessee and the learned Departmental Representative for the Revenue was reliance by the learned Departmental Representative for the Revenue on the decision of the Hon’ble High Court of Uttarakhand in CIT Vs. Pankaj Nagalia in Income Tax Appeal No.27 of 2012, judgment dated 31.12.2012, wherein it was held that once the re-assessment proceedings have been completed, then the issue of exercise of jurisdiction under section 263 of the Act become academic.
We have heard the rival contentions and perused the record. The issue raised in the present appeal filed by the assessee is against exercise of jurisdiction by the Commissioner under section 263 of the Act. The main object of the assessee trust was to promote cricket and hosting cricket matches on national and international level. The assessee trust is in existence for several years and is affiliated to BCCI. The assessee trust had recognition under section 12A of the Act for the past several years. The assessee had been receiving voluntary contributions on account of infrastructure subsidy or TV rights subsidy, etc. from BCCI from year to year. The assessment for assessment years 2002- 03 to 2004-05 were completed under section 143(3) of the Act and the deduction claimed under sections 11 and 12 of the Act has been allowed in entirety. Thereafter, in assessment year 2005-06, there was no scrutiny and for assessment years 2006-07 and 2007-08, notice under section 147 of the Act has been issued to the assessee. The original assessment for assessment year
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2008-09 was completed under section 143(3) of the Act and no addition was made. However, the order was set aside by the Commissioner under section 263 of the Act and fresh assessment was directed to be made. Similar is the position for assessment year 2009-10. For assessment years 2010-11 to 2012- 13, assessments have been completed under section 143(3) of the Act and tax demands have been raised and the appeals are pending before the CIT(A) or the Tribunal. After completion of assessment under section 143(3) of the Act, the Commissioner issued show cause notice to the assessee under section 263 of the Act, copy of which is reproduced in the order passed under section 263 of the Act. The Commissioner exercised jurisdiction under section 263 of the Act on the ground that the Assessing Officer while completing assessment proceedings had failed to look into various aspect of the case and had only concentrated on the amendment to section 2(15) of the Act by introduction of proviso. The Assessing Officer had concluded that the said amendment was prospective i.e. applicable from assessment year 2009-10 and was not applicable to the year under consideration. The Commissioner was of the view that the Assessing Officer failed to look into other aspects which were connected with the Income and Expenditure Account for the year under consideration. Hence, the order passed by the Assessing Officer was both erroneous and prejudicial to the interest of revenue. The case of assessee on the other hand, is that certain issues were settled issues and the claim of assessee was allowed by the Assessing Officer following earlier years and hence, there was no merit in the said exercise of jurisdiction by Commissioner.
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The powers enshrined in Commissioner under section 263 of the Act has been summarized by the Mumbai Bench of Tribunal in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO reported in 101 TTJ 1095, as under:- “(i) The CIT must record satisfaction that the order of the A.O is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the A,O and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the A.O has adopted one of the courses permissible under law or where two views are possible and the A.O has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the A.O is unsustainable under law. (vi) If while making the assessment, the A.O examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s. 263 is not permitted to substitute his estimate of income in place of the income estimated by the A.O. (vii) The A.O exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the A.O has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the A.O allows the claim on being satisfied with the explanation of the assessee, the decision of the A.O cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.”
Before proceeding with the order of Commissioner passed under section 263 of the Act, we first make reference to the order passed by the Tribunal in ITA Nos.1855/PN/2012 & 1856/PN/2012, order dated 28.08.2014, wherein two separate appeals were filed by the assessee against separate orders of
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Commissioner under section 12AA(3) and 263 of the Act relating to assessment year 2009-10. The assessment year 2009-10 is the year in which amendment to section 2(15) of the Act was made by inserting proviso. The Commissioner cancelled the registration granted to assessee under section 12A of the Act by passing order under section 12AA(3) of the Act. The Tribunal observed that the assessee was registered under section 12A of the Act earlier on the basis of its objects and activities. The Tribunal then, referred to the addition in objects by inserting three clauses, wherein sub-clause (e) related to enabling the assessee to establish, built, construct, operate and maintain a stadium for cricket and other infrastructural facilities for promotion of cricket and other games in Maharashtra. Similarly, sub-clause (g) enables the assessee to procure appropriate land for construction of stadium and sub-clause (f) enables the assessee to establish a company under section 25 of the Companies Act, 1956 with the object of promoting, developing and encouraging the sport of cricket and any other sport in Maharashtra. The Tribunal vide para 30 held as under:- “30. Even a cursory perusal of the aforesaid new clauses inserted do not distract from the fact that the same are subsumed in the already existing objects of the Association, which we have reproduced earlier in para 4 of this order.”
The Tribunal further held that the import of newly inserted clauses was not in contravention of assessee’s primary object of promoting, developing and controlling the game of cricket in the specified territory of Maharashtra. Relying on the decision of Hon’ble Bombay High Court in Deccan Gymkhana (Oldest Trust) Vs. CIT (2003) 262 ITR 459 (Bom) to the effect that it would be inappropriate to construe the aforesaid insertion as new objects of the assessee association, the Tribunal in this regard held that the aforesaid three insertions in the objects clause, only sought to provide enabling power to the Managing Committee of association to accomplish its objects and held that registration
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granted to the assessee originally under section 12A of the Act on 09.12.1991 cannot be rendered nugatory. The order of Commissioner in this regard was set aside and the registration granted to assessee under section 12A of the Act dated 09.12.1991 was restored.
The Tribunal then took up the appeal in ITA No.1855/PN/2012, which was directed against the order of Commissioner passed under section 263 of the Act i.e. amendment to section 2(15) of the Act and various subsidies received by the assessee and set aside the order of Commissioner passed under section 263 of the Act.
Now, coming to the appeal of assessee relating to assessment year 2008- 09, wherein the first plea raised by the assessee is that the Assessing Officer during the course of assessment proceedings had raised various issues and in response thereto, detailed submissions were made by the assessee, hence assessment order cannot be held to be erroneous and prejudicial to the interest of Revenue. The case of Revenue on the other hand, is that the Assessing Officer has failed to make any enquiries. In this regard, copies of order sheet entries for the year under consideration were furnished and it was pointed out that assessment was made without considering the documents and without examination of facts of debatable issues. Hence, the order passed by the Assessing Officer becomes erroneous and since there is loss of revenue, then prejudicial to the interest of Revenue and the Commissioner is empowered to exercise his revisionary jurisdiction under section 263 of the Act.
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Section 263 of the Act empowers the Commissioner to call for and examine the records of any proceedings under the Act and where he considers that order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue, then he, may, after giving the assessee an opportunity of hearing and after making or causing to be made such enquiries, as he may deems fit, pass such order thereon including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The Commissioner has exercised the said jurisdiction against assessment order passed by the Assessing Officer dated 29.12.2010 on the ground that there was failure on the part of Assessing Officer to enquire into various aspects which we shall deal in the paras hereinafter, making the order to be erroneous. In order to exercise revisionary jurisdiction under section 263 of the Act, then both the conditions in the said section i.e. order being erroneous and prejudicial to the interest of Revenue, needs to be satisfied.
The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (supra) had held that an incorrect assumption of facts or incorrect application of law or an assessment order made without application of mind by the Assessing Officer was liable to be considered as erroneous within meaning of section 263 of the Act.
Similar proposition has been laid down by different High Courts also including the Hon’ble Bombay High Court in CIT Vs. Hindustan Lever Ltd. reported in 343 ITR 161 (Bom). In other words, non-application of mind by the Assessing Officer during the course of assessment proceedings would justify invoking of revisionary powers by the Commissioner, where such an order has resulted in loss of revenue to the Revenue making the order prejudicial to the
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interest of Revenue. To examine as to whether or not an assessment order was passed without application of mind, then the Commissioner is duty bound not only to pursue the assessment order itself but also the entire assessment records.
The Hon’ble Bombay High Court in CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) had laid down that an assessment order would not be held to be erroneous simply because there was absence of an elaborate discussion in respect of particular point, if the record otherwise showed that the Assessing Officer had made enquiries with regard to point raised by the Commissioner and the assessee had filed explanation in writing during the course of assessment proceedings. As per the Hon’ble Bombay High Court (supra), such assessment order could not be held to be erroneous merely because it did not contain elaborate discussion on the issue raised by the Commissioner.
Now, coming to the order of Commissioner passed under section 263 of the Act, wherein he has held the assessment order passed by the Assessing Officer to be erroneous and prejudicial to the interest of Revenue on five issues. The first issue raised is whether subsidies were voluntary in nature or not i.e. TV rights’ subsidies. The assessee has been receiving TV rights subsidy from BCCI in preceding years including the year under consideration. In financial year 2006-07, the assessee had received subsidy of ₹ 1.50 crores, in financial year 2007-08 of ₹ 18.30 crores, in financial year 2008-09 of ₹ 21.04 crores and in financial year 2009-10 of ₹ 18.63 crores. The Assessing Officer during the course of assessment proceedings had raised the issue of subsidy received from BCCI, which is mentioned in the order sheet entries, copy of order sheet entry is
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filed by the learned Departmental Representative for the Revenue. The explanation of assessee on share in TV rights from BCCI was as under:- “14. Note on share in TV rights from BCCI BCCI gives subsidy to their affiliated State Cricket Associations each. This subsidy was declared in the AGM of BCCI as per their profits for the year. This depends upon the status of the particular State Cricket Association i.e. Staging Association, Test Center, Non Staging Association. The subsidy differs every year depending on the profits made by BCCI for the particular financial year.”
Another issue was also raised i.e. share in TV rights from BCCI. The assessee has also filed the replies given during the course of assessment proceedings, wherein it has filed Note of its charitable nature of activities and clarified that it had received subsidy from BCCI, which was on the basis of matches held at the stadium of assessee. The assessee in addition had received TV rights subsidy from BCCI. The case of assessee is that it was not in a position to demand any amount from BCCI but it was subsidy given by BCCI on its own motion. The Assessing Officer while passing assessment order under section 143(3) of the Act accepted submissions of assessee and treated the same as voluntary contribution and did not tax the same. The Commissioner on the other hand, has held such stand of Assessing Officer being without application of mind and being erroneous and prejudicial to the interest of Revenue. First of all, where the Assessing Officer had raised query which was replied by the assessee and thereafter, the assessment order was passed under section 143(3) of the Act, it cannot be said to be a case of non-application of mind by the Assessing Officer. Secondly, the issue that the said subsidy is not taxable in the hands of assessee has been decided by the Hon’ble High Court of Madras in Tamil Nadu Cricket Association Vs. DIT(E) (Madras) reported in 360
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ITR 633 (Mad), wherein similar issue of receipt of subsidy from BCCI and also TV subsidy arose and it was observed as under:- “56.The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue….”
The Delhi Bench of Tribunal in Delhi & District Cricket Association Vs. DIT (E), New Delhi in ITA No.3095/Del/2012, order dated 13.01.2015 applied the said principle and held that where the core activity of assessee was charitable in nature, then various receipts of assessee including subsidy from BCCI, income from advertisement, sale of tickets, restaurant and catering income, subscription, fees for providing services for IPL were held to be receipts from business activity of assessee and were intrinsically related, interconnected and interwoven with the charitable activity of assessee therein.
Further, the Hon’ble High Court of Madras in CIT Vs. Pathy Cine Enterprises (supra) had held as under:- “What was not prejudicial to the Revenue for two decades cannot be construed as prejudicial to the Revenue for the impugned assessment year, merely because the lessee happens to be one of the directors of the assessee company, as it is well settled that the phrase “prejudicial to Revenue” must be read in conjunction with an erroneous order.”
Coming to the issue raised before us, we hold that in the first instance, where the Assessing Officer had made enquiries during the course of assessment proceedings and had decided the issue of non-taxability of subsidy/TV subsidy from BCCI as non-taxable in the hands of assessee and
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where similar receipts have been held to be not taxable in the hands of assessee for preceding years also, then such an order passed by the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of Revenue. Further, we also hold that in view of the ratio laid down by the Hon’ble High Court of Madras in Tamil Nadu Cricket Association Vs. DIT(E) (Madras) (supra), the nature of receipt is such that it is intrinsically linked to the charitable activities of assessee carried on by the assessee and hence, the same cannot be held to be taxable in the hands of assessee. Accordingly, we reverse the order of Commissioner both on preliminary issue and also on merits.
The next issue raised by the Commissioner was whether expenditure incurred on infrastructure and construction of stadium was to be allowed as capital expenditure in the hands of assessee and whether such an issue having not been looked into by the Assessing Officer, makes the order erroneous. The linked issue to the same is whether infrastructure subsidy directly credited to the Capital Reserve Account and not routed through Profit and Loss Account was not looked into by the Assessing Officer and hence, the order passed by him is erroneous.
The perusal of queries raised and replies filed by the assessee reflect that during the course of assessment proceedings, the assessee had explained the infrastructure facilities available with it and it was proposing to built on fresh land being acquired. The explanation was given under the head ‘Stadium Project’, wherein it explained that seeing the need and the growing number of cricket fans, people interested in learning the game and hence, increase in the number of matches, the assessee had decided to build up a stadium of its own which would
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be one of the best international stadiums in India. For this, the assessee had acquired project site at Gahunje, Pune. It was further explained that BCCI had come out and fully supported the decision of assessee and offered to help them both financially and administratively. The assessee also referred to the activities and objects of the Trust in this regard and in reply to the query raised by Assessing Officer on Capital Reserve with details of additions during the year, the assessee explained as under:- “10. Note on Capital Reserve with details of additions during the year & documentary evidence thereof. The association is in the process of developing and constructing stadium, club house and other facilities at Gahunje, District Pune. For this purpose the Association is eligible for a subsidy in form of reimbursement of Rs.50 crore from BCCI. Out of this an amount of Rs.19,33,92,837/- has already been received during the financial year 2007-08. The Association has decided to treat the amount received against purchase of land as „Capital Reserve‟ and amount received against stadium and other facilities as „subsidy from BCCI for stadium‟. BCCI reimburse Rs.18,16,37,500/- towards Land cost for purchase of land and Rs.1,17,55,337/- towards expenses incurred for Stadium Project. Total reimbursement is Rs.19,33,92,837/- during the year. BCCI reimburse 50% of the amount expended by us on the project.” …. 13. Note on Gahunje Ground Breaking Ceremony MCA celebrated a Ground Breaking Ceremony of Maharashtra Cricket Association‟s International Cricket Center, Stadium and Club on 21st October, 2007 at the hands of Shri Sharad Pawar, President BCCI and Honorable Union Minister for Agriculture.”
All these documents and explanations were filed before the Assessing Officer including various explanations on the issues raised by the Assessing Officer, wherein the Assessing Officer vide order sheet entries had raised the query vis-à-vis Capital Reserve with details and addition to Corpus Fund for infrastructure. In view of explanation given by the assessee which was considered by the Assessing Officer during the course of assessment
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proceedings and where no addition was made in the assessment order, then such a view taken by the Assessing Officer cannot be held to be erroneous merely because the Assessing Officer in assessment order does not refer to queries raised and explanations filed. The exercise of revisionary jurisdiction by the Commissioner on this point is thus, also not valid and the same is reversed.
The next issue raised by the Commissioner is that where he was of the view that the Assessing Officer had failed to take into consideration the change in objects of assessee. We find that similar issue arose before the Tribunal in assessee’s own case in assessment year 2009-10, wherein also the Commissioner had exercised jurisdiction under section 263 of the Act. The Tribunal vide para 50 noted the queries raised by Assessing Officer during the course of assessment proceedings and have held that in such circumstances, there was no merit in the charge made by the Commissioner of non-application of mind by Assessing Officer on the said aspect. The relevant findings are in paras 50 and 51, which read as under:- “50. Now, we may take up the second issue raised by the Commissioner. In this context, the Commissioner was of the view that the Assessing Officer failed to take cognizance of the change in the objects of the assessee and also the change in structure so as to examine that such changes had a bearing on the taxability of the income of assessee. On this aspect also, we find that the queries made by the Assessing Officer, which we have reproduced above and the explanations furnished by the assessee thereof copies of which have been placed on record, belie the assertions of the Commissioner. In-fact, the queries raised by the Assessing Officer show that he had show-caused the assessee as to why the receipts on account of tournaments, etc. were not to be taxed considering the amendments to section 2(15) of the Act. Further, the Assessing Officer made enquiries with regard to the one day matches, T-20 matches, IPL conducted during the year, and also rent earnings from the ground owned by the assessee. It has been pointed out that the aforesaid queries are in the background of the charge sought to be made by the Commissioner that the change in object/structure of the assessee reflects carrying on commercial activities. 51. We have carefully examined the entire factual matrix on this aspect and find that it is difficult to uphold the charge made by the Commissioner of non- application of mind by the Assessing Officer on this aspect. In-fact, the Office Note No.3 recorded by the Assessing Officer clearly shows that he examined the
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case of the assessee for grant of exemption u/s 11 of the Act in the context of the advent of new cricketing tournament, namely, T-20 tournament, etc.. It was found by him that no such tournaments have been conducted by the assessee during the year under consideration. Be that as it may, a perusal of the entire Office Note reflects that the Assessing Officer was conscious of the amended provisions of section 2(15) of the Act and he not only queried the assessee on such aspect but also recorded his mind on the same, albeit in the Office Note below the assessment order, though, in our view, it would have been appropriate for him to put such discussion in the body of the assessment order itself. Nevertheless, for the present purpose, we have considered the entire record of the proceedings and we are unable to uphold the charge made by the Commissioner that the assessment order has been made without application of mind by the Assessing Officer. Therefore, on the preliminary issue itself, we set- aside the order of the Commissioner as being bereft of the requisite conditions prescribed u/s 263(1) of the Act. Accordingly, the impugned order of the Commissioner is set-aside and the assessment order dated 30.12.2011 (supra) is restored.”
Following the same parity of reasoning, we reverse the order of Commissioner on this ground also that the Assessing Officer had failed to look into the change in objects of assessee. In any case, such insertion in the objects clause was held to provide enabling powers to the Managing Committee of Association to accomplish its objects. The Tribunal while deciding the issue of 12AA(3) of the Act vide order passed by the Commissioner in assessment year 2009-10 held that additional objects do not signify that registration granted to the assessee earlier vide order dated 09.12.1991 should be withdrawn.
Now, coming to the last issue raised by the Commissioner against order of Assessing Officer in not looking into the change of method from cash to mercantile.
The learned Authorized Representative for the assessee pointed out that it had made express Notes in Balance Sheet and filed reconciliation, which is placed at page 26 of Paper Book-II. The said reconciliation was filed during the course of assessment proceedings, against which the Assessing Officer did not
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raise any query. In such circumstances, the issue is whether the Commissioner can exercise jurisdiction under section 263 of the Act for making enquiries in particular manner. We find no merit in the order of Commissioner in this regard, wherein queries were raised by the Assessing Officer and explanation was filed by the assessee and merely because the matter was accepted by Assessing Officer and the issue was not elaborately discussed, would not render the assessment order to be erroneous. Such is the proposition laid down by the Hon’ble Bombay High Court in CIT Vs. Design and Automation Engineers (Bombay) P. Ltd. (supra), which is as under:- “6. We have considered the arguments advanced by the Advocates appearing for the Revenue as well as Assessee. In the instant case as recorded earlier, the ITO had by his order dated 30th October, 1996 sought details/explanation from the assessee which the assessee had given by his letter dated 5th November, 1996. It is evident from the order of the Assessing Officer that he has considered all detailed particulars filed before him and after discussion allowed the deduction of the entire profit earned by the assessee pertaining to his export business. We are in complete agreement with the decision of this Court in the case of Commissioner of Income Tax Vs. Gabriel India Ltd (supra) and we reject the submission of the revenue that the order of the Assessing Officer is erroneous or is passed without application of mind because in his order he has not made elaborate discussion in that regard. In any event the Revenue has admittedly not argued before the CIT or before the Tribunal that the order passed by the Assessing Officer was without application of mind. CIT(A) has set aside the order of the Assessing Officer only on the ground that the CIT did not agree with the view taken by the Assessing Officer and took a view different than that taken by the Assessing Officer. In our view it cannot be said that the Assessing Officer has not applied his mind while granting deduction to the assessee under section 80HHC as regards net profit earned by the assessee pertaining to their export business. In our view, the Tribunal is correct in its view that the view taken by the Assessing Officer was a possible view and that the condition precedent for invoking jurisdiction under section 263 by the CIT did not exist.”
The Hon'ble Supreme Court in CIT Vs. Amitabh Bachchan (supra) vide para 21 had held Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from.
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In the facts of the case before the Apex Court though it was held that where the assessee had initially made a claim but had withdrawn the same would give rise to the necessity of further enquiry in the interest of Revenue. However, such is not the case in the present set of facts before us. In view thereof, we hold that exercise of revisional powers by the Commissioner under section 263 of the Act is not warranted on all the five issues and the order passed by the Commissioner is held to be invalid and bad in law. The grounds of appeal raised by the assessee are thus, allowed.
In the result, appeal of assessee is allowed.
Order pronounced on this 28th day of September, 2018.
Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 28th September, 2018. GCVSR आदेश की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. प्रत्यथी / The Respondent; 2. ववबागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “फी” / DR 3. ‘B’, ITAT, Pune; गार्ड पाईऱ / Guard file. 4. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune