M/S JASLEEN EDUCATION SOCIETY,INDORE vs. THE ACIT 2(1), INDORE

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ITA 82/IND/2013Status: DisposedITAT Indore19 January 2017AY 2004-059 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CBDT Instruction No. 10/2004, prescribing timelines for issuing notices under Section 143(2), is binding on the department. Since the notice was issued beyond the prescribed period, the assessment framed was invalid.

What were the facts?

The assessee, an educational society, claimed exemption under Section 10(23C). The Assessing Officer rejected the claim, adding surplus income and unsecured loans. The assessee argued that the assessment order was invalid due to a belated notice under Section 143(2).

What were the issues?

Whether an assessment order is invalid if the notice under Section 143(2) is issued beyond the timeline prescribed by CBDT Circulars.

Which sections of the Income-tax Act were involved?

Section 10(23C),Section 143(2),Section 69C

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI D.T. GARASIA & SHRI O.P. MEENA

For Appellant: Shri Pankaj Mogra, Shri Rajiv Jain
Hearing: 19.1.2017

आदेश /O R D E R

PER SHRI D.T. GARASIA, JM

This appeal has been filed by the Revenue against the

order of the learned CIT(A)-II, Indore, dated 31.12.2012.

M/s Jasleen Education Society ITA No. 82/Ind/2013 2. The assessee has taken the following additional

ground of appeal :-

“That on the facts and in the circumstances of the case, the assessment order as passed by the Assessing Officer was based on the invalid notice as issued u/s 143(2) of the Income Tax Act. Hence, the order u/s 143(3) of the Act as passed on this notice is not a valid order. The same now requires to be quashed.”

3.

The short facts of the case are that the assessee is

running a school and income of the assessee is exempt u/s

10(23C) of the Act. The Assessing Officer rejected the claim

of the assessee for exemption u/s 10(23C) of the Act mainly

on two grounds; firstly the assessee has shown surplus of

Rs.22,29,702/- and secondly that the assessee has given

loan/advance of Rs.1,25,95,668/- to Sheetu Education

Service Pvt. Ltd. which is sister concern of the assessee.

Therefore, the Assessing Officer has come to the conclusion

thatg the assessee is not existing solely for educational

purposes but it is existing for the purpose of profit. As a

result, the Assessing Officer added surplus shown by the 2

M/s Jasleen Education Society ITA No. 82/Ind/2013 society of Rs. 22,29,702/-. The Assessing Officer also

added the opening balance of unsecured loans of

Rs.32,85,966/- u/ 69C of the Act and also disallowed some

part of salary expenses, gardening expenses, kitchen

expenses, etc. As such, the Assessing Officer assessed the

total income of the assessee at Rs.65,36,970/-.

4.

During the course of hearing, the learned counsel for

the assessee has taken a legal ground that in the present

case the assessee has filed the return of income on

31.10.2004. The Assessing Officer has issued notice u/s

143(2) of the Act on 1.8.2005. As per CBDT Circular

No.19/2004 dated 20.9.2004 it was directed to the concern

Assessing Officers that the process of selection of cases for

scrutiny for returns filed upto 31.3.2004 must be

completed by 15th October, 2004.For returns filed during

the current financial year 2004-05, the selection of cases

for scrutiny will have to be completed within 3 months of

M/s Jasleen Education Society ITA No. 82/Ind/2013 the date of filing of the return. As per said CBDT Circular,

the Assessing Officer ought to have issued notice u/s

143(2) within three months from the date of filing of the

return of income during the financial year 2004-05. In the

year under consideration the assessee has filed the return

of income on 31.10.2004 which falls during the financial

year 2004-05 and, therefore, notice u/s 143(2) of the Act

ought to have been issued on 31.1.2005 but in the present

case the notice u/s 143(2) of the Act was issued on

1.8.2005 which is barred by limitation as per Circular No.

10/2004. The learned counsel for the assessee relied upon

the decision of the Chhattisgarh High Court in the case of

DCIT vs. Sunita Finlease Ltd.; 330 ITR 491 wherein it is

held that notice for selection of scrutiny issued beyond the

period as prescribed in the CBDT Circular No. 9/2004 is

not valid. The learned counsel for the assessee also relied

upon the decision of the ITAT, Indore Bench, in the case of

M/s Jasleen Education Society ITA No. 82/Ind/2013 Shri Sanjay Agrawal; ITA No. 490/Ind/2008 dated

27.11.2012 wherein the issue was decided in favour of the

assessee. Similarly in the case of Piyush Agrawal, ITAT,

Indore Bench vide ITA No. 184/Ind/2012 had taken a

similar view. Similarly Calcutta Bench of ITAT had also

considered this issue and decided the issue in favour of the

assessee.

5.

The learned DR has objected to the proposition of the

assessee on the ground that as per the decision of the

Hon'ble Supreme Court in the case of Kerala Financial

Corporation vs. CIT (SC); 210 ITR 129(SC) it was decided

that the Circular issued by CBDT in exercise of powers

conferred by section 119 of the Act has no significance

insofar as the point under consideration namely whether

the circular can override or detract from the provisions of

the Act is concerned, inasmuch as what section 119 has

empowered is to issue orders, instructions or directions for

M/s Jasleen Education Society ITA No. 82/Ind/2013 the “proper adminitration” of the Act or for such other

purposes specified in sub-section (2) of the section. Such

an order, instrtuction or direction cannot override the

provisions of the Act; that would be destructive of all the

known principles of law as the same would really amount

to giving power to a delegated authority to even amend the

provision of law enacted by Parliament. The learned DR,

therefore, submitted that as per the decision of the Hon'ble

Supreme Court, any Circular issued by CBDT does not

override the provisions of the Act and in the Income tax Act

the limit for issuing the notice u/s 142 is one year and this

notice is, therefore, within time. The learned DR argued

that this plea of the assessee is, therefore, not tenable.

Moreover, he also relied upon the decision of the Bombay

High Court in the case of Banque Nationale De Paris vs.

CIT; 237 ITR 518 (Bom) wherein the same principle has

been laid down. The learned DR, therefore, prayed that

M/s Jasleen Education Society ITA No. 82/Ind/2013 this Circular is not binding and the matter may be decided

on merit.

6.

We have considered the submissions of both the sides.

We find that an identical issue had come up before this

Bench of the Tribunal in the case of Shri Sanjay Agrawal;

ITA No. 490/Ind/2008 dated 27.11.2012 wherein the same

CBDT Circular No. 10/04 was considered the the matter

was decided by the Tribunal as under :-

“7. We have considered the rival submissions and have gone through the orders of the authorities below in the light of judicial pronouncement cited at bar. There is no dispute to the factual position regarding date of filing the return, date of issue of notice u/s 143(2) and the date on which such notice was served on the assessee. As per C.B.D.T. instruction no.10/2004, the process of selection of scrutiny of returns filed during the financial year 2004-05 must be completed within 3 months of the date of filing of return. However, in the instant case before us, as the return was filed on 28.10.2004, the same falls during the financial year 2004-05, therefore, as per this instruction of C. B. D. T., Notice u/s 143(2) was to be served latest by 27.1.2005. However, the Assessing Officer has issued notice dated 28.7.2005, which was served on the assessee on 8.8.2005. Since notice u/s 143(2) served beyond the period of three months, proceedings u/s 143(2) was liable to be quashed in view of the direct decision of Hon'ble Chhatisgarh High Court in the case of Sunita Finlease Limited, 17 ITJ 272, wherein the Court held that C.B.D.T. Instruction No.9/2004 is binding on Department and same is not violative of the provisions of the Act. Accordingly, Tribunal was held to be justified in holding that since the notice u/s 143(2) was issued in non-compliance of said C.B.D.T. Instruction No.9/2004, which was binding on the revenue, 7

M/s Jasleen Education Society ITA No. 82/Ind/2013 the assessment so framed was invalid. As the issue under consideration is squarely covered by the decision of Hon'ble High Court, respectfully following the same, we allow the ground of invalidity of assessment. However, no contrary judicial pronouncement was brought to our notice. We, therefore, follow the judgment of Chhatisgarh High Court.”

In view of the above discussion, we hold that CBDT

Instruction No.10/2004 is binding on Department and

same is not violative of the provisions of the Act. We further

hold that since the notice u/s 143(2) was issued in non-

compliance of said CBDT Instruction No.9/2004, which

was binding on the revenue, the assessment so framed was

invalid.

7.

In the result, the appeal of the assessee is allowed.

The order has been pronounced in open Court on

19th January, 2017.

Sd/- sd/-

(ओ.पी.मीना) (डी.ट�.गरा�सया) लेखा सद�य �या�यक सद�य (O.P.Meena) (D.T.Garasia) Accountant Member Judicial Member �दनांक /Dated :19th January, 2017.

M/s Jasleen Education Society ITA No. 82/Ind/2013

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